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Inside This Issue:

  • Contractor not Responsible for Costs of Changes Caused by Building Code Violations Contained in Owner’s Drawings
  • Electronic Discovery Issues – An Emerging Challenge
  • Copyright Protection Granted to Land Surveyor’s Site Plan======================================

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ARTICLE # 1
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Contractor not Responsible for Costs of Changes Caused by Building Code Violations Contained in Owner’s Drawings

Where a contractor explicitly disclaimed responsibility for engineering of second floor additions creating snow load on existing roof structures, the court held that the contractor did not breach any implied warranty although certain building codes were apparently violated. In the case of Associated Builders, Inc. v. Oczkowski, 801 A.2d 1008, 2002 ME 115, the Oczkowskis [Owner] contracted with Associated Builders to covert an old restaurant into a motel. They provided the builder with detailed drawings. The contract was never executed by the parties but work was performed pursuant to an unsigned document stating in relevant part: “We [contractor] will complete the following Work on a Time and Material Basis, the word detailed below will be as per the plans provided by the owner….. Note: Contractor is not responsible for the Engineering of the 2nd floor Additions Creating Snow load on the Existing Roof Structures and will assume no liability for same.” An “estimated” cost of $55,000 to $60,000 was provided.

After work began, the local code enforcement officer expressed concern about whether the proposed construction plans would comply with the building codes dealing with structural support for roofs bearing snow loads. The Owner retained an engineer to evaluate the situation, and the engineer recommended modifications to the plans. As a result of the proposed modifications, some of the construction work that had already been completed had to be ripped out and redone. This significantly increased the scope and cost of the job, bringing the total job cost to $84,000. The Owner objected to paying more than $50,000 for the job and they claimed that the contractor had agreed to waive its invoices for all amounts in excess of that. The contractor disputed this and ultimately filed a mechanics lien and litigation to recover the balance it claimed was due.

The trial court found that although the contract had not been executed, the written terms of the unsigned agreement would be binding upon the parties since they proceeded to perform the work pursuant to its terms. Moreover, the court found that the “estimate” of $50,000 was only for the work as “originally represented” and did not reflect the increased costs necessitated by the changes to the plans that had been provided by the Owner. Based on the theory of “quantum meruit” the court entered judgment for the full $84,000 on behalf of the contractor. As explained by the court, “quantum meruit requires proof that (1) services were rendered to the defendant by the plaintiff; (2) with the knowledge and consent of the defendant; and (3) under circumstances that make it reasonable for the plaintiff to expect payment.” This judgment was affirmed on appeal, and the court also ruled against the Owner on the Owner’s counterclaim for breach of warranty.

On the breach of warranty counterclaim the issue was whether the contractor had breached an implied warranty based upon the theory that every construction contract contains an implied warranty that the building will comply with all applicable building codes. In rejecting this, the court quoted other case precedent for the proposition that “Ordinarily, a contractor who completes a construction project in a workmanlike manner and in strict compliance with plans furnished by the owner will not be held liable for damages resulting from defects in the owner’s specifications.” Even though there is an exception to this rule in some states for commercial contracts where a contractor may have a duty to discern any reasonably obvious defects in the plans and bring them to the attention of the customer, the court here found that the contractor had expressly disclaimed any liability for problems associated with the engineering of the second floor structures and this negated any warranty that might have otherwise been implied by law.
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ARTICLE # 2
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Electronic Discovery Issues – An Emerging Challenge

By: Scott A. Aftuck, Esq.; Haese, LLC Attorneys at Law

It is becoming increasingly commonplace for businesses to conduct complex transactions electronically. Electronically produced documents, such as e-mail, provide companies with a fast and efficient means of communicating and discussing problems. Entire transactions are being completed without any data ever reduced to writing. Many people, however, do not realize that courts commonly require businesses to produce electronic documents during litigation. These electronic documents are valid as evidence, even if they were never printed out on paper. In fact, the recent antitrust case against Microsoft exemplifies the importance of such evidence and the extent to which it can reveal confidences in a way never intended. This electronic revolution has created the need for businesses to implement strategies for dealing with electronic documents both before and after disputes arise. Most companies, unfortunately, are not prepared to meet this challenge.

Under the Federal Rules of Civil Procedure, parties are required to produce “computerized data and other electronically-recorded information” as part of their discovery obligations. Advisory Committee Notes to the 1993 Amendments to Fed. R.Civ.P.26. “[I]t is black letter law that computerized data is discoverable if relevant” even if hard copies of the documents have already been produced. Anti-Monopoly, Inc. v. Hasbro, Inc., 1995 WL 649934 (S.D.N.Y. Nov 3, 1995). Courts have defined “computerized data” to include information such as “e-mail messages and files, back-up e-mail files, deleted e-mails, data, files, program files, backup and archival tapes, temporary files, system history files … and other electronically recorded information.” Kleiner v. Burns, 2000 WL 1909470 (D. Kan. Dec. 15, 2000).

The use of electronic documents as the sole manner of conducting business means that companies must seek to preserve this electronic data. If a company fails to maintain such electronic records, it may not be able to adequately prosecute or defend actions. Additionally, companies may be sanctioned for destroying electronic data. Consequently, it is important that companies implement a document retention policy in relation to electronically stored files in order to reduce this threat. Typically, companies should preserve all electronically stored documents for a period of time. Once a party becomes aware that a suit has been filed or is likely to be filed, it must make sure to preserve all electronic data which it knows (or should know) as the subject matter of the dispute and/or will be requested during discovery. Courts have gone as far as requiring the production of e-mails which had previously been deleted off a computer system. Playboy Enterprises, Inc. v. Welles, 60 F.Supp.2d 1050 (S.D. Cal. 1999). If electronic files are destroyed after suit is filed, companies may be subject to severe sanctions, such as adverse judgment or dismissal of an action.

The ever-expanding use of electronically produced and stored information has led to the creation of new technology to deal with electronic discovery issues once litigation has commenced. This technology can help attorneys prepare for litigation, arbitration and/or mediation by assembling, storing and sorting the electronic documentation and allowing it to be retrieved almost instantly. Reliance on this new technology makes it easier and quicker to prepare complex, document intensive cases. An added benefit from this technology is that attorneys will need to spend less time reviewing and searching for documentation and more time preparing the case.
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About the this Article: This article, written by Scott A. Aftuck, was originally published in the Spring 2002 issue of “Building on the Law,” the legal newsletter of the law firm of Haese, LLC; 70 Franklin Street, 9th Floor; Boston, MA 02110; 617-428-0266. (http://www.haese.com). BIDDING OPPORTUNITIES. Be sure to check out the law firm’s large website that includes public and private bidding opportunities throughout the United States. There are currently over 300 links to websites maintained by state and federal agencies, municipalities and other sources of project information. It is organized by region and then by state within each region.

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ARTICLE #3
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Copyright Protection Granted to Land Surveyor’s Site Plan

A land surveyor and planner (“Sparco”) was entitled to copyright protection of his plans and drawings. Perhaps even more important, however, was the protection afforded the survey pursuant to his contract barring the owner from revising or using the surveyor’s drawings without his consent and participation. As to his proposed improvements to the site, the plan included the location and contour of the building footprint, the location and contour of parking lots; placement and design of curbs, driveways and walkways as well as utilities, plants, trees and lights. The surveyor/planner applied for and obtained a certificate of copyright for the site plan. Being unsatisfied with the building design, the owner replaced the project architect with a construction management firm to revise and complete the project. This resulted in Sparco also being replaced. With what were apparently only minor revisions, the new team used Sparco’s drawings and plans. Sparco brought suit, claiming that his copyright had been violated.

The trial court concluded that to the extent that Sparco’s site plans identified existing factual information about the site, it was not a violation of a copyright for the Owner to use that information even though it was contained and included within the plans produced by Sparco. But in addition to representing existing physical features of the site, the site plan also included proposed physical improvements drawn by Sparco. As to those elements, the trial court denied copyright protection because it believed they were depictions of conceptual ideas of a general nature, insufficiently detailed to be utilized in construction of the building. For that reason, the trail court concluded that the defendant’s only copied “ideas” and “ideas” cannot be protected by copyright.

In reviewing the case law concerning what is to be deemed merely an unprotected “idea” and what can be copyrighted as an author’s more precisely detailed depiction of that idea, the court reviewed several case precedents that distinguish between whether the copying was of the author’s generalized ideas and concepts or of the author’s more precisely detailed realization of those ideas. The appellate court held that the trial court incorrectly applied the law to the facts. In this case, the appellate court concluded that Sparco’s site plan specified more than vague, general indications of shape and placement of the elements. “It provides detailed specifications for preparation of the site.” For this reason, the court reversed the judgment of the lower court and will allow the question of copyright infringement to proceed. It is interesting to note, however, that in a footnote, the appellate court stated that Sparco had brought a separate claim for breach of his contractual rights that barred the owner from using his site plan without his consent and on-going participation. The contract between the land surveyor and project owner stated that the surveyor’s drawings and plans would not be used by the client “for the completion of this project by others, except by a separate agreement in writing, and with appropriate compensation to the surveyor.” The court states: “That claim was settled. It therefore appears that Sparco was compensated for defendants’ unpermitted copying and their failure to use his services in amending the plan. If those losses have already been compensated, it is not easy to see what further damages might remain available for copyright infringement.” Sparco v. Lawler, Matusky, Skelly, Engineers, 303 F.3d 460 (2nd Cir. NY 2002).
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Risk Management Note: The court’s footnote about the breach of contract claim based on the same facts as the copyright infringement claim highlights an important point concerning contract remedies. By including language in the contract specifically barring the owner from revising and using the site plan without his consent and participation, the surveyor established protection that was easier to enforce than was the copyright itself. Whereas there could be debate over what types of information and depiction of data could be protected under the copyright laws, there was apparently little or no debate over the protection afforded under the very precise language of the contract. This is why it is so important that the parties to these contracts pay close attention to who is given ownership and use of the Instruments of Service, and what conditions are established for such use.
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ABOUT THIS NEWSLETTER & A DISCLAIMER

This newsletter Report is published and edited by J. Kent Holland, Jr., J.D., a construction lawyer and risk management consultant for environmental and design professional liability.  The Report is independent of any insurance company, law firm, or other entity, and is distributed with the understanding that ConstructionRisk.com, LLC, and the editor and writers, are not hereby engaged in rendering legal services or the practice of law.  Further, the content and comments in this newsletter are provided for educational purposes and for general distribution only, and cannot apply to any single set of specific circumstances. If you have a legal issue to which you believe this newsletter relates, we urge you to consult your own legal counsel. ConstructionRisk.com, LLC, and its writers and editors, expressly disclaim any responsibility for damages arising from the use, application, or reliance upon the information contained herein.

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