A recent case involved a mechanical subcontractor with claims against an engineering, procurement and construction contractor on a major chemical plant project. By an unusual quirk of fate, certain of the disputes were arbitrated to award by an International Code Council tribunal in the Fall of 2017, and other disputes were tried to a jury verdict in the Fall of 2018. Both proceedings, however, reaffirmed certain core principles related to avoiding and preserving subcontractor claims.
Read the Contract, Then Read It Again and Again
At the risk of stating the obvious, the starting point for preserving a subcontractor claim is the subcontract itself. The importance of understanding the parties’ respective contractual obligations cannot be overstated. For example, depending on the law governing the contract, the failure to give contractually required notice of a claim, in the form required by the subcontract, can be fatal to that claim. Likewise, if the subcontract requires proof of a critical path delay to recover delay damages, the inability to demonstrate CP delay may result in the denial of damages even if there is clear evidence of contractor-caused delay to the subcontractor.
Attention also needs to be paid to the claim and dispute resolution provisions to determine the manner and method by which claims and disputes must be presented. Specifically, subcontractors should consider whether certain steps are “conditions precedent,” that is, a step that must be completed in order to have the right to proceed to the next stage of the process.
In short, the contract provides a roadmap for what can be claimed, the proof required and the process for making the claim, and must be followed. Parties that comply with their contractual obligations, notwithstanding breaches by the other party, generally have the better odds of prevailing.
Document, Document, Document
The importance of contemporaneous project documents supporting a claim also cannot be overstated. They need to be the “right” kind of documents. Meeting minutes that appear to be “cut and pastes” of prior minutes are attackable as being inaccurate and not a true representation of the project status. Minutes that vaguely state that “material requisitioning continues to impact work in Unit 9000” are not particularly useful in establishing delay or disruption claims due to the lack of necessary detail.
It is not uncommon for valid claims to fail because the project records do not adequately support entitlement and/or quantum. In a perfect world, a daily foreman report would establish both an event and causation (e.g., work on line 2420 in Unit 980 was stopped due to dimensional error), and the event’s impact on the work (e.g., lost two hours waiting for engineering decision; demobilized from line 2420 and remobilized to line 4980, 4.5 hours). Such detailed documentation serves to explain productivity losses in real time during the project while also providing evidence for any claim presentation that might later become necessary. Importantly, many decision-makers regard contemporaneous documentation as more reliable proof of events than later created documents or expert analysis. Moreover, the time and cost of field personnel taking an extra five or ten minutes to fully document issues is substantially less than the cost of an expert trying to recreate events well after the fact.
The Elmo Rule
In this context, “Elmo” is not the beloved Sesame Street character, but rather the camera system federal courts use to display documents on video screens during trial. The rule itself, is quite simple: never write anything you don’t want displayed during a trial (especially if on the witness stand). Again, while having documents is important, having the right documents is equally important.
This rule applies with particular force to internal communications, such as emails, which tend to be much more informal than external communications. Text messages are even more informal, often drafted on the fly with multiple distractions, and without careful consideration of the language used and message conveyed.
What needs to be remembered is that emails and text messages are largely discoverable by the opposing party in a dispute resolution proceeding. Advanced litigation support software developed over the past decade, which improves each passing year, makes the likelihood that an opposing party will locate the email or text that should not have been sent quite high. Further, dispute resolution, be it a trial or an arbitration, typically takes place years after documents were created during the project, and the context in which they were created is almost always lost. As a result, humor, sarcasm or colorful commentary never looks good with the passage of time, particularly to decision-makers who did not live the project. It also needs to be remembered that an opposing party’s lawyer has an ethical obligation to zealously represent his or her client. As a result, a failed attempt at humor three years ago may be argued to represent something more nefarious in the present day. The antidote is to treat emails and text messages (if used at all) as business communications, which should be factual and contractual in content.
Clarify and Confirm
The playwright George Bernard Shaw is credited with the saying, “England and America are two countries separated by the same language.” The underlying sentiment is particularly appropriate in this era where project owners, contractors, subcontractors and suppliers may be from different countries overseas. Just because the language of the project is English, does not mean that the recipient will understand a communication the same way the author intended. For example, U.S. project managers may have been trained and socialized in cultural, political and economic environments that are vastly different from their overseas counterparts. Contract language may be interpreted differently based on differing past experiences. Idioms and metaphors that are common to the U.S. – e.g., “threw me a curve” – are likely lost on many non-Americans. Project communication and project documents need to be clear and concise and then confirmed with the recipients so that everyone is on the same page.
