September 16, 2021
By Dean B. Thomson & Matthew T. Collins
Dean Thomson and Matt Collins are members of the firm’s Construction Law Department. Dean can be reached at 612.359.7624 or firstname.lastname@example.org. Matt can be reached at 612.359.7610 or email@example.com.
Forty years ago on October 6th, the founders of Fabyanske, Westra, Hart & Thomson, P.A. opened their doors to serve and dedicate their professional life’s work to the Lending, Real Estate, and Construction Industry in Minnesota and beyond. During that time, we’ve continued to dedicate our work to improving the law and practice in these areas through negotiation, creating standard industry contracts, obtaining important and significant court decisions, and groundbreaking legislative achievements. On the eve of our Firm’s 40th Anniversary, this month’s Briefing Paper reviews just a few of those important accomplishments to the industries we serve, and we look forward to how we will serve our clients and positively impact the law in these areas in the next 40 years.
The Past and the Present
The Spearin Doctrine. Attorneys in our Firm were one of the first to extend the U.S. Supreme Court case holding of United States v. Spearin to Minnesota in the landmark case of Alley Construction Co., Inc. v. State of Minnesota. The Spearin doctrine essentially holds that the government impliedly warrants that the plans and specifications it provides to contractors on a public procurement are both accurate and adequate for their intended purpose. A practical extension of the doctrine, often called the government contractor defense, is that if the contractor builds the project according to those plans and specifications, the contractor will not be liable if the design does not work. On scores of cases, we’ve obtained recovery on behalf of our clients because they encountered conditions contrary to those indicated in or reasonably inferable from the contract documents.
For example, in Zontelli & Sons, Inc. v. City of Nashwauk, we represented a contractor who brought suit against the city and its engineer to recover compensation for extra work due to the fact that the actual quantity and quality of concrete and unsuitable materials differed from that shown in the plans. The Minnesota Supreme Court found that the contractor was entitled to recover for the extra work and held that the contractor was not responsible for the additional cost because the contractor was entitled to rely on the plans and specifications furnished by the owner and had no duty to independently investigate the project site.
Procurement Integrity. Ensuring the integrity of the public procurement process and that public projects are properly awarded is a concern for all our clients and an important practice area for our Firm. For example, in Raytheon Engineers & Constructors Inc., v. MnDOT, we represented a design-build joint venture in the largest successful bid protest in Minnesota. The Firm successfully challenged MnDOT’s procurement decision to reject RAK as a “non-responsible” contractor for the Hiawatha Light Rail Transit project. The Court held that MnDOT failed to articulate sound reasons for its decision and could not arbitrarily declare reputable contractors not responsible without adequate findings.
In Lovering Johnson v. City of Prior Lake, we successfully represented a bidder who challenged a municipal contract bid award. On behalf of our client, the Firm proved that because both a plus and minus sign preceded a bid for an alternate creating an ambiguity and the City improperly allowed a material modification to the bid in violation of Minnesota’s competitive bidding laws.
In addition, we’ve been in the forefront of drafting and promoting legislation that ensures integrity in emerging delivery systems such as CM at Risk, Design-Build, and Best Value procurement.
Defending Claims. One of the best ways to defend against stale and untimely claims on which memories have faded and documents have become scarce is to assert a defense based on the statute of limitations. In Twinco Romax Auto. Warehouse, Inc. v. Olson Gen. Contractors, Inc., we successfully represented the manufacturer of roof joists and defended claims arising out of a roof collapse. In a case of first impression, the Appellate Court held that the claim was barred by the statute of limitations because roof joists were ordinary building materials subject to the two-year statute of limitations. In Lietz v. Northern States Power Co., one of the seminal Minnesota construction statute of limitations cases, we obtained summary judgment for a client, upheld by Minnesota Court of Appeals and Minnesota Supreme Court, dismissing plaintiff’s claim as time-barred. The plaintiff sued seeking recovery for property damage caused by a gas explosion. The property owner sued more than two years after the explosion, and the district court dismissed the lawsuit based on the two-year statute of limitations applicable to claims involving improvements to real property. The Minnesota Supreme Court affirmed, adopting a “common-sense interpretation” to the meaning of the statute of limitations, and that negligence during the installation process can create a “defective and unsafe condition” within the meaning of the statute.
Asserting Claims. Delay, Disruption, and Acceleration claims seem to be part of almost every construction project, and successfully resolving them is part and parcel of our Firm’s practice as these cases illustrate: In Lunda Constr. Co. v. PDM Bridge, LLC, we successfully represented the general contractor and obtained $16 million judgment for delay, disruption and material breach in dispute arising from steel fabricator’s non-performance on a bridge construction project. In Industrial Steel Constr. Inc. v. Lunda Constr. Co., we successfully represented the same general contractor and defeated another steel fabricator’s $13 million acceleration claim. In Stahl Constr. v. Fern Hill Place Arbitration, we successfully obtained multi-million dollar judgment for the general contractor on delay, disruption, and acceleration claim on condominium project, and in Integrity Floor Covering, Inc. and Framing Systems, Inc. v. Weis Builders, Inc., we defeated multi-million dollar delay, disruption and acceleration claim against a general contractor based on failure of proof and intentionally overstating a lien.
Valid delay claims can also provide relief against liquidated damages claims by the owner, and in Polk County v. Widseth, Smith, Nolting, we obtained summary judgment dismissal of water district’s claims against the contractor for contract adjustments and liquidated damages. The district court granted the client’s motion for summary judgment because the water district failed to comply with contractual claim-notice provisions and waived any claim to liquidated damages under the contract by issuing final payment. The Minnesota Court of Appeals affirmed.
Securing Claims. Throughout its 40-year history, the Firm has perfected and enforced mechanic’s liens to make sure the laborers and materialman who actually build the projects get paid for their work and contributions. Often the priority of a mechanic’s lien over a bank’s mortgage determines the practical value of the security provided by the lien. In Richard Knutson, Inc. v. Westchester, Inc., in a case of first impression, we successfully represented a construction company in mechanic’s lien dispute in which the Appellate Court held that mechanic’s liens were valid and superior to lender’s mortgage on the property due to staking of the property prior to grading. Attorney fees can be awarded to a successful lien claimant, and we extended that principle to arbitrations: in Stiglich Const., Inc. v. Larson, the Appellate Court held that the contractor was entitled to submit its claim for fees incurred during both the underlying arbitration and the foreclosure proceeding. Mechanic’s liens can even be used to recover improvements to a project even though construction may never have started. In Rasminde, LLC v. Hutchinson Properties, LLC, we represented the project architect, and the Court of Appeals rejected the owner’s argument that under the parties’ oral agreement, payment to the architect was conditioned on the actual construction of the project and affirmed the district court’s decision that the architect was entitled to payment under the agreement and on its mechanic’s lien.
ADR. The Firm has become and will continue to be a leader in creative settlements and use of alternative dispute resolution (ADR) to resolve important matters for our clients. The cases below reflect some of efforts in not only enforcing agreements to arbitrate but fashioning new methods of resolving disputes: In Rice Lake Contracting Corp. v. Rust Env’t & Infrastructure, Inc., we negotiated and upheld settlement agreement between contractor and the City of Two Harbors. The settlement agreement was payable out of the proceeds from the legal claims the contractor asserted on behalf of the City against the consulting design firms. The contractor prevailed on the City’s claim against the designers and the City’s conditional promissory note to the contractor was fully paid.
Rather than litigation, we promote alternative methods to resolve disputes like arbitration. In Cmty. Partners Designs, Inc. v. City of Lonsdale, we represented a city in dispute with design professional over nonpayment of engineering fees and moved to compel arbitration pursuant to the parties’ contract. The Minnesota Court of Appeals enforced the clause holding, “Minnesota favors arbitration as a means of conflict resolution[.]” In fact, many of the Firm’s attorneys are themselves arbitrators and mediators on the AAA’s most select panels.
Finding Insurance Coverage. Sometimes a settlement is only possible with contributions from the insurers involved in the case. The Firm has a history of taking on insurance companies to successfully obtain coverage for clients wrongfully denied the protections provided under the policies at issue, and we see this aspect of our practice only expanding in future years. In a case involving Westfield Insurance Company, we obtained over $15 million in coverage for contractor for diminution in value of the townhome development and cost of repair caused by water intrusion. In another case involving Westfield Insurance Company, we obtained a favorable judgment for client in an insurance coverage action establishing the duty to defend in the underlying lawsuit and was awarded attorney’s fees of $361,923.25, plus prejudgment interest. The Eighth Circuit affirmed the district court’s ruling, holding that under Minnesota law (1) an insurer’s duty to defend is broader than its duty to indemnify; (2) insured only has to show that one of the owner’s claims is “arguably within the [policy’s] scope; and (3) if it can, the burden shifts to insurer to establish that the claims “fall clearly outside the scope of coverage” under one or more policy exclusions.
Alternative Energy. A growing area of the Firm’s practice is in the alternative energy sector. We have been extensively involved not only in negotiating ethanol, solar, and wind turbine development contracts, but also in resolving disputes on those projects. In Faith Techs., Inc. v. Aurora Distributed Solar LLC, we represented a provider of electrical and energy services in successfully enforcing a $33 million mechanic’s lien against the developer on a solar project that included an award of full costs and fees. In EDF v. RES, we successfully defended the developer against a $13 million force majeure claim and acceleration claim on a wind turbine project. In Enel Green Power N. Am., Inc. v. Geronimo Energy, we represented an energy company against claims involving a Membership Interest Purchase Agreement and a Project Investment Agreement for development of wind and solar energy projects. And in Tharaldson Ethanol Plant I, LLC v. VEI Global, Inc., we successfully represented 300 million gallon a year ethanol plant in multi-million dollar design and construction management dispute, eventually vindicating our client’s position before the North Dakota Supreme Court.
Throughout our 40 years as a Firm, we have been honored to help our clients manage their legal risks through careful contract drafting and providing timely advice gained from decades of experience. When appropriate, we have been equally proud to have advocated for our clients’ rights through ADR, arbitration, or litigation. As we look toward the future, we hope to deepen our relationships with our clients as that is the most rewarding part of our practice. We hope to you will continue to choose us as your legal advisors. As we hope this review of the last 40 years has shown, we know Construction Law because we helped shape Construction Law.
Please join Fabyanske, Westra, Hart, & Thomson to share food and beverages for our 40th Anniversary Celebration, Thursday October 7th from 4:00 to 7:00 pm at the SPS Tower Turf Club located at 333 South 7th Street, Minneapolis. All clients are welcome. RSVP here.
Mark Becker is set to present “Covid Mandate Update” on October 22, 2021 between 10:00 a.m. and 11:00 a.m. at the AGC Office, 525 Park Street, Suite 110 in Saint Paul. For more information about the event, including how to register, visit the AGC website here.
Fabyanske, Westra, Hart & Thomson, P.A. is pleased to announce the recognition of ten attorneys, Mark Becker, Charles Carpenter, Matt Collins, Rory Duggan, Gary Eidson, Marv Fabyanske, Kyle Hart, Jesse Orman, Dean Thomson and Mark Westra by U.S. News Best Lawyers©, one of the oldest and most respected peer-review publications in the legal profession.
Congratulations to the Fabyanske, Westra, Hart & Thomson, P.A. attorneys who have been named The Best Lawyers in America: Ones to Watch (2022 Edition). They are Alexander Athmann, Colin Bruns, Lucas Clayton, and Kenzie Longren.
This discussion is generalized in nature and should not be considered a substitute for professional advice. © 2021 FWH&T