Illinois Construction Law Blog : Illinois Construction Lawyer & Attorney : Foran Glennon Palandech Ponzi & Rudloff Law Firm : Chicago IL

Michael Downs v. Rosenthal Collins Group, LLC, (Ill. App. 1^st, Doc. No. 1-08-0636) will be of interest to anyone reviewing their own contracts.  The case involves a contract's indemnity provision and whether or not it included an indemnification for attorney’s fees.

In a prior action, the plaintiff, a CEO and Member of a limited liability company, had been sued for breach of his fiduciary duties and breach of contract.  He successfully defended those claims and then filed a separate action against the corporation for breaching their agreement to indemnify him by not paying him for the attorney’s fees he expended in the prior case.

The agreement’s indemnification provision read:

“21.2  The Company shall indemnify each Member for any act performed by such Member with respect to Company matters permitted by this Agreement and/or Majority Approval, but in no event for fraud, willful misconduct, negligence or an intentional breach of this Agreement.”

The plaintiff argued that because only the word indemnify was used, it should be interpreted to have a broad meaning that included attorney’s fees.  The court analogized this case to a case where the word “defend” had been used in the indemnification agreement… “to protect, defend, indemnify and hold harmless” and noted that the agreement in this matter failed to use such language.  Combining the contract’s lack of specificity regarding attorney’s fees and noting that the American system of jurisprudence favored parties bearing their own costs and attorney’s fees unless otherwise agreed, the court found that attorney’s fees were not included in the agreement.  The court went on to state that a well-settled bright-line rule on the issue provided certainty in the law and would put parties on notice to include precise language on attorney fees when negotiating their contracts.

The lesson is to ensure that you’ve included or at least considered whether you want an attorney fee provision in your indemnification clause.  Although the court in this case seems to agree that the word “defend” added to the word indemnify may have made things come out differently, it would be best to specifically request the fees and/or costs that you want.

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ConsensusDocs released their BIM addendum a while back and the AIA has now announced the release of six new IPD and BIM documents which include a BIM Exhibit that should help facilitate direct communication of each party's duties and an on-site project representation document that should be interesting.  A full press release from the AIA can be read here.

It's impossible to keep the excitement that surrounds BIM projects from spilling over into construction's legal sphere.  The challenges of contracting for a collaborative exercise and answering the new questions that are raised in an atmosphere that could become an entirely open and instant exchange of information will likely end up creating the need for many future revisions and additions to all the collaborative agreements.

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    Chances are that if you’ve been through an arbitration you’re going to have a strong opinion about it.  It’s even likely that your experience has influenced you enough to include or delete arbitration clauses from your contracts.  Splitting the baby in two is a normal result and the parties are expected to air their grievances up front - it is, after all, an alternative to the litigation process, and should not be treated as a precursor to some other form of conflict resolution, and the opinion in the matter of  Environmental Barrier Co., LLC v. Slurry Systems, Inc. (7^th Circ. Doc. No 06-3910) is no exception.

    An arbitration claim was filed by a company that had purchased some of the assets of a subcontractor during the subcontractor’s bankruptcy.  The original arbitration claim was for $657,273.50 against the general contractor by the company that had purchased the sub’s contract in the bankruptcy (the “sub-purchaser”), and the final arbitration award was $388,919.88.  After the sub-purchaser moved to confirm the award in court, the general raised a new issue:  that there had been no agreement to arbitrate between the parties.  The seventh circuit addressed the issue and found in favor of the sub-purchaser.  The court raised policy concerns about allowing a party to sit on the issue of arbitrability throughout an arbitration and then to raise it after the parties have completed the arbitration process and have moved on to court.

“This is not a tactic we can accept, for sound policy reasons.  It is terribly wasteful of the arbitrator’s time, the parties’ time, and the court’s time.  Anyone who wants to object to arbitrability is entitled to make her position known to the arbitrator and the other party; the other party may then, if it wishes, respond with a petition for an order to compel arbitration under the Federal Arbitration Act…and obtain a judicial determination on arbitrability.  In addition, keeping the arbitrability card close to the chest would allow a party like [the general contractor] to take a wait-and-see approach: if it had liked [the arbitrator’s] decision, it would have remained silent, but since it did not, it is now complaining about arbitrability.”

    The court is correct, and this is a lesson for anyone getting ready to participate in an arbitration, or considering the merits of not participating.  The time to object is in the beginning.  The legal process, including arbitration, is about the resolution of disputes and not tactical gamesmanship.

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In another development in the area of job site safety in Illinois, a Cook County trial Judge has found that a construction manager cannot be held liable for an injury suffered by a worker when he fell into a trench.  The opinion is attached here.

The court reasoned that the construction manager, Ambitech Engineering, did not have sufficient control over the plaintiff's work to create a duty to him despite contractual language obligating Amitech to motinor job site safety.  The court also found insufficent evidence of knowledge of any dangerous conditions on the part of Ambitech.  This case, like dozens of others like it, demonstrate that the courts will continue to scrutinize personal injury claims against construction managers and general contractors on a case by case basis.  We will continue to monitor this developing area of law and expect that sometime soon the Illinois Supreme Court will speak on the topic. 

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