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Construction In Brief: Winter 2012

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Why You Need an Electronically Stored Information Plan

By John A. Greenhall

Your project superintendent receives a digitally recorded voicemail from a subcontractor requesting a change order and responds by text message that a change order will be issued. Your project manager deletes every email she thinks is unimportant and stores the rest on her laptop in folders by month combining the three different projects on which she is working.

These scenarios and many more are commonplace in this day and age of instantaneous information. Businesses today need to understand the impact that electronic documentation and communication have on their business and know how to address these scenarios before they happen. The plans and policies relating to these e-documents are known as “Information Governance” or “IG.” Without an IG plan, your business is more likely to face problems such as losses in costly litigation, sanctions or negative implications in court, and the inability to find critical documents to assist in your defense or prosecution of claims.

Why Do You Need to Address IG Now?

Electronic documentation is simply not the same as paper files. The volume of 
e-documents is multiplying on an exponential basis, and all of these documents are easily duplicated, modified, deleted or re-located. When a paper document is destroyed, it is gone; the same cannot always be said for e-documents.

Unlike paper, e-documents, including the underlying and hidden information known as “metadata,” (the “data about the data”) can be quickly searched for information such as: the name of the document author, the date of last access, the last save and last print dates, as well as track changes or redlines. You simply can’t keep everything forever, but you can’t throw everything away. Instead, the courts and the government are demanding IG. 

It’s Not Just Email Anymore One of the problems in controlling how your employees communicate is that communication is ever changing. Email has grown to such an extent that for many it is no longer fast enough because your “important” email gets lost in the proverbial haystack. Communication and documents come in the forms of texts, tweets and other social media, web sites, ftp sites, SharePoint®, wav files, as well as the more common databases, Word®, Excel® and pdf formats. In addition, servers and networks, stand-alone computers, stand-alone laptops, tablets, smartphones, flash drives, portable hard drives, and cloud computing are a far cry from the typewriter and carbon paper.

What Can We Do to Control this Mountain of Information?

The answer to this overwhelming quantity of digital documentation, as well as ever increasing types of computing hardware, is “Information Governance.” IG means planning to manage an ever increasing amount of information, preparing for increased regulations and filing requirements, preparing for “e-discovery” and doing all of this while cutting costs, reducing risks, and increasing the amount of valuable information.

The steps that need to be taken in the IG process depend on the company. At a minimum, your company should undertake the following tasks:

   • Preliminary planning meetings with counsel, accountants, and IT professionals;

   • Securing your IT systems with proper back-up and storage policies;

   • Drafting a comprehensive but not complicated Electronic Stored Information (“ESI”) policy;

   • Revising employee handbooks to address the policy; and

   • Training and follow-up.

At the center of any IG process is the ESI plan. Every company should have a written record retention policy, understand that it has a duty to preserve records once it knows or should have known of potential litigation, and develop a plan regarding how records will be preserved once a dispute emerges. These policies need to be in writing. Like the IG process itself, every ESI policy should be unique, because every company is somewhat unique. Factors impacting a company’s ESI management policy include: 1) the types of records generated and retained by the business; 2) the location of the records; 3) the personnel who control the records; 4) the platforms being used; and 5) when records may be destroyed.

How Long Should We Keep Everything?

One key aspect of the ESI plan is how long the company should keep electronic documents. The answer, unfortunately, is that it depends. It depends on the jurisdiction where your business is located, the statute of limitations (the length of time someone has to sue you), the statute of repose (the additional time for an owner to discover a latent defect in your work), and the types of documents being retained. The record maintenance plan can be as simple or as detailed as you want, but remember that the more complicated it is, the harder it is to follow. Consider different retention periods of time for different departments and create levels of document importance in each department. For example, a contract, insurance policy, or certificate of final completion is more important six years from now than a packing slip, supplier invoice, or reimbursement receipt. 

To avoid unnecessary complications, your company must begin to address Information Governance. Without an IG plan and ESI policy in place, you could find yourself on the losing end of a lawsuit, which you could have won but for the lack of proper documentation. You should work with your attorney, accountant, and IT department to set up workable IG and ESI policies.

John is a Partner with the Firm and a member of the Construction Group. He can be reached at (215) 564-1700 or jgreenhall@cohenseglias.com

 

What's New

Brief Note:

Happy Winter everyone! As we all get back into the swing of things, we felt it was important to highlight some technology concerns you should be aware of to ensure that you are complying with the latest rules and regulations. Read on for helpful tips and strategies on how to manage your e-discovery as well as social media. As always, please reach out to us with any questions.

Ashling and Kate

Co-Editors-in-Chief

What’s New – Winter 2012

By Kerstin Isaacs

New Faces

Cohen Seglias is pleased to welcome two new Associates to the Construction Group.

Prior to joining the Firm, Jennifer Budd was with the New Jersey Attorney General’s Office, Division of Law in the Transportation, Construction and Condemnation Section. In this role, she reviewed bids for Department of Transportation construction projects, participated in bid protests, drafted appellate briefs, and reviewed contracts. She has also litigated delay and design defect claims involving the Department of Transportation and the Department of Treasury, Division of Property Management and Construction.

Jennifer previously clerked for The Honorable Edwin H. Stern, P.J.A.D. in the Appellate Division and Supreme Court of New Jersey. She graduated cum laude from Rutgers School of Law and received her undergraduate degree from Elon University.

Prior to joining the Firm, Jessie L. Jandovitz was an Associate with a New York based firm and represented clients in various areas of litigation including mass torts, class actions, employment discrimination, personal injury, and medical malpractice. In this role, she researched and drafted legal briefs including oppositions to summary judgment, appeals, motions and complaints in both federal and state courts.

Jessie is a magna cum laude graduate from Tulane University School of Law in New Orleans, and she received her undergraduate summa cum laude from West Chester University. Additionally Jessie earned her LLM in Trial Advocacy from Temple University School of Law.

Holiday Toy Drive

Cohen Seglias is gearing up for our Annual Holiday Toy Drive! Together with our clients and friends, we are able to provide toys and monetary donations to several charities assisting children in need every year, and we are excited to be able to contribute again in 2012.

Please check our website for additional information on the charities we support and how you can contribute.

Save the Date!

The 5th Annual Labor and Employment Law Seminar is just around the corner. Our Labor and Employment group will be covering hot topics and recent developments in case law and regulatory trends that can impact on your business.

Dates and Cities:

Philadelphia      Union League               Wednesday, March 6, 2013

Pittsburgh         Duquesne Club             Wednesday, March 13, 2013

Harrisburg        Hilton                           Wednesday, March 20, 2013

 

Look for more information on our website soon as well as an e-mail invitation. 

New Website

We are pleased to announce the launch of our redesigned website. The site, which is built to enhance your user experience, incorporates new content and functionality. It is also one of the pioneer law firm sites built with responsive design, a flexible layout that adjusts to any size computer or smart phone screen.

Kerstin is the firm’s Marketing Director. She can be reached at (215) 564-1700 or kisaacs@cohenseglias.com.

 

 

 

Can Employers Police Employees’ Use of Social Media?

By Marc Furman

During the past several years, the National Labor Relations Board (“NLRB”) has targeted employers’ efforts to limit employees’ use of Facebook, Twitter, and other social media as a forum to badmouth their employers. In the Summer of 2012, the NLRB published the third in a series of reports addressing social media policies. Several months later, the NLRB issued its first decision involving an employer’s policy restricting employees’ use of social media, and struck down the employer’s prohibition against posting defamatory or damaging statements through social media. In light of these developments, em­ployers should carefully review their current policies and procedures to ensure compliance with the National Labor Relations Act (“NLRA”).

Background

Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” and the “right to refrain from any or all” such activities.

An employer’s policy will violate its employees’ Section 7 rights if it expressly prohibits employees from engaging in these activities. If a policy does not expressly bar employees from these activities, the policy will only violate the NLRA if: (a) employees would reasonably construe the policy to prohibit Section 7 activity; (2) the policy was promulgated in response to union activity; or (3) the policy was used to restrict employees from exercising their Section 7 rights. 

In the recent case of Costco Wholesale Corporation, the NLRB issued its first ruling on an employer’s social media policy. The NLRB struck down a portion of Costco’s social media policy that broadly prohibited employees from electronically posting statements that “damage the Company, defame any individual or damage any person’s reputation.” The NLRB found that employee statements criticizing or protesting terms and conditions of employment could be deemed to “damage the Company, defame any individual or damage any person's reputation.” Even though Costco’s policy did not expressly prohibit employees from exercising their Section 7 rights, the policy did not exclude statements protected by Section 7. Thus, the NLRB concluded that the policy violated the NLRA because it “has a reasonable tendency to inhibit employees’ protected [Section 7] activity.”

Social Media Policy DOs and DON’Ts

Throughout the NLRB’s social media report and the Costco decision, the NLRB emphasized that employers must provide specific examples of prohibited conduct, as opposed to relying on sweeping, generalized prohibitions. In fact, the use of appropriate examples often determined whether or not the policy was found to violate the NLRA.

Based on the NLRB’s current position, employers should carefully review their policies relating to social media and other restrictions on employees’ communications. Some examples include:

Do prohibit employees from making discriminatory, harassing, or retaliatory statements, threats of violence, or similarly inappropriate or unlawful statements. Don’t prohibit employees from expressing personal opinions or lawful statements that are critical of supervisors, managers, or the company.

Do set appropriate limits on employees’ use of social media during work hours and at any time while using company equipment and resources. Don’t prohibit or discourage employees from using social media or online forums during non-work hours.

Do instruct employees about their obligation to keep confidential your company’s trade secrets and confidential business information, and identify specific examples of prohibited disclosures. Don’t suggest that prohibited disclosures extend to protected communications about the workplace, workers’ satisfaction, wages, or work conditions.

Do encourage employees to resolve or report complaints relating to their employment or the company through internal complaint procedures. Don’t request or require that employees only use internal procedures to resolve or report such complaints.

Do encourage employees to report suspected illegal or unethical conduct to the company, and provide mechanisms for anonymous reporting. Don’t request or require that employees refrain from speaking publicly about such conduct or reporting it to outside persons.

Conclusion

If you have any questions about your company’s social media policy, contact an attorney to ensure that the policy complies with the NLRA and other employment laws.

Marc is a Partner with the Firm practicing in the Labor and Employment Group. He can be reached at (215) 564-1700 or mfurman@cohenseglias.com.

Your Claim May Survive A Contactor’s Bankruptcy

By Alexander F. Barth

The situation is all too familiar in the construction industry: your company, working

as a subcontractor, contracted with and performed work for “General Contractor,” completed that work in a timely and professional manner, only to be told, “I’m sorry Subcontractor, there is simply no money to pay your invoice. We all have to share the loss.” Subcontractors are faced with this situation frequently for various reasons including the reality that owners under­estimate the amount of funding necessary to complete a project; general contractors’ profit margins shrink and, to protect their financial interests, general contractors try to shift all or a portion of the loss down the chain by not paying or only partially paying subcontractors and suppliers.

In response to General Contractor’s failure to pay, Subcontractor initiates a lawsuit against General Contractor in state court alleging that General Contractor: (i) breached the contract; (ii) made a material misrepresentation to Subcontractor; and (iii) committed actual fraud. After trial, the court finds that General Contractor breached the contract and made a material misrepresentation. Finding that the General Contractor intentionally made a material misrepresentation to deceive Subcontractor, and that Subcontractor reasonably relied upon the misrepresentation, the court enters a judgment against the General Contractor and in favor of Subcontractor in the full amount of its claim. Nevertheless, General Contractor still refuses to pay and, when Subcontractor’s attorney initiates the collections process, General Contractor files for relief under the Bankruptcy Code.

Upon discovering that the General Contractor filed bankruptcy, Subcontractor contacts its attorneys and inquires, what it should do to collect on its judgment? Should Subcontractor simply write off its claim against the bankrupt General Contractor? Should Subcontractor file a proof of claim and hope for the best? Or, does the Bankruptcy Code provide another mechanism by which Subcontractor could, without violating the automatic stay, increase its odds of collecting the full amount of its claim or, at least, a greater percentage of its claim relative to the amounts recovered by other similarly-situated general unsecured creditors?

The answer is Section 523 of the Bankruptcy Code, which is entitled “Exceptions to Discharge.” Section 523 identifies various debts that ultimately may not be dischargeable at the conclusion of a bankruptcy case, notwithstanding the fact that an Order is ultimately entered discharging the vast majority of the debtor’s debt. Specifically, Section 523(a)(2) provides, in relevant part, that an individual debtor cannot discharge any debt for money, property, or services to the extent the debt was obtained by false pretenses, false representations, actual fraud, or through the use of a statement in writing that is materially false, regarding the debtor’s financial condition and that was relied upon and deceived the person to whom the written statement was provided.

It is important to note that Section 523(a)(2) is not self-effectuating. If a state court has entered a judgment in Subcontractor’s favor and against General Contractor, Subcontractor still is required under Section 523(a)(2), and applicable bankruptcy rules, to promptly file a complaint in bankruptcy court seeking a determination that its claim against General Contractor is non-dischargeable in bankruptcy. In such a hypothetical scenario, a bankruptcy court will likely find that Subcontractor’s claim against General Contractor is non-dischargeable – even if General Contractor’s other debts are discharged.

Ultimately, whenever you learn about a bankruptcy filing involving a party who may be directly or indirectly responsible for paying your invoices on a project, every project owner, general contractor, subcontractor, and supplier must determine what is the most effective and efficient practice to implement. In almost every circumstance, the best and safest practice is to seek advice from your attorney early in the bankruptcy proceeding to determine: (i) what lien or other rights you may be entitled to assert against the debtor, its estate, or sureties; (ii) how and when you must act to preserve your rights and assert claim(s) against the debtor, its estate, and any responsible surety; and (iii) after considering the cost and the likelihood of success, what other affirmative steps you should take under the unique circumstances presented in almost every construction bankruptcy case. If a determination is made in consultation with your attorneys that your claim against a debtor is non-dischargeable, and that your claim is of sufficient size to justify the costs of filing a complaint in bankruptcy court, your complaint must be filed within three months after the debtor files for bankruptcy protection. Filing a complaint in the bankruptcy court seeking a determination that your claim is non-dischargeable will prompt discussions with, and significantly improve your position in negotiations with, almost every debtor and usually results in a significant percentage of recovery on your claim.

Jeff is a Partner with the Firm and a member of the Bankruptcy Group. Alex is an Associate with the Firm and a member of the Business Transactions Group. They can be reached at (215) 564-1700, jcarbino@cohenseglias.com or abarth@cohenseglias.com

Dealing with Experts – What You Should Know

By Jonathan A. Cass and Robert John O'Brien

During the litigation process, a contractor may want to have dis­cussions with and send documents to expert witnesses who have been retained on behalf of the contractor. However, based on the current state of the law in Pennsylvania, contractors should always consult with their counsel before having any direct communications with an expert. 

A recent decision by the Pennsylvania Superior Court, Barrick v. Holy Spirit Hospital of the Sisters of Christian Charity, held that the legal analyses and mental impressions contained in written correspondence between a party’s attorney and the attorney’s expert witness constitute attorney work-product and, accordingly, such communications are protected from discovery. 

The Barrick case began when Mr. Barrick was sitting on a chair in a hospital cafeteria. Mr. Barrick’s chair collapsed, and Mr. Barrick suffered severe spinal injuries. Mr. Barrick and his wife filed suit against the hospital and the hospital cafeteria management company, among others (collectively “Defendants”). Subsequently, Defendants subpoenaed the employer of Mr. Barrick’s treating physician, who had been designated as a trial expert witness by Mr. Barrick’s attorney. The physician’s employer partially complied with the Defendants’ subpoena and turned over documents relating to Mr. Barrick’s medical treatment; however, the physician’s employer refused to provide correspondence between the physician and Mr. Barrick’s attorney. Defendants filed a motion to enforce the subpoena, and, thereafter, the trial court ordered the physician’s employer to produce all documents pertaining to Mr. Barrick, including correspondence between Mr. Barrick’s physician and Mr. Barrick’s attorney. Mr. Barrick appealed the decision and the Superior Court reversed the trial court.

The Superior Court found that communications between an attorney and his trial expert witness are generally immune from discovery. The Court held that written communication between counsel and an expert witness retained by counsel is not discoverable unless the proponent of the discovery request shows specifically why the communication itself is relevant.

In the end, what does this mean for contractors? Trial expert witnesses are often vital participants in high-stakes construction litigation cases where technical and scientific details are critical to advance or defend against particular claims. It is often important for expert witnesses to understand as many details as possible about the project that is the subject of the litigation. Accordingly, open and honest channels of communication between contractors and expert witnesses can be the difference between winning and losing.

The Barrick decision indicates that under Pennsylvania law, communications among a contractor, attorney, and trial expert are generally protected from discovery, so long as the attorney is directly involved in those communications. Therefore, a contractor should feel comfortable having candid discussions with a trial expert so long as the contractor’s attorney is present during those discussions. Similarly, if a contractor wishes to forward documents to an expert, those documents should not be provided directly to the expert, but, rather, sent to the expert through the contractor’s attorney.

The Barrick decision is currently on appeal to the Pennsylvania Supreme Court, who will decide the extent to which communications between attorneys and their trial experts are protected from discovery. The Court may impose blanket work-product protection to all such communications. Alternatively, the Court may carve out certain categories of communications that are protected and other types that are not. In the meantime, however, contractors are encouraged not to have any direct communications with a trial expert without first discussing the matter with their attorneys. 

Jonathan is a Partner with the Firm and a member of the Commercial Litigation Group. Robert is an Associate and a member of the Construction Group. They can be reached at (215) 564-1700 or jcass@cohenseglias.com or robrien@cohenseglias.com.

New Gender Equity Notice Requirement for New Jersey Employers

By Melissa C. Angeline

The New Jersey legislature recently enacted a law requiring employers to post and distribute written notices informing employees of their “right to be free from gender inequity or bias in pay, compensation, benefits or other terms or conditions of employment” under state and federal law. All New Jersey employers with 50 or more employees are subject to this requirement.

The written notice must be posted conspicuously in each workplace, in English and Spanish, and provided to all new hires and existing employees. Employers also must re-distribute the notice each year to employees, and at any other time upon request. The law permits employers to deliver the annual notice by various means, including email distribution, paycheck insert, and attachment to the employee handbook. Employers must obtain signed acknowledgments confirming that employees have received, read, and fully understand the notice.

Employers are required to post and distribute the notice by November 21, 2012, assuming the notice is published by that date by the New Jersey Division of Labor and Workforce Development. At the time of print, the notice had not yet been published. If the notice is published after the November 21, 2012, employers are required to post the notice within 30 days after publication by the New Jersey Division of Labor and Workforce Development. If you have any questions regarding this requirement, you should contact your counsel. 

Please contact the Labor & Employment Group with any questions.