Tag Archives: lawsuit

The police are at the door! Service of the construction lawsuit on your company (Law & Order: Hard Hat files Part 2)

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sheriff carThe police?  Yes, that’s right.  If you are sued, at least in North Carolina, you may find Mr. Policeman (or Ms. Policewoman) at your door.  There are several ways that you may find out you or your company are being sued, but undoubtedly seeing the Sheriff at the door is the most nerve-racking.  Heck, we have Sheriffs in our law office occasionally to serve papers, and the sight never fails to startle me.  So be forewarned—the first you find out that there is a lawsuit may be when Johnny Law himself comes knocking.

While unnerving (as it is often meant to be by the party suing you), rest assured that all the Sheriff will be doing is identifying you and handing you papers showing you’ve been sued.  The Sheriff doesn’t actually have to hand you the papers personally- in fact, depending on if and how you are incorporated, he may be handing them to your spouse, another adult that resides in your house, your business partner, or an officer or manager of your professional association.  While the Sheriff is not supposed to leave papers with a mere employee, that can and does happen as well.

The Sheriff is not the only way you can be sued.  You can also get a certified mail package—you know, the type that requires you to go sign for it at the post office.  Or, you may get a Fed Ex package.  If you are being sued in federal court, or you know the lawsuit is coming, you may not get anything, as it may all come to your lawyer instead.

What should you do if you do get the lawsuit (called the Complaint)?  First, run, do not walk, to your insurance carrier and/or lawyer.  Do not pass go.  This should be the first thing you do.  If you don’t have a lawyer, but you have insurance, your agent should be able to help you report the claim, and a lawyer will be assigned to you by the insurance company.  If you have a lawyer, you can report to him/her, and ask the lawyer to make the claim on your behalf to your insurance company.

Remember, however, that you need to report it as soon as you can.  In state actions in North Carolina, you have 30 days from receipt to respond.  In federal actions, you have 20 days.  There are certain rules concerning weekends and governmental holidays that change these deadlines at times.  But the important thing to remember is that you must respond, timely, or you can end up with a judgment entered against you in default.  So, when you report the lawsuit, the first thing your agent or lawyer will want to know is the date you (or someone connected with you) first received the Complaint.

If you report the claim and do not hear back?  Follow up.  Never assume that an email went through or that the person you called isn’t on vacation or in the hospital.  Make sure that you speak with your agent and/or lawyer personally and that they know when you were served.

Questions? Comments?  Have you ever been sued?  Do you now know something you wish you knew then?  Drop me a line or comment below.

Next week in our series:  You have the right to an attorney! (but one will not be appointed for your construction lawsuit)

Photo (c) freefoto.com

 

Is there a dead body in your future? The first sign of trouble on the construction project (Law & Order: Hard Hat files Part 1)

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fake dead bodyNobody dies in a construction dispute.  At least most of the time!

However, just as the usual “thunk-thunk” chord in Law & Order warns the viewer that something is awry, there are warning signs that your construction project may be under similar dire straights.  You should recognize these signs for what they are—early-warning lawsuit detection devices.  Signs that a lawsuit may be in your future include:

  1. The  “everything has gone wrong” situation.  This one is fairly big and obvious, but it bears mentioning.  If the project is delayed, over budget, and there are signs that the owner is looking for someone to take the fall, watch out.
  2. Much more subtle, but equally troubling, is the “start acting squirrely” syndrome.  If you have always had a good working relationship with the general contractor, but suddenly he is aloof, watch out.  If the owner is usually friendly and free with the flow of information, and he suddenly begins to clam up, be concerned.
  3. The “let’s document everything” protocol.  Now, as a lawyer, I feel duty bound to tell you that I think documenting everything is best management practice.  However, I do know that most normal folk don’t usually behave this way 24/7.  So, if you are on a project where a contractor likes to write letters to the file almost as much as he does change order requests, be leery.  Could be he just listens well to his lawyer’s proactive advice to document everything.  Or, could be he is preparing a case from the get-go to claim design failures, construction administration delays, and the like.  How to tell the difference?  Often, you can only go with your gut.  But take note—is Mr. Letter Writer documenting everything, or just items that might be considered “blame-able” ?
  4. The “I’m confused” RFI king.   Similar to #3 above, but more specific, the confused RFI king always seems to need clarification or further information about your design.  The requests for information flow so fast, you may have trouble responding timely.  This may be part of the plan.  Or, it may simply be a numbers game— either the contractor is asking RFIs to buy time on the project (often on a case with strong liquidated damages provisions), or he wants to later be able to point out the “excess number of RFIs” to prove “bad design.”

 Now that you’ve caught the whiff of trouble brewing, how do you stop it before the dead body smell takes up residence in your car?  Observe, document, and respond in kind.

If you are dealing with an RFI king, respond timely, and note when the RFI is asking for information that is readily available on the plans.  You might even consider keeping your own running log of questionable RFIs, so you can readily show your lawyer, and a future jury, that although there may have appeared to be a large number of RFIs on the project, the fact was that most of them (X percentage) were questions about something that the contractor should have already known if he had reviewed the plans.

If you have a “document everything” guy on your hands,  respond in kind.  You should be doing this anyhow, of course, but if you have someone that is especially prone to documenting everything, you need to be extra vigilant that he is not stating anything that is untruthful, that the documentation is complete, and that any time you get a document that doesn’t completely tell “the truth, the whole truth”, that you supplement it with your own documentation accordingly.

If you have a squirrely acting client, you might consider just politely confronting him to ask if anything is going on.  It could be something that has nothing to do with the project –  internal politics, personnel crises, etc.  In which case, you will find that out.  If there is something more sinister afoot, you can probably determine that as well.  The key here is to ask whoever you are (or had been) close to, and to ask them off the record, in person.  You can learn a whole lot through non-verbal body language.  If you find out, directly or indirectly, that there may be a claim afoot, then you can proceed accordingly.

If the project has gone to hell in a handbasket, there is not a whole lot you can do, other than to keep ensuring that you and your team are meeting all contract requirements.  Part of this should include documentation for the eventual lawsuit, if it comes to that.  You might also contact your lawyer or insurance company for assistance behind the scenes—something called “loss prevention”.  Remember, reporting the dead body is the first step to clearing the air.  It’s the cover up that usually gets folks in trouble.

Now it’s your turn.  Drop me a note or comment below to share your own techniques for recognizing possible lawsuits.  Next week in the series: the mechanics of being sued.  Stay tuned!

Photo (which is not of a *real* dead body) (c) garlandcannon via cc. 

 

Latent Defects: extending the statute of limitations (law note)

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defective-tools-cause-injuriesAs we’ve previously discussed, the statute of limitations for construction claims in North Carolina is generally three years.  That is, once 3 years have passed, you are generally protected from any lawsuit filed after that time.

Does that mean that no lawsuit can be filed against you subsequent to that time?  No.  First, the statute of limitations is an affirmative defense, meaning that you must timely assert the defense as part of your response to the lawsuit.

Secondly, it is sometimes not apparent when the three year period begins to run.  Substantial completion or final completion?  What if your work is finished, but the project is not– does the three year period not start until project completion?  The issue of whether the statute of limitations has run is complex, and a mixture of law and fact questions.  See, Lord et al v. Customized Consulting Specialty, Inc. et al, 182 N.C. App. 635, 643 S.E.2d 28 (2007).

Finally, be aware of the hidden danger of hidden dangers. 

The three years does not start to run until it becomes obvious that there is damage stemming from your professional negligence.  The applicable statute states that the three years “shall not accrue until bodily harm to the claimant or physical damage to his property becomes apparent or ought reasonably to have become apparent to the claimant, whichever event first occurs.” N.C. Gen.Stat. § 1-52 (2005).

In other words, if there is a defect that is not readily observable and visual, the three years may not start to run until it becomes observable (e.g., through destructive testing, repair work, or renovation work).  This is what is known as a “latent defect”, and it can impose liability far beyond the initial 3 years.

Does the latent defect rule extend liability indefinitely?  No, it does not.  The statute of repose (6 years in NC; other states vary) will impose an absolute final date on real property improvements, after which no further liability can successfully be claimed.

Questions?  Drop me a comment, below.  Also, be sure to sign up for regular email updates and our free Construction Professional newsletter by entering your contact information on the top right of the homepage.

Photo “Defective Tools Cause Injuries” – NARA – 514107 

Something to Hang Your Hat On… (Limitation of Liability clauses) (law note)

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hat rackIn the past on this blog, I have pointed out the benefits of Limitations of Liability clauses.  These are the clauses that state that the most damages that your Firm can be responsible for is capped at a certain dollar amount or your contracted fee.

Do you have a limitations of liability clause in your professional services contract?  You should.  Best practice would be to have such a clause that limits damages against you to a set amount.  For example:

Engineer’s liability to Client for any and all injuries, claims, losses, expenses, damages or claim expenses arising out of this agreement, from any cause or causes, shall not exceed the total amount of $50,000 or the amount of Engineer’s fee, whichever is greater.

While best practice is to have such a provision, it is not always enforced.  In a case arising out of the Western District of North Carolina, the court noted that such provisions will not be enforced where the result would be unconscionable and “elicit a profound sense of injustice.” See  Performance Sales & Mktg., LLC v. Lowe’s Companies, Inc.,2010 WL 2294323 (W.D.N.C. June 4, 2010).

What does this mean in practical terms?  It means that you should endeavor to include a limitation of liability clause, but don’t necessarily think that if you have that you’ve capped your risk.  A court can always decide that the clause is unconscionable.  But, such a limitation is one more thing to “hang your hat on” if and when you find yourself staring down the barrel of litigation*.

* If, however, you are facing litigation, make sure you sign up for regular blog updates.  Starting next week, I am writing a new series on the anatomy of a construction lawsuit, so stick around! 

 

Photo:  (c) BabbNet via CC.

Understanding & Modifying Key Construction Contract Terms

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As I mentioned, I  was one of three amigos who spoke on a Construction Contract webinar last week.  We had a good turn out and lots of very astute questions during the Q&A portion.  While you will miss all of my witty insightful helpful commentary, you can check out the slides for my portion, on understanding and modifying key terms, here:

Drafting Construction Contracts

My comrades’ presentations can be found by visiting Chris’s blog (for payment provision issues) and Craig’s blog (for damages and dispute resolution issues).  Happy viewing!