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Insight
Going Once, Going Twice ... A New Alternative to Design-Bid-Build Contracts
The 2014 Legislative Session brought new possibilities for large construction projects under the Public Contract Law. Generally, a public entity is required to separately hire a design professional to design the project, and let the project out for public bid for the construction work. "Design-build" contracts, in which the public owner contracts with one entity for the design and construction of the facility, are prohibited under Public Contract Law. However, the Legislature has now given public entities another option under the Public Bid Law: Construction Management at Risk Delivery Method (CMAR).
As a precursor to the new law, the Legislature granted special approval for use of the construction management at risk delivery method for several projects, to include the new airport terminal for the New Orleans Aviation Board at the Armstrong International Airport. This CMAR delivery method required two separate contracts for design and construction, but allowed selection of the construction contractor based on factors other than lowest construction cost. In other words, the design professional was selected in accordance with Public Contract Law, and the owner secured a lead construction firm during the design phase through an evaluation of the contender construction firms' qualifications, experience and history.
Under a construction management at risk delivery method, the selected lead contracting firm commits to deliver the final project for a maximum price. The owner has the option to award the construction contract to the firm after the design phase. Because the design professionals and the contractor are on the same team during the design phase, many industry leaders believe the construction management at risk method will help public entities control costs by allowing the contractor and designer to work together on scheduling, budgeting and constructability during the design phase. The goal also is to minimize the risk of construction and design disputes through the collaborative effort.
In 2014, via Act 782, the Legislature enacted La. R.S. 2225.2.4 which allows a public entity to use the CMAR method for projects estimated to cost 25 million dollars or more. The statute defines a CMAR contractor as one who is properly licensed, bonded and insured and can provide construction experience to the owner or its design professional and/or contracts with the owner to construct the project for a guaranteed maximum price, thus eliminating the need for a separate bid phase.
Under the statute, the public entity must advertise a request for qualifications to award a contract to a CMAR contractor for preconstruction and construction services in the official journal and website of the public entity. After the responses to the RFQ are received, a selection review committee makes a recommendation to the owner. This committee consists of one design professional not involved in the contract, one licensed contractor not involved in the contract, a representative of the owner and two members from the general public.
Once the CMAR contractor is awarded the contract, the contractor and the design professional are required to furnish the owner with a probable cost of the project at the 60% and 90% design completion phases. The CMAR contractor must provide the public entity a guaranteed maximum price for construction of the project. If the owner agrees with the guaranteed maximum price and the construction phasing and sequencing, the owner can award the construction contract to the CMAR contractor. If the public entity and the CMAR contractor cannot agree, the construction phase of the project will be re-advertised and let out for public bid.
Construction
Contracts
Public Bid Law
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MOTORCYCLE COVERED UNDER AFTER-ACQUIRED VEHICLE UM PROVISIONS
In Green v. Johnson, et al., 14-C-0292, (La. 10/15/14), the lower court awarded summary judgment in favor of Allstate in a claim seeking UM policy benefits. The Green Supreme Court reversed and held that the representative of a deceased motorcycle accident victim could be entitled to UM coverage even though there was no coverage under the liability provisions of the policy. Under the facts, neither the victim nor the involved motorcycle respectively met the liability policy definitions of “insured person” or “insured auto.” The Court found that, even though there was no liability coverage under the policy, the motorcycle could nevertheless meet the “insured auto” definition necessary for coverage in the after-acquired vehicle provisions of the UM section of the policy.
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RE-EMERGENCE OF OBVIOUSNESS DEFENSE POST-BROUSSARD
In Rodriguez v. Dolgencorp, LLC, 2014 -1725 (La. 11/14/14), the plaintiff alleged that a “maze of shopping carts” in the defendant’s parking lot created an unreasonable risk of harm such that defendants should be liable for the injuries sustained after the plaintiff’s left foot came in contact with one of the carts. The defendant filed a motion for summary judgment after the plaintiff admitted that she saw the offending shopping cart prior to her fall. In reversal of the lower courts, the Louisiana Supreme Court opinion stated: “Courts have recognized that the mere presence of obstacles in a store, such as shopping carts, does not create an unreasonable risk of harm when the condition is open and obvious.” The opinion cites the Court's recent decision in Bufkin v. Felipe’s Louisiana, LLC, 2014-0288 (La. 10/15/14) which appears to have softened the perceived impact of Broussard v. State of Louisiana, 2012- 1238 (La. 4/5/13).
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What's the Delay? Contractor Delay Damages Under the Public Bid Law
Generally, a provision in a construction contract for private work limiting the contractor's right to recover additional costs arising from delays outside of the contractor's control may be enforceable. However, under the Public Bid Law, such a provision has been found to be against public policy. La. R.S. 38:2216 prohibits any public contract provision that purports to waive, release or extinguish the rights of a contractor to recover delay damages if the delay was caused in whole or in part by the acts or omission of the public entity.
A recent First Circuit decision struck down a contract provision that purported to limit a contractor's right to damages in a public contract. In F.H. Myers Const. Corp. v. State, Div. of Admin. Office of Facility Planning & Control, 2013-2153 (La.App. 1 Cir. 6/18/14), reh'g denied (July 22, 2014), a general contractor brought an action against the State for breach of contract, seeking payments for extended-fixed job site overhead.
The State argued that the contract contemplated that the contractor could recover extended-fixed job site overhead only if there was a complete stoppage of work solely attributable to the State. The contractor argued that the contract provision was in violation of La. R.S. 38:2216.
The court found that La. R.S. 38:2216 contemplates that a contractor who is a party to a public contract shall be able to recover for any delay they may suffer from the fault of the State entity. Because the contract waived the contractor's rights to seek damages for extended-fixed job site overhead for any delay short of a complete stoppage of work, the contract imposed a stricter limit on damages than the statute allows. The court also noted that the contract only allowed for damages where the State was 100% at fault, whereas the statute allows recovery even if the State is only partially at fault. As such, the provisions at issue were held to be void and unenforceable.
Construction
Contracts
Public Bid Law
Resource
NO “EASE OF ASSOCIATION” IN PERMITTING CASE
In Maw Enterprises, L.L.C. v. City of Marksville, 2014-0090 (La. 9/3/14), a premise owner filed suit against the City of Marksville based on the City’s failure to grant an alcoholic beverage permit to the premise owner’s lessee. The owner alleged that the failure to properly issue a permit caused harm in lower payments under the lease. In response, the City alleged that the premise owner did not have a cause of action, and the Supreme Court of Louisiana agreed. The Supreme Court reasoned that the permit was issued to the lessee, not the property owner. Thus, the owner possessed no cause of action concerning the permit's non-issuance.The owner also alleged a negligent interference with contractual relations by the City. However, the Court reasoned that there was no ease of association between the moral, social, and economic values involved with the duty to issue a retail alcoholic beverage permit and the economic loss allegedly sustained by an entity whose only interest arose from a lease with the permit applicant. Therefore, the Court ruled that the premise owner failed to state a cause of action upon which relief could be granted.
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Insight
Smart Phones: Dangerous Weapons?
In Riley v. California, 134 S. Ct. 2473, 2477, 189 L. Ed. 2d 430 (2014), the Supreme Court considered whether police officers could search the contents of a smart phone incident to an arrest. In Riley, an alleged gang member was arrested for possession of a concealed firearm. At the precinct, a police officer went through the arrestee's smart phone looking for evidence of other crimes and found a picture of the arrestee next to a car connected to a drive-by-shooting.
Before determining whether the search violated the Fourth Amendment, the Court looked to a trilogy of case.
The first two cases, Chimel v. California, 395 U.S. 752 (1969) and U.S. v. Robinson, 414 U.S. 218 (1973), held that searches incident to arrests are proper when necessary to protect evidence or officers.
The third, Arizona v. Gant, 556 U.S. 332 (2009), held that police may search a vehicle when it is reasonable to believe that evidence relevant to the crime of arrest may be found, including containers located in the vehicle.
The Supreme Court determined that none of the justifications in the above cases were present in Riley. Unlike Chimel and Robinson, neither the evidence, i.e., the phone, nor the officers were in danger. While officers may examine the physical aspects of the phone to ensure that it will not be used as a weapon, a phone, once secured, poses no threat. Further, multiple options are available to prevent the destruction of evidence without invading the privacy of the arrestee, such as disconnecting the phone from the network or placing the phone in a "Faraday bag."
The Court also considered the prosecution's argument based upon Gant, which compared a cell phone to a physical container. In rejecting this rationale, the Court commented that classifying a smart phone as a physical container is "like saying a ride on horseback is materially indistinguishable from a flight to the moon. Both are ways of getting from point A to point B, but little else justifies lumping them together." The Court's analysis was informed by the vast storage capacity of the modern cell phone.
In conclusion, the Supreme Court held that a smart phone could not be searched incident to arrest under the facts of the case. It will be interesting to observe the extent to which the Court's acknowledgment of the privacy concerns involved in smart phone technology may creep into civil discovery and evidentiary disputes.
Constitutional Law
Evidence
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FMLA CLAIM BLOCKED BY SOVEREIGN IMMUNITY
Louisiana is immune from suits, except when Louisiana elects to waive the defense of sovereign immunity. In Holliday v. Bd. of Sup’rs of LSU Agric. & Mech. Coll., 2014-0585 (La. 10/15/14), the plaintiff alleged that the Board of Supervisors of LSU Agricultural and Mechanical College was in violation of the Family and Medical Leave Act of 1993, a federal law. The Supreme Court of Louisiana ruled that, while Louisiana may have waived sovereign immunity with respect to some claims, Article 1, § 26 of the Louisiana Constitution indicates that Louisiana has not waived its sovereignty within the federal system. Therefore, the Supreme Court reversed the decision of the trial court, and held that the FMLA claim asserted by the plaintiff fell to the sovereign immunity of Louisiana.
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SUPREME COURT NARROWS IMPACT OF BROUSSARD
In Bufkin v. Felipe’s Louisiana, LLC, 2014-0288 (La. 10/15/14), the Supreme Court of Louisiana considered whether summary judgment was appropriate when a pedestrian was struck by a bicycle while walking around a dumpster in a parking area. The plaintiff alleged that the dumpster created an unreasonable risk of harm, creating a “blind spot” which prevented pedestrians from seeing oncoming traffic. Finding that any obstruction caused by the dumpster was obvious and apparent, and therefore reasonably safe, the Court granted the defendant’s Motion for Summary Judgment. This case appears to soften the impact of Broussard v. State ex rel. Office of State Bldgs., 2012-1238 (La. 4/5/13), 113 So. 3d 175, 179, which had been interpreted as creating a near-ban on a motion for summary judgment based on “open and obvious” facts.
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Insight
Do Not Pass Go
The Louisiana Supreme Court recently considered the recoverability of indirect economic damages caused by negligent injury to property of others in MAW Enterprises, LLC, et al v. City of Marksville, et al. The Court found the defendant's duty did not include liability for damages resulting from negligent interference of a contract, and dismissed the case.
MAW involved the City of Marksville's denial of a liquor permit to the plaintiff's lessee. The rent was dependent in part upon the amount of gasoline sales.The plaintiff alleged that the City's improper denial of the liquor permit resulted in lower gasoline sales. Under these facts, the Court held that the plaintiff had no cause of action against the City because the damages claimed were not within the "scope of the duty."
The MAW Court extensively discussed its earlier decision in PPG Industries, Inc. v. Bean Dredging, 447 So.2d 1058 (La. 1984). Citing to the analysis in PPG, the Court reasoned that holding a tortfeasor responsible for indirect economic damages caused by injury to property of others could improperly create liability in an indeterminate amount for an indeterminate time to an indeterminate class.
The Court held that general tort duties duty did not encompass the plaintiff's injury. Additionally, after a lengthy analysis, the Court held that the duties under La. R.S. 26:71 et seq. (involving the issuance of liquor licenses) likewise did not encompass the plaintiff's damages because these duties were owed only to the person whose liquor license was denied or granted, namely the lessee.
One dissenting Justice found the majority's reliance on PPG improper because, unlike PPG, the plaintiff's damages were not caused by a "negligent injury to property resulting in physical damages." The majority's citation to PPG appears to indicate that PPG's reasoning may be applicable to cases involving both physical and non-physical damages.
Contracts
Insight
Business as Usual?
Louisiana has updated its corporate laws by adopting legislation modeled off the Model Business Corporation Act ("MBCA"). The new set of laws is named "The Louisiana Business Corporation Act" and will replace Louisiana's Business Corporation Law, which was enacted in 1968. The change occurred on May 30, 2014 when the Governor signed HB319 into law as Act 328. The new provisions will go into effect on January 1, 2015.
The MBCA is a set of model laws created in 1950, and are regularly amended and updated by the American Bar Association's Committee on Corporate Laws. The MBCA is meant to govern the functioning of public and private corporations. It has been adopted in whole or in part by a majority of the states.
Representative Franklin J. Foil (R - Baton Rouge) originally introduced HB408 in the 2013 Regular Session to adopt laws modeled off the MBCA based on the recommendation of the Louisiana State Law Institute. However, this bill died toward the end of the session. Thereafter, Rep. Foil introduced HB319 during the 2014 Regular Session, which was passed, thereby adopting much of the MBCA.
The newly adopted laws constitute a comprehensive update to Louisiana's corporate law system and will bring substantial change in some areas. Merely by way of example, the law provides some protections to minority shareholders in closely-held corporation who are being "oppressed."
It will be interesting to see the extent to which Louisiana courts will seek guidance from the decisions of other states that have operated under similar laws for many years.
Corporate Law
Resource
PCF OBLIGATED UNDER STANDING COURT ORDER
In Watkins v. Lake Charles Mem’l Hosp., 2013-1137 (La. 3/25/14), the Supreme Court addressed the extent to which the Louisiana Patient's Compensation Fund (“PCF”) continues to be obligated to make advance payments for custodial/attendant care for a medical malpractice victim, after receiving information indicating that such care may no longer be needed. In this case, the district court pursuant to its continuing jurisdiction had ordered the PCF to pay quarterly and in advance for the victim's custodial/attendant care.In its analysis, the Supreme Court noted that court orders must be obeyed until set aside, and that failure to comply with a court order is constructive contempt of court. The Court then held that the PCF was obligated to comply with the district court's ruling requiring advance payment, unless or until the ruling is modified or set aside by the trial court.
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NOTARIAL TESTAMENT INVALIDATED
In re Succession of Smith, 49-118 (La. App. 2 Cir. 8/13/14), the Second Circuit considered whether the “attestation clause” of the notary and witnesses required for a notarial testament is satisfied by an attestation of the testator signed by the witnesses and notary.In general, in order for a notarial testament to be valid as to form: (1) the testator must declare or signify in the presence of a notary and two witnesses that the instrument is his last will and testament; (2) the testator must sign his name at the end of the testament and on each separate page; and (3) the notary and two witnesses must sign a declaration in the presence of each other and the testator attesting that the testator declared that the instrument is his last will and testament in their presence. In the case at hand, the court held that the attestation clause at was an attestation clause of the testator, and not of the notary and two witnesses as required. In keeping, the court held that this defect invalidated the notarial testament.
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