Ask not for whom the bell tolls: it tolls for thee! The construction trial (Law & Order: Hard Hat files Part 9)
The time has come. You’ve been sued. Suffered through discovery. Talked about the project under oath til your throat turned raw. And responded to the umpteen million request from your lawyer. You’ve engaged experts, second-guessed your work, and looked at copies of legal documents that made your head spin. Now, at long last, you will have your day in court. Or will you?
When will your case be heard?
Your trial date is a moving target, at least in North Carolina. Depending upon the county or jurisdiction the lawsuit is filed in, you are probably looking at your case taking from 1 year (for a small homeowner lawsuit) to 2 or 3 years for very complex cases. This is one reason why court ordered mediation is required in all Superior Court cases in North Carolina. It is also why most construction lawsuits do settle– at some point– prior to trial. Some cases settle, literally, on the courthouse steps (or in the courthouse conference room). Others settle during trial itself. But if you find yourself settling at the last minute, you will have spent the time and money for trial preparation for naught. A somewhat bitter pill to swallow.
What is involved in trial preparation?
Expect to review many documents relating to the project all over again with your lawyer(s), even if you’ve previously discussed them. Expect to spend time with your expert(s) discussing your plans and design intent. Expect to have some mock testimony sessions with your lawyers and others on their team. Mostly, expect a lot of aggravation. Trial preparation takes time. A lot of time. While much will be done by your construction lawyer, you will need to be actively involved.
How does the trial work?
The trial itself is probably the closest to a Law & Order scene that you will experience. But don’t expect Jack McCoy (or Perry Mason) moments. Very little happens in a trial that is completely unexpected.
If the trial is a jury trial (and most are), your lawyers will question the potential jury pool to try to weed out folks that have predisposed themselves to one side of the case. The other side will do the same. The result, ideally, is a group of disinterested, neutral folks that will decide your case.
After jury selection, opening statements are given. These are speeches given by the lawyers to forecast the evidence that will be given to the jury.
The, the plaintiff (that is, the party suing you) will be told to call its first witness. The plaintiff will proceed to call witnesses to the stand to testify. The order that they are called in is up to their lawyers, and different lawyers have different strategies for deciding which witnesses they call first, middle, and last.
With each witness, the plaintiff’s counsel will ask open ended, non-leading direct examination questions. After that, your counsel will ask leading questions on cross examination aimed at poking holes in the other side’s case, and establishing your own case theory.
After the plaintiff has presented its case and rests (and following some procedural motions at that point), the roles are reversed, and your lawyer will conduct direct examination, while the plaintiff will cross examine witnesses.
There are often legal sidebars during a trial, where the lawyers approach the judge and whisper about legal matters. If extended debate on something is needed, the jury will be excused. While you will not be invited to the bar to talk during sidebars, your lawyer can tell you what was discussed and how it effects your case.
At the conclusion of all evidence, the jury is given a set of legal jury instructions, and the lawyers present their closing arguments as to why their position should prevail. Then, you wait. And wait. And wait, until the jury reaches a verdict. The jury foreperson will read the verdict into the record.
What happens after trial?
Depending on the trial results, one side may ask the judge to set aside the verdict (called a j.n.o.v.), which is rarely granted. Whoever has lost may decide to notice an appeal of the verdict. Appeals must be based on legal errors that the judge made during trial. An appeal can take years, and the end result can be the same (that is, the verdict is upheld), overturned (set aside), or remanded for a new trial. Yes, that’s right: you can be forced to re-try your case.
Is all lost, then, if you lose the jury verdict? No; definitely not. No one likes to spend time and money on appellate briefs. So, even though the case is over, the parties may *still* negotiate a settlement. Be aware, however, that you will have a judgment “on the books” against you if the jury found that way, and that can affect your credit ratings. However, the judgment will also be rendered “satisfied” if you settle (or pay it off), which generally helps re-establish your good credit rating.That’s it! You now know just enough about the construction trial process to be dangerous! I’ve obviously had to condense many details in this series, so if you have any questions or want me to expand on any area, drop me a note or comment in the comment section of the blog.
Previously on Law & Order: Hard Hat files [chunk-chunk], we discussed how to know when a lawsuit is coming, how you will be sued, why you should not be your own attorney, and why documentation is key. We’ve also discussed being deposed, hiring experts, and mediation. We’re coming to the top of the 9th now, discussing how to have your case decided by a judge. [Next up: the jury trial].
Your lawyer has told you that your case might be heard on legal issues alone, before a judge. Or he’s mentioned that he is filing a motion for “Summary Judgment”. What, exactly, does that mean? To understand summary judgment, it is first necessary to understand how a typical case is heard.
In a case that goes to a jury trial, it is in fact the jury, not the judge, who decides the case. The judge handles order in the courtroom, the admissibility of evidence or witnesses, and other legal issues. But at the end of the day, the factual issues (that is, was your plan defective? If so, what if any damages did that defect cause?) are decided entirely by the jury. Most of the time.
So what’s this thing called “summary judgment”?
Sometimes, there are no real factual issues in dispute. In that case, the judge can decide the matter on the legal issues alone. For example, if you are sued after the expiration of the statute of repose, and there is no debate about when you last performed professional services on the project, then your lawyer can bring a motion to have the judge decide the case in your favor purely on that legal issue.
Most construction cases, however, are not so clear cut factually. However, you can still have a judge decide a case on summary judgment if the disputed facts, taken in the light most favorable to the other side, still show that you should win.
What happens when you file for a summary judgment hearing?
Either side can file a paper called “Motion for Summary Judgment”. This is usually done during or after discovery, as factual issues are determined and the list of truly disputed items is narrowed. Both sides have an obligation to present evidence as to why/why not the judge should grant the motion. Evidence can include affidavits (including your own and that of your expert), discovery responses, deposition testimony, and documents produced in discovery.
How does the judge decide?
The judge is required to take the factual evidence in dispute, and assume that the non-moving party’s version is correct. For example, let’s say you are moving for summary judgment based on the statute of repose. You claim that you last performed work more than 6 years before the lawsuit was filed. If the other side has some evidence that work was done later than you claim, then that is a dispute of a material fact. The judge will have to assume that the other side’s date is correct, and deny the motion for summary judgment on those grounds.
If, however, the disputed facts are not material (that is, not crucial to the deciding law), then the judge does not need to even consider them. And no one can rely on bare assertions of fact (of the “nuh-uh” variety): they have to produce some evidence of their position.
How will we know if we won or lost?
This varies from judge to judge. In general, unless the case is clear cut, the judge will want to take the case “under advisement”. What that means is that the judge is going to review the presented materials, make a decision, and then call the lawyers to tell them how he/she has ruled on the motion.
What does it mean if we lose summary judgment?
If you are asking for summary judgment and lose (and in close calls, expect to lose as judges prefer that cases go to a jury), then the denial of your motion for summary judgment means that the show goes on. Discovery can continue, and the case will be prepared for trial.
Of course, just because mediation has impassed and summary judgment has failed does not mean there *will* be a trial. Many cases continue to be negotiated and settled “on the courthouse steps”. Literally sometimes.
If your case does not, next week’s entry on jury trials should be required reading.
Have a question about summary judgment or other court motions? Drop me a line or comment, below.
I have previously discussed the ABCs of Lien Laws for those making claims on a project (that is, architects, engineers, contractors, subcontractors, and suppliers) and the 123s of Lien Laws for project owners. Now, time to learn some new tricks: enter, the Lien Agent.
In case you’ve been hiding in your man-cave waiting for warmer weather to arrive and missed all the hoopla, as of April 1, 2013, North Carolina has a new lien law act. Essentially, for *most* construction projects [there are a few limited exceptions for low dollar work or single family, owner occupied residences], owners will need to file a notice of an entity to be their “Lien Agent”, and contractors will file notices within a short window of starting work. If done correctly, it should keep everyone aware of who is on the project, who is doing what work, and who may have a lien.
The most pertinent part that affects architects and engineers? This:
N.C. Gen. Stat. § 44A‑11.2
(h) When a lien agent is not identified in a contract for improvements to real property subject to G.S. 44A‑11.1 entered into between an owner and a design professional, the design professional will be deemed to have met the requirement of notice under subsections (l) and (m) of this section on the date of the lien agent’s receipt of the owner’s designation of the lien agent. The owner shall provide written notice to the lien agent containing the information pertaining to the design professional required in a notice to lien agent pursuant to subdivisions (1) through (3) of subsection (i) of this section, by any method of delivery authorized in subsection (f) of this section. The lien agent shall include the design professional in its response to any persons requesting information relating to persons who have given notice to the lien agent pursuant to this section. For purposes of this subsection, the term “design professional” shall mean any architects, engineers, land surveyors, and landscape architects registered under Chapter 83A, 89A, or 89C of the General Statutes.
In other words, if the owner designates a lien agent up front, you follow the process and note your involvement for the record.
What if the owner does NOT designate a lien agent up front? You are covered by default, once he does so. And he will do so, as before the owner can get a building permit, he will be forced to designate a lien agent. Nice, right? You have built in protections, and you don’t need to worry about filing a lien and damaging a relationship with an owner if they are slow to pay.
The on-line system for selecting Lien Agents (for owners) and notifying Agents of your work (for everyone else) on a project is LiensNC. A helpful tip sheet produced by the Title Insurance industry walks you through the process.
Many other fine folks have weighed in on the nuts & bolts of how the new system works, so I will not repeat it all here. Instead, let me direct you to a few of these resources (apologies in advance for anyone I may have slighted):
Bryan Scott: A good place to start for a broad overview of what you need to know
For the designer’s perspective, from Matthew Bouchard:
I’m a design professional providing services prior to the execution of a contract for construction. What if there’s no lien agent in placing during my pre-construction performance?
That depends on whether your contract is with the owner or with another design professional. If you are in direct contractual privity with the owner and your contract does not include the lien agent information, the owner is responsible for providing your contact information to its lien agent upon the owner’s appointment of same. If you are a design subcontractor, you should make a written request to the owner for the lien agent’s contact information. By statute, you will have no obligation to comply with the preliminary notice requirements until you receive the contact information you have requested.
I believe that the new lien law will help design professionals, as you no longer have to worry about alienating the owner by filing a lien or risk losing your lien priority. Instead, the lien agent will be as common as a building permit. You will be protected from the beginning with little effort, and without even having to depend on the owner. What do you think?
Comments? Questions? Share you thoughts in the comments box, below.
Photo (c) Seattle Municipal Archives.
A client asked me about a contract he was asked to sign in which consequential damages were being waived. Consequential damages are those things that cost money which arise indirectly out of a failure of a party on a construction project. They can include:
- loss of use
- loss of rent
- loss of profit
- loss of bonding capacity
- extended overhead
- extended equipment rental fees
- increased material costs
Note that this is not an exhaustive list, and other consequential damages may be applicable depending on the project.
The standard industry contracts all have at least some waiver of consequential damages, as noted in this chart.
Bottom line: waiver of consequentials can be a good thing or a bad thing, but you will not know which when you are signing on the dotted line.
Just make sure that if there is a waiver, that it is mutual on both sides. Good luck, and “be safe out there”
Your turn. Have you ever waived your right to consequentials? Horror story to share about paying someone else’s costs? Share in the comment section.Dollar Photo (c) sivlen001. Chart (c) Melissa Brumback
Can’t we all just get along? Mediation and settlement of the construction lawsuit (Law & Order: Hard Hat files Part 7)
Today, part 7 of our series on the Construction Lawsuit, Law & Order: Hard Hat files.
At some point during the lawsuit (usually, but not always, after expert reports are produced), your lawyer may tell you the case is going to mediation. In fact, in North Carolina, all Superior Court cases are ordered into mediation, though the timing is usually left to the lawyers.
What is mediation?
Quite simply, mediation is a process in which the parties, their insurance representatives, and their lawyers get together to discuss trying to settle the case. The process is usually fairly informal, fast, and, often effective.
How is mediation different from arbitration?
In arbitration, you present your case to a one or three person “panel” of arbitrators. Witnesses are sworn in, evidence is presented, and, ultimately, the arbitrator(s) decide who wins, who loses, and what amount of damages should be paid.
In mediation, however, there is no “decision maker,” and the only way your case will be resolved is if you agree to having it resolved. In other words, you have much more control over the outcome.
Technically, how does a mediation work?
Mediations are all unique, but in general, most start out with a “general session” in a large conference room in which all parties (lawyer, parties to the lawsuit, and insurance reps) are present. The mediator, usually another lawyer who is not involved in the case, will present opening remarks, explaining that he/she is not there to decide anything, the ground rules for the day, and how he handles confidential information.
Then, the mediator asks each lawyer to state his case. The party who brought the lawsuit always goes first, and they state how the project started, why they sued, and why they believe they are entitled to damages. This can range from a 5 minute speech from their lawyer to a full-blown 2 hour multi-media (read: powerpoint) presentation, including remarks from retained experts. I’ve seen both, and everything in between.
Following the plaintiff’s presentation, the other parties will be asked to state their case (i.e., their defense, and any counterclaims), and why they believe they will prevail at trial.
After all of the lawyers have had their say, the mediator will generally allow any parties to speak if they wish to. Discuss this with your lawyer ahead of time, but the default is to simply bite your tongue, keep your mouth shut, and wait until “private session” to have your say. No architect or engineer ever made things better by arguing during the opening general session.
What are these “private sessions” of mediation all about?
After the opening session, the mediator will divide the parties into different conference rooms. Sometimes, parties whose interests are closely aligned may be in the same room, at least for part of the day. For example, if an architect and his engineer are united in their defense, they may want to spend part of the private sessions together.
The mediator will then practice “shuttle diplomacy”. That is, the mediator will talk with each party privately, playing devil’s advocate, discussing case outcomes, and, ultimately, passing offers to settle back and forth among the parties.
How do the offers of settlement work?
The settlement offers are highly case-dependent, and can vary throughout the day depending on how the mediator likes to work and how much leeway the attorneys give him. Usually, he starts with the plaintiffs to find out what amount of money, short of the full amount claimed, they would accept to walk away from the lawsuit.
Then, the mediator talks with the defendants (and third party defendants) about how much money they would be willing to pay to be done with the risks and unknowns of a jury trial. Conditional, confidential, and other offers are sometimes employed. If they are, the mediator will discuss the process with you at that time.
Why should I pay money? My design was good and I haven’t done anything wrong!
At some point during the day, you will end up saying this. It will seem extremely unfair that you are being asked to pay (or have your insurer pay on your behalf) for someone else’s problem or mix-up. However, ultimately you will have to make a business decision about how much time and effort your Firm wants to spend on taking the case to a jury. If the case settles, you free up the time you would otherwise spend in depositions, meeting with your lawyer, talking to experts, and reviewing documents. Depending on the scope of the project and the lawsuit, this could be hundreds of man-hours. Further, at the end of the day, you end up risking bad publicity and an adverse judgment that will affect either your bottom line or your insurance premium.
Are you saying I have to settle?
No, absolutely not. Sometimes, the plaintiff has such a crazy demand, that you are better off taking the case to a jury. Other times, the evidence is so much in your favor that it doesn’t make sense to settle. Usually, however, the case is more nuanced, and so you need to discuss the evidence, and your chance of a successful verdict, with your lawyer on a case by case basis.
My case was “impassed” at mediation. What does this mean?
If the mediator concludes that the parties are too far apart to settle, at some point he will declare an impasse. If this happens, everyone shakes hands and goes home.
What happens next is that the lawyers may continue to talk over the next month or so to see if there is any chance at all for settlement, and at the same time begin or continue their preparations for a trial. Just because a case impasses at mediation, doesn’t mean it can’t or won’t settle.
Cases can settle right up and through trial, until the jury comes back with a verdict. Obviously, the sooner a case settles the better, as you will have spent less time and money on trial preparation. However, do not give up all hope of settlement simply because of a mediation impasse. (After all, Lennie Briscoe never gave up, did he?!).
Your turn. Have you been part of a mediation? Tell me about your experiences, good and bad. And, if you haven’t already, be sure to sign up for email updates of blog posts directly to your inbox. The sign-up box is on the top right hand side of the homepage.
Photo (c) cobrasoft.