Michigan Arbitration Act: Arbitration Agreement Between Architects Enforced

Posted by: Hilger Hammond On: 27th November 2012 | no responses.

In the recent case, Rouleau v Orchard, Hiltz,& McCliment, Inc. (“OHM”)(October 2012), the Michigan Court of Appeals cheap online viagra enforced an arbitration agreement, even though that agreement did not conform to the exact requirements of the Michigan Arbitration Act.

purchasing levitra

In Rouleau, two architectural firms (OHM and Hitch, Inc.) entered into an agreement in 2005 to form a third company, called Hitch LLC.  Hitch Inc. transferred all of its assets and liabilities to the new entity, Hitch LLC.  The parties’ 2005 agreement included provisions for arbitration and indemnity.  Later, White Cloud Public Schools sued Hitch Inc. for negligently performed construction work.  OHM, the sole shareholder of Hitch Inc., then sued a former shareholder seeking indemnity for the costs OHM incurred in defending the White Cloud lawsuit.  OHM sought to arbitrate the dispute with its former shareholder pursuant to the parties’ 2005 agreement.

buy essay

The question before the court in Rouleau dealt with the interpretation of the arbitration provision.  Michigan law distinguishes between statutory arbitration and common law arbitration.  Statutory arbitration is governed by Michigan’s Arbitration Act (MAA).  To be enforceable under the MAA, the agreement must be in writing and must provide that “a judgment of any circuit court may be rendered upon the award.”  If the agreement complies with the MAA, neither party can revoke it.  If the agreement does not comply with the MAA, then it is treated as a common law arbitration agreement and either party can revoke it at any time before the arbitrator renders an award.

The arbitration clause in Rouleau did not contain the language required by the MAA; therefore, the trial court refused to compel arbitration.  The appellate court, however, reversed finding that the arbitration provision satisfied the MAA because it incorporated the commercial arbitration rules of the American Arbitration Association (AAA).  Because the AAA rules contained the language required by the MAA, neither party could revoke their agreement to arbitrate.

Incorporating AAA arbitration rules is a common practice in business transactions and construction contracts.  What do YOUR contracts provide regarding arbitration and do your contracts need updating to comply with the MAA?

Contractor Loses Battle with Architect Over Improper Influence in Bid Selection

Posted by: Hilger Hammond On: 30th October 2012 | no responses.

By Aileen Leipprandt

In Cedroni Associates, Inc. v Tomblinson, Harburn Associates, Architects & Planners, Inc. (July 2012), the Michigan Supreme Court rejected a contractor’s claim against an architect for tortious interference for allegedly lying about a contractor’s qualifications during a bid selection process.

In Cedroni, Davison Community Schools (DCS) invited bids on a school construction project.  The architect, Tomblinson, Harburn Associates, Architects & Planners (THAAP) assisted DCS with the bid selection process by reviewing and evaluating bids, investigating contractors and their references, and expressing opinions about which contractor should be awarded the project. Plaintiff, Cedroni Associates, was the low bidder. THAAP, however, recommended that the school board award the contract to the second lowest bidder.  The school board accepted THAAP’s recommendation.

Cedroni then sued THAAP asserting that THAAP tortiously interfered with Cedroni’s “prospective economic relations” by wrongfully informing DCS that Cedroni was unqualified to perform work. Cedroni claimed the THAAP’s recommendation was motivated by revenge against Cedroni for a dispute between Cedroni and THAAP on another project that resulted in THAAP being fired from the project.

In a 4-3 opinion, the Supreme Court sided with the Architect affirming the long-standing principle that a disappointed low bidder on a public contract has no reasonable expectation of being awarded a contract, “only wishful thinking.”  In the absence of a valid business expectancy, the contractor could not sue the architect for tortious interference.  In so ruling, the Supreme Court did not rule that an architect was immune from liability for making false statements about the low bidder, implying that there may be some other theory upon which the offended contractor could sue the architect.  While Cedroni may be considered a victory for design professionals, the Supreme Court left the door open for other claims.  What those claims might be remains to be seen.

 

Proposed Expansion of the Michigan Construction Anti-Indemnification Statute

Posted by: Hilger Hammond On: 25th September 2012 | no responses.

By:  Mark A. Rysberg

Since 1966, construction related indemnity provisions for personal injury or property damage resulting from the sole negligence of the indemnified party are invalid.  MCL 691.991.  The Michigan House of Representatives proposed extending the application of that statute to design professionals and to further limit indemnification on public projects to the percentage of the indemnitor’s fault.   2011 HB 5466.  The Bill has been referred to the Senate Committee on Judiciary.

Michigan Construction Law: Sometimes Juries Get It Wrong

Posted by: Hilger Hammond On: 27th July 2012 | no responses.

Design Professional Not Liable For Alleged Defective Pavement

By Aileen Leipprandt

In a recent Michigan Court of Appeals case, the court threw out a verdict by the jury against a design professional, holding that the engineer could not be held liable where there was no expert testimony that the engineer breached the professional standard of care.   In the absence of this expert testimony, the appellate court concluded that the jury improperly was left to speculate whether the engineer’s conduct fell below the standard of care.

The case, City of Huntington Woods v Orchard Hiltz McCliment, Inc (“OHM”) (May 2012), involved reconstruction of Coolidge Highway in Oakland County.  The plans and specifications prepared by OHM required that a certain type of binder be used with the asphalt and further provided for seasonal suspension of paving between November 14 and April 16.  In spite of these specs and without issuing a change order, OHM allowed the use of a different binder and allowed paving to occur on November 18.   Apparently there were problems with the paving and the City of Huntington sued OHM claiming OHM breached its contract by providing negligent design or negligent inspection or supervision of the contractor. The trial court treated the claim as one of professional negligence against OHM.  The jury returned a verdict in favor of the City.

OHM appealed arguing that although it did not strictly comply with the plans and specs, there was no expert testimony that the standard of care required written change
orders for those changes or that the change in use of specified binder and paving on November 18 breached the standard of care.  The court of appeals agreed, finding that the
absence of expert testimony on these points was fatal to the City’s claim.   The trial court should have ruled in favor of the engineer and the matter should never have been submitted to the jury.

While the engineer ultimately prevailed, it suffered the privilege of doing so through a trial and appellate process.  Next time around, the engineer may give closer consideration to the contract requirements, including the change order process.

Contractor Gets a Shot at Proving Architect Improperly Interfered with Bid Award

Posted by: Hilger Hammond On: 8th April 2011 | no responses.

''By Aileen Leipprandt

Previously published in AGC Michigan Legal Brief, Volume VII, Issue 1, 2011

 

A contractor’s claim for tortious interference in the context of a bid selection process was recently the subject of a detailed and lengthy Court of Appeals decision, Cedroni Associates, Inc. v Tomblinson, Harburn Associates, Architects & Planners, Inc., (November 2010). There, the appellate court ruled that the low bid contractor had produced enough evidence to allow the contractor to proceed to trial on its claim that the architect improperly interfered with the bid award process in refusing to recommend the low bid contractor.

 

In Cedroni, Davison Community Schools (DCS) invited bids on a construction project involving two elementary schools.  Pursuant to its contract with DCS, the architect, Tomblinson Harburn Associates, assisted DCS with the bid selection process in typical fashion by reviewing and evaluating bid applications, investigating competing contractors and their references, and expressing opinions as to which contractor should be awarded the project.  Plaintiff, Cedroni Associates, Inc., was the low bidder. However, based upon reference responses and the architect’s own experience with Cedroni, the architect recommended that the school board award the contract to the second lowest bidder.  The school board accepted the architect’s recommendation.
Cedroni then sued the architect asserting that the architect tortiously interfered with Cedroni’s “prospective economic relations” by wrongfully claiming that Cedroni was unqualified to perform work on the project.  The architect asked the trial court to dismiss the lawsuit because Cedroni did not have a valid expectation of entering into a business relationship with the school district given the broad discretion afforded the school district in selecting contractors and because the architect did nothing improper in expressing its opinion as to which bidder the school district should select.  The trial court agreed with the architect and dismissed the case.  The contractor appealed and the Court of Appeals reversed the trial court and remanded the case for trial.
The Court of Appeals first concluded that while the school board’s Fiscal Management Policy contained multiple provisions reserving to the board the right to reject bids, such discretion was not unfettered and was subject to the provision requiring an award to be made to the “lowest responsible bidder” as defined in the Fiscal Management Policy.
The appellate court next concluded that Cedroni had submitted enough evidence to suggest that Cedroni was a “responsible” contractor and that there was a reasonable probability that Cedroni would have been awarded the contract but for the wrongful conduct of the architect.  To that end, Cedroni presented a detailed affidavit regarding the specifics of various projects that Cedroni had timely and successfully completed.  In light of this evidence, the Court concluded that Cedroni had a valid business expectancy in the construction project.
Next, the appellate court ruled that Cedroni had submitted enough evidence to create a factual dispute as to whether the architect acted improperly in the manner in which it communicated and recommended the bidders.  Cedroni showed that a great deal of friction and animosity had developed between Cedroni and the architect on past projects by the time of the bid selection on the Davison Schools project, and that this animosity unfairly colored the architect’s recommendation so that the unfavorable recommendation was motivated by malice and not legitimate business reasons.  That is, the architect “sabotaged” Cedroni’s bid.
The appellate court was careful to limit its opinion, emphasizing that the architect’s exercise of professional business judgment in making recommendations as to public contracts “must be afforded some level of protection and deference.”  Nonetheless, given that there was some evidence to suggest the architect’s exercise of judgment was “in reality a disguised” attempt to improperly interfere with Cedroni’s business expectancy, the appellate court concluded that Cedroni should have a chance to prove its case.
Judge Kelly authored a strong dissenting opinion, observing that given the school district’s broad discretion in bid selection, Cedroni’s only legitimate business expectancy was a fair bidding process free of fraud, not a favorable outcome.
While the Cedroni case may be considered a victory for contractors, design professionals may be dismayed at the prospect of being embroiled in litigation for recommendations it makes on bid awards.