June 2001
Vol. 4, Issue 1

 Recovering Economic Losses Related To Unmarked Underground Utility Lines
By: Robert A. Hager, Esq., Alan P. DiGirolamo, Esq., Andrew S. Perry. Esq.

In a case recently litigated by our firm, the Summit County Court of Appeals determined that BDB's client, Kenmore Construction Company, Inc. ("Kenmore") was entitled to seek economic damages (i.e. loss of productivity, delay damages) based upon East Ohio Gas' negligent failure to accurately locate and mark its underground utility lines at numerous construction sites.

Ohio law requires utility companies, like East Ohio, to locate and mark the locations of their underground utility lines within 48 hours of receiving notice from the contractor that construction operations will begin in the area. After receiving notice from Kenmore, East Ohio hired Central Locating Services, Ltd. ("CLS") to mark the location of East Ohio's underground lines. CLS failed to accurately mark the lines, including the approximate depth of the lines at the time of installation. The utility lines were damaged by Kenmore's excavation equipment. East Ohio sued Kenmore for the damaged utility lines and loss of natural gas. Kenmore counterclaimed to recover economic losses resulting from East Ohio's negligent failure to accurately mark the lines.

The Trial Court granted summary judgment for East Ohio and determined that Ohio law prohibited Kenmore's recovery of economic losses without a showing of personal injury or property damage unless there was an express contract between Kenmore and East Ohio. This is known as the economic loss doctrine. There was no evidence of property damage to Kenmore's property, as the only property damaged was East Ohio's utility lines. There also was no evidence of personal injury (i.e. gas inhalation or exploding gas).

Recoverable Economic Damage
The Summit County Court of Appeals reversed the Trial Court and determined that under Ohio law, economic damages are recoverable by Kenmore if it can demonstrate that a connection exists between the parties that is sufficient to substitute for an express contract between them. Kenmore identified three grounds which show that a sufficient connection between East Ohio and Kenmore exists. First, Kenmore argued that Ohio statutory law creates a mandatory duty for a utility owner such as East Ohio to mark its underground lines, including the approximate depth at the time of installation. Second, Kenmore was a third-party intended beneficiary of the locating service contract between East Ohio and CLS. Third, East Ohio exercised direct control and supervision over third parties, such as CLS, which located its underground lines. The Court of Appeals held that these facts established a connection between Kenmore and East Ohio sufficient to overcome summary judgment.

The case has been remanded to the Trial Court for a new trial on Kenmore's claims for loss of production and delay damages against East Ohio Gas. Kenmore will also be permitted to pursue its claims against East Ohio Gas for money due on open account.

Robert A. Hager, Esq., is a member of the Real Estate and Construction Law Practice Group and can be reached at: bhager@bdblaw.com or at 216.615.7318. Alan P. DiGirolamo, Esq., is a member of the Real Estate and Construction Law Practice Group and can be reached at: adigirolamo@bdblaw.com or at 216.615.7342. Andrew S. Perry, Esq., is a member of the Real Estate and Construction Law Practice Group and can be reached at: aperry@bdblaw. com or at 330.258-6479.

Internet Benefits For The Construction Company
By: Jeannette L. Knudsen, Esq.

Many construction companies believe that creating a Web site on the Internet is of no benefit to them because of the service-oriented nature of the industry. However, other construction companies have found that a well-developed site can be very beneficial. Nowadays, many individuals and companies use the Internet as a daily business tool to locate information about products and services and to correspond with business contacts quickly and efficiently via electronic mail.

So how can the Internet be beneficial to a construction company? Consider the following example. A subcontractor is submitting a bid for a project with a general contractor with whom the subcontractor has not previously performed work. If the subcontractor has a well-developed Web site, the general contractor can use the Internet to familiarize himself with the subcontractor's work. A contractor's Web site can include information on:

• The type of projects completed
• The number of company employees
  
• Other contractors for whom the company has performed work
  
• The company's suppliers
  
• The company's principals
  
• The length of time the company has been in business
  
• The company's location and contact information.

Providing a general contractor with this type of information could give the company the competitive edge needed to be awarded the project. Be careful, however; before hiring a company to develop your Web site, consult an attorney to ensure that your legal rights to and ownership of your web site are protected.

In addition to the benefits of a Web site, many companies are starting to use the Internet for exchanging information via electronic means. What could this change mean for the construction company? The Internet gives contractors the ability to electronically exchange various types of documents, including contracts, contract addenda, change orders, invoices, bids, requests for additional project information, and project meeting materials. The electronic exchange of information and the legal enforceability of electronically transmitted documents are now supported by the enactment of the federal Electronic Records and Signatures in Commerce Act and the Ohio Uniform Electronic Transactions Act, which in essence give electronically executed documents that same effect as traditional paper documents. Be careful, however, to see that a well-drafted electronic data interchange agreement is executed by the parties - before agreeing to exchange any documents electronically. This agreement will establish rules for exchanging documents and will provide enforceability for those documents.

Jeannette L. Knudsen, Esq., is a member of the Intellectual Property Practice Group and can be reached at: jknudsen@bdblaw.com or at 330.643.0350.

Practice Group Profile - Edward V. Buehrle

Build On This for this quarter features Edward V. Buehrle, who has been a member of the Firm's Real Estate and Construction Practice Group since 1997, resident in the Akron, Ohio office. Ed joined us as a result of our merger with Nicholas T. George & Associates and was elected a Buckingham shareholder on February 28, 2001.

Ed concentrates his practice on real estate transactions. He likes this area of the law because transactions have "a beginning and an end and each deal is different." He explains, that "identifying the issues at the earliest possible point translates into good client service. Part of the challenge is to try to minimize the surprises and avoid the last minute fire drills."

The most challenging aspect of real estate transaction work, Ed believes, is managing expectations. The attorney needs to do this effectively throughout the whole process: from meeting deadlines to communicating events as they occur. At the end of a transaction, one goal is to have the client feel that value was received. Although clients certainly appreciate it when we can help resolve their problems, oftentimes our value is in helping clients avoid problems. But, "sometimes it is difficult for clients to appreciate value related to the problems that are avoided and never materialize. When we help clients avoid problems and pitfalls, to some clients, it's as if the potential risks never existed. So, it is important for clients, for their own sense of satisfaction, to appreciate what doesn't happen as much as for what does happen."

Originally interested in a business career, Ed enrolled in the joint degree program at the University of Akron, receiving both an M.B.A. and a J.D. in 1992. He feels that his law practice has allowed him to be engaged in a higher level of business more quickly than if he had he pursued a career in business alone.

Born in Red Bank, New Jersey and raised in Akron, Ohio, Ed is married to Tina. They have two sons, Riley and Victor, and are expecting a third child this October. He enjoys golfing, fishing and sailing. Ed serves as a Trustee of the YMCA Endowment Board, the Akron City Club, Child Guidance Centers, Family Solutions and is an executive committee member of Cascade Capital Corporation.

A Post-it note on Ed's office wall sums up his attitude toward the practice of law: "Part of the fun is to think of creative ways to excel at client service."

Robert A. Hager (Cleveland, Ohio) will present at a Lorman Education Services seminar on August 9 in Independence, Ohio. The topic is Construction Lien Law for Attorneys In Ohio. To register online visit the Lorman web site at www.lorman.com

Donald B. Leach, Jr., Kenneth A. Fisher, Jr., (Columbus, Ohio) Robert A. Hager, and John P. Slagter, (Cleveland, Ohio) will present in two Lorman seminars on Design-Build Construction Management in Ohio. The Cleveland seminar is on September 19, 2001, and on September 27 in Columbus, Ohio. For more information or to register online visit the Lorman web site at www.lorman.com

On June 6, Donald B. Leach, Jr., (Columbus, Ohio) presented to the Builders Exchange of Central Ohio on Ohio's Mechanics Lien Laws: Using the Laws to Your Advantage. Don will make this presentation again for the Builder's Exchange on December 4, 2001. For more information or to register online visit the Builders Exchange web site at www.bx.org

William L. Caplan (Akron, Ohio) recently spoke on Environmental Concerns For Developers at the National Business Institute Seminar.



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 at 800.686.2825 ext. 546 or: cwarren@bdblaw.com


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. 
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