Bowie & Jensen, LLC Construction Law Forum

Maryland, Virginia, and D.C. Mechanic's Lien Law: Part I

2009-07-06T09:53:00.002-04:00

This is the first of several blogs that will examine the differences and similarities in mechanic’s lien statutes in Maryland, Virginia and Washington, D.C.

Notice Provisions and Bringing Claims

Mechanic’s liens laws exist in every state to protect the rights of contractors and subcontractors. Due to the economics of the construction trade, contractors and subcontractors require greater protection from non-payment for their work performed or materials furnished than merely the right to sue for breaches of contract. As such, mechanic’s liens are a statutory mandate enforced by each state, permitting a contractor to obtain a security interest in the title to property that benefited from the work performed or materials furnished. The laws governing mechanic’s liens vary from state to state, including, but not limited to, notice provisions to owners, deadlines for filing a mechanic’s lien, and the type of property subject to a mechanic’s lien. This blog will focus on the timing of filing mechanic’s liens and notice requirements for mechanic’s liens in these jurisdictions.

In Maryland, all contractors (including subcontractors) wishing to enforce a mechanic’s lien must file a petition within 180 days from the last day any work was performed on the project. Subcontractors, however, have an additional hurdle before filing a petition: a subcontractor must first provide written notice to the owner of the property by registered or certified mail, return receipt requested, within 120 days from the last day of any work performed on the project. Notice also may be given by posting on the door of the property if the subcontractor is unable to serve the owner by mail. A subcontractor who fails to meet this notice requirement will be barred from obtaining a mechanic’s lien.

A contractor wishing to file a mechanic’s lien in the District of Columbia, whether a claim is due or not, must notify the Office of Record of Deed in writing of its intention to do so, within 90 days after the completion of construction. The term “completion” refers to substantial completion of the project. The same limitations and notice requirements apply to subcontractors, however, a subcontractor must also serve the same notice provided to the Office of Record of Deed (and within the same time period) upon the owner of the property in which the lien is claimed. D.C. requires that a mechanic’s lien be filed within 180 days after the filing of the notice of intention with the Office of Record of Deed or the completion of the building, whichever is later.

In Virginia, there is no notice provision for contractors or subcontractors; however, a claimant must file its mechanic’s lien within 90 days from the last day of the month that work was performed. For example, if ABC Contractor’s last day of work on a project with XYZ Owner was June 5, 2009, ABC Contractor would have 90 days from June 30, 2009 to file a mechanic’s lien. Additionally, the claimant cannot make claims that are older than 150 days from the date of the filing of the mechanic’s lien. Using our previous example, if ABC Contractor filed a mechanic’s lien on June 30, 2009, it would only be permitted to recover for work performed or materials furnished on or after February 2, 2009.

Essentially, Virginia law compels contractors to file a mechanic’s lien as soon as a problem arises, as compared with Maryland, where a contractor can bring a cause of action for claims dating back to its first day on the jobsite (as long as the mechanic’s lien petition is filed within 180 days from the last day work was performed or materials furnished) or D.C., where a contractor must file a mechanic’s lien within 180 days after its notice of intention or the completion of the project, whichever is later. D.C. ensures that the notice of a potential lien is provided by any contractor and also provides the longest amount of time in which a contractor can theoretically bring a claim. Maryland does not require notice from the prime contractor to the owner, but limits the timeframe for a mechanic’s lien to 180 days from the time the work was performed or materials furnished.

For further information contact Michael W. Siri at siri@bowie-jensen.com or 410-583-2400.

Rejection of All Bids for A Public Project in Maryland

2009-06-29T12:28:00.002-04:00

A recent decision by the Maryland Board of Contract Appeals reaffirmed the state’s ability to reject all bids for a project, pursuant to the Code of Maryland Regulations (“COMAR”) 21.06.02C. A contractor submitted the apparent low bid for a construction project to repair erosion damage at the BWI Airport. After reviewing all of the bids, the Maryland Aviation Administration (“MAA”) decided to reject all bids and rebid the job. The MAA advised the contractor with the lowest bid of its decision and also notified that contractor that its bid contained several deficiencies. The contractor filed a timely bid protest, claiming that its bid was not deficient. The bid protest was rejected and the contractor appealed. The Maryland Board of Contract Appeals did not even consider whether the bid contained any deficiencies, but ruled that the MAA can reject all bids outright. The decision to reject all of the initial bids was the lone issue and the Maryland Board of Contract Appeals would not consider whether the contractor’s bid contained any deficiencies. For additional information on bid protests in Maryland, contact Michael W. Siri at siri@bowie-jensen.com.

The Supreme Court, Judicial Elections and Contract Solutions

2009-06-17T09:37:00.006-04:00

The United States Supreme Court recently reversed a decision by the Supreme Court of West Virginia on the basis that campaign contributions by Massey Coal's CEO, Don Blackenship, to one of the Judges in the West Virginia majority created an appearance of impropriety or a "serious risk of actual bias." Unlike Maryland, West Virginia has contested elections for its appellate judges. Several years ago Bowie & Jensen, LLC represented a contractor in a residential construction dispute against one of the justices on the West Virginia Supreme Court and her husband a prominent Plaintiff's attorney. The local rumblings indicated that his money got her elected, and the pair had been the subject of a less than flattering article published in The Wall Street Journal. The Journal article suggested that rulings by Justice Robin Davis at the appellate level had paved the way for large jury awards and large settlements for her husband of which she was a direct beneficiary.

Davis and Segal filed suit against our client in a West Virginia State trial court. Because there was diversity of citizenship and the amount in controversy exceeded $75,000 we sought to remove the case to Federal Court. However, we ran into the first of several problems. We could not find local counsel. Many attorneys would not take the case out of concern for retribution against other clients and themselves should they find themselves in front of Davis. Eventually, we found local counsel, an attorney who had been involved in a locally publicized dispute over the postings by certain Justices on the West Virginia Supreme Court website. We successfully removed the case, but then ran into further problems, including reluctant witnesses, inability to access certain public records and an onslaught of discovery motions.

Ultimately, the Federal Judge (not subject to contest elections) assigned to the case recused himself out of a concern that his relationship with the Justice Davis may be perceived by either party as affecting the outcome of the case. He agreed to mediate the case and it eventually settled.

Now, Justice Davis is back in the news for authoring the majority opinion that reversed the jury verdict reached at the trial court. It is this decision that Justice Benjamin, the beneficiary of Blackenship's generosity, joined and then authored a concurring opinion to justify his refusal to recuse himself.

Back to Maryland. Several years ago, the wife of then Baltimore Mayor Martin O'Malley became a District Court Judge, another position that does not have contested elections. She recused herself from cases involving the City and the Baltimore City Police to prevent any perceived bias.

While the United State Supreme Court's recent decision represents significant progress and is a "shot across the bow" for contested judicial elections, there are still States and jurisdictions that are highly political or parochial. The lesson in all of this for contractors is to choose carefully when deciding to do business in a particular State or if there is a concern regarding the independence of the judiciary (who will ultimately decide any disputes) include a well-drafted forum selection clause or arbitration provision. The forum selection clause should designate a specific State or county in which disputes must be brought. Likewise, an arbitration provision should select the location of the arbitration, the number of arbitrators, and the governing law.

For further information, please contact Matt Hjortsberg at Hjortsberg@bowie-jensen.com or 410-583-2400.

Maryland's Implementation of the Virginia Graeme Baker Pool and Safety Act

2009-05-06T15:46:00.001-04:00

As Memorial Day weekend approaches, public swimming pools throughout Maryland are preparing to open for the summer; however, all public swimming pools in Maryland must comply with the Virginia Graeme Baker Pool and Spa Safety Act (“Graeme Baker Act”), which was enacted on December 19, 2008. As mentioned in a previous blog, the Graeme Baker Act promotes the safe use of pools, spas, and hot tubs by requiring the following: 1) all manufactured safety drain covers must conform with the American National Standard ASME A112.19.8-2007 Suction Fittings for Use in Swimming Pools, Spas, and Hot Tubs published by the American Society of Mechanical Engineers (“ASME”); 2) all new and existing public pool drain covers must be equipped with the conforming drain covers; and 3) all new and existing public pool with a single main drain should be equipped with additional preventative suction entrapment devises meeting applicable ASME standards.

Effective January 1, 2009, the new design criteria was incorporated in the Maryland Public Swimming Pools and Spa Regulations, Code of Maryland Regulation §10.17.01 (“COMAR”). The State of Maryland Department of Health and Mental Hygiene requires all public swimming pools and spas in Maryland to submit the Aquatic Facility Review Form for Compliance with the Graeme Baker Act to the Department of Health and Mental Hygiene for approval. A separate form is required for each main drain system repaired. Further, a “pool professional” or “Registered Design Professional” must approve of any corrections make for compliance with the Graeme Baker Act. Failure to obtain this approval will prevent a facility from obtaining a pool permit. For further information, please contact Michael W. Siri at siri@bowie-jensen.com.

Bid Protest Rejected for Inadequate Bid Bond

2009-05-04T20:23:00.004-04:00

The Federal Circuit upheld the rejection of the lowest bidder by the Department of Transportation where the bid bond supplied by the low bidder failed to comply with the Federal Acquisition Regulations (FAR). In Tip Top Construction v. United States, the general contractor submitted a bid bond from an individual surety backed by mined coal. The government rejected the bond because the asset securing the individual security was too speculative and hence did not comply with the FAR's requirements. The invitation to bid required a bid bond of three million or 20 % of the bid amount whichever was less.

In affirming the rejection of the bid, the court emphasized the purpose of the bid bond; namely to protect the government in case the bid is withdrawn. Thus, the assets securing the bond most be sufficiently liquid or marketable to cover the expenses of rebidding the project. The court noted that too many variables impact the pricing of the coal in order to adequately assess its value and liquidity. In short, the coal was a speculative asset and therefore insufficient collateral.

For further questions regarding bid protests, contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-jensen.com

Bid Protest Brought By Second Lowest Bidder

2009-04-03T15:26:00.003-04:00

The Maryland Board of Contract Appeals (“MBCOA”) recently permitted the second lowest bidder for a project to submit a bid protest after the contractor’s bid was rejected by the procurement officer. In this case, the lowest bid was deemed non-responsive and was rejected after it failed to comply with MBE requirements. The lowest bidder did not submit a bid protest. The second lowest bid was subsequently deemed non-responsive and was rejected for the identical reasons as the lowest bid. The second lowest bidder submitted a bid protest; however, the procurement officer rejected the bid protest. The matter was then appealed to MBCOA, which held that the second lowest bidder would having standing to bring a bid protest because it would be in line for an award of the contract, after the rejection of the lowest responsive bidder. Therefore, even if a contractor is not the lowest bidder on a construction contract, they may still have the right to bring a bid protest. If you have additional questions, please contact Michael W. Siri at siri@bowie-jensen.com.

Priority of Remedies for Subcontractor Claims

2009-03-11T22:07:00.007-04:00

Subcontractors beware. The Maryland Court of Special Appeals has recently ruled that a subcontractor on a federal project may have to avail itself of a pass-through claim against the government rather than pursue its remedies in a direct claim against the general contractor. In Skanska v. Smith Management Construction, the Court of Special Appeals held that where the general contractor claimed that a portion of the subcontractor's claim may be the result of actions by the government, the subcontractor was bound by the construction claims process under the Federal Acquisition Regulations. It could not proceed directly against the general contractor in court. The court reasoned that the contract language suggested that if the general contractor alleged that the government bore some responsibility for the subcontractor's claim for entitlement then the subcontractor had to pursue its remedies under the Contract Disputes Act set forth in FAR. Consequently, the subcontractor had to pass through its claim and certify it to the contracting officer. If the subcontractor was dissatisfied with the result, it could appeal to the appropriate board of contract appeals or proceed in the Federal Court of Claims.

Significantly, the court noted that the mere contention by the general contractor that the subcontractor's claim was a governmental dispute divested the state court of jurisdiction to consider the subcontractor's claim against the general contractor. Furthermore, the court noted that the nature of the claims, which were for increase to the gross maximum price and for time, were governmental issues, which also created a governmental dispute.

There are inherent risks for a subcontractor in proceeding with a pass through claim. First, the Severin doctrine may preclude a subcontractor's recovery where the owner can show that the subcontractor would have no right to recover against the general contractor. Furthermore, the subcontractor's claim may be presented with other claims and ultimately result in a global settlement irrespective of whether there exists more merit to the subcontractor's particular claim. Ultimately, a subcontractor must be aware of this risk before entering into a contract. For further information, contact Matt Hjortsberg at 410-583-2400

Economic Recovery Act

2009-02-16T14:02:00.004-05:00

Government contractors that act quickly stand to benefit from the Economic Recovery Act. Click here to review a summary of the Act prepared by our friends at Patton Boggs, LLP. You may also visit their website at www.pattonboggs.com. Bowie & Jensen, LLC has also prepared a summary of important legal issues facing privately held companies in today's economy.

Understand Before You Sign on the Dotted Line

2009-01-20T09:17:00.002-05:00

A recent case before the United States Court of Appeals held an employment agreement is enforceable, even when one party to the contract is ignorant of the language in which the agreement is written. A Spanish speaking employee of a general contractor entered into an employment agreement requiring any disputes arising out of the agreement be arbitrated. After being terminated by the general contractor, the employee brought a lawsuit in the District Court of the United States. The trial court found that the employee could not be bound by the arbitration provision of the contract, because the contract was written in English, a language the employee did not understand. As a result, the lower court reasons that the employee never assented to the arbitration provision of the contract. The appellate court reversed the decision, stating that acceptance of a contract is measured not by a parties’ subjective intent, but its outward expressions of the assent. Essentially, when a party executes a contract, the party is assumed to understand all the provisions contained within the contract. In order to preserve the integrity of contracts, a party cannot claim to have not read a portion of a contract and thereby be relieved of its binding effect.

On a practical note, before entering into a contract, be certain you understand all of the provisions of the contract. Further, despite representations by the opposing party as to the contract provisions, make sure you have read and understand the contract. For additional questions, please contact Michael W. Siri at siri@bowie-jensen.com.

Virginia Graeme Baker Pool and Safety Act in Maryland

2009-01-15T16:16:00.003-05:00

On December 19, 2008, the Virginia Graeme Baker Pool and Spa Safety Act (“Graeme Baker Act”) took effect nationwide, including Maryland, imposing a federally mandated requirement for suction entrapment avoidance. The Graeme Baker Act promotes the safe use of pools, spas, and hot tubs by requiring the following: 1) all manufactured safety drain covers must conform with the American National Standard ASME A112.19.8 – 2007 Suction Fittings for Use in Swimming Pools, Spas, and Hot Tubs published by the American Society of Mechanical Engineers (“ASME”); 2) all new and existing public pool drain covers must be equipped with the conforming drain covers; and 3) all new and existing public pool with a single main drain should be equipped with additional preventative suction entrapment devises meeting applicable ASME standards. Pools that will open in the summer of 2009 are not required to comply until the pool is opened. They can only open when they are in compliance. Public pools currently in use, however, must comply with the Graeme Baker Act. This Act has wide ranging ramifications related to insurance, private pools, applicable standards of care, contract langauge and workmanship. For further information, please contact Michael W. Siri at siri@bowie-jensen.com.

Liquidated Damages Provision

2009-01-11T17:30:00.002-05:00

Many construction contracts contain liquidated damages provisions. A liquidated damages provision is where the parties to the contract agree to a fixed sum as damages for the breach by one or both of the parties. It is a common misunderstanding, that the party making a claim for breach of contract must prove that they were damaged in order to recover under a liquidated damages provision. Under Maryland law, however, where a valid liquidated damages clause exists, a party need only prove a breach of the contract. Proof of damages is not required. Theoretically a party who has not suffered actual damages because of another party's breach may still recover damages under a liquidated damages provision. For further information, please contact Matt Hjortsberg at 410-583-2400 or Hjortsberg@bowie-jensen.com

Construction Contracts - Forum Selection

2008-12-19T14:36:00.004-05:00

The United States District Court for Maryland dismissed a construction-related case because the contract required the case to be heard in either one of Maryland’s state court. Some construction contracts contain a provision known as a “forum selection clause”, whereby the parties to the contract agree on the location and governing law of any legal action. In this case, a $6 million dispute related to cost overruns arose between the developer and contractor of the project. Before the merits of the case could be heard before the United States District Court of Maryland, however, the Court ruled that the case should be dismissed because the contract requires any “dispute between the parties shall be exclusively brought in the courts of the State of Maryland.” The Court found that this provision specifically excludes the United States Federal Court from hearing the case. From a practical standpoint, before entering into a contract, understand the repercussions of each provision within the contract and how it may affect you in the event legal action is required. To further protect yourself, have an attorney review the contract to ensure your rights are protected. If you have any additional questions, please feel free to contact Michael W. Siri at siri@bowie-jensen.com.

Notice Provisions in Construction Contracts

2008-11-24T12:02:00.006-05:00

A reader has asked whether a contractor must provide notice to preserve a claim when the contractor discovers that the plans and specifications are defective. The short answer is "yes." Virtually all construction contracts require that the contractor provide written notice of a claim. The notice provisions may differ from contract to contract, and in the instance of governmental contracts may be set by the applicable regulations, e.g., Federal Acquisition Regulations, Code of Maryland Regulations. Careful attention should be paid to the applicable notice provisions. The United States District Court for the District of Maryland found that a contractor forfeited his rights to make a claim for extended general conditions when the contractor failed to follow the claim provisions contained in the contract. The contractor indicated in a letter that it was "considering making a claim." The court found that "considering" a claim and "making" a claim are two different things. Skanska v. Battelle Memorial Institute(D. Md. 2006). Consequently, it is incumbent upon a contractor to read, understand and follow the claim provisions in its contract. For any questions, please contact Matt Hjortsberg (410)583-2400 or at Hjortsberg@bowie-jensen.com

UPDATED - Important notice to all businesses with any offices or employees in Washington, D.C.

2008-11-04T15:56:00.009-05:00

The District of Columbia Accrued Sick and Safe Leave Act of 2008 becomes effective on November 13, 2008. To be a covered employee under the Sick Leave Act, an individual must be employed by the same employer for 1 year without a break in service except for regular holiday, sick, or personal leave granted by the employer and have worked at least 1000 hours during the 12-month period immediately preceding the request for family or medical leave either for an employer located in the District of Columbia.

The Sick Leave Act will require employers with:

(1) 100 or more employees to provide at least one hour of paid sick leave for every 37 hours worked, up to a cap of seven days per calendar year;
(2) 25 to 99 employees will be required to provide at least one hour of paid sick leave for every 43 hours worked, up to a cap of five days per calendar year; and
(3) with fewer than 25 employees to provide at least one hour of paid sick leave for every 87 hours worked, up to a cap of three days per calendar year.

Here are some of the important details about the new Sick Leave Act, although you should seek specific advice for your particular company to ensure compliance with the law, and to understand some important exemptions that might apply to your business or certain employees.

- Employees can use paid sick leave for absences relating to their own physical or mental illness or injury or preventative medical care; to care for a sick child, parent, spouse, domestic partner or any other family member, and to take leave when they are a victim of of stalking, domestic violence, or sexual abuse, for the purpose of obtaining psychological or other counseling or taking legal or some other action associated with these offenses.

- Requests to use sick leave under the Sick Leave Act must be made in writing and in advance if the leave is foreseeable, but employers can request reasonable verification of the legitimacy of the request.

- Upon termination of employment, employers are not required to cash out accrued but unused sick leave.

- Employers cannot retaliate against an employee who takes leave pursuant to the new law.

- Employers will be required to conspicuously post a notice summarizing the Sick Leave Act in several languages once such a notice is prepared by the Mayor.

Again, there are important exemptions to the Sick Leave Act that might apply to your business or certain employees, such as exemptions for certain restaurant staff, independent contractors, exempt employees under the Fair Labor Standards Act, and other categories of employees.

It is important to have, by November 13, completed a review of your company’s existing practices and policies that to ensure that they comply with the Sick Leave Act’s requirements, make any changes to your company’s policies (and notify employees of these changes) before the Sick Leave Act takes effect, and put into place a compliance and monitoring plan. Please contact Nicole Windsor at (410) 583-2400, or by email her at windsor@bowie-jensen.com, for this useful advice.

Maryland’s Flexible Leave Act Now in Effect

2008-11-04T15:52:00.006-05:00

Employers should now be complying with Maryland’s new "Flexible Leave Act," which took effect October 1, 2008. The Act requires private-sector employers in Maryland with 15 or more employees and who provide their employees with paid leave, to:

(1) permit their employees to use any type of accrued paid leave (sick, vacation, personal or paid time off) to care for the illness of a child, spouse or parent; and

(2) permit their employees to elect the type of earned leave that they will use for this purpose.

The law prohibits covered employers from taking adverse employment action against an employee who uses paid leave for the illness of an immediate family member. The law does not define the term “illness” and does not include a provision which allows employers to verify the existence of the illness for which leave is being taken. As such, unless or until the statute is clarified, employers will need to interpret the term broadly or risk violating the law.

For assistance with this important policy review and change, please call Nicole Windsor at 410-583-2400, or email her at windsor@bowie-jensen.com.

Extension of Deadline - Reporting Requirement

2008-10-22T13:24:00.001-04:00

Maryland lawmakers have pushed back the October 15 deadline for companies to send in records that the state plans to use in a study of Maryland’s corporate income tax structure. The new deadline is November 30, 2008. Under the revised reporting requirement (pursuant to the passage of Senate Bill 444), corporations that are members of a larger corporate group are required to file with the Comptroller certain specified information, including (but not limited to) information on the State income tax impacts of a single sales factor, and income apportioned to other states that might otherwise be taxed by the State. Hefty fines remain in place for late filing of this information - $5,000 per day for the first 30 days and $10,000 per day thereafter.

Election Day Reminder to Employers

2008-10-17T10:38:00.002-04:00

The election is only a few short weeks away. Remember that under Maryland law, an employee is allowed up to two hours to vote during his/her work day if the polls aren’t open two consecutive hours outside the employee’s regular shift. The time off is paid with proof that the employee voted. (Md. Code Ann. Section 10-315) If the polls are open for two consecutive hours outside an employee’s regular shift, an employer is not required to permit an employee to leave to vote on Election Day. Furthermore, if an employer permits an employee to leave to vote under these circumstances, that employer does not have to pay the employee for the time missed from work by the employee to vote.

2008-10-16T16:10:00.002-04:00

Maryland: State Will Offer Health Insurance Subsidies to Small Employers

The Working Families and Small Business Health Coverage Act, which took effect on July 1, 2008, establishes a Small Employer Health Benefit Plan Premium Subsidy Program (the “Program”) for small employers not currently offering health insurance to their employees. The purpose of the Program is threefold: (i) to provide incentives to employers with 2-9 employees to offer their employees health insurance; (ii) to assist low to moderate income employees of these small employers in securing health insurance; and (iii) to promote access to health care services and reward participating individuals for efforts to improve their health and/or manage chronic disease.

Under the Program, a small business that has 2 to 9 full-time employees, has not offered health insurance to its employees during the previous 12 months, and meets the Maryland Health Care Commission’s wage requirements, is eligible to receive a subsidy of up to 50% of the cost of insurance premiums. Family coverage can also be subsidized. Once enrolled in the Program, most businesses will be eligible for the subsidy in following years. To receive the premium subsidy, the employer must establish a Internal Revenue Code Section 125 premium conversion plan (Section 125 allows eligible employees to pay for certain fringe benefits that are sponsored by their employer with pre-tax dollars) and must also purchase a wellness benefit as part of the health plan. The subsidy goes both to the employer and to the employee. Enrollment will be capped to stay within the Program’s approved annual budget.

To be eligible, businesses must meet the following eligibility requirements:

The business has at least 2 and no more than 9 full-time employees. Full-time is defined as any individual who is not a temporary, seasonal, or substitute employee and works 30 hours or more per week. Owners and partners working more than 30 hours per week at the business count as full-time employees.
The business has not offered insurance to its employees in the most recent 12 months.
The average wage of the full-time employees is below $50,000.

Eligibility Requirements for the Employee

Any full-time employee who obtains health insurance through an eligible small employer’s plan may receive a subsidy toward the cost of employee-only coverage. A full-time employee seeking an additional subsidy for dependent coverage (spouse and/or children) must have a family income of less than $75,000. Part-time, temporary, and seasonal employees do not qualify for a subsidy.

Additional details about the plan’s eligibility requirements, the amount of premium subsidies, and the application process can be found at:

http://www.dhmh.state.md.us/workingfamilies/index.html

Statutory Provisions May Affect Open-Ended Contracts

2008-10-10T16:31:00.002-04:00

In Maryland, open-ended contracts may be affected by statutory provisions enacted after the contracts were executed. An open-ended contract is a contract that does not provide a specific date of expiration by its own terms, but will terminate only after either or both parties end the contract. In a recent Maryland case, a supplier and a dealer entered into an open-ended contract in 1984, which provided that the contract could be terminated with 120 days notice. In 1998, Maryland enacted the Maryland Equipment Dealer Act, prohibiting a supplier from terminating a dealer contract without good cause. The supplier subsequently attempted to terminate the open-ended agreement by providing notice of 120 days, as stated in the contract; however, the Maryland Court found that the supplier could only terminate for good cause because of the Maryland Equipment Dealer Act. The Court found that parties are presumed to know the law when entering into contracts and because the contract at issue had a 120 day notice provision, the open-ended contract renewed every 120 days. Therefore, upon the renewal of the contract, the new statutory provision was incorporated. Thus, companies entering into any open-ended contract must be aware of any statutory changes affecting the terms of the contract. If you have any questions, please contact Michael W. Siri at siri@bowie-jensen.com.

Equipment Dealer Contracts

2008-09-27T21:27:00.002-04:00

Because of changes in the construction market, we have had, from time to time, clients move from providing contracting services to dealing equipment for their particular trade. Maryland has a specific set of statutes that govern contracts between dealers and suppliers. Here are some of the highlights.

- A supplier may not directly or through an officer, agent, or employee terminate, cancel, fail to renew, or substantially change the competitive circumstances of a contract without good cause.

- a supplier who terminates, cancels, fails to renew, or substantially changes the competitive circumstances of a contract with good cause is not required to provide any notice or the right to cure a deficiency to a dealer.

- However, if a supplier terminates, cancels, fails to renew, or substantially changes the competitive circumstances of a contract based upon the dealer's failure to capture the share of the market required in the contract and the supplier has worked with the dealer for a minimum of 12 months to gain the desired market share, the supplier shall provide a dealer with at least 90 days' written notice of the termination of the agreement and a 60 day right to cure.

- whenever a dealer enters into a contract in which the dealer agrees to maintain inventory and the contract is terminated by either party, the supplier shall repurchase the dealer's inventory on the terms specified in the statutes of this subtitle unless the dealer chooses to keep the inventory.

Consequently, any contract dealing in equipment should be carefully drafted to not run afoul of these Maryland statutes. For further questions, contact Matt Hjortsberg at hjortsberg@bowie-jensen.com or 410-583-2400.

Material Deviation Results in Denial of Bid

2008-09-17T17:20:00.001-04:00

The Maryland Board of Contract Appeals (“MBOCA”) upheld the denial of a company’s bid protest because the samples of the materials provided by the contractor deviated from the Invitation to Bid’s requirements. The MBOCA stated that a material deviation from an Invitation for Bid’s requirements occur when the price, quantity, or quality of the goods or services is affected. Despite the contractor’s claim that the materials supplied contained minor deviations that would not affect the quality of the goods furnished, the MBOCA expressly stated that a responsive bid must conform “in all material respects to the requirements contained in the invitation for bids.” They found that a sample provided with a bid is a matter of responsiveness and that the failure to provide a sample or the failure to provide a sample that conforms to the detailed specifications is nonresponsive. As such, the bid would be denied. Contractors must ensure that both the bid and any required samples outlined in any Invitation to Bid meet the specifications requested or the bid will be deemed nonresponsive and denied. If you have any questions on bid protests, please contact Michael W. Siri or Matthew G. Hjortsberg at 410-583-2400.

Green Building in Maryland

2008-09-03T13:08:00.000-04:00

Upon meeting certain standards for energy efficiency and environmental designs, a developer or contractor can decrease its actual cost on a project, despite the additional costs associated with building a more energy and environmental efficient building. The Leadership in Energy and Environmental Design (LEED) Green Building Rating System is the nationally accepted benchmark for the design, construction, and operation of high performance green buildings.

Maryland, as well as several municipalities throughout the State, provides tax credits for the construction of LEED certified buildings. For example, Baltimore City passed a bill that requires commercial developers who received loans, tax credits or other benefits from the city to be certified by the U.S. Green Building Council and also requires developers not receiving any assistance from Baltimore City to incorporate “Green Building” elements. In Baltimore County, for most new commercial building construction and major renovations that meet specific LEED requirements, an owner or developer could obtain up to an 80% tax credit for a period of five years.

In additional to the environmental benefits of constructing a LEED certified building, there are several monetary benefits to the owner and developer. For additional information, contact Michael W. Siri at siri@bowie-jensen.com.

UPDATED - Employers Must Pay Accrued but Unused Vacation Leave

2008-08-26T14:28:00.004-04:00

Maryland’s recent legislative session produces a mixed bag for employers. First, the good news, Maryland enacted legislation that clarifies when employers are required to pay employees accrued leave up their separation from employment. The bill corrects a recent decision issued by the Maryland Court of Special Appeals which held that employers must pay employees for accrued vacation upon their separation from employment even where the employer has a policy, which has been communicated to its employees, stating that no such entitlement exists. The new law requires employers to pay out accrued paid leave upon termination of employment only to the extent as provided in a written policy that is communicated to the employee prior to their termination.

On a less favorable note, Maryland also enacted legislation entitled the Flexible Leave Act which requires Maryland employers, who provide their employees with paid leave, to permit their employees to use that leave to care for ill family members defined as the employee's child, spouse or parent. While many employers already permitted employees to use their accrued leave for this purpose, some worry that the state mandate could lead to abuses.

If you have questions, please contact our office.

Document Retention: Construction Projects

2008-08-19T18:38:00.002-04:00

With the advent of electronically stored information, often referred to as ESI, courts have increasingly scrutinized the document preservation policies of businesses. The most prevalent focus has been on the need to preserve documents relevant to a dispute when a party knows or should know that their is a reasonable probability of litigation. Defining this point in time is not always easy. However, given the propensity for claims on construction projects it is important for contractors to keep this requirement in mind. The United States Court of Claims has specifically pointed to a the issuance of a differing site conditions claim as the point in time in which relevant documents should be preserved. Likewise it also noted that the issuance of a cure notice triggered the obligation to preserve relevant documents. By analogy, payment bond claims, delay claims, a disputed change order and notices of mechanic's liens would all likely trigger the obligation of a contractor to preserve all relevant electronically stored information. The consequences for failing to abide by this obligation are significant and include monetary sanctions and inferences against the party who has failed in their preservation efforts. Recently, the Federal Rules of Civil Procedure, which govern the manner in which disputes in federal court proceed, allowed for some relief form this sometimes onerous obligation by stating that the good faith destruction of ESI during the routine operation of a computer system can operate as a "safe harbor." However, some commentators have referred to this exception as the "not so safe harbor," given the burden to prove what is routine and what is good faith.

For further information contact Matt Hjortsberg at hjorsberg@bowie-jensen.com. Matt Hjortsberg has given several presentations on both construction law as well as document preservation and ESI for multiple organizations including the American Subcontractor's Association (ASA), Lorman Education Services, MICPEL, the Maryland State Bar Association and most recently for the Maryland Association of Counties (MACO).

Minimum Wage Increase Effective 7/24

2008-07-21T17:42:00.001-04:00

Minimum Wage Increase effective July 24, 2008

Just a reminder that, effective July 24, 2008, the federal minimum wage for covered non-exempt employees will rise from $5.85 to $6.55 per hour. The Fair Minimum Wage Act of 2007, which amended the Fair Labor Standards Act (FLSA), provides for phased-in increases ultimately reaching $7.25 per hour effective July 24, 2009. Prior to the law’s effective date, Maryland’s minimum wage of $6.15 governs. Thereafter, the federal law’s $6.55 per hour will govern unless or until Maryland’s minimum wage law is amended to exceed the federal minimum. Covered employers must comply with both. The youth minimum wage and tip credit provisions of the FLSA remain the same.

Please contact Nicole Windsor at 410-583-2400 if you have any questions.