Washington Construction Law Blog

Late last week, the U.S. Supreme Court declined to review the Ninth Circuit's Western States decision. That decision, issued in May 2005, held that Washington's implementation of the race-based preferences in the Transportation Equity Act of 1998 (TEA) was unconstitutional in violation of the Equal Protection Clause.

Whenever 8 of the 9 U.S. Supreme Court Justices vote the same way in a particular case, you can assume the issue is relatively free of doubt. And so it was with yesterday's decision in which the Court held that an arbitration clause contained in a contract that may be void on some basis (such as illegality) is still enforceable and thus still requires arbitration of the dispute. The Court acknowledged that its holding would from time to time result in compelling arbitration in a contract the arbitrator later finds to be void.

The holding is not a surprise, given the Court's precedent in this field, but it again is a reminder to those who include arbitration clauses in construction agreements of the potent scope of such clauses and of the care which needs to accompany their drafting.

This decision today by Oregon's Supreme Court to uphold the validity of property rights Measure 37 will certainly add some fuel to the Farm Bureau's push for a similar initiative in Washington.

Washington voters in 2003 approved Initiative 841, which repealed workplace ergonomics rules issued by the Department of Labor & Industries (L&I). The AGC and other industry organizations were heavily involved in the campaign.

Last week, the Supreme Court took up the issue of how far I-841 went. In this case, (SuperValu Holdings, Inc. v. Dep't of Labor & Industries), L&I issued an investigative subpoena to an employer to examine possible ergonomic-related injuries. The employer moved to quash the subpoena, arguing that I-841 had stripped L&I of authority in this field. The trial court agreed and quashed the subpoena.

On direct appeal to the Supreme Court, L&I maintains it still has the authority under the "general duty" clause of RCW 49.17.060(1) to investigate and regulate ergonomic injury because Initiative 841 merely repealed a specific set of rules, not the concept of ergonomic workplace injury itself. The employer (with AGC as an amicus) contend the scope of Initiative 841 was broader and reflected the voters' conclusion that ergonomics was itself not fit for regulation at this time. A decision is expected within three months and, based on the nature of the questions from the bench, it appears the Court is sharply divided.

This new ASBCA case stemming from a Bremerton project is pretty dense to read (so what's new about ASBCA decisions?), but it contains a valuable legal nugget toward the end: merely proving that a bid specification is ambiguous is not enough to obtain compensation from the government - the claimant must in addition demonstrate "reliance" on the poor specification (i.e., that the bidder in fact based its bid price on its interpretation of the ambiguous specification). Otherwise, the claim is rejected as in this case.

The re-development project at the old Olympia brewery in Tumwater has taken an interesting twist, as the City of Olympia has filed suit to condemn the property owner's water rights of 12 to 14 million gallons/day. From the Olympian:

Condemnation for a water right is rare, said Tom Loranger, a water resources manager at the state Department of Ecology. The last time it happened was in 1895.

Toward the end of this opinion (in which the 9th Circuit forbids the City of Seattle from regulating the Olympic Pipeline), there's an obscure but interesting holding which should be a note of caution to public owners transacting with federally regulated entities such as pipelines: executing a franchise agreement (and thereby agreeing to submit to safety measures & oversight in the agreement) does not constitute a waiver of the federally-regulated entity's right to assert a preemption defense in the event the city seeks to enforce the agreement. The 9th Circuit reasoned that preemption is not a personal defense capable of waiver, but rather a power of the federal government.

This preemption twist needs to be kept in mind in planning major projects where federally-regulated entities are involved, as they can apparently seek to avoid certain contractually assumed liabilities or obligations under a preemption defense.

Decided in diversity under Alaska's three-year limitation period for breach of contract, this case provides general guidance on three asserted exceptions to the commencement of the statute of limitations.

A crane company missed the statute by bringing suit three and 1/2 years after terminating service to a hotel project. It raised -- and the 9th Circuit rejected -- three theories as to why the running of the statute should be deferred so as to make the action timely -- an "invoice" theory (the statute doesn't begin to run until plaintiff submitted it invoice), a "single contract" theory (the statute doesn't begin to run until plaintiff completed work on a second project also located in the same city) and an "open account" theory (the statute doesn't begin to run until the account on both projects closed).

Extra bonus: there's a nice primer on the rules of diversity jurisdiction as applied to LLCs (the defendant/owner operated as an LLC)

This year's attempt to repeal the Mike Johnson decision has died in committee. Mike Johnson held that contractual notice provisions are to be strictly enforced regardless of prejudice to the owner, unless the owner has waived enforcement of the notice provision.

In contract law, a warranty is a different breed of cat. To prevail, one generally need only prove the the work was defective. The focus is upon the end result itself, not whether the installer or subcontractor breached the details of a contract provison or specification. Breach of contract claims, by contrast, depend upon proof the subcontractor actually failed to comply with an applicable standard in the documents. In the other words, the problem or defect in itself is not enough; one must prove a breach leading to the defect to prevail.

Depending on state law and the wording of the contract, the warranty remedy may be deemed an exclusive remedy - and thereby trump the contract claim - or not. Division 1 recently said no, holding that a subcontractor's one-year warranty to correct defective work was not the "exclusive remedy" for a GC. Download file

OK, after a lot of heavy stuff this week, we deserve something on the lighter side. Here's a link for the humor collection, a potpourri of industry slang which ranges from the useful to the bizarre. Cranial disharmony? Cloon?

There's no telling how this suit will ultimately turn out, but at least this broad-based industry challenge to some new Clean Water Act regulations jointly developed by EPA and the Corps will be heard on its merits, according to this opinion handed down February 3d by the D.C. Circuit.

It seems EPA and the Corps had decided that the act of using "mechanized earth-moving equipment in waters" itself constituted a "discharge" so as to trigger permit requirements for the activity under the CWA. The lower court said the suit wasn't ripe and dismissed on that ground. This court reversed and remanded for a hearing on the merits.

Because of the large volume of harbor and navigable water dredging and construction work in Washington, this case has obvious significance to costs and time impacts on many regional projects. And builders will tell you that permitting is probably the biggest single risk in many such projects -- especially mid-project permit changes and failure to grant permits on a timely basis. The Pacific Legal Foundation supported the industry appeal as an amicus.

The U.S. Supreme Court's decision in the 1918 case of Spearin v. U.S. remains one of the landmark construction law cases. In rough terms, it stands for the rule that an owner, by sponsoring a set of plans, makes an implied warranty to the builder that the plans are adequate for their intended purpose.

The exact reach of Spearin in a particular case is the subject of 100s of cases across the country. One of the latest and most interesting is this Ohio opinion which finds in favor of the owner and denies the builder's monetary claim for impacts and delays allegedly attributable to bad plans.
Download file

If this case is any indication, architects and engineers have a receptive audience in the new Chief Justice, John Roberts. While sitting on the D.C. Circuit last year, he wrote an opinion affirming summary judgment dismissal of claims by owner against an architect over alleged defects in an HVAC system. The basis of the ruling was the owner's failure to make a causal connection between its "litany" of complaints with the performance of the HVAC and any defect in the plans. The opinion has some choice language, certain now to be used more widely given Judge Roberts' confirmation as the new Chief Justice.