Construction Law Today : Construction Lawyer & Attorney : Joshua Glazov : Design Build Contracts, Construction Bankruptcy

From me and my family to you and yours: have a safe, cheerful, and Merry Christmas!!!

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The Top 5 Reasons to follow Construction Law Today on Twitter:

1. You're away from where you get your RSS feed and want to know when new topics get posted here. Not familiar with RSS feeds? Watch this video to get started. Then come back and subscribe for an RSS feed to this blog
2. You want new links to news and information about construction contracts, disputes, and financing
3. You want unexpected and interesting content that I "retweet" from other Twitter users you haven't yet met
4. You want to join the conversation. You can converse on a blog like this by leaving comments below. But Twitter's a different kind of conversation. It's less like a stage presentation with Q& A, and more like a giant dinner party. Read something here you want to talk about? Direct a quick remark to me: @joshuaglazov. Or ask a question. Chances are I'll respond faster, and, you'll also probably get responses from plenty of others too. But remember to be careful and comply with the Terms of Use and Disclaimer before tweeting about what you see here. And never put anything confidential on Twitter; it's a worldwide billboard. Everyone with an internet connection can see what you tweet!!
5. You want to be the first to know whether the FDIC took over the bank with the construction loan on your project this Friday. Each Friday afternoon and evening I closely follow FDIC bank takeovers and tweet the names of each bank that failed and which bought their deposits and assets

Give it a try. Start following on Twitter here. Don't have a Twitter account yet? Sign-up for one here.

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This past week the Chicago Tribune reported that resuming work on the Chicago Spire is one step closers. The Spire is a 150-story mixed use tower in Chicago designed by Spanish architect Santiago Calatrava that, when complete, will be the tallest building in North America. The Great Recession forced the Spire's developer, Dublin, Ireland based Shelbourne Development Ltd., to temporarily suspend work on the project.

But Shelbourne recently announced new tentative financing in the form of bridge and mezzanine loans. This financing will become active if Shelbourne can secure about $170M more that's necessary to restart work.

Additional financing candidates include Union Labor Life Insurance Co. and two trusts of the AFL-CIO union pension funds. They could each benefit directly from on return on investments in the project, and indirectly from mobilizing their members to erect the remainder of the project too.

Shelbourne also reports that about 30% of the Spire's 1,200 residential condominium units are already under contract for sale.

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Indulge me sometimes for drifting off topic, there's only so much one person can write about construction law and bank failures.

I haven't followed much of the scandal surrounding Tiger Woods and Elin Nordegren. I guess I'm afflicted with a perverse indifference to tabloid news about celebrities, whether they be athletes, entertainers, politicians, or some combination thereof.

But every Wednesday I listen to Frank Deford's Sweetness and Light on National Public Radio. And today's broadcast is about Tiger and Elin. Mr. Deford always gives a unique perspective and I felt compelled to mention it here. Regardless of whether you agree with anything he says, he's among the few eloquent voices to chime-in. Scroll down, click play, and listen closely. Is Mr. Deford's commentary more about Tiger and Elin, or more about us?

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Internet site BidForMaterials.com is a place where contractors can electronically request bids from material suppliers, sort them, and pick which to buy from. Here's how it works:

• Register
• Upload and post your material list
• Suppliers respond with bids
• Pick the best offer
Tags: Off Topic Posts
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A couple of weeks ago we talked about how Pepsi mishandled a Complaint suing the company for allegedly stealing trade secrets resulting in a $1.26 Billion default judgment.

In Judge Scraps $1.26 Billion Judgment Against Pepsi, the Milwaukee Journal Sentinel's Bruce Vielmetti reports that the Honorable Jacqueline Erwin, the judge hearing the case, granted Pepsi's motion to vacate the default judgment. Judge Erwin will now hear the case "on its merits." And according to Pepsi's lawyers, the company has some very meritorious defenses.

Pepsi lawyers, executives, and shareholders must be pleased. The gentlemen who sued Pepsi - Wisconsin businessmen Charles Joyce and James Voigt - probably aren't so pleased.

Learning from our mistakes is good. Learning from the mistakes of others is better, and cheaper:

• Prepare to get sued by ensuring that you, your registered agents, and everyone in your organization knows how to recognize a Complaint and what to do with it after getting it.

• If you sue someone and they don't respond to the Complaint on time, don't ask for stratospheric damages. That'll just make it so much easier for the judge to grant your opponent's request to vacate. Joyce and Voight's odds would have been a lot better if their judgment was for $126,000, or maybe even $1.26 Million. But they never had a chance with that eye-popping $1.26 Billion. Remember: pigs get fat, hogs get slaughtered

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The late Justice Robert H. Jackson suggested that often, the justices don't:

There is no doubt that if there were a super-Supreme Court, a substantial proportion of our reversals of state courts would also be reversed. We are not final because we are infallible, but we are infallible only because we are final.

For more about the U.S. Supreme Court, take a look at SCOTUSblog founded by Tom Goldstein.

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YoChicago's Joseph Askins reports in Construction Checkup: Legacy at Millennium Park on construction progress at Mesa Development's Chicago residential condominium project known The Legacy at Millennium Park.

I confess I'm biased. I worked on contracts for this project with architect Solomon Cordwell Buenz and prime contractor Walsh Construction. Regardless of my own partisanship, or problems that may crop up in the Legacy's design or construction, this building adds a superlative aesthetic complement to the Chicago skyline. Go see the photos and see for yourself. Better yet, watch this slideshow of construction through the end of September 2009....

And if you're in Chicago at sunset, stop and gaze at how the sun and other edifices of the South Loop's skyline reflect off the the Legacy's mirror-like glass curtain wall. You might find yourself agreeing with me that it's one of the most captivating views in the city.

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Starting this morning, I'm attending the Fall Conference of the American Resort Development Association ("ARDA") in Washington, D.C.

ARDA is the principal trade association for the timeshare and fractional ownership industry. We'll be:

• Writing new laws affecting the development and offering of timeshare and fractional ownership to the public
• Discussing new models for timeshare and fractional ownership plans and financing
• Attending presentations on developments in the design and construction of timeshare and fractional ownership resorts

And if you're interested in timeshare or fractional ownership - buying, selling, or learning how to better use and trade timeshare or a fractional you or a relative already own - ARDA's home page is a prime place for you to start.

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Becky Yerak at the Chicago Tribune reports that the FDIC just seized 9 banks operated by FBOP Corporation, including Park National Bank in Oak Park, Illinois.

Park National's construction related initiatives include:

• Lending to redevelop 200 acres in the Pullman neighborhood
• Development and construction lending for the Christ the King Jesuit College Prep school and the Chicago Jesuit Academy

According to the FDIC's press release, U.S. Bank, NA from Minneapolis has entered into a Purchase and Assumption Agreement with the FDIC to buy the deposits of FBOP banks and ensure continued banking services for their depositors.

It's not clear yet whether U.S. Bank will assume and continue funding construction loans, lines of credit and other un-disbursed loan obligations of the FBOP banks. Borrowers are standing-by to see whether that happens or whether the FDIC will stop funding and repudiate their loans.

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In Price to PepsiCo for Not Being in Court: $1.26 Billion, the National Law Journal's Lynn Marek reports that an assistant in PepsiCo's legal department misplaced a Complaint costing the company $1.26 Billion. Yes, you read that correctly, $1.26 Billion!

What Happened?

In their Complaint, the plaintiffs - Wisconsin businessmen Charles Joyce and James Voigt - allege that PepsiCo misappropriated their trade secrets for bottling and selling purified water, like Aquafina. When PepsiCo didn't respond to the Complaint by the deadline set under the Wisconsin Rules of Civil Procedure, Joyce and Voight's lawyer asked the Clerk of the Court to enter a default in the case. Then they followed-up in unopposed papers to prove the amount of their damages. And voila - Joyce and Voigt got a judgment against PepsiCo for $1.26 Billion.

Continue Reading...

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Last week I posted asking for your sponsorship to participate in the Skyline Plunge - rappelling 27 stories down the side of the recently opened theWit Hotel to benefit the Respiratory Health Association of Metropolitan Chicago.

With help from many sponsors, including readers here, I rappelled from the roof down 27 stories, landed safely beside State Street, and raised over $2,000 for lung disease research, education, and treatment. THANK YOU!

While waiting to go over the edge, I also had the good fortune to meet Steve Theis from McHugh Construction, the prime contractor who built theWit. Steve filled me in on some of theWit's innovative design and building features as well as ongoing work McHugh does there to improve the hotel and keep it in prime condition as one of Chicago's most fashionable destinations for lodging, food, beverages, and entertainment.

I've represented many owners and contractors negotiating contracts to build new projects. I've toured some projects under construction and post-completion, even gone up on the roof of some. But this is the first project where I represented one of the principal participants and then donned a harness and scaled down the exterior on a crisp autumn day. There's really nothing like the smell of exterior glass curtain wall panels 25 stories up. I suggest you try it.

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Last month I mentioned serving as a juror for a couple of weeks during the trial of a case between a saleswoman and her former employer. Chicago Tribune business correspondent Ameet Sachdev covered this case from nearly the beginning. The front page of yesterday's Business Section includes his piece on the trial: Jury's $1.8 Million Verdict A Call For Privacy Rights. And Mr. Sachdev writes this RSS feed reader worthy law and business blog too.

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I'm reluctant to ask for anything here.  But I'm asking you to sponsor me to rappel down 20+ floors on the side of theWit hotel, starting at the top and ending on the ground at State Street just north of Lake Street in Chicago.  It's one of the projects I've done legal work on. And now the Wit is hosting me and others repelling down the curtain wall to raise funds for the Respiratory Health Association.  The event is October 25th

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In the last jury service post I explained the background of the case I sat as a juror on, the verdict my fellow 11 jurors and I reached, and I offered some suggestions from the jury box for lawyers who try cases. 

This post is about suggestions for jurors, and prospective jurors, that might make your jury experience a little better.  So when you open your mailbox to find a jury summons someday, come back here to prepare yourself  the day before you must appear at the courthouse.  It's also about final thoughts about jury service.

Suggestions for Jurors:

• Bring a bottle of water.  You will get thirsty. Drinking fountains may be few and inundated by long queues
  
• Bring snacks.  You'll get hungry and there may be little or no food available
  
• Bring a book.  You'll endure long periods waiting for something to happen and yearn for entertainment.  Officials may prohibit use of PDAs, smart phones, iPods and other electronic devices at some point.  So bring an old fashioned book.  You can bring a newspaper too.  But they're cumbersome and you may be in close quarters where it's impractical to open-up and turn the pages of a newspaper
  
• Sit where you have a good view of the witnesses.  Watch them closely.  It's the best way you can decide whether you think they're telling the truth
  
• The in-court Sheriff's deputy is your friend.  Be good to them and they'll be good to you

Continue Reading...

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A couple of weeks ago I reported that I was picked for jury service in the Illinois Circuit Court for Cook County.  Well, the testimony and lawyers' arguments are finished.  We finished deliberating and rendered a verdict.  The judge thanked and discharged us. Now I can tell you about it.

The Case We Heard and Decided

The case started with a commissioned saleswoman suing her former employer for unpaid commissions.  The former employer counter-sued the saleswoman for repayment of excess advances she received against future commissions she didn't earn before leaving her job.

The saleswoman also sued her former employer for invading her privacy.  She claimed that her former employer illegally intruded on her seclusion.  She claimed that her former employer gave personal information from her personnel file to a private investigator.  And then the private investigator used that information to impersonate the saleswoman and get records of her home and mobile phone calls - who she called, when she called, and how long each call lasted.

We found for the former employer on most of the unpaid commission claims and all of the advance repayment counter-claim.  Our verdict came to about $15,000.  We found for the saleswoman on her invasion of privacy claims - $65,000 in compensatory damages and $1,750,000 in punitive damages.

Continue Reading...

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Well, Chris Thorman at Software Advice suggests using a smart phone application - an "App" on an iPhone or Blackberry - to do it.  And he shares his ideas in Bringing Your Punch List Into the 21st Century.

Pretty much everyone in the construction business knows that the "punch list" identifies the final items of work that must be done after substantial completion before a project is finally complete and the contractor gets fully paid.



Punch List App Benefits

Chris suggests that a punch list App will benefit prime and subcontractors.  I think it could benefit lenders, owners, and design professionals too.  The benefit for all can be faster, more coordinated, and more efficient:

• Identification and valuation of punch list work
• Communication to those who must perform the punch list work
  
• Evaluation of punch list work to confirm proper completion
• Payment for properly completed punch list work

Construction management software applications have been around for years.  Some even work on mobile devices.  But they don't maximize the features now available on smart phones.

Continue Reading...

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The conventional wisdom is that lawyers don't get picked to serve on juries.  Well, don't always bet on the conventional wisdom. 

I got my summons about a week ago and went this morning to the courthouse with hundreds of other registered Cook County voters.  Most of the day was spent waiting.  For a few minutes I filled out a juror questionnaire and answered questions from the judge and lawyers for the litigants.  I was surprised when the judge announced my name as one of the jurors selected.

I'm sworn not to talk about the case with anyone.  So you I can't tell you anything about it, except that the composition of our jury is contemporary and looks nothing like the picture above.

So if I miss a few days of posting, it's because I'm hearing evidence and listening to lawyers' arguments by day and working as a lawyer myself, instead of blogging, by night.  I'll post here later to fill you in after the trial ends and the judge discharges me.
    

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The United States Securities and Exchange Commission (the "SEC") recently sued Maynard Jenkins, former chief executive officer of CSK Auto Corporation ("CSK"), to reimburse CSK and its stockholders for more than $4 million worth of bonuses and stock sales while CSK was allegedly committing accounting fraud.  Are you asking yourself "so what's that have to do with me in the construction industry?"  Read on and I'll tell you.

According to the SEC's Complaint, during part of Mr. Maynard's tenure at CSK (parent of auto part stores Checker Auto Parts, Schucks Auto Supply, and Kragen Auto Parts), the company contracted for deferred vendor allowances (i.e., rebates) from various auto part suppliers.  The more CSK bought from a supplier, the bigger the allowance.  Receiving allowances lowered CSK's cost of purchasing inventory.  That lowered CSK's cost of goods sold, giving a higher profit margin on sales allowing them to report higher revenue to investors.  But trouble started when some suppliers didn't pay their allowances.
  

The SEC alleges that CSK executives hid uncollectible allowances instead of writing them off as required by Generally Accepted Account Principles.  That resulted in CSK reporting better than actual performance to investors.  Later, CSK had to re-state their earnings for 2002, 2003, and 2004.  

The SEC claims that under the "clawback" provisions in Section 304 of the Sarbanes-Oxley Act of 2002 ("SOX"), Mr. Maynard must give back to CSK:

• Bonuses he received within 12 months after this under-reporting occurred
• Profits he made on the sale of CSK stock during that period
  

And why should you or I in the construction industry care about the SEC suing a former auto parts store executive?

• For many years various sectors of the construction industry have used rebates, refunds, and discounts like CSK's vendor allowances to sell building materials and equipment.  Prime contractors, subcontractors, and material suppliers have all enjoyed these kinds of subsidies and incentives that lower their costs and increase their profit margins.  Executives at some could "overlook" writing-down unpaid incentives like management at CSK did.  And executives of those who are publicly could also hear from the SEC, just like Mr. Maynard.

     

• The SEC isn't alleging that Mr. Maynard broke any other securities laws.  They're not suing Mr. Maynard for securities fraud. And the Department of Justice hasn't charged him with any criminal offense under the securities laws (though the DoJ did charge others involved).  Perhaps this signals a more aggressive SEC enforcement policy, going after reimbursement from executives under Section 304 of SOX without alleging fraud or other securities law violations?  In any event, the SEC is serving notice to executives at publicly traded companies that the agency can come and try to clawback money made while under-reporting uncollectible allowances, rebates, and similar incentives; regardless of whether there's any other violation of the securities laws.
  

  

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I now often hear sentiments of discontent and alienation.  You may not agree. But I haven't yet heard anyone express it as colorfully as Jonathan Swift almost 300 years ago:

By this means the wealth of a nation, that used to be reckoned by the value of land, is now computed by the rise and fall of stocks: and although the foundation of credit be still the same, and upon a bottom that can never be shaken, and although all interest be duly paid by the public, yet, through the contrivance and cunning of stock-jobbers, there has been brought in such a complication of knavery and cozenage, such a mystery of iniquity, and such an unintelligible jargon of terms to involve it in, as were never known in any other age or country in the world.

                                                                          -- Jonathan Swift
                                                                             The Examiner
                                                                             No. XIII, Thursday, November 2, 1710

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The American Institute of Architects is looking to hire a new lawyer to serve in a job as Associate Counsel for work on the AIA's Contract Documents. 

Duties include:

• Editing AIA Contract Document drafts to ensure (1) consistency within the document and with parallel language in other related documents, (2) grammatical accuracy, and (3) conformance to the AIA style for contract documents.

• Performing legal research, and preparing case briefs and legal memoranda as needed to clarify contract issues.

• Issuing document drafts to outside organizations for comment; organizing, synthesizing, and recording, or overseeing the recording of, comments for committee review; coordinating discussion of comments, and recording committee responses and action.

• Creating and maintaining accurate written and electronic records of drafts, correspondence, and meetings.

• Writing and editing AIA Contract Document user instructions and guides.

• Writing and editing promotional, educational, and explanatory material on AIA Documents for Institute newsletters, the AIA's Web site, and other publications.

• Preparing and editing PowerPoint presentations about AIA documents for AIA spokespersons.

• Preparing document synopses and abstracts.

• Editing documents for printing.

• Assisting in developing, reviewing, and testing upgrades to the AIA Contract Documents software application.

• Attending Documents Committee meetings (as scheduled) and preparing minutes at those meetings. Providing staff support to an assigned task group of committee members.

• Rotating with other Assistant Counsels, providing assistance to documents users regarding the content of AIA documents by via e-mail and phone, and recording questions and answers.

• Representing the Documents program at official AIA functions, like the AIA's annual leadership conference and National Convention.

Click here for more.

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Usually the focus here is on legal issues.  But sometimes new design and construction developments are so remarkable I've got to mention them.  This is one of those developments.

Last week Lynn Becker at Chicago Architecture Plus wrote about research underway on a new self-healing concrete at the University of Michigan called Engineered Cement Composite ("ECC"). 

ECC can heal itself when it cracks.  Just add water and carbon dioxide. Several wet days will mend a damaged member made of ECC.  ECC is designed to bend and crack in narrow hairlines instead of breaking and splitting open in wide gaps like traditional concrete.  The result is that ECC can repair itself.  

When ECC is strained, many micro-cracks form instead of one large crack that causes failure. Here, a specimen is bending as a force of five percent tensile strain is being applied. Regular concrete would fail at .01 percent tensile strain.  


Continue Reading...

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