Construction Law Section Newsletter
 & Georgia Construction Law Update
Official Publication of the Atlanta Bar Association Construction Law Section
In This Issue
Upcoming Events
Announcements
Georgia State Construction Manual, Second Edition, is Approved and Published
Estate of Pitts v. City of Atlanta
Georgia Enacts False Claims Act
Federal Court Orders Principal to Deposit Collateral with Surety as Security for Bond Claims
When Must a Contractor Notify its Liability Insurer of a Job Site Accident?
Project Site Injuries - Workers' Compensation
RICO and Builder/Seller's Liability for Construction Defects
Court Addresses Energy-Related Construction Project Gone Wrong
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Summer 2012
Newsletter Editor: 
T. Bart Gary

 

Construction Law Section Board of Directors

 

Chair T. Bart Gary
Vice Chair-Chair-Elect Philip E. Beck
Secretary/Treasurer Herbert H. Gray III
Immediate Past Chair Danielle J. Cole
 
Members at Large
Frank L. Bigelis
Deborah Cazan
R. Daniel Douglass
C. Damon Gunnels
Mark V. Hanrahan
W. Henry Parkman
Frank E. Riggs Jr.
Lynn C. Stewart

 

Upcoming Events
 
calendarMark your calendars for 
our upcoming Section 
Breakfast meetings at the Buckhead Club!
 
Wednesday, September 26, 2012
Wednesday, October 24, 2012
Wednesday, November 14, 2012
Wednesday, January 23, 2013
Wednesday, February 27, 2013
Wednesday, March 27, 2013
Wednesday, April 24, 2013
 
More information to be posted online at www.atlantabar.org.

Announcements
megaphone
The Construction Law Section wants to publish your announcement in
the next Edition of the Section newsletter! 
 
Email announcements to
                                   Frank Bigelis.

---------------------------------------------------------

Tim Toler has joined the business litigation firm of Hobgood & Rutherford LLC. Tim continues to practice construction law and to represent owners, contractors, and subcontractors on commercial and industrial projects. 
 
Section Member-at-Large C. Damon Gunnels recently joined the firm of Foltz Martin, LLC.
 

A New Year Begins

by T. Bart Gary, Freeman Mathis & Gary, LLP

 I thank the outgoing chair, Danielle Cole,
 for her leadership and hard work for the
 past year. I now assume the mantle,
 but not her shoes.  Our meetings will
 commence in September and I urge you
 all to mark your calendars. This is my
 last newsletter and Frank Bigelis has
 graciously agreed to take on that task
 for the next year. Ours is an informal
 section and we depend on feedback
 from you, the members, to make the
 section a meaningful professional organization. I encourage you to share your thoughts about topics and speakers for the meetings and provide Frank contributions for the newsletter. You may have noticed the new web based format of the newsletter that allows for more content. We have a new section to tell about professional changes and such. Please keep us informed.  Finally, I want to recognize Tanya Windom and Brantly Watts at the Atlanta Bar. Tanya keeps everything running smoothly and Brantly is the newsletter publisher. Both do an excellent job for us.

T. Bart Gary
Construction Law Section Chair

Georgia State Construction Manual, Second Edition, is Approved and Published

by T. Bart Gary, Freeman Mathis & Gary, LLP

scales and bookIn November 2011 the Georgia State Financing & Investment Commission and the Board of Regents approved the second edition of the Georgia State Construction Manual. The manual recently became available on its web site. It is a prodigious undertaking and contains a lengthy explanation of the construction process for state-owned buildings and facilities from financing to turn over and operations. Since July 1, 2010, state agencies, boards, departments, commissions and other state bodies are required by law to adhere to the policies and procedures in the manual for project for all state owned buildings in Georgia funded by state bonds or other state revenue. O.C.G.A. 13-10-3(c). The manual is therefore likely to have the force of law, for example, in disputes over contract interpretation.

Estate of Pitts v. City of Atlanta, et al., __ Ga. App. __ , 2011 WL 4581550 (October 5, 2011) Now Proceeds to the Georgia Supreme Court.
by David R. Hendrick, Hendrick, Phillips, Salzman & Flatt
 This decision of the Georgia Court of
 Appeals was reported in the prior Atlanta
 Bar Construction Law Section Newsletter
 regarding the ruling of that Court
 allowing summary judgment in favor of
 the estate of a worker fatally injured in
 a project site accident and against the
 project owner, the prime contractor and
 first tier subcontractor on a breach of
 contract theory.  The breach was found
 to have resulted from the contended failure of enforcement by each of the defendants of contractual automobile liability insurance requirements flowing down the contract chain from the owner to, ultimately, the second tier hauling subcontractor whose employee was driving the vehicle causing the accident. 
 

 

Georgia Enacts False Claims Act
by Leanne Prybylski, Freeman Mathis & Gary, LLP
tax questionsThe Georgia Taxpayer Protection False Claims Act (False Claims Act) was signed by Governor Nathan Deal on April 16, 2012 and becomes effective on July 1, 2012.  It is a far-reaching law that imposes civil penalties for knowingly submitting false claims to Georgia state and local governments including counties, state departments and agencies, boards, commissions and other public entities.  The False Claims Act will help prevent fraud so that taxpayer dollars are not spent on such false claims.  It applies to any person, firm, corporation or legal entity that requests or demands money or property from the state or any local government.  It also applies to subcontractors and suppliers who submit requests for payment to general contractors for projects that are paid for with money from the state or a local government.  Therefore, contractors, subcontractors or suppliers providing goods or services must have procedures in place to ensure that their pay requests and information submitted therewith contain no known falsities.

 

View entire article

 

Homeowner Successfully Pierces the Home Builder's Corporate Veil
by Steven Campbell, Alston & Bird
In 2005, Anthony and Ellen Sinyard (the "Sinyards") hired Spellbrook Builders, Inc. ("SBI"), a company owned and operated by two individuals (the "Officers"), to build a custom home.  By the March 2006 closing date, a number of outstanding construction items (the "punch list" work) remained outstanding.  The parties agreed in writing to proceed with closing under the condition that SBI would complete the punch list work after closing.  At closing, SBI executed a seller's affidavit stating that the house had been completed and that the work and materials were warranted for one year.  Despite its written agreement with the Sinyards, SBI refused to perform the punch list work because the company was out of money, a fact that the Officers knew at the date of closing.  The Sinyards commenced against SBI and obtained a default judgment.
 
The Sinyards then commenced suit against the Officers seeking to pierce the corporate veil and hold the Officers personally liable for the Sinyards' judgment against SBI.  After a bench trial, the trial court ruled that the Sinyards had successfully pierced the corporate veil to hold the Officers liable for the acts of SBI.  The trial court further ruled that the Officers were liable for the Sinyards' attorney fees under O.C.G.A. 13-6-11.
 

 

Federal Court Orders Principal to Deposit Collateral with Surety as Security for
Bond Claims
by Timothy N. Toler, Hobgood & Rutherford LLC

Construction sureties issue performance and payment bonds on behalf of their contractor and subcontractor principals. These bonds are issued in reliance upon the principal's agreement to indemnify the surety against loss. But how may a surety guard against the possibility that the principal will be without sufficient financial resources to indemnify? One way is to include a collateralization clause in the indemnity agreement requiring the principal to deposit funds in trust with the surety, as collateral, as soon as liability exists or is asserted against the surety.

 

 

When Must a Contractor Notify its Liability Insurer of a Job Site Accident? 
by Joel Pieper, Womble Carlyle Sandridge & Rice, LLP
If a general contractor learns that a worker has been injured on one of its jobsites, it should not wait until a claim is asserted to put its liability insurer on notice, since such delay can relieve the insurer of its obligation to cover the claim under a commercial general liability. A condition precedent to coverage under a typical CGL policy requires that the insurance company be notified "as soon as practicable" of any occurrence that "may result" in a covered claim. But what happens if some other party appears responsible for a jobsite accident, and an insured contractor lacks enough knowledge of the law to recognize that it also could be subject to liability?  If the contractor is surprised when such a claim later materializes, may its liability insurer refuse to cover the claim on the grounds that the contractor failed to provide it with the requisite prompt notice? 

 

 

Project Site Injuries - Workers' Compensation
by Jeffrey Paul Lutz, FSB FisherBroyles
Upholding the established principle of tort immunity for statutory employers under Georgia's Workers' Compensation laws, the Georgia Court of Appeals, in Vratsinas Const. Co. v. Chitwood, recently reversed a State Court's denial of summary judgment to the defendant, general contractor.  --- S.E.2d ----, 314 Ga.App. 357, 2012 WL 604032 (2012); c.f. Estate of Pitts v. City of Atlanta, 312 Ga.App. 599, 719 S.E.2d 7 (2011)(sidestepping workers' compensation bar to suit and addressing contractual duty to maintain adequate insurance and third-party beneficiary status of claimant), certiorari granted (April 24, 2012), Archer Western Contractors, LTD v. Estate of Mack Pitts, Case No. S12G0517.

 

RICO and Builder/Seller's Liability for Construction Defects
by T. Bart Gary, Freeman Mathis & Gary, LLP
sections lady justiceThe Georgia Supreme Court reversed the Court of Appeals ruling that a RICO claim predicated upon mail and wire fraud in connection with the sale of a condominium unit, required proof of reliance by the purchasers/plaintiffs.  See Pollman v. Swan, 289 Ga. 767, 716 S.E.2d 191 (2011).  The plaintiffs sued a builder and others for damages for defective construction of a residential condominium unit.  One claim was based upon the Georgia Racketeer Influence and Corrupt Organization (RICO) Act.  The Court of Appeals affirmed the trial court's grant of summary judgment to the defendants on the RICO claim because the plaintiffs failed to show or prove detrimental reliance on the misrepresentations purportedly made in furtherance of the scheme to defraud.  The Supreme Court, however, relying upon federal court cases, held that the common law requirement of justifiable reliance by claimant for fraud cases is not a requirement of the mail fraud statute upon which the RICO claim was predicated.  The Supreme Court remanded the matter to Court of Appeals for further proceedings.
 

 

Court Addresses Energy-Related Construction Project Gone Wrong
by David R. Cook Jr. and Mark V. Hanrahan, Autry, Horton & Cole, LLP
The Georgia Court of Appeals recently upheld an $8.4 million judgment against a design-builder for damages arising from defects in a custom energy system at a manufacturing plant.  In Wellons, Inc. v. Langboard, Inc., -- S.E.2d --, 2012 WL 1003577, (2012), a design-builder ("DB Contractor") entered into two separate contracts with a plant owner ("Owner") - one for design and the other for installation of a custom energy system.  The system was intended to generate electricity to power Owner's plant and to sell any excess.
 
The project, however, experienced several problems.  It was unable to meet applicable emissions requirements, and it did not produce enough steam to generate the level of electricity required by the contract.  Owner ultimately filed suit against DB Contractor.