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Record for a UF thesis. Title & abstract won't display until thesis is accessible after 2009-12-31.

Permanent Link: http://ufdc.ufl.edu/UFE0021581/00001

Material Information

Title: Record for a UF thesis. Title & abstract won't display until thesis is accessible after 2009-12-31.
Physical Description: Book
Language: english
Creator: Hild, Franklin Jay
Publisher: University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2007

Subjects

Subjects / Keywords: Building Construction -- Dissertations, Academic -- UF
Genre: Building Construction thesis, M.S.B.C.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
born-digital   ( sobekcm )
Electronic Thesis or Dissertation

Notes

Statement of Responsibility: by Franklin Jay Hild.
Thesis: Thesis (M.S.B.C.)--University of Florida, 2007.
Local: Adviser: Issa, R. Raymond.
Electronic Access: INACCESSIBLE UNTIL 2009-12-31

Record Information

Source Institution: UFRGP
Rights Management: Applicable rights reserved.
Classification: lcc - LD1780 2007
System ID: UFE0021581:00001

Permanent Link: http://ufdc.ufl.edu/UFE0021581/00001

Material Information

Title: Record for a UF thesis. Title & abstract won't display until thesis is accessible after 2009-12-31.
Physical Description: Book
Language: english
Creator: Hild, Franklin Jay
Publisher: University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2007

Subjects

Subjects / Keywords: Building Construction -- Dissertations, Academic -- UF
Genre: Building Construction thesis, M.S.B.C.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
born-digital   ( sobekcm )
Electronic Thesis or Dissertation

Notes

Statement of Responsibility: by Franklin Jay Hild.
Thesis: Thesis (M.S.B.C.)--University of Florida, 2007.
Local: Adviser: Issa, R. Raymond.
Electronic Access: INACCESSIBLE UNTIL 2009-12-31

Record Information

Source Institution: UFRGP
Rights Management: Applicable rights reserved.
Classification: lcc - LD1780 2007
System ID: UFE0021581:00001


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1 CASE STUDIES IN CONSTRUCTION DISPUTES By FRANKLIN J. HILD A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLOR IDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUILDING CONSTRUCTION UNIVERSITY OF FLORIDA 2007

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2 2007 by Franklin J. Hild

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3 To my mother, many times over, and to taking the leap, the power of belief, and coming full circle

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4 ACKNOWLEDGMENTS I thank Faith Keating, J.D., for teaching me to keep looking for the cheese and not focusing on the wall when the path chosen in the maze hits a dead end. I thank Thomas F. Egan, J.D., Ph.D., for my enjoyment of the law generall y and litigation specifically, and for making me a believer that the more improbable something seem s the more likely it is to happen. I thank Art Witters for his extreme thoroughness and professionalism. His work let me get ahead of the learning curve before starting to practice once more. I would also like to thank my supervisory committee. I thank Dr. R. Raymond Issa for his re spect and the fifteen banker boxes that put me here. I thank Dr. E. Douglas Lu cas for his stories of stepping into the ring. And, I thank Dr. Svetlana Olbina for her genuine interest. As to the Rinker faculty, I thank Dr. Charles Kibert for teaching what he does. I thank Dr. Richard Smailes for teaching how he does. I thank Dr. Paul Oppenheim for both. And I thank Dr. Ajay Shan ker for his humor and affirming that every construction project has a lawyer involved to some degree.

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5 TABLE OF CONTENTS Page ACKNOWLEDGMENTS...............................................................................................................4 LIST OF TABLES................................................................................................................. ........12 ABSTRACT...................................................................................................................................13 CHAP TER 1 INTRODUCTION..................................................................................................................14 2 METHODOLOGY................................................................................................................. 17 3 LITERATURE REVIEW.......................................................................................................19 Liability Issues of Owner, General Contractor and Architect/Engineer ................................. 19 Professional Negligence Liability Absent Privity of Contract ........................................19 Owner, General Contractor and Designer Liability for Personal Injury......................... 24 Owner.......................................................................................................................25 Architect...................................................................................................................27 Warranty and Construction Defect Liability for Owner, Contractor and Architect ............... 29 Patent and Latent Defects................................................................................................ 29 Subrogation and Indemnification for Latent Defects...................................................... 30 The Economic Loss Rule........................................................................................................ 32 The Economic Loss Rule in Florida Today..................................................................... 32 Other Exceptions to the Economic Loss Rule and Remedies......................................... 34 Summary of Liability Issues................................................................................................... 35 Florida Lien Law....................................................................................................................36 Overview.........................................................................................................................36 General Lien Discussion..................................................................................................36 Liens with Privity and Absent Privity............................................................................. 37 Express or Implied Contract And Noti ce to Owner As Requirem ent of Lien................. 38 Liens and the Final Payment Affidavit............................................................................ 40 Notice of Commencement and Liens.............................................................................. 42 The Claim of Lien per Florida Statute .08 (2006)................................................... 42 Duration of Lien Claim................................................................................................... 44 Summary of Lien Notices and Claims............................................................................. 45 Liens and Payment and Performance Bonds.......................................................................... 45 Payment Bonds................................................................................................................ 45 Relevant Case Law on Payment Bonds........................................................................... 47 Construction Defects..............................................................................................................50 Statute of Repose.............................................................................................................50 Florida Statute, .......................................................................................................52

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6 4 COUNTY COURTHOUSE DISPUTE; DESIGN NEGLIGENCE VERSUS CONTRACTOR NEGLIGENCE ........................................................................................... 54 Preface....................................................................................................................................54 Project, Scope and Parties.......................................................................................................54 Project..............................................................................................................................54 Scope and Sequence of Construction at Tim e Contract Executed.................................. 54 The Parties.......................................................................................................................55 Facts in Common....................................................................................................................56 The Bid, General Condition Requirements and Value Engineering............................... 56 Date of Commencement and Delays............................................................................... 56 Nature of Dispute....................................................................................................................58 Termination of GC and Claim on Bond.......................................................................... 58 Demands for Arbitration..................................................................................................58 Allegations by GC (Plaintiff).................................................................................................. 59 Design Errors, Omissions and Failure to Coordinate As Cause of Delays .....................59 Window and Curtain Wall............................................................................................... 60 Post Tension Slab............................................................................................................61 GC Termination of Contract............................................................................................ 62 Allegations by Owner (Defendant)......................................................................................... 62 GC Ethical Lapse and Relian ce On Inadm issible Facts.................................................. 62 GCs Financial Condition and Scheduling of Project..................................................... 63 Response to Specific Delay Claims................................................................................. 64 Time computation.................................................................................................... 64 Change order reservation of rights...........................................................................64 Dealings with subcontractors and buyout................................................................64 Schedule and Sequence Failures..................................................................................... 65 Relevant Clauses of the General Conditions.......................................................................... 66 Duties of General Contractor........................................................................................... 66 Claims Procedure............................................................................................................. 67 Subcontractors.................................................................................................................68 Time.................................................................................................................................68 Payments....................................................................................................................... ...68 Progress Payments........................................................................................................... 69 Termination By Contractor.............................................................................................. 69 Termination By Owner.................................................................................................... 70 Suspension By The Owner For Convenience.................................................................. 70 5 CONTRACTOR VERSUS AIRPORT AUTHORITY; EXTENDED GENERAL CONDITION COSTS ............................................................................................................. 72 Preface....................................................................................................................................72 Project, Scope and Parties.......................................................................................................72 Project..............................................................................................................................72 Scope and Sequence of Construction..............................................................................72 The Parties.......................................................................................................................73 Facts in Common....................................................................................................................73

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7 The Contract and Time.................................................................................................... 73 No damage for delay clause.....................................................................................74 Notice to Proceed..................................................................................................... 74 No time extensions provided.................................................................................... 74 Piling Contractor and Delays........................................................................................... 75 Change Orders.................................................................................................................75 Substantial Completion................................................................................................... 76 Nature of Dispute....................................................................................................................76 Delay Claim Overview.................................................................................................... 76 Extended General Daily Condition Costs........................................................................ 77 Additional Claims by GC................................................................................................ 78 Claim Dollar Amounts by GC and Offset Claimed by Owner........................................ 78 Allegations by GC.............................................................................................................. ....79 Delays Due to Piling Contractor...................................................................................... 79 Delays Due to Change Orders......................................................................................... 80 Retainage.........................................................................................................................81 Mold Offset Claim by Owner..........................................................................................81 Allegations by Owner........................................................................................................... ..82 Response to GC Claims................................................................................................... 82 Owners Independent Claims..........................................................................................83 6 CONTRACTOR VERSUS STRIP MALL DE VELOPER; ACTIVE INTERFERENCE AND CONTRACTOR NEGLIGE NCE................................................................................. 84 Preface....................................................................................................................................84 Project, Scope and Parties.......................................................................................................84 Project..............................................................................................................................84 Scope and Construction................................................................................................... 84 Parties..............................................................................................................................85 Facts in Common....................................................................................................................85 Contract Bid Package......................................................................................................85 Notice to Proceed, Change Orders and Substantial Com pletion..................................... 86 Payment Issues................................................................................................................ 87 Nature of Dispute....................................................................................................................88 GCs Claims....................................................................................................................88 Owners Counterclaims................................................................................................... 88 Conditions Relevant to Both Parties................................................................................ 89 Allegations by GC (Plain tiff / Cross Defendant) ....................................................................89 Overview.........................................................................................................................89 Active Interference by Owner......................................................................................... 90 Breach by Owner.............................................................................................................91 Allegations by Owner........................................................................................................... ..92 Overview.........................................................................................................................92 Estimate and Bid Deficiencies......................................................................................... 93 Change Orders, Staffing and Scheduling........................................................................ 93 Periodic Payments...........................................................................................................94 Lost Lease Income Claim................................................................................................ 94

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8 7 COMMERCIAL GC VERSUS HOSPITAL; DESIGN ERRORS A ND OMISSIONS ........ 96 Preface....................................................................................................................................96 Project, Scope and Parties.......................................................................................................96 Project..............................................................................................................................96 Scope and Sequence........................................................................................................96 The Parties.......................................................................................................................97 Facts In Common....................................................................................................................97 Overview.........................................................................................................................97 Design Documents........................................................................................................... 98 Change Directives...........................................................................................................98 Nature of Dispute....................................................................................................................99 Allegations by GC (Plain tiff/Cross Defendant) ......................................................................99 Overview of Delay Allegations.......................................................................................99 Duty to Provide Design Docu m ents (Spearin Doctrine)............................................... 100 Bulletin Drawings..........................................................................................................101 Lack of Error Free Conformed Contract Drawings....................................................... 102 Drawing Scale and Dimensions..................................................................................... 103 Requests for Information...............................................................................................103 Design by Shop Drawing...............................................................................................105 8 WINE CELLAR CONSTRUCTION DEFECT CLAIM.....................................................106 Preface..................................................................................................................................106 Project, Scope and Parties.....................................................................................................106 Project and Scope.......................................................................................................... 106 The Parties.....................................................................................................................106 Facts In Common..................................................................................................................107 Design Process...............................................................................................................107 Construction Materials and Techniques........................................................................ 107 Manifest Problems.........................................................................................................108 Contract Omission......................................................................................................... 108 Nature of Dispute..................................................................................................................109 Allegations by Owner........................................................................................................... 109 Breach of Express Warranty and Implied Warranty of Fitness..................................... 109 Construction Expert Opinion.........................................................................................110 Allegations by GC.............................................................................................................. ..111 Design Defect Not Construction Defect........................................................................111 HVAC System Not in GCs Scope................................................................................ 112 Relevant Portions of 58.002, Florida Statutes (2007) ...................................................... 112 558.002 Definitions......................................................................................................112 558.005 Contract provisions; application.....................................................................113 9 ALASKAN ROCKET FACILITY....................................................................................... 115 Preface..................................................................................................................................115 Project and Parties............................................................................................................ ....115

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9 Project............................................................................................................................115 The Parties.....................................................................................................................115 Facts in Common..................................................................................................................116 Design and Development.............................................................................................. 116 Unique Technology.......................................................................................................117 Bid and Contract............................................................................................................118 Notice to Proceed and Substantial Completion............................................................. 119 Owner Termination of GC............................................................................................. 120 Nature of Dispute..................................................................................................................121 Allegations by Owner........................................................................................................... 123 Schedule........................................................................................................................124 Management Issues Causing Delay............................................................................... 125 Basis of Withholding Su bstantial Completion .............................................................. 125 Response to GCs Claim............................................................................................... 126 Termination of GC........................................................................................................127 Allegations by GC.............................................................................................................. ..128 Delays Due to Design.................................................................................................... 128 Assertion of Substantial Completion............................................................................. 131 The Claim......................................................................................................................132 Specific Delay Claim Issues................................................................................................. 133 Weather..........................................................................................................................133 Surety Costs...................................................................................................................134 Labor Productivity.........................................................................................................134 Heat, Cover, Snow and Concrete Forms.......................................................................134 Electrical and Phone Charges........................................................................................134 Interest on Retainage..................................................................................................... 134 Pass-thru Claim by Steel Erector...................................................................................135 Anchor Drilling Claim...................................................................................................136 10 SITE SUBCONTRACTOR VERSUS DESI GN PROFE SSIONALS; DELAY CLAIM.... 137 Preface..................................................................................................................................137 The Parties............................................................................................................................137 Facts in Common..................................................................................................................138 Schedule and Notice to Proceed.................................................................................... 138 Delays Documented....................................................................................................... 139 Grade Elevation............................................................................................................. 140 Design Conflicts............................................................................................................ 141 GCs Acceleration of Schedule..................................................................................... 143 Nature of Dispute..................................................................................................................143 Claim History................................................................................................................ 144 Claim Basis....................................................................................................................144 Allegations by Sitesub (Plaintiff)......................................................................................... 145 Failure to Exercise Reasonable Care............................................................................. 145 Construction Sequence Disruption................................................................................ 147 Vertical Datum Grade Error.......................................................................................... 147 Ball Field Pipe Conflict.................................................................................................148

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10 Other Alleged Delays.................................................................................................... 148 Summary of Sitesub Claim............................................................................................150 Allegations by Architect and Engineer................................................................................. 150 Economic Loss Rule Defense ............................................................................................152 11 CONCLUSION..................................................................................................................... 154 APPENDIX A GCS 25 ITEM BAR CHART SCHEDULE........................................................................ 155 B CLAIM SUMMARY............................................................................................................156 C FOUR YEAR FINANCIALS OF GC.................................................................................. 162 D PAYMENT HISTORY AND LIEN RELEASES................................................................ 164 E SUBCONTRACTOR BUYOUT ANAL YSIS.................................................................... 165 F PILING DELAYS................................................................................................................ 167 G CHANGE ORDER SUMMARY......................................................................................... 169 H EXTENDED GENERAL CONDITION COSTS................................................................. 170 I CLAIMS AND OFFSET SUMMARY................................................................................ 172 J COMPLAINT...................................................................................................................... .179 K COUNTERCLAIM...............................................................................................................200 L NEWBERRY SQUARE V. SOUTHERN LANDMARK, 578 SO.2D 750 (FLA. 1ST DCA 1991)...................................................................................................................... ......213 M PAYMENT TIME ANALYSIS........................................................................................... 220 N OWNER CLAIM SUMMARY............................................................................................ 223 O LOST RENTAL INCOME...................................................................................................224 P HOSPITAL PHASING PLAN............................................................................................. 228 Q HOSPITAL ADDENDA DRAWINGS DURING BID PERIOD........................................ 232 R DRAWING SUMMARY..................................................................................................... 235 S RFI SUMMARY..................................................................................................................237 T MECHANICAL AND ELECTRICAL LATENT DEFECT COSTS .................................. 238

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11 U OWNER LIQUIDATED DAMAGE CLAIMS.................................................................... 239 V PAYMENT HISTORY......................................................................................................... 240 W SUMMARY GC SCHEDULE UPDATES.......................................................................... 241 X PUNCH LIST EXAMPLES................................................................................................. 242 Y SUBSTANTIAL CO M PLETION ANALYSIS................................................................... 246 Z DAMAGE CALCULATIONS AND FORMULA............................................................... 247 AA COMPLAINT...................................................................................................................... .251 AB ENGINEER COUNTERCLAIM AND AFFIRM ATIVE DEFENSES............................... 256 LIST OF REFERENCES.............................................................................................................262 BIOGRAPHICAL SKETCH.......................................................................................................266

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12 LIST OF TABLES Table page 1-1 Summary of Cases Studied by Dispute Subject Matter. .................................................... 18

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13 Abstract of Thesis Presen ted to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Master of Science in Building Construction CONSTRUCTION LAW CASE STUDIES By Franklin J. Hild December 2007 Chair: Raymond Issa Cochair: E. Douglas Lucas Major: Building Construction There is little room for erro r on any project in the building construc tion industry today. More so than ever, time is truly money. The construction contract defines a date by which the project shall be substantially complete and othe rwise ready for the intended use. The final product is expected to be safe, free from defects or any impediment to use. The successful completion of a construction project within the given time frame and within the expected budget requires exceptional effort on the part of the owne r, the design entity, the general contractor and any and all subcontractors. The ma rgin for error is slim and the money involved is substantial. As such all of the parties re lationship to each other is defined by the most formal of legal relationships, the contract. Despite the best expectations expresse d in the contractual relationship of the parties th ings not only go wrong on a constr uction project, things can go terribly wrong on a construction project. The mode rn construction lawyer is, therefore, involved at all aspects of the project, from contract negotia tions to the claims that occur when one or more of the many parties involved in the construction relationship are di ssatisfied or suffer damage. My research, referencing actual construction claims, presents case studies of construction litigation. The object is to offer a study of how and why a construction projects can devolve into claims and litigation, and thus avoid the same.

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14 CHAPTER 1 INTRODUCTION A construction project has a significant and unique reliance on the law. The average construction project involves numerous independ ent entities combining specific expertise and knowledge towards the completion of singular goal Added to the challenge of focusing the energy of numerous entities towards completion of one goal is the real ity that in any project time and money are finite. In fact time and money ar e defined by contract and those constraints are felt by each entity on the project. As the cons traints of the project are defined by the legal contract, the remedies for failure to perform with in those constraints are also defined by the legal contract or by the law of the ju risdiction where the project exists. The construction lawyer has changed from be ing a general practice commercial lawyer to being a specialized practitioner. The Florida Bar, in last several years, added construction law as a board certified specialization area. The unique demands of th e construction industry and the breadth and scope of claims rela ted to the construction projects requires the construction lawyer to focus and perfect a practice on this area of the la w. As such the modern construction lawyer is as likely to have Primavera scheduling software on the office computer as is the construction manager. The modern construction lawyer no longe r relies on the expert to explain the project, but focuses the expert on the areas of the project that demand attention. To err is human. Unfortunately in th e construction industry any error may have consequences that negatively impact the time and money of a project. Additionally defects to the construction of the project may appear immediat ely or manifest after time. Defects may only appear upon the personal injury to an individual. Clai ms on a project may be substantial, relative to the project. For instance a mold damage claim on a million dollar home may easily total several hundred thousand dollars. Similarly, claims on a several hundred million dollar

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15 commercial project may easily total $50,000,000. With the threat of such si gnificant liability the entities involved in project delivery are legally astute. The object of this thesis is to use actual claims and litigation to illustrate how and why projects became prone to error and subject to claims and litigation. The following studies contain examples of viable claims that involve all parties in the construction process. The entity causing a delay may be the owner or designer, just as well is it may be the general contractor. Included are claims to: 1) reco ver for general condition costs expe nded, but not contemplated in the contract; 2) remedy a wine cellar that produc es interior condensation which sponges into the wine racks; 3) claims where bot h parties have engaged in patt erns of practice that entirely destroyed a project schedule; 4) cl aims that turn on whether the ar chitect or engineer are liable for design errors and omissions or professional malpractice. The claims are presented in such a way as to provide a brief overvie w of the entire case, followed by a description of the parties and the project. The facts in common, i.e. the facts that might be stipulated to, are then presented. The nature of the dispute is the presented, describing the monetary nature and position of the claims. Finally separate sections are provided to outline the allegations by each party. As in all things that surr ound a legal case, there is not a singular correct answer. Legal cases are resolved based on factual analysis and how do the facts of the case fit into the legal framework of the jurisdiction. References to statutes and case law are provided herein whenever applicable. The case studies are written seeking to advocate the best issues and arguments for each party. In some case studies the parties focu s on separate issues and allegations, forcing the reader to determine if offsets on awards are app licable. In other case studies the parties are in dispute over singular delays, usua lly the failure to meet substa ntial completion and each party

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16 has arguments that allege the other party is the cause in fact of the delay. Technical notice requirements also play an important aspect of the claims process and these are presented. The case studies are summaries of actual claims and litigation, extrapolated from review of expert witness files and court files. As in all things law the reader is encouraged to discern the positive and negative arguments of both parties. The Literature Review is provided as a means of presenting a preliminary unders tanding of some of the most re levant case law. While the liability portion of the Literature Review is very on point and can be app lied to the case studies that follow, the portion of the Literature Review that concerns lien law is also important. The lien law portion of the Literature Review discusse s technical notice requirements that are of the type required in claims notification. Furthermore the lien law portion of the Litera ture Review discusses surety coverage and remedies. Every entity involved with the construc tion project is expected to secure performance and/or payment bonds. The project is bonded at every turn. The case studies present real situations where one party will claim on the bond as the initial remedy. This is not insurance and the surety will seek indemn ification from the bond holder. The bond holder then has a significant motivation to file a claim against the party that claimed on the bond. Because the surety will seek indemnification, the bond holder has a greater intere st to become involved in the claims process than in litigati on that involves an insurance carri er. These case studies present several situations where a party, perhaps a liab le party, claimed on a payment or performance bond and were subsequently claimed on by the holder of the bond. These case studies will offer the basis for understanding and discussion on the procedural, substantive and legal pr inciples of construction law.

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17 CHAPTER 2 METHODOLOGY An extensive literature review form s the ba sis for this research analysis. A thorough review of case law was initially completed regarding all aspects of liability of the parties, liens and bonds. Using the foundation and context of the literature review, actu al case studies were analyzed. The case studies were primarily reports from noted expert witnesses, with the majority of documents from the files reviewed being donated to the University of Florida by Art Witters. Most of the case studies used were based on volum inous expert reports, so me having billed work of approximately nine hundred hours to generate. Additionally, settlements of claims take years and a trial of claims takes even longer. Thus the information reviewed was presented at a point in time of the claims process. To supplement th e information in the voluminous expert reports, public information research was conducted in applicable court files. Some of these case studies were settled either informally or formally. In either event the primary documents that surround these cases are not in the public domain, and any su ch settlement remains confidential. Specific care was taken to not include any information or attach any exhibit that violates the potential confidentiality of any party. Wh en matters proceed to circuit civil court, then a public records exists and is accessible via the clerk of courts office for a copying fee. Some of these case studies include the actual Complaints and relate d pleadings filed in the matter. This offers insight into the evolution of the claim from a llegation to formalized pleading in a lawsuit. My research includes a dispute over a c ourthouse complex construction. The issues include design negligence, design errors and omissi ons and contractor negligence. I analyze the construction of an airport terminal with issues that include delay damages for extended general condition cost, and the construc tion of a strip mall with the primary issues being active interference by the owner and delays caused by the general contractor in a cause and effect fact

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18 pattern. The analysis includes th e construction of a hospital and i nvolves claims of design errors and omissions versus contractor negligence. Additional study concerns construction of wine cellar in a private residence and involves the ap plicability of Florida Statute Chapter 558 as concerns defective construction. Significant focus is directed in the construction of rocket launch facility and concerns issuance or withholding of subs tantial completion and delays involved with cutting edge techno logy. Finally analysis includes a subcontractors ability to sue design professionals for professional malp ractice in the absence of privity. Table 1-1. Summary of Cases St udied by Dispute Subject Matter GC Breach Owner Active Interference Design Errors Omissions Extended General Condition Costs Construction Defects Non Privity Claims Owner Breach Chapter 4 x x x Chapter 5 x x x Chapter 6 x x x Chapter 7 x x x Chapter 8 x Chapter 9 x x x Chapter 10 x

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19 CHAPTER 3 LITERATURE REVIEW Liability Issues of Owner, General Contractor and Architect/Engineer Professional Negligence Liability Absent Privity of Contract It is well settled that a cont ract binds and benefits only the parties themselves. Thompson v. Commercial Union Ins. Co. 250 So.2d 259 (Fla. 1971). The clear cut exception is if the contract at issue is entered into for the direct and substantial benefit of a third party. City of Tampa v. Thornton-Tomasetti, P.C. 646 So.2d 279, 282 (Fla. 2nd DCA 1994). The law of Florida further recognizes that professionals can be liable to non-priv ity parties if those professionals exhibit negligence which may fores eeably injure or cause economic loss to a third party. Id. @ 281. It is with this latter exception to privity that Florida contractors are most interested. Liability for professional neg ligence accrues to some, not all, third parties. Third parties that may have a claim against the alleged negl igent conduct of a contract party are usually limited to direct third party bene ficiaries, as opposed to indirect third party beneficiaries. Id. @ 282. It is not enough that professional services rendered ultimately accrue to an entity for that entity to have a claim against the parties in contract. Publix v. Cheesbro Roofing, Inc. 502 So.2d 484, 488 (Fla. 5th DCA 1987). There are several Florida cases that are coun ter to the common law rule that privity of contract must exist in order for negligent performance of a contractual duty to give rise to liability for damage to an intangible economic interest. Biakanja v. Irving 49 Cal.2d 647 (Cal. 1958). The primary construction industry case in Florida circumventing privity is A.R. Moyer, Inc. v. Graham 285 So.2d 397 (Fla. 1973).

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20 In Moyer a Contractor filed suit against the Architect for damages suffered by the Contractor as caused by the Archit ects professional negligence in performing the duties within the Architects scope of service. The Florida Supreme Court in Moyer held that the Contractor was entitled to recover costs incurred as pr oximately caused by Architect negligence. Id. @ 401402. The Moyer Court further held that a Contractor mi ght be a third party beneficiary to the contract between the Architect and Owner, depending on the supe rvisory role defined for the Architect in the Owner / Architect contract. Id. @ 402. Although no such contract was placed in evidence the record in Moyer was clear that the Architect ha d the power to stop work. Id. at 400-402. The power to stop work, therefor e, establishes supervisory conduct. The holding of Moyer is further defined by the 5th DCA in the case of Southland Construction, Inc. v. Richeson Corp. 642 So.2d 5 (Fla. 5th DCA 1994). In Southland a Contractor filed suit against an Engineering corporate entity and the designing Engineer for damages stemming from alleged negligen t design of a retain ing wall. The 5th DCA reasoned that the economic loss rule only applies to partie s in privity and should not be a limitation or diminution to established theories of tort liability: The professional malpractice of persons not in direct privity with a person injured by the professionals services is the gist of numerous lawsuits in this state as well as elsewhere. Allowing tort recovery in this context is th erefore not an extension of established tort liability. Rather, to deny to rt liability on the basis of th e economic loss doctrine would reduce already-established tort liability. Id. at 8. The 5th DCA was the court that certified Moyer 285 So.2d 397, to the Florida Supreme Court. The 5th DCA in Southland explains the Moyer decision as the Contractor having no contractual claim for Architect negligence, unles s specifically defined in the Owner / Architect contract. Id. at 8. Furthermore this absence of a 3rd party beneficiary c ontract claim by the Contractor against Architect, assured that the Contractors remedy was in tort. Id at 8.

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21 The 5th DCA in Southland held that the Engineer, not in privity with the Contractor, could be held liable in tort for damages arising from the alleged negligent design of a retaining wall. Southland at 9. In Southland therefore, the Contractor has a privity contract claim against the Engineer corporation and a tort claim against the Engineer, with whom it is not in privity. Due to the legal posture of Southland i.e. the surviving contract claim against the Engineer Corporation, the 5th DCA did not address the validity of th e lower court dismissing the tort claim against the Engineer Cor poration. However, the 5th DCA in Southland does state that damages from the negligent design of the retaining wall ex tended to other property by fact of damage to an abutting pool deck and another wall. Id. At 9. As such Southland offers a clear direction for avoidance of the economic loss doctrine and pursuit in tort. In City of Tampa v. Thonton-Tomasetti 646 So.2d 279 (Fla. 2nd DCA 1994) the General Contractor filed claims for delay damages of $20M against the City due to being provided with faulty plans and specs. Approximately $9.5M of the claim was paid. In turn the City filed suit against the Architect and the C onsultants retained by the Archite ct for provision of the faulty plans and specs. The Second DCA upheld dismissal of the tort and contra ct claims against the Consultants. The Second DCA upheld dismissa l of the Citys tort claims against the Consultants, based on City fa iling to show any damage othe r than purely economic. Id. @ 281. The Citys contract claims against the Cons ultants were based on the City being a third party beneficiary to the contract between the Archite cts and Consultants. Id. @ 282. The second DCA distinguished the facts in this matter from those in A.R. Moyer, Inc. v. Graham 285 So.2d 397 (Fla. 1973) and Southland Const. Inc. v. Richeson Corp. 642 So.2d 5 (Fla. 5th DCA 1994). The Second DCA in City of Tampa 646 So.2d 283, held that the City was only an indirect, not a direct third party beneficiary of the contract between the Archite ct and the Consultant. In so

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22 holding the Second DCA essentially found that the Consultants were but an agent for the design team entity ultimately liable for the desi gn and specifications, i.e. the Architect. E.C. Goldman, Inc, v. A.R.C. Associates, Inc 543 So.2d 1268, 1271 (Fla. 5th DCA 1989) is a predicate to City of Tampa Supra., and holds that a subcont ractor roofer has no privity and no cause of action against consultant engineer. This is despite the fact that the consultant engineer was the second such cons ultant retained after first consultant agreed with Architect and Roof Sub that roof was built to specification and Owner should issue payment. Id. at 1268-1269. An independent consultant, therefore, does not assume liability in rendering an opinion. Similar to E.C. Goldman and the companion case of City of Tampa is McElvy, et.al. v. Arlington Electric, Inc. 582 So.2d 47 (Fla. 2nd DCA 1991), in which the Electrical Subcontractor sued the Architect for negligently rendering advi ce to City that cause d Subcontractor economic distress due to Citys prolonge d refusal to substitute ligh ting manufacturer. Electrical Subcontractor did not sue Architect for faulty pl ans and specifications. Second District held, like E.C. Goldman Supra., that Architects were not cont racted with City to make material substitution decisions and as consultants the advi ce given by Architects to City towards material substitution requests was not binding upon City. McElvy 582 So.2d 50. City issued denial of substitution letters so cause of action against City. Id. at 50. In the more recent case of Moransais v. Heathman 744 So.2d 973 (Fla. 1999), the Florida Supreme Court clearly defines the liability a professional may incur. Moransais also limits the scope of the economic loss rule in the State of Fl orida, which discussion will be addressed in that titled subsection of this paper. The Moransais facts involve buyer Moransais purchasing a home from seller Heathman. Buyer contracted with an Engineer Corporation for inspection of the house, pre-sale, and relied upon that inspection fo r purchase of the home. After buyer purchased

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23 the home, defects were discovered that should have been, but were not discovered in the engineering inspection. Id. at 974-975. Buyer filed suit against the se ller, the Engineering Corporat ion and individual engineers who performed services. The trial court reluctantly dismissed the tort actions against the individual engineers. The Second District upheld the dismissal based on Second District precedent while noting conflict with the Fifth Distri ct case of Southland Const. Inc. v. Richeson Corp. 642 So.2d 5 (Fla. 5th DCA 1994). The Second District reasoned: that Moransais had no cause of action against the individual engineers and permitting such a cause of action with whom Moransais has no traditional professional/client relationship runs afoul of the economic loss ru le by allowing Moransais to pursue in tort what amounts to a breach of contract clai m and, thereby, expand his remedy for breach of contract beyond that which he agreed to. Moransais 744 So.2d 975. The Second District recognizing the conflict with the Moyer 285 So.2d 397, and its progeny Southland certified the professional liability a nd economic loss rule issues to the Florida Supreme Court. Citing statutory provisions for profe ssional regulation, Fla. Stat. .023 (1999) regarding engineers, and Fla. Stat. .07 (1999) regarding pr ofessional associations, the Florida Supreme Court held that formation of a professional association shall not relieve the individual members of their persona l professional liability. Moransais 744 So.2d at 978. Just as a lawyer in a firm and a physician in a prac tice group can be held individually liable for the malpractice suffered by a client contracting with the corporation, so too can the engineering professional be held liable. Id. at 979. The Court notes that this fixing of liability on the individual actor professional is simply the le gislative extension of the common law duty placed upon the professions. While the Contractor may not be considered a professional per stat ute, the Contractor faces the implied and express warranty issues inhe rent in providing the product to the consumer.

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24 It is the design professional who must take Moransais to heart. The sm art Contractor should interplead the Architect into any claim, especially when the Architect assumes an active, obstructionist or obstreper ous role in the completion of the project. The liability of the Architect becomes even more evident when Moransais is further analyzed in the discussion of the economic loss rule (ELR) contained herein. Owner, General Contractor and Designer Liability for Personal Injury As a general principle, an entity who hires an independent contractor is not liable for any personal injury sustained by that independent co ntractor, or that independent contractors employees, within the course a nd scope of the work. Van Ness v. Independent Construction Co. 392 So.2d 1017, 1019 (Fla. 5th DCA 1981). For liability to attach to the hiring entity, the hiring entity has to exercise active pa rticipation and control in the work of the independent contractor. Cecile Resort, Ltd. v. Hokanson 729 So.2d 446 (Fla. 5th DCA 1999). Conklin v. Cohen 287 So.2d 56 (Fla. 1973) makes clear the Owner, Architect and Engineer may all be responsible for personal inju ries sustained by a laborer. Florida workers compensation law prohibits tort recovery by an inured worker against his employer if that employer obtains workers compensation in surance. .10. Simila rly, an independent contractor has no cause of action against the hiring entity. Van Ness Supra. Conklin 287 So.2d 59-62, holds that an Owner a nd Architect are not entitled to any workers compensation immunity afforded by Chapter 440, Florida Statutes. The Owner and Architect are defined as a th ird party tortfeasor. Id. at 59-62. The Owner and Architect do not have liability simply because they exist. The pl aintiff has a distinct burde n to prove liability for both Owner and Architect. Id. at 61.

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25 Owner As to the Owner a pla intiff must demonstrate that the Owner was actively participating in the construction to the extent that the Owner dir ectly influences the manner in which the work is performed. Conklin v. Cohen 287 So.2d at 60. If the Owner is a passive non-participant then no liability may be ascribed to Owner for injuries sustained by a laborer. Id. at 60. In the matter of Cecile Resort v. Hokanson 729 So.2d 446 (Fla. 5th DCA 1999), the Owner was entitled as a matter of law to a directed verdict as the plaintiff failed to show a ny specific or identifiable acts of negligence on the part of the Owner. Cecile Resort 729 So.2d at 448. Armentos v. Baptist Hospital of Miami, Inc. 714 So.2d 518 (Fla. 3rd DCA 1998) reinforces the high threshold an injured worker mu st meet to affix liability for the injury on the Owner. Limited acts by an Owner will not cons titute the control element necessary to for a finding of liability. Id. at 521. Specifically the plaintiff Armentos made now showing that Baptist Hospital had control of the methods of work and operative details. Id. at 523. See also: St. Lucie Harvesting v. Cervantes 639 So.2d 37 (Fla. 4th DCA 1994), directed verdict for defendant grove owner who told independent contra ctor at which citrus gr ove to pick fruit and did not direct worker to drive i ndependent contractors vehicle, w ith full load, to that site, where full load caused vehicle to flip on pub lic highway and injure worker; Eiler v. Camp, Dresser & McKee 583 So.2d 1086, 1087 (Fla. 5th DCA 1991), County (Owner) not liable for workers electrocuti on as record does not suggest active Owner participation in directi ng work for project; Garcia v. Biltmore Court Villas, Inc. 534 So.2d 1173, 1176 (Fla. 3rd DCA 1989), No Owner liability for worker injury when no evid ence Owner actively participated at site or exercised control over method and manner of work or over method and manner of safety

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26 practices of independent contra ctors. No showing Owner aw are of dangerous condition and neglected remediation. Juno Industries, Inc. v. Heery Intl. 646 So.2d 818, 823 (Fla. 5th DCA 1994) offers a succinct expression of Owner liability concer ns regarding physical injuries on a job: Just because an owner has the right to inspec t work for conformance with the contract does not change the owner from a passive nonpartic ipant to an active participant in the construction with the right to supervise or control the work, nor does it destroy the independent status of the c ontractor and render the owner liable fo r the contractors negligence in performing the work by creating a dangerous condition. In Ramos v. Univision Holdings, Inc. 655 So.2d 89 (Fla. 1995), the Florida Supreme Court defined the separate identity of an Owner from a Contractor via a workers compensation claim issue. Only where the owner assumes the role of contractor and employer and, consequently, the duty to provide workers comp ensation benefits is th e owner entitled to workers compensation immunity. Id. at 90. This is distinguished from a case such as Croon v. Quayside Assoc., Ltd. 464 So.2d 178 (Fla. 1985), in which an owner discharged the GC during construction and assumed all dutie s and contractual obligations of the GC. Such an owner is entitled to workers compensation immunity because such an owner now has the liability of the statutory employer. Ramos 655 So.2d at 90. Of specific importance is the case of Martin v. Venice Hospital 603 So.2d 1377 (Fla. 2nd DCA 1992), which remained undisturbed by Ramos Supra. Martin dealt with a wrongful death suit when an MEP worker was electrocuted by an uninsulated 7,620-volt power line. Martin 603 So.2d at 1378. The project was being coordi nated by a team composed of Owner reps, Architect reps and the c onstruction manager. Id. at 1378. Evidence showed that the power line was exclusively in control of the Owner and FPL Evidence further showed that the Owner was not the contractor and was not, ther efore, the statutory employer. Id. at 1379.

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27 The Second District held that material facts exist to allow a jury determination if the Owner was involved in scheduling th e work that led to the electroc ution or if the Owner allowed the utility lines to remain despite ongoing work. Id. at 1379. What Martin establishes is that an Owner may exercise enough control and direction to be ascribed liability, but that control and direction will not meet the requirements of being a statutory employe r afforded workers compensation immunity. This is an important middle ground for the Owner and Contractor to be aware. The lesson to the Contractor is to allow the meddling Owner to act as they will at their own peril. Architect The Architect faces vary ing exposure to liabilit y for personal injuries. It is important to keep in mind that the facts whic h create greater personal injury li ability for the Architect, create greater general liability for the architect. If th e Architect merely acts as the Owners agent and engages in passive nonparticipati on inspections, then the Architect suffers no greater exposure to personal injury exposure than the Owner. The Ar chitect, however, may incur greater liability generally if the Owner and Archite ct contract vests the Architec t with independent contractor status to partake in hands on management and supervision of the construction. Geer v. Bennett 237 So.2d 311, 316-318 (Fla. 4th DCA 1970), holds that an Architect becomes liable upon assuming supervisory dutie s and obligations above and beyond mere production of plans. Specifically if the Architect contracts with the Owner and is specifically compensated by the Owner to undertake a wholly or contributory supervising role in the construction, then the Architect may be liable fo r personal injuries that occur on the site. Id. at 317. Material issues of fact are created if the Architect becomes a supe rvising entity of the construction project. Id. at 317-318. Thus an Architect w ho becomes employed to supervise

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28 construction is not entitled as a matter of law to prevail upon a motion to dismiss or summary judgments. Conklin 287 So.2d 61. Credible and tangible disputed issues of material fact allow the plaintiff to get to the jury for finding of the scope of the supervisory role and, thus, liability of the Architect. The Architects supervisory role is often a matter of fact for jury decision. Schauer v. Blair Contruction Co. 374 So.2d 1160 (Fla. 4th DCA 1979). If the Owner relies upon the Architect for supervisory functions the Architect may well be deemed either wholly or partly liable for an occurrence of negligence. Id. at 1162. An architect or e ngineer is always liable not only to those in privity, but to any third person w ho may foreseeably be injured as the result of professional negligence. Luciani v. High 372 So.2d 530 (Fla. 4th DCA 1979). An Architect accrues no liability for latent defects due to Contract or using non specified components if Architect was w ithout knowledge of such use. Shepard v. City of Palatka 399 So.2d 1044 (Fla. 5th DCA 1981). Architects liability in such a case may be dependent upon Owner Architect contract. Id. at 1045. Owner Architect cont ract that requires periodic inspections, but does not cause Arch itect to be responsible for safe ty, means, methods or for acts or omissions of contractor does not create type of supervisory role for Architect to accrue liability. Id. at 1045. Again the Architect may always face liability for a defect in plans or specifications. LeMay v. U.S.H. Properties 338 So.2d 1143 (Fla. 2nd DCA 1976). Such defect may simply be steps in a mall that are not differentiated by color, which is the cause of a slip and fall. A third party invitee injured from a non-obvi ous latent defect has a cause of action against the Architect for negligent design. Id. at 1145. In essence the third party pe rsonal injury hidden (latent) defect claim against the Architect is viable if th e design documents created the latent defect.

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29 In Moore v. PRC Engineering, Inc. 565 So.2d 817 (Fla. 4th DCA 1990) the Owner Engineer Contract placed all supervisory safety oversight on the Engineer. When personal injury occurred to an employee of Contractor the Engineer beca me a third party tortfeasor. Warranty and Construction Defect Liability fo r Owner, Contractor and Architect Patent and Latent Defects The case of Kay v. Slavin 108 So.2d 462 (Fla. 1959), continues to be good law in defining liability for latent versus patent defects. A late nt defect is that which is hidden from ordinary observation. Id. at 467. No ordinary, prudent inspection by a lay person will necessarily discover the latent defect. As such, there is no intervening fault to sever the causal relation between the contractors neglig ence and the injury or problem that the defect presents. Id. at 467. Whether a defect is latent or patent may be a matter for the jury. A defect may exist on a job site. In Hawkins v. Champion Intl Corp. 662 So.2d 1005 (Fla. 1st DCA 1995), Material fact disputes existed whether the ge neral warning Owner Champion issu ed Contractor Brown & Root encompassed a gap in the floor into which Plaint iff Subcontractor fell and was injured. If the Champions warning did not include the gap then the gap was a latent de fect. If latent and Champion had actual or constructiv e knowledge of it, then Champion is liable to Plaintiff. Id. at 1008. These are issues for the finder of fact. The test to determine if a defect is patent is the obviousness of th e defective condition of the object, i.e. the nature of the object, not where the object is placed or how the object is oriented. Kala Investments, Inc. v. Sklar 538 So.2d 909, 913 (Fla. 3rd DCA 1989). Thus in Kala the latent/patent issue when a toddler fell out a window was not whether the window was obviously so close to the floor as to violate code, but was whethe r the screening was defective. Id. at 913. No evidence existed as to Owners sp ecial knowledge of pressure loads of screens.

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30 Id. at 913. The Third District held, therefore, that issues of fact existed as to whether the low window was an obvious defect to Owner and if s o, should Owner have known if window screen was not code compliant for pressure loads. Id. at 913. Whether the nature of material used in a job is unknown to the Owner and constitutes a latent defect is usually a ques tion for the jury. U.S. Lodging of Jax, Ltd., v. H.B. Daniel Constr. Co., Inc. 617 So.2d 448 (Fla. 1st DCA 1993). In U.S. Lodging Owner accepted hotel built by Contractor, including pool built by Subcontractor. Guest slipped and fell on tile that spelled no diving. Was Owner aware of nature of the tile th at caused the fall? Based on premises liability the Owner was liable and the issue was the indemn ification by Contractor and Subcontractor. Id. at 450. First District held it was a jury question whether Owner had specific knowledge of nature of tile that caused accident. Id. at 450. If no specific knowledge then tile was a latent defect and indemnification was viable. Id. at 450. A patent defect by comparison does not create vicarious liability or subrogation liability to the Architect, Contractor or Engineer. A patent defect in a structure does not allow for recovery against the Architect, E ngineer or Contractor for a pers onal injury to a third party. Easterday v. Masiello 518 So.2d 260 (Fla. 1988). If a defect is patent, the Slavin doctrine permits recovery from the Owner of the real property who maintains the improvement. Id. at 261. The Developer and Contractor, of course, may be responsible for patent defects via express and implied warranties under Florida law. Subrogation and Indemnification for latent D efects Kala Investments 538 So.2d 909, holds the Architect, Engi neer and Contractor liable for latent defects where no privity and no vicarious liabi lity exist. This is an important case as Kala holds that a remote purchaser of a dwelling ha s a subrogation right Ar chitect, Contractors and Engineer for latent defects. Id. at 919. The Kala Court utilizes the theory of equitable

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31 subrogation to hold the Architect and Defendants liable if the de fects are latent. The policy behind the doctrine is to prevent unjust enrichment by assuring th at the person who in equity and good conscience is responsible for the debt is ultimately answerable for its discharge. Id. at 917; citing U.S. Fidelity v. Bennett 119 So.2d 394 (Fla. 1928). The more standard liability affixed to latent defects is indemnification liability to the contractor, sub-contractor and architect, by means of vicarious liability to the Owner or Developer. Biscayne Roofing C o. v. Palmetto Fairway Condo. Assoc. 418 So.2d 1109 (Fla. 3rd DCA 1982) involves a latent defect that presented itself as defective material and workmanship in a roof. The roofing contractor was held li able for constructing a defective roof after the project was completed. Latent defects may be expressed as test of time issues. Biscayne Roofing illustrates the important reality of vicarious liability for the Owner/Developer as vicarious liability may attach regardless of direct liability or culpable action. Biscayne Roofing illustrates the indemnification re medy for the Owner/Developer to the negligent subcontractor, but does not relieve the Owner/D eveloper of liability. Id. at 1110. Developers and Contractors s hould be aware that an imp lied warranty is granted to a condominium association for common areas and for first purchasers of residences or condominiums. A Developers and Contractors may be held liable for damages for breach of implied warranties in failure to construct a ccording to plans. Schmeck v. Sea Oats Condo. Assoc., Inc. 441 So.2d 1092, 1097 (Fla. 5th DCA 1983) citing Drexel Properties, Inc. V. Bay Colony Club 406 So.2d 515 (Fla. 4th DCA 1981). A Developers a nd Contractors also breach an implied warranty for failure to construct in a workmanlike or acceptable manner. Schmeck 441 So.2d 1097, citing Gable v. Silver 258 So.2d 11 (Fla. 4th DCA 1972). Fina lly, Developers

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32 and Contractors may breach an implied warranty for failure to provide a unit or building which is reasonably habitable. Schmeck 441 So.2d 1097. The Florida Supreme Court has declined to extend the implied warranty towards structures on the land that are not the dw elling. Specifically in Conklin v. Hurley 428 So.2d 654 (Fla. 1983) the Florida Supreme Court refused to extend the implied warranty to a seawall that collapsed a several years af ter being installed. In so holding the Court in Conklin 428 So.2d 659, made a point of stating that the purchaser may still pursue an action in negligence against the builders of the seawall. That negligence action will be based upon a latent defect premise. The Owner faces liability for a latent defect ex clusively in a premises liability scenario as with an invitee or a lessee involvement. The Developer or Developer Contractor owes an implied warranty to the purchaser, which all but obviates the latent defect concern. The independent General Contractor, Architect, Engineer and Sub-Cont ractor are the entities who face liability for the latent defect when it manifests. The Contractor should not deviate from plan s or specifications without express, and ideally written, consent of the Architect and Engin eer. If the Contractor unilaterally deviates the Developer will seek indemnification for any judgme nt entered against the Developer due to those unilateral changes. If the Developer instructs ch anges to plans or specif ications, the contractor should ask for those changes in writing as mean s of insulating from potential liability the Developer may accrue for failure to follow plans and thereby breaching the implied warranty. Schmeck v. Sea Oats Condo. Assoc., Inc. 441 So.2d 1092 (Fla. 5th DCA 1983). The Economic Loss Rule The Economic Loss Rule in Florida Today Judge Alten bernd of the Second District Cour t of Appeals wrote that the economic loss rule is stated with ease but applied with great difficulty. Sandarac Assn. Inc. v. W.R. Frizzell

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33 609 So.2d 1349, 1352 (Fla. 2d DCA 1992). The benchmar k case for the construction industry is Casa Clara Condominium Associati on v. Charley Toppino and Sons, Inc. 620 So.2d 1244 (Fla. 1993). It is fair to say that Casa Clara is considered the high wate r mark for the Economic Loss Rule (ELR) in Florida. It is also fair to say that Casa Clara was a 4-3 decision that would not have a similar outcome if decided by anot her Court, arguably even todays Court. The ELR is significantly limited since Casa Clara The most recent decision is Indemnity Insurance Co. of No. Amer. v. American Aviation 891 So.2d 532 (Fla. 2004), which the Court took on certification from the United States 11th Circuit. Justice Pari ente clearly writes in Indemnity Insurance that: The Economic Loss Doctrine bars a negligence action to recover solely economic damages only in circumstances where the parties are either in contractual privity or the defendant is a manufacturer or distributor of a product and no established excepti on to the application of the rule applies. Id. at 534 Indemnity Insurance holds that the ELR applies in two instances: 1) where parties are in privity and a party sues in tort for purely economic loss; or 2) there is a de fect in the product that causes damage to that product as a whole, but causes no personal injury or damage to other property. Id .at 536. Economic loss is defined as damages for inadequate value, costs of repair or replacement of defective product, consequential loss of profits or loss of benefit of a bargain. Id. at 536. This products liability loss rule applies even in the absence of privity. Id. at 541. Plaintiffs in Casa Clara of course had breach of warranty claims against the Developer/Contractor, who in turn would seek indemnification agai nst concrete supplier Toppino. This approach is neither direct nor serves the purpose of judicial efficiency. Perhaps as a sub-current the Florida Supreme Court has sc aled back the ELD bar to corollary causes of action.

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34 Prior to Indemnity Insurance the Florida Supreme Court in HTP, LTD. v. Lineas Aereas Costariccecenses, S.A. 685 So.2d 1238 (Fla. 1996) stated that torts for purely economic loss are viable, and the ELD is inapplicab le, if it is shown that such to rt claim is independent of and extraneous to the contract at issue. Id. at 1240. Fraud in the inducem ent is such an independent tort claim. Id. at 1239. It is essential that the fraudul ent inducement or misr epresentations be separable from the parties agreement. Pressman v. Wolf 732 So.2d 356, 361 (Fla. 3rd DCA, 1999). Some courts look for a temporal distan ce between the alleged fraud and the contract formation or look for facts of alleged fraud that are unique and distinct from the alleged breach. J. Square Enter. V. Regner 734 So.2d 565, 567 (Fla. 5th DCA 1999). In Moransais v. Heathman 744 So.2d 973 (Fla. 1999), the Co urt stated, as discussed under the professional liability se ction of this paper, that the ELR does not bar actions for professional negligence. Id. at 979. Regarding the ELR specifi cally, the Court states that its holdings (i.e. Casa Clara ) have appeared to expand the a pplication of the rule beyond its principled origins and have contri buted to applications of the rule by trial and appellate courts to situations well beyond our original intent. Id. at 980. Other Exceptions to the Economic Loss Rule and Remedies Moransais clearly holds that the ELR does not bar a cause of action in professional negligence despite lack of personal injury or property damage. Id. at 979. The question then becomes what causes of action in tort escape the preclusion of the ELR As stated above, fraudulent misrepresentation does s o. Fraud in general appears to be grounds for circumventing the ELR. While courts have voiced varying opinions, conversion appears to be a tort able to survive the ELR. Most Courts post-Moransais have held conversion to be a viable tort in spite of the ELR. As a matter of law some courts have held that thievery and embezzlement go

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35 beyond and are independent from a simple breach of contract. Targia v. U.S. Alliance Corp. 2003 LEXIS 21799 (S.D. Fla. 2003). In fact Targia specifically distinguished the limitations imposed by Casa Clara and held conversion to be a viab le tort. Duncan v. Kasim, Inc. 810 So.2d 968 (Fla. 5th DCA 2002) has also held that a convers ion claim is viable if such claim alleges facts that are beyond mere breach. Pursuant to an action under Fla. Stat. .035 (2005), the civil remedy for theft, there is plaintiff has the ability to secu re treble damages pursuant to Fla. Stat. .11 (2005). Snyder v. Bell 746 So.2d 1096 (Fla. 2nd DCA 1999) Treble damages are tallied by taking a judgment amount tripling it and adding the initial judgment b ack to that amount. It held that treble damages are both mandatory in proving civil thef t (conversion) and are non-punitive. AagaardJuergensen v. Lettelier 579 So.2d 404 (Fla. 5th DCA 1991). By treble damages not being punitive, trebles do not run amok of the ELD. The ELD clearly prohibits punitive damages. J. Batten Corp. v. Oakridge Inv. 85, Ltd. 546 So.2d 68 (Fla. 5th DCA 1989). Treble damages carry with it a higher burden of proof, clear and convincing rather than preponderance. The Fourth Districts expres sion of trebles in the case of Anton v. Anton 763 So.2d 404 (Fla. 4th DCA 2000) is the most apt. Any person who by clear and convincing evidence that he or she has been injured in any fashion by reason of any violation of Fl a. Stat. .02 .037, has cause for treble damages and at a minimum $200 plus attorney fe es and costs in trial and appellate courts. Summary of Liability Issues The Developer, the Contractor, the Archite ct, the Engineer and the Owner all have distinct liability concerns and mitigated shelter from a deteriorating Economic Loss Rule. While Florida law may prevent some parties from sust aining a claim against an entity, the avenues of indemnification and subrogation make even the she ltered party at risk. Th e professionals in the construction field, the Architect and Engineer, ha ve a heightened amount of exposure as the ELR

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36 clearly does not protect them. Th ese same professionals may have heightened protection against tort injury suits if and only if they ma intain a non-supervisory role on a project. Florida Lien Law Overview This focus on Florida lien law is limited to th e following areas. Specifically Fla. Stat. .05 (2006) and Fla. Stat. .06 (2006) will be analyzed to provide a context for construction liens in Florida as relates to privity a nd non-privity relationships. The technical aspects and pitfalls of Florida construction liens will be addressed with discussion of lien priority and notice of commencements per Fla. St at. .07 (2006) and Fla. Stat. .13 (2006). Lastly analysis of liens and performance bonds will be analyzed, per Fla. Stat. .23 (2006), as the Florida Supreme Court issued several recent opinions that demand attention. General Lien Discussion To begin, the impact of Fl orida construction liens cannot be overemphasized. While Florida may be a haven for debtors, notoriously transferring assets into homestead property for exemption from bankruptcy and beyond the reach of creditors, construction liens pierce this veil. Construction liens placed upon property are encu mbrances and valid liens on that property, whether homestead or not. As such the impact of Florida construction li ens is significant and requires a devil in the details approach from the lienor and lienee. Secondly it is necessary to state how liens ar e foreclosed upon. While a lien is filed per the prescriptive modes of Chapter 713, Florida Statutes, foreclosure upon that lien is done by judgment. Judgment is entered by a court, asse ssing the validity and merit of the lien claim and establishing the dollar amount of the lien due and owing, with inte rest and attorneys fees in most cases. A complaint for foreclosure on a li en is smartly accompanied by other causes of

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37 action, such as breach of contract, quantum meruit, and the like. While separate and unique actions, the basis of a lien foreclosure is clos ely linked with the elements of other actions. Finally, as a condition precedent, liens can only be filed and are only valid upon work done as a permanent improvement to property. Cutting the grass is not a permanent improvement. Although planting for landscaping purposes may be considered a permanent improvement, maintenance landscaping services do not bestow a permanent benefit upon the land, and do not entitle the labor er to a mechanics lien. Legault v. Suncoast Lawn Service 486 So.2d 72 (Fla. 4th DCA 1986). Liens with Privity and Absent Privity Florida Statute .05 (2006) governs liens when the lienor is in privity with Owner. Thompson v. Jared Kane Co, Inc. Case No. 2D03-2011 (Fla. 2nd DCA 2004). When privity exists there is also the presumption that the Own er knows of the existence of the lienor. Privity, therefore, negates the Notice to Owner filing required of those lienors (i.e. subcontractors, materialmen, et. al.) not in privity with Owner. Thompson Non-privity lienors have lien remedies via Fla. Stat. .06 (2006). Lienors not in privity must announce themselv es via a Notice to Owner. Fla. Stat. .06 (2006). This notice must be served upon the Own er (and possibly copied to Contractor if a materialman filing such notice is not in privity with Contractor) before commencing or not forty-five (45) days after commencing to furnish his or her labor, services or materials, but, in any event, before the date of the owners disbur sement of the final paym ent after the contractor has furnished the final payment affi davit. Fla. Stat. .06(2)(a) (2006). The Florida Supreme Court has expl icitly held that the forty-five (45) days within which to file a Notice to Owner does not begin to run until material or labor is supplied to the job site.

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38 Stunkel v. Gazebo Landscape 660 So.2d 623, 625 (Fla. 1995). Thus traveling with Owner to select material (or trees) does not constitute work that begins the 45 day period. Id. at 625 Express or Implied Contract And Noti ce to Owner As Requirement of Lien A contract is essential for a m echanics lien. Stunkel v. Gazebo Landscape 660 So.2d 623, 625 (Fla. 1995); citing Viking Communities Corp. v. Peeler Constr. Co. 367 So.2d 737, 739 (Fla. 4th DCA 1979). This contractual basis must be: 1) an express cont ract; 2) a contract implied in fact; or 3) a contract implied in law. An express contract is written, recorded or otherwise documented, while a contract implied in fact is exhibited cl early from the parties actions and a contract implied in law is a quasicontract based in equity. CDS v. 1711 743 So.2d 1223, 1224 (Fla. 4th DCA 1999). An express contract is most clearl y defined as it is specifically defi ned. A contract implied in fact is inferred in whole or in part from the parties conduct, not solely from their words. A contract implied in law is a quasi-contract with an oblig ation created by the law without regard to the parties expression of assent by their words or conduct. Id. at 1224; citing Commerce Partnership 8098 Ltd. Partnership v. Equity Contracting Co. 695 So.2d 383, 385 (Fla. 4th DCA 1997). The clearest expression of the implied in la w quasi-contract is the Fourth DCA in CDS v. 1711 Supra. at 1224, stating the elements of a contract implied in law as: 1) the plaintiff has conferred a benefit to the defendant; 2) the de fendant has knowledge of the benefit; 3) the defendant has accepted or retained the benefit conf erred, and 4) the circumstances are such that it would be inequitable for the defendant to retain th e benefit without paying fair value for it. CDS v. 1711 supra. at 1224. Such description of the quasi -contract implied in law contemplates the non-privity lien requirement of the Notice to Owner, defined in Fla. Stat. .06 (2006). For instance a

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39 Materialman has no express contract or contract implied in fact with Owner, as the Materialmans only connection to Owner is through third parties, i.e. Subcontractor and General Contractor. Thus the Materialmans claim agains t Owner is wholly absent privity and is based on the contract implied in law. Florida law requir es that for a lien and a contract implied in law to exist the non-privity lienor mu st announce their presence to the Owner. It is the duty of the non-privity lienor to inform th e Owner as to the existence and benefit provided by the nonprivity lienor. The Florida Supreme Court long ago held that whether in priv ity or absent privity, certain conditions must be met for a lien to exist. In brief some material benefit must be conveyed to Owner and Owner must offer some c onsent, either directly or indi rectly, for the benefit. Lee v Sas et.al. 53 So.2d 114 (Fla. 1951). In Lee v Sas the Lee family (mortgagee) sold a hog farm to the Dutchmen family (mortgagor) on favorable terms. The Dutchmen family hired foreman Branton to operate the hog farm. The Dutchmen family defaulted on the mortgage and the Lee family recovered the property. Upon default Branton claimed a lien upon th e property for repairs made, labor provided, crops supplied and hogs fatte ned. In denying Brantons claims the Florida Supreme Court stated: If the Lees are to have a lien fastened on them they should have been a party to the contract or they should have had knowledge of each tran saction in which it is attempted to bind them, brought to their attention at the appropriate time As to most of the items on which the lien is fastened, the evidence does not show that the Lees were aw are of them. A labor or materialmans lien must be grounded on express or implied contract It cant be fastened on one like you would buckle a collar on a bird dog or paste a tag on an express package that is being forwar ded to a friend. Lee v. Sas 53 So.2d 116 (emphasis added) It is clear that Brantons lien claims agai nst the Lee family do not satisfy the four (4) elements of an implied non-privity contract as defined by CDS v. 1711 743 at 1224. The requirement for a Notice to Owner per Fla. Stat. .06 (2006) thus becomes clear. The

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40 Subcontractor and Materialman not in privity mu st announce themselves to Owner and, at times, to the Contractor. Consent is implied from the notice acceptance. In sum, the Notice to Owner is long held by the Florida Supreme Court to establish privity where privity otherwise does not exist and to form the basis of a contract implied in law. In Harper Lumber & Manufacturing Co. v. Teate 125 So. 21 (Fla. 1929), this Court held that privity requires both knowledge by an ow ner that a particular subcontractor is supplying services or materials to the job site and an expre ss or implied assumption by the owner of the contractual obliga tion to pay for those services or materials. Aetna Casualty and Surety Co. v. Buck 594 So.2d 280, 281 (Fla. 1992). The Notice to Owner is a near absolute requirement as only individual laborers are exempt from this filing. Fla. Stat. 713.06(2)(a) (2006). VL Orlando v. Skilled Services Corp. 769 So.2d 526 (Fla. 5th DCA 2000). Slights of hand and technicalities do not defeat the requirement to file a Notice to Owner. Gulfside Properties Corp. v. Chapman Corp 737 So.2d 604 (Fla. 1st DCA 1999). In Gulfside a GC signed the Notice of Commencement where Own er was to sign, but all other information on the notice divulged the actual Owner of the project. A lien was defeated as the First District held that the intended lienor who did not file any Notice to Own er, with any entity, was in fact presented all necessary disclosure of the Owne rs identity despite the GC signing for Owner on the Notice to Commence. Id. at 607. Employment companies who provide labor to a job site, bu t are otherwise not subcontracted to the project, are not considered laborers and may not file a claim for lien as the actual laborer is able to do. Liens and the Final Payment Affidavit Florida Statute .06(3)(d)(1) (2006), requires the General Contractor to file a detailed affidavit, disclosing the payment status of all entities subcontracted to the GC. This final

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41 payment affidavit is a condition precedent to Owner being obligated to issue final payment to GC. The Florida Supreme Court held that the failure by GC to file the final payment application does not necessarily preclude GC from foreclosure on a lien action against Owner. Holding Electric, Inc. v. Roberts 530 So.2d 301, (Fla. 1988). The Court reasoned that delivery of the final payment affidavit is not jurisdictional, but is a prerequisite to foreclosure against Owner, alerting Owner to any deficiency in payments and providing Owner oppor tunity to remedy any such deficiency prior to foreclosure. Id. at 303. The Court further st ated that the clear purpose of Fla. Stat. .06(3)(d)(1) is to protect Owner against the risk of having to pay for the same services or materials more than once, and to allow Owner to make proper payment before the suit is filed. Id. at 303. Holding Electric allows the GC to file a Complaint, then file a missing payment affidavit and then file an amended complaint. The more recent case of Puya v. Superior Pools 902 So.2d 973, (Fla. 4th DCA 2005) makes the payment affidavit requirement of 3.06(3)(d)(1) to be absolu te even if GC is terminated from the job. Id. at 975. Puya affirms that GCs final payment affidavit must be filed even if work is stopped, contract relations break down and another entity is retained by owner to complete the job. Issuance of final payment by Owner absent C ontractors submission of the final payment affidavit does not bar otherwise valid lien clai ms. Superfos Construction v. HAJOCA Corp. 712 So.2d 1228 (Fla. 2nd DCA 1998). Florida Statute .06(2)(a) (2006) specifically states that a lien holder must file a notice to owner within 45 da ys of starting work or before the disbursement of final payment AFTER contractor furnishes the final payment affidavit. Making final payment

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42 without receiving a final payment affidavit subjects Owner to the claim of any subcontractor who files a lien within 45 days of starting wo rk or otherwise maintains a valid lien. Id. at 1229. Notice of Commencement and Liens The Notice of Commencement is held to be an indispensable record item to determine if Owner or Owners agents were served a Noti ce to Owner by a non-privit y lienor. Metal Foam Industries, Inc. v. Watson 716 So.2d 328 (Fla. 2d DCA 1998). If Owners agent is served the Notice by a non-privity lienor, that Notice is imputed to Owner and Owners property for purposes of perfecting the subsequent lien claim, i.e. Owner was on notice. Id. at 329. The Notice of Commencement is not defeated by shell game corporate identities. If Owner is also the landholder, the developer or Contractor on a job and all identities have one address, Notice to Owner is not mandatory. Privity is imputed to all such en tities if it exists with any. Aetna Casualty and Surety Company v. Buck 594 So.2d 280, 282 (Fla. 1992). We find that privity exists either when an owner knows a subcontractor is working on the job and that owner assumed the contractual obli gation for the work or when the owner and contractor share a common identity. In either situation notice is not required. Id. at 282. The Claim of Lien per Fl orida Statute .08 (2006) Entities either in privity or not in privity w ith Owner must file a claim of lien pursuant to .08, F.S. (2006), in order to claim against Ow ners property. Understanding the claim of lien process is extremely important to lien perfec tion. A claim of lien may be recorded at any time during the progress of work or thereafter but not later than ni nety (90) days after the final furnishing of the labor or services or materials by the lienor .08(5), Flor ida Statutes (2006). All claims of lien must offer a detailed descri ption: of the lienor; th e direct or indirect relationship to Owner; the descri ption and contract price of la bor and material furnished to Owner; a description of Owner and Owners proper ty; the time the last labor and material was

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43 furnished; and the amount unpaid to lienor for se rvices rendered to includ ing finance charges. Additionally the entity not in privity with Owner must state the date and method of service whereby Notice to Owner was provided. If the cl aim of lien is made by a person not in privity with GC or a subcontractor, the da te and method of service of the copy of Notice to contractor or subcontractor shall be stated. .08, Florida Statutes (2006). The trial court has discretion in remedying or overlooking errors in the Notice to Owner and Claim of Lien. .08(4)(a), Florida Statutes (2006). In Johnson v. Aqua Pool Co, Inc. 725 So.2d 458 (Fla. 2nd DCA 1999), GCs business dissolved, leaving the pool subcontractor and Owner at odds for payments not tendered to poo l subcontractor. Owner defended pool subs lien claim by alleging Notice to Owner not timely file d and contained incorrect information. The Second DCA held that because Owner was not a dversely affected because they still had funds to pay for the pool after paying al l facially valid claims that th e trial court properly allowed for the Notice to owner to stand, thus pr eserving the subcontractors lien. Id. at 460. In essence Owner doesnt otherwise experience a windfall due to technical error. Johnson v. Aqua Pool stands for equity decisions oftentim es being an inherent part of lien litigation. In this case the GC dissolution pr ejudiced both Owner and the pool subcontractor. Conceptually, the lien law seeks to assign the ri sk of loss. Ultimately where one or two innocent persons must suffer as a result of the defa ult of another, the loss shall fall on him whose act made the loss possible. Johnson v. Aqua Pool 725 So.2d 459. Appellate Court holdings indicate deference to the trial court as to the validity of the lien at issue. It is held that Florida Statute 713.05 is not an avenue for a breach of contract. Onionskin, Inc. v. DeCiccio 720 So.2d 257, 258 (Fla. 5th DCA 1998). Including damages for breach in a claim of lien does not necessarily render the entire lien fraudulent or filed in bad faith

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44 as to defeat the entire lien. Stevens v. Site Developers, Inc. 584 So.2d 1064 (Fla. 5th DCA 1991). Amount of lien claimed in excess of lien amount adjudicated does not render the lien fraudulent. Id. at 1064. But it is the trial judge that ha s discretion to determine the intent and good or bad faith of the prosecuting lienor. Onionskin 720 So.2d 258. Florida law allows concurrent lien and breach of contract claims. Fischer-McGann, Inc. v. Glick 715 So.2d 994 (Fla. 4th DCA 1998) holds that GC has some offset rights when lien claims are brought by sub-subcontractors and breach claims are brought by the subcontractor. In Fischer-McGann GC hired a subcontractor who in turn hired four (4) sub-subcontractors. GC and sub-subcontractors were not in privity. GC, short on cash, ceased making scheduled progress payments to subcontractor, who in turn ceased making payments to sub-subcontractors. The subcontractor sued the GC for breach of contract, and the sub-subcontractors filed lien claims against the GC. At remand the trial court offset the full value of the lien claims, despite the sub-subcontractors only recovering approximate ly ten percent of the full lien claims. Id. at 996. The matter was again appealed and the Fourth DCA held that GC is only entitled to an offset for the actual amount GC paid on the lien claims to the sub-subcontractors, not for the amount claimed in the lien claims. Id. at 996. This is important to note, as a subcontracting entity should pursue damages in breach of contr act against GC for damages the subcontractor may be liable for if sub-subcontractor claims breach of contract ag ainst the subcontractor. Duration of Lien Claim A construction lien may not exist for more than one year, unless a claim to enforce lien is brought within that one year peri od. Fla. Stat. .22(1) (2006). As litigation can span several years the lien holder must simply file the complaint to enforce lien within a year of filing the claim of lien. Any amendments to a claim of lie n do not toll the time to file the claim upon that

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45 lien, as the original lien claim filing date persists. Hoepner & Assoc. v. Gilman Co. 648 So.2d 854 (Fla. 5th DCA 1995). Summary of Lien Notices and Claims In sum the law places a burden on Owner to be proactive in investigating and managing the financial matters of a project. Once an en tity files a Notice to Owner announcing itself, Owner has an ongoing liability to th at entity that mere payments to the contractor will not extinguish. Keller v. Newman and Sons, Inc. 756 So.2d 120 (Fla. 3rd DCA 2000). This is why it is so important for Owner to demand the fi nal payment affidavit from the GC, obtain lien releases as condition precedent for the final or progress payments (releases in the amount of work paid to date) and for Owner to reference all lien releases and entities paid in the final payment. As means for Owner to escape from the pot ential liability of having liens placed on property, Owner can require provision of a payment bond where all lien claims will be transferred to bond claims and Owners prope rty will be safe from any encumbrance. Liens and Payment and Performance Bonds Payment Bonds Paym ent bonds for construction activities in Fl orida are governed by the lien statute, Fla. Stat. .23 (2006). The payment bond shall be in at least the amount of th e original contract price and a copy shall be attached to the Notice of Commencement. Fla. Stat .023(1)(a) (2006). The payment bond shall be issued by a su rety authorized to do business in Florida and shall be conditioned upon GC making prompt payment for labor, services, and material to all lienors under the contractors direct contract. Fla. Stat. .23(1)(a) ( 2006). Owner, GC or surety shall furnish a copy of the bond to any lienor demanding it. Fla. Stat. .23(1)(b) (2006).

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46 Either before beginning or within 45 days after beginning to furnis h labor, material or supplies, a lienor who is not in privity with GC, except a laborer, shall serve GC with notice in writing that the lienor will look to the GCs payment bond for protection on the work. Fla. Stat. .23(1)(c) (2006). If a non-privity lienor is not notified of the bonds existence due to failure of recordation on Notice of Commencement or no reference to payment bond in Notice of Commencement, that non-privity li enor shall have 45 days from date notified of bond to file a Notice. Fla. Stat. .23(1)(c) (2006). Most importantly, the lienor is required as a condition precedent to recovery under the bond, to serve written notice of nonpayment to the c ontractor and the surety not later than ninety (90) days after final furnishing of labor, services and materials by lienor. Fla. Stat. .26(1)(d) (2006). All claims against the bond must be commenced within one year from the performance of labor or completion of delivery of the materials and supplies. Fla. Stat. .23(1)(e) (2006). Note the year period is different than the time allowed to file an action on a lien, which is one year from filing of claim of lien, where such claim of lien may be filed up to 90 days from completion of labor, etc. The payment bond shall secure every lien under th e direct contract acc ruing subsequent to its execution and delivery, excep t that of the contractor. Fla. Stat., .23(2) (2006). There also exists under Florida law, a c onditional payment bond pursuant to Fla. Stat. .245, (2006). A conditional payment bond implicates the surety only to those payments made by Owner to GC and subsequently not paid by GC to those entities due and owed the payments. The conditional payment bond must have on its face, in 10-point type, the statement: THIS BOND ONLY COVERS CLAIMS OF SUBCONTRACTORS, SUBSUBCONTRACTORS, SUPPLIERS, AND LABORERS TO THE EXTENT THE

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47 CONTRACTOR HAS BEEN PAID FOR THE LABOR, SERVICES, OR MATERIALS PROVIDED BY SUCH PERSONS. THIS BOND DOES NOT PRECLUDE YOU FROM SERVING A NOTICE TO OWNER OR FI LING A CLAIM OF LIEN ON THIS PROJECT. Fla. Stat. .245(1)(c) (2006). Relevant Case Law on Payment Bonds Several recent cases have both clarified and confused the paym ent bond landscape of Florida law. On July 7, 2005, the Florida Supr eme Court issued the opinion American Home Assurance Co. v. Plaza Materials Corporation 908 So.2d 360 (Fla. 2005). In American Home the Court was dealing with a payment bond disput e pursuant to the public works construction of several sections of the Polk Parkway. Separa te sections of the Parkway were under separate prime contracts. In American Home Owner (the Department of Trans portation) made payment to GC who made payment to Subcontractor. Subcontract or never paid Materialman. Both GC and Subcontractor filed bankruptcy, leaving Materialman to claim against Owners surety, American Home. American Home 908 So.2d 362. American Home and Owner defended the Materialmans claim on the basis that the pa yment bond was a statutory bond and Materialman did not meet the statutory requirements of clai ming against a payment bond, including filing the claim within one year and failing to serve notice of intent to claim against bond. Id. at 362. Materialman argued the bond was a common law bond because American Home surety and Owner failed to include the prescribed language on the face of the bond, indicating the bond type and the relevant time frames of the bond. As such a common law bond permits claims for five years, not one. Id. at 363. Florida courts have long adopted that the manner in which to delineate between a statutory bond and a common law bond is in the coverage. A payment bond is a common law bond if it provides more expansive coverage than that provided for in statut e. Standard Heating Services,

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48 Inc. v. Guymann Constr., Inc. 459 So.2d 1103, 1005 (Fla. 2nd DCA 1984). More expansive coverage may include expanding the class of claimants. Natl Fire Ins. Co. of Hartford v. L.J. Clark Contstr. Co. 579 So.2d 743, 744-745 (Fla. 4th DCA 1991). In American Home the Court majority held that Surety was at fault for issuing a bond without the statutory prescriptive notices on the face of the bond, per Fla. Stat. .23(6) (2006). The Court also held th at the Materialman was at faul t for not complying with the claimant requirements of Fla. Stat. .23(4) (2 006). The Court held th at the failure of the notice requirements on the face of the bond re ndered the bond a common law bond subject to a five (5) year claims period. The Court poten tially allowed Materialmans claim by reasoning that: Once the claimant upon the bond makes a prima f acie showing that th e bond is facially deficient within the context of the statut e AND establishes by a preponderance of the evidence that the claimant did not have act ual notice of the provi sion, the surety is estopped from attempting to enforce those provisions. American Home v. Plaza 908 So.2d at 370. The majority of the Court in American Home creates a two-prong test for the trial court. The facial sufficiency or deficien cy of the bond is a question of la w. The question arises in the second prong of the test of whether the claimant did or did not have actual notice of the notice requirements of the bond. It is important to note that the Court was split 4-3 on American Home Justice Cantero issued a lengthy dissenting opinion joined by Jus tice Bell and Justice Wells, who also issued a more concise dissenting opinion. Th e dissent in sum states that al lowing a claimant to avoid the strict provisions of the statute based on the sure tys failure to do so rewards the claimant for ignorance. American Home v. Plaza 908 So.2d 378-379. What Justice Cantero essentially suggests is that in the abundance of caution a claimant should hire counsel and strictly comply with all aspects the statute that may govern the bond. Better safe than sorry.

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49 A case of similar facts came out of the Florid a Second District Court of Appeal on June 8, 2005, a mere month before the American Home was decided by the Florida Supreme Court. In Bridgeport, Inc. v. Tampa Roofing Co. 903 So.2d 306 (Fla. 2nd DCA 2005) Owner contracted with GC who in turn contracted with Subcontractor for roofing work. GC failed to make payment to Subcontractor, so Subcontractor sued GC for breach and claimed against GCs payment bond. Id. at 307. Surety defended in stating that bond is a statutory bond and Subcontra ctor did not comply with the notice requirements of Fla. Stat. .23(1)(d) and did not bring an action within one year of last performance of labor per Fla. Stat. .23(1)(e). Id. at 307-308. Subcontractor alleged in the complaint th at the bond at issue was a common law, not statutory bond. Subcontract or argued that the owner, the c ontractor and the surety failed to comply with various requirements contained in chapter 713. Id. at 308. Because of the noncompliance the bond was a common law bond, not statutory bond, and was subject to a 5 year claim period not 1 year. Id. at 308. It is very important to note that nowhere in Bridgeport v. Tampa Roofing does it enumerate or specify what or how Owner, GC and Surety failed to comply with the provisions of Fla. Stat. .23 (2006). In holding that the bond was statutory Subcontra ctor was time barred from filing a claim the Second District held: We conclude that even if th e subcontractor is correct that the owner, the surety and contractor did not fully adhere to the requi rements of chapter 713, the subcontractor was not excused from complying with the requi rements of .23, that it provide notice of nonpayment before filing suit and that it file suit within one year from its completion of performance, and the bond did not convert from a statutory payment bond to a common law bond Finally the record does not demons trate that the subc ontractor suffered prejudice as a result of the alleged failure by others to comply with chapter 713 in a manner that could arguably excuse its own ob ligation to comply with the requirements of

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50 section 713.23. For example the subcontractor di d not establish that it was unable to file suit on the bond within the one year limitations period because of any noncompliance by the owner, contractor or surety. The holding of American Home v. Plaza 908 So.2d 360 provides for the two-prong test to determine if the claimants bond claim is valid when the claimant does not comply with the statutory notice requirements. Th e second-prong of that test is whether the claimant had notice of the claim limitations of the bond. Unfortunately Bridgeport v. Tampa Roofing 903 So.2d 306, states that Owner, Surety and GC did not comply with the .23, but does not indicate specifics of the noncompliance. Was it the bonds failure to notice time limits or was it failure to attach the bond to the Notice of Commencement? Does the Second Districts hold ing that a claimant must show prejudice by an omission of statutory prescribed action on the part of Surety/Owner/GC before being exempt from its own statutory requirements equate to th e claimants burden of establishing no notice of bond provisions as stated in American Home v. Plaza 908 So.2d 360? Conversely, the Second Districts opinion in Brid geport v. Tampa Roofing 903 So.2d 306, is in line with Justice Cantero s dissent in American Home v. Plaza 908 So.2d 360. Justice Cantero holds the claimant to an absolute standard of complying with statutory notice requirements despite ignorance, and the Second Dist rict seems to be stating that the chapter 713 is strictly adhered to and that a bond claimant has the burden to file the notice of non-payment prior to any litigation and desp ite whether the claimant has re ceived a copy of a bond or not. Bridgeport v. Tampa Roofing 903 So.2d at 309. Construction Defects Statute of Repose Florida Statute, .11(3)(c) (2007) governs the tim e in which to file an action (lawsuit) due to a construction defect. That time is de fined as four (4) years, generally. To wit:

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51 An action founded on the design, planning, or co nstruction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of issuance of a certificate of o ccupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contract or and his or her employer, whichever date is latest; excep t that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years (emphasis added) after the date of actual possession by the owner, the date of actual possession by the owner, the date of issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer registered architect, or lic ensed contractor and his or her employer, whichever date is latest. Furthermore an action based on negligence is fo ur (4) years. Florida Statute, .11(3)(a) (2007). This will apply to a professional neglig ence claim brought by a party not in privity with another party. An example of such a claim be tween entities on the construction project is discussed in Chapter 10 of this paper. A noted exception to the statute of repos e timelines occurs with an action based professional malpractice, between parties in priv ity of contract. Florida Statute, .11(4)(a) establishes a two (2) year period to pursue such a cause of action. The action itself may be founded in contract or tort, but the parties must be in privity for th is two year limitation to apply. To wit: An action for professional malpractice, othe r than medical malpractice, whether founded on contract or tort; provided that the period of limitations sha ll run from the time the cause of action is discovered or should have been discovered with the exercise of due diligence. However, the limitation of actions herein for professional malpractice shall be limited to persons in privity with the professional. Application of these statute of limitations timelines are utilized as affirmative defenses. Wishnatzki v. Coffman Construction, Inc. 884 So.2d 282, 285 (Fla. 2nd DCA 2004). Prohibiting an action based on a statute of limitation defense, i.e. expiration of time in which to file a complaint, should only be granted in extraordinar y circumstances in which the facts pleaded in the plaintiffs complaint conclusively establish a time bar applies. Id. at 285. If a complaint

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52 alleges latent defects that were discovered with in the statute of limitations time period and those defects are alleged to cau se damage in whole or part the co mplaint should not be dismissed. Id. at 285. The statute of limitations defense to a cl aim is more appropriate at a motion for summary judgment, once evidence is established. Id. at 286. Florida Statute, In 2004 the Florida Legislature am ended the cons truction defect statut e, Florida Statute, that establishes prescriptive measures by which a claims process must adhere to or be dismissed. Several key provision s and requirement to pre-suit are: that the parties must exchange expert reports and othe r discoverable evidence, that a general contractor may inspect all buildings in a multi-family development and that destructive testing is permitted on all property subject to a claim. A claimant must provide the contractor and a ny other allegedly respons ible party with one hundred twenty (120) day written not ification of an alleged defect prior to filing a complaint. The defect must be described in reasonable detail. The contract or, upon receipt of the notice, has fifty (50) days to inspect the dwelling or any other affected unit. During the first thirty (30) days of receiving the notice of defect the contractor must notify any other entity the contractor reasonably believes is responsible for the alleged defect. Any other such notified entity may also inspect the dwelling within the same time peri od provided to the contractor for inspection. The contractor must furnish a written response to the claimant within seventy five (75) days. The contractors response should be base d on competent evidence and all testing should be done by the time the response is issued. The clai mant therefore has a duty to coordinate and facilitate any testing that the co ntractor seeks to perform, although all destructive testing is stated to be coordinated by mutual agreement. This te sting may be destructive testing with the entity seeking to test being the financ ially responsible party for the testing and remediation of the

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53 destruction. At the conclusion of the seventy five (75) day time period the contractor must furnish the claimant with a written response that e ither: contains an offer to repair the defect at no cost to claimant, contains an offer to compro mise the claim by monetary payment or contains a written statement that the contractor disputes the claim. If multiple defects are alleged by the claimant the contractors response may differ for each alleged defect.

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54 CHAPTER 4 COUNTY COURTHOUSE DISPUTE; DESIGN NEGLIGENCE VERSUS CONTRACTOR NEGLIGE NCE Preface Contractor alleged delay clai m s are commonly based on: O/ A delays in issuing change orders; O/A suspension of work orders, O/A dela ys in providing inspections/approvals, faulty plans specifications and shop dr awings (i.e. errors and omissi ons in contract documents) and O/A failure to coordinate work. The Contr actor may terminate the contract for cause accordingly. The Owners contractual remedy for Contractor not meeting Substantial Completion is the Liquidated Damages provision of the contract. The Owner may terminate the GC prior to Substantial Completion, but only fo r cause, including the GC: (1) persistently failing to supply sufficient labor or materials; (2) failing to pa y Subcontractors; (3) detrimentally disobeying laws, rules and regulations; or (4) being in substan tial breach of the C ontract Documents. This case concerns the construc tion of a courthouse complex. This case is included to demonstrate the damaging effect of having a rela tively unsophisticated owner rely exclusively on an architect that has never managed so large a project and a general c ontractor that appears overwhelmed. Project, Scope and Parties Project County Adm inistrative and Judicial complex built on the site of existi ng judicial buildings, after demolition or original complex. Scope and Sequence of Constructi on at Time Contract Executed Dem olition of existing jail; Construction of new administ ration building on site of th e old jail, and renovation of certain areas of an adjacent elections building;

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55 Removing and reconstructing the exterior skin and interior finishes of a second building adjacent to the old jail and in terconnecting these two buildin gs with the existing old courthouse. Construction of site work, including a 3 area parking lot and a central court area. The County was to engage separate contra ct for asbestos inspection, abatement and removal. The Parties Owner is a County on west coast of Florida, seeking to build a new courthouse com plex. The full scope of work is defined above. Evid ence indicates that the County Attorney and a liaison in the County Administrativ e Offices were the primary Own er contacts at all relevant times. Architect is a small firm, local to the County. This was the largest project, historically, that Architect at any time designed or administered. Architect did not employ a full-service structural design engineer. The Architect employed a structural engineer on an as-need basis. This structural engineers main job was to review work of others, i.e. review shop drawings, and to solve problems as needed. GC is not local to the County. GC is located on the east coast of Florida. GC is a small firm with maximum bonding capacity of $10M. Th is County project, when awarded, consisted of approximately 26% of this GCs outstand ing work and, potentiall y, GCs only profitable project. The GC placed a superintendent on-site, fu ll-time. The frequency that the project manager was on-site is disputed. How frequency that officers of the GC presented on-site is also disputed. Bonding Company is the surety for GCs payment and performance bonds.

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56 Facts in Common The Bid, General Condition Requirements and Value Engineering The Owner, a west coast Florida County (Count y), invited bids for a courthouse com plex. The bids were required to conform to detailed sp ecifications. As is customary in bids for public work, the lowest conforming bid is awarded the contract. GC submitted the second lowest base bid and the lowest bid with alternates. Owner decided to include alternates and, therefore, awarded bid to GC. The Owner solicited bids with a stated tim e allowance of 545 days to substantial completion. GC stated in the bid that GC could achieve substantial completion in 365 days. An AIA 101 contract was executed between the par ties on June 8, 1993 (6/8/93), and incorporates by reference AIA 201, General Conditions of the Contract. Per the GCs bid, the contract reflects substantial completion shall be achieved in 365 calenda r days from the Date of Commencement. The contract imposes liquidate d damages of $125 per day for each day final substantial completion is not obtained. Upon entering the contract the GC submitted a 25 item bar chart schedule, in accord with the general conditions requirement of keeping the Owner informed of all scheduling. (APPENDIX A) Whether this was the only sign ificant schedule submission by the GC is a matter of controversy between the parties. After the contract documents were executed the GC endeavored in a value engineering exercise. This VE resulted in the slab system for the buildings being changed from precast to cast in place, post-tension. Change Orde rs reflected this structural change. Date of Commencement and Delays The contract defined the Date of Commenc e ment as the next calendar day following issuance of the building permit and Notice to Procee d, whichever is the later date. The building

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57 permit was issued last on July 19, 1993, and Date of Commencement was established as July 20, 1993. Delays occurred immediately. The initial construction sequence was scheduled as the demolition of the old jail. Demolition permits for the old jail were delayed due to asbestos remediation requirements. It was determined by th e parties to build the parking lots first. The parking lot drawings did not reflec t accurate civil engineer data and required destruction of trees that could not be permitted for removal. The parking lots required redesign. The initial delays were so substantial th at the parties stipul ated that Date of Commencement was amended to September 20, 1993. Work on the parking lot began on 9/21/93 and demolition of the jail began on 9/28/93. Delays continued, however, with this initial work. Three (3) septic tanks, an unforeseen condition charged to the Owner, were found under the jail and caused additional delays in the jail demolition. The pa rking lots were also delayed and not finished until 11/23/93, as the proctor on the soil compaction continually failed, a means and methods condition charged to the GC. All sides admit that the GC and Architect relationship became adversarial almost immediately. For instance, in regards to the jail demolition the bid specifications did not require the GC to perform asbestos remediation. The GC, therefore, did not bid on asbestos remediation. The Architect immediately drew a line in the sand and require d the GC to supply asbestos remediation. Pursuant to negotiated change or der and begrudgingly the GC performed asbestos remediation. Further pronounced and exaggerated delays oc curred with the cast-in-place post-tension slab system, curtain wall window system, CM U construction and brick faade installation. These will be discussed in detail below.

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58 By the time the GC terminated the contract in January 1995, the project was six (6) months over the 365 day construction time frame of the contract, and only 50% complete. Nature of Dispute Termination of GC and Claim on Bond The stipulated Date of Comm encement is September 20, 1993. On January 23, 1995, the GC issued a seven (7) day Notice of Termination. GC claimed that the Owner consistently failed in the obligations and of the cont ract documents that relate to th e progress of the project. GC alleges, therefore, that Owner and its agents caus ed repeated delays on the project. On January 30, 1995 the GC ceased work with approximately 50% of the project complete. The Owner, thereafter, claimed against GCs surety (performance bond) and the second lowest bidder was employed to complete the rema ining 50% of the project. The Owner collected $214,220 on the performance bond for damages associated with GC terminating the contract. The GCs surety also paid $401,521 on payment bond cl aims to subcontractors contracted to GC. The GC alleges it reimbursed the surety most of the $615,741 bond claims. The GC, as Plaintiff, filed a claim against Owner for reimbursement of bond indemnification and alleging damages and interest due to Owner Ar chitect (O/A) induced delays. Demands for Arbitration The GC filed a De mand for Arbitration on September 3, 1997 (9/13/97) alleging that: The Owner and its agents failed to fulfill their obligations under the contract documents which caused repeated delays on this project. GC alleges that O/A imposed delays rendered it impossible for GC to complete work on this project as GC faced mounting financial losses due to the intransigency and hostility of the O/A. On March 16, 1998 (3/16/98), the GC filed an Amended Demand for Arbitration, wherein expert analysis alleges that GC suffered damages in the amount of $4,225,507 due to Owners

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59 breach of contract. GCs damage claim against Owner (APPENDIX B) include damages totaling $1.8M for extended general conditions, reimburseme nt for surety indemnification, lost profits, unpaid retainage and unfunded change orders. GC claims another $1.3M for lost bonding capacity. GC claims another $1M for prejudgm ent interest pursuant to Chapter 57, Florida Statutes. Costs, expenses and fees (legal) ar e ongoing and are not determined by Arbitration, but by the Circuit Court. Allegations by GC (Plaintiff) Design Errors, Omissions and Failure to Coordinate As Cause of Delays The GC alleges that the specifications and de sign drawings contained significant errors and omissions at all relevant times. GC alle ges that despite notice given the Architect never remedied errors and omissions in the contract documents. The GC alleges that the Architect, instead, engaged in a blame game with the GC to deflect responsibility for those errors and omissions. GC alleges Architect never provided current drawings to the field and without current, reliable drawings the build ing process was one of asking perpetual questions, rather than one of construction. GC alleges that the Owner and Architect were consistently late in responding to RFIs, Change Orders and other inquiries filed by GC. GC alleges that many responses, when issued, were non-responsive or incomplete. GC was directed to perform work not in the scope of the bid and O/A forced GC to accept inadequate moneta ry and time compensation. O/A developed an adversarial and outright belligerent attitude to GC. O/A worked in bad faith against GC. GC alleges that it informed Owner Architect of all delays in correspondence, sent via fax or U.S. Postal Service. The project was initially delayed more than sixty (60) days. Du ring this time Owner approved Change Order 1, to reflect value engine ering. When this Change Order was approved

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60 work still could not begin as no remediation of asbestos occurred as prerequisite to demolition of the jail and parking lot drawings were incomplete. GC alleges that because work was scheduled per phased sequence that disruption to the initial part of the construction caused a cascade, cumulative effect of disruption and delay to all phases of the project. GC alleges that Architect errors and omissi ons in regards to window/curtain wall design and structural tie-ins caused the most excessive delays. GC cites specific examples of delays associated with the window curt ain wall and post-tension slab as indicative of contract document errors and omissions. On October 1, 1993 GC submitted post-tension slab shop drawings, per Change Order #1 value engineering redesign. These were ap proved on October 20, 1993. Architect however did not make necessary changes to over all plans to reflect connections (emphasis added) of posttension slab as replacement to pre-cast slab. The Architect never changed the cast in place connections to accommodate the post-tension design change. On February 16, 1994, Architect provided to GC over thirty (30) revi sed MEP, Structural and Architectural drawings. On March 9, 1994 GC provided a floor by floor estimate for these changes in the sum of $109,239.90. Architect woul d only authorize $75,748 of this estimate. A Change Directive was issued by O/A for GC to comp lete this work, to debate the cost dispute at the end of the project. GC alleges that ch anging so many drawings at the mid-point to substantial completion caused excessive delay for GC and caused havoc for subcontractors. Window and Curtain Wall In regards to the window/curtain wall, the sp ecifications suggest us e of an EFCO brand system with the specifications listing a permi ssible substitution from the manufacturer CrawordTracey. GC sought approval of Crawford-Trace y and Architect approved same. Questions

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61 about structural adequacy of window anchoring began when Architect returned curtain wall shop drawings on February 11, 1994. GC alleges that Architect did not provide structural elements by which windows could be installed. Architectural drawings indicated curtain wall and windows anchored into the brick veneer. GC alleges that brick veneer was not a structur al support. When GC noted to Architect the inadequacy of the window anchors as drawn th e Architect in essence stated thats your problem. After much delay and argument, the Architect finally transmitted to the on-call structural engineer the GCs suggestion of incor porating a structural sub-buck (window anchor platform). The Architect did this only after independent revi ew of the issue. An independent review of the curtain wall system in May 1994 supported GCs contention that structural revision and incl usion of a sub-buck must occur for proper installation of the window/curtain wall system. It was not until July 27, 1994 that Architectural and Structural approval was forthcoming for curtain wall shop draw ings that included the structural sub-buck. GC alleges that more than six (6) months of delays with the curtain wall and window system originate in Architect not initially generating ade quate drawings and subsequently being resistant to remedy of this problem. In sum GC alleges that Architect failed by not initially providing or subsequently seeking a structural engineered solution to the window issue. Architect instead blamed the GC for the obvious structural error. GC alleges that Ar chitect delayed providing the necessary follow-up window and curtain wall deta ils into the Fall of 1994. Post Tension Slab In regards to the post-tensioning slab system this was a value engine ered choice that in fact saved the Owner money on the material and la bor of the slab system. GC alleges it never assumed responsibility for the structural design of the post-tension slab system. In fact the

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62 Architect, by letter at time of value engineering, stated that the post-tension system would add no great cost from the design perspective. GC alleges that when construction was to begi n on the post-tension slabs that the drawings did not accurately reflect tie-in capability as the Architect never revised the working drawings to accommodate the post-tension slabs. Essentially the drawings maintained connections for the pre-cast slab system and the walls were constructed as such. GC estimated over $68,000 of remediation work to accommodate the post-tension slabs. GC alle ges that the plac ing of in-beds for post-tension slabs is relatively inexpensive if done at the time the walls were built. GCs position is that it builds to the co ntract documents in the field, as provided by the Architect. GC alleges that it is Architects errors and omissions that caused the delay and remediation cost for the post-tension system. GC Termination of Contract GC alleges that by November 1994, Architect w as not approving any pay requests, was stonewalling GC and was actively soliciting Owner to terminate GC. Under the circumstances of a hostile Owner a nd Architect, lack of cooperation, lack of payment, and worsening project schedule, and wi th no end in sight, GC was forced to give a Notice of Termination on January 23, 1995. Given the attitudes of O/A, this was the only was GC could mitigate its losses and the losses of the County. Allegations by Owner (Defendant) GC Ethical Lapse and Reliance On Inadmissible Facts Owner alleges that the GC failed in its ethical obligation to inform O/ A of deficiencies in the contract documents until after such deficien cies caused delay. In this sense the Owner alleges the GC used this project, from the start, to set-up claims for litigation.

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63 Owner further contends that GCs Demand for Arbitration is based on facts not in evidence. Financial records and assessments referenced in the GCs Demand and relied upon as the basis of GCs damage allegations were not disclosed to the Owner, as required by rules of discovery. Field reports refere nced by the GC were not disclo sed to the Owner, per rules of discovery. As such the Owner has grounds for moti ons to dismiss or exclude this evidence. The GC cannot sandbag the Owner. GCs Financial Condition and Scheduling of Project Owners analysis reveals that the GC was hemorrhaging money on several other jobs. Financial records, generated prio r to GCs submission of any clai m, indicate that of the GCs four (4) largest projects three were losing $579,401.00, while the County project was making $136,680. (APPENDIX C) Owners expert opines that GC was relying on the County project to essentially bail out GCs other projects. Analysis of Daily Logs in dicate that while GC had a superintendent on the County project full-time, the Pr oject Manager and the executive management of the GC were rarely, if ever, on-site at the County project. This leads the Owner to allege that the County project was being massaged and bi lled while the GC focused on the other, financially troubled projects. Owner alleges that GC produced a single twenty-five (25) item bar chart schedule (APPENDIX A). Owner alleges that GC made only slight alterations for one subsequent submission to Owner. Owners expert opines the f or a contractor to schedule the largest and a most complex project into only twenty-five (25) activities is ludicrous. The GCs schedule was devoid of a critical path, dependent links, early starts/finishes, late starts/finishes or floats. The Owner alleges that the GCs schedule was not viable at inception and when the schedule adjustments occurred the GC was complete ly unable to grasp the long-term impact of

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64 those changes. Owner alleges that the GC ne ver provided Owner with revised schedules to reflect the changes and or addr ess the delays that plagued th is project from the onset. Response to Specific Delay Claims Time computation In regards to GCs delay claims Owner ma kes several cogent arguments in defense. First, Owner correctly points out that the GC, in all damage analysis, uses the initial Date of Commencement of July 20, 1993, and completely i gnores the stipulated Date of Commencement of September 20, 1993. Owner has already stipulat ed to delays of approximately 62 days. Owner argues it paid general condition costs fo r this initial delay period and as GC was apparently pre-occupied with other troubled jobs, Owner does not owe GC any further damages for this initial 62-day delay regarding Date of Commencement. Change order reservation of rights Owner further alleges that GC waived any and all rights to delay claims associated with approved change orders. GC did not include time adjustments in change orders and submitted all change orders at issue absent any RESERVAT ION OF RIGHTS. Owner contends, therefore, that GC acquiesced to any and a ll time associated with redesign or clarification of issues associated with any and all change orders. Dealings with subcontractors and buyout Owner alleges that the majority of all dela ys after 9/20/93, were caused by the financial house of cards that GC was trying to keep standing. Owner contends that GC stopped submitting, as required by the contract, partial re lease of liens with payment applications. (APPENDIX D) While this most evidently occu rred with the sixteenth payment application going forward, the subcontractors were clearly not being kept current as GCs surety paid in excess of $400,000 to settle all payment bond claims of subcontractors. Deposition testimony of

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65 GCs on-site superintendent indicates that GC was having numerous problems with numerous subcontractors due to not being curren t on payment to those subcontractors. GCs apparent financial ma lfeasance with subcontractors is further illustrated by the Owners expert analysis timeline of when GC wa s entering into subcontracts. (APPENDIX E) It appears GC did not complete full buy-out of the contract until one month prior to GC terminating the contract. Owners expert op ines that not securing all subcontracts at the inception of the project makes it impossible to crea te a valid schedule (even one that is not viable) and leaves the GC exposed to price escalations. GC never provided Owner with names of subcontractors bidding on work, despite the contract requiring that GC submit a ll potential subcontractor names to Owner for approval. Schedule and Sequence Failures Owner alleges that GCs delay claims assume that construction proceeds in a purely linear manner. Owner alleges that GC ignores that construction can utilize a sequence, with adequate lead times built into a critical path schedule. Owner conte nds that having no CPM schedule and not entering subcontr acts as soon as possible prevents this coordina ted construction sequencing. Owner alleges that GCs scheduling malfeasance was the cause of excessive delays. The CMU subcontractor started work on Decem ber 20, 1993 and left the job in mid-April 1994, either due to being run-off fo r quality issues or leaving due to non-payment by the GC. In either event the GC self performed the CM U work. CMU was complete on June 28, 1994, one hundred ninety-eight (198) days after CMU work began. Upon completion of CMU the GC did not have a brick subcontractor under contract. GC entered a brick subcontract on July 15, 1994, and brick work began on August 1, 1994. The brick work subcontract specified a three (3) month period for completion of brick work. Th e brick work in fact took six (6) months to complete.

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66 Owner alleges that if the GC had a brick s ubcontractor under contra ct, brick work could lag behind CMU work, but both jobs could be performed simultaneously. Owners expert estimates that brick work could begin on or about March 15, 1994 and take the scheduled three (3) months to complete. According to Owner, referencing the one schedule submitted by GC, CMU work and brick work was scheduled to span 12/20/93 6/15/ 94. Instead CMU was delayed and brick work was not complete until 1/27/95. This was a total period of four hundred three days (403) completely under th e control of the contractor. The Owner, while taking responsibility for some delays, attributes the bulk of delays on this job to the GCs poor contract management and not entering into sub-contracts at the inception of the job, but only hiring s ubcontractors on an as-needed basis. Relevant Clauses of the General Conditions Duties of General Contractor 3.2.1 The Contractor shall carefully study a nd compare the Contract Documents with each other and with the information provide d by the Owner pursuant to paragraph 2.2.2 (i.e. Owner furnished site surveys and legal desc riptions of property and utilities thereon) and shall at once report to the Architect erro rs, inconsistencies or omissions discovered. The Contractor shall not be liable to the Own er or Architect for damage resulting from errors, inconsistencies or omissions in the Contract Documents unless Contractor recognized such error, inconsistency or om ission and knowingly failed to report it to the Architect. If the Contractor performs any construction activity knowing it involves a recognized error, inconsistency or omission in the Contract Document s without such notice to the Architect, the Contr actor shall assume appropriate responsibility for such performance and shall bear an appropriate am ount of the attributable costs for correction. 3.10.1 The Contractor, promptly after being awarded the Contract, shall prepare and submit for the Owners and Architects inform ation a Contractors construction schedule for the Work. The schedule shall not ex ceed time limits current under the Contract Documents, shall be revised at appropriate intervals as required by the conditions of the Work and Project, shall be related to the en tire Project to the extent required by the Contract Documents, and shall provide for expeditious and practi cable execution of the Work.

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67 Claims Procedure 4.3.1 Definition of Claim : A Claim is a demand or a ssertion by one of the parties seeking, as a matter of right, ad justment or interpretation of Contract terms, payment of money, extension of time or othe r relief with respect to the terms of the Contract. The term Claim also includes other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract. Claims must be made by written notice. The responsibility to substantiate Claims shall re st with the party making the Claim. 4.3.2 Decision of Architect : Claims, including those alle ging an error or omission by the Architect shall be referred init ially to the Architect for acti on as provided in paragraph 4.4. A decision by the Architect, as provided in Subparagraph 4.4.4, shall be required as a condition precedent to arbitrati on or litigation of a Claim between the Contractor and Owner as to all such matters arising prior to the date final payment is due, regardless of (1) whether such matters relate to execution and progress of the Work or (2) the extent to which the Work has been completed. The decision by the Architect in response to a Claim shall not be a condition precedent to arbitration or litigation in the ev ent (1) the position of Architect is vacant, (2) the Ar chitect has not received evidence or has failed to render a decision within agreed time limits, (3) the Arch itect has failed to ta ke action required under Subparagraph 4.4.4 within 30 days after the claim is made, (4 ) 45 days have passed after the Claim is referred to the Architect or (5 ) the Claim relates to a mechanics lien. 4.3.3 Time Limit on Claims : Claims be either party must be made within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later. Claims must be made by written notice. An additional Claim made after the initial Claim has been implemented by Change Order will not be considered unless submitted in a timely manner. 4.4.1 The Architect will review the Claims and take one or more of the following preliminary actions within ten days of receipt of a Claim: (1) request additional supporting data from the claimant, (2) submit a schedule to the parties indicating when the Architect expects to take action, (3 ) reject the Claim in wh ole or in part, stati ng reasons for rejection, (4) recommend approval of the Claim by the othe r party or (5) suggest a compromise. The Architect may also, but is not obligated to, notify the surety, if any, of the nature and amount of the Claim. 4.4.2 If a Claim has been resolved, the Archite ct will prepare or obtain appropriate documentation. 4.4.3 If a Claim has not been resolved, the party making the Claim shall, within ten days after the Architects preliminary response, take one or more of the following actions: (1) submit additional supporting data requested by the Architect, (2) modify the initial Claim or (3) notify the Architect that the initial Claim stands. 4.4.4 If a Claim has not been resolved afte r consideration of the foregoing and of further evidence presented by the parties or requested by the Architect, the Architect will

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68 notify the parties in writing that the Architects decision will be made within seven days, which decision shall be final and binding on th e parties but subject to arbitration. Upon expiration of such time period, the Architect will render to the parties the Architects written decision relative to the Claim, incl uding any change in the Contract Sum or Contract Time or both. If there is a surety and there appears to be a possibility of a Contractors default, the Ar chitect may, but is not obligat ed to, notify the surety and request the suretys assistance in resolving the controversy. 4.5.4 When Arbitration May Be Demanded : Demand for Arbitration of any Claim may not be made until the earlier of (1) the date on which the Architect has rendered a final written decision on the Claim, (2) the tenth day after the parties have presented evidence to the Architect or have been given reasonable opp ortunity to do so, if the Architect has not rendered a final decision by that date, or (3 ) any of the five events described in Subparagraph 4.3.2. Subcontractors 5.2.1 Unless otherwise stated in the Contract Documents or the bidding requirements, the Contractor, as soon as practicable after award of the Contract, shall furnish in writing to the Owner through the Architect the names of persons or ent ities (including those who are to furnish materials or equipment fabricat ed to a special design) proposed for each principal portion of the Work. The Architect will promptly reply to the Contractor in writing stating whether or not the Owner or the Architect, after due investigation, had reasonable objection to any such proposed pe rson or entity. Failure of the Owner or Architect to reply promptly shall co nstitute notice of no reasonable objection. Time 8.2.1 Time limits stated in the Contract Documents are of the essence of the Contract. By executing the Agreement the Contractor confirms that the Contract Time is a reasonable period for performing the Work. 8.2.3 The Contractor shall proceed expeditiously with adequate forces and shall achieve Substantial Completion within the Contract Time. Payments 9.3.1.2 Applications for Payment may not in clude requests for payment of amounts the Contractor does not intend to pay to a Subcontractor or material supplier because of a dispute or other reason. 9.3.3 The Contractor warrants that title to all Work covered by the Application for Payment will pass to the Owner no later than th e time of payment. The Contractor further warrants that upon submittal of an Application for Payment all Work for which Certificates of Payment have been previously issued and payments received from the Owner shall, to the best of the Contractors knowledge, be free and clear of liens, clai ms, security interests

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69 or encumbrances in favor of the Contractor, Subcontractors, material suppliers, or other persons or entities making a claim by reas on of having provided labor, materials and equipment relating to the Work. 9.4.1 The Architect will, within seven days af ter receipt of the Cont ractors Application for Payment, either issue to the Owner a Certificate for Payment, with a copy to the Contractor, for such amount as the Architect determines is properly due, or notify the Contractor and Owner in writing of the Architect s reasons for withholding certification in whole or in part as provided in Subparagraph 9.5.1 9.5.1 Decision to Withhold Certification: The Architect may decide not to certify payment and may withhold a Certificate for Paym ent in whole or in part, to the extent reasonably necessary to protect the Owner from loss because of (1) Defective work not remedied; (2) third party claims filed of r easonable evidence indica ting probable filing of such claims; (3) failure of th e Contractor to make payments properly to Subcontractors or for labor, materials or equipment; (4) reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract sum; (5) damage to the Owner or another Contractor; (6) reasonable evidence that th e Work will not be completed within the Contract Time, and that the unpaid balance wo uld not be adequate to cover actual or liquidated damages for the anticipated delay; or (7) persistent failure to carry out the Work in accordance with the Contract Documents. Progress Payments 9.6.2 The Contractor shall promptly pay each Subcontractor upon receipt of payment from the Owner, out of the amount paid to the Cont ractor on account of such Subcontractors portion of the Work, the amount to which sa id Subcontractor is entitled, reflecting percentages actually retained from paymen ts to the Contractor on account of such Subcontractors portion of the Work. 9.6.4 Neither the Owner nor Architect shall have an obligation to pay or to see to the payment of money to a Subcontractor excep t as may otherwise be required by law. Termination By Contractor 14.1.1 The Contractor may terminate the Contract if the Work is stopped for a period of 30 days through no act or fault of the Contract or, or a Subcontractor Subsubcontractor or their agents or employees or any other pe rsons performing porti ons of the Work under contract with the Contractor, for any of the fo llowing reasons: (1) issu ance of an order of a court or other public authority; (2) an act of government, such as a declaration of national emergency, making material unavailable; (3) because the Architect has not issued a Certificate for Payment and has not notified the Contractor of th e reason for withholding the certification as provided in Subparagr aph 9.4.1, or because the Owner has not made payment on a Certificate for Payment within th e time stated in the Contract Documents; (4) if repeated suspensions, delays or interruptions by the Owner as described in Paragraph 14.3 constitute in the aggregate more than 100 percent of the total number of days

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70 scheduled for completion, or 120 days in any 365-day period, whichever is less; or (5) the Owner has failed to furnish the Contractor promptly, upon Contractors request evidence of Owners financial status. 14.1.2 If one of the above reasons exists, th e Contractor may, upon seven additional days written notice to the Owner and Architect, te rminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools and construction equipm ent and machinery, including reasonable overhead, profit and damages. 14.1.3 If the Work is stopped for a period of 60 days through no act or fault of the Contractor or Subcontractor or their agents or employees or any other persons performing portions of the Work under contract with the Contractor because the Owner has persistently failed to fulfill the Owners obl igations under the Contract Documents with respect to matters important to the progre ss of the Work, the Contractor may, upon seven additional days written notice to the Owner a nd the Architect, terminate the Contract and recover from the Owner as pr ovided in Subparagraph 14.1.2. Termination By Owner 14.2.1 The Owner may terminate the Contract if the Contractor: (1) persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; (2) fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors; (3) persistently disregards laws, ordinances, or rules regulat ions or orders of a public authority having jurisdiction; or (4) otherwise is guilty of substantial breach of a provision of the Contract Documents. 14.2.2 When any of the above reasons ex ist, the Owner, upon certification by the Architect that sufficient cause exists to justify su ch action, may without prejudice to any other rights or remedies of the Owner and afte r giving the Contractor and the Contractors surety, if any, seven days written notice, te rminate employment of the Contractor and may, subject to any prior rights of the surety: (1) take possession of the site and of all materials, equipment, tools, and construc tion equipment and machinery thereon owned by the Contractor; (2) accept assignment of subcontracts pursuant to Paragraph 5.4; (3) finish the Work by whatever reasonable me thod the Owner may deem expedient. Suspension By The Owner For Convenience 14.3.1 The Owner may, without cause, order the Contractor in writing to suspend, delay or interrupt the Work in whole or in part for su ch period of time as the Owner may determine. 14.3.2 An adjustment shall be made for incr eases in the cost of performance of the Contract, including profit on the increased cost of performance, caused by suspension, delay or interruption. No adjustment shall be made to the extent: (1 ) that performance is, was or would have been so suspended delaye d or interrupted by another cause for which

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71 the Contractor is responsible; or (2) that an equitable adjust ment is made or denied under another provision of this Contract.

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72 CHAPTER 5 CONTRACTOR VERSUS AIRPORT AUTH ORITY; EXT ENDED GENERAL CONDITION COSTS Preface The Airport Authority engaged in a signi ficant expansion project via multiple prime contracts. One Prime Contractor the GC responsible for building the terminal and hotel, claims delay damages against Owner. The alleged delay da mages are in two parts. The first aspect of the delay claim is based on alleged delays a nd disruptions caused by the Prime Contractor responsible for pile foundations. The second asp ect of the delay claim is based on excessive change orders issued by the Owner throughout the course of the project. In sum, GC seeks damages for increased General C ondition costs incurred. In sum, Owner seeks offsets for work it alleges to be faulty or to c ontain patent or latent defects. Project, Scope and Parties Project Multi-phase expansion of ex istent airport located in la rge city and major tourist destination in Florida. Project involves cons truction of new terminal and hotel adjacent to terminal. Scope and Sequence of Construction The airport expansion w as divided into more than 155 bid packages, based on numerous prime contracts for specific scopes of work. Of significance to this matter in controversy is that the pile foundation work was pursuant to a prime contract wholly independent from the prime contract for the terminal and hotel construc tion. The piling work was dependent on some demolition to occur. The Terminal and Hotel are in contiguous space, with a seamless transition. In essence the Hotel entrance and foyer is a pa rt of the Terminal. The Terminal and Hotel

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73 construction were entirely dependent on the su ccessful and timely completion of the pile foundation work. The Parties The Owner is the Airport Authority, wh ich is governed by a seven member board composed of; the mayor of the City, the Chairm an of the Board of County Commissioners, and five other members who are appointed by the Governor and subject to confirmation by the Florida Senate. The Owner alleges defect damage s in a counterclaim to delay damages claimed by the General Contractor. The Architect and Engineer are moot in th is matter. There is no prevalent claim of design errors and omissions. The General Contractor (GC) for Prime Contract Bid Packages (BPs) one hundred twenty five (BP 125), the Air Terminal, & one hundr ed fifty five (BP 155), the Hotel, is a large commercial contractor (GC). The GC is experienced in the type of general contracting services it is providing to Owner. GC is the moving pa rty (plaintiff) in the action for delay damages against owner. The Piling Contractor was responsible fo r Prime Contract Bid Package 122 (BP 122), which is the piling foundation pl acement. Prime Contract of BP 122 is wholly and mutually exclusive from Prime Contract of BP 125 and 155. The GC of BPs 125 & 155 (the air terminal and the hotel) had no contractual relati onship with Piling Contractor BP 122. Facts in Common The Contract and Time The GC entered in to a prime contract with Own er for construction of a landside terminal, BP 125, and a hotel, BP 155. The terminal was built first, with the hotel following in sequence. The Owner entered a separate prime contract wi th a piling contractor for foundation work, BP

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74 122, for both the terminal and hotel. The bid package for BP 125 contained drawings issued by Owner indicating scope and duration for piling work. The pilings were the foundation for the GCs construction of the terminal and hotel. As such the GCs bid response analyzed the piling contractors schedule of work. The GCs bid response schedu led construction in three (3) phases. The GCs bid submission relied upon th e piling contractors successful completion of the piling work as stated in the bid documents. No damage for delay clause The GC and Owner entered a contract ba sed on the GCs bid. The GCs bid was dependent on the piling contractor completing the piling work in a timely and complete manner. The General Conditions of the Owner/GC contract contained a no damage for delay provision. All construction on this job was undertaken with time being of the essence. Notice to Proceed A Notice to Proceed was issued on 1 1/19/ 88, with the 559 day substantial completion deadline of 9/1/90 for the terminal in the contract documents. The construction of the landside terminal, BP 125, was contracted to take 559 days The Hotel construction was scheduled to take approximately three hundred seventy (370) days and start immediatel y after the terminal construction. No time extensions provided No extension of tim e was ever provided on th e contract, despite the Terminal construction exceeding the contractually sti pulated substantial completion date by approximately seven hundred eighteen (718) days. GC filed timely filed claim letters a nd reserved all rights to time extensions in timely filed change orders. The part ies, in fact, stipulated to preservation of all claim rights in executed change or ders, wherein all known and existi ng claims were stipulated to exist within the four corner s of such change orders

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75 Piling Contractor and Delays The piling w ork encountered significant problems almost as soon as it started. (APPENDIX F) First the subsurface information that was provided by the Owner was incorrect. The piling system utilized was a precast and cast in sections system that was tied together as the individual sections were hammered downward. So me of the piles were driven more than one hundred (100) feet before hitting limestone. The piles were not designed for this depth. The piling contractor also experienced numerous access delays, in part due to delays with demolition of preexistent structures th at covered piling placement. The piling contractor employed a subcontract or to accomplish the actual casting of the pile sections. These pre-cast piling sections, in part, started to fail specification testing. To remedy this problem the piling contractor fired th e subcontractor and started to cast the piles on site. The piling contractors focus was apparent ly disturbed by self performing the pile casting, as some piles were found to be drifting off center of the specified locations. Another problem manifested itself with some pile heads being fractured. While the piling placement was wrought with several delays, the total impact of these delays was exponentially magnified for the GC who was building th e landside terminal and hotel on top of the pile foundation. This was because the problems with the pilings were completely random and scattershot, in no order or pattern. The GCs three (3) phased construction sequence was pockmarked with piling issues in all three (3 ) phases. All parties were aware of the piling issues and all parties recognized de lays to some degree or other. Change Orders During the construction of the Terminal th e Owner issued five hundred eleven (511) Owner Change Orders. (APPENDIX G) Of these, five hundred ten (510) were approved by the Airport Authority once the costs submitted by the GC were reviewed. Of the total approved, two

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76 hundred twenty three (223) Owner Change Orders were issued after January 23, 1991 (1/23/91). The Architect issued a Certifi cate of Substantial Completion for the Terminal on October 16, 1991, (10/16/91). All Change work was not co mpleted in the Terminal until August 20, 1992. The Hotel received Certificate of Substantial Completion on September 24, 1992 (9/24/92). Because the Terminal and Hotel are in the same space (the Hotel is at the end of the Terminal and is essence part of the Terminal) the linge ring Owner Change Order work on the Terminal was part and parcel of the actual work on the Hotel. Substantial Completion The last Owner Change Order was approved by the Airport A uthority on August 27, 1993 (8/27/93), almost one year afte r the Substantial Completion Certif icate was issued on September 24, 1992 (9/24/92), for the Hotel (BP 155). Nature of Dispute Delay Claim Overview The nature of this dispute concerns delay dam ages, in the form of extended Daily General Condition costs. (APPENDIX H) GC claims and alleges all delays are due to the Owner or agents of the Owner. On November 19, 1988 (11/ 19/88), the Owner issued the GC a Notice to Proceed (NTP) to commence building a landside air terminal (BP 125) and to immediately be followed by a Hotel connected to the terminal (BP 155). The Terminal and Hotel are in contiguous space. The Terminal was scheduled and contracted to reach substantial completion in 559 days, on 9/90/91. The Hotel was contracted to start construction immedi ately thereafter and reach substantial completion in 370 days. It must be noted that the parties were in communication and discussions and were otherwise well aware of the delays occurring on the project. The GC, at a ll relevant times alerted Owner to pending claims for the alleged delay da mages occurring. The parties agreed to keep

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77 the project moving, as required by the contract, and preserved all delay claims in writing for resolution once construction was finalized. Extended General Daily Condition Costs The GC delay claim is two-fold. First, th e GC alleges it suffered 156 days of extended Daily General Condition (DGC) costs due to dela ys directly caused by the piling disruption and delays. The GC also alleges it suffered an additional 562 days of extended Daily General Condition (DGC) costs due to an overwhelming number of Owner Change Orders (OCOs). The 156 day piling delay claim and the 562 day OCO de lay claim are mutually exclusive and not concurrent. The delay damages claimed by GC are for Daily General Condition (DGC) costs GCs original bid contemplated a de fined time period for construc tion of 559 days, 11/19/88 through 9/1/90. The GC contemplated DGCs for those 559 days and the GCs bid reflected that. GC alleges that piling delays reasonably caused the Terminal cons truction to extend 156 days to 2/4/91, or 754 days from NTP. GC argues it was not responsi ble for the piling delays and, therefore, GC claims it is owed reimbursement for 156 days of DGC costs. For the 754 day period from 11/18/88 (NTP) to 2/4/91 (expected substantial completion with the piling delays) Genera l Condition costs average $14,546 pe r day. GC then multiplies this average DGC cost by the 156 day piling de lays to obtain a total DGC delay cost of $2,269,176, directly attributable to th e piling delays. The 156 days is itself an average of the piling delays encountered on all three (3) phases of the Terminal Construction. The GC uses actual hard data to the exte nded DGC costs for the 562 day delay period, 2/4/91 through 8/20/92. This is 562 days of extended DGC costs is recorded in actual monthly totals by the GC. The total General Cond ition costs from 2/4/91 through 8/20/92, is $3,273,216.

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78 Total extended delay and disruption costs for the Terminal construction claimed by the GC for 156 day piling delays and 562 da y Owner Change Order delays are $5,542,392. Additional Claims by GC There are other corollary claims made by th e GC as well. The GC claims Terminal retainage held by the Owner in the amount of $1,223,902. The parties stipulated to segregate all crane costs from the DGC costs. GC claims extended crane costs for the alleged 156 piling disruption delay days and for the alleged 562 OC O delay days. The total extended crane costs claimed are $656,916 and $255,943 respectively. Total ex tended crane costs alleged by the GC are $912,859. All crane costs are subs umed under the Terminal claim. Other corollary claims include claims from a prime subcontractor, who also experienced significant delay damages due to the piling a nd OCO delays. In total $1,714,027 is claimed by the GC for delay damages suffered by subcontractors. There is an additional claim with a subcontractor in the amount of $54,363.00, as nego tiated and agreed to between the Owner and Subcontractor. Claim Dollar Amounts by GC and Offset Claimed by Owner All claim s for the Terminal subtotal $9,447,543. Overhead and Profit at ten percent, on the DGC costs only, equals $554,239. This is a total claim of $10,001,782. In June 1991, GC formalized all previously filed Terminal claims and claims this is the date from which interest on total claims accrues. As such the interest claim is $5,000,890. The GCs total claim for the Terminal BP 125 is $15,002,672. The GC makes a similar type claim for the Hotel, BP 155. All claims for the Hotel, including unpaid contract balan ce, delay and disruption claim, subcontractor claims, overhead and profit and interest totals $5,070,9 83. The total claim of the GC for the Terminal and Hotel is $20,073,655. (APPENDIX I)

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79 The Owner, in response, makes two offset clai ms. The first is for welding defects and the second is for construction defects alleged to cause mold intrusion in the Hotel. The Owner claims damages of $1,385,000 for the welding defect s and damages of $1,120,000 for the mold intrusion. Owner claims $411,000 of interest on combined claims. In total the Owner claims $2,916,000 for damages. Owner claims these damages as an offset against the claim of the GC. Allegations by GC Delays Due to Piling Contractor The GC delay claim is two-fold. First the GC claims delay damages for one hundred fiftysix (156) days beyond the original 559 days for construction of the Terminal. These 156 days are wholly attributable to dela ys suffered due to piling delays and disruptions. (APPENDIX J) The Notice to Proceed (NTP) for the Termin al was issued on 11/19/88, with construction contracted to reach substantial completion by 9/1/90, 559 days. This did not happen. The GC alleges that piling delay and disruptions delayed substantia l completion of the Terminal construction 156 days, from 9/1/90 to 2/4/91. The GC alleges that piling delays were so di sruptive because of the scattershot nature of the delays. The GC scheduled the terminal cons truction in a sequenced three (3) phase plan. Most importantly concrete pours were scheduled to o ccur in total in Phase I, prior to pours in the adjacent space of Phase II, prior to pours in the adjacent space of Phase III. Concrete pours in each phase were scheduled to occur in the most efficient manner to eliminate access problems. The piling disruptions were apparently random over all three phases. As a result concrete pours were dictated by lack of piling problems, ra ther than by efficient scheduling. Concrete pour may take place in an inner quadrant of Phas e I and then proceed to an outer quadrant of Phase III. The hopscotch nature of the concrete pours caused extreme inefficiency and excessive delays.

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80 The GC suffered the largest cost delay in the st eel work that preceded the concrete pours. Rebar placement was significantl y disturbed due to the hopscotch approach of the concrete pours. The reinforcing steel work bounced aroun d between Phases and quadrants in Phases. GCs expert witnesses document delays cause d by piling disruption at 156 days minimum. The 2/4/91 date, however, reflects only an anti cipated date of substantial completion for the Terminal due to piling delays and disruptions. The Architect did not issue a Certificate of Substantial Completion on the Terminal until 10 /18/91. Owner Change Order work continued on the Terminal until 8/20/92. A total of 510 Ow ner Change Orders were implemented for the Terminal and 223 occurred after 2/4/91, the anti cipated substantial completion date reflecting only piling delays. GC cites Construction Committee Minutes dated 3/5/91, that GCs cont ract was delayed at minimum ninety (90) days as a result of the piling delays. The context of the meeting minutes was pursuant to a discussion for a $200,000 change or der that related to th e delays of the piling contractor. In addition GC point s out that Owner is actively pur suing a claim against the piling contractor for all direct and indirect costs associated with all piling delays. Delays Due to Change Orders The GC claim s five hundred sixty two (562) days of delay due to 510 implemented Owner Change Orders (OCOs). GC claims these change orders delayed the Terminal for the period 2/4/91 (the anticipated Terminal extended subs tantial completion date with piling delays included), through 8/20/92, the date of actual substa ntial completion of the Hotel. GC alleges that as the Terminal and Hotel occupy contiguous space that the nature of the Owner Change Orders extended Terminal work until, approximately, substantial completion on the Hotel was achieved.

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81 The GC alleges that the staggering scope of th e Owner Change Orders is evident in that 223 OCOs were issued after 2/4/91. The tota l sum of the 510 OCOs added approximately 43% to the Terminal contract price. The GC a lleges that the sum value of the 510 implemented OCOs, 223 of which were implemented after 2/4/ 91, indicates the reasonabl eness of the delays claimed in relation to the change order work. Retainage GC alleges that Owner is holding retainag e that is due and owed on the Term inal construction. GC alleges that Owner is holdi ng this Terminal retainage pending outcome of litigation between Owner and GCs Bonding Comp any for alleged defec tive pipe welding on work. The alleged defective pipe welding work is pursuant to separate bid packages wholly unrelated to the Terminal or Hotel bid packages. GC alleges that no matt er what the outcome of that litigation GC is not a party and any indemnification by GC woul d be to the surety and not to Owner. GC references correspondence dated May 18, 1990 from Owner, wherein Owner stated that all crane time extension costs will be reimbursed at the end of the project. GC alleges this supports that Owner considered the de lays that occurred are compensable. Mold Offset Claim by Owner GC alleges that any m old intrusion in the Hote l is due solely to a design defect, not to a construction defect. Specifically GC alleges th at the interior decorator placed vinyl wall paper on the interior side of all exterior walls. GC alleges that it is well known in the hotel industry that in humid climates the placement of vinyl pa per on the interior side of exterior walls will create mold problems. GCs expert witness opines that vinyl paper on the interior side of exterior walls creates a vapor barrier on the interior of th e wall. GC cites engineering ar ticles which hold that in humid

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82 climates the vapor barrier is to be placed on th e exterior side of a wall system to prevent the transfer of vapor into the wall system. GC alleges that the interior design placement of vinyl wallpaper on the interior side of the exterior walls is the cause of mold intrusion. GC alleges that this design defect allows outside water vapor to transfer through the wall system and accumulate in the insulation of the wall cavity and in th e sheet rock finish of the interior wall. Secondly, GC alleges that the construction de fects alleged by Owners mold expert are actually design defects. GC allege s that it built the exterior wa lls of the hotel exactly to the specifications of the contract documents. GC alle ges that it is the design itself that allows for some water intrusion by letting humid air into wall cavities.. Finally, in regards to the o ffset claimed by Owner due to mold intrusion, GCs expert points out the deficiencies of Owners expert mold witness. First Owners expert mold witness is not a licensed engi neer in the State of Florid a, where this claim arises. GC alleges, therefore, that Owners mold witness is not a qualified ex pert in any venue in the State of Florida. Allegations by Owner Response to GC Claims Owner does not assert any defense, affirm ative or otherwise, to the piling delays. Owner at best seeks to mitigate the amount of time claimed by GC for the piling delays. On record Owner speaks to piling delays totaling approximately ninety (90) days. In fact Owner alleges piling delays in that Owner is pursuing reimbursement against the piling contractor and the piling contractors surety for the cost of the piling delay claims. As to the 510 implemented Owner Change Orders, Owner does not directly respond to the delay associated with these change orders othe r than to argue for a reduction in the amount of time claimed as necessary for the completion of the work.

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83 Owners Independent Claims Owners allegation s concern matters relate d to the constructi on generally, but are essentially counter-claims for items wholly inde pendent of what is claimed by the GC. In essence Owners tact seems to be to offer a mi nor defense to the claims alleged by GC, but to raise significant other claims in an effort to offset the claims of the GC. (APPENDIX K) What Owners counter-claims essentially al lege is both constructi on and design defect. Owner by letter states that it is either the GCs or design engineers defect and that those parties should conference to resolve all Owner alleged defect issues pr ior to Owner allocating such liability. The primary offset claim alleged by Owner re gards mold intrusion in the Hotel rooms. Owner alleges that construction defects are cause in fact of the mold intrusion. Owner offers an expert from the Atlanta area that renders an opinion to support the allegation that construction defects are the cause in fact of the mold intrusion. Owner alleges that the moisture intrusion into the wall cavity, the cause of the mold intrusion, is due to construction defects. Owner alleges that GC s installation of window and door systems is defective and permitted excessive mo isture into the wall system. Owner alleges that the gaps in construction joints between concrete member s and other components of the building envelope were so wide that light transferred between some of these joints. Owner alleges that GC performing the subsequent reme dial measure of caulking some of the accessible joints after the mildew problem developed is ev idence of construction de fects. Owner alleges that the demising walls (walls that separate units) were not properl y taped and sealed, resulting in fan coil plenums directly c ontacting gaps in joints in the exterior walls.

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84 CHAPTER 6 CONTRACTOR VERSUS STRIP MALL DEV ELOPER; ACTIVE INTERFERENCE AND CONT RACTOR NEGLIGENCE Preface Owner/Developer withheld retainage and th e final pay application from GC at the conclusion of this project. GC sued Owner fo r the money due pursuant to the contract. The Owner counterclaimed alleging that GC breach ed the contract and delayed substantial completion of the project and, therefore, damage d Owner. Owner alleges that any non-payment by Owner is due to Owners loss as caused by GCs breach. GC alleges that due to a pattern and practice of Owner behavior, GC wa s forced into a position of failure. This matter was presented to a jury, was appealed to the Florida First Di strict Court of Appeal and a written opinion was issued; Newberry Square v. Southen Landmark 578 So.2d 750 (Fla. 1st DCA 1991). (APPENDIX L) Project, Scope and Parties Project This project is the construction of a K-Mart and Publix strip m a ll in Gainesville, Florida. The facilities will provide for nume rous secondary tenants. This was one of three near identical projects the General Contractor was cont racted to build for the Owner/Developer. Scope and Construction This entire p roject was defined as a time is of the essence project. The Owner was essentially building core and shell space for th e anchor tenants K-Mart and Publix and for smaller secondary tenants. As such this was a straightforward sequence of construction beginning with site work, to foundations to th e core and shell. Th e K-Mart building was contracted to finish first, to allow the tenant additional time for tenant finish work enabling the entire plaza to open for busine ss at or near the same time.

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85 Parties Owner/Developer (Owner) is a business ent ity that engages in retail development throughout North Central Florida. Owner is not a consortium, but is under the direction of one principal and corporate staff. It is Owner that is identified by the GC as the cause of delays. General Contractor (GC) has a diverse portfolio of commerci al projects including apartments, retail and educational constructi on. GC had an approximate ten million dollar bonding capacity. The Architect/Engineer is of interest in this matter only insofar as GC alleges that design drawings and specifications that reflected change s to the original drawings were slow to be issued and approved. Subcontractors are relevant to the extent of those subcont ractors who filed claims for unpaid work. Facts in Common Contract Bid Package Owner and GC contracted for construction of three (3) separate K-Mart plazas th roughout Florida. As such GC was actively building some what identical core and shell strip malls for Owner in Pasco, Hardee and Alachua Counties. The Alachua County project is the subject of this case study, as the delays on this project evolved into laws uit and eventual appellate court written decision, i.e. case law. Each contract between the Owner and GC was awarded per a traditional bid system. GC was awarded the Alachua County project ba sed on a bid of $4,277,000.00. Discovery in the course of litigation indicate d that the GC estimated the job at $4,214,552.00, inclusive of all general conditions and subcontractor costs. Th is indicates that the GC was allowing only $63,000, or 1.5% of the contract price, for comb ined home office overhead and profit. There

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86 was discrepancy between the partie s whether or not the Publix pad was in fact part of the bid package. The GC did not include the Publix pad in the bid. The contract between the parties contained a sp ecial provision, a rider, indicating that time was of the essence on this project. Both parties initialed this provision in addition to signing the contract. Notice to Proceed, Change Orders and Substantial Completion A Notice to Proceed was issued on th e Alachua C ounty project on March 15, 1985 (3/15/85). The contract sti pulated substantial completion fo r the K-Mart on January 1, 1986 (1/1/86) and for the other stores on February 1, 1986 (2/1/86). There were ninety-seven (97) change orders issued on the pr oject for a total addition of $43,760.20 (or 1.06% of net value) to the contract pri ce. Accordingly the change orders adjusted included requests for time which were granted. The adjusted substantial completion date for the K-Mart was to February 9, 1986 (2/9/86). The adjusted substantia l completion date for the retail stores was to April 6, 1986 (4/6/86). The ad justed substantial completion dates were not achieved. Substantial Completion was issued fo r the K-Mart on Septem ber 1, 1986 (9/1/86) and at varying times for the other retail stores in the strip mall from November 1986 to April 1987. The other two contracts between the parties for similar retail constructi on in Pasco and Hardee Counties were finished at substantial completion. All structural drawings for the K-Mart were finalized to include all changes in June 1985. All structural changes to the dr awings were minor. The final drawings reflecting changes were issued to and received by GC no later than July 15, 1985, as indicated by GCs date stamp. GC did not begin vertical co nstruction on the K-Mart until mid-November 1985.

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87 Payment Issues Paym ent issues are central to this dispute. Th e contract stipulated th at the pay application end of period was the twenty fifth (25th0 of each month and all payments would be issued within fifteen (15) days of the 25th of the month. The contract did not stipulate that a late submittal by GC allowed or required the Owner to withhold pa yment until fifteen days after the 25th of the next month, i.e. the next payment application deadline. The contract simply stated that Owner was to issue payment fifteen days after receipt of a payment applicati on and a pay application period was not due and owing until the period ende d on the twenty-fifth (25th) of the month. GC submitted almost all pay requests late. The Owner was late issuing payment on all pay requests. After the thirteenth (13th) Pay Application a co-payee system was instituted due to subcontractors not receiving full payment pursuan t to periodic payments issued by Owner. As such Owner became an oversight entity to ensure that payments issued were received by the Subcontractors. (APPENDIX M) There is no indication in the re cord that Owner requested GC to obtain partial release of liens from the subcontractors, as a condition pr ecedent of issuance of the subsequent months periodic payment. In apparent protest to GC missing the ex tended substantial comp letion dates, Owner withheld payment on GCs final pay application. Owner also w ithheld payment on all retainage held. Owner did not file a claim against the GC. GC filed a lawsuit against Owner to obtain the monies held by Owner. In response Owner filed affirmative defenses an d cross-claimed GC for damages due to GCs delay in reaching substantial completion.

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88 Nature of Dispute GCs Claims The nature o f this dispute is two-fold. First the GC claims that the Owner is in breach of contract for not paying the fina l pay application and for holding all retainage due and owed on this project. The total amount claimed by GC fo r the unpaid contract ba lance and retainage is $448,661.83. GC also had claims for previous outstanding balance claims from subcontractors, but GC did not plead these claims within the four corners of the Complaint (the lawsuit). GC never amended the Complaint to include those subcontract or claims. GC did present these claims as damages to be considered by the jury. These dama ges were awarded. The First District reversed this award for subcontractor balances as these damages were not spec ifically pled in the Complaint or in an Amended Complaint. A defe ndant must be given th e procedural opportunity to put a claim through discovery. Owners Counterclaims Owner counterclaim s against GC for damages th at offset and exceed those claimed by the GC. The Owner claims $578,962.70 in lost rental in come GCs failure to achieve substantial completion. Owner claims $146,349.82 for costs of completion, correction and warranty work. Owner claims interest loss of $49,520.89, due to Own er capital expenditures in remedy of GCs late or defective work. Owner lastly claims costs of $70,000.00 fr om corrective and finish work on a parking lot abandoned by GC. In sum Own er claims gross damages of $844,833.41. When this amount is reduced and offset by the unpaid contract balance and GC retainage held by Owner and claimed by the GC, there is a net claim by Owner for $396,171.58. (APPENDIX N)

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89 Conditions Relevant to Both Parties It is im portant to keep in mind while readi ng the below allegations of the parties that Owner unilaterally withheld payment from GC for amounts due and owed for the unpaid contract balance (final pay applic ation) and for retainage. Owner, in its counterclaims, is asserting justification for withholding of those monies from the GC, due to GC missing substantial completion by six months at minimum. Owner is essentially saying that GC was remiss and, therefore, does not deserve to be paid. GC, in response, is using the best defense to this allegation, that the Owners actions and interf erence is the root cause of the delays. The crux of the lawsuit, therefore, becomes a question of whether GCs delay was due to negligence by the GC or due to interference by the Owner. Each si de is pointing fingers at the other. In framing the lawsuit in such a manner the jury is forced to determine two essential facts. How clean are the hands of each party? Can the jury find a single but for cause that triggered the delays and, therefore, assign liability to one party? Allegations by GC (Plaintiff / Cross Defendant) Overview The allegations of the GC are sim ple. The Owner is in breach of the contract by failing to issue payments to GC. The Owner failed to pay the GC amounts due and owed for the remaining, unpaid contract balance and for all reta inage. The GC alleges that Owner threatened to crush the GC for missing s ubstantial completion. The GC a lleges that of the three (3) projects it was contracted with Owner, only the Alachua County project was delayed. GC alleges that the Owners active interference on all three (3) projects were the cause of the Alachua County proj ect being delayed.

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90 As to all of Owners allegations (discussed he rein), the GC has a singular response; that it was Owner interference on all three (3) projects that caused the GC to experience delays and miss substantial completion on the Alachua County project. Active Interference by Owner GC alleges Owner activ ely interfered with the project via habitual failure to issue periodic payments on a timely basis. The parties agreed by contract that the Own er would issue payment within fifteen (15) days of the end of the pay application period defined as the twenty-fifth (25th) of the current month. The GCs stipulates that a pay application for a current month is not timely until, at least, the twenty-fifth (25th) of that month. A July pay application can be submitted prior to, but is not due unt il at least July 25th. The Owner has fifteen days to issue payment once the pay application is due and owed. GC argues that a pay application for a month is timely if submitted on the twenty-fifth (25th) of the current month or at any time after that GC argues that if it files a pay application on the twenty-seventh (27th) of the current month or the second (2nd) of the next month that Owner must pay within fifteen days of that submission. In essence, GC argues that a pay application can only be early (i.e. before the 25th of the month claimed on the pa y application), but cannot be late. GC alleges that whether GC submitted pay a pplications on the twenty-fifth of the month or at some point after that, the Owner never issued payment within th e contractually stipulated fifteen (15) days after Owners receipt of the pay a pplication. GC alleges that this caused a delay cascade effect when this alleged Owner intransi gence is compounded over all three (3) projects. GC alleges the primary effect of Owners chroni c late payments was disr uption of subcontractor performance.

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91 GC alleges that the Owner was always five (5 ) to forty (40) days late on issuing payment in response to pay application submitted by the GC Of significance is that this pattern started from the initial payment period and the Owners de lays were often more severe at the beginning of project. GC alleges that subcontractors, th erefore, were always placed in the position of playing catch-up. GC alleges that this de-motiv ated the subcontractors who immediately began to focus on other jobs that maintained current, prompt payments for work completed. GC alleges that GC submitted payment applications on the twenty-fifth (25th) of the month for the initial four (4) months of this Alachua County project and the Owner responded by tendering payment consistently later and later each of those initial four (4 ) months. Payment for GCs month four (4) payment application was te ndered by Owner approximately forty days late. It must be noted that Owner is late upon expiration of the fifteen (15) day payment window, as defined by contract. If Owner pays forty (40) days la te, this equates to fifty-five days since GC submitted the payment application. Thus at the beginning of this Alachua County project GC alleges it was delaye d in paying subcontractors by al most sixty (60) days due to Owners delays payments. Breach by Owner GC alleges, therefore, th at Owner immediatel y breached the contract. GC further argues that while it attempted to mitigate Owners breac h that the delays to subcontractor work caused by Owners late payments were insurmountable. Thus any alleged brea ch by GC was only due to Owners active interference in the project. This interference is an act of omission, Owners breach of never issuing one timely periodic paymen t. In the alternativ e GC argues that once Owner was in breach of the contract that the GC could not breach. GC alleges that the co-payee arrangeme nt that occurred at the time of the 13th pay application was an intentional effort by GC to get Owner involved in the process of paying

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92 subcontractors. GC alleges this allowed the s ubcontractors to be fully informed as to the payment practices of the Owner in an attempt to hold harmless the GC for late payments to subcontractors for work performed. As regards the Publix pad site work and f oundation placement, GC testified under oath in deposition that the bid package a nd contract drawings did not include the Publix pad in the scope of work. GC further alleges that excessive delay occurr ed with approval of all change orders. GC alleges that Owner, per Owners inclusion of a time of the essence clause in the contract, failed in the obligation to achieve efficient processing of the change order requests. GC alleges that due to the time of the essence na ture of the contract, that cha nge order delays caused a cascade delay effect on the cons truction as a whole. Allegations by Owner Overview Owner, with the support of expert opinion, offers detailed analysis of alleg ed breaches of contract by GC and resultant delays to the project Owner is able to demonstrate numerous worst practices employed by GC. The total critique by Owner points to an unsophisticated GC that entered the job on its heels and spiraled downward from that point. Owner alleges that a full account of GCs malf easance is impossible to ascertain due to the GC failing to produce daily job logs and rela ted project documentation. GC, pursuant to litigation discovery requests, did not produce daily logs, mee ting minutes or subcontractor payment logs. Daily logs in particular are a known insulation mechanism to liability and standard operating procedure demands they be kept in triplicate.

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93 Estimate and Bid Deficiencies Owner alleg es significant deficiencies with GC s estimate and bid. The Owner alleges that GC made two initial estimate blunders. GCs bid was $4,277,000. GCs estimate for all direct costs was $4,214,552. This allowed only $63,000, or a combined 1.5% for home office overhead and total profit. Owners alleges that this was not feasible and GC was setting itself up to fail. Owner alleges industry standard is for 7% overhead and 3% profit. Owner further alleges that GC has no credible evidence that th at the Publix pad site work and foundation was excluded from the bidding require ments. The Architectural drawings clearly show the Publix pad and as such all site work and foundation placement were within the defined scope of the contract documents issued for invitation for bid. Own ers expert opines that the estimate inclusive of the Publix pad, 7% overh ead and 3% profit renders a feasible bid of $4,771,559. Owner alleges, therefore, that GC submitte d a bid that placed GC in an approximate $500,000 red hole at the point the co ntract was awarded to GC. Change Orders, Staffing and Scheduling Owner alleges any change order delays were du e to the repeated practice of the GC submitting inflated change order requests, to ostensibly recoup the monies GC lost in submitting a short bid based on an incomplete estimate. Owner alleges that all change orders were subject to an unreasonable amount of haggling over pric e. Owners expert witness, furthermore, provides analysis that the subjec t matter of the change orders wa s structural in nature and was easily resolved at the time of the final structural drawings being received by GC in mid-July. No vertical construction be gan until Mid-November. Owner alleges, from the minimal records produced by GC and from other evidentiary sources, that GC did not fully staff the proj ect until vertical cons truction began in midNovember. Owner alleges that staffing shortage s were due to GC pulling people off one project

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94 when it reached a level of completion and putting that staff on another pr oject that was behind schedule. Owner alleges that such staffing plans cannot meet a schedule. Regarding schedules, Owner alleges that GC never produced a total schedule. GC produced a schedule after all struct ural drawing changes were made and delivered to GC in midJuly. GC missed all deadlin es on the schedule it produced. Periodic Payments Owner alleg es that the GC mismanaged all periodic payments issued. First Owner alleges that only two of the twenty-one total pay request s were on submitted on time. Owner is silent as to Owners timeliness of issuing payments in response to GCs pay applications. Owner simply alleges that GC mismanaged peri odic payments that GC received. Owner alleges that by mid-1986 suppliers and subcontractors were so derelict in their contractual obligations and were ca using so much delay to the project that a co-payee system had to be established, wherein the Owner had overs ight and direct payment participation to subcontractors and suppliers. Owner alleges the problems started because the GC engaged in a line item discount of the Schedule of Values it presented to the Owner for issuance of payment. In other words, Owner alleges that GC was crediting the subcontractors with less work completed than GC billed to Owner. Owner alleges in some instances GC was providing the subcontractors with greatly reduced payments or non-payments. Lost Lease Income Claim Owner alleg es that it is seeking lost revenue only in the form of lost lease income. (APPENDIX O) Owner further allege s that it is only seeking lost lease income for leases that were secured and in place by the time the exte nded substantial completion was to occur, i.e. substantial completion dates that take into account the change order delays. Owner alleges that it is not claiming any potential lease income via sp eculation or projection of a percentage of the

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95 vacant space that would be under lease if substan tial completion was met. Only hard leases in hand at the time when extended substantial comple tion was to occur are being used for lost lease revenues.

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96 CHAPTER 7 COMMERCIAL GC VERSUS HOSPITAL; DE SIGN ERRORS AND OMISSIONS Preface The subsidiary of a large, na tiona l commercial construction firm contracted with a hospital for construction to include renovatio ns and additions. This case study is excessively biased towards the allegations and position of the general contractor, as the reader will appreciate. This is due to the near overwhelming evidence to indica te that the general cont ractor was subject to delay caused by the design team. The owners de fense of this claim is limited, reduced to general allegations of the gene ral contractor negligence. This case study is included to demonstrate the evolution of pr oject design since 1993. This cas e study demonstrates why it is in the owners best interest for their genera l contractor to participate in the design and development (D&D) phase of the project. Project, Scope and Parties Project This project included both substantial renovati ons to an existing three floor hospital, and also som e expansion construction to all three floors of the existing hospital. This is a small to medium sized hospital overall. Scope and Sequence Construction renovation and additions were planned for all three (3 ) floors of a local hospital. (APPENDIX P). Owner employed one Ge neral Contractor (GC) and requested an aggressive schedule be employed to reach s ubstantial completion. The additions occurred vertically on the east side of the building. The square foot scope of new construction and additions increased with each floor above ground level. GC attempted to employ a phased schedule of construction that would accommodate Owner and cause the least amount of off-line

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97 time possible. Owner had very aggressive expe ctations for the schedul e and time requirements of the design development and c onstruction phases of the project. The Parties Owner is a regional hospital in Greensbor o, North Carolina. Owner engaged in a traditional bid-build plan for the renovations and additions to the hospital. Owner did not employ an owners representative. Owner re lied exclusively upon the Architect for the administration of the contract. Owner pushed for an aggressive design development phase of the contract. Architect is a regional design firm with in-house engineering serv ices. As such, all design documents were created and vetted through a single source, i.e. Architect. GC is the local subsidiary of a national commercial construction contractor. GC submitted a lump sum bid, the lowest, and was awarded the contract. GC is experienced in the type of general contracting servic es provided to Owner. GC is th e moving party (plaintiff) in the action for delay damages against owner. Subcontractors do not play a significant role in the claims between the parties. Facts In Common Overview The GC responded to an invita tion to bid on a lum p sum cont ract for hospital renovations and additions. The original bid invitation was issued on Se ptember 2, 1993, and included two hundred fifty five (255) drawi ngs. Bid opening was scheduled for October 12, 1993. Notice to Proceed (NTP) was issued on November 12, 1993. The contract called for substantial completion in less than two (2) years. Substant ial completion was not met. In fact, due to project delays that Owner attri buted to GC, GC was terminated from the job in April 1996 (six months after the initial substantial completion date ). A completion contractor was hired to finish

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98 the balance of outstanding work. The completi on contractor began to experience problems by November 1996. Design Documents During the approxim ate six (6) week time fram e from bid invitation to bid opening, six (6) separate addenda were issued. Addenda were issued on September seventeenth, twenty-third, and twenty-ninth (October 17th, 23rd and 29th) and on October fifth, seventh, and eleventh (October 5th, 7th and 11th). Emphasis is placed on addenda be ing issued within twenty-four (24) hours of bid opening on 10/12/93. (APPENDIX Q) The addenda consisted of fiftynine (59) contract drawing re issues, two hundred sixty eight (268) bulletin drawings issued, two hundred one (201) contract drawi ng revisions via text narrative issued in the addenda and three hundred and three (303) pages of specification changes. The specification changes were eith er new issues or re ference drawings. Change Directives The project had a total of one-hundred twenty-s even (127) C onstruction Change Directives (CCDs) (i.e. directives by Owner/Architect to GC to perform work with costs and times associated with the work to be determined by stipulation or claim at the conclusion of the project). These CCDs can be summarized with a before and after da te. On January 12, 1995, Owner Change Order number five (O.C.O. #5) was issued, an ag reed upon change. Prior to 1/12/95, thirty nine (39) CCDs were issued. After 1/12/95, eighty eight (88) CCDs were issued. Eighty eight CCDs after the point wh en, arguably, 60% 70% of the project should be completed is a good indication of the type of dela ys and problems in the relationship between the Owner/Architect and the GC.

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99 Nature of Dispute Both parties make claims in this disput e. GC claims for extended General Condition costs, acceleration costs, and fo r lost profits due to termination and forced non-completion of the contract. The GC alleges that Owner was in bre ach of the contract by issuing incomplete design documents at the time of bid invita tion. GC further alleges that the Owner was in breach of the contract by issuing design documents plagued with errors and omissions. GC seeks to recover the costs of the monies it paid to the surety when the Owner called upon the GCs performance bond to complete the project. Owner pursued action against GCs suret y, i.e. GCs performance bond, for costs associated with completion of the work and costs associated with brining a completion contractor to the job. Owner defends agai nst GCs claims for costs and damages, including recoup of the monies GC paid to indemnify the surety, by alleging that GC was the sole cause of delays on the project due to poor management, coordination, scheduling and untimely buy outs, all of which were the cause in fact of the project being delayed. Allegations by GC (Plaintiff/Cross Defendant) Overview of Delay Allegations GCs alleges delay dam ages as the result of si gnificant errors and om issions of all design documents. GC alleges that the design of the project was not complete at the time bids were solicited, nor at the time NTP was issued. GC furt her alleges that the Architect, as sole contract administrator and owners representative, comple tely failed in its res ponsibilities as contract arbiter. Architects design errors and omissions give rise to the GC alleging to what amounts to professional negligence. The GC points to multiple instances and specific examples of the design team being the cause in fact of the delays that the project suffered. The GCs st ance is that any and all delays

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100 are solely due to not being provided plans and specifications that the GC could easily or otherwise construct. GC allege s that Architects contract ma nagement and responsiveness to GCs inquiries caused further delay of the project. GC was terminated on or about April 15, 1996. A completion contract or was retained by Owner. Owner made a claim on GCs performance bond for the delay and completion costs of the project. By October of 1996 GC alleges that the completion contractor was behind schedule and complained that said delays were due to the design not being coordinated and the drawings not being conformed. GC allege s the systemic scope of the de sign errors is proven by the completion contractor making allegations identical to GC. Duty to Provide Design Documents (Spearin Doctrine) GC alleges that for responsive, accurate, low risk bids Owner and Architect m ust provide design documents that define quantities, products locations and time deadlines for construction in an organized and coherent manner. This is set forth in the AI A Handbook of Professional Practice. GC also alleges that Owner and Architect have a responsibility to review the schedules submitted by GC and remedy any target dates th at Owner and Architect consider to be unachievable. Specifically Architect has the most insight into whether target dates are achievable due to Architect having the most knowl edge of the status and completeness of the design documents. GCs allegations as to the insu fficiency of the design documents are allegations of a breach of an implied warranty as defined by the Sp earin Doctrine. In United States v. Spearin 248 U.S. 132 (1918), the Supreme Court first held, and its progeny have further defined, that an implied warranty exists as to plans and specifications. Specifically the person or entity supplying the plans warrants the design and materials defined by the plans and specifications will permit the intended construction within the time defined by contract. In other words there exists an implied

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101 warranty as to the accuracy and constructabi lity, i.e. the suitabili ty, of the plans and specifications. The question is, therefore, wh ether the plans and specifications supplied by Owner and Architect could be reasonably relied upon to meet substantial completion as defined by contract. On a more basic level GC alleges that Owner has to be realistic and helpful if the project is to be a success. Bulletin Drawings GC alleges that Architects excessiv e use a nd misuse of Bulletin Drawings (BDs) to substantiate the design errors omi ssions inherent in this project. A total of six hundred and fifty (650) BDs were issued on this pr oject, three hundred fifty two ( 352) of which were issued after NTP. GC alleges that BDs were issued ra ndomly and without consistency. GC points to instances where one BD issued in a package issu ed by Architect directly conflicted with another BD issued in the same package. (APPENDIX R) GC alleges that Architect labeled many of the BDs with the term Clarification. GC alleges that these clarifications on the BDs were actually the provision and furnishing of essential or critical design data th at was not on the contr act drawings. GC alleges, therefore, that the Architect attempted to remedy errors and omi ssions with issuance of BDs under the guise of clarification. GC alleges that by Architect seeking to re medy errors and omissions of the contract drawings with issuance of hundr eds of BDs that the Archit ect set up the BDs to take precedence over the contract drawings. GC alleges th at this is improper. GC further alleges that this creates significant confusion and that significant confusion wa s created on this project by the trickle of accurate design documents being issue d. GC alleges that despite numerous requests at the start of the project, throughout the project a nd just prior to the termination of GC, that Architect and Owner never issued an updated co nformed copy of the contract drawings. GC

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102 alleges that it is standard for a conformed set of dr awings to be issued at NTP. GC states that it is impossible for the various subcontractors and trades to follow narratives and BDs that are to be considered updates to the contract drawings. Lack of Error Free Conformed Contract Drawings GC alleges that the n eed for multiple issu ances of conformed contract drawings was essential in this matter. GC alleges that the design documents that were issued suffered from internal errors, omissions and conf licts. GCs analysis indicates th at sixty three percent (63%) of the drawings issued did not disclose the drafte r and were not checked. The lack of drawings being checked and verified created repeated problems. Many of the updated design drawings were overlaid on the wrong design sheet, a condition that was avoidable if the 63% of the drawings were properly checked. GC alleges that the Architect relied on CAD drawings to the detriment of the project. By placing design updates on the wrong base sheet the errors provided to GC, and by extension the subcontractors, were compounded and amplified. This was manifest in numerous ways, namely repeated errors on the structural drawings. The structural drawings suffered from the repe ated absence of column line references. As a result the BDs that were issued to remedy the errors and omissions of the structural contract drawings (or what the Architect deemed clarif ications) could not be reconciled with the intended structural drawings. GC and subcontr actors often had to reconcile the BDs to the structural drawings by matching up room numbers or identifyi ng other like similar features. GCs analysis indicates that eight percent (8%) of the BDs did not have meaningful registration (location) information; that twen ty seven percent (27%) of the orig inal contract drawings issued for bid on 9/2/93, were never updated (revised) with structural change s that in fact occurred; and

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103 that thirty eight percent (38%) of the revisions issued were ov erprinted on the wrong base sheets and were never corrected. Drawing Scale and Dimensions The overall quality of the design drawings wa s poor, as alleged by GC. The Architect used com puter drawings and utilized sm all scale that worked well on th e computer with the ability to zoom and pan. When the drawings were actually printed and issued the scale was too small and GC alleges that significant amount of design deta ils that the Architect attempted to include on portions of the drawings we re impossible to read. Architect also failed to uniformly dimens ion the drawings or placed incorrect and conflicting dimensions on the drawings. In either event the GC and subcontractors had significant problems in trying to determine ev en the simplest dimensions and reference measurements. Architect re lied upon marked up shop drawin gs to remedy the lack of dimensioning specification and definition. GC allege s that it is not an acceptable solution to use shop drawings as the sole source of desi gn dimensions that control the project. Requests for Information GC alleges that the nature of Requests for Information (RFIs ) speaks volumes in regards to the errors and omissions that the design doc uments suffered. Approximately seventy percent (70%) of the RFIs submitted concerned design cl arification issues; twen ty three percent (23%) of the RFIs submitted concerned construction field conditions; and seven percent (7%) of the RFIs went unanswered. (APPENDIX S) GC alleges that the majority of RFIs were caused by incomplete, uncoordinated, incorrect and sometimes conflicting drawings. In all there were four hundred and thirty five (435) single issue RFIs submitted. Architect, furthermore, di d not directly respond to RFIs submitted.

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104 Architect often responded with Architect Engi neer Supplemental Inst ructions (AESIs). GC alleges this tactic was an intentional mean s of obscuring what was an otherwise design error and omission. Architect used AESIs to forwar d answers to RFIs, issu e BDs, issued CCDs, give instructions and solicit soluti ons to design problems. GC alle ges that the use of the AESIs by Architect was wholly improper and was another means of compounding the mess that existed with the design documents. GC alleges Architect was often in conflict with its own specifications or appeared to have no actual knowledge of the condition s of the job. Specifically Arch itect specified installation of wood handrails to match those in the operating room (OR). GC issued an RFI asking for an example of the type of wood handrail intended by the design, as there were no existing wood handrails in the OR. Architect responded to the RFI that an AESI was being drafted as there were no wood handrails on the entire job. GC uses the elevator as another example of the design errors and omissions, due to Architects lack of coordination of the desi gn documents. Between 9/2/93, when the bid documents were issued, and 9/17/93, the elevat or location was moved. Many of the contract drawings and BDs issued at all times after the ch ange of elevator locati on showed the elevator in the old/wrong location. In total thirty per cent (30%) of the contract drawings that were deemed current and from which the building was to be constructed showed the elevator in the wrong location. The elevator was shown in diffe rent locations on four (4) Amended Bulletin Drawings (ABDs) issued on the same date, 9/17/93. Architect specified that th e elevator was front door opera ble. On the shop drawings Architect marked that the elevator, per Owners requested conditions, was to be front and rear door operable. This issue was re solved with a change order.

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105 A total of eighteen drawings were issued speci fically with column lines on the second floor near the elevator. These were comprised of three (3) contract drawings and fifteen (15) BDs. Many of these drawings showed incorrect column line reference points for the elevator, or failed to show any column line reference points for th e elevator. Only three (3) of the 18 drawings were checked. The actual contract drawings were not used to construct th e area at or near the elevator. An Amended Bulletin Drawing issued directly to GC was the document used to construct the area at or near the elevator. Th e Electrical Bulletin Drawings (EBD) were also incorrect. The electrical subcontractor never possessed a correct design drawing for the area at and near the elevator. Design by Shop Drawing The GC alle ges that Architect attempted to de sign significant portions of the electrical and mechanical systems of this project by marki ng up shop drawings. GC alleges that if the Architect alters shop drawings to correct omissions or errors as exist in the design drawings, as issued, that this is a basis for a change order. In fact Architect termed the HVAC drawings as schematic only, at all relevant times from the pre-construction meeting forward. GC allege s that this showed Architects technical design deficiencies and Architects re liance on the subcontractor to so lve all design problems. GC alleges that this places the de sign liability and res ponsibility on a normally unlicensed entity.

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106 CHAPTER 8 WINE CELLAR CONSTRUCTION DEFECT CLAIM Preface A physician in Tampa, Owner, contracted w ith a residential general contractor for the construction of a wine cellar on the first floor of the home. The wine cellar was constructed with a separate hvac system designed to keep the cond itions at seventy (70) de grees Farenheit and at fifty (50) percent relative humidity (70F/50RH). Within a short time of the wine cellar being operational moisture started to accumulate on the inside of the wine cellar. The moisture accumulation caused semi-saturation of the wood st orage racks occurred. Operational conditions of the wine cellar, therefore, were not as intended. Project, Scope and Parties Project and Scope This project involved the constr uction of a wine cellar in an existing private residence. The project relied on the conversion of closet space into a functioning wine cellar. The Parties Owner is a p rivate homeowner who contracted with GC for a wine cellar addition to the Owners residence. Owner did extensive resear ch on the design criteria for construction of a wine cellar. GC is a small volume, local contractor with primary business of residential construction, additions and renovations. The GC was licensed in Florida and, therefore, experienced with an environment of high outside temp erature and humidity levels. There was no architect of record for this wi ne cellar. The wine cellar was the renovation and conversion of an existent food storage closet with Owner and GC collaborating as the design entity.

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107 Facts In Common Design Process The Owner contracted with GC for addition of a sm all wine cellar on the first floor of the Owners residence. The GC converted an existent food closet that separated the dining room from the garage. As an existent structure the Owner and GC avoided pulling any permits for this work or generating any drawings for the design of this wine cellar. The GC discussed with Owner what GC believed to be a working design. The Owner considered himself something of a wine connoisseur and researched extensively the design requirements of a wine ce llar. Owner conveyed to GC the specific operating conditions of the working wine cellar. GC renovated the food storage closet to meet the operational standards de tailed by the Owner. The GC proposed numerous construction designs to the Owner. The Owner expressed certain budgetary constraints. The Owner discussed the vari ous price parameters versus performance expectations. Owner agreed to the design details and price of the wine cellar, asbuilt. The wine cellar sits in one corner of the fi rst floor. One small wall is the common outside wall; one long wall is the common wall with the garage; the othe r long wall is the common wall with the dining room; the fourth wall is the en trance to the wine room and faces the kitchen. Construction Materials and Techniques The outside wall and garage wall are ei ght inch concrete masonry unit (CMU) construction. The interior of the CMU has fur strips with expanded poly in sulation (Styrofoam). The interior common walls are wood framing with batt type fiberglass insulation. The ceiling is insulated. All walls and ceiling utilize green board as the gyp sum product. Green board is

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108 gypsum board with a moisture resistant paper. All green board was covere d in a skim coat of stucco. The GCs renovations included stripping the inside of the intended wine cellar of all existent gypsum board. GC insulated the wa lls and ceiling as noted. GC then installed greenboard and finished with a sk im coat of stucco. Electrical additions included a 220-volt feed for a ductless split system to maintain conditi ons in the cellar. A ll 110-volt needs were preexisting. The wine cellar utilized a ductless split system, designed to keep conditions at seventy degrees Fahrenheit (70) maximum, with a rela tive humidity of fifty-five percent (R.H. 55%). Manifest Problems Once the wine cellar becam e operational a nd summer like conditions persisted in the outside environment, the wine cellar exhibited moisture retention on the inside stucco walls and ceiling. The moisture collection on the inside of the wine cellar caused the wine racks to show signs of moisture retention, to include swelling and discoloration. Additionally some degrading of corks was visible and documented. The Owner responded to the moisture in th e wine cellar by loweri ng the temperature of the wine cellar. The Owner believed that if th e hvac ran at a colder temperature the unit would have greater evaporation potential and would, therefore, rid the cel lar of the moisture build-up. This did not occur. The colder that the Own er ran the unit the more it appeared moisture collected on the inside stucco walls. Contract Omission The contract signed between the Owner and GC did not contain the Notice of Construction Defect Claim language th at is required by law per Florida Statute.

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109 Nature of Dispute Owner contracted with GC to build a wine cellar in the Owners residence. The construction techniques are described above. The Owner seeks correction of the moisture problem in the wine cellar. The Owner seeks replacement of wine racks, mold remediation and construction of a wi ne cellar that does not accumulate moisture on the inside walls. Owner wants a humidity controlled wine cellar. GC contends that is built the wine cel lar to the specifications of Ow ner. GCs position is that any further construction or remediation will be at cost to Owner. Allegations by Owner Owner alleges that the GC is liable for a c onstruction defect. Speci fically Owner alleges that GC is liable for a deficiency in the cons truction and remodeling of the wine cellar, where such construction suffers from defective desi gn, defective components and does not meet the accepted trade standards of good and workmanlike construction. Breach of Express Warranty and Implied Warranty of Fitness Owner further alleges th at GC is in breach of the express warranty in that Owner alleges the GC made affirmative statements that GC woul d construct a wine cellar to function to the specifications defined by the Owner. Those specifi cations were conveyed to GC, that the room shall be no more than seventy (70) degrees Fa hrenheit and no more th an fifty (50) percent relative humidity. Owner alleges GC affirmed the desired specifications of the wine cellar were realistic and achievable. Owner lastly alleges that GC is in breach of an implied warranty of fitness. This claim is based on the alleged fact that the wine cellar ca nnot be used for its intended purpose. The implied warranty of fitness claim is based sole ly on the fact that Owner wanted a functioning wine cellar and GC contracted to deliver a func tioning wine cellar. GC was bound, therefore, to

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110 deliver the product that GC contr acted to deliver. The wine cel lar, as alleged by Owner, is nonfunctional as it traps condensation on the interior stucco walls, causing ruin to wine racks and corks. Owner alleges that GC made affirmative promises to Owner, that the construction of the wine cellar would be easy, stra ightforward and not produce any delays or problems. Owner asserts that this was a warranty in regards to th e performance of the wine cellar. Owner alleges that GC assured Owner that a de sign professional was not necessary for the construction of this wine cellar, in response to Owners inquiries of the need to hire a design professional for drafting plans for the wine cellar. Owner further alleges th at GC indicated that no entity at the county or city permit review level had a ny experience in wine cellar cons truction, that no codes exist in regards to wine cellars and that Owner woul d only be opening up a can of worms by seeking municipal inspection and permitting of the wine cellar. Construction Expert Opinion The Owner hired a construction expert who rendered certain opinions concerning the condensation problem s of the wine cellar. The e xpert opines that the de sign is inadequate to prevent the transmission of water vapor acros s the walls. The significant difference in temperature and, more importantly, relative hum idity between the wine cellar and the two exterior walls is targeted as the source of the problem. The two exteri or walls are preexistent cmu construction and there was no significant va por barrier applied to either. The vapor transmission that occurs, even to a minimal extent, is amplified as th e hot humid outside air migrates into the wine cellar. The air in the wine cellar has a lower de w point and cannot hold the moisture that is migrating into the room, thus the condensation problem. The Owner retained expert makes several sugg estions that include applying specific vapor barrier applications to the outside surface of th e exterior CMU walls. This is an attempt to

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111 prevent the moisture from migrating into and th rough the CMU. The expert suggests application of products similar to those that are applied to below grade CMU walls. Expert also opines that foil backed gypsum board be applied to walls of the wine cellar that ar e common with interior areas of the home, as less vapor transmission will be occurring at these locations, including the ceiling which is common with the second floor of the home. Allegations by GC Design Defect Not Construction Defect GC alleges that all lim itations of the wine room design were discussed with Owner. GC alleges that GC provided Owner with alternat ive construction designs and Owner, limited by budget, chose the design that was constructed. GC further alleges that GC advised Owner to hire a design professional for the best design results of the wine cellar. GC alleges that Owner held himself out to be an expert in the design specifica tions of the wine cellar. Owner utilized GCs knowledge of construction materials and costs to choose the design that Owner wanted, within Owners budget. GC alleges that there is nothing inherently wrong with the quality of construction, that there is no construction defect pe r se. GC contends that the pr oblems with the wine cellar are design issues and GC never held itself out as a design professional. GC alleges it discussed with Owner, in response to Owner inquiry, the lack of municipal inspectors, in GCs opinion, with knowledge of wine cellar construction and that all municipal inspectors would be looking for was the sufficiency of construction not whethe r the wine cellar was viable in operation. GC alleges that this was, in fact, an easy straightforward renovation and that the Owner assumed implicit control of the design elements. GC alleges that it o ffered Owner numerous materials and methods of construc tion that could be possible. GC emphasizes that there was never a representation to Own er that GC was any type of design professional.

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112 HVAC System Not in GCs Scope GC alleges that the Owner ins talled the hv ac system for the wine cellar per separate contract with an entity that Owner represen ted as being skilled and knowledgeable in the installation of wine cellar mechan ical systems. GC simply obt ained specifications from this mechanical supplier and stubbed out, framed in and otherwise provided the necessary conditions that facilitated the mechanical subcontracto r to simply install the mechanical system. As such GC alleges that the mechanical system may be sized incorrectly or not of the type that is necessary to achieve the Owners desi red operating specifications. Furthermore GC alleges that the Owner did not want to enter a fo rmal contract that included notices of claims rights and procedures per Florida law, i.e. Chapter 558, Florida Statutes. Owner conceived and abbreviated contract that simply stated the amount due and owed to the GC for general home repairs. GC points to this fact to allege that Owner was aware and accepted the potential shortcomings of the wine cellar construction and was, in fact, experimenting with construction techniques to determine what was ultimately successful. Relevant Portions of .002, Florida Statutes (2007) 558.002 Definitions (1) "Action means any civil action or arbi tration proceeding for damages or indemnity asserting a claim for damage to or loss of r eal or personal property caused by an alleged construction defect, but does not include any administrative action or any civil action or arbitration proceeding asserting a claim for a lleged personal injuries arising out of an alleged construction defect. (2) "Association" has the same meaning as in s. 718.103(2), s. 719.103(2), s. 720.301(9), or s. 723.075. (3) "Claimant" means a property owner, incl uding a subsequent purchaser or association, who asserts a claim for damages against a cont ractor, subcontractor, supplier, or design professional concerning a constr uction defect or a subsequent owner who asserts a claim for indemnification for such damages. The term does not include a contractor, subcontractor, supplier, or design professional.

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113 (4) "Construction defect" means a deficiency in or a deficiency aris ing out of, the design, specifications, surveying, planning, supervision, observation of construction, or construction, repair, alteration, or remode ling of real property resulting from: (a) Defective material, products, or components used in the construc tion or remodeling; (b) A violation of the applicable codes in e ffect at the time of construction or remodeling which gives rise to a cause of action pursuant to s. 553.84; (c) A failure of the design of real property to meet the applic able professional standards of care at the time of govern mental approval; or (d) A failure to construct or remodel real property in accordance with accepted trade standards for good and workmanlike constr uction at the time of construction. (5) "Contractor" means any person, as defined in s. 1.01, that is le gally engaged in the business of designing, developi ng, constructing, manufacturing, repairing, or remodeling real property. (6) "Design professional" means a person, as defi ned in s. 1.01, licensed in this state as an architect, interior designer, landscap e architect, engineer, or surveyor. (7) "Real property" or "property" means land that is improved and the improvements on such land, including fixtures, manufactured housing, or mobile homes and excluding public transportation projects. (8) "Service" means delivery by certified mail, return receipt request ed, to the last known address of the addressee. (9) "Subcontractor" means a person, as de fined in s. 1.01, who is a contractor who performs labor and supplies material on behalf of another contractor in the construction or remodeling of real property. (10) "Supplier" means a person, as define d in s. 1.01, who provides only materials, equipment, or other supplies for the cons truction or remodeling of real property. 558.005 Contract provisions; application (1) Except as otherwise provide d in subsections (3) and (4), the provisions of this chapter shall apply to every contract for the design, construction, or remode ling of real property entered into: (a) Between July 1, 2004, and September 30, 2006, which contains the notice as set forth in paragraph (2)(a) and is conspicuousl y set forth in capitalized letters. (b) On or after October 1, 2006, which contains the notice set forth in paragraph (2)(b) and is conspicuously set forth in capitalized letters.

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114 (2)(a) The notice required by paragraph (1)(a) mu st be in substantially the following form: CHAPTER 558 NOTICE OF CLAIM CHAPTER 558, FLORIDA STATUTES, CO NTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MA Y BRING ANY LEGAL ACTION FOR AN ALLEGED CONSTRUCTION DEFECT IN YOUR HOME. SIXTY DAYS BEFORE YOU BRING ANY LEGAL ACTION, YOU MUST DELIVER TO THE OTHER PARTY TO THIS CONTRACT A WRI TTEN NOTICE, REFERRING TO CHAPTER 558, OF ANY CONSTRUCTI ON CONDITIONS YOU AL LEGE ARE DEFECTIVE AND PROVIDE SUCH PERSON THE OPPORTUNITY TO INSPECT THE ALLEGED CONSTRUCTION DEFECTS AND TO CONSIDER MAKING AN OFFER TO REPAIR OR PAY FOR THE ALLEGED CONSTRUCTION DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER WHICH MAY BE MADE. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER THIS FLORIDA LAW WHICH MUST BE MET AND FOLLOWED TO PROTECT YOUR INTERESTS. (b) The notice required by paragraph (1)(b) mu st expressly cite this chapter and be in substantially the following form: CHAPTER 558 NOTICE OF CLAIM CHAPTER 558, FLORIDA STATUTES, CO NTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MA Y BRING ANY LEGAL ACTION FOR AN ALLEGED CONSTRUCTION DEFECT. SI XTY DAYS BEFORE YOU BRING ANY LEGAL ACTION, YOU MUST DELIVER TO THE OTHER PARTY TO THIS CONTRACT A WRITTEN NOTICE, REFERRING TO CHAPTER 558, OF ANY CONSTRUCTION CONDITIONS YOU ALLE GE ARE DEFECTIVE AND PROVIDE SUCH PERSON THE OPPORTUNITY TO INSPECT THE ALLEGED CONSTRUCTION DEFECTS AND TO CONSIDER MAKING AN OFFER TO REPAIR OR PAY FOR THE ALLEGED CONSTRUCTION DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER WHICH MAY BE MADE. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER THIS FLORIDA LAW WHICH MUST BE MET AND FOLLOWED TO PROTECT YOUR INTERESTS.

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115 CHAPTER 9 ALASKAN ROCKET FACILITY Preface The Owner, via state fun ding and federal grants pursued construction of a rocket launch facility on Kodiak Island. The construction of the facility oc curred in three (3) phases, bid packages. Lowest responsive bid was awarded the fixed price contract. Phase I was site work. Phase II and Phase III were construction of the numerous separate buildings, assemblies and facilities that compose a launch complex. This case study only concerns the claims between Owner and the General Contractor (GC) who built Phases II and III. Of importance is that several aspects of this project were technologically unique an d new to implementation. The claims between the Owner and the GC concern a small portion of work that is the basis of Substantial Completion not being issued. Project and Parties Project This project involves the cons truction of a rocket payload processing, assembly and launch facility on Kodiak Island, Alaska. The The Parties Owner is a state chartered corporation, fo rmed for the sole purpose of developing a commercial rocket launch facility. The Owner re lies on state and federal grants as the funding source. Owner further relies on a specialized Arch itect Engineer firm as the Owners agent and contract management entity. General Contractor (GC) is a large commercia l contractor located in Seattle, Washington. GC is experienced with doing work in Alaska having completed thirty eight (38) projects in Alaska. At the time of prequalification and bi d, GC had numerous ongoing Alaska jobs. GC has

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116 a history of successful completion of jobs in Al aska, and thereby is familiar with the conditions and limitations of working in the Alaska environment. Architect Engineer (AE) is a single entity, specialty firm located in Melbourne, Florida. AE has significant experience in providing design and engineering services for N.A.S.A., in both Florida and Texas, and other priv ate launch facilities in the Un ited States. AE was retained initially to assist Owner in developing criter ia upon which to base design. This included choosing location. AEs involveme nt continued as the design en tity and the sole agent for Owner engaging in contract management. Facts in Common Design and Development An Alaska state chartered corporatio n, Owner was created for the specific purpose of bringing online a commercial orb ital and sub-orbital rocket launc h facility. The business plan included providing services to public and private clients. Private clients include communication related payloads. Besides resear ch payloads, public clients of course included N.A.S.A., the United States Air Force and other military related contract business. In fact the construction of the facility was interrupted for two Air Force la unches. Launches since completion include the two (2) tests for the U.S. missile defense shield. Owner, not being sophisticated in the technical specifications of building such a launch complex, contracted with a design engineering fi rm (AE) in Melbourne, Florida. This AE brought specific relevant experience to the tabl e, having worked with N.A.S.A., the U.S. Air Force and other public entities in all design and construction aspects of manned and unmanned launch facilities. As such the Owner relied upon the AE to provide technical analysis and consulting services while feasibi lity studies were conducted. The AE then assisted in choosing

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117 the peninsular location for the intended launch site After more than eight months of preliminary development, design work began in earnest in 1994. Owner and AE spent approximately three (3 ) years on design and development. This project was intended to be a fixed price, hard bid construction contract an d as such the GC was not included in D&D and did not offer input as to design, value engineering or the like. The design drawings and specifications were comple te, with no expectation of delay due to design errors and omissions. Unique Technology It is important to note that the Owner, and AE at Owners behest, was seeking to implement design ideas that existed at no other f acility in the world. In order to make the Alaskan site truly accessible the de sign team sought to insulate from weather conditions as much as possible. In Florida the la unch vehicle and payload are estab lished in a Vertical Assembly Building (VAB) and slowly wheeled to the launch pad. This is impossible in Alaskan conditions due extremely high winds and weather that has the tendency to quickly dete riorate at most times of year. The Alaskan facility was designed with a track on which a Space Craft Assemblies Transport (SCAT) building could move between the Integration Processing Facility (IPF) and the Launch Support Structure (LSS). An entire rock et could be assembled, fit with payload and moved in segments to the launch facility with zero exposure to outside conditions. The LSS also was designed to rotate at a center point, to prov ide for assembly of the rocket on the launch pad with zero exposure to outs ide conditions. The rocket is entire ly prepared for launch in interior conditions. Rolling assembly buildings and a rotating launch pad required unique design conditions.

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118 Bid and Contract Phase I was all site work. It was placed out for bid just prior to Nove mber 21, 1997 (11/21/97). It was awarded to a large site work contractor located in Anchorage. Phase II was all remaining work. Phase II was put out for bi d on 11/21/97, with a bid opening date set for February 11, 1998 (2/11/98). A pre-bid meeting wa s held that clearly established the Owners expectations for substantial completion. At the pre-bid meeting Owner stressed the time of essence nature of the contract. Owner further i ndicated potential construction delays due to U.S. Air Force use of facility pr ior to full completion. During the bid period seven (7) addenda were issued to clarify the design documents issued. On bid day, 2/11/98, all bids exceeded the current funding level available to the Owner. Owner split the construction into Phase II and Phas e III. The total project consisted of five (5) unique buildings: the Launch Control Center (LCC); the Payload Processing Facility (PPF); the Integration Processing Facility (IPF); th e Space Craft Assemblies Transport (SCAT); and the Launch Support Structure (LSS). Bid documents were reissued solely for Ph ase II, with full resolution of all design clarification issues raised in th e seven (7) addenda during the first bid period. Phase II bids were opened on April 8, 1998 (4/8/98) and GC won with the lowest responsive bid of sixteen million, one hundred ninety thousand dollars. Owner and AE obtained ALL necessary permits for construction prior to issuance of the bid document, except a domes tic water permit to be obtained by the GC. The parties entered a lump sum contract w ith numerous detailed provisions. Graduated Liquidated Damages (LDs) were defined. Within fifteen (15) da ys of the contract signing GC was required to provide AE the list of the manu facturers of all products to be used. Any substitutions were required to be approved during the bid phase. Within thirty (30) days of

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119 signing the contract the GC was required to provide AE a confir mation list of subcontracts and material delivery dates. AE provided GC with a schedule for submittals. GC could only submit items for submittal during the time periods defi ned on the submittal schedule. This was all defined in the General Conditions to ma ximize efficiency as determined by AE. Notice to Proceed and Substantial Completion Notice to Proceed (NTP) was issued on April 20, 1998 (4/20/98). Phase II was scheduled to meet substantial completion, as defined by th e contract, in three hundr ed thirty five (335) days, on March 20, 1999 (3/20/99). Total completi on of Phase II was contra cted to occur thirty days later on April 19, 1999 (4/19/ 99). GC staff did not arrive at the jobsite until June 15, 1998, (6/15/98), fifty six (56) days after NTP was i ssued. This equates to GC staffing the project seventeen percent (17%) between NTP and substantial completion. GC management staff on site consisted of five (5) persons. Th ere were two Project Managers, one Project Engineer, one Superinten dent and one person responsible for Quality Control. Of this group the longest tenure with GC was three (3) years. Some of this on-site staff had construction management degrees, some had business degrees and some had no formal education. During the construction of Phase II the Owner secured the funding for Phase III. This scope of work was negotiated with the GC for a pr ice of nine million ($9M) dollars. Rather than enter a separate contract, Phase III was tied to the existing contract between the parties via Owner Change Order (O.C.O.) #10. O.C.O. #11 was a supplement adding another three hundred fifty thousand dollars to the contract price. In total Phase III added nine million three hundred fifty thousand dollars ($9,350,000) to the contract price. The Phase II contract price was sixteen million, one hundred ninety thousand ($16,190,000). The total contract price for Phase II and

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120 Phase III was twenty five million five hundred forty thousand dollars ($25,540,000). Change orders added in excess of a million dollars to the contract price. The addition of Phase III to the contract, via O.C.O. #10, included changes to some of the key contract specifications. A new schedule of liquidated damages was created, wherein progressive LDs were maximized in a shorter time. New substantial completion and completion dates were agreed upon. The GC and Subs agreed to waive all claims for the period prior to March 15, 1999 (3/15/99). Owner provided a built-in incentive to co mplete the Payload Processing Facility (PPF) by date certain. Phase III provided for an additional two hundr ed thirty six (236) days to achieve substantial completion. O.C.O. #19 added an ad ditional eight (8) days. Phase II contract, inclusive of Phase III, i.e. O.C.O. #10, set s ubstantial completion for January 7, 2000 (1/7/00). The G.C. submitted a schedule the day after O.C.O. #10 was executed. This schedule showed substantial completion one hundred two days after the date, 1/7/00, established by O.C.O. #10. Subsequent schedules submitted by the GC showed substantial completion one hundred ninety seven (197) and then one hundred eighty eight (188) days later than the 1/7/00, substantial completion date set by O.C.O. #10. Each schedule update showed more and more slippage. Owner Termination of GC Owner offer ed numerous incentives to get th e project to substantial completion. On occasion Owner would offer financial bonuses or other incentives to ensure that substantial completion was achieved. In early August 2000 the GC walked off the pr oject declaring substantial completion was achieved. Substantial completion was contracted for 1/7/00. AE did not issue substantial completion when GC walked off project in 8/ 00. On August 29, 2000 (8 /29/00), the GC, Owner

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121 and AE agreed to conditions for GC to complete and correct all outstanding work by September 30, 2000 (9/30/00). This was two hundred and sixty seven (267) days after the contract date 1/7/00 substantial completion. On September 20, 2000, Owner declared GC in de fault of the contract, issuing notice to GC. Seven (7) days later, on September 27, 2000 (9/27/00) Owner terminated GCs contract. It is important to note that the U.S. Air Force utilized the launc h facility on two (2) occasions during the middle of construction. On November 5, 1998 (11/5/98), the Air Force launched the first Atmospheric Interceptor Techno logy (A.I.T.) test missile. On September 15, 1999 (9/15/99), the Air Force launch ed the second A.I.T. test mi ssile. During both launches the facility was restricted and c onstruction was disrupted for a period and suspended for a shorter period. In addition the Air Force reconfigured, re-wired and made substantive changes to parts of the electric and control system s to accommodate the launch needs. Nature of Dispute Unlike most claim disputes that involve te rmination of a GC the construction of this facility was, more or less, complete. The di spute between the partie s concerned issuance of substantial completion. The facili ty was operational with launch es occurring while construction was ongoing. This claim dispute concerned the last percentage of work, mainly punch list items and items deemed to be latent defects. Ther e was no completion contra ctor brought to the job and no claim on bond. The Owner filed a claim for liquidated damages (LDs) and the GC responded with a claim for delay damages. The Owner claims there exists just ov er four hundred thousand dollars ($403,931) in mechanical latent defects and just over four hundred fifty thousand dollars ($451,943) in electrical latent defects. (APPE NDIX T). The latent defects are, arguably, realized only due to

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122 the use of the facility and are not the common patent punch list items. In addition there were other ongoing, traditional punch list items that Owner argues prevents substantial completion. The GC claimed it reached substantial comple tion, at the latest, when the GC walked off the job in August 2000. The Owner and, more impor tantly, the AE disagr eed that substantial completion was appropriate in August 2000. Inspec tions by Owner, AE and retained consultants continually yielded long lists of critical, necessary and r equired corrections to work installed. The work in question mostly concerne d mechanical and electrical systems. Once the GC was terminated the Owner and AE were in no rush to issue substantial completion. As of June 4, 2001 (6/4/01), once all claims were filed by all parties, the AE would still not issue substantial completion for the PPF, IPF, SCAT or LSS. Only the LCC was designated substantially complete. On March 1, 2001 (3/1/01) the Owner submitted two claims for Liquidated Damages (LDs). (APPENDIX U). The first claim is solely for the Payloa d Processing Facility (PPF) and covers the periods August 23, 1999 to December 8, 1999 (8/23/99 12/8/99) and then from December 8, 1999 to termination on September 27, 2000 (8/23/99 9/27/00). The LDs claimed for the PPF total one million two hundred eigh ty three thousand dollars ($1,283,000). The Owners isolation of the PPF claim is based on th e fact that the PPF was a unique part of the construction and substantial completion of the PPF would allow mitigation of loss. The Owners second LD claim is for the rema inder of the facility construction. The LD period is August 23, 1999 to March 1, 2001, (8/23/99 3/1/01), the date of claim filing. The Owners second LD claim totals one million nine hundred three thousand ($1,903,000). In sum the Owner claims combined LDs in the tota l amount of three million one hundred eighty six thousand dollars ($3,186,000).

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123 The GCs claim, in summary, seeks the diffe rence between what the GC bid and what the GC spent. (APPENDIX V). On March 27, 2001, th e GC submitted two claims. The first claim, based on the total cost approach, covers twenty-two (22) items and totals eleven million seven hundred ninety four thousand three hundred eigh ty six ($11,794,386). This first claim covers specific delay damages alleged by GC. The GCs second claim is based on the modified total cost approach and totals thirteen milli on one thousand two hundred fifty four dollars ($13,001,254). The GCs second claim is for extende d General Condition costs. The GC adds one million nine hundred eighty two thousand two hundred seventy one dollars ($1,982,271.00) as 20.2% to account for overhead, profit, bond, insura nce, claim preparation costs and interest. The GCs claim in total is for twenty six million seven hundred seventy seven thousand nine hundred eleven dollars ($26,777,911). The Owner claimed and unilaterally rec overed Liquidated Damages by withholding the funds of GCs pay application tw enty seven. In addition the Owner withholds retainage. It is uncertain if the Owner used these funds to offs et the claim made against the GCs performance bond. Allegations by Owner Owner alleges that it held pre-bid meetings to specifically convey that need for the project to finish on time. Owner further alleges it conveyed the extremely technical nature of the project and the need to have as many of the fine points resolved up front as possible. Owner alleges that GC sought to secure Phase II, know ing that it would more likely be awarded Phase III. Thus GCs performance in Phase II belied th e actually competency of GC on the project as a whole.

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124 Schedule Owner alleges that GC never intended to m eet substantial completion dates. GC entered into O.C.O. #10, the Phase III addendum to the contract, and GC immediately submitted a schedule that exceeded the agreed upon revised substantial completion by six months. Owner alleges that the six hundred one (601) days that GC scheduled to achieve substantial completion for Phases II and III was unrealistic. Owner contends that GC never submitted a feasible schedule. The record substantiates that the GC anticipated being able to gain compensable time extensions as well as increased profit from cha nge orders. Owner points out that the GC never met one milestone date that it set. (APPENDIX W). Owner states that GC provided schedules th at were structurally not feasible. Owner submitted a two hundred (200) activity bid schedule and represented that the working schedule, required for submission and review by contract, would be significantly more complex. The working schedules submitted by the GC never exceeded four hundred (400) items. Owner states the schedules for a project of this complexity required between one thousand five hundred and two thousand (1500 2000) items. Owner does not contend that the GC manipulated the schedule to show false progress, but simply that the schedule was weak from inception. When Owner brought up the scheduling issues to the GC, the GCs alleged response was that the start finish dates in the submitted sc hedules were for payment purposes only. Owner contends that this position by GC raises th e issue of fraud, if GC was submitting payment application based on a schedule that had not bearing to reality. Owner shows that the as-build schedule compiled by the GC was al so ripe with errors and di d not reflect actual completion dates. All activities took far longer to complete than GC planned, not just activities in either parties claims.

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125 Management Issues Causing Delay GC delays were self induced as the GCs plan of attack did not seek to m aximize progress in segments. For instance the GC scheduled th e same activity sequentially on each part of the project and would not start simu ltaneous activities until the prev ious activity completed. GC progressed in too linear a manner and did not pl ace increased focus on any one aspect of the project. One of the first negative consequences was that all of the initial concrete work was delayed until the winter. Another incident Owner points to is that steel fabrication su bcontractor for the vertical portion of the Launch Support Structure (LSS) informed GC that, at minimum, it would take thirteen (13) months from date of Order to delivery of steel at the docks. Despite this knowledge the GC allowed this aspect of th e project to suffer. GC is ar guing for substantial completion, at earliest, that is one hundred and fifty nine (159) days late. Owner c ontends not only is LSS substantial completion later than this, but that th e GCs disregard for mate rial delivery is the reason that substantial completi on was not met and forms the basis for LDs. Owner uses this steel delivery example to show that GC inte ntionally provided completion dates it could not meet. Owner alleges that GC had a weak staff, w ith not one person on staff having more than three (3) years of experience with the GC and, by ex tension, the complexity of the launch facility project. GC had nine (9) other projects ongoing in Alaska worth fifty five million dollars ($55M) and short staffed the launch complex job. Owner points to th e fact that the GC staff did not arrive on the jobsite for approximately sixty (60) days once NTP was issued. Basis of Withholding Substantial Completion Owner points out that the supplem entary genera l conditions of the c ontract specifically state that Owner may be jeopardized if substa ntial completion is issu ed without all permits,

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126 approvals, licenses and other documents from an y agency with jurisdiction to assess the beneficial occupancy of the work. As such Owner contends that from the time GC was terminated until May 6, 2001 (5/6/01), after Owner filed the LD claim, that the punch list showed seventy four (74) incomplete items. Thirteen (13) of these seventy four (74) items the Owner deemed critical for the intended use of the facility. These critical items all concern redundancy and standby systems, wh ich Owner contends prevent substantial completion from occurring. Owner states that to issue substantial completion with these critical punch list items outstanding will be a liability issue for the Own er and AE. (APPENDIX X). Owner contends it has a duty to mitigate any known potential hazard and these unres olved punch list items are more akin to latent defects and issuance of substantia l completion causes Owner to accept all liability that should arise with these cr itical punch list items. Owner states that the GC cannot claim substantial completion is met without otherwise addressing an d completing the punch list work presented to the GC and the Subs. The cost of th e punch list work is wholly the responsibility of the GC. Unless and until GC corrects the punch lis t items to the satisfaction of AE and other consultants employed by the Owner, the AE is under no obligation to issue substantial completion. Response to GCs Claim Regarding the claim presented by the GC, the Owner points out that the GC goes down the impossible road of trying to quantify specific de lays on individual activities. The reason, Owner alleges, that the GC does not state how many da ys delay outside influences, design errors and omissions or climate had on the project as a w hole is because the GC never had an accurate schedule for the whole project. The GC, thus, is trying to quantify as much individual delay as possible to obscure the fact that the GC has no timely progression and schedule to rely upon.

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127 The GCs claim is prone to huge overstatements. The Modified Total Cost Approach, known as the Eichleay formula, is inapplicable un less the Owner actively inte rferes to effectively halt work or issues a stop work order and the GC cannot mitigate the damages with other work. That did not happen here. More importantly the GC is taking th e most generous analysis with calculation of alleged damages. Instead of doing monthly equipment rental co st averages, the GC did daily averages for a select period. The difference is monthly es timated costs at two hundred ninety thousand ($290,000) versus more than three million ($3.3 M). The GC did not supply or submit any methods or calculations for delays. The GC also did not submit any methodologies and factors for productivity losses. The GC offered no specificity, derivations or cale ndar dates that delays allegedly in fact occurred. The GC exhibi ted reluctance and at times did not respond to Architects Information Requests (A.I.R.). Owner points out that the GC previously perf ormed over thirty eight (38) projects in Alaska, worth several hundred million dollars. Th is GC was well aware of conditions in Alaska and was competent to plan, schedule, staff the pr oject, coordinate material shipping and work with the weather conditions. GC represented it had these capacities upon qualifying to bid for the work. Owner contends that GC simply got lazy and dropped the ba ll in not finishing the project to full substantial completion. Owner c ontends that GC and GCs Subs did not accept that Owner needed completely operational facilities. Termination of GC Due to Owner term ination of GC, for cause, the Owner made a claim against the GCs surety for completion of the work. The Owner alle ges that the GC repeatedly failed in attempts to complete the punch list items that were repeat edly presented to it. Owner alleges that the facility is not fully functional and poses liability is sues unless and until the punch list items are

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128 fully completed. GCs termination and clai m against the GCs bond allowed the Owner to address what Owner considered the items preventing issuance of substantial completion. Owner admits that the majority of the unfinished or punch list items are electrical or mechanical in nature. Owner also makes claim against the performan ce of the siding in the Payload Processing Facility (PPF) which exhibited a problem in a llowing significant air intrusion and exchange in the building. Th ere also existed an issue with the siding allowing excessive rain water intrusion. Owner claims that in the prebid meeting Owner stressed the need for siding to withstand high winds and horizontal rain. Owner also makes a claim against the integrity of the paint on the structural steel. The paint is a requirement to protect against the elements of the coasta l environment. Painting of the structural steel was also a require ment of providing facilities that were maintained to the highest degree as required by the nature of the launch facility. As such it was imperative that the paint on the structural steel perform. Allegations by GC GC filed two claims based on the premis e of Delayed Acceptance of Substantial Completion. The GC claims that it met substa ntial completion on all buildings and that the Owner and AE refuse to formally issue substa ntial completion. GC claims that it will be impossible for substantial completion to ever be issued based on the standards adhered to by Owner and AE, standards that GC claims are unreasonable under the circumstance. Delays Due to Design This launch cente r is absolutely unique. No where else in the world does a launch complex have the capabilities for unma nned payload launches as does this facility. The GC points out that the permitting authorities were without persp ective or knowledge as to this facility. The

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129 Owner and the AE were required to hold inform ation and educational se ssions regarding the technologies and design criteria of the launch facility. GC alleges that AE is self motivated in not issuing certificates of substantial completion. The contract documents vest AE as the sole en tity to determine substantial completion. GC alleges that many of the items claimed to impede substantial completion are, in fact, latent design issues not latent construction defe cts. GC points out that most if not all of the items AE states are delaying issuance of certificates of substantial completion are issues with systems, electrical or mechanical. The GC alleges that it put together the buildi ng and systems as exist on the drawings. If the systems dont work or are not working as designed, GC alleges these are design defects. If this facility incorporates cutt ing edge designs then the Owner and AE should expect some glitch and delay in getting all systems to operate as in tended. These are design bugs to be ironed out, not construction flaws to suspend issuance of certificates of s ubstantial completion. GC uses the example of the Space Craft Assemblies Transport (SCAT) building as evidence of AE ironing out design issues on GCs dime. The SCAT is a building that travels between the Integration Processing Facility (IPF) and the Launc h Support Structure (LSS). The purpose of the SCAT is to allow for complete ro cket and payload assembly via interior, climate controlled conditions. This is a unique design concept, without a working model elsewhere. The AE required that the GC demonstrate the working nature of the SCAT. The AE used the demonstration to note design flaws, made m odifications and required the GC to implement the modifications under the pretext that the GC was responsible for construction defects. GC alleges that the AEs actions and demands violat e the Spearin Doctrine. The Spearin Doctrine, derived from a U.S. Supreme Court case, places an affirmative obligation on the Owner and AE

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130 to supply construction plans and sp ecifications that ar e feasible, constructible and will work. The GC states that if it builds in conformance w ith the plans and specifications that it is not responsible for the functionality of the design. At minimum the GC claims it should not have to test or be responsible for th e design performance of the SCAT or any other design component of this project. The GC contends that the issue with the SCAT is representative of the greater tension between the GC and the AE on this rocket launch facility project. The GC is only responsible to build what the AE provides via plans and specifi cations. If the unique design aspects of this project require that the AE make design changes once the functionality of the design is tested post-construction, the GC contends that if the GC is not held harmless for subsequent design modifications violates the Spearin Doctrine GC alleges that any design changes postconstruction, whether for feasibility, functionality or otherwise, are compensable to the GC for both time and cost. GC alleges that AE relied too heavily on C AD drawing to the detr iment of designing a building that could be built as drawn. The AE neve r considered how to build it. GC alleges that the tolerances on the AE drawings were simply not feasible. The CAD drawings were very accurate, but not realistic to build with exactitude. GC alleges th at the AE had a vision of the glass half empty, as the AE measured th e GCs success against the CAD drawings. On this point the GC contends that the AE was overly concerned with the Owner and never gave any benefit of any doubt to the GC. The AE staff, excluding management, was mostly Alaskan residents, locals. These were not hi ghly trained professiona ls in high technology construction. GC contends that the AE local staff defaulted to a position of animosity or

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131 contempt for the GC due to on-site manageme nt of AE expressing unc ertainties with GCs performance. GC contends this created greater communication issues. Assertion of Substantial Completion GC disputes the failure of a ll build ings except the Launch C ontrol Center (LCC) to reach substantial completion. GC claims that the AE will not issue substantial completion on all buildings due to a very small punc h list that is confined to items the GC contends are design flaws and are subject to change order work, not contract work. GC further defends any delays that occurred as either due to weather or co mpensable delays Owner us ing the facility while construction was ongoing. (APPENDIX Y). Specifically the use of the facility while construction was ongoing caused something of a nightmare, GC contends. The U.S. Air Force made substantial changes to existing electrical systems in LSS, in order to make the facility conform to Air Force requirements and allow use of military proprietary technologies. This was in addition to physical disruption that occurred during the time that the Air Force used the facility. Between August 1, 1999 and October 1, 1999 (8/1/99 10/1/99) the Air Force declared a one hundred fifty foot (150) exclusionary radius around the LSS. GC contends this interfered with progress in good weather. GC also contends that July 2000 was disrupt ed due to a Lockheed Martin launch. GC states that while July 2000 is beyond the time of contracted subs tantial completion, that other compensable or excusable delays made it reasonable that cons truction was ongoing in July 2000. Owner further delayed contractor by scheduling a Lockheed launch in July 2000. The GC claims the following in regards to substantial completion. The Launch Control Center (LCC) reached substantial completion sixt y (+60) days before the contracted date of January 7, 2000 (1/7/00). The Payload Processing Facility (PPF) reached substantial completion fifty nine (+59) days before 1/7/00. The Sp ace Craft Assemblies Transport (SCAT) reached

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132 substantial completion eight (+8) days before 1/7/00. The Integration Processing Facility (IPF) reached substantial completion one hundred thirty nine days (-139) af ter 1/7/00. The Launch Support Structure (LSS) reached substantial comp letion one hundred fifty ni ne days (-159) after 1/7/00. The delays to the IPF and the LSS the GC, in its claim, attributes wholly to the Owners use of the facility and various circumstances beyond the GCs immediate control. The Claim As stated th e GC seeks reimbursement for the difference between the contract price and the amount GC expended. GC makes this claim via claim for all monies expended, irrespective of the contract or payments pursuant to the contract GCs claim strategy relies on the allegation of Owner breach of contract to allow for complete recovery of actual monies spent until the time of contract termination. (APPENDIX Z). GC alleges that the reason the Owner terminat ed GC was for Owner to have direct control over the subcontractors. GC previously walked off the job in protes t of having substantial completion withheld due to items that GC considered the tweaking a nd making functional of design specifications. GC considers that the Own er and AE made an end run by terminating the contract and relied upon a remedy what was othe rwise not available to correct and complete design errors and omissions. Once the Owner claimed on the GCs bond the GC was left to argue with the surety about th e appropriateness of completing design issues that the Owner cloaks as construction defects. GC points to the total claim ag ainst the surety being no more eight hundred thousand dollars ( $800,000) and being almost exclus ively composed of electrical and mechanical items.

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133 Specific Delay Claim Issues Weather All bidders were pre-qualifie d for experience in Alaskan co nstruction. All subcontractors intended to be used by the GC were also requir ed to pre-qualify with Owner. A significant aspect of f the prequalification was familiarity w ith the weather that plays such a factor in construction in Alaska generally and north Alaska specifically. Owner contends that weather in and of itsel f cannot be the excuse for delay and will not excuse the imposition of Liquidated Damages. Own er contends that weat her delays are only the basis for delay if the weather is so unusual and not reasonably anticipated for the specific season in the specific geographic location. The GC claims a total of one hundred ninety (190) days of weather delays. GC claimed days beyond the contracted substantial completion date of 1/7/00. The basis of the GCs weather delay claim is the sum of all days that were eith er of below average temp erature or of conditions more severe than historical da ta suggests as normal. Owner contends that the GCs use of weathe r delays is invalid. Owner alleges that GC makes no showing that the weathe r in fact on any day actually pr ohibited construction. Owner contends that if the temperatur e on a day was minimally below hi storic averages that no delay automatically results from this. The GC offers no other proof that condi tions were excessively abnormal as to prevent or inte rfere with ongoing construction. Own er also points out that the weather delays in GCs claims differ significantly and far exceed the weather delays shown in all of GCs schedules. Owner relies upon Army Corp of Engineer data which shows an average of twenty (20) expected days of weather delay fo r the contract period. The GCs own logs only show sixty nine (69) lo st days until termination and only th irty nine (39) lost days for the contract period, ending on subs tantial completion of 1/7/00.

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134 Surety Costs GC claim s for the monies paid by the surety pursuant to Owners call on the bond. The resolution of this claim depends upon the validity of GCs termination. Labor Productivity GC claim s labor productivity loss due, primarily to Owner use of the facility and due to weather. Owner alleges that productivity loss was pr oject wide and cannot be attributed to labor. GCs claim alleges only estimated production loss due to labor and does not offer an actual loss per scheduled item. Heat, Cover, Snow and Concrete Forms GC claim s seventy nine t housand ($79,000) in labor cost s and sixty three thousand ($63,000) in equipment and expendable costs due to weather effects on forms and construction generally. Owner alleges that GCs claim is not valid as GC has over two hundred fifty million ($250M) in Alaskan construction ex perience. GC bid this job w ith only twenty eight thousand ($28,000) for temporary heat and lights. Owner alle ges that this is a conscious short fall on part of GC. GC claims that the dela ys caused by Owners use of the f acility in turn caused the GC to do more than expected construction in the wint er and cause greater expense for these items. Electrical and Phone Charges GC m akes a claim for reimbursement of all electrical and telephone charges. Owner defends by alleging that under Section 3.4.1 of the General Conditions the GC is responsible for all fees associated with the installati on and use of utilities and communications. Interest on Retainage GC m akes a claim for interest due and owed on all retainage held by Owner. Owner held retainage as part of recovery of Liquidated Da mage claim alleged by Owner. GC alleges that termination was improper and th at Owner did not follow the prope r notice procedure. GC also

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135 alleges that termination was also improper beca use AE has no basis to withhold issuance of certificates of substantial completion. Owner defends, simply, by asserting that substantial completion was not issued, so retainage is not due and owed. If substantial completion is not issued and retainage is not due and owed, then no interest on retainage is due and owed. GC alleges that if substantial completion is found to have constructively occurred then all retainage and interest on retainage is due and owed from the date of constructive substantial completion forward. Pass-thru Claim by Steel Erector Steel erection in Phase II was scheduled by GC for August 1, 1998 through October 31, 1998. In fact the GC did not enter a steel er ection subcontract for Ph ase II until September 10, 1998. Steel erection on Phase II actually occu rred between September 21, 1998 and June 28, 1999. GC makes claim to Owner for extended ove rhead costs regardi ng steel erection, in response to steel subcontractors claim to GC for extended overhead costs. Steel subcontractor experienced multiple weather delays and was re quired to undertake numerous re-mobilizations during the nine (9) month period that steel erection actually oc curred. GC adds overhead and profit to the subcontract ors claimed damages. Owner contends that it is not responsible for any extended costs associated with this Phase II steel erection. Owner contends that GC entered the steel erec tion subcontract late and steel erection began almost two (2) months over schedule as the winter months we re fast approaching. Any weather delays were avoidable if GC had started steel on time.

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136 Anchor Drilling Claim All of the immoveable structures, i.e. those not on rail or the parts of th ose structures that are imm oveable, were designed to be anchored to the ground as means of support against the winds and weather. The anchor drilling subcontractor files a claim with GC for three hundred sixteen thousand three hundred fifteen do llars ($316,315.00) doe delays. The drilling subcontractor claims costs that include remobilizations, rentals, extended overhead, legal services and interest. The GC adds to the drillings subcontractors cl aim eighty four thousand dollars ($84,000) for overhead, profit, bonding, claim preparation and interest. The GCs bid to Owner only priced one (1) re mobilization for the dr illing subcontractor. The contract between the GC and the dril ling subcontractor contemplated five (5) remobilizations. Owner alleges that the subcontra ct indicates that the GC had knowledge of the requirements of mobilization and intentionally left these requirements out of the bid to Owner as means of reducing the bid amount. Owner alleges th at GC must live by its bid. The subcontract called for drilling to occur for a period of one hundred five (105) days. Fift y five (55) of these days were considered work days and fifty (50) of these days were provided as down days due to weather or other necessary delay. The drilling took just under one (1) year to complete. The drilling subcontractor claims interfer ence and brings the claim against GC.

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137 CHAPTER 10 SITE SUBCONTRACTOR VERSUS DESI GN PROFE SSIONALS; DELAY CLAIM Preface A Florida municipality contracted for the expansion of a m unicipal park, to include parking, playing fields and sanitary sewer faci lities. The municipali ty maintained some engineering oversight of the project, but contracted for the design and development of the architectural and engineering. The municipality contracted with a regional general contractor, who in turn contracted with a site subcontractor for all civil construction (i.e. pipe placement, parking, sidewalks). This municipal park and al l construction expansion of this municipal park existed and occurred on what was a former naval training base. The site work subcontractor was terminated for not meeting the general contract ors scheduled completion date and brings a professional negligence tort suit (non-contract claim) against the design professionals alleging errors and omissions as the cau se in fact of all delays. The Parties Owner is a major Florida city seeking to expand an existing municipal park. Owner maintains some design control with the Director of Public Works listed as the record engineer. Architect is primarily a landscape architectur al and engineering firm who entered a prime contract with Owner for design and development of an expansion to an existing municipal park. Engineer is a civil engineering firm in contract with the Arch itect. Engineer is to provide all civil engineering design for the municipal park expansion. Civil en gineering work not only includes storm water management, but a large indoor restroom facility is being constructed and Engineer must design all sa nitary sewer requirements. Geotechnical Engineer (Geotech) entered a consulting agreement with the Engineer to provide soil and subsurface data related to this project.

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138 General Contractor (GC) is a southeast re gional GC, in prime contract with Owner to provide construction management services for th e construction of the municipal park expansion. Site Work Subcontractor (Sitesub) is in contr act with the GC to perform all site work for the municipal park expansion, to include grading and installation or providing for installation of all underground utilities. Sitesub is directly responsible for placement of storm water and sanitary sewer piping, curb and gutters and parking lot construction. Facts in Common The Owner seeks construction of a Community Pa rk proje ct. It is a large site with construction to occur throughout fift y four (54) acres. The pre-ex isting facilities of the park include baseball fields, soccer fields and some picnic facilities. The expansion includes additional parking, sidewalks and an indoor cond itioned restroom facilit y. The Director of Public Works for the Owner is listed in the project manual as the record engineer. The site as exists and on which construction will occur was a naval training facility. Owner contracted with Architect for design a nd development. Architect is a full service firm, with a stated specialty in landscape architecture and engineering. Architect entered a subcontract with Engineer. Engi neer is a civil engineering firm and was responsible for design of civil engineering concerns on this project. Engi neer entered a consul ting agreement with a geotechnical specialty firm, to obtain soil and subsurface data for the site. Schedule and Notice to Proceed This project was heavy on the site and civil work. The Sitesub was to complete all sitework to include all piping, paving and sidewalk placement. The Sitesub submitted a twenty five (25) item bar chart schedul e to the GC, which the GC appr oved and incorporated into the initial critical path schedule produced by the GC. The Sitesubs schedule indicated thirty seven (37) weeks to complete all site work. The GC pr oduced a finalized critical path schedule to the

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139 Owner prior to the start of construction. The contract between the Owner and the GC allowed for the issuance of a Notice to Proceed (NTP) pr ior to all permits being obtained for the full scope of construction. The NTP was issued by Owner on September 21, 2001 (9/21/01). This NTP was issued prior to all permits being issued for the full scope of construction. The Owner wanted the construction to begin and believed that the perm it issuance would keep up with the construction schedule. On October 5, 2001, (10/5/01) the Owner contacted GC and gave verbal release for the grading and earthwork, but water and sewer piping could not begin due to permit not being issued by the Department of Environmental Prot ection (DEP). Owner also indicated on 10/5/01, that some revisions to the plans were to occur prior to the final plans being sealed and issued. Delays Documented On October 10, 2001 (10/10/01) the S itesub sent a letter to the GC indicating that the lack of per mit for the underground pipe work was starting to negatively effect compliance with the schedule. Essentially pipe was onsite and pipe and labor were sitti ng idle waiting for permit clearance. On October 11, 2001, (10/11/01) Owner indicated that DEP was approved, but would not be issued for up to sixty (60) days. Owner indicated that work under the permit could not begin until official issuance of the permit. To S itesub this meant up to sixty days of idle time. On November 6, 2001 (11/6/01) the Owner allo wed Sitesub to start installing storm pipe, prior to issuance of the DEP permit. The installation of the storm pipe was out of sequence, as the sanitary sewer pipe needed to be under the storm pipe. This out of sequence work is one of delay issues that surround this project. On or about 11/6/01, the Sitesub directly contacted the Engineer and informed the Engineer of the problems that the Sitesub was having in trying to install the storm pipes first, with the expectation of installing the sanitary sewer pipes below the storm pipes at a later date.

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140 The other related issue is whic h engineering design entity, i.e. the Owner, the Architect or the Engineer, was primarily responsible for obtaining which permits for which scope of construction. Neither the GC nor the Sites ub were responsible for obtaining the permits necessary for the insta llation of the undergr ound utilities and piping. The Owner was handling contract management of this project. This began to prove problematic as the information chain from subc ontractors in the field to the civil engineer required passing through five (5) separate enti ties. To simplify and speed up the information gathering and issue resolution process on D ecember 17, 2001, (12/10/01) the Owner expanded the Architects contract to include constructi on administration services A further point of contention is that the Engineer s proposal for services stat ed the Engineer would provide construction administration services. The Owner and Architect, apparently, never vested this power in the Engineer. Grade Elevation By November 9, 2001, which was within three (3) days of the Sitesub starting to lay storm pipe the Sitesub discovered that grade eleva tions and all work to date were off by one (1) foot. On November 9, 2001, the Sitesub notifie d the GC that the benchmarks shown on the design drawings did not correlate to the elevations given in the plan s for existing structures. This correspondence further states that the north area is completely graded, three hundred (300) feet of storm pipe and two (2) structures are installed. This corr espondence further states that the Sitesub is suspending all work until the Engineer verifies the benchmark to be used and relied upon. It is disputed as to the cause of the benc hmark error. The Owner supplied the vertical datum for the project. The Engineer did not include a benchmark reference or indicate the vertical datum to be used on the project. The Owner produced reclaimed water drawings that

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141 indicated a benchmark to be used. The reclaimed water drawing has a note on it that it is issued For Information Only. There are two (2) vertical datum sources that ap pear to be integrated into this project. The County utilizes a vertical datum source via 1929, the National Geodetic Vertical Datum (NGVD). The City, i.e. the Owner, uses the mode rn North American Vert ical Datum (NAVD). At the project site the difference between these vert ical datum sets is appr oximately one (1) foot. Upon investigation two benchmark locations, in addition to the benchmark used by the Sitesub, were discovered in the vicinity of the benchm ark used by the Sitesub. That totals three (3) separate benchmarks in the same vicinity that re ference two (2) separate vertical datum sets. The contract documents vested the GC with th e responsibility of determining the vertical datum, but all contract documents and drawings were silent on the multiple vertical datum sources and benchmarks. The Sitesub is the ent ity that discovered, sort ed through and clarified all of the vertical datum confusion. The Own er clearly utilized and provided the modern vertical datum. It is questionable if the Own ers drawings indicated the correct benchmark reference. It is unclear if the Engineer utilized the vertical datum issued by the Owner or obtained the 1928 vertical datum via its own resources. What is clear is that the vertical datum control was, at best, unclear and ripe for confusion and misinterpretation. Design Conflicts The contract between the Owner and GC cont aine d a stipulation that the existing ball fields, immediately adjacent to th e expansion site, were not to be disturbed or interfered with in any manner to prevent ongoing use. Problematic ally, the design drawi ngs indicated placement of storm popes, sanitary sewer pi pes and structures that crossi ng swaths of the ball fields. Disruption of the ball fields, thus, was necessary as dictated by the design drawings. The Sitesub

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142 was placed in the position of being the cause of a breach between the Owner and GC or deviating from the design plans. There is no record evidence of the Engineer Architect or Owner resolving the conflict between the design documents and the ball field intrusion. The Sitesub submitted proposals for redesign of the storm and sanitary sewer line inst allation without disturban ce to the ball fields. On December 7, 2001, the Sitesub sent correspondence to GC with full description of sheet reference and structure movement to accommodat e the stipulation to leave the ball fields undisturbed. The Owner, Architect and Engin eer all approved the proposed design changes. An eight inch (8) pvc sanitary sewer lin e was designed to run between two existing structures, as part of the great er facility renovation. The design documents indicated a path for this 8 line that directly intersected an existing forty-two inch (42) storm line. The Owner and Engineers solution was to install the 8 pipe th rough the 42 pipe. A greater problem existed in the civil design provided for a 0.5% slope of the 8 pipe. Site sub could not achieve this 0.5% slope with under the existing conditions and tie-in requirements. In essence, the design documents were not constructable. The Owners minimum slope requirement for sanitary sewer was 0.3%. The Owner and Engineer eventually a llowed Sitesub to place the sanitary sewer line with the maximum obtainable slope of 0.28%. The GC and Sitesub submitted a total of elev en (11) RFIs in November and December 2001, in regards to site civil engineering issues. These RFIs required an average of forty one (41) days response time. Some of the concrete pipes that Sitesub was required to excavate turned out to be asbestos cement pipes. There was no indication in the contract document as to the existence of asbestos concrete pipes and there was no policy outlined for remediation of asbestos concrete pipes.

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143 The Geotech only performed eighteen (18) boring tests for the entire fifty four (54) acre construction site. The Geotechs report did not reference any subsurface encumbrances. Sitesub started to excavate significant quantities of burie d debris, such as concre te footings and other construction garbage, believed to be buried wh en the site was a naval training facility. GCs Acceleration of Schedule The Sitesub s original schedule estimated thirty eight (38) weeks or two hundred and sixty six (266) calendar days to complete the work. The GC accepted this schedule and integrated it into the CPM schedule submitted to Owner. On or about January 28, 2002, the one hundred twentieth (120th) day after NTP, the GC accelerated the Sitesubs completion date by ninety seven (97) days. At the time this occurred the Sitesub was left with less than sixty (60) days to complete the contract work. The GC set the Sitesubs completion date at March 13, 2002. The Sitesub was not able to meet the GCs revise d completion date and did not finish the job on March 13, 2002. The Sitesub fini shed the job on July 24, 2002. The need for the GC to accelerate the Sitesubs schedule is stated by the GC to be the delay in issuance of the general building permit. The building permit was delayed due to the delay in obtaining the DEP permit, which itself was a function of design errors and omissions on the civil drawings. The general building permit was also allegedly upheld due to deficiencies in the architectural and structural dr awings. While the Owner issued NTP on 9/21/01, the GC had not received the general building pe rmit as of December 2001. Thus the GC faced a time crunch and was forced to speed up all subcontractors work on the project. Sitesub was the first sub on the job and was forced to bear the in itial brunt of th is acceleration. Nature of Dispute The GC withheld payment to the Sitesub for one hundred thirty three (133) days, from the March 13, 2002, accelerated completion date the GC implemented to July 24, 2002, the date

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144 the Sitesub actually finished the job. The GC term inated the Sitesub once the initial site and civil work was completed on July 24, 2002. Claim History The Sitesub filed a claim agai nst the GC and Owner for one hundred thirty three (133) days of delay damages, as the Si tesub was in direct contractual privity with the GC. The Owner, being a Florida municipality, was immunized by Sovereign Immunity with recovery limited to one hundred thousand dollars. The GC defende d the claim by alleging design errors and omissions as being the cause in fact of the Sitesubs delays. The GC further defended by alleging that the accelerated schedule implemen ted by GC was achievable absent the numerous design errors and omissions. The Sitesub and GC settled the claim based on a comparative negligence basis, where the total damages claimed by Sitesub were offset by percentage of delays re asonably attributed to design errors and omissions. Procedurally the GC was obligated to plead the design entities into the claim. The GC and Sitesub agreed to settle the claim and allow the Sitesub to pursue the design entities directly on the ba sis of professional negligence. The Sitesub initiated a lawsuit against th e Architect and the E ngineer alleging delay damages due to professional negligence on the part of those design entities. This was not a contract action as no privity exis ted between the Sitesub and either the Architect or Engineer. The negligence action is a tort action, which Sites ub claims are not subject to the limitations of the economic loss rule. Claim Basis The Sitesub claims damages for the one hundr ed thirty three (133) days that include increased labor costs, increased equipment costs, increased field overhead, increased home office

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145 overhead, loss and diminution of payment and perf ormance bond capacity, loss of future profits, loss of business value, interest and penalties. The Sitesub also claims wrongful termination. The Sitesub uses a total cost approach to calculate damages in this matter. This calculation is based on dividing th e five year average general c onditions cost by the five year average revenues. This percentage obtained is th en multiplied by the total billings for the current job, i.e. the weighted percentage of genera l condition costs for the matter in dispute. Additionally labor and equipmen t damages are calculated. The total delay damages claimed by the Sitesub against the Architect and Engineer are two hundred seventy two thousand one hundred fifty nine dollars ($272,159). This is exclus ive of penalties, interest and attorney fees. Allegations by Sitesub (Plaintiff) The Sitesub alleges professional negligence against the Architect and Engineer. The Sitesub alleges that the Architect and Engin eer are liable for preparing erroneous design documents with knowledge that GC would design documents to Sitesub a nd that Sitesub would be injured by their inadequacy. Sitesub further alleges that th e Architect and Engineer were careless and negligent in the pe rformance of their duties in co nnection with the planning and construction of this project. (APPENDIX AA). Failure to Exercise Reasonable Care The Sitesub claim s that the Architect and Engineer failed to exercise the reasonable care, and technical skill, ability and diligence as are ordi narily required of an Ar chitect or Engineer in the production of plans, specifications and othe r contract documents. The Architect and Engineer, furthermore, did not exercise the ca re and skill, ability and diligence ordinarily required in regards to the inspection and supervis ion of the construction. Sitesub further alleges that the Architect and Engineer failed in their duty to respond to schedule sensitive requests, including RFI and submittal responses.

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146 Sitesub further alleges that Architect and E ngineer failed to properl y investigate existing conditions at the site and failed to obtain sufficient geotechnical da ta as is ordinarily required. Sitsub alleges that the Architect and Engineer comp letely disregarded the ordinary duty to obtain and verify accurate and complete survey data an d to include accurate and complete survey data and references on the contract plans and specifi cations. Specifically Sitesub alleges that the Architect and Engineer permitted the inclusion of conflicting benchmarks and vertical datum in the design documents. Lastly the Sitesub alleges that the Architect and Engineer failed to supervise, inspect or visit the project on a regular, timely and routine basis. Sitesub alleges that as part of this lack of direct supervision the Architect and Engineer routinely delega ted contractual, statutory and common law professional duties that were required to be perfor med by a licensed architect or engineer. Sitesubs Complaint, in sum, alleges that the Architect and Engineer failed to exercise the reasonable care and technical skill, ability a nd diligence expected of a professional in the community where the project site is located. Pr ofessional negligence must be proven in regards to the professional community in which professiona l negligence is alleged. This is also termed the Standard of Care threshold. (Compare to The Duty of Care st andard wherein an architect and engineer is expected to design a building that does not collapse or cause third party injury.) Sitesub alleges that as a direct and proximate re sult of the Architect and Engineer violating the Standard of Care and committing professional negligence that the Sitesub suffered the damages delineated herein. Sitesub alleges that in GC accelerating the completion of the site work from June 18, 2002, to March 13, 2002, any and all room for delay was removed from the schedule. With the

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147 removal of all potential float from the Sitesub s schedule it was necessary that Sitesub not be subject to any delay in its wor k. Sitesub alleges that not only did it encounter excessive delay, but that the delay encountered was wholly beyond control of Sitesub. Construction Sequence Disruption Sitesub alleges that the Archite ct or Engineer had a responsib ility to obtain the DEP perm it as soon as feasible in the design process. Failure to do so is the alleged cause in fact for delay. For NTP to occur without the DEP permit was e ssentially starting a job that could not, in actuality, be started. The 10/10/01, le tter issued by Sitesub to GC cl early indicates that the lack of DEP permit is creating an idle work force for Sitesub. The solution achieved by the Owner, Architect and Engineer, i.e. to lay the storm pipe first, Sitesub alle ges was not a solution at all. Sitesub alleges that the Architect and E ngineer were negligent in producing design documents that specifically called for the pla cement of sanitary sewer lines under the storm water piping. Sitesub alleges, therefore, that it was incumbent for Architect and Engineer to ensure that the DEP permit was obtained so that work could proceed in sequence and not be subject to redundancy. Sitesub alleges that Ar chitect and Engineer did not use reasonable diligence in obtaining the DEP permit or issui ng signed and sealed plans as the condition precedent to obtain the DEP permit. Sitesub allege s loss of fifteen to thirty days due to this permit fiasco. Vertical Datum Grade Error Sitesub claim s delay caused by the confusion of the vertical datum and benchmarks. Sitesub alleges that the Engineer produced all civil drawings to conform to the ve rtical control used by the County, not the control used by the Ow ner (City). While the civil drawings do not show a specific temporary benchmark for vertical reference control, th e Engineers use of incorrect data without specifying a benchmar k caused significant confusion. The Owner

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148 produced drawings showing a temporary benchm ark and this is what the Sitesub relied upon throughout the project. Th e problem is that the overlay vert ical dimensions on the civil plans were pegged to a different benchmark with a varian ce of one foot (1). Si tesub alleges that it is the Engineer that was responsible for identifyi ng this conflict and resolv ing it in the design and development phase. Ball Field Pipe Conflict Sitesub claim s delays due to the design c onflicts with the exis ting ball fields. As previously stated the Owner and GC entered a sti pulation in the prime contract that the existing ball fields will not be disturbed during construc tion. The final design documents released by the Architect and Engineer show placement of sanitary sewer pipes in portions of the ballfields. For the Sitesub to follow the design drawings, the use of the ball fields would be disrupted and the stipulation between the Owner and GC would be violated. The Architect and Engineer di d not offer any input or revised design drawings in regards to the pipe placement conflict with the ball fiel ds. The Sitesub was required to cease work and configure redesign of the pipe pl acement in conformance with the stipulation that the ball fields would remain undisturbed. The Sitesubs design work was forwarded to the Owner, Architect and Engineer for review and approval. By the Sitesub taking on site design duties the Sitesub was delayed in the performance of its contract obligations, namely performing site work. Other Alleged Delays Sitesub alleges delay dam ages regarding the in stallation of an eight inch (8) sewer line and reclaimed water line. As stated herein, th e design documents specified a 0.5% slope for the sanitary sewer line, which was not achievable pe r existing conditions in the field with regards design specifications. The Sitesub also encountered a high pressure gas line adjacent to the line of sewer pipe placement defined by the design do cuments. Sitesub also encountered existing

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149 forty two inch (42) round concrete pipe storm pipes in the speci fied path of the sanitary pipes to be installed. Additionally there existed large amounts of buried construction debris from the time the site was a naval facility. This debris included buried fuel oil tanks, partially full, and abandoned asbestos concrete pipe that re quired remediation. Specifically the asbestos pipe required a HAZMAT containment procedure. None of the s ubsurface debris and hazards were anticipated as they were not noted by Architect or Engi neer and were not disc overed by Engineers subsurface consultant. The Sites ub alleges the delay days claimed due to the subsurface issues are wholly reasonable. The Sitesub alleges that the Architect and Engi neer did not make an adequate preliminary investigation of the existing subsurface site conditions prior to issuing design documents. Sitesub alleges that Architect and Engineer, furt hermore, made no effort at design remediation once the subsurface problems and conflicts were discovered. As with all site work problems on this project, the Sitesub made the design m odification suggestions fo r approval by the Owner, Architect and Engineer. The design modifications and solutions so a pproved by the Owner, Architect and Engineer created additional time constraints for the Sitesub. The solution for the conflict between the 8 sanitary pipe and the 42 storm pipe was for the 8 pipe to bisect the 42 pipe. This solution required construction of a box, which was far beyond the original plan of simply running pipe.The asbestos concrete pipe issues were resolved by removi ng of the asbestos water line and not disturbing the asbestos sewer line. Sitesub claims a further delay due to design errors and omi ssions regarding the reclaimed water pipe. The designed tie in for the system wa s not feasible due to the tie in location being

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150 too close to all other existing util ities. The Sitesub suggested m oving of this reclaimed water tie in to a location more suitable for the excavation and work necessa ry to be performed. Secondly the design documents for the reclaimed water line did not include a backflow prevention valve. The Architect and Engineer had not included th e specification for a backflow prevention valve on the design documents. Summary of Sitesub Claim Sitesub a lleges that the failure of an overs ight design entity and contract administration entity became clear as the project became more and more problematic. To remedy this problem and to create a condition to suppor t the efficient administration of the contract and address the numerous design errors that were evident, the Owner renegotiated the contract with the Architect to include contract administration services. Sitesub alleges that despite this additional contractual duty on the part of th e Architect, that the Architect and Engineer were mostly absent from the project. Sitesub can point to only one or two site visits by either the Architect or Engineer for the entire duration of Sitesubs work on the project. Allegations by Architect and Engineer Architect and Engineer, represented by separate counsel, o ffer identical defenses and counter-allegations to the claims and allegations of the Sitesub. Architect and Engineer allege that the Sitesub failed to mitigate any and all alleged damages by failing to timely seek review and clarification of alleged design errors and om issions (as exist in the contract documents). This position by the Architect and Engineer states that the end user of the design documents has a duty to identify any issues that exist upon field implementation a nd to immediately seek resolution of those issues. (APPENDIX AB). Architect and Engineer allege that the S itesub did not follow the design recommendations of the Architect and Engineer. This alleges that the Sitesub failed to follow the plans and

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151 specifications as designed and failed to follow the clarification and resolution of issues as supplied by the Architect and Engineer. The Architect and Engineer fu rther allege that the work pr oduct these entities produced met the specifications of the contract they ente red with Owner. Architect and Engineer further allege that even if portions of the contract work with Owner were not satisfactory that the work of the Architect and Engineer were accepted and approved by all of the appropriate enforcement and permitting agencies, including the Owner and relevant State agencies (i.e. the Department of Environmental Protection and the Water Management District). Architect and Engineer allege that Sites ub cannot pursue any claim for failure to notify the Architect and Engineer of the claim in a timel y manner. Architect and Engineer allege that any such timely notification requi red Sitesub to inform the Archite ct and Engineer of any alleged design errors and deficiencies, thus allowi ng Architect and Engin eer the opportunity at remedying same. Architect and Engineer further allege that any delays suffe red by the Sitesub are due to the acts, errors and omissions of persons or en tities other than the Ar chitect or Engineer. Architect and Engineer define these other entitie s and persons as other subcontractors, suppliers and any and all agents, representati ves or employees of the Sitesub or of other entities or persons. Architect and Engineer allege that the alleged other entities and persons were intervening or supervening causes of Sitesubs alleged damages. The allegations of the Architect and Engi neer, known as affirmative defenses, do not state with specificity any details of events, condit ions or acts. The posture that the Architect and Engineer are taking is that once discovery be gins, i.e. depositions, document production, etc, the evidence will indicate that the Architect and Engineer did not commit professional

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152 negligence and that the delays suffered by the Site sub will be clearly and wholly attributable to entities other than Architect and Engineer. Archit ect and Engineer, to be safe, claim for any and all offsets available as the result of monies prev iously paid to Sitesub by third parties for delay damage. Architect and Engineer further claim for a comparative offset of negligence based on actions of any other Defendant, whether currently named as a party or to be discovered as negligent during the c ourse of the action. Economic Loss Rule Defense The initial defense relied upon by the Architect and Engineer is that Econom ic Loss Rule (ELR) bars the claim by the Sitesub. The ELR, broa dly defined, bars a tort claim if the damages are purely economic (no personal in juries involved) and the subj ect matter of the dispute is contractual in nature. The ELR, hi storically, was used as a very e ffective defense to tort claims brought as the result of a construction dispute. In Florida numerous opinions were issued by th e Supreme Court in the last ten to fifteen years that limit the application of the ELR. Thes e cases have reached a culmination. One of the most recent opinions rendered by the Florida Su preme Court on the application of the ELR is Indemnity Insurance Co. of No. Amer. v. American Aviation 891 So.2d 532 (Fla. 2004), which the Court took on certification from the United States 11th Circuit. Justice Pariente clearly writes in Indemnity Insurance that: The Economic Loss Rule bars a negligence action to recover sole ly economic damages only in circumstances where the parties are either in contractual privity or the defendant is a manufacturer or distributor of a product and no established exception to the application of the rule applies. Id. at 534

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153 Indemnity Insurance holds that the ELD applies in two instances: 1) where parties are in privity and a party sues in tort for purely economic loss; or 2) there is a de fect in the product that causes damage to that product as a whole, but causes no personal injury or damage to other property. Id .at 536. Economic loss is defined as damages for inadequate value, costs of repair or replacement of defective product, consequential loss of profits or loss of benefit of a bargain. Id. at 536. This products liability loss rule applies even in the absence of privity. Id. at 541.

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154 CHAPTER 11 CONCLUSION In conclusion many of the construction disput es that arise can be avoided if all parties involved in the project are first able to communi cate and adhere to realistic expectations. The failure to communicate and do what is promised is the greatest issu e for any contractual relationship. The attention to detail is another means of avoiding many of the issues and disputes contained herein. The industr y as a whole has moved toward s remedying avoidable problems by bringing all of the parties to th e table early in the process. It is common for the general contractor to not only be available, but to participate in the design and development phase of a project. Additionally the reliance on hard bi ds is being phased out for the preference of negotiated work. Contractors are able to be involved in the pr ocess early, provide input and negotiate a price that involves th e realistic success of the project. As a general rule as much detailed, up front work as possible must occur to eliminate the occurrence of the claim at the end of the project. Despite all of the attempts to reduce the occurrence of claims and litigation these still occur. There are so many pieces to a puzzle that is the reality of the construction process that if one piece is missing or one link is weak the cumulative and cascading effect can be pronounced. As such it is necessary for an entity in th e process to know its lia bility and remedies.

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155 APPENDIX A GCS 25 ITEM BAR CHART SCHEDULE

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164 APPENDIX D PAYMENT HISTORY AND LIE N RELEASES

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165 APPENDIX E SUBCONTRACTOR BUYOUT ANALYSIS

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167 APPENDIX F PILING DELAYS

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170 APPENDIX H EXTENDED GENERAL CONDITION COSTS

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213 APPENDIX L NEWBERRY SQUARE V. SOUTHERN LANDMARK 578 SO.2D 750 (FLA. 1ST DCA 1991) Page 750 578 So.2d 750 16 Fla. L. Weekly 856 NEWBERRY SQUARE DEVELOPMENT CORPORATION, Diversified Centers, Inc., and Robert L. Miller, Appellants, v. SOUTHERN LANDMARK, INC., and Aetna Casualty & Surety Co., Appellees. No. 89-1363. District Court of Appeal of Florida, First District. March 29, 1991. Rehearing Denied May 21, 1991. Page 751 Stephen B. Rakusin, of Rakusin & Iv ey, Gainesville, and S. Larue Williams, of Kensey, Vincent & Pyle, Daytona Beach, for appellants. Philip N. Hammersley, of Trawick, Ha mmersley & Valentine, Sarasota, for appellees. WENTWORTH, Senior Judge. Appellants (hereinafter Newberry Square) 1 seek review of an order by which appellees (hereinafter Southern Landmark) were awarded damages in a construction contract dispute. We find that the only point which requires reversal is the allowance of damages, in Southern Landmark's

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214 Page 752 award, for two of Southern Landmark's subcontractors. We reverse the order as to this portion of the total damages, and otherwise affirm. Southern Landmark entered into a contract to construct a shopping center for Newberry Square. The contract specified completion dates for Southern Landmark's work. When the work was not completed until after the scheduled dates Newbe rry Square withheld payment of the outstanding contract balance and refused to pay the full amount of Southern Landmark's final pay requisition. Southern Landmark thereafter filed an action seeking recovery which included damages related to delays which it contended were attributable to Newberry Square. Although the contract contained a "no damage for delay" clause which purported to limit Southern Landmark's available remedy to an extension of time, such a clause does not preclude recovery for delays resulting from a party's fraud, concealment, or active interference with performance under the contract. See United States for the Use & Benefit of Seminole Sheetmetal Company v. SCI Inc., 828 F.2d 671 (11th Cir.1987); C.A. Davis Inc. v. City of Miami, 400 So.2d 536 (Fla. 3d DCA 1981), pet. for review dismissed 411 So.2d 380 (Fla.1981). And despite such a clause damages may be awarded upon a "knowing delay" which is sufficiently egregious, see Southern Gulf Utilities Inc. v. Boca Ciega Sanita ry District, 238 So.2d 458 (Fla. 2d DCA 1972), or upon the willful concealment of foreseeable circumstances which impact timely performance. See McIntire v. Green-Tree Communities Inc., 318 S o.2d 197 (Fla. 2d DCA 1975). These exceptions to the no damages clause are generally predicated upon an implied promise and obligation not to hinder or impede performance. See Seminole Sheetmetal, supra. In the present case there was evidence that Newberry Square delayed in providing approved plans and specifications, and in providing plans and specifications which incorporated desired changes. There was also evidence that Newberry Square delayed in executing change orders and required that construction not proceed without such orders. And it was indicated that Newberry Square repeatedly failed to make timely payments required by the contract. This course of conduct was established not only as to the Newberry Square project, but also as to two other construction projects involving these parties. And Southern Landmark's president testified that appellant Robert Miller had threatened "that he would break me before he'd pay...." There was thus adequate evidence to present a jury question as to whether Newberry Square actively impeded, or willfully and knowingly delayed, Southern Landmark's ability to timely perform under the contract, and in these circumstances the "no damage for delay" clause does not preclude Southern Landmark's recovery. Newberry Square argues that Southern Landmark should not have been allowed to present evidence as to the delays and difficulties which occurred on the other two construction projects which were not a part of the contract in this case. However, all three projects were bid during the same month, and it was indicated that the procedures in administering the contracts, including the payment process and change orders, were identical. Evidence was presented as to various delays which Newberry Square occasioned on the other two projects, and the manner in which these difficulties impacted Southern Landmark's ability to perform under the contract in the present case. The evidence was pertinent to Newberry Square's motive, knowledge, and intent and thus admissible under section 90.404(2)(a), Florida Statutes, as it refl ected the totality of the circumstances and the course of dealing between the parties as related to the dispute in the present case. Newberry Square also argues that it should have been allowed to present the testimony of an accountant who performed a cash flow analysis of payments on the construction project in this case. But it was indicated that this analysis did not include all overhead costs, and did not consider the impact of payment delays from the other projects. And similar testimony

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215 Page 753 was presented by two other witnesses who suggested that Southern Landmark had not adequately paid their subcontractors when payments were made to Southern Landmark. Given the questionable accuracy of the accountant's cash flow analysis, an d the presentation of similar evidence by other witnesses, the exclusion of the accountant's cash flow testimony does not constitute reversible error. During the presentation of Southern Landmark's evidence a witness used a chart titled "Summary of Amounts Claimed." Newberry Square asserts that the chart was also used during argument by Southern Landmark's counsel, although the record is not entirely clear in this regard. The chart contained figures reciting the various amounts claimed as damages. One of the items was modified in accordance with the concession of Southern Landmark's president that certain damages should be excluded. After the jury retired to begin deliberations it requested that the court provide a written breakdown of the damages claimed. Counsel fo r Newberry Square suggested that it would be "inappropriate ... to provide the jury with any ... information," and expressed a preference that the chart "not go in" to the jury room. The court then returned the jury to the courtroom where the chart was displayed, and advised the jury: "this is not evidence. This is a chart ... used to explain to you what their damage--what claims there are. You should not use this chart as evidence of damage, just what their claims of damage are." The court explained to the jury why one of the figures on the chart had been altered, and noted that the bottom-line figure needed to be adjusted accordingly. The jury thereafter returned to the jury room and continued deliberations. Louisiana-Pacific Corp. v. Mims, 453 So.2d 211 (Fla. 1st DCA 1984), suggests that a chart used during argument "must be promptly removed from the jury's observation" when the argument is concluded. See also, Ratner v. Arrington, 111 So.2d 82 (Fla. 3d DCA 1959). But in Mims the jury was allowed to take the chart into the jury room as a court exhibit, whereas in the present case the chart was not allowed into the jury room. Rather, the jury was merely permitted to again view the chart, which had also been used by a witness during testimony, for approximately five minutes in the courtroom, after which it remained outside the jury's view. The present case is also unlike Ballard v. W.E. Rowe, 234 S.E.2d 890 (S.C.1977), where a blackboard display of claims was taken into the jury room. In Ballard the blackboard display had been utilized in response to a jury request, and then additional claims were displayed upon a further request initiated by the trial court. The appellate court cautioned against "any intimation" by the trial court which might influence the minds of the jurors. In the present case the trial c ourt clearly informed the jury that the chart was merely a summary of amounts claimed, and should not be considered as evidence. It has not been shown that the trial court's actions imperiled the fairness of the proceeding by prejudicing the minds of the jurors, as has been required for reversal in cases such as Pennsylvania Thresherman v. Koltunovsky, 184 So.2d 450 (Fla. 3d DCA 1966). The brief and limited use of Southern Landmark's claim chart in response to the jury's inquiry does not create the necessary inference of prejudice, and does not constitute reversible error. Southern Landmark's damage award included amounts for two subcontractors ($39,000 for Newsom Brothers, and $141,000 for Home Electric). Such claims, when a contractor sues a project owner on behalf of a subcontractor, have been allowed when the contractor would be liable to the subcontractor, and in situations such as public contracts where the subcontractor is unable to establish an express or implied contract with the project owner. See Farrell Construction Co. v. Jefferson Parish, 693 F.Supp. 490 (E.D.La.1988); Public Health Trust of Dade County v. M.R. Harrison Construction Corp., 454 So.2d 659 (Fla. 3d DCA 1984); see also, Wexler Construction Co. v. Housing Authority

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216 Page 754 of Norwich, 149 Conn. 602, 183 A.2d 262 (1962). But the present case does not involve a public contract, and Southern Landmark is made contractually liable to the subcontractors "only to the extent" that Newberry Square is liable to Southern Landmark. The circumstances of this case thus do not accord with the standard announced in Farrell, and the other cited cases, for such claims. And as a matter of special damages peculiar to this case, the claims for the subcontractors' losses should have been specifically pleaded. See Fla.R.Civ.P. 1.120(g); cf., Safeco Title Ins. Co. v. Reynolds, 452 So.2d 45 (Fla. 2d DCA 1984). While Southern Landmark's complaint refers to additional expenses for material, labor, and services, and notes that litigation was filed by subcontractors, it does not make any more specific request for damages pertai ning to subcontractors' losses. Special damages should be pleaded with particularity sufficient to apprise the opposing party of the nature of the special damages claimed. See Augustine v. Southern Bell Telephone & Telegraph Co., 91 So.2d 320 (Fla.1956); see generally, Fla. Power Corp. v. Zenith Ind. Co., 377 So.2d 203 (Fla. 2d DCA 1979), cert. denied 388 So.2d 1120 (Fla.1980). Although Southern Landmark attempted in its pretrial compliance statement to increase the claim to encompass the subcontractors' losses, this document was filed less than three weeks before trial commenced and does not serve as an amendment of the pleadings. Indeed, in its pretrial statement Sout hern Landmark acknowledged that Newsom Brothers' and Home Electric's losses had not been included in Southern Landmark's claim. The failure to specifically plead a claim for these damages, and the absence of a basis for presentation of these claims, precludes the inclusion of such damages in Southern Landmark's award. The order appealed is reversed insofar as the subcontractors' losses were included in Southern Landmark's damages. The order is otherwise affirmed, and the cause remanded. MINER, J., concurs. ERVIN, J., conc urs and dissents w/written opinion. ERVIN, Judge, concurring and dissenting. I concur in all aspects of the majority's opinion except those relating to the trial court's refusal to permit testimony regarding how Southern Landmark used construction funds following payment from Newberry Square, the admission of hearsay statements made by an employee of Southern Landmark regarding what other employees told him about problems on the job, and the lower court's comments on and revisions to Southern Landmark's damages chart in the presence of the jury after jury deliberations had begun. If the first two issues were the only errors which occurred at trial, I could concur with the majority in affirming under the theory that such errors were only harmless. Because, however, I consider that the third issue requires reversal and remand for new trial, I would reverse as to the former two as well. As to the first issue, after the trial court ruled inadmissible certain evidence pertaining to the manner in which appellant had paid construction funds to Southern Landmark on the Newberry Square project, the appellants proffered Ira Baron as an expert witness. Baron testified that he had examined and analyzed various financial data belonging to Southern Landmark, including cancelled checks, general ledgers, cash receipt journals, and check vouchers, and concluded therefrom that for the final eight months of 1985, and the first seven months of 1986, Southern Landmark had been overpaid in excess of $160,000. As such, Baron's testimony challenged Southern Landmark's theory that it could not pay its subcontractors because Ne wberry Square was not making prompt payments to Southern Landmark. The purpose of that testimony was clearly relevant to establish that Southern Landmark was receiving payments from Newberry in excess of that needed on the project and at the same time was not paying its subcontractors. Because the evidence concerned Newberry Square's theory of defense, it complied

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217 Page 755 with the definition of relevant evidence, 2 and was therefore admissible. Appellees defend the trial court's decision to exclude such testimony on the ground that Baron's cash-flow analysis was incomplete in that it neither took into consideration cash-flow problems which existed at the other two construction projects, nor contemplated the contractor's home office overhead. In my judgment this argument goes more to the weight of the submitted evidence--not its admissibility. See Gershanik v. Department of Professional Reg., Bd. of Medical Examiners, 458 So.2d 302 (Fla. 3d DCA 1984), review denied, 462 So.2d 1106 (Fla.1985); Nat Harrison Assocs., Inc. v. Byrd, 256 So.2d 50 (Fla. 4th DCA 1971). Any weakness in the underlying basis of Baron's opinion testimony could have been effectively brought to the jury's attention during cross-examination and later during the arguments of appellee's counsel. But his testimony for that reason alone should not, in my judgment, have been the cause for its exclusion. Moreover, in determining whether the evidence was admissible, the trial court should have considered the counterbalancing factors outlined in Section 90.403, Florida Statutes (1989). Although a trial court enjoys wide discretion in deciding whether to admit or exclude relevant evidence pursuant to section 90.403, Dale v. Ford Motor Co., 409 So.2d 232 (Fla. 1st DCA 1982), such discretion is not unlimited. As section 90.403 expressly provides, the discretion to exclude relevant evidence may be exercised only if the evidence's "probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, misleading the jury, or needless presentation of cumulative evidence." (Emphasis added.) In commenting upon Federal Rule of Evidence 403, after which section 90.403 is patterned, Wright and Graham point out that "the discretion under Rule 403 is far from a license for free-wheeling exclusion; it carefully delineates a balancing test that must be applied before the evidence can be excluded." 22 C.A. Wright & K.W. Graham, Jr., Federal Practice and Procedure Sec. 5166, at 74 (1978). The balancing process required by section 90.403 was analyzed in the following terms by a well-known commentator: In weighing the probative value against the unfair prejudice, it is proper for the court to consider the need for the evidence; the tendency of the evidence to suggest an improper basis to the jury for resolving the matter, e.g., an emotional basi s; the chain of inference necessary to establish the material fact; and the effectiveness of a limiting instruction. 1 C.W. Ehrhardt, Florida Evidence Sec. 403.1, at 103 (2d ed. 1984). In my judgment appellant's need for the opinion evidence outweighed any adverse consideration. At the very minimum it clearly was not substantially outweighed by any of the countervailing factors listed in section 90.403. Baron wa s the only witness who actually testified as to the amount of overpayment, stating that as of January 31, 1986, Southern Landmark received $228,230 more than it paid out, and that during the seven months ending July 31, 1986, Southern Landmark received $1,881,000 and paid out $1,879,000. This testimony went to the very crux of appellants' defense, and therefore had substantial probative value. Appellees finally argue that the cash-flow analysis was offered in the face of undisputed evidence that each of the payments to the contractor on the project were made following a certification by the architect that the contractor was due the amount, and, pursuant to the contract documents, that the architect's certificate for payment was conclusive. I agree with appellant that such certificates for payment would simply show how much the contractor had been paid, but would not show whether Southern Landmark actually used such amounts on the Newberry Square project. Turning next to the issue relating to hearsay testimony, Southern Landmark's employee, Ed Johnson, testified that he had

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218 Page 756 been informed that Robert Miller, the sole sh areholder and chief executive officer of Newberry Square, had failed to timely pay design professionals. He also stated that the civil engineer had advised him that he was owed money. Appellee asserted that this hearsay testimony was harmless because it was cumulative. On the contrary, the only testimony which corroborated Miller's was that of an architect who testified that he had delayed paying the electrical engineer, because he was not being paid promptly by Miller. Under the circumstances, it cannot be said that Johnson's hearsay testimony was cumulative. As to the third issue, the majority omits the fact that the trial judge, in the presence of the jury, crossed out the item listed on Southern Landmark's damages chart as the "amount due under the contract[,] $481,132.28," and replaced it with the figure $478,470.32. As he did so, the judge made the following comments to the jury: "What I did at the top [of the chart], is the initial claim was four eightyone what have you, and subsequent testimony redu ced that to $478,470.32[,] and the bottom number [the total sum for all items of damages claimed on the chart] needs a deduct, too...." (Emphasis added.) Despite the court's cautionary instruction to the jurors that the chart should not be considered as evidence, the court's other comments could have no e ffect other than to convey the impression that the court tacitly approved the revised figure. This assumpti on is supported by the fact that the amount which the jury awarded to Southern Landmark for this ite m of damages corresponded precisely with the court's revised figure. The majority, in affirming as to this issue, focuses upon distinguish ing facts in other cases in which--unlike the present case--the jurors were permitted to take exhibits into the jury room. The majority also emphasizes that the trial judge below specifically instructed the jury that the chart should not be considered as evidence. These distinctions, in my judgment, are not compelling when it is considered that the jurors were not only permitted to view the chart in the courtroom, but were also provided with pads and pencils. Implied comments on the evidence, su ch as those made here, have been continuously disapproved in a substantial body of case law. For ex ample, in Louisiana-Pacific Corp. v. Mims, 453 So.2d 211 (Fla. 1st DCA 1984), this court reversed a judgment in which the trial court permitted a list of damages to be taken to the jury room as a court's exhibit, notwithstanding that the trial judge cautioned the jury that the chart was not evid ence. In so holding, we observed that "[t]he designation of the chart as a court's exhibit, lending to it the sanction and influen ce of the judge, is an error far more grievous than leaving it in the view of the jury during phases of the trial for which its use is unnecessary." Id. at 212-13. The effect that a trial judge's comments express or implied, may have on a jury's verdict was further alluded to in Ballard v. Rowe, 268 S.C. 517, 234 S.E.2d 890 (1977)--a case this court relied upon in Mims--in which the jury, during deliberations, request ed a list of the items claimed by the plaintiff. Both the plaintiff and the defendant listed their claims on a blackboard and the court permitted the jury to view the lists and take them into the jury room The Supreme Court of South Carolina reversed and remanded for new trial, stating, Although the judge admonished the jury that the matters written on the blackboard (which were the equivalent of an exhibit) were merely the claim or contention of the general contractor, we must keep in mind the fact that the presiding judge has great influence upon the minds of the jurors, who are quick to seize upon any intimation by [word] or gesture from him. Id. 234 S.E.2d at 892. Finally, in Steele v. United States, 222 F.2d 628 (5th Cir.1955), the trial court permitted the jury to take into the jury room two government exhibi ts which were compilations of the alleged income of the defendant, who had been charged with tax evasion. The court reversed the judgment of conviction as to this issue and remanded, stating: [W]e agree with appellant that the jury could scarcely consider this act of the court [sending the exhibit to the jury

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219 Page 757 room] other than as investing thes e exhibits with an air of credibility as demonstrative evidence over and above, and independent of, the eviden ce which they purported to summarize and embody, with the undoubted effect of completely erasing from the minds of the jury, as to the socalled exhibits, any therapeutic eff ect the charge to the jury that the exhibits were not original evidence and were not binding upon the jury, was intended or calculated to have. Id. at 630. The above cases clearly demonstrat e the persuasive influence which an exhibit, prepared simply to support a party's theory of the case, may have upon jurors, once it is allowed to go with them into the jury room during thei r deliberations. The prejud icial effect is no less when a trial judge revises an item of damage s on a chart which has no evidentiary value and comments that he has done so in order that the item may be conformed to the evidence. In both cases the items are invested with an aura of cr edibility. And, in the latte r case, the item may be additionally perceived in the jurors' minds as having been clothed with judicial approval. For the above reasons I would revers e the judgment and remand the case for new trial. --------------1 Appellant Diversified Centers is Newberry Square's parent cor poration, and appellant Robert Miller is the sole share holder of both entities. The parties agreed below that appellants are the same for the purpose of liability. 2 "Relevant evidence is evidence tending to pr ove or disprove a material fact." Sec. 90.401, Fla.Stat. (1989).

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220 APPENDIX M PAYMENT TIME ANALYSIS

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223 APPENDIX N OWNER CLAIM SUMMARY

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224 APPENDIX O LOST RENTAL INCOME

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228 APPENDIX P HOSPITAL PHASING PLAN

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232 APPENDIX Q HOSPITAL ADDENDA DRAWINGS DURING BID PERIOD

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237 APPENDIX S RFI SUMMARY

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238 APPENDIX T MECHANICAL AND ELECTRICAL LATENT DEFECT COSTS

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239 APPENDIX U OWNER LIQUIDATED DAMAGE CLAIMS

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240 APPENDIX V PAYMENT HISTORY

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241 APPENDIX W SUMMARY GC SCHEDULE UPDATES

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242 APPENDIX X PUNCH LIST EXAMPLES

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246 APPENDIX Y SUBSTANTIAL COMPLETION ANALYSIS

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247 APPENDIX Z DAMAGE CALCULATIONS AND FORMULA

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251 APPENDIX AA COMPLAINT

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256 APPENDIX AB ENGINEER COUNTERCLAIM AND AFFIRMATIVE DEFENSES

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262 LIST OF REFERENCES Aagaard-Juergensen v. L ettelier 579 So.2d 404. (Fla. 5th DCA 1991) Aetna Casualty and Surety Company v. Buck 594 So.2d 280 (Fla. 1992) American Home Assurance Co. v. Plaza Materials Corp. 908 So.2d 360 (Fla. 2005) Anton v. Anton 763 So.2d 404 (Fla. 4th DCA 2000) The Architects Handbook of Professional Practice The American Institut e of Architects; David Haviland, Editor, 1897 Armentos v. Baptist Hospital of Miami, Inc. 714 So.2d 518 (Fla. 3rd DCA 1998) A.R. Moyer, Inc. v. Graham 285 So.2d 397 (Fla. 1973) Biakanja v. Irving 49 Cal.2d 647 (Cal. 1958) Biscayne Roofing Co. v. Palmetto Fairway Condo. Assoc. 418 So.2d 1109 (Fla. 3rd DCA 1982) Bridgeport, Inc. v. Tampa Roofing Co. 903 So.2d 306 (Fla. 2nd DCA 2005) Casa Clara Condominium Assoc. v. Charley Toppino and Sons, Inc. 620 So.2d 1244 (Fla. 1993) CDS v. 1711 743 So.2d 1223 (Fla. 4th DCA 1999) Cecile Resort, Ltd v. Hokanson 729 So.2d 446 (Fla. 5th DCA 1999) City of Tampa v. Thonton-Tomasetti, P.C. 646 So.2d 279 (Fla. 2nd DCA 1994) Commerce Partnership 8098 Ltd. Partnership v. Equity Contracting Co. 695 So.2d 383 (Fla. 4th DCA 1997) Conklin v. Hurley 428 So.2d 654 (Fla. 1983) Croon v. Quayside Assoc., Ltd. 464 So.2d 178 (Fla. 1985) Drexel Properties, Inc. v. Bay Colony Club 406 So.2d 515 (Fla. 4th DCA 1981) Duncan v. Kasim, Inc. 810 So.2d 968 (Fla. 5th DCA 2002) Easterday v. Masiello 518 So.2d 260 (Fla. 1988) E.C. Goldman, Inc. v. A.R.C. Associates, Inc. 543 So.2d 1268 (Fla. 5th DCA 1989) Eiler v. Camp, Dresser & McKee 583 So.2d 1086 (Fla. 5th DCA 1991) Fischer-McGann, Inc. v. Glic 715 So.2d 994 (Fla. 4th DCA 1998)

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263 Gable v. Silver 258 So.2d 11 (Fla. 4th DCA. 1972) Garcia v. Biltmore Court Villas, Inc. 534 So.2d 1173 (Fla. 3rd DCA. 1989) Geer v. Bennett 237 So.2d 311 (Fla. 4th DCA 1970) Gulfside Properties Corp. v. Chapman Corp. 737 So.2d 604 (Fla. 1st DCA 1999) Harper Lumber & Manufacturing Co. v. Teate 125 So. 21 (Fla. 1929) Hawkins v. Champion Int'l. Corp. 662 So.2d 1005 (Fla. 1st DCA 1995) Hoepner 7 Assoc. v. Gilman Co. 648 So.2d 854 (Fla. 5th DCA 1995) Holding Electric, Inc. v. Roberts 530 So.2d 301 (Fla. 1988) HTP, LTD. v. Lineas Aereas Costariccecenses, S.A., 685 So.2d 1238 (Fla. 1996) Indemnity Insurance Co. of North Amer. v. Amer. Aviation 891 So.2d 532 (Fla. 2004) J. Batten Corp. v. Oakridge Inv. 85, Ltd. 546 So.2d 68 (Fla. 5th DCA) Jervis, Bruce, ed. Recovering Unabsorbed Ov erhead: Defining a Compensable Suspension. Construction Claims Monthly os 16 (1994): 1+ Johnson v. Aqua Pool Co., Inc. 725 So.2d 458 (Fla. 2nd DCA 1999) J. Square Enter v. Regner 734 So.2d 565 (Fla. 5th DCA 1999) Juno Industries, Inc. v. Heery Int'l. 646 So.2d 818 (Fla 5th DCA 1994) Kala Investments, Inc. v. Sklar 538 So.2d 909 (Fla. 3rd DCA 1989) Kay v. Slavin 108 So.2d 462 (Fla. 1959) Keller v. Newman and Sons, Inc. 756 So.2d 120 (Fla. 3rd DCA 2000) Lee v. Sas Et.Al. 53 So.2d 114 (Fla. 1951) Legault v. Suncoast Lawn Service 486 So.2d 72 (Fla. 4th DCA) LeMay v. U.S.H. Properties 338 So.2d 1143 (Fla. 2nd DCA 1976) Lesser, Steven B. Floridas New Constructi on Defect Statute; The Aggrieved Homeowners Obstacle Course. The Florida Bar Journal 9th ser. 77 (2003): 18. Lesser, Steven B. The 2004 Amendments to Floridas Construction De fect Statute: Some Solutions and More Confusi on. The Florida Bar Journal 9th ser. 78 (2004): 47

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264 Luciani v. High 372 So.2d 530 (Fla. 4th DCA 1979) Martin v. Venice Hospital 603 So.2d 1377 (Fla. 2nd DCA 1992) McConnell, Hugh. Distinguishing Quantum Meruit a nd Unjust Enrichment in the Construction Setting. The Florida Bar Journal 3rd ser. 71 (1997): 88. McElvy et. al. v. Arli ngton Electric, Inc. 582 So.2d 47 (Fla. 2nd DCA 1991) Metal Foam Industries, Inc. v. Watson 716 So.2d 328 (Fla. 2nd DCA 1998) Moore v. PRC Engineering, Inc. 565 So.2d 817 (Fla. 4th DCA 1990) Moransais v. Heathman 744 So.2d 973 (Fla. 1999) Nat'L Fire Ins. Co. of Hartford v. L.J. Clark Constr. Co. 579 So.2d 743 (Fla. 4th DCA 1991) Newberry Square v. Southern Landmark, 578 So.2d 750 (Fla. 1st DCA 1991) Onionskin, Inc. v. DeCiccio 720 So.2d 257 (Fla. 5th DCA 1998) Publix v. Cheesbro Roofing, Inc. 502 So.2d 484 (Fla. 5th DCA 1987) Puya v. Superior Pools 902 So.2d 973 (Fla. 4th DCA 2005) Ramos v. Univision Holdings, Inc. 655 So.2d 89 (Fla. 1995) Sansarac Assn., Inc. v. W.R. Frizzell 609 So.2d 1349 (Fla. 2nd DCA 1992) Schauer v. Blair Construction Co. 374 So.2d 1160 (Fla. 4th DCA 1979) Schmeck v. Sea Oats Condo. Assoc., Inc. 441 So.2d 1092 (Fla. 5th DCA 1983) Shepard v. City of Palatka 399 So.2d 1044 (Fla. 5th DCA 1981) Snyder v. Bell 746 So.2d 1096 (Fla. 2nd DCA 1999) Southland Construction, Inc. v. Richeson Corp. 642 So.2d 5 (Fla. 5th DCA 1994) Standard Heating Svcs, Inc. v. Guymann Constr., Inc. 459 So.2d 1103 (Fla. 2nd DCA 1984) Stevens v. Site Developers, Inc. 584 So.2d 1064 (Fla. 5th DCA 1991) St. Lucie Harvesting v. Cervantes 639 So.2d 37 (Fla. 4th DCA 1994) Stunkel v. Gazebo Landscape 660 So.2d 623 (Fla. 1995) Superfos Construction v. HAJOCA 712 So.2d 1228 (Fla. 2nd DCA 1998) Targia v. U.S. Alliance Corp. 2003 Lexis 21799 (S.D. Fla. 2003)

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265 Thompson v. Commercial Union Ins. Co. 250 So.2d 259 (Fla. 1971) Thompson v. Jared Kane Co., Inc. ,. 2D03-2011 (Fla. 2nd DCA 2004) United States v. Spearin 248 U.S. 132 (1918) U.S. Fidelity v. Bennett 119 So.2d 394 (Fla. 1928) U.S. Lodging of Jax, Ltd. v. H.B. Daniel Constr. Co., Inc. 617 So.2d 448 (Fla. 1st DCA 1993) Van Ness v. Independent Construction Co. 392 So.2d 1017 (Fla. 5th DCA 1981) Viking Communities Corp. v. Peeler Constr. Co. 367 So.2d 737 (Fla. 4th DCA 1979) VL Orlando v. Skilled Services Corp. 769 So.2d 526 (Fla. 5th DCA. 2000)

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266 BIOGRAPHICAL SKETCH Frank Hild received a Ju ris Doctor from the University of Florida in 1998, and practiced civil and criminal law. The diverse practice prov ided significant exposure to complex litigation. Mr. Hild maintains a significant interest in cr iminal law. However it was the practice of commercial law and a personal inte rest in design and construction that prompted Mr. Hild to enroll in the Rinker School of Building Constructi on to obtain a master of science, which he will realize in December of 2007. Mr. Hild is resu ming a practice specializing in construction law.