Posted September 23, 2016 by laurieandbrennan
Categories: Construction Law

The Illinois Appellate Court recently issued an important opinion regarding indemnity provisions in construction contracts. In 933 Van Buren Condo. Ass’n v. W. Van Buren, LLC, 2016 IL App (1st) 143490, a condominium home owner’s association (HOA) sued the condominium developer for various claims based on warranty and fraud theories following the discovery of a leaky roof.   The developer then asserted claims against two roofing contractors that it hired for the project – Illinois Roof Consulting Associates, Inc. (IRCA) and Total Roofing & Construction Services, Inc. (Total) – asserting that both had a contractual duty to indemnify the developer against the HOA’s claims.  The trial court dismissed the indemnity claims because the HOA’s complaint was based on the developer’s failure to disclose the leaks (rather than the defective construction that led to the leaks) and, in any event, the indemnity clauses were not enforceable under the Construction Contract Indemnification for Negligence Act (the “Act”).  See id. at ¶ 23. The Illinois Appellate Court reversed in part and remanded the case. See id. at ¶ 62.

As a threshold matter, the Illinois Appellate Court found that the indemnity provisions from the roofers did not violate the Act.  See id. at ¶¶ 38, 41. This Act provides that a contract provision purporting “to indemnify or hold harmless another person from that person’s own negligence is void as against public policy.” 740 ILCS 35/1 (West 2012). The court noted that IRCA’s indemnity provision with the developer was broader than Total’s, and that IRCA’s contract with the developer “could be construed as indemnifying [the developer] from any party’s negligence, which could include the negligence of itself.” Id. at ¶¶ 6, 36. Nevertheless, the court refused to follow such a construction because Illinois law presumes that parties enter into contracts with full knowledge of the law—including the Act—and because “a construction of a contract which renders the agreement enforceable rather than void is preferred.” Id. at ¶¶ 33, 36, 38. Thus, the indemnity provisions did not violate the Act.

The Illinois Appellate Court further held that the roofing companies had a duty to indemnify the developer against the HOA’s claims for breach of warranty and breach of the implied warranty of habitability, but did not have to indemnify the developer for the HOA’s claims rooted in fraud theories. See id. at ¶¶ 1-2. The HOA’s breach of warranty allegations against the developer arose from faulty work on the leaky roof attributable to IRCA and Total’s scope of work, thus triggering the indemnification provisions.  Id. at ¶¶ 51, 53-54. However, the court found that IRCA and Total did not need to indemnify the developer against the HOA’s fraud claims against the developer because those claims were based on the developer’s intentional misconduct rather than the misconduct of others that could otherwise trigger the indemnity provisions.  See id. at ¶¶ 47-49.

This case demonstrates that courts are inclined to construe contract provisions to have an enforceable meaning rather than invalidate the provisions.  Nonetheless, it is important to be aware of the Act and draft in compliance with the Act rather than rely on serendipity from a court.


Posted August 17, 2016 by laurieandbrennan
Categories: Construction Law

Laurie & Brennan is pleased to announce that Ryan A. Hiss has joined us as a partner in the firm.  Throughout his 20+ year career, Ryan has focused his practice on asserting and protecting the legal rights of those involved in the construction industry.  He strives to effectively advocate on behalf of his clients and favorably resolve disputes as efficiently as possible – so his clients can focus on the building process, instead of legal issues.    Ryan is well-known for his tough but practical advocacy for his clients.  We are excited about adding Ryan to our team and look forward to providing even better client service to the construction industry. To learn more about Ryan, feel free to review his biography on our website at

New Overtime Regulations From the U.S. Department of Labor

Posted July 19, 2016 by laurieandbrennan
Categories: Construction Law

On May 18, 2016, President Obama and Secretary of Labor Perez announced the publication of the Department of Labor’s final rule updating the overtime regulations. The Department of Labor states that this will automatically extend overtime pay protections to over 4 million workers within the first year of implementation.

The Department of Labor states the Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt as follows:

  1. The Rule sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker). This is the so-called automatic overtime limit. This is more than double the amount previously set back in 1975;
  2. The Rule sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
  3. The Rule also establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
  4. Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The Final Rule becomes effective December 1, 2016. As a result of this regulation, businesses should immediately start tracking hours for all employees making less than the $47,476 threshold—regardless of whether such employee is currently considered “hourly” or “salaried.”


Owner and Contractor Play “Hot Potato” with Design Error Claim

Posted July 7, 2016 by laurieandbrennan
Categories: Construction Law

The Fifth Circuit recently handed down an important lesson to building owners: if you ask contractors to point out potential design errors, make sure you are prepared to resolve them.  In reversing the district court’s grant of summary judgment in Dallas/Fort Worth International Airport Board v. INET Airport Systems, Inc., 819 F.3d 245 (2016), the Fifth Circuit held that a contract between an airport and a contractor placed the risk for defective design on both parties, and that it was not clear from the record which party had impeded the resolution of a design defect flagged by the contractor.  While contracting parties can allocate the risk of design defects as they see fit, it is imperative to adopt an explicit procedure for resolving flagged defects and to expressly indicate which party has the burden of moving the resolution process along at each stage of the process.

INET Airport Systems, Inc. (INET) entered into a contract with the Dallas/Fort Worth International Airport Board (DFW) for the installation of rooftop air handling units in the passenger boarding bridges in Terminal E of the DFW Airport.  The contract required INET to follow the design specifications provided by DFW, which Campos Engineering (Campos) had prepared for DFW.  INET was prohibited from substituting any materials or designs from Campos’ specifications without prior authorization from DFW, and had a contractual obligation to notify DFW immediately of any apparent defect in the plans or specifications.  The parties were to remedy these design defects through a written change order issued by DFW and agreed to by INET.

INET initiated the change order process in a construction kick-off meeting in October, 2009 when it noted that the rooftop units specified by Campos were potentially incompatible with systems already in place at the airport.  After receiving no immediate response from DFW, INET submitted a Request for Information (RFI) asking how it should proceed.  INET, DFW, and Campos conferred on a resolution to the design error, ultimately generating two proposals.  INET admittedly rejected one of these proposals, as it determined that it would not effectively solve the problem, while DFW failed to fully respond to a second RFI submitted by INET asking for more information regarding the second proposal.  DFW eventually notified INET that INET had failed to meet the substantial completion deadline specified in the contract, declined to pay at least one invoice submitted by INET, and eventually had the work completed by a substitute contractor in July, 2013.  DFW sued INET for breach of contract, and INET countersued claiming entitlement to the money DFW refused to pay and for unjust enrichment and money had and received on the part of DFW.

The Fifth Circuit reversed the district court’s grant of partial summary judgment in favor of INET, finding disputes of material fact regarding which party prevented performance by failing to fully cooperate in arriving at a solution once INET discovered the error.  While the district court focused on determining which party was the first to breach, the Fifth Circuit concentrated on the respective obligations of the two parties once the error was flagged.  The court found that the language of the contract placed the risk of, and obligations to address, defective designs on both parties. The contract charged INET with pointing out potential defects, and DFW was responsible for issuing the change order with a resolution.  However, this change order was not a unilateral power wielded by DFW – it had to be accepted by INET.  Accordingly, the court remanded the case to the district court for a factual inquiry into which party obstructed the change order process, breaching their agreement to work together towards a resolution.


Posted June 21, 2016 by laurieandbrennan
Categories: Construction Law

In a unanimous decision delivered by Justice Clarence Thomas, the Supreme Court recently recognized the “implied false certification theory of liability” under the False Claims Act (FCA).  The FCA imposes civil liability on “any person who…knowingly presents, or causes to be presented, a false or fraudulent claim for payment” for services rendered to the Government.  The implied false certification theory admits FCA liability where a defendant makes certain representations in submitting a claim but fails to disclose noncompliance with material statutory, regulatory, or contractual requirements that renders these representations misleading.

In Universal Health Services, Inc. v. United States ex rel. Escobar,, a mental health facility operated by a subsidiary of Universal Health Services, Inc. submitted Medicaid reimbursement claims for services rendered to the decedent daughter of the respondents.  After their daughter died due to an adverse reaction to a medication prescribed by a purported psychiatrist at the facility, respondents discovered that few of the facility’s employees were actually licensed to provide the services rendered.  A qui tam suit was filed in 2011 relying on the implied false certification theory of liability, alleging that Universal Health defrauded the Government by submitting Medicaid reimbursement claims that “made representations about the specific services provided by specific types of professionals, but that failed to disclose serious violations of regulations pertaining to staff qualifications and licensing requirements for these services.” While circuit precedent had previously embraced the implied false certification theory of liability, the District Court dismissed the case for failure to state a claim because the regulations Universal Health violated were not express conditions for payment under the Medicaid program.  The United States Court of Appeals for the First Circuit reversed on that point, and the Supreme Court granted certiorari to resolve a circuit split over the validity and scope of the implied false certification theory of liability.

The Court first looked to the text of the FCA, noting that by failing to define what makes a claim “false” or “fraudulent” under the statute, Congress incorporated the well-settled common-law understanding of the terms.  Accordingly, the Court held that the claims in this case fell “squarely within the rule that half-truths—representations that state the truth only so far as it goes, while omitting critical qualifying information—can be actionable misrepresentations.”  The parties agreed that misrepresentations by omission can be the basis for liability, but Universal Healthcare argued that it had made no representations—and therefore no misrepresentations through half-truths—in submitting its claim.  The Court did not reach respondents’ counter-argument that every claim implicitly represents that the claimant is legally entitled to payment.  Instead, it held that Universal Healthcare’s claim did make such representations because it used special payment codes that correspond to specific counseling services and because its claim used National Provider Identification numbers that correspond to specific job titles.  The Court recognized the validity of the implied false certification theory where the claim submitted makes “specific representations about the goods or services provided” and the “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”

The Court, however, circumscribed the potential scope of implied false certification theory with its treatment of the issue of materiality.  At first, the Court rejected Universal Healthcare’s contention that FCA liability for failing to disclose violations of legal requirements should only attach where those requirements were designated as express conditions of payment.  The Court found nothing in the text of the FCA, nor a valid public policy reason, for so restricting liability.  On the other hand, the Court disagreed with the Government’s contention that the designation of a requirement as an express condition of payment automatically triggers liability, nor would it find that the Government’s legal entitlement to refuse payment were it aware of the violation qualifies the violation as material.   Instead, the Court found a middle ground, holding that the designation of a specific legal requirement as an express condition of payment was relevant, but not singularly dispositive, of the requirement’s materiality.  After Escobar, the FCA’s materiality requirement tracks that of other areas of the law, looking to whether the statement or omission has an “effect on the likely or actual behavior of the recipient of the alleged misrepresentation.”  In this case, the Government surely would have acted differently had it known of United Healthcare’s failure to operate its health facility with licensed staff, but the Court remanded the case for reconsideration under the now-clarified standards of FCA liability.

San Francisco Goes Solar: First Major U.S. City to Require Solar on New Construction

Posted June 10, 2016 by laurieandbrennan
Categories: alternative energy, Construction Law, solar

In April, San Francisco’s Board of Supervisors unanimously adopted a proposal amending the city’s building codes to require the installation of solar panels on new commercial and residential buildings.[1] This is the first such legislation in a major U.S. city, and it looks like other major cities may be taking notice.  San Francisco’s resolution comes several years after two smaller California cities adopted similar policies—first Lancaster, on the edge of the Mojave desert north of Los Angeles, and several months later Sebastopol, close to Napa and Sonoma wine countries[2]—and has been closely followed by Santa Monica’s vote to implement an even more expansive solar requirement.[3]

Supervisor Wiener’s innovative proposal—the Better Roofs amendment to San Francisco’s Green Building Code §§ 4.201.2 and—goes into effect on January 1, 2017 and covers new residential and non-residential buildings ten floors or less.[4]  Larger buildings are exempt. While the city’s building code previously required builders to construct solar-ready zones atop new projects, developers will now be required to actually install solar panels on those rooftops.  The legislation promotes the city’s goal of meeting 100% of its energy needs from renewable sources, even as it allows an exception for buildings with non-solar “living roofs.” These “living roofs” utilize vegetation to provide insulation, create wildlife habitat, absorb pollution, and help manage the drainage of excess storm water.

Weiner hopes that this push to activate underutilized roof space will efficiently promote the use of solar energy and ensure a sustainable future for San Francisco and the surrounding region. While this is a lofty goal, the new legislation’s direct impact may be limited by the relatively small number of new and planned buildings in San Francisco that are under ten stories. Still, the ordinance is expected to add 50,000 solar panels and avert 26.3 million tons of carbon dioxide annually, and will contribute to San Francisco’s move toward 100% sustainability.  The move to solar is not without indirect economic benefits as well, as consumer investments in renewable resources lessen the need for expensive construction and maintenance of traditional infrastructure systems.  A combination of energy efficiency and renewable energy production has reduced the expected burden on the California grid, allowing for the cancellation of several major infrastructure projects to the tune of $192 million in savings for California taxpayers.[5]  These cost savings, together with the environmental benefits of renewable energy, should prompt even more cities to follow San Francisco, and now Santa Monica, on the quest for alternative energy sources.

[1] San Francisco Ordinance No. 70-16 (Amended in Board April 19, 2016),

[2] Devi Glick, A Tale of Two Solar Cities, Rocky Mountain Institute Outlet, August 27, 2013,

[3] Chris Meehan, Santa Monica Joins San Francisco in Mandating Solar on New Rooftops, Solar Reviews, May 4, 2016,

[4] Ordinance No. 70-16, §§ 4.201.2-601.

[5] Julia Pyper, Californians Just Saved %192 Million Thanks to Efficiency and Rooftop Solar, GreenTech Media, May 31, 2016,


Posted June 1, 2016 by laurieandbrennan
Categories: Construction Law



On May 19, 2016, the Illinois Supreme Court handed a victory to developers and builder-vendors of new residential construction.  In Fattah v. Bim,  2016 IL 119365,  the court held that the implied warranty of habitability may not be extended to a second purchaser of a home when a valid, bargained-for waiver of the warranty was executed between the builder-vendor and the first purchaser.  In Fattah, the original builder-vendor built and sold a new home in the Chicago suburbs in 2007.  Approximately three years later, the original purchaser resold the home.  That sale included an “as-is” addendum in the sales contract.  Not long after the second sale, portions of a retaining wall around the rear patio of the house began to give way resulting in a portion of the patio collapsing.  The second purchaser brought suit alleging, among other things, a breach of the implied warranty of habitability.  At the trial court level, the plaintiff was denied relief because the trial court found that the original waiver of the implied warranty of habitability was enforceable as against the second purchaser.  The Illinois Appellate Court reversed but the Illinois Supreme Court ultimately agreed with the trial court.

The Illinois Supreme Court clarified that its holding in the 1982 case of Redarowicz v. Ohlendorf, 92 Ill. 2d 171 (1982) was decided on a particular set of facts that warranted the extension of the implied warranty of habitability to a subsequent purchaser.  However, in the Fattah case, the question was whether an original, valid waiver of the implied warranty of habitability with the first purchaser of a home would extend to a second purchaser of that home.  The Redarowicz decision never considered this question.  The Illinois Supreme Court held that for a variety of legal and public policy reasons the waiver should be enforced as against the second purchaser.  Among other reasons, the court stated that when a builder-vendor offers the original purchaser of a new house a bargained-for waiver of the implied warranty of habitability to gain financial certainty as to when its exposure for certain liabilities ends, that certainty would be lost if the waiver were not enforceable against a second purchaser.  In addition, the court found it nonsensical to allow an implied warranty of habitability to be resuscitated in the face of an otherwise valid waiver simply because a home had been resold.

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