Live-Blogging from the ABA Forum's Annual Meeting, Day 1

Coming off our Southwest Flight there is a strong smell of sweet confections.   Is it Mrs. Fields cookies opposite the jetway, the pretzel factory, Ethel’s chocolate confectionary, or the iCandy store featuring, Godiva, Jelly Belly, M&M, and Sees branded candy, pre-packaged candy, bulk candy, nostalgic candy, sugar-free candy, and cotton candy?  Hard to tell, but there is an overwhelming sense of chemical, sugary, sweetness in the air. It permeates the entire terminal.  Coffee aroma from five Starbucks on the way to the airport shuttle can’t cut through it.  Forty million passengers pass through this airport annually, sixty-seven times the population of Las Vegas.

There are more than 200,000 hotel rooms in Las Vegas.  Occupancy rates for hotel rooms hover near 90 percent.  The Bellagio alone offers 3,933 rooms.   Eight thousand guests, eight thousand employees, and eight notable restaurants: the Bellagio is a good size city. 

A couple of hours after arriving at this resort-city-gaming-Mecca I experience another overwhelming sensation of smell: cigarette smoke.  Stale smoke is thick in gaming rooms, it lingers in corners, and remains in nominally non-smoking guest-rooms.  “Don’t worry, I’ll call room services and they’ll come spray it,” says the house staff.  They are used to this. It's enough to give me a mild headache and burning eyes. 

The annual gaming revenue of Clark County is $9.2 billion.  According to my knowledgeable Forum source, $1 billion of this is dropped at the Bellagio.  Registration for the annual meeting is a great success; approaching 500 attendees.  However, I’m afraid we will drag down the average gambling statistics.  Nobody likes to gamble less than lawyers.   As a profession we’re obsessed with avoiding downside risk. 

This place flirts with gaudy, but it pulls it off because it is well done and on a grand scale.  The pool setting the hotel back from the strip is 8 acres, with a graceful, sweeping entryway.  There is great stone work throughout.  

The Chehuli’s in the lobby are as impressive as they were at the DeYoung museum.  The Bellagio is to the Waldorf Astoria what St. Peter’s Basilica is to Notre Dame.  

Tomorrow, we’ll put all these distractions out of mind--flamingo girls posing in their feather suits with happy tourists, Germans, Brits, Italians, and Chinese moving about in groups with their roller bags—because the Forum has got another great program on tap! 

The Exception to the Exception to the Economic Loss Doctrine

Construction lawyers are familiar with the economic loss doctrine. In jurisdictions where the doctrine is recognized, the doctrine operates to prevent a plaintiff who has suffered only economic losses from suing entities outside the chain of contract to recover those losses. The most common application in a construction context is to prevent a contractor or subcontractor from suing an architect or engineer with whom the contractor has no contract. Thus, in a traditional design-bid-build delivery system, the construction team would have no claims against the design team (with limited exceptions, most of which have to do with good faith in the handling of payment applications). Because not all states recognize the economic loss doctrine, attorneys tend to view the doctrine as binary: a given state either recognizes it or it doesn't. Nevertheless, even in states with weak or nonexistent economic loss doctrines, the savvy lawyer can find utility for his or her client. Florida's version of the economic loss doctrine has two substantial exceptions that are relevant to construction law. First, suits against professionals alleging professional negligence are never barred by the economic loss doctrine. Second, negligent misrepresentation suits are not barred by the economic loss doctrine so long as the plaintiff is among the class of individuals whom the defendant could reasonably have foreseen relying on the statements that are alleged to be misrepresentations. Moransais v. Heathman, 744 So.2d 973 (Fla. 1999). The co-operation of these two exceptions has created a cookie-cutter complaint that contractors use to sue designers in Florida: they allege that the plans and specifications fell below the standard of care, and that the contractor relied on the representations in the designs when bidding, and was misled by the plans to its detriment. In this way, the contractor can pursue its full compliment of damages, but stay squarely in Florida's recognized exceptions to the economic loss doctrine. The opinion of the court in Recreational Design & Construction, Inc. v. Wiss, Janney, Elstner Associates, Inc., --- F.Supp.2d ---, 2011 WL 5117130 (S.D.FL Jan. 24, 2011) illustrates how the economic loss doctrine can be leveraged, even in states (like Florida) that are viewed as having no strong economic loss doctrine. There, Recreational Design & Construction served as the general contractor for the construction of a pool for the City of North Miami Beach. After construction was complete, the City began to notice sub-standard workmanship in the construction, and hired Wiss, Janney to assess the completed project. After an investigation, Wiss, Janney issued a report that recommended a number of corrective measures be taken to address poor workmanship in the completed project. Relying on this report, the City ordered Recreational Design to undertake the work, and refused to pay any additional money for that work. After performing the work, Recreational Design brought a claim against Wiss, Janney for professional malpractice and negligent misrepresentation, alleging that Wiss, Janney's reports were incorrect, and had harmed Recreational Design. While this pleading effectively got around the economic loss doctrine, by limiting Recreational Design to claims of malpractice and negligent misrepresentation only, the pleading begged the question: does a construction inspector (which was essentially the role Wiss, Janney was fulfilling) owe any duty to the contractor whose work it is inspecting? On Wiss, Janney's motion for summary judgment, the court found the answer was no. The court found that, because Wiss, Janney had only the power to recommend action, and not the power to compel Recreational Design to perform additional work, Wiss, Janney did not owe Recreational Design any duty when inspecting the project and making recommendations to the City. Notably, one authority cited by the court in reaching this conclusion was in McElvy, Jennewein, Stefany, Howard, Inc. v. Arlington Elec., Inc., 582 So.2d 47 (Fla. 2d DCA 1991), which considered the duties owed by the architect of record to the contractor on the project when interpreting the plans and specifications. Thus, it is possible that the result reached in the Recreational Design case has ramifications beyond the narrow scope of its uncommon facts. Lawyers laboring in states with weak or nonexistent economic loss doctrines can despair of (or rejoice in, depending on whom they are representing) the loss of protections enjoyed elsewhere, even in these circumstances, there are opportunities. When the doctrine compels a plaintiff to plead narrowly, more traditional attacks on issues of duty and causation can become more effective than they would have been had the plaintiff been afforded a panoply of pleading options. Strategic use of these opportunities can yield excellent results.

Latest CA High Speed Rail Business Plan

For anyone ineterested, here is the Revised 2012 Business Plan for the California high speed rail project.  The revised plan uses some existing tracks; cost projections to build the system have been reduced to $68 billion, with estimated completion in 2029.  Revenue projections for the operating systems are shown in the black for three revenue scenarios.

In the meantime, however, the California Legislative Analysts Office is concerned that, to date, only $12.5 billion of the $68 billion needed for the project has been approved.   Accordingly the legislative analyst is recommending a go slow approach.  They urge the legislature to hold off on approving the Governor's requested funding for this year, except for amounts sufficient to keep studying the project.  Governor Brown's budget requests the legislature to release $2.6 billion in state funding, which would trigger $3.3 billion of matching federal funds. 

Keeping P3's in Perspective

Lots of people have much invested in the growth of P3 projects.   Politicians, think tanks, law-firms, consultants,  bankers, as well as connected contractors with experience and ability to carry-out these projects sing its praises--often uncritically.  The promise of lower delivery costs surely serves everybody, but only if the promises become reality. 

In the U.S. P3 is gaining momentum in part on the perceived successes in Europe, Canada, and Australia.   What has been the experience of actual projects in these locations?  It is always useful to be reminded that there are trade-offs between different delivery systems.   Here is a cautionary list of 100 projects assemled in 2005 by the Ontario Health Coalition.  The individual descriptions for these "flawed, failed, and abandoned" projects is too short and cursory to be very helpful, but surely it is useful to keep in mind that no one delivery system assures success in every case.    [Hat tip to Roger Haerr and Paul Bruno in their recent article in the Construction Lawyer on mechanics liens in the P3 context]

In the meantime, the Brookings-Rockefeller Institute has a December 2011 report which has the latest statiscs on P3's in the United States.  They recommend that state legislatures establish dedicated P3 units to tackle bottlenecks in the P3 process and protect the public interest, pass legislation to assure a transparent and outcome based project selection process, and cooperate with the federal government to address any technical assistance gaps for P3's on an as needed basis.

Who Says Legislatures are in Grid-Lock Throughout the Land?

And here we thought rancorous public wrangling prevented any type of progress! 

Edward Gentilcore of Pittsburg, PA has an article up on the ABA Litigation Section webpage about roadblocks to a best-value selection process encountered by the PDOT for a proposed design-build project.  He notes that Pennsylvania issued a major overhaul of its procurement code for public works projects in the late 1990's and suggests it is already out of date as it does not readily accommodate design-build procurement. 

Deborah Ballati and Eric Tausend in their article in the California AGC "Constructor," March-April issue, similarly note:  "One impediment to the use of alternative project delivery systems ... is the substantial body of public contracting statutes which imposes requierments for sealed bids, awarded to the lowest responsive and responsible bidder."  They detail the legislative response in California, which now allows design-build contracting in education, transportation, and other sectors.

Meanwhile, over at the DBIA website they outline recent legislative action in New York and Ohio to allow more design-build in public procurement.  If you've not checked out that site recently, it's a great place to keep up with design-build developments. 

What is the status of design-build for public procurement in your state?  Post on the Triclinium or shoot me a note and I will post it for you with full attribution.

UPDATE:  The Pennsylvania legislature adjurned without passing the proposed P3 legislation. 

Maryland Moves to Overhaul Public Private Partnership Legislation

Pillsbury reports in its Gravel 2 Gavel blog that Maryland is primed to overhaul its public private partnership legislation.  The legislation has passed the house and is expected to pass the senate shortly.  The legilsation permits private ventures to make unsolicited proposals for PPP projects.  SB358/HB576.  The legislation appears to permit for a lot of flexibilty, includes sale or lease of existing State facilities, as well as construction, financing, or operation (with toll collection) of new facilities.  The legislation provides for oversight by the State Treasurer and budget committees, and it mandates certain contractual provisions that must be in all P3 Agreements. 

Roland Nikles