July 2000
Vol. 3, Issue 1
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Owner's Disclaimer Of Liability Ineffective

By Donald B. Leach, Jr., Esq.

In a case decided at the end of January, the Franklin County Court of Appeals found the government liable for the breach of its warranty of the accuracy of its own documents, in spite of disclaimers to the contrary. The case, Smoot Construction v. Ohio Department of Administrative Services, arose from the construction of a state correctional facility. Our Firm, through Don Leach and Ken Fisher of the Columbus office, served as counsel to Smoot Construction. The Court held that where the government provided information about site conditions, which was obviously intended to be used by contractors in formulating their bids, the government could not avoid liability for differing site conditions by disclaiming any responsibility for the accuracy of the information provided.

Soil Borings "For Information Purposes Only"
As is frequently done, the owner in this case provided soil borings before the bid "for information purposes only" and not as part of the contract documents. Use of the information by the contractor was stated to be "totally at the risk of the contractor," and bidders were instructed to inspect the site of the work.

The conditions encountered at the site were, in fact, different from those reflected in the soil borings. The difference resulted in substantial additional costs to the contractor. The Court of Appeals held that the contractor was entitled to recover those costs.

Implied Warranty
Citing the long-standing Spearin doctrine, which provides that in cases involving government contracts, the government implicitly warrants the accuracy of its affirmative indications regarding job site conditions, the Court ruled that the implied warranty of job site conditions "will prevail over express contract clauses which disclaim any responsibility for the accuracy of information provided to contractors, and which require contractors to examine the site and check the plans."

The only exceptions to recovery recognized by the Court arise where (1) a reasonable inspection of the job site by the contractor would have revealed the actual site conditions or (2) the information provided by the government was accurate, but the conclusions drawn by the contractor differed from the actual site conditions. Neither of these exceptions applied to the Smoot case.

Reasonable Expectations
In its reasoning the Court recognized that it is unreasonable to expect every bidder on a government contract to perform expensive job-site investigations when the government is in a position to perform the testing once for the benefit of all bidders. To require every bidder to conduct its own testing would reduce the number of bidders on government contracts and increase the price of the few bids received.

In other aspects of its decision the Court held that the contractor was entitled to recover costs incurred for additional mason helpers, who were necessary to overcome work disruptions caused by another prime contractor. In addition the Court recognized that the contractor could recover damages incurred on one contract as a result of the same owner's breach of another, unrelated contract.

Don Leach is a partner in the Firm and serves as the Shareholder-in-Charge of the Columbus office. His practice focus is on construction law and he regularly represents owners, lenders, contractors, subcontractors and suppliers in construction contracting and dispute-related matters. Don is a member of the Builders Exchange (BX), is a past president of the BX board of directors and is actively involved in the Law Group of the BX. He can be contacted at 614.227.4262 or by e-mail at dleach@bdblaw.com

Environmental Update

by Sheila Noonan Mitchell, Esq.

Three recent environmental law developments discussed below will impact the real estate and construction industries:

I. Wetlands: A significant change in the Nationwide Permit that regulates the filling of wetlands for residential, commercial and industrial development became effective June 7, 2000. The U.S. Army Corps of Engineers (Corps) issued five new Nationwide Permits (NWPs) and modified six existing NWPs to replace NWP 26, the general permit that allowed the filling of up to three acres of wetlands without having to obtain an individual permit from the Corps. Of the new NWPs, NWP 39 is the one that most impacts industrial, commercial, and residential development.

NWP 39 is much more restrictive than NWP 26. NWP 39 only allows the filling of one-half acre of wetlands or 300 linear feet of stream (as opposed to three acres and 500 linear feet of stream under NWP 26). NWP 39 requires pre-construction notification to the Corps 45 days prior to the filling of more than one-tenth of an acre of wetlands (as opposed to 30 days notice for filling more than one-third of an acre of wetlands under NWP 26). NWP 39 requires mitigation for the filling of more than one-tenth of an acre of wetlands (NWP 26 required mitigation for the filling of more than one-third of an acre of wetlands).

The end result of the new NWPs is that any filling of more than one-half acre of wetlands or 300 linear feet of stream for residential, commercial, or industrial development requires an individual permit from the Corps. An individual permit involves considerably more cost and time to obtain (as long as six months to a year) because it requires more extensive ecological study of the wetlands and an additional water permit from the State EPA.

II. Stormwater Permits: Developers and other parties involved with construction presently are required to obtain a general stormwater discharge permit for construction activities if construction at a site will disturb five or more acres of land. On December 8, 1999, the U.S. EPA adopted final regulations that will require a stormwater discharge permit for construction activity that disturbs between one to five acres of land. Under these new regulations, each state has until December 8, 2002 to draft a state-specific general permit for these activities. Owners and operators of developments disturbing one to five acres of land will be required to have a permit under the program by March 10, 2003.

III. Revision of ASTM Standards for Phase I Site Assessments: Revisions to the ASTM standards that apply to Phase I site assessments were approved in April, 2000. The most significant changes to the standard include a new focus on identifying "business environmental risks" (the environmental issues impacting the property and its intended use) and an increase in the number of environmental matters that are not required to be investigated in an ASTM Phase I. The anticipated publication and effective date of the new standard is September, 2000.

Sheila Noonan Mitchell is a member of the Environmental and Business Law Practice Groups. If you would like more information on these or other environmental issues, e-mail her at smitchell@bdblaw.com or call 330.643.0331.

Industrial Commission Decision May Impact Construction Companies

The Industrial Commission found that an employee driving from home to a work site would be covered by workers' compensation for an accident on the way to work. The Hearing Officer found that the construction worker who routinely traveled from his home to work sites was not a "fixed situs employee." The Hearing Officer found that the worker's "injuries were sustained in the course of and arising out of his employment." The case is being appealed.

To help you learn more about our attorneys in the Real Estate and Construction Law Practice Group, each issue of Build on This will provide you a profile of one of our group members. This month, we are featuring Bob Hager of our Cleveland, Ohio office.

As an 18-year-old, Bob Hager joined the Local International Laborers' Union in Cleveland and began his work in the construction industry. Through college and law school, he worked on many underground utility construction projects in Ohio, Pennsylvania and Hawaii, gaining practical field experience and a lifelong connection with the industry. After passing the bar examination in 1988, Bob joined several trade associations (American Subcontractors Association, American Institute of Constructors, and Associated Builders and Contractors) which improved his understanding of the construction industry from both a business and legal standpoint. Bob is currently the Chairman of the Ohio State Bar Association Construction Law Subcommittee.

"Practicing as a construction lawyer allows me to participate in the creative and exciting process of building new schools, libraries and businesses. Initially, we strive to avoid problems by assisting during the early planning stages of the project. This proactive approach requires excellent communication between all parties involved to anticipate and prevent problems which may occur on a particular project. The preparation of clear and concise 'front-end documents' is extremely important. If disputes arise, the factual and legal issues must be quickly identified to allow for the ability to suggest practical solutions. More extensive disputes may require formal mediation or arbitration proceedings, and in some cases, litigation is necessary. A practical and progressive approach toward resolving construction disputes usually requires the creative use of dispute avoidance and alternate dispute resolution techniques. The lawyer's goal should be to create an environment where disputes are avoided or quickly resolved so as not to negatively impact the ultimate goal of constructing a first-class facility intended to benefit many people."

Bob has been practicing at Buckingham, Doolittle & Burroughs, LLP since 1988 and serves as the Shareholder-in-Charge of the Firm's Cleveland office. He can be reached by email at bhager@bdblaw.com or by phone at 216.615.7318.

Bob Hager, of the Cleveland office, is presenting Construction Lien Law for Attorneys in Ohio on August 2, 2000 at the Holiday Inn Cleveland. This seminar is designed for attorneys who represent clients with claims related to construction or mechanics' liens.

Brett Miller, from the Columbus office, presented the In's and Out's of Workers' Compensation to the Builders Exchange of Central Ohio on May 18, 2000.

George Weinstein, of the Boca Raton office, will teach a class in Estate Planning at the University of North Carolina College for Seniors in Ashville, N.C. from July 24-27 which features instructors deemed outstanding in their respective fields. He has just completed his term as President of the Greater Boca Raton Estate Planning Council and is now serving a term as Director Emeritus.

If you are interested in having a speaker from BDB make a presentation to your organization, please contact: Cheryl Warren, Director of Client Relations and Marketing 800.686.2825 ext. 546 or by e-mail at cwarren@bdblaw.com.

For more information on speaking engagements, visit http://www.bdblaw.com/new/events.html.

At BDB we are always improving our processes so that we operate efficiently and effectively. Please let us know how you like our new broadcast format. E-mail: bdb@bdblaw.com Phone: 330.258.6473 Fax: 330.252.5473. 
Thank you.