constructionattorneyblog

A lesson for Architectural Firms: be careful how you pay employees

Tom Hess was employed by an architectural firm. After leaving the firm, he sued, claiming that the firm had failed to pay him for overtime work in violation of the Fair Labor Standards Act of 1938 ("FLSA"). The firm moved for judgment on the pleadings on the grounds that the plaintiff was an architect and was paid more than $455 per week, thereby making him exempt. Hess responded that, although he has a degree in architecture, he was not actually employed as an architect at the firm. He claimed that his work was "production only," which was essentially the function of a draftsman. 

The FLSA provides that employees, not otherwise exempt, are to be paid overtime compensation for hours in excess of 40 per work week. 29 U.S.C. 207(a). However, section 207 does not apply to an employee "employed in a bona fide . . . professional capacity . . ." To be so empoyed, an employee must be (i) compensated at a salary of not less than $455 per week (ii) whose primary duty is the performance of work "[r]equiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction." 29 C.F.R. 541.300(a).

The court denied the motion, finding that Hess had adequately pled a claim for violation of the FLSA and issues of fact preclude judgment on the pleadings. Presumably, those factual issues include whether Hess was actually working as an architect, or merely as a draftsman (which does not require a degree in architecture). Architectural firms may want to have their architect employees agree in writing that they are, indeed, working as architects. This could be in the employment agreement or a separate document. The cost of litigating such a case can be significant.

Hess v. James R. Childers, Architect, Inc., Case No. 11-CV-482-GKF-FHM, US Dist. Ct., Northern Dist. Oklahoma, March 19, 2012.

 

Arbitrations are not always private

For those who believe that arbitration proceedings are always private, a recent Kansas case, reported in www.kansascity.com on March 23, 2012, proves otherwise. Apparently, there was a court proceeding to vacate the huge arbitration award and the court allowed the arbitration file to be unsealed. Many arbitrations are attacked by the losing party, seeking to vacate an unfavorable award. Although the chances of success in such a proceeding are slim, the details of the arbitration and the dispute are then open to the possibility that they will be made public, such as here.

DESPITE HAVING TWICE SIGNED CONTRACT, CORPORATE REPRESENTATIVE NOT NECESSARILY OBLIGATED TO PERSONALLY ARBITRATE

The Second Circuit has issued a summary order in the case of Bonnant v. Merrill Lynch, 2012 U.S. App. LEXIS 5034 (2d Cir. Mar. 8, 2012), addressing whether a president/director of a corporation which entered into a form Merrill Lynch contract which included an arbitration clause, was personally obligated to arbitrate a third-party claim brought against him by Merrill Lynch.  The lower, district court granted summary judgment to Merrill Lynch on this issue and ordered the plaintiff, Marc Bonnant, an attorney, to arbitrate.  The appellate court, applying New York law, vacated the summary judgment and remanded the case back to the district court, concluding that the contract at issue was ambiguous and could be read either way, i.e., Bonnant had personally agreed to arbitrate or had not.  The lower court, it seems, had based its decision mostly on the plaintiff having signed the contract twice.  The Second Circuit, however, disagreed with this interpretation:  "After considering the agreement in its entirety, we conclude that Bonnant's second signature did not unambiguously identify him either as accountholder or as a party to the agreement."  This case underscores the importance of making clear, on the face of the contract, in what capacity one is signing it.

illinois supplier denied mechanics lien

An Illinois appellate court has affirmed the trial court's summary judgment against a lumber company's mechanics lien. National City Mortgage v. Hillside Lumber, 2012 Ill. App. LEXIS 153 (2nd Dist., March 8, 2012).  The lender foreclosed on its mortgage after the owners defaulted. Hillside was then joined as a defendant because it had recorded a mechanics lien that alleged that the lumber company was owed more than $65,000 for materials used to improve the property. Hillside filed a counterclaim to foreclose its mechanics lien.

Both parties filed summary judgment motions. The lender's motion was based, in part, on Hillside's failure to serve it with notice of the lien. At the hearing, Hillside admitted that it did not have either the white card evidencing a certified mailing with a tracking number, a copy of the envelope addressed to the lender, or a green card evidencing receipt of the lien by the lender. The court granted the lender's motion for summary judgment and denied Hillside's cross-motion.

On appeal, Hillside contended that there was a genuine issue of material fact sufficient to defeat summary judgment. The court held that, once the party entitled to receive notice of the lien (the lender) denies receipt of the notice, the party providing the notice has to prove that the other party actually received notice. Here, Hillside admitted that it could not produce documentation that it even sent notice, let alone documentation that notice was received. Therefore, summary judgment was appropriate.

TRIAL COURT DECIDES THAT ARCHITECTS CAN'T BE LIABLE IN IMPLIED WARRANTY OF HABITABILITY

A homeowner plaintiff with whom the architect did not contract will sometimes nevertheless sue that architect for breach of implied warranty of habitability.  To "establish a breach of warranty of habitability, one must prove that the home had a latent defect caused by improper design, material or workmanship, which rendered the property unsuitable for use as a home."  Eickmeyer v. Blietz Org., 671 N.E.2d 795, 801 (1st Dist. 1996).

Illinois law provides that the duty of a design professional is defined and limited by the contract.  See Ferentchak v. Village of Frankfort, 475 N.E.2d 822 (1985).  That would seem to rule out the possibility of an implied warranty of habitability claim.  Still, plaintiffs have tried to use the case of Minton v. Richards, 425 N.E.2d 835 (1st Dist. 1983), to serve as a basis for pursuing the architect.  Minton allowed a homeowner to sue a subcontractor because the party with whom the owner contracted, the builder-developer, was insolvent.  This case has been used by several condominium homeowners associations to sue architects after construction defects were discovered.  In each case, the architect contracted with a developer, and not the association.

A recent order entered in a Cook County Circuit Court case refused to extend Minton to architects. In this Memorandum Opinion and Order, Judge Tailor expressly states that "Minton applies to subcontractors who participate in the actual construction of the property, but not architects who do no physical work at the project site."  While Judge Tailor's ruling is not law, it does provide some persuasive reasoning leading to the conclusion that implied warranty of habitability simply does not apply to architects.  Here are the motion, response and reply brief, respectively, which lead up to the Memorandum Opinion and Order.

architect arrested in connection with fireman's death

A year after a Los Angeles firefighter died in a $11 million mansion, the architect for the house (he was also the owner) was arrested for involuntary manslaughter, according to firehouse .com. The fire occurred just two days before filming for a reality TV show was to begin. The architect allegedly ignored safety regulations and altered the home after inspections. There were no fireplaces shown on the plans, and the architect had told inspectors that none were planned. However, he installed four outdoor fireplaces in the home after it was inspected, in violation of code. These fireplaces included combustible materials and one actually vented into the home. The deadly fire broke out from a fireplace on the third floor, racing upward and through the mansion's attic, eating away at wood framing and supports holding up the ceiling. As the firefighters were inside the building, the ceiling collapsed, fatally injuring one of the firemen.

The manufacturer had advised the architect that the fireplaces were only for outdoor use. One building inspector allegedly described the architect as argumentative, insisting that in Germany "the architect is in charge and decides when things are signed off." This is certainly different than the situation in the U.S.

States must follow supreme court precedent - arbitration and the faa

The Supreme Court in Marmet Health Care v. Clayton Brown, 565 U.S. ___ (Feb. 21, 2012), came down hard on the Supreme Court of Appeals of West Virginia in reversing a decision that denied arbitration. Here is the court's summary:

State and federal courts must enforce the Federal Arbitration Act (FAA), 9 U. S. C. § 1, et seq., with respect to all arbitration agreements covered by that statute. Here, the Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle. The state court held unenforceable all predispute arbitration agreements that apply to claims alleging  ersonal injury or wrongful death against nursing homes.

 

The decision of the state court found the FAA’s coverage to be more limited than mandated by this Court’s previous cases. The decision of the State Supreme Court of Appeals must be vacated. When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established. See U. S. Const., Art. VI, cl. 2.

 

Architect not liable when owner deviates from plans

In a recent New York case, Steven Bruno v. Trus Joist, 929 N.Y.S.2d 163 (August 23, 2011), an architect was hired to prepare drawings for permit. The drawings required the use of traditional wood joists and listed various finishes. Once the plans were approved, the architect had no further involvement with the project, although he informally visited the site after construction was completed, when he noticed that his plans had not been followed.

The owner had decided to use manufactured wood joists. Further, the owner had also changed various finish materials to ceramic tile and stone, which increased the weight throughout the building. When cracks started appearing in the stone floors, the owner sued various parties, including the architect. The architect moved for summary judgment, arguing that he had not deviated from the standard of care and the services he performed were not the proximate cause of the damages. The trial court granted the motion and the owner appealed.

The owners argued that they had informed the architect of their intent to use heavier finish materials and to change the joist system. However, it was undisputed that the final plans prepared by the architect did not show any of these changes. The owner's contention did not raise a triable isuse of fact because the final architectural plans established that the architect approved only the materials shown on the plans. The plaintiffs proffered an expert who opined that the architect's plans contained an improper structural load design. The court rejected this as not relevant because those plans were not followed.

The trial court's dismissal of the architect was upheld.

Fifth Circuit holds that manifest disregard is not basis for reversal

A 5th Circuit panel that included Sandra Day O'Connor has held that there is no longer a nonstatutory basis for vacating an arbitration award, following Hall Street.  Saipem America v. Wellington, No. 08-20247 (June 9, 2009).

LEED project managment software

The hot new topic for designers is LEED. While there are many legal issues that will unfold in the near future, there are new software products that address some of the management issues. This post by Houston Neal covers construction project management software used to track LEED credits.