Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

My friend Vickie Pynchon recently posted at Chris Hill's blog, Construction Law Musings, on "How to Get Sued".  On the flip side, there are some simple pointers that all individuals and entities can follow that will dramatically reduce the chances of being sued.  These tips apply across a spectrum of businesses and are certainly not limited to just construction, real estate and land use.

1.  Be likable.  It is a lot harder to sue a friend.  If you maintain a friendly, warm relationship and the other side genuinely likes you, it is very difficult to cross the threshold of considering suit, let along filing one.

2.  Failing that, at least be palatable and not obnoxious.  On some level, likability and personality are somewhat pre-wired and we may not all be blessed with the so-called "winning personality".  It is clearly within most of our ability to avoid being confrontational, impolite or nasty.  Those traits make it real easy to turn a dispute personal and into trench litigation warfare.

3.  Be honest and maintain credibility.  Understand that if you get caught even in somewhat meaningless falsehoods, they come at the price of your credibility throughout the deal.  Many lawsuits flow from the plaintiff losing trust in the honesty of their opponent.

4.  Play nice.  Taking extreme advantage during a deal may feel like a good move at the time, but it can create an atmosphere that calls for payback.  Building a relationship of shared mutual success and teamwork can help smooth over differences of viewpoint during performance of contracts.

5.  Be organized.  Expensive, protracted and risky litigation looks a lot less attractive if your opponent looks like they have their act together and can or may win.  Sending the message that you are well organized throughout a contract can help create that impression.

6.  Document, document, document.  This may be the most important substantive point, as opposed to personality driven point, of all.  My career is littered with cases fraught with peril due to the failure of clients or opponents to document decisions, conversations, agreements, or notices.  In the era of instantaneous e-mail transmission, there is no excuse for why you failed to drop a quick line confirming what turns out to be the pivotal facts once you get into litigation.  Sending that timely confirmation is a great investment in avoiding litigation.

Image:  Yale University Art Gallery

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In 2004, 515 Granby, LLC proposed a $180.5 million condo development. With 34 stories and 327 units, Granby Towers would be the tallest building in Norfolk and would revitalize the northern part of the city. The following year, the federal government threatened to condemn the property, causing just enough of a delay for the ebbing economic tide to overtake the Granby Tower project and thwart 515 Granby’s ability to secure financing.

Fortunately for 515 Granby, the prime contract with Turner Construction Company had the following language:

This Agreement and any liability and obligations of the Owner…shall be subject to and expressly conditioned upon the closing by the Owner, and the initial funding by its lender, of the construction loan… and Owner shall have no obligation or liability to Construction Manager for any costs for the Construction Phase under this Agreement unless such construction loan closing is completed.

Turner and its subcontractors, who were owed over $13 million for construction on the project, challenged this language in a two-day evidentiary hearing in the Circuit Court for the City of Norfolk. In a letter opinion issued by Judge Martin, Judge Martin rejected this challenge, finding that 515 Granby “made great efforts to secure financing for the project,” but was unable to do so due to the current conditions of the credit market. Judge Martin concluded that 515 Granby would have had to pay Turner only if and when it had received initial funding of the construction loan.  For an in-depth look at the court's reasoning, and what you can do if you face such a contractual provision, go to Yes, Virginia, Contract Terms Do Matter:  Financing Term Offers Owner an Escape Hatch, by my colleague, Tim Hughes, guest blogging on Construction Law Musings. 

Fortunately for Turner, its subcontracts contained the following language:

The obligation of Turner to make a payment under this Agreement, whether a progress or final payment, or for extras or change orders or delays to the Work, is subject to the express condition precedent of payment therefor by the Owner.

One of the subcontractors, Suburban Grading & Utilities, claimed this language was unenforceable. In a second letter opinion, Judge Martin upheld this provision as well, noting that the Supreme Court of Virginia finds “pay if paid” clauses enforceable “where the language of the contract in question is clear on its face.” This language was an unambiguous “pay if paid” clause that Judge Martin had no choice but to uphold, leaving Suburban to eat the costs of $575,928 for labor and materials and another $245,662 for dewatering.  For a great and very timely discussion of this opinion and advice about "pay if paid" clauses, I urge you to read Chris Hill's Construction Law Musings post, Pay if Paid, Pay Attention Subs.

Don’t go away thinking there will be no winners in this debacle! The federal government has since conveniently renewed its desire to condemn the property in order to expand the federal courthouse next door.  It offered a paltry $6.1 million to seize the Granby Tower property, an offer that no one is jumping at yet.  If you’re interested in reading more on this very likely end to the Granby Towers saga, take a look at Harry Minium and Tim McGlone’s recent article in The Virginian-Pilot.  
 

Image by:  Hyunsoo Leo Kim/The Virginian-Pilot 

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