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Construction In Brief: Spring 2008

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Cohen Seglias Pallas Greenhall & Furman PC
CONSTRUCTION IN BRIEF

Spring 2008 Issue


Cover Story:Twenty Years at a Glance 
         -  by Roy S. Cohen, Esq.

Twenty years ago, in the spring of 1988, I, along with a corporate partner and a bright, energetic young associate, John Greenhall, decided to forge out on our own and start the firm that would eventually evolve into Cohen Seglias Pallas Greenhall & Furman, P.C.   Many of you know our story; some of you don’t; and some might just be interested in hearing about a small firm making it in the big city...

In some respects, the past twenty years seem to have flown by in the blink of an eye. Along the way, however, there have been some amazing stories of energy and growth. These stories and, more importantly, the people on both our professional and non-professional staff and our ever loyal clients, help explain why we have grown from a single office, focusing almost exclusively on work in the Philadelphia area, to a firm with seven offices, business throughout the United States, international speaking engagements, and more than 750 companies relying on us as their counsel.

To say our beginnings were humble would be an understatement. We went through the typical and not so typical pains of every new business, whether it was forming the appropriate firm name or dealing with a leasing agent and landlord . . . who would have thought that you would have to “establish credit worthiness” to sign a lease!
 
There are many adventures from our early days that might not be appropriate for this forum, but I would like to detail some of the others for you.  (Of course, if you call me, I would be happy to share the juicier tales with you.)  Our first year at the firm was truly humble and was an indicator of things to come.  For example, on only our second day in business, John and I came back from successfully trying our first case for our new firm to a furniture-less office where we sat cross-legged on the floor taking turns talking on our lone telephone. From there, things only got more interesting as the firm steadily grew.

During our first ten years, the firm specialized in construction litigation with the occasional off-the-cuff commercial case (apple juice bottling, lunch truck monopolies and the like) thrown into the mix as well as insurance defense and transactional work. While we had our share of spectacular victories for our construction clients, including major construction cases and countless jury and arbitration awards, we continued to focus on finding the right mix of services for our construction clients.  But something was just not right.

Once Ed Seglias, George Pallas and John Greenhall became partners in 1998, we realized that our firm did not have the correct mix of practice groups.  We decided to break from the insurance defense practice, which simply was not synergistic with our growing construction clientele, establishing Cohen, Seglias, Pallas & Greenhall, P.C., an eleven lawyer firm.

Although we had big plans, we had no idea just how far this eleven lawyer firm would go.  In fact, we saw our construction practice triple in size over the next decade. We steered the firm to add several related practices, including, labor & employment, commercial litigation, business transactions, real estate, estate planning, and bankruptcy to our core business to more fully serve our clients. In the process, we merged with Rothenberg Silverman & Furman, PC, a fifty-year old labor and employment firm, and asked Marc Furman to head up this new practice group. The firm then took its present name, but we were not done.  We added Marian Kornilowicz and Steve Usdin to lead the business practice/bankruptcy/creditors rights group and Wayne Buckwalter and Lonny Cades to oversee the estate planning and tax groups.  We also saw Jason Copley rise through the ranks from a young associate to a member of our current executive committee. In addition, our satellite offices have taken on a life of their own as we encompass most of the Mid-Atlantic region and currently search to further expand our footprint as opportunities arise.

Today, with more than fifty attorneys, we proudly look forward to our third decade of representing our clients.  We are a much deeper organization than ever before. Under the skillful guidance of our managing partner John Greenhall and his team of division heads including our controller, marketing director, IT director and facilities manager, we have grown past our home region and have handled matters in over 35 states, including Hawaii, California, Arkansas, Arizona, Colorado, Missouri, Minnesota, as well as up and down the eastern seaboard.

Over the next decade, we look forward to continuing to grow with our clients and to representing them wherever their travels and needs take them. We will continue to successfully grow due to the energy and dedication of our lawyers and staff and, more importantly, due to our clients, many of whom have been with us for much of the twenty year journey.  On behalf of all of us at Cohen Seglias, thank you for twenty years of success.


Labor & Employment Law:
FMLA Changes on the Horizon 
               -- by Melissa C. Angeline, Esq. and Mark J. Leavy Esq.


On February 11, 2008, the United States Department of Labor (“DOL”) published proposed changes to the Family Medical Leave Act (“FMLA”) regulations.  This proposal, or some variation thereof, will likely become final later this year.

The FMLA regulations have become notorious for their complexity and counter-intuitiveness.  Since the FMLA’s enactment in 1993, employers have urged the DOL and lawmakers to clarify certain issues and incorporate more protection for employers faced with questionable family and medical leave requests.  The proposed regulations will provide some relief for employers, but numerous issues remain unaddressed.  Even so, employers need to be aware of the new FMLA requirements when they take effect, and to be prepared for the impact of these changes upon their business operations.

•    Employee Eligibility.  To be eligible for FMLA leave, an employee must have worked at least 1,250 hours during the 12-month period immediately preceding the leave, and must also have been employed for a minimum of 12 months with the employer.  Under the proposed regulations, this 12-month service requirement has been expanded to include non-consecutive service so that all employment by the employee during a 5-year period before the leave must be counted toward the 12-month service requirement.

•    Medical Certifications.  Many employers perceive a conflict between the FMLA and HIPAA concerning their right to obtain information and their employees’ right to privacy.  Under the proposed changes, employers are permitted to contact the employee’s physician to clarify or authenticate information contained in the medical certification form.  Employers challenging the completeness or sufficiency of a certification must state the claimed deficiency and allow the employee seven (7) days to cure the deficiency (or, alternatively, to verify their diligent, good-faith effort to cure the deficiency).

In addition, the DOL has proposed broadening the definition of “serious health condition” under the FMLA from being “unable to work at all” to being “unable to perform the functions of a position.” This means that under the proposal an employer would be able to request that the employee’s physician clarify the specific functions that the employee cannot perform.

•      12 Week Leave Period Clarified.  The FMLA provides a maximum of 12 weeks off.  Under the current regulations, holidays occurring within the period cannot extend that amount of time.  However, the DOL has proposed that holidays not be counted against available FMLA time for leaves of less than one full workweek.

•    Reinstatement of Lapsed Health Insurance. An employer may terminate an employee’s health insurance or allow it to lapse during FMLA leave if an employee fails to pay his or her portion of the premium. The DOL has proposed that, in such cases, the employer must reinstate that coverage upon the employee’s return to work, or be liable for any harm the employee suffers if the employer fails to reinstate the coverage.



Q&A: With The Business Practice Group
A New Look at Bankruptcy Proceedings 
               -- by Steven D. Usdin, Esq.


Is it necessary to file a proof of claim to protect your  company interests if a customer or client files a bankruptcy case (the “Debtor”)?

This question actually raises a series of secondary questions.  Foremost is to determine if the Debtor has listed your company as a creditor on its schedules.  If listed, it is necessary to determine if your claim is listed as disputed, unliquidated or contingent.

In the situation where the claim is listed as disputed, unliquidated or contingent, you MUST file a proof of claim to protect your interests.  The Debtor has gone on record as saying that your claim has no value.  The filling of a proof of claim is mandated to protect your claim and to have the opportunity to participate in the case.  Ultimately, the Debtor may file an objection to your proof of claim, but without filing a proof of claim, you have no legal standing to participate in the case.

Another occasion where you MUST file a proof of claim is when the Debtor has listed your company on its schedules, but does not list the correct amount of your claim.  If you fail to file a proof of claim, then the dollar amount the Debtor identified on its schedules becomes the dollar amount of your claim.  That amount will also be used to calculate any distributions and to calculate voting rights your company may have concerning the Debtor’s plan of reorganization.

Is there a difference in the need to file a proof of claim in a Chapter 7 and Chapter 11 bankruptcy case?

There are two primary types of bankruptcy cases.  In Chapter 7 cases, the bankruptcy statute sets the time for filing a proof of claim.  Often, you will receive a notice from the Clerk of the Court advising to not file any proof of claim until you receive further notice from the Clerk to do so.  You may, however, go ahead and file a claim immediately if you want to do so.  In any event, you must be warned that you MUST file a proof of claim in a Chapter 7 case before the deadline in order to participate in the eventual distribution of assets.
   
In a Chapter 11 case there is no statutory deadline and the court will enter an order establishing the Bar Date for filing a proof of claim.  In order to be a valid claimant, you must file your proof of claim prior to the date that is set.
   
Be aware, there are instances where filing a proof of claim will bring your company into the bankruptcy case and compel you to waive jurisdiction in any other forum.


Construction News:
Better Know a Bond 
             -- by Scott C. Hofer, Esq.

Have you ever filed a bond claim which was rejected without any explanation or apparent investigation?  Ever have the bonding company seem to ignore your claim or seem to throw a bunch of paper at you in an apparent attempt to stall your claim?  It may seem like this happens more often than not.  However, these tactics may become a relic of the past.  The last three years have seen an emerging trend in payment bond cases throughout the country, swinging the enforcement of payment bonds more toward contractors and away from sureties.  In these cases, the courts have been stern, forcing sureties to make good on their terms, rather than hiding behind general denial letters.  As a result, unique opportunities for payment bond claimants who know what their bonds do and do not allow the bonding companies to do have been created.

The trend first emerged in the case of National Union Fire Ins. Co. of Pittsburgh v. Wadsworth Golf Constr. Co. of the Midwest.  The National Union Court strictly construed an AIA A312 payment bond against the surety, finding the surety had waived all defenses to the contractor’s claims because it failed to respond to the claimant’s notice of claim within the time period set forth in the bond.

Approximately one year later, the United State District Court for the Eastern District of Virginia followed the reasoning of National Union in the case of Casey Industrial, Inc. v. Seaboard Surety Co. Casey, like National Union, involved the interpretation of a payment bond.  In Casey, the surety responded to the claim within the time period that the bond prescribed, but the surety sent a letter generally denying the claim and reciting a broad reservation of rights instead of providing specific bases for challenging the claim the instrument required.  The Casey Court, like the National Union Court, said that the surety was required to closely adhere to the language of the bond, which required the bonding company to state “the amounts that are undisputed and the basis for challenging any amounts” in dispute.  In short, the court said the surety could not simply issue a general denial letter; rather, the surety had to do what the bond said it should do.

J.C. Gibson Plastering Co., Inc. v. XL Specialty Ins. Co. expanded the National Union line to the United States District Court for the Middle District of Florida.  In that case, the court refused to allow the surety to add a requirement for the claimant to provide “proof of claim” before the surety addressed the bond unless the bond specifically required one.  The court found that even if the notice of claim did not contain enough information for the surety to fully investigate the claim, the surety could not ignore its obligation to respond to the claimant.  In other words, if the surety wanted to require a “proof of claim,” it could have added the requirement to the bond; if it did not include a “proof of claim” requirement, that was the surety’s mistake.

The National Union line of cases provides fertile ground for claimants to press for the speedy resolution of their claims.  More and more, sureties are being told they cannot hide behind general denials or engage in stalling tactics.  Even better, claimants may argue that the sureties handling their claims have either waived all defenses to their claims, or have limited themselves if they engage in such conduct.

All potential payment bond claimants should pay close attention to the language of their bond.  In many instances the terms of that document will provide a ready mechanism to swiftly press for the successful resolution of these claims, allowing claimants to short circuit otherwise potentially lengthy and expensive litigation.


Going Green:  The Time Is Here 
               -- by Lane F. Kelman, Esq.


Seemingly, after Al Gore’s An Inconvenient Truth, a trend started.  A cause celeb has infused pop culture – going "Green".   Green building, in turn, gained considerable exposure.  But what started as a movement is quickly becoming a reality with both public and private works projects.  Like any new practice, potential areas of previously uncontemplated liability exist. 
   
Governmental involvement is hastening Green or Leadership in Energy and Environmental Design (“LEED”) projects.   LEED building, which is not necessarily synonymous with green building, is a rating system in which projects are certified based upon earning points in key performing areas.  These areas include, for new construction, Sustainable Sites, Water Efficiency, Energy and Atmosphere, Materials and Resources, Indoor Environmental Quality and Innovation in Design.

Various jurisdictions have enacted green building practices.  For instance, the U.S. Department of Energy now requires new federal buildings to achieve at least 30% greater energy efficiency over prevailing building codes. This applies to federal commercial, multi-family high-rise residential buildings and new federal low-rise designed for construction after January 3, 2008.  In Philadelphia, Mayor Nutter’s Sustainable Committee is examining numerous potential recommendations to the City’s Sustainable Director.  Many of the recommendations are expected to echo those of the federal government. The onslaught of new codes, specifications, and performance criteria creates a slew of areas of potential liability.

In addition, owners who develop Green or LEED certified projects have an array of expectations that, if not met, can create exposure to another party.  Owners of these projects often base their budgets upon anticipated tax breaks, energy savings, occupancy rates, and sale price and rental rates.  Two recent studies, one by the New Buildings Institute (“NBI”) and one by CoStar Group, validate that third party certified buildings derive these economic benefits for the owner.  Furthermore, U.S. Department of Energy data reflects an average of 30 to 50 percent less in energy costs for green buildings compared to conventional buildings.  If the energy savings are not realized or LEED certification isn’t achieved, the owner surely will look to recover from any party it deems potentially liable for the failure.

For design professionals, committing to produce a result such as LEED certification or achieved energy savings can lead to obligations that exceed the standard of care.  Further, professional liability insurance may not cover contractual obligations.  In addition, the signing of submittal templates may trigger exclusions in design professional’s liability policies.  Specifying unfamiliar materials or products without knowledge of lead time can also create exposure. 

Exposure to a contractor can come from two areas --  a direct, breach of contract action or indemnification obligations under a performance bond.  A contractor needs to be aware of numerous issues involved with a green building.  Different techniques (means and methods) to work with new materials are often needed.  Warranty obligations may be shifted.  Is the contractor obligated to certify recyclable content or maintain and tracking certification documentation?  Aside from direct contractual obligations, a contractor may have exposure by way of indemnification to its surety.  If the contractor has provided a performance bond, does the bond cover LEED certification of a certain level or performance criteria? 

Ultimately, regardless of your role in a Green or LEED project, familiarity with the work and your obligations is essential in order to mitigate your exposure.  As with any project, the contract language is crucial.  Acceptable levels of risk and obligations need to be negotiated and appropriately apportioned in the contract documents.  In time, this trend will become commonplace and, in turn, so will your familiarity with the process and risks.


What's New At The Firm?
  
-- by Edward T. DeLisle, Esq.

Cohen Seglias is pleased to report that it is continuing to experience growth in its various departments.  Our Labor & Employment group has added two associates, Melissa C. Angeline and Mark J. Leavy. Melissa graduated from Florida Atlantic University, Cum Laude, received her masters in Labor and Industrial relations from the University of Illinois, Institute of Labor & Industrial Relations and then moved on to the University of Illinois College of Law where she graduated Cum Laude. Prior to joining the firm, Melissa worked for two large Philadelphia-based firms, where she gained valuable experience in management-side employment and labor law. Mark graduated from the University of Pennsylvania and received his J.D. from Rutgers University School of Law. Mark previously worked at a firm in New Jersey where he focused his efforts on insurance coverage litigation among other things.

The Construction Group also has added a new associate.  Anthony Michael Gianantonio graduated from Grove City College and received his J.D. Cum Laude from Duquesne University School of Law.  Michael has experience in the areas of complex commercial and construction litigation, which he obtained at a mid-size firm in suburban Pittsburgh.  Michael will be working out of the firm’s Pittsburgh office.

Finally, our Philadelphia office would like to welcome Rene D. Quinlan back to its Construction Group.  Rene rejoins the firm after serving as in-house counsel to a general contractor based in the Philadelphia area.


Did You Know?
1.  Our staff has a thing for toys...
Occasionally you might see an attorney riding a new bike around our office corridors, “testing” its durability.   That bike, among hundreds of other toys, will be donated to a child in need.  Each Fall we get together with clients and gear up for a gift drive in conjunction with our Philadelphia and Pittsburgh holiday parties.  We collect toys for the Support Center for Child Advocates and the Allegheny County Department of Human Services, Office of Children Youth and Families.  This event was initiated by Roberta Frankel Bloom, Esq. in 2002 and remains a staple for our firm.


2.  We are serious pool players (among other things)....
The billiard table in our Philadelphia offices might indicate that we like to have fun around here, but we are also quite serious about the work we do for our clients, including a selection of non-profit work in which our attorneys participate.  Some of these include: 
• CADE  (Helping children make better decisions)
• VIP  (Phila. Volunteers for the Indigent Program)
• Parent/Infant Center  (University City)
• United Way
• Mental Health Assoc. of Southeastern, PA


3.  We are "Going Green"....
In the spirit of the efforts of many of our clients, Cohen Seglias has already initiated “going green” in much of what we do here.  This includes building energy conservation like shutting down computer systems each night, maintaining paperless files and documentation, and even printing our quarterly newsletter on recycled paper.


4.  Collecting hard hats can be addictive.....
Founding partner Roy Cohen spiked a hook into the wall and hung up his first hard hat in 1988.  He liked the way it looked so much, that he began collecting them from our clients’ work sites.  Since then, he has found room for 139 more hats on the walls of his own office.  Now, Roy is thinking of closing off his windows to make more room, and it’s becoming a difficult decision between the hard hats and his custom planter.  What do you think?

To add your opinion to our poll of whether to keep the planter or add more hard hats, email Roy at:  RCohen@cohenseglias.com



5.  We like boots!
Attorneys from our construction department have been known to wear work boots on a job site. Occasionally we catch lawyers from our Labor & Employment, Real Estate, Commercial Litigation, Personal Wealth, and Bankruptcy departments stomping around the office in theirs too.   Copycats.




Words From Our Editor:
               -- by Janet L. Treiman, Esq.


Welcome to the Spring 2008 edition of Construction in Brief.  As you know, we are celebrating the 20th anniversary of Cohen Seglias.  Over the past twenty years, the face of construction in general and construction law has changed dramatically.  In this edition, we focus on some of those changes with articles addressing “green building” and changes in the laws involving bond claims and the Family Medical Leave Act.  We also hope to entertain you with some facts about Cohen Seglias and the people that work here called “Did You Know?”, which are featured throughout the issue. 

As always, we welcome you to submit suggestions for future articles that may be of interest to you, either by regular mail or e-mail at: JTreiman@cohenseglias.com.

Remember, if you have a specific legal concern, we recommend that you consult with counsel so that you may receive the best advice.  Thanks for reading, and we’ll see you next issue!