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Ohio Supreme Court Issues Its Decision in
Dugan v. Meyers Construction Co., Inc. v. Ohio
Department of Administrative Services
By:
Donald B. Leach, Jr. and
Michael V. Passella
In a closely-watched case for Ohio’s construction
industry, the Ohio Supreme Court issued its long-awaited
decision in Dugan & Meyers Constr. Co., Inc. v. Ohio
Dep’t. of Admin. Svcs., (April 25, 2007), 113 Ohio
St. 3d 226, 2007-Ohio-1687, dramatically impacting the
presentation of claims by contractors.
Dugan & Meyers was the lead contractor for the
construction of three buildings for the Fisher College
of Business at The Ohio State University (“OSU”), and
was terminated and assessed liquidated damages of $3,000
per day for delay in completion. Dugan & Meyers sued to
recover its delay damages, alleging that the delays were
due to OSU’s failure to provide accurate and complete
plans and specifications. Applying the 1918 U.S.
Supreme Court decision in Spearin v. United States,
the Court of Claims referee, after a lengthy trial,
found that Dugan & Meyers was entitled to rely upon the
accuracy of the owner-provided plans and specifications
and awarded judgment in its favor in excess of $3
million.
The Tenth District Court of Appeals reversed the Court
of Claims judgment, holding that Dugan & Meyers did not
fulfill its contractual obligation to provide OSU
adequate notice of the plan errors. The Appellate Court
determined that Dugan & Meyers waived its right to
damages for delay as a result of its failure to adhere
to the contract’s requirements for providing notice and
requesting time extensions.
The Ohio Supreme Court affirmed the Tenth District’s
decision, finding that Dugan & Meyers was not entitled
to additional compensation or mitigation of liquidated
damages because it failed to strictly follow the
contract’s notice requirements for requesting time
extensions. In doing so, the Court held that the “no
damage for delay” clause was enforceable because the
contract pre-dated Ohio’s Fairness in Contracting Act of
1998, codified in R.C. §4113.62(C). This law provides
that any contract that waives or precludes recovery of
delay damages by a contractor when the owner was the
cause of the delay is void and unenforceable, but it
only applies to contracts executed after its effective
date of September 30, 1998.
The Court also refused to extend the application of the
Spearin Doctrine to cases such as this one that
involve delay damages due to plan changes. The Court
distinguished cases where the inaccurate plans fail to
reveal the existence of a site condition that actually
precludes completion of a project. Although the Court
reasoned that under the Spearin Doctrine, there
is an implied warranty for the accuracy of the plans and
specifications, such an implied warranty will not trump
the express contract provisions regarding notice and
requests for extension of time.
This decision makes it more important than ever that all
parties to a construction contract read, understand, and
follow all provisions of their contracts, particularly
the requirements for notice and requests for time
extensions. All parties must understand that they must
promptly and accurately document all requests arising
from delays to avoid waiver of such claims. Further,
contractors cannot assume that the implied warranty of
the accuracy of the plans and specifications issued by
the owner can supersede the express contractual
requirements.
LESSONS LEARNED
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Carefully
read and understand your contract, paying particular
attention to the notice requirements.
-
Do not
assume the plans and specifications are accurate and
complete.
-
Contractors should inspect the job site and review
the plans and specifications for accuracy and
completeness prior to starting construction.
-
When an
error or delay is encountered, follow all notice
procedures:
-
Provide timely notice
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Identify all errors in the plans or
specifications
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Contractors should request a written change
order or construction change directive and
owners should be prepared to issue them to
minimize the risk of a work suspension
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Identify the potential impact on the schedule,
and whether it affects the critical path
-
Identify the impact to of the work and date of
completion, providing as much detail as possible
regarding additional costs you will incur
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Reserve the right to submit a claim for
additional costs in the future
-
Identify if a delay is caused by another party (e.g.,
owner, contractor, co-prime, subcontractor or
material supplier)
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Provide as much supporting documentation as
possible
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Documentation should tie any costs incurred to
the event for which notice was given
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Follow
this procedure in all circumstances, even if you
perceive it to be futile.
Don Leach
is a Shareholder in the Real Estate
& Construction Law and
Business Law Practice Groups.
He can be reached at
dleach@bdblaw.com or
614.227.4262. Mike Passella
is an Associate in the Real Estate
& Construction Law Practice Group.
He can be reached at
mpassella@bdblaw.com or
614.227.4204.
Public Contractors Beware
By:
James S. Simon and
Donald B. Leach, Jr.
At the end of 2006, the Ohio General Assembly passed H.B.
694, a sweeping reform of Ohio’s campaign finance laws
that affects all public contractors. This new law
severely constrains public contractors’ ability to make
political contributions to officeholders that award
bid or unbid public contracts valued over $500.
Affected public contracts include those let by the
state, state agencies and political subdivisions,
including local governments and appointed boards,
agencies and commissions. H.B. 694 imposes harsh
sanctions, including criminal prosecution and contract
rescission, on contractors that violate its limits.
The provisions of H.B. 694 affect all contributions made
after January 1, 2007. Under the new law, an
officeholder (and all boards, agencies or commissions
the officeholder appoints) cannot award a public
contract to a contractor if the officeholder received
campaign contributions exceeding $1,000 during the
preceding two years from an individual owner, member,
partner, 20% shareholder, or professional corporation
shareholder of a public contractor. The limit includes
contributions by owners’ spouses and minor children.
Further, an officeholder (and all boards, agencies or
commissions the officeholder appoints) cannot award a
public contract to a contractor if the officeholder
received campaign contributions exceeding $2,000 during
the preceding two years from all of a public
contractor’s partners, members, 20% shareholders (of a
general corporation), or professional corporation
shareholders (including owners’ spouses and minor
children), and any “affiliated PAC.”
The burden of proving compliance with H.B. 694 rests on
the contractor. Before being awarded a public contract,
the contractor must certify compliance with H.B. 694.
False certifications are punishable as fifth-degree
felonies. These same limits apply from the award of a
contract until one year after its completion. Further
contributions over the limits after the award of a
contract can result in fines and rescission of the
contract.
Under H.B. 694, seemingly nominal support of an
officeholder from a public contractor or its owners can
disqualify the contractor from receiving public
contracts or may result in the loss of already-awarded
contracts. Therefore, it is important for every public
contractor to closely monitor the political
contributions it makes and the contributions made by its
owners and any affiliated PAC.
Jim Simon
is an Associate in the
Business Law
Practice Group.
He can be reached at
jsimon@bdblaw.com
or
330.643.0268.
Don Leach
is a Shareholder in the
Real Estate & Construction Law
Practice Group.
He can be reached at
dleach@bdblaw.com
or
614.227.4262.
How
an Innocent Gift Can Be Undone After the Passing of a
Loved One
By:
David L. Drechsler and
Michael J. Matasich
When you provide something
of monetary or sentimental value to a close family
member or friend, the last thing you expect or want is
to embroil that person in a lengthy, costly, and
mentally-taxing dispute, the final resolution of which
may be that he is required to surrender the gift. That
is exactly what might happen if you fail to take proper
precautionary steps when making a substantial gift
during your lifetime. The same holds true for
beneficiary designations (such as in an insurance policy
or retirement fund), payable-on-death bank accounts,
transfer-on-death deeds, trust agreements, wills, and
other similar transactions.
Where
a “fiduciary relationship” exists between a donor and
the recipient of a gift at the time the gift is made, or
the donor relies on the recipient to assist with the
transfer of the gift, Ohio law presumes that the
recipient unlawfully, or unduly, influenced the donor to
make the gift. In the face of a challenge to the gift
after the donor’s death, the recipient or “fiduciary”
must present evidence that he did not unduly influence
the donor to make the gift. In the absence of any such
evidence, the court may require the fiduciary to return
the gift to the donor’s estate or otherwise turn it over
to the person deemed to be the proper recipient.
A fiduciary relationship is
a relationship in which one places special confidence
and trust in the integrity and fidelity of another, such
as a caregiver, an attorney-in-fact, or perhaps a close
relative, friend or member of the clergy. The fiduciary
is expected to act in the other person’s best interest.
However, a fiduciary is in the unique position of being
able to take advantage of the other person, such as by
unduly influencing that person to make a substantial
gift to the fiduciary. And because of the nature of the
relationship, there often is a lack of direct evidence
of undue influence between a donor and a fiduciary.
Accordingly, Ohio law places the burden on the fiduciary
to prove that he did not exert undue influence.
Imagine, for example, an
elderly widowed woman with a large estate. The woman
has lived with her daughter for several years and
depends on her for day-to-day care. Because of all the
daughter has done for her, the woman decides to leave
her entire estate to the daughter, to the exclusion of
her three other children. The woman tells her daughter
of her wishes and requests the daughter to write them
out in a will, which the daughter dutifully agrees to
do. The woman then properly signs the will. Shortly
thereafter, the woman dies.
In the event of a challenge
to the will from one or more of the woman’s other
children, the daughter will likely be deemed to have
been in a fiduciary relationship with her mother.
Furthermore, the mother relied on the daughter to assist
with the transaction, i.e., write out the will. Ohio
law, therefore, will probably presume that the daughter
unduly influenced her mother to make the will. Unless
the daughter is able to produce evidence that her mother
made the will free from undue influence, the daughter
could lose the dispute and her siblings may be awarded
their share of their mother’s estate. The mother may
have intended to express her gratitude and provide
financial stability for her daughter. Instead, her
daughter may be forced to surrender three-fourths of her
inheritance after a potentially lengthy, costly, and
exhausting court battle.
Depending upon the nature
of the transaction and the relation of the recipient,
different rules may apply and different steps may be
taken to protect your intentions. One thing, however,
remains constant – when making a substantial gift, a
will, a trust, or other similar transaction, or when
asked by another to assist with such a transaction, the
best thing you can do is to consult with an attorney.
Not only will the attorney ensure that all legal
requirements have been met, but the attorney’s
involvement will interpose an element of independence
into the transaction which, if a challenge is later
mounted, may provide sufficient evidence to rebut the
presumption of undue influence.
David Drechsler
is a Shareholder in the Litigation
Practice Group. He can be reached at
ddrechsler@bdblaw.com or
216.615.7344. Mike Matasich is an
Associate in the Litigation
Practice Group. He can be reached at
mmatasich@bdblaw.com or
330.258.6522.
IRS Audits of
Nonprofits
By:
Andrew W. Bernat
Nonprofit organizations have recently found themselves
in the cross-hairs of the Internal Revenue Service. IRS
audits of nonprofit organizations are on the rise at a
time when the tax laws applicable to nonprofit
organizations have changed. The Pension Protection Act
of 2006, signed into law on August 17, 2006, requires
nonprofits to comply with additional reporting and
disclosure provisions. This will likely further
increase audits of nonprofits, especially those that may
not be familiar with the new reporting and disclosure
requirements. The audits have focused on unrelated
business taxable income, excise taxes, and even the
tax-exempt status of the nonprofit itself. However,
there is a silver-lining to the cloud of IRS audits-- as
audits have increased, IRS staffing has remained
constant resulting in more cursory audits that generally
have not resulted in additional taxes for the
nonprofits. If your nonprofit is in need of guidance on
how to comply with the reporting and disclosure
requirements of the Pension Protection Act of 2006,
contact a member of BDB’s Nonprofit Subgroup. If your
nonprofit receives a notice of an IRS audit, contact a
member of BDB’s Tax and Employee Benefits Subgroup.
Andrew Bernat
is an Associate in the Business
Law
Practice
Group. He can be reached at
abernat@bdblaw.com or
330.258.6504.
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SM
614.227.4211
Ms. Conomy has 15
years experience as a public sector attorney for the
State of Ohio. She most recently had a successful
career as Chief Legal Counsel for the Ohio
Department of Transportation. While there she
successfully led and implemented several innovative
projects. Ms. Conomy also served as Assistant
Deputy Legal Counsel in the Office of the Governor.
Business Practice Group,
Associate
Litigation
Practice Group, Associate
Mr. Neuman has extensive experience in complex litigation,
with an emphasis on construction law. He has
successfully prosecuted and defended complex,
multi-party commercial matters on behalf of global,
national, and regional entities. Mr. Neuman has
wide-ranging experience resolving claims through all
forms of alternative dispute resolution including
arbitration and mediation.
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Kudos
Denise Bleau
(Boca Raton)
authored the article, "Before the
Storm…Understanding Employer Obligations,"
which discussed employers’ obligations before a
hurricane or other disaster.
She also discussed employers’ obligations to the
regulations contained in the Fair Labor
Standards Act (FLSA) and the Occupational
Safety and Health Act (OSHA). The article
will be published in the Miami Herald.
Thomas Bonasera
(Columbus)
received the Alumni Outstanding Service Award from
Capital University Law School. This award was created in
2006 to be given to a Capital University Law School J.D.
alumnus who has performed significant voluntary service,
beyond the call of business or professional duty, to his
or her community and/or Capital University Law School.
Mr. Bonasera was also elected to the Ohio State Bar
Association’s Council of Delegates for District 7. His
two-year term will commence on July 1, 2007.
Nicholas George
(Akron) was the
recipient of the Outstanding Entrepreneurial Leadership
Award from the Fitzgerald Institute for Entrepreneurial
Studies (part of the University of Akron).
The award
recognized Mr. George’s extraordinary entrepreneurial
leadership abilities.
Bob Hager
and
John Slagter (Cleveland)
both wrote a chapter for Aspatore Books entitled, Inside the
Minds: Construction Law Litigation Strategies.
Mr. Hager's chapter
is entitled, “The Six Stages of Construction Litigation.”
Mr. Slagter's chapter is called, “Resolving Disputes in
Construction Law.”
Thomas Himmelspach (Canton) was
appointed Vice-Chair of the Appellate Advocacy General
Committee for the American Bar Association for the
2007-08 fiscal year.
Don Leach
(Columbus)
was elected to the Ohio State Bar Association’s Council of
Delegates for District 7. His second two-year term will
commence on July 1, 2007.
Congratulations to
Michael Mopsick
(Boca Raton) for
becoming President-Elect of the South Palm Beach
County Bar Association.
L.A. Perkins
(Boca Raton)
will be inducted into the Florida Association of Women
Lawyers (FAWL) as Historian for 2007-08.
Henry I. Reder
(Cleveland) was appointed to the Board of
Directors of the AIA Ohio Foundation.
Jennifer Simpson
(Boca Raton)
was recently elected to serve on the Board of Directors
for the Boca Raton Children’s Museum. Ms. Simpson is the co-chair of the committee
responsible for the Science and Technology Toy Fair to be held in November.
Sally Still
(Boca Raton)
recently wrote two articles for Thompson Publishing
Group’s Employer’s Guide to the Fair Labor
Standards Act and Fair Labor Standards
Handbook for States, Local Governments and Schools.
The first article was entitled, “Common Errors Under
the FLSA - And Tips on Correcting Them.” The other
article was entitled, “Feeding Frenzy: A Perspective on
FLSA Litigation.”
Louis Wagner, Mark Skakun, and Phil Wiese
(Akron) wrote a chapter
for Aspatore Books entitled, Intellectual Property
Law 2007: Top Lawyers on Trends and Key Strategies for
the upcoming Year. The chapter is
“A Supreme Court Case that Was Never Decided: But Did
the United States Patent and Trademark Office Get the
Message?”
Speaking Out
Save the Date for these Upcoming Presentations:
August 1 -
Andrew Bernat,
Steve Dimengo,
Rob Malone,
(Akron) and
Christopher Ernst
(Cleveland)
will be presenting
at a Lorman Education Services seminar entitled,
Partnerships, LLCs and LLPs: Organization and
Operation at the Hilton Inn West in Akron, Ohio.
For more information,
click here.
August 8 -
Tod Morrow,
Robert Meyer,
Barbara Knapic,
Mary Reynolds,
Kristina Harless and
Denise Gary
(Canton) will be presenting at the Workers’ Compensation Lorman Education Services seminar in Akron, Ohio.
September 19 -
Scott Topolski
(Boca Raton) will be one of the speakers at a National Business
Institute Seminar, Winning Your First Jury Trial.
September 27 - BDB will be co-sponsoring its
Annual Nonprofit Law Seminar with the Center for
Nonprofit Excellence. The seminar is entitled,
Strategies for Finding the Next Dollar:
Regionalism, Entrepreneurism, and Improving the Bottom
Line and will take place at the Holiday Inn on
Rockside Road in Independence, Ohio from 9:00 a.m. -
12:00 p.m. More information to follow at
www.bdblaw.com.
October 24 - BDB will be sponsoring its
Annual Business Law Seminar at the Hilton Inn West in
Akron, Ohio. More information to follow at
www.bdblaw.com.
October 25 - BDB will be sponsoring its
Annual Business Law Seminar at the Kent State Stark
Professional Center in Canton, Ohio. More
information to follow at
www.bdblaw.com.
Out and About – Recent
Presentations:
Business Practice Group
Gerald Chattman
(Cleveland) spoke at a
National Business Institute seminar in Cleveland, Ohio
entitled, The New Age of Corporate Governance for
Nonprofit Organizations. He presented on Business and Employment issues.
Nicholas George
(Akron)
was selected by Heart to Heart
Communications to be the keynote speaker at its annual
Akron Speaks
Out for Values Seminar. Mr. George's topic was entitled,
"Faith Is What Makes the Impossible, Possible: 12
Steps to Lead with Character."
Employment & Workers' Compensation
Practice Group
Denise Bleau
(Boca Raton)
was a speaker at the Florida Recreation and Park
Association conference. Her topic was "Pitfalls
of Email and the Do's and Don'ts of Discharge."
Ms. Bleau also served as moderator for a two-day
human resources workshop entitled, "A
Toolkit for Managing the FMLA" for the Council on
Education in Management. Ms. Bleau, Jeffrey Pheterson
and Sally Still
(Boca Raton), and
Susan Rodgers
(Akron) spoke on FMLA
topics such as serious health conditions, intermittent
leave and the FMLA's relationship to other leave laws.
Ms. Bleau also spoke before 20 girl scouts and conducted
two mock jury trials in Boca Raton, Florida during law
week in April. Finally, she was a speaker at
the American Woman's Society of Certified Public Accountants
("AWSCPA") on the topic "The Pitfalls of Emails."
Christine Faranda and
Douglas Paul
(Cleveland),
Kristina Harless
and
Mary Reynolds
(Canton),
and Janice Casanova
(Columbus)
presented a mock trial highlighting FMLA,
ADA, and workers' compensation retaliation issues to the
Disability Management Employers Coalition at Maumee Bay
State Park Conference Center.
Christine Faranda
(Cleveland),
Jan
Hensel,
Brett Miller,
Michael Williams
(Columbus),
Barbara Knapic
and
Mary Reynolds
(Canton)
presented at the Ohio Self-Insured
Association (OSIA) conference this year in Cincinnati,
Ohio. The topic was “ADA, FMLA, Workers’
Compensation - A Mock Trial.”
Kristina Harless
(Canton)
spoke at SIGO's Annual Education Day
regarding, "Retaliatory Discharges: Coolidge vs.
Riverdale Local."
Tod Morrow
(Canton)
presented an Employment Law Update to the Northeast Ohio
CPA Forum at the end of last year. Recently, he
delivered a similar presentation to the Tuscarawas
County Chapter of the Society for Human Resources.
Mr. Morrow spoke at the CAK Safety Council CEO meeting. His
topic was "How to Control Workers'
Compensation Costs." Mr. Morrow also
presented at the Tuscarawas County Safety
Council meeting
on "Avoiding Liability for Workplace Accidents."
He also spoke at the Bureau of Workers' Compensation
All-Ohio Safety Congress, where his topic was
"Navigating Your Way Through the Disability Minefield."
Finally, Mr. Morrow spoke to the Summit County Safety
Council on
"Workers' Compensation Reform."
Mary Reynolds
(Canton)
gave a presentation to the Industrial
Commission Statewide Hearing Officer Training Meeting at
Maumee Bay. Her topic was "New Developments in
Workers' Compensation."
Ms. Reynolds also spoke at the OSBA-CLE Basic Workers’
Compensation Seminar in Columbus.
Susan Rodgers
(Akron)
participated as a guest on Civic Forum of the Air, a TV
show which airs in Cuyahoga, Stark, and Summit counties
of Ohio. The subject matter dealt with the generational
divide in the workplace. Ms. Rodgers also presented an
“Employment Law Update” to the Wayne County Society
for Human Resource Managers.
Health & Medicine Practice Group
Don Antrim
(Columbus) spoke at an event hosted by a5inc,
a national marketing company in Chicago, for an invited
gathering of senior health care executives from
across the United States. The event was held at the
Pinehurst Country Club in North Carolina.
The keynote speaker was
Newt Gingrich, the former Speaker of the United
States House
of Representatives. Mr. Antrim spoke individually
and on a panel concerning the development and
offering of outpatient services.
Priya Bathija
(Columbus) made a presentation to The Ohio State
University College of Optometry regarding,
"Employment Agreements and Third Party Contracting."
Paul Dzenitis
(Cleveland) made a presentation at the Ohio Health
Care Association convention in Columbus, Ohio regarding,
"Trying the Long Term Care Case."
Joe Feltes
(Canton)
presented
"E-Mail, the Internet, and Other E-ddictions" to
University Hospitals in
Cleveland, Ohio.
Cathy Godshall
(Akron)
spoke at a continuing legal education seminar
sponsored by the National Business Institute.
The seminar was called, Tax-Exempt
Organizations and the Pension Protection Act of
2006: Make Sure Organizations Are in
Compliance with New Requirements.
Thomas
Hess (Columbus)
presented at two Lorman Education Services seminars in
Cleveland, Ohio. His topics were "How to Survive
a Government Audit" and
"Confidentiality of Medical Records." Mr. Hess also spoke
at the Ohio Health Care Association Annual
Convention in Columbus, Ohio.
His topic was "Government Penalties and Other
Fun Stuff."
Christopher Humphrey
(Canton) spoke to a group of nurses for
Boston Scientific regarding, "Medical Records
Documentation."
Real Estate & Construction Practice Group
Edward Buehrle
(Akron) and
Mark Craig
(Cleveland)
presented at a Lorman Education Services Seminar in
Akron, Ohio. The seminar was entitled, "Real Estate
Development from Beginning to End."
Michael Copley
and
Michael Passella
(Columbus)
spoke at a seminar entitled, "Ohio Construction
Law for Architects, Engineers and Contractors" at the
Radisson Hotel in Worthington, Ohio. Mr. Copley
also presented,
"Managing the Problem Project"
to The Builders Exchange of Central Ohio.
Don Leach
(Columbus) spoke on "Liens and Encumbrances Affecting Real
Estate" at an OSBA-CLE Institute seminar entitled, Titles
to Real Estate in Ohio in Columbus,
Ohio. He also presented to The Builders Exchange
of Central Ohio on
"Ohio Mechanics' Lien Law: The Hows and
Whys of the Paperwork (General Contractors,
Owners, Architects, and Lenders)."
Finally, Mr. Leach spoke at an OSBA - CLE Institute
seminar on "Implementing Strategies to Minimize the Risk of
Mechanics' Liens and 'Paying Twice'."
David Lindner
(Columbus)
spoke on "Liens and Encumbrances Affecting Real
Estate" at an OSBA-CLE Institute seminar entitled, Titles
to Real Estate in Ohio
in Cleveland,
Ohio.
Trusts & Estates Practice Group
Thomas Bonasera
and
Michael Renne
(Columbus) participated in a Huntington National Bank teleconference
presentation regarding "Special Needs, Supplemental
Services and Wholly Discretionary Trusts."
Mary Sue Donohue
(Boca Raton)
spoke to a group of lawyers at Mellon Bank
regarding current trusts & estates issues.
INFORMATION ON SEMINARS OR SPEAKERS
If you are interested in obtaining information on
upcoming seminars or would be interested in having
speakers from Buckingham, Doolittle & Burroughs, LLP
make a presentation to your organization, please
contact: Lorna
Henderson, Client Relations Administrator, at
lhenderson@bdblaw.com
or 800.686.2825 ext. 86473. |
