Washington Supreme Court Upholds Strict Interpretation of Contractual Notice Provisions: Failure to Immediately Give Notice of Claim a Complete Bar to Recovery

Nova, a public works contractor, filed a claim for breach of the covenant of good faith and fair dealing, based entirely on the City’s untimely and repeated rejection of submittals to perform culvert work in Olympia. The Supreme Court held that the contractor was barred from seeking damages because it failed to give written notice of protest “immediately” when the rejections occurred rather than waiting until the City terminated the contract. Under Section 1-04.5 of the contract (adopted from the WSDOT standard specifications), the contractor is required to “immediately” file a written notice of protest to preserve any claims related to rejection of such submittals, including claims for expectancy or consequential damages.

Failure of the contractor to “immediately” file such a written notice of protest following rejection of its submittals, regardless of actual notice by the City, bars the claim under the rule set forth in Mike M Johnson in the 2003 case. Interesting side note, the Washington Court of Appeals had carved out an exception to the harsh result of the Mike M Johnson rule and allowed the contractor to proceed with its breach claims since they were based on expectancy and consequential damages, not for the cost of work performed. The Supreme Court reversed and once again affirmed that no notice means no claim, leaving the contractor without a leg to stand on.

Nova Contracting Inc. v. City of Olympia, Case No. 94711-2 (Sept. 27, 2018).

Get Trained on New Requirements for Bidding on Public Works Contracts

Washington’s “responsible bidder” law already imposes significant requirements on contractors bidding on public works contracts: for instance, bidders must obtain certain types of industrial insurance, maintain records of wages and components used in construction, and must not have committed more than one prevailing wage violation in the past five years. Now, a new law will also require contractors to undergo training on public works and prevailing wage requirements in order to become eligible to bid on public contracts.

On March 23, 2018, Governor Jay Inslee signed SSHB 1673 into law, amending Washington’s current “responsible bidder” statute to add a new requirement that bidders on public works projects “have received training on the requirements related to public works and prevailing wage” and designate at least one person to be trained on these requirements. The bill requires the Department of Labor and Industries (L&I) to develop a curriculum for this training, which can be provided either by L&I itself or by a third-party training provider whose course has been approved by L&I. For its part, L&I has already created a web page which lists some of the qualifying in-person courses available to contractors.

Fortunately, the requirements of SSHB 1673 don’t go into effect until July 1, 2019, so aspiring public contractors have time to receive the required training. In addition, bidders with significant public contract experience are grandfathered in: the training requirements don’t apply to contractors who have completed at least three public works projects and have maintained a valid Washington business license for at least three years. But businesses that don’t meet these criteria are advised to complete the applicable training requirements as soon as possible—once the law goes into effect next summer, what you don’t know about public works and prevailing wage laws can hurt you.

Department of Labor to Hold Listening Session on Overtime Regulation in Seattle on September 11

As contractors well know, most construction workers are entitled to overtime pay when they have to work more than 40 hours a week. However, under the Fair Labor Standards Act, there is a “white collar” exception for certain employees who earn no less than a standard salary threshold and meet other conditions. In May of 2016, the U.S. Department of Labor (DOL) raised that salary threshold to $47,476, but the rule was later enjoined by the courts. In July of last year, the DOL sent out a request for information looking for comments on the “white collar” exception and other aspects of the rule.

Now, the DOL is coming to Seattle on September 11 for a “listening session” to hear the public’s comments on any changes needed to the overtime exceptions. The session will be held at the Jackson Federal Building at 912 Second Avenue from 10 am – noon, and you can sign up here. Sign up now for a chance to let DOL know your opinions on this issue.

How Should Businesses Respond to a Notice of Intent Letter?

This article was originally published in the Vancouver Business Journal.

When businesses open a letter from Northwest Riverwatcher (a fictional environmental group) with the subject line “Notice of Intent to Sue Under the Clean Water Act,” the tendency, particularly among smaller businesses, is to ignore it and hope Riverwatcher goes away. There may be a mistaken belief that the threat to sue is an empty one, and that Riverwatcher sends out scores of such letters, hoping that a small percentage of the recipients will pay some money to make it go away. Continue Reading

State of Oregon Loses Statutory Recreational Immunity Defense Under New Court of Appeals Decisions

ORS 105.682 provides immunity from contract or tort claims to landowners who permit the public the use of their lands for recreational purposes. Under that statutory provision, a recreational user or the estate of such a user cannot sue the landowner if that user suffers personal injury, death, or property damage from the use of the land. On August 1, 2018, the Oregon Court of Appeals released decisions in two cases in which the State of Oregon used ORS 105.682 as a defense to negligence claims by injured users of State-owned property. In the first case, a 14-year-old boy had been surfing at Pacific City near Cape Kiwanda when he collided with a dory boat, which severed his arm. In the second case, a man was severely injured by a submerged boulder when he dove into Lake Billy Chinook at Cove Palisades State Park. In both cases, the critical question was whether the State had the authority to “make a volitional decision whether or not to allow recreational use on the land in question.” The court found in both cases that the State had not effectively demonstrated that it had that authority. The court used the standard text-in-context/legislative history interpretational aids to interpret ORS 105.682 as providing a legislative quid pro quo to landowners to encourage them to open their lands to the public for recreational purposes in exchange for immunity. If the owner of land does not have that authority, recreational immunity does not apply. 


Injunctive Relief Exclusive Remedy For Successful Bidder Seeking Damages on Construction Job Not Performed

On July 26, 2018, the Washington Supreme Court issued a new decision addressing public bidding in Specialty Asphalt & Constr., LLC v. Lincoln County. Specialty Asphalt was the winning bidder on a paving project for Lincoln County. After not requiring a performance bond typically required by statute in the bid, the County asked that Specialty post one as part of the contract award. Specialty refused and the project was delayed, resulting in damages to Specialty. Later, the County dropped the bond requirement, but Specialty decided not to perform and sued for damages based on breach of contract and discrimination. Specialty argued that it was entitled to pursue monetary damages for its breach of contract claim, analogizing its case to Scoccolo Construction, Inc. v. City of Renton, 158 Wn.2d 506, 145 P.3d 371 (2006).

The Court of Appeals and the trial court instead relied on Skyline Contractors, Inc. v. Spokane Housing Authority, 172Wn. App. 193, 289 P.3d 690 (2012). The Supreme Court agreed with the Court of Appeals. In Scoccolo, the contractor completed the project. Specialty did not, nor did it even begin performance. Therefore, injunctive relief was the exclusive remedy even if the successful bidder was impacted by the delays.

The rationale was affirmed with the following quote:

[W]hile equitable,  extraordinary,  or declarative  relief  may  serve the public interest by preventing the award and execution of a contract for an excessive amount, permitting damages in such cases serves the bidder’s interest alone, and is contrary to the public interest the competitive bidding laws were designed to protect, further burdening a treasury already injured by paying too high  a price for the goods or services.

Id.  at  591  (emphasis  omitted)(quoting  James  L.  Isham,  Annotation,  Public Contracts: Low  Bidder’s  Monetary  Relief  against  State  or Local  Agency for Nonaward of Contract, 65 A.LR.4th 93, § 2[a] (1988)).

In summary, if a contractor seeks damages before breach of contract to perform a public contract, they need to perform the work. Otherwise, the contractor is left with only seeking declaratory or injunctive relief.

Oregon Supreme Court Allows Coos Bay Terminal Project to Move Forward

On July 26, 2018, the Oregon Supreme Court affirmed the Court of Appeals in its affirmance of a Department of State Lands’ (DSL) final order granting a permit to the Port of Coos Bay that allows the Port to dredge 1.75 million cubic yards of material from the bay for a deep water marine terminal. Coos Waterkeeper v. Port of Coos Bay, 363 Or 354 (2018). DSL issued the permit under ORS 196.825, which contains a number of approval criteria applicable to the applicant’s “project.” Petitioners argued that the “project” is the “construction, existence, and operation” of the terminal and that DSL erred in failing to consider negative effects of the operation of the terminal when it reviewed the Port’s application. The Court disagreed, and held instead that ORS 196.825 in this case was limited to the impacts of removal and fill activity, and the construction of the proposed development. The Court reached that conclusion by analyzing ORS 196.825 according to the standard rules of statutory interpretation, and determined that the text and legislative history of the statutory provisions were not consistent with a requirement that DSL analyze ongoing operations.

Recap: Construction Breakfast Roundtable & Seven Habits of Highly Effective Contractors/Owners

We had a great turnout at our Seattle Breakfast Roundtable earlier this week, which was attended by in-house counsel, representatives from a diverse group of companies across the industry, and attorneys in our Construction team. Our conversation covered a range of topics, including contract terms and requirements, project communications, and documentation. In particular, we discussed the importance of making sure contracts match what happens in the field and ensuring that the onsite team has knowledge and understanding of the contract. The group also discussed new technologies (e.g., BIM, PlanGrid, text messages, etc.) and how they can solve or complicate claims.

Based on the early feedback we have received, the biggest benefit to our attendees was the opportunity to hear the perspective from representatives across the industry. We had a lively discussion about the industry and business constraints on various groups, legal solutions to common pitfalls, and opportunities for more effective and efficient project delivery. Below are the seven habits of highly effective contractors/owners that we covered at the event.

For those who missed this roundtable, we will be holding another on this topic in our Portland office on June 5th. In addition, we will be holding another roundtable in Seattle this fall. Please keep an eye out for more details in the coming months. Thank you to those who joined us. If you were not able to attend, but would like more information on these topics, contact Tara O’Hanlon or Brian Esler.

Click here for our printable handout, which includes the seven habits of highly effective contractors/owners.

Buzz Kill: Coffee Companies Roasted by Court Over Warning Labels

Chances are that if you live in or have visited California, you have seen conspicuously placed “WARNING” signs notifying you that a product you are consuming or a location you are entering “contains chemicals known to the State of California to cause cancer and birth defects or other reproductive harm.”

Now, following a March 30, 2018, proposed statement of decision in the Los Angeles Superior Court case Council for Education & Research on Toxins v. Starbucks Corp., cancer-warning labels may need to be added to coffee under Proposition 65, California Health & Safety Code section 25249.6 et seq. Continue Reading