A single-justice of the Massachusetts Supreme Judicial Court has held that a temporary suspension by the Massachusetts Board of Registration in Medicine must be based on the “preponderance of the evidence,” and not merely “substantial evidence.” See Randall v. Massachusetts Board of Registration in Medicine, SJ-2014-0475.
The Board of Registration in Medicine can summarily (temporarily) suspend a physician’s license if it “determines that a licensee is an immediate and serious threat to the public health, safety, or welfare.” However, the Board must “provide a hearing on the necessity for the summary action within seven days after the suspension.” If the temporary suspension is upheld at that hearing, the temporary suspension remains in effect pending a hearing on the merits of the allegations against the licensee and a final decision.
The single-justice of the SJC agreed that “substantial evidence” was the appropriate standard to be applied when administrative decisions are appealed to the courts, but that it is the inappropriate standard to be applied in the first instance. The single-justice noted that “[w]hile due process requirements may be lessened in the context of a temporary suspension, resulting in shorter time frames and the consideration of the available evidence in less than pristine or complete form, such a suspension must still be based on the preponderance of the evidence actually considered.”
This ruling helps to clarify the standard that must be followed by administrative law judges in determining whether a temporary or summary suspension is warranted. As this type of suspension can cause significant harm to a physician’s practice, even if he or she is later exonerated, this new standard will hopefully ensure that temporary/summary suspensions are only issued when the facts of the case call for such a finding.
Legal updates, news and commentary from Preti Flaherty's Professional Services Attorneys
Architect to Serve Jail Time Over Design and Construction Defects That Killed Los Angeles Firefighter
Wednesday, January 8, 2014
An architect recently pleaded no contest to an involuntary manslaughter charge stemming from the ceiling collapse at a luxury home that the architect designed and built. The architect was sentenced to three years of probation and one year in county jail. For more information regarding this story, see the recent ENR story, "Architect Will Serve Jail Term Over Blaze that Killed L.A. Firefighter."
While most construction professionals strive to meet their obligations based upon pride and professionalism, there are risks on any project that can go beyond those that can be insured. Preti Flaherty attorney Kenneth E. Rubinstein has written on the topic in the Constructor Magazine and has spoken on the topic at the American Council of Engineering Companies 2012 Annual Conference. For further information, Ken can be reached at (617) 226-3868 or (603) 410-1568 or by email at krubinstein@preti.com.
For more information on professional liability matters, contact Ken or any member of our Professional Liability Group.
While most construction professionals strive to meet their obligations based upon pride and professionalism, there are risks on any project that can go beyond those that can be insured. Preti Flaherty attorney Kenneth E. Rubinstein has written on the topic in the Constructor Magazine and has spoken on the topic at the American Council of Engineering Companies 2012 Annual Conference. For further information, Ken can be reached at (617) 226-3868 or (603) 410-1568 or by email at krubinstein@preti.com.
For more information on professional liability matters, contact Ken or any member of our Professional Liability Group.
Mello Construction, Inc. v. Division of Capital Asset Management, 84 Mass. App. Ct. 625 (December 18, 2013)
Tuesday, January 7, 2014
The question presented on appeal was whether a general contractor may sue the Division of Capital Asset Management (DCAM) for money damages after a discretionary decision to deny an annual application for certification to bid on public construction projects. DCAM is the Massachusetts state agency within the Executive Office of Administration and Finance established to oversee public building projects and to administer the public bidding statutes. The Appeals Court affirmed the Superior Court’s dismissal of the contractor’s complaint.
From 1985 until 2004, Mello Construction, Inc. (Mello), a general contractor specializing in large-scale public construction projects, received annual certificates of eligibility from DCAM. In October 2004, Mello submitted its annual application for certification. On August 19, 2005, DCAM issued a preliminary determination denying the application based in part on two negative contractor evaluations. As permitted by the statute (M.G.L. c. 149, §44D), Mello timely requested reconsideration and submitted additional information and documentation to DCAM, including lengthy rebuttals of the allegedly biased evaluations. On October 27, 2005, DCAM, refusing to disregard the negative evaluations, denied Mello's application for four reasons: (1) failure to achieve a minimum average project rating required for certification; (2) receipt of two failing scores on projects; (3) failure to disclose on its application the termination from another project; and (4) failure to disclose the invoking of a performance bond.
After a hearing in January 2006, the Attorney General issued a decision on April 6, 2007, affirming the denial of the application. In July 2007, Mello commenced this Superior Court action against DCAM, seeking monetary damages. On December 1, 2009, DCAM filed a motion to have the case proceed pursuant to a writ of certiorari under M.G.L. c. 249, § 4, which was allowed. The parties then filed cross motions for judgment on the pleadings. DCAM's motion for judgment on the pleadings was granted, Mello's motion was denied, and the complaint was dismissed. Mello filed a timely notice of appeal.
Under the Massachusetts competitive bidding statute, every contract for the construction of public buildings estimated to cost more than $100,000 “shall be awarded to the lowest responsible and eligible general bidder.” DCAM was charged by the Legislature with the duty of certifying bidder eligibility, and eligibility is a prerequisite to bidding on any public construction contracts. Each year, a contractor must submit a detailed application to DCAM and DCAM is required to evaluate the applicant "on the basis of the application and on relevant past performance according to procedures and criteria" mandated by statute and the regulations and guidelines prescribed by DCAM. The contractor has the burden of establishing to DCAM's satisfaction that it is competent and responsible. DCAM has wide discretion in deciding whether to issue a certificate of eligibility.
DCAM's requirements and conditions for certification are lengthy. Some events occurring within the five-year statutory look back period require the mandatory denial of an application for certification, while others constitute justifiable cause for denial. Discretionary grounds for denial include, as herein relevant, the following events: termination for cause from a building project, a record of two project ratings that fall below the passing score established in DCAM's Contractor Certification Guidelines and Procedures (guidelines) on more than one building project, and a record of an invoked performance bond. DCAM may also deny an application based on the provision of either false or misleading information or the failure to provide all required information.
This appeal turned on the meaning of "remedies at law" that an aggrieved party may seek following the exhaustion of its administrative appeal. Mello contended "the remedies at law" referred to in the second paragraph of M.G. L. c. 149, § 44D(4), was the right to bring a civil action for money damages against DCAM with a full jury trial on the merits. However, the court disagreed, noting that the Commonwealth of Massachusetts did not waive its sovereign immunity with respect to any claims arising from the denial of, or refusal to, issue a license or certificate. The court further noted that even if immunity was waived, the legislative intent necessary to infer an implied right of private action from the statute was absent in this case. The court also noted the statute provided an applicant with the remedy of an administrative appeal to the Attorney General and expressly empowered the Attorney General to institute enforcement proceedings, if warranted, against DCAM.
The court was also not persuaded by Mello's argument that a cause of action for money damages against DCAM existed at common law. The court noted that licenses are required to engage in many occupations and businesses; and the loss of a license may cause devastating financial and emotional consequences to an applicant. Nonetheless, there is no right to money damages flowing from an improper licensing action.
To learn more about this case, contact attorney Daniel Sonneborn at 617-226-3800 or by email dsonneborn@preti.com. To learn more about construction law or professional liability matters, contact any member of Preti Flaherty's Professional Liability Practice Group.
From 1985 until 2004, Mello Construction, Inc. (Mello), a general contractor specializing in large-scale public construction projects, received annual certificates of eligibility from DCAM. In October 2004, Mello submitted its annual application for certification. On August 19, 2005, DCAM issued a preliminary determination denying the application based in part on two negative contractor evaluations. As permitted by the statute (M.G.L. c. 149, §44D), Mello timely requested reconsideration and submitted additional information and documentation to DCAM, including lengthy rebuttals of the allegedly biased evaluations. On October 27, 2005, DCAM, refusing to disregard the negative evaluations, denied Mello's application for four reasons: (1) failure to achieve a minimum average project rating required for certification; (2) receipt of two failing scores on projects; (3) failure to disclose on its application the termination from another project; and (4) failure to disclose the invoking of a performance bond.
After a hearing in January 2006, the Attorney General issued a decision on April 6, 2007, affirming the denial of the application. In July 2007, Mello commenced this Superior Court action against DCAM, seeking monetary damages. On December 1, 2009, DCAM filed a motion to have the case proceed pursuant to a writ of certiorari under M.G.L. c. 249, § 4, which was allowed. The parties then filed cross motions for judgment on the pleadings. DCAM's motion for judgment on the pleadings was granted, Mello's motion was denied, and the complaint was dismissed. Mello filed a timely notice of appeal.
Under the Massachusetts competitive bidding statute, every contract for the construction of public buildings estimated to cost more than $100,000 “shall be awarded to the lowest responsible and eligible general bidder.” DCAM was charged by the Legislature with the duty of certifying bidder eligibility, and eligibility is a prerequisite to bidding on any public construction contracts. Each year, a contractor must submit a detailed application to DCAM and DCAM is required to evaluate the applicant "on the basis of the application and on relevant past performance according to procedures and criteria" mandated by statute and the regulations and guidelines prescribed by DCAM. The contractor has the burden of establishing to DCAM's satisfaction that it is competent and responsible. DCAM has wide discretion in deciding whether to issue a certificate of eligibility.
DCAM's requirements and conditions for certification are lengthy. Some events occurring within the five-year statutory look back period require the mandatory denial of an application for certification, while others constitute justifiable cause for denial. Discretionary grounds for denial include, as herein relevant, the following events: termination for cause from a building project, a record of two project ratings that fall below the passing score established in DCAM's Contractor Certification Guidelines and Procedures (guidelines) on more than one building project, and a record of an invoked performance bond. DCAM may also deny an application based on the provision of either false or misleading information or the failure to provide all required information.
This appeal turned on the meaning of "remedies at law" that an aggrieved party may seek following the exhaustion of its administrative appeal. Mello contended "the remedies at law" referred to in the second paragraph of M.G. L. c. 149, § 44D(4), was the right to bring a civil action for money damages against DCAM with a full jury trial on the merits. However, the court disagreed, noting that the Commonwealth of Massachusetts did not waive its sovereign immunity with respect to any claims arising from the denial of, or refusal to, issue a license or certificate. The court further noted that even if immunity was waived, the legislative intent necessary to infer an implied right of private action from the statute was absent in this case. The court also noted the statute provided an applicant with the remedy of an administrative appeal to the Attorney General and expressly empowered the Attorney General to institute enforcement proceedings, if warranted, against DCAM.
The court was also not persuaded by Mello's argument that a cause of action for money damages against DCAM existed at common law. The court noted that licenses are required to engage in many occupations and businesses; and the loss of a license may cause devastating financial and emotional consequences to an applicant. Nonetheless, there is no right to money damages flowing from an improper licensing action.
To learn more about this case, contact attorney Daniel Sonneborn at 617-226-3800 or by email dsonneborn@preti.com. To learn more about construction law or professional liability matters, contact any member of Preti Flaherty's Professional Liability Practice Group.
A Professional's Failure to Perform As Promised Is Cause for Breach of Contract Action
Friday, January 3, 2014
S.D. Cummings & Co., PC provided accounting and business services to a construction industry client. The client asked for a recommendation to an attorney to place a mechanic’s lien on property where he had done some framing, for which he was owed $44,000. Cummings suggested she could provide the services, and gave the client a Representation Letter promising to communicate with all pertinent parties and to prepare all documents necessary to secure the claim, including applications for a mechanic’s lien. She instructed the client to direct all future communications from anyone on the topic to her. Accordingly, the client forwarded to her offers by the general contractor and the property owner to pay the sums owed if the client would finish the work. Unfortunately, Cummings failed to provide any of the services she promised, and the time for securing the mechanic’s lien expired. The client sued her for the balance owed, and won.
The NH Supreme Court rejected each of three arguments Cummings raised on appeal. (1) Claimants must take reasonable measures to mitigate their damages, and Cummings protested the client could have responded to the offers, or unilaterally sued the contractor or homeowner. No duty to mitigate arises until the defendant’s breach of the contract is clear, however, and here, the client’s failure to respond to the offers or to timely sue the general contractor or property owner came about in reliance on the professional’s promise to undertake communications and document preparation. By the time the client learned Cummings had done nothing to secure the lien, there was little the client could do. (2) Cummings argued there was no causation established between her inaction and the loss. But it was clear her inaction caused the lapse of the client’s mechanic’s lien rights. (3) Most interestingly for professional liability practitioners, the court also rejected an argument that an expert witness was required. The court explicitly noted that this was neither a negligence nor a legal malpractice case, but rather simply a breach of contract action. The issue was whether the defendant failed without legal excuse to perform as promised in the Representation Letter. Such a finding was within the realm of common knowledge and everyday experience, and the award was sustained.
At oral argument, some distinction was made between this defendant and a hypothetical case against an attorney on similar facts, but we expect to see Audette v. Cummings, No. 2012-496 (December 24, 2013) cited in the future, as plaintiffs’ counsel try to garner breach of contract damages (i.e., expectancies) in legal and other professional negligence cases, effecting an end-around to the economic loss rule.
For more information on professional liability matters, contact attorney Bill Saturley at 603-410-1500 or by email at wsaturley@preti.com or a member of Preti Flaherty's Professional Liability Practice Group.
The NH Supreme Court rejected each of three arguments Cummings raised on appeal. (1) Claimants must take reasonable measures to mitigate their damages, and Cummings protested the client could have responded to the offers, or unilaterally sued the contractor or homeowner. No duty to mitigate arises until the defendant’s breach of the contract is clear, however, and here, the client’s failure to respond to the offers or to timely sue the general contractor or property owner came about in reliance on the professional’s promise to undertake communications and document preparation. By the time the client learned Cummings had done nothing to secure the lien, there was little the client could do. (2) Cummings argued there was no causation established between her inaction and the loss. But it was clear her inaction caused the lapse of the client’s mechanic’s lien rights. (3) Most interestingly for professional liability practitioners, the court also rejected an argument that an expert witness was required. The court explicitly noted that this was neither a negligence nor a legal malpractice case, but rather simply a breach of contract action. The issue was whether the defendant failed without legal excuse to perform as promised in the Representation Letter. Such a finding was within the realm of common knowledge and everyday experience, and the award was sustained.
At oral argument, some distinction was made between this defendant and a hypothetical case against an attorney on similar facts, but we expect to see Audette v. Cummings, No. 2012-496 (December 24, 2013) cited in the future, as plaintiffs’ counsel try to garner breach of contract damages (i.e., expectancies) in legal and other professional negligence cases, effecting an end-around to the economic loss rule.
For more information on professional liability matters, contact attorney Bill Saturley at 603-410-1500 or by email at wsaturley@preti.com or a member of Preti Flaherty's Professional Liability Practice Group.
First Circuit Enforces Arbitration Clause in Attorney Engagement Letters
Tuesday, December 24, 2013
In Bezio v. Draeger, No. 13-1910 (December 16, 2013), the Court of Appeals for the First Circuit affirmed a ruling by the United States District Court for the District of Maine, enforcing an arbitration clause in an attorney-client engagement letter. The former client brought malpractice and unfair practice claims, but the action was dismissed and sent to arbitration under Maine law.
The court found that (1) Maine professional responsibility law for attorneys permits arbitration of legal malpractice claims so long as there is no prospective limitation of the firm's liability; and 2) Maine law, like the Federal Arbitration Act, evidences no hostility to the use of the arbitral forum.
There were several material factors in the instant case that could limit its application to its particular facts. The client negotiated the terms of the engagement letter, for example, changing some, and then signed the letter and initialed each page, thus specifically noting his agreement to each term. This client also had specific and particular prior experience with arbitration, thus limiting the amount of explanation of the procedure that was required of the firm in reaching informed consent of the particulars of this type of dispute resolution.
But the broader significance is clear: arbitration of client disputes is permitted and indeed encouraged. If attorneys mimic the procedure followed in this particular engagement letter, by actually getting client signature on letters, there is every reason to believe their choice of arbitration for dispute resolution will be followed. Of particular note, while making sure prospective clients are informed about the process is material to the outcome, the court found no requirement that the law firm encourage the client to seek independent counsel over the meaning of the term in the agreement.
For more information on professional liability and arbitration issues, contact attorney William Saturley or a member of Preti Flaherty's Professional Liability group.
The court found that (1) Maine professional responsibility law for attorneys permits arbitration of legal malpractice claims so long as there is no prospective limitation of the firm's liability; and 2) Maine law, like the Federal Arbitration Act, evidences no hostility to the use of the arbitral forum.
There were several material factors in the instant case that could limit its application to its particular facts. The client negotiated the terms of the engagement letter, for example, changing some, and then signed the letter and initialed each page, thus specifically noting his agreement to each term. This client also had specific and particular prior experience with arbitration, thus limiting the amount of explanation of the procedure that was required of the firm in reaching informed consent of the particulars of this type of dispute resolution.
But the broader significance is clear: arbitration of client disputes is permitted and indeed encouraged. If attorneys mimic the procedure followed in this particular engagement letter, by actually getting client signature on letters, there is every reason to believe their choice of arbitration for dispute resolution will be followed. Of particular note, while making sure prospective clients are informed about the process is material to the outcome, the court found no requirement that the law firm encourage the client to seek independent counsel over the meaning of the term in the agreement.
For more information on professional liability and arbitration issues, contact attorney William Saturley or a member of Preti Flaherty's Professional Liability group.
Contractors Have No False Claims Act Liability for Overweight Trucks
Wednesday, December 18, 2013
In a refreshing rebuke to the certification theory of False Claims Act (“FCA”) liability, the Fifth Circuit in United States ex rel. Stephenson v. Archer Western Contractors, Case No. 13-30327 (5th Cir. Dec. 2, 2013) affirmed the dismissal of a complaint alleging FCA liability brought by the owner and manager of a trucking company against various contractors working on the reconstruction of the New Orleans levee system for the United States Army Corps of Engineers. The complaint alleged that the contractors had defrauded the government by falsely certifying as part of their requests for payment that they were in compliance with all “Federal, state and municipal laws, codes and regulations applicable to the performance of the work” when in fact they were consistently violating state and local weight limits for trucks on highways. The evidence presented to the Court indicated that the topic of overweight trucks had been raised in emails between the government and the contractors and that it was readily visible on-site. Nevertheless, the government had never issued any stop work orders, never stopped the delivery of clay by the overweight trucks to the project site, and never withheld payment to the contractors. Accordingly, the Fifth Circuit concluded that the alleged “fraud” was immaterial and could not be a basis for FCA liability.
There are innumerable laws and regulations that may apply to a particular construction project. This decision makes it clear that only those violations of law which actually affect the decision of the government to pay for the work being performed on the project are a basis for FCA liability. In particular, the decision suggests that payment by the government with full knowledge of the violation may be a basis to conclude that such violations are immaterial. This should hopefully alleviate any concerns for contractors signing off on such certifications that technical violations of laws or regulations unrelated to the government’s payment decision should not result in FCA liability.
For more information on professional liability and construction issues, contact attorney Nathan Fennessy or a member of Preti Flaherty's Professional Liability group.
There are innumerable laws and regulations that may apply to a particular construction project. This decision makes it clear that only those violations of law which actually affect the decision of the government to pay for the work being performed on the project are a basis for FCA liability. In particular, the decision suggests that payment by the government with full knowledge of the violation may be a basis to conclude that such violations are immaterial. This should hopefully alleviate any concerns for contractors signing off on such certifications that technical violations of laws or regulations unrelated to the government’s payment decision should not result in FCA liability.
For more information on professional liability and construction issues, contact attorney Nathan Fennessy or a member of Preti Flaherty's Professional Liability group.
Why the Project Delivery Method Matters in Construction Litigation
Friday, December 13, 2013
The most common theme in construction litigation is a dispute between owners, contractors, and designers as to who was responsible for a construction defect that caused delays or additional costs. In these cases, the matter is often determined by which construction delivery method was being used by the parties involved.
Most construction is done on a design-bid-build model, meaning that the owner hires a designer (architect/engineer) to put together plans and specs, and then the owner hires a contractor to build to those plans and specs. When the owner hires the contractor, they are given an implied warranty (the Spearin doctrine) that if the contractor builds in accordance with the plans and specs that the design is sufficient so that the contractor will achieve the intended purpose. In other words, if an owner gives the contractor plans and specs that will result in a building envelop, the owner can't then blame the contractor when the contractor builds in accordance with the faulty design.
By contrast, some construction is done on a design-build basis in which the owner hires one firm that is responsible for both the design and construction of the building. In that instance, if something goes wrong, the owner doesn't have to figure out who is at fault - they have one firm that carries all of the responsibility. Notably, even in cases where the construction was generally done on a design-bid-build basis is not necessarily dispositive, because sometimes contracts will leave specific aspects of the construction (such as HVAC) to be done on a design build basis. In those instances, the designer will provide most of the design for the building, but will intentionally exclude certain systems, with the understanding that the contractor (or more likely his sub) will likely design the particulars of their solution anyway.
When litigating this issue, take a look at the plans and specs to find out whether the roof was being done on a design-build basis as that will be critical to your analysis. Part of that analysis is looking to see whether the contract provides a "design spec" or a "performance spec" for that aspect of the work. A design spec allows the contractor to determine the means and methods of construction (how to perform the work), but tells the contractor the specific materials or sizes that are required. Where a design spec is used, the owner (and by extension, the architect) retains responsibility for the design being used. A performance spec, by contrast, simply dictates the desired outcome, but leaves it to the contractor to determine how to achieve that outcome. In these instances (even where the contractor still has to provide shop drawings for their solution to be approved), the contractor ultimately bears all responsibility for all aspects of meeting the defined objective.
For more information on construction or professional liability matters contact attorney Ken Rubinstein at 603-410-1500 or any member of Preti Flaherty's Professional Liability Practice Group.
Most construction is done on a design-bid-build model, meaning that the owner hires a designer (architect/engineer) to put together plans and specs, and then the owner hires a contractor to build to those plans and specs. When the owner hires the contractor, they are given an implied warranty (the Spearin doctrine) that if the contractor builds in accordance with the plans and specs that the design is sufficient so that the contractor will achieve the intended purpose. In other words, if an owner gives the contractor plans and specs that will result in a building envelop, the owner can't then blame the contractor when the contractor builds in accordance with the faulty design.
By contrast, some construction is done on a design-build basis in which the owner hires one firm that is responsible for both the design and construction of the building. In that instance, if something goes wrong, the owner doesn't have to figure out who is at fault - they have one firm that carries all of the responsibility. Notably, even in cases where the construction was generally done on a design-bid-build basis is not necessarily dispositive, because sometimes contracts will leave specific aspects of the construction (such as HVAC) to be done on a design build basis. In those instances, the designer will provide most of the design for the building, but will intentionally exclude certain systems, with the understanding that the contractor (or more likely his sub) will likely design the particulars of their solution anyway.
When litigating this issue, take a look at the plans and specs to find out whether the roof was being done on a design-build basis as that will be critical to your analysis. Part of that analysis is looking to see whether the contract provides a "design spec" or a "performance spec" for that aspect of the work. A design spec allows the contractor to determine the means and methods of construction (how to perform the work), but tells the contractor the specific materials or sizes that are required. Where a design spec is used, the owner (and by extension, the architect) retains responsibility for the design being used. A performance spec, by contrast, simply dictates the desired outcome, but leaves it to the contractor to determine how to achieve that outcome. In these instances (even where the contractor still has to provide shop drawings for their solution to be approved), the contractor ultimately bears all responsibility for all aspects of meeting the defined objective.
For more information on construction or professional liability matters contact attorney Ken Rubinstein at 603-410-1500 or any member of Preti Flaherty's Professional Liability Practice Group.
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