Frost Brown & Todd LLC http://www.constructionlawnews.com/ Frost Brown & Todd LLC RSS Feed en-US Copyright Frost Brown & Todd LLC webmaster@sablaw.com Fri, 21 Nov 2008 18:00:58 GMT Fri, 21 Nov 2008 18:00:58 GMT <![CDATA[Green Building Series: Are State and Local Green Building Laws and Ordinances Preempted by Federal Law? One Federal Court Says, “Maybe.”]]> http://www.constructionlawnews.com/BlogEntry.aspx?_entry=940fcec7-15ef-4eb8-965c-33023200ef27&RSS=true http://www.constructionlawnews.com/BlogEntry.aspx?_entry=940fcec7-15ef-4eb8-965c-33023200ef27&RSS=true 11/19/2008
The Energy Policy and Conservation Act (EPCA) is a federal law that establishes a national standard for the energy efficiency of major commercial and residential appliances and equipment, including HVAC equipment. The Department of Energy is responsible for maintaining and updating these standards. The EPCA contains a provision that expressly prohibits state and local regulation concerning the energy efficiency, energy use, or water use of any product covered by the act.

The new City of Albuquerque ordinances cover both new construction and renovations to existing buildings. They also cover commercial, multi family, and single family projects. Depending on the type of project, there are various ways that a project can achieve compliance with the new ordinances. These include achievement of LEED Silver certification, demonstrating a measured 30% increase in system efficiency over a baseline standard, compliance with modified ASHRAE standards, or compliance with the Build Green New Mexico program – a sustainability accreditation developed by the New Mexico Home Builders’ Association. There is also a prescriptive compliance option available to all types of Projects. Under this option, the individual components of the system must be evaluated against Albuquerque’s new standards, most of which are stricter than federal standards.

In finding that the Plaintiffs were entitled to the injunction, the court came to several conclusions. First, the court found that Albuquerque’s new ordinances would require defendants to increase warehouse space, carry additional stock, and decipher the new code to meaningfully assist customers in selection of compliant equipment. The court found that these new requirements would cause the plaintiffs economic harm that is irreparable because the City of Albuquerque is protected by sovereign immunity and cannot be sued by plaintiffs who suffer economic losses due to the new laws. The court further found that the injunctions would not pose a hardship on the City since it would merely require maintenance of the status quo. The court also referenced Congress’ comments to the existing federal legislation which found that uniform national requirements favor public interest.

Finally the court found that “at a mimimum” the prescriptive paths to compliance require the use of appliances with standards in excess of federal efficiency standards. The court continued, “[w]hile it is less clear that Plaintiffs will prevail on their challenge to the performance-based options, Plaintiffs, at a minimum, have raised questions that are “serious, substantial, difficult and doubtful.”’

The final paragraph of the court’s opinion is perhaps most telling,

The City’s goals in enacting Albuquerque’s Energy Conservation Code and the Albuquerque High Performance Buildings Ordinance are laudable. Unfortunately, the drafters of the Code were unaware of the long-standing federal statutes governing the energy efficiency of certain HVAC and water heating products and expressly preempting state regulation of these products when the Code was drafted and, as a result, the Code, as enacted, infringes on an area preempted by federal law.

If these federal standards were unknown to the drafters of the Albuquerque ordinances, then they may have also been unknown to the drafters of similar laws and ordinances around the country. Accordingly, the preemption contemplated by the New Mexico court may apply to other codes from other states and cities.

The injunction granted by the New Mexico court is temporary. Whether or not it will become permanent depends on the final outcome of the New Mexico case. However, at this point in the underlying litigation, the court does not seem optimistic that the ordinances, as written, will ever be enforceable. If the court permanently enjoins enforcement of the statute, this case could become a precedent that causes similar laws around the country to come under scrutiny.  Submitted by Christopher J. Dutton.]]> Blog Entry <![CDATA[Green Building Series: Wells Fargo’s Green Financing]]> http://www.constructionlawnews.com/BlogEntry.aspx?_entry=0764dee1-3dcf-4302-8f21-4b8b50c32261&RSS=true http://www.constructionlawnews.com/BlogEntry.aspx?_entry=0764dee1-3dcf-4302-8f21-4b8b50c32261&RSS=true 12/19/2008 Wells Fargo & Company, which just announced a recent milestone in green financing in that it has provided more than $2 billion in financing secured by real estate with green structures. It has also doubled its commitment to high performance, LEED-certified buildings in the past 19 months.

While Wells Fargo has clear long-term goals of corporate responsibility and environmental stewardship, it is in the business of making sound investments. Larry Chapman, head of Commercial Real Estate at Wells Fargo, stated, “We can achieve long-term value for our businesses and our society though the development of high performance, resource-saving buildings.” In a time when there is great debate over the worth of all real estate, Wells Fargo is apparently willing to assume the risk that these new green buildings will not be subject to the type of expected depreciation of much of the commercial real estate market. Developers should keep this in mind as they attempt to secure financing for their future projects.

Geoff White is a Senior Associate in the Commercial Transactions and Real Estate Group at Frost Brown Todd. Mr. White is licensed to practice law in Kentucky and Ohio and is a member of the Kentucky Chapter of the U.S. Green Building Council. Learn more about Geoff White.  ]]> Blog Entry <![CDATA[A CALL TO PRESIDENT-ELECT OBAMA TO INVEST IN INFRASTRUCTURE]]> http://www.constructionlawnews.com/BlogEntry.aspx?_entry=35d031a6-3b15-43df-955f-03854b7c692e&RSS=true http://www.constructionlawnews.com/BlogEntry.aspx?_entry=35d031a6-3b15-43df-955f-03854b7c692e&RSS=true 11/12/2008
Last week, New York Times columnist David Brooks published an outstanding article under the headline “Next president can jump-start economy by investing in infrastructure”. (11/3/08 Cincinnati Enquirer) Brooks writes: “In times like these, the best a sensible leader can do is to take the short-term panic and channel into a program that is good on its own merits even if it does nothing to stimulate the economy over the next year. That’s why I’m hoping the next president takes the general resolve to spends gobs of money, and channels it into a National Mobility Project, a long-term investment in the country’s infrastructure.”

Brooks notes that a “major infrastructure initiative would create jobs for the less-educated workers who have been hit hardest by the transition to an information economy. It would allow the U.S. to return to the fundamentals.” Brooks also calls for streamlining “the regulations that can now delay project approval by five years.” He recommends the exploration of “all the new ideas that are burgeoning in the transportation world – congestion pricing, smart highways, rescue plans for shrinking Midwestern cities, new rail and airplane technologies.”

Brooks concludes: “when you look into this sector, you see we are on the cusp of another transportation revolution. A mobility project would dovetail with the energy initiatives both presidential candidates have offered. It would benefit from broad political support from liberals and business groups alike. It would rebalance this economy, so there is more productive weight to go along with Wall Street wizardry. Smart investors are going to take advantage of the current panic to make money. A smart president could take advantage of it to build something that will last for decades and decades to come.”

We believe that revitalizing and rebuilding our infrastructure is a priority that all Americans can and should support.  Submitted by Scott Gurney.

 ]]> Blog Entry <![CDATA[OHIO COURT UPHOLDS STATUTE REQUIRING OUT OF STATE CORPORATION TO REGISTER TO DO BUSINESS OR FACE DISMISSAL OF CLAIMS]]> http://www.constructionlawnews.com/BlogEntry.aspx?_entry=71046c7b-094f-484a-b93e-013071965cce&RSS=true http://www.constructionlawnews.com/BlogEntry.aspx?_entry=71046c7b-094f-484a-b93e-013071965cce&RSS=true 11/12/2008
This concept was at issue in the recent case cited as National Crime Reporting, Inc. v. McCord & Akamine, L.L.P. (2008), 177 Ohio App. 3d 551. National had filed a complaint against McCord alleging breach of contract and unjust enrichment. In response, McCord filed a motion to dismiss contending that National was not properly registered to do business in Ohio in violation of Ohio Revised Code Section 1703. National admitted that it had not registered but claimed that it had filed an application for registration which was pending. That application had been filed after the original complaint had been filed.

McCord’s motion to dismiss was converted into a motion for summary judgment by the court. After a hearing on the motion, the trial court granted summary judgment in favor of McCord on all claims. On appeal, National contended that the trial court erred in dismissing the claims with prejudice.

In its review, the appellate court noted that Section 1703.03 requires that foreign corporations must hold a license to do business in the state of Ohio. A corporation failing to obtain the license is prohibited from maintaining any action in Ohio courts until it has complied with the statute. While the initial motion had been a motion to dismiss, the court had converted it into a motion for summary judgment since it took evidence outside the complaint to resolve the matter. The appellate court noted that an adjudication under Rule 56 operates as a decision on the merits such that the dismissal is with prejudice. In this particular case, however, the court noted that the dismissal should be without prejudice since it was not a disposition on the merits; rather, it was a decision on a procedural issue.

The appellate court observed that similar issues had been presented in other cases which had held that a decision on the merits was inappropriate under these circumstances. The court stated that a dismissal based upon a lack of capacity to sue is a procedural issue rather than a decision on the merits of the case. The court also cited a case interpreting Ohio Revised Code Section 1329.10(B) which provides that no person doing business under a trade or fictitious name may commence an action in that trade name or fictitious name until it has registered that name with the Secretary of State. The court noted the parallels between these two statutes and also that they are procedural in application.

The bottom line was that the judgment was reversed and the trial court was directed to enter a new judgment dismissing the action but without prejudice.
The important takeaway from this case is that Ohio law requires that a foreign corporation must register with the Secretary of State in order to transact business in Ohio. Most importantly, if that action is not taken and a dispute arises, the foreign corporation cannot pursue claims for collection of an otherwise valid debt unless or until it has completed the registration process.

Since many construction companies cross borders or rivers in order to perform work in adjacent states, the company should be mindful of the impact those seemingly invisible lines have on the enforcement of their legal rights.

David C. Olson, Esq.
Frost Brown Todd LLC
2200 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
dolson@fbtlaw.com
513-651-6745]]> Blog Entry <![CDATA[OHIO APPELLATE COURT ESTABLISHES PRIORITY OF LIENS AND DENIES LIEN HOLDER PREJUDGMENT INTEREST]]> http://www.constructionlawnews.com/BlogEntry.aspx?_entry=8c81bb27-eeea-4c82-a661-01aaeea8026f&RSS=true http://www.constructionlawnews.com/BlogEntry.aspx?_entry=8c81bb27-eeea-4c82-a661-01aaeea8026f&RSS=true 10/31/2008
In May 2003 Milano Sports purchased some property to convert an indoor tennis court into an ice rink. In June 2003, Milano hired various subcontractors to perform work on the facility and one of the contractors, Esco Electrical Contractors, Inc., was engaged to perform the electrical work and that company rented equipment to perform some of its work. In July 2003 Milano closed on the property and financed the purchase with the proceeds of a mortgage that was obtained from Guernsey Bank. On July 10, 2003 the general warranty deed as well as the mortgage was filed. At no time, however, was a notice of commencement filed.

Renovations proceeded through the remainder of 2003, but Milano Sports failed to pay for the work on the project. As result, mechanics liens were filed against the property. In 2004, the bank filed a foreclosure action and through amendments added the various lien claimants as parties. Competing claims were filed, and the trial court found that the lien claimants took priority over the mortgagee. Further, the court awarded prejudgment interest to the lien claimants. The title insurer that provided a title policy to the bank had also been added.

The trial court’s judgment established the priority of the liens and declared that the bank was entitled to coverage under the title insurance policy. Further, the trial court established the amounts due the various lien claimants and ordered the sheriff to pay the claimants from the proceeds of the sale of the property.

On appeal, a number of issues were addressed by the court. Upon analysis, the court overruled the objections of the bank finding that the liens were properly established and timely filed.

In upholding the validity of the mechanics liens, the court noted that Ohio Revised Code Section 1311.06 creates a right not recognized in common law such that the court must strictly construe the statute providing the benefit of a mechanics lien.

The bank challenged the validity of Esco’s lien, contending that it did not properly set forth the amount due after all legal set offs. In its motion, Esco submitted an affidavit from its CEO stating that the amount set forth in the mechanics lien was, indeed, the amount due to the lien claimant over and above all legal setoffs. As the entity challenging this evidence, the bank had the burden to demonstrate that the assertion was incorrect. The appellate court found that the bank had failed to provide evidence establishing that the affidavit stated the wrong amount such that its summary judgment motion was properly denied on that issue.

The next argument challenged the timeliness of the filing. The court noted that the statute required a filing within 75 days of the date on which the last work was performed or material was furnished. At its deposition, the lien claimant’s executive testified that it had three laborers performing work at the job site on a date well within the 75 day time period. While the bank presented conflicting evidence, the court found that there was adequate evidence that permitted the trial court to find that the lien was filed in a timely fashion.

The bank also contended that the work performed on the relevant date was not within the scope of the lien claimant’s contract. The court noted that the time for perfecting the lien cannot be extended by tacking two separate contracts together. The court then approved the approach based on the analysis of whether the work performed was “a necessary part of the proper completion and performance of the work which the lien claimant undertook to do.” The court then concluded that the work performed on the date within the time frame satisfied this requirement.

The final challenge went to the priority of the various liens. The court noted that under the applicable Ohio statute mechanics liens are effective from the date the first visible work or labor was performed if no notice of commencement were filed. The parties stipulated that no notice of commencement was ever filed such that the applicable date to determine priority was the date on which the first visible work or labor was performed or the first materials were furnished.

The final issue decided by the appellate court was the award of prejudgment interest to the various lien claims. The appellate court reviewed the statutory derivation of mechanics liens and noted that they are statutory rights against the property (or in rem proceedings) as opposed to actions against an individual (or in personam). The court noted that the mechanics lien statute provides a laborer or material supplier with a statutory right to bring an action against the property as security for its claim. Other appellate courts had held that this distinction between in rem and in personam claims prevented the award of prejudgment interest since a subcontractor does not have a privity of contract with the owner. Some appellate courts had allowed the assessment of prejudgment interest when there was, in fact, privity of contract. The Tenth District, however, rejected this approach, holding that the nature of the action alone prevents the award of prejudgment interest for distribution from the proceeds of a mechanic’s lien foreclosure sale.

Given the conflict between the appellate districts, the Ohio Supreme Court may be called upon to resolve this conflict.]]> Blog Entry <![CDATA[Green Building Series: A Quick Primer on Green Building and the LEED, Green Globes and ENERGY STAR Frameworks]]> http://www.constructionlawnews.com/BlogEntry.aspx?_entry=f933bded-de3c-41a4-942a-1278630f4c68&RSS=true http://www.constructionlawnews.com/BlogEntry.aspx?_entry=f933bded-de3c-41a4-942a-1278630f4c68&RSS=true 10/31/2008 “Green” is more than just a buzz word in the real estate and construction industries today. The U.S. EPA defines green building as the practice of creating healthier and more resource efficient models of construction, renovation, operation, maintenance and demolition. The benefits of green building are: reduced operating costs; increased property value; desirable perception as an environmentally friendly consumer; reduced strain on the environment; and potential availability of tax rebates or other government incentives for the property. Until recently, many people placed a higher value on the costs of green building than the perceived benefits. Those costs generally range anywhere from a 15% to 25% increase of the construction costs depending on the level of sustainability achieved. The established approach is beginning to change. Large, multinational retailers such as Wal-Mart and Starbucks have instituted green initiatives for their properties. PNC Bank requires each newly constructed branch office be green. Ten states, including Ohio, have enacted statutes that require certain buildings funded entirely, or in part, by the state be green. Cities such as Cincinnati, Chicago and Seattle each have green building initiatives. Large federal government properties are also now required to be green.

How can a building or tenant space be classified as green?

There are multiple frameworks and classification systems that allow buildings to be considered green, but the three most widely accepted and third-party-administered green classification systems are ENERGY STAR, Green Globes and Leadership in Energy and Environmental Design Green Building Rating System (“LEED”). The E.P.A. and Department of Energy have established ENERGY STAR to certify buildings as green. Green Globes, which is administered by the Green Building Initiative, is a third-party system that rates green buildings. Experts consider it a cost-efficient and user-friendly system, but not the most demanding of the best green building practices. The most established, widespread and stringent green building guidelines in the U.S. is LEED. The U.S. Green Building Council (the “USGBC”) administers LEED certification for new construction, existing building renovations, commercial interiors, core and shell design, schools, retail, healthcare, homes and neighborhood development. LEED certification is further divided into four ratings: (i) Certified, (ii) Silver, (iii) Gold, and (iv) Platinum. Various LEED related initiatives are found in the legislation, resolutions, ordinances or policies of seventy-eight cities, twenty-four counties, twenty-eight states and twelve federal agencies. The USGBC has tracked approximately 1,300 LEED certified projects as of May, 2008.

Geoff White is a Senior Associate in the Commercial Transactions and Real Estate Group at Frost Brown Todd, which has a Resource Conservation Committee that is helping it go green.  Mr. White is licensed to practice law in Kentucky and Ohio and is a member of the Kentucky Chapter of the U.S. Green Building Council.  Learn more about Geoff White.]]> Blog Entry