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Monthly Archives: December 2012

22DEC 2012

David Salazar and Daniel Levin of Cole, Scott & Kissane’s construction law group recently obtained a final judgment against 9 Plaintiffs in the defense of a roofing contractor awarding the Plaintiffs zero of the $211 million in damages they alleged they sustained as a result of certain alleged construction defects and deficiencies on several commercial properties.

The Plaintiffs alleged that our client had illegally allowed another entity to use its roofing license to repair the roofs of the commercial properties after damages caused by Hurricane Wilma. The Plaintiffs added that our client contractor deviated from the standard of care by failing to perform its work in a workmanlike manner, which purportedly caused water intrusion originating from the roofs and causing dozens of tenants to terminate their leases, or otherwise be relocated to other commercial space. The Plaintiffs alleged that, as a result, they suffered damages in connection with business interruptions, lost profits, lost rental income, relocation expenses, and costs incurred or expected to be incurred in the repairs or replacement of the roofs. Because of the alleged illegal lending of the license, the Plaintiffs claimed they were entitled to treble damages pursuant to Florida Statute Section 768.0425.

Upon finally committing the Plaintiffs, in their answers to interrogatories, to the alleged damages figure of $211 million, David and Dan established that, based upon approximately 15,000 documents produced in discovery and several motions to compel production of documents, there was no way Plaintiffs could have calculated the alleged damages figures from the documents produced. Likewise, the Plaintiff’s damages calculations contained numerous mathematical inconsistencies. Through discovery, it became obvious that the Plaintiffs were perpetrating a fraud.

After filing a Motion to Strike Plaintiffs’ Pleadings for Fraud upon the Court, for Spoliation of Evidence, and Failure to Comply with the Court’s Discovery Orders, an evidentiary hearing was held and the Court entered specific Findings of Fact and Conclusions of Law, an Order Dismissing Plaintiffs’ Claims with Prejudice, and Final Judgment Against the Plaintiffs.

Final Judgment was entered against the Plaintiffs and the Court reserved jurisdiction to address our client’s claims for attorneys’ fees and costs incurred in defending the case.

Congratulations to David and Dan on a great result in this complex and difficult case.

10DEC 2012

After a spirited election season and as we wind down toward the end of the year, the elected officials in Washington D.C. are in the midst of a strong debate regarding the tax increases and budget cuts that will begin in 2013.  Although the impact is largely debatable, discussions about the “fiscal cliff” are rampant and relevant.  What is the “fiscal cliff” and what does it mean to you – the construction industry?

The fiscal cliff arises from tax increases due to the expiration of President Bush’s tax cuts and spending cuts under the Budget Control Act of 2011.  Lawmakers must choose whether to leave some or all of these cuts in place, replace them, postpone them or cancel them entirely. The decision will certainly impact the economy, the country’s credit rating and the U.S. debt burden.  If left in place, the fiscal cliff could lead to the biggest single-year drop in the annual deficit as a percent of the economy since 1969. However, because it would be so abrupt, it also could throw the United States back into a recession next year, when more than $500 billion will be taken out of the economy – or, off the “fiscal cliff.”

According to a recent study by the AIA, the annual rate of federal construction totaled $25.2 billion. However, this will be greatly impacted by 48 separate budget accounts that will be reduced which directly fund the design, construction and rehabilitation of buildings and other vertical infrastructure. These cuts are expected to result in a 9.4 percent reduction in non-exempt defense discretionary funding and an 8.2 percent reduction in non-exempt nondefense discretionary funding – more than $2 billion dollars.

Although this is only an estimate, less spending inevitably means less jobs relating to government projects. A July 2012 study by the George Mason University Center for Regional Analysis estimated that the total employment impact in architecture and engineering occupations would be over 61,000. This number does not include the employment loss from government contractors, or from construction workers, which could make the number significantly higher.

In order to minimize the impact on the construction industry, the AIA recently wrote to President Obama and Congressional leaders in order to express the importance of avoiding the “fiscal cliff.” The AIA stressed the fact that a large portion of agency facility budgets are devoted to repairs, maintenance and retrofits. If those funds are cut, the need for such repairs still exists and may result in costing taxpayers additional money in the long run. The AIA urged the President to address the fiscal cliff in ways that do not disproportionately impact the already struggling design and construction industry.

Although the AIA did not offer any particular suggestions on how to properly address the fiscal cliff’s impact on the construction industry, it properly alerted congressional leaders of the crippling impact it may have on a vital industry to the US economy. We will continue to keep a watch on Congress’s reaction to the spending cuts for federal construction projects. However, as a precautionary measure, contractors, engineers and architects should keep abreast of these impending cuts and plan accordingly for the upcoming year. It appears that federal construction funds will be inevitably reduced, so contractors must expand their project portfolio to counteract these cuts.