Author: Lynda

The ongoing COVID-19 global pandemic’s impact on the A/E community has been, at best, unsettling. With due recognition of the countless personal and professional tragedies experienced and to be experienced, here, we will focus primarily on the impact of COVID-19 on construction litigation and some potential contractual tools to consider to mitigate against this and potentially future pandemics.

Clearly, the construction industry at large has suffered from the additional burdens and public policy implications COVID-19 has had on ongoing and planned projects. National organizations such as the AIA and ASCE have cited factors such as funding delays, intermittent and unpredictable suspensions of work, shortages in material and labor, and often confusing and haphazardly enforced health precautions having a profound and adverse effect on both design and construction activities. Contractual, legal, and insurance aspects (i.e., the potential impact of force majeure clauses, the determination of excusable and non-excusable delays, and “for cause” terminations) are amongst the areas of primary concern. The depth and breadth of issues are well beyond those that can be addressed here, but we can (and hopefully do) provide some meaningful background information from a legal perspective and some practical mitigation suggestions.

Impacts on Construction Litigation

“Justice delayed is justice denied”

Simply put, if you have or expect to have an affirmative claim as against your client or others (fee claims, copyright violations, etc.), justice will be delayed.

Access to the California judicial system is the subject of both “Orders” from Governor Newsom and from Presiding Judges for each county.

• Overview of State and Local Rules of Court
• With the COVID-19 closures and stay-at-home orders, the Court system throughout California and the nation have been forced to deal with substantial delays to all aspects of the judicial system. There is a constitutional requirement for “speedy” criminal trials and practical considerations for fast-tracking divorce, child custody, and probate matters. With these priorities, civil litigation of all stripes, including construction litigation, has come to almost a complete standstill. Courts are setting trial dates up to three years down the road (typically 18-24 months), and there is substantial concern that even those trial dates will need to be pushed back.
• Beyond the inherent delays, COVID-19 has also dragged litigation procedures into the 21st Century, though with much gnashing of teeth. At the outset of the pandemic, the California Judicial Council passed a series of emergency rules which set out how to conduct litigation when many attorneys and their staff were not allowed in their offices and people were not allowed to congregate. These rules included the requirement that attorneys accept electronic service of documents (via email instead of US Mail) and allowed for witnesses to appear remotely for depositions. Many of these emergency rules have now been converted into statute, and now Court hearings and video depositions using Zoom, Microsoft Teams, WebX and others are now the norm throughout the State.
• Further, each Court has, or is in the process of developing, their own local rules in an effort to practically account for the social distancing requirements in largely antiquated courtrooms, public corridors and even elevators.
• Practical impacts on litigation:
  • Remote depositions are now the “new norm” and are well supported technologically. While many initially bemoaned the lack of control occasioned by the deponent being in a separate location, practically, they proceed without incident and serve their intended purpose. It should be noted that while there may be some cost savings involved as there is typically no travel required, preparation time, especially in document intensive cases will likely increase as documents (exhibits) need to be pre-organized and sometimes delivered in advance to the witness, and/or posted on the court reporter’s case website.
  • Remote mediations are also now normal but, especially in complex multi-party cases, significantly less effective. While there are a multitude of variables, these mediations typically involve a brief “all party” session followed by individual sessions with each party who are, essentially, isolated from the other parties. One result of this is rather than engaging/cajoling with other parties and counsel around the snacks, each party sits in their own virtual room, often convincing themselves of the righteousness of their case assessments. The mediator then becomes the only point of connection between the parties, and their ability to assess the factual and legal issues and to persuade the parties as to the risks of their position becomes the only (or at least primary) means of reaching a compromise resolution. That is a heavy load and as a result, while many cases still settle, the more complex and litigious matters often become more so.
  • Remote trials are amongst the suggestions being contemplated by Trial Judges and parties with, as you might imagine, lukewarm reactions. Initially, it is highly doubtful that remote Jury Trials will happen as the jury pool’s access to technology is severely compromised (see the failings of online education amongst the underprivileged) and high-speed reliable internet access, not just computers/tablets, would be required. However, the potential for remote non-jury Trials is a distinct possibility, subject to technological upgrades.
  • It should be noted that remote Arbitrations are becoming more common and efficient and many parties in construction litigation are voluntarily seeking alternative dispute resolution processes, including binding Arbitration, even when the applicable written agreements do not call for it. The hope is that private Arbitrations will give the parties some semblance of justice without having to wait a currently unknowable period of time.
  • Finally, while fairly unique, private Trials or Trials by reference have been utilized on large/lengthy/complex matters and they may become more prevalent as the possibilities of a Jury Trial remain remote. All of the regular Court rules would apply, but the costs could be prohibitive as the parties would have to front all costs for room rentals, jury fees, technological support and administrative personnel. While we have yet to see this happen, if Arbitration is simply inappropriate, Private trials may/could be an option.

Potential COVID-19 Mitigation Tools

At least two contractual tools should be considered if not implemented:

• Expanded Force Majeure Clauses

The “act of god” contract avoidance provision known as a force majeure clause can be useful to escape some of the effects of the COVID-19 related shutdowns. However, many of the AIA form contracts do not contain a force majeure provision and many of the industry standard agreements do not include a force majeure provision that would include COVID-19 and related shutdowns. Going forward, we recommend adding force majeure provisions to all contracts which include a specific reference to “pandemics, epidemics, and plagues”.

A party may also consider adding additional contractual provisions for aggressively resolving disputes privately between the contracted parties during the course of the project in order to avoid protracted litigation, which may take years to resolve. Obviously, the final resolution should be reviewed by your local counsel to ensure you have been properly protected.

• Court v. Arbitration

As set forth above, while the judicial system may be 2-5 years (if ever) from fully recovering from the pandemic, Arbitrations are proceeding with increased frequency, and reasonably well. Those concerned about the lack of meaningful appellate rights in Arbitration should note that the AAA has a procedure for Appeals of Arbitration awards and recommended contract language.

Conclusion

As the Court systems continue to be disrupted, parties are seeking alternative methods of resolution with some modest success. It is anticipated that lingering effects of COVID-19 on the Court will go on for years and the parties should adjust their contractual provisions accordingly.

---

Author Information

Murtaugh Treglia Stern & Deily, LLP is an Orange County, California based law firm proudly serving the A/E community for over 40 years. For more on the firm please visit us at https://www.murtaughlaw.com/

Lawrence A. Treglia

Senior Partner
Murtaugh Treglia Stern & Deily LLP Visit >
2603 Main Street, Penthouse
Irvine, CA 92614
ltreglia@murtaughlaw.com
p: (949) 794-4000

Madelyn A. Enright

Senior Partner
Murtaugh Treglia Stern & Deily LLP Visit >
2603 Main Street, Penthouse
Irvine, CA 92614
menright@murtaughlaw.com
p: (949) 794-4000

I am currently President of the Ohio Chapter of the American Board of Trial Advocates (ABOTA). Our chapter has about eighty members comprising of plaintiff and defense attorneys throughout Ohio. One of the main missions of ABOTA is to protect the right to civil jury trials so we are generally attuned to what is going on in the State. The three largest counties, Franklin (Columbus), Cuyahoga, (Cleveland), and Hamilton (Cincinnati) had not scheduled any jury trials until mid-April (Franklin) and mid- March (Cuyahoga, Hamilton) while smaller counties had pushed forward sooner. Civil cases are now slowly moving forward all across the State with court rooms made as COVID safe as possible.

I am General Counsel for ACEC Ohio and made a presentation for their “Rising Leaders” program in late March. COVID protocol was observed with those in attendance at separate tables 8-10 feet apart. Masks were worn at all times. My practice is entirely representing architects and engineers. For the most part my clients have been able to weather the COVID storm. Many projects were slowed but few were entirely shut down.

The lack of courtroom availability has forced counsel for parties involved in construction disputes to be more creative/cooperative in resolving issues. We have had mediations both in person and via ZOOM in an effort to resolve matters knowing that the normally long litigation process has gotten even longer due to COVID. Trials that were scheduled over the past year which were initially stayed, have all been reset toward end of the year or into the first half of 2022 assuming COVID will be in the rearview mirror. Discovery has taken place on limited basis as to depositions with most being done via ZOOM.

In conclusion, the trial slow down due to COVID has not greatly affected my clients from the legal standpoint as much as had been anticipated. In fact, it forced counsel and parties to find solutions which hopefully will carry on regardless of COVID. 

---

Author Information

David Patterson

Weston Hurd LLP Visit >
10 West Broad Street, Suite 2400
Columbus, OH 43215-3469
DPatterson@westonhurd.com
p: (614) 280-1120 | f: (614) 280-0204

As legal professionals representing design professionals, we have been grappling with the implications of delayed justice for over a year while trying to balance the safety of clients, jurists, court personnel and lawyers during the pandemic. The pandemic, however, presented an opportunity few could have foreseen — a chance to modernize an archaic system, riddled with decades-old rules and practices, previously resistant to internet transformation.

In spring 2020, the largest, busiest and most complex court system in the country came to a screeching halt, at a time when hundreds of civil trials packed New York’s state courts and the city’s courthouses were at their busiest. All trials statewide were postponed and the courts that were briefly reopened in the fall were again suspended mid-November amidst a rise in infections. Only recently, on March 22, 2021, civil trials resumed throughout the state. In New York City, there were 26 jury trials, 19 civil trials and seven criminal trials on schedule for the first week of courts’ reopening. By comparison, in November 2020, the New York state court system had over 1.1 million pending civil actions and over 100 thousand criminal actions in the pipeline.

Federal District Courts fared better with advancing the civil actions, primarily because of the more stringent procedural rules and more hands-on involvement from the federal jurists. Still, the challenges to evidentiary hearings with jurors presented an insurmountable obstacle. Most participants in these court disputes will not have their day in court for years to come.

Last year, most states, including New York, allowed virtual depositions, court appearances, and hearings. This was a much-needed change in how the legal system operated to date. With any hope, gone are the days when attorneys bill a client for hours spent traveling to court for a quick five to ten-minute preliminary or pretrial conference.

In December 2020, the federal judiciary announced a two-year pilot program to livestream the audio of hearings in 13 district courts. Arguments have now even been livestreamed before the U.S. Supreme Court. In late January 2021, the New York City Civil Court in Manhattan, hearing cases with a monetary limit of up to $10,000, launched an online dispute resolution pilot program for small claims matters.

With trials on hold, we have seen exponential growth in virtual mediations and arbitrations, as alternatives to litigation. Early on, there was great apprehension among litigators to partake in the Alternative Dispute Resolution (ADR) proceedings, primarily due to technical challenges with document sharing and the inability to evaluate witnesses’ non-verbal cues. This quickly changed, as attorneys realized virtual proceedings were the only means available to them and their clients. As the year progressed, these ADR proceedings proved to be the main avenues for advancing the disputes to a conclusion, as state courts grappled with administrative quagmire and awaited decisions on reopening policies and guidelines.
 

What does the future hold for design professionals and insured policyholders?

Virtual hearings and proceedings, with all their inherent anomalies and awkward moments, are here to stay. But audio livestreams and video appearances should not replace in-person proceedings. Non-verbal communication, facial expressions and body language are lost or absent altogether if a hearing is audio-only or may become distorted in a video feed or if a connection gets dropped. We expect courts to continue to upgrade their antiquated infrastructure to accommodate more virtual attendance and participation for parties, jurors (with court-issued tablets or laptops), judges and attorneys.

Fortunately for the state court proceedings, early mediation has now become a mandatory step in every case filed in the state courts in New York. With a recent amendment to the state trial court rules, parties can jointly request a settlement conference before the assigned justice or another judge at any time during the litigation. Courts remain fully committed to implementing a model of presumptive early ADR procedures in order to transform the old culture of “litigate first” to the new culture of “mediate first” in all appropriate cases. This is a welcome development, considering the potential expense, time-commitment and uncertainty of a judge/jury ruling on a dispute’s outcome.

ADR proceedings, however, will remain the leading dispute resolution forum for design professionals and other construction industry stakeholders for years to come. Standard forms of agreement for the A/E community, offered by the American Institute of Architects (AIA) or Engineers Joint Contract Documents Committee (EJCDC), will continue to emphasize the industry’s deference for mediation. Leading dispute resolution centers, including the American Arbitration Association, JAMS and others, are likely to expand their virtual dispute resolution offerings – both mediations and binding arbitrations – for construction/contract disputes with experienced construction industry professionals, frequently non-lawyers, serving as neutrals.

---

Author Information

Wojciech “Voytek” Jackowski, Esq.

Offit Kurman, PA Visit >
590 Madison Ave.
New York, NY 10022
wjackowski@offitkurman.com
(212)-545-1350
 

The following is a by the numbers report from the ACEC Research Institute as of the end of 2019. These numbers speak loudly and lays out just how impactful the Engineering & Architecture industry is, and how it contributes to the overall GDP. Download here.