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Legal Defense Fund | ASA of Ohio | American Subcontractors Association

Legal Briefs

This is a very important case because is gives us a chance to win back some of the losses from 2007 Dugan & Meyers case.  In Dugan the Court of Appeals reversed the Court of Claims decision awarding Dugan $1,996,421 for delay and unabsorbed home office overhead expenses.  The Ohio Supreme Court Affirmed the Appellate decision.  The Court of Appeals held that despite the poor quality of the plans and specifications prepared by the associate architect (Dugan & Meyers alone issued over 700 Requests for information, “many of which produced no timely response” and the associate architect issued over 250 field work orders and 85 architectural supplemental instructions to D&M) that D&M must still strictly comply with the change order provisions for an extension of time.  At the same time the Court also added a new provision to the Spearin Doctrine (which provides that a public owner warrants that its plans and specifications are buildable) by holding that, “the record fails to demonstrate that [the problems with the plans] rendered the owner-furnished plans unbuildable or otherwise wholly inadequate to accomplish the purpose of the contract,” finding that the “buildings were completed upon substitution of a new lead contractor.” (who had the benefit of the responses to the 700+ RFIs and 250+ field work orders and 85 architectural supplemental instructions.  United States V. Spearin is a 1918 US Supreme Court case which held that the government impliedly warrants that its plans and specifications are buildable.  Subsequently, the Doctrine was adopted by every state across the country.  The Dugan Court expanded its 1982 ruling in S&M Constructors v. City of Columbus which held that, “the Spearin Doctrine does not invalidate an express contractual provision: “Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because  unforeseen difficulties are encountered.”  In S&M the contractor, a sewer tunneling contractor, had an unambiguous contract that barred it for recovering any additional expenses (actually an outrageous holding considering the lack of negotiating ability that any bidding contractor has and the complete control that the public authority has).  The Dugan Court used that language to further limit the Spearin Doctrine holding that it was going to “decline the opportunity to extend the Spearin Doctrine from job-site-conditions cases to cases involving delay due to plan changes.”
I believe that Justice Pfeifer was correct in his dissent.  He wrote:  “This case calls for an application, not an extension, of United States v. Spearin (1918), 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166, 54 Ct. Cl. 187.  As in all Spearin Doctrine cases, the fault in this case lies with the owner’s plans. It requires no leap to find that the state implicitly warranted that its plans were buildable and [***77]  that that warranty prevailed over general contract provisions. An owner’s plans and specifications must be reliable for the contractual process to work. The majority seems to suggest that an owner need not be concerned with preparing accurate plans, since any deficiencies must be corrected by the contractor. As it turns out, the state could have saved a lot of money on blueprints and just submitted some sketches on the backs of a few cocktail napkins.”
In our case, J&H Reinforcing & Structural Erectors, Inc. v. Ohio Schools Facilities Commission, the OSFC has appealed a Court of Claims decision by Magistrate Thomas R. Yocum.  Tom, was appointed to hear the case by the Chief Justice of the Ohio Supreme Court, after a two-week trial on the merits, wrote a very well thought out opinion which properly and effectively addressed all of the salient points of law as they related to the facts of the case.  Hopefully, the care that Tom took in writing the Decision will overcome the hurdles that have been placed in the path of contractors by the preceding cases.
The trial court awarded the contractor $959,232, plus interest, less damages to the OSFC of $180,332 because of delays on the project caused by other contractors.  More importantly, additional problems were caused by a manipulation of the schedule by the Construction Manager, Bovis Lend/Lease, which disguised the actual cause of the delay and stacked trades.  Then the OSFC tried to strictly enforce the notice requirements of the contract, which were rendered impossible to comply with due to the actions of Bovis.  We argue, among other things, that the OSFC, as a result of its monopsony as the single construction buyer for school construction projects, has an unfair advantage over bidders, which is bad for the construction industry and its employees, and ultimately our taxpayers.  That they should not be able to demand strict compliance with contract terms when those terms are unreasonable and especially when the contractor’s compliance is hindered by the OSFC.
On a separate note, we also wrote an SLDF Amicus Brief in the case Keybank v. Columbus Campus,  a case where the bank is trying to apply a flow-down clause to assert a “no-lien” provision in the prime contract against subcontractors and suppliers.  Keybank was left with this remedy for priority of its “construction” loan when it failed to properly document the loan/mortgage as a construction loan as required by the statute that affords such lenders priority over mechanic’s lien claimants, which would have put potential lien claimants on notice that their right to be paid was jeopardized.  That case comes up for a hearing on October 9 and will be argued by Don Gregory.

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