Falling Light Poles Pose Safety Risk At Schools

By Kirk H. Hays

At least nine steel stadium light poles manufactured by Whitco Co. LP of Fort Worth Texas have collapsed. One fell through the roof of a school gymnasium and another two fell on studium bleachers. Nearly another 50 have been found with significant cracks prior to falling.

This has caused the U.S. Consumer Product Safety Commission (CPSC) to issue an alert warning of the danger of this product. Cracks and fractures are developing next to the weld that joins the pole at its base plate. The CPSC warns that a visual inspection may not be sufficient to identify potential failures and recommends that the areas of, and next to all welds joining a pole to its base plate for these products be inspected by a qualified professional immediately.

Whitco Co. is no longer in business.

For more information contact the CPSC's Hotline at (800) 638-2772 or e-mail info@cpsc.gov.

Two Recent Trial Court Decisions

By Kirk H. Hays

Juries in two recent trials have issued verdicts on construction law cases. Ensely v. Forecast Residential Sales of Arizona (Maricopa CV2007-023466) was a six-homeowner lawsuit that alleged damage to their homes due to soil movement, window leaks and stucco deficiencies. The plaintiffs requested about $90,000 per home for repairs. The jury awarded between $14,743 and $27,780 per home for a total verdict of $122,508. Both sides of the dispute declared victory; Forecast because the verdict is significantly less than the requested relief and the plaintiffs because they beat Forecast’s settlement offers prior to trial.

For the geotechnical soil movement issue, the verdicts ranged from $7,723 to $19,100 per home. For the window claim the damages were $1,400 to $3,080 per home. For the stucco issues it was $4,480 to $9,240 per home.

A significant issue now is the allocation of attorney’s fees and costs. The plaintiffs reportedly plan to submit a request for about three times the verdict amount in attorney’s fees and costs—meaning this case cost them about three times more than they recovered! The award is discretionary with the Court, who might consider the low verdicts as a defense win. A low attorney’s fee award may result in the plaintiff’s recovering very little or maybe even going in the hole on this lawsuit.

The second case is Landmark Building Consultants v. Vic’s Plumbing Inc. (CV 2006-016925). Vic’s installed gas and water lines for Landmark that allegedly later leaked. Vic’s claimed that only one leak was brought to its attention and it quickly fixed it and that the unreported leaks were caused by other trades. Vic’s also claimed that if the work had not been installed correctly, the City of Scottsdale’s building inspector would not have signed off on the work. Landmark asked for $29,452 in damages. The jury found for Vic’s on the gas leak but in favor of Landmark on the waterline leak in the amount of $19,015.95.

For more information on these cases contact Kirk H. Hays at khays@holmwright.com or (480) 961-0586.

AZ Preliminary 20-Day Notice: Did You Serve the Lender?

By Jared M. Scarbrough

The prudent contractor, subcontractor, materialman, and supplier—especially in this economy—is ensuring that it files its Preliminary 20-Day Notice on every applicable job in the event that it has trouble getting paid for its work. But are you properly serving all of the necessary parties? Arizona Revised Statutes §33-992.01 requires that a claimant serve the Preliminary 20-Day Notice upon the owner, general contractor, contractor with which the claimant contracted, and the construction lender. In a case that is currently pending appeal, a Maricopa County Superior Court judge ruled that pursuant to A.R.S. §33.992.01, the subcontractors on a traditional residential construction project had an affirmative duty to discover the identity of and actually serve the construction lender.

A.R.S. §33-992.01(B) and (E) state that a subcontractor that wants to file a lien on a project must “as a necessary prerequisite to the validity of any claim of lien, serve the owner or reputed owner, the original contractor or reputed contractor, the construction lender, if any, or reputed construction lender, if any, and the person with whom the claimant has contracted for the purchase of those items with a written preliminary twenty day notice . . . by mailing the notice by first class mail sent with a certificate of mailing, registered or certified mail, postage prepaid in all cases, addressed to the person to whom notice is to be given at the person's residence or business address. Service is complete at the time of the deposit of notice in the mail.”

Of course, the subcontractors argued that they requested the lender’s information under A.R.S. §33.992.01(I), and that the owner and general contractor failed to respond within ten days. The judge, however, ruled that the lender’s information was readily available to the subcontractor on the Maricopa County Recorder’s website, and that the lender would have been prejudiced by the owner’s failure to provide the lender’s information to the subcontractors, and thus, granted the lender’s motion for summary judgment.

As mentioned, this case is pending appeal, but it is a clear signal that the prudent contractor, subcontractor, materialman, and supplier must be even more conscientious with their preliminary lien notices and ensure that it performs its due diligence to discover the identity of the construction lender and properly mail the preliminary notice to the lender using the specific means set forth in the statute to protect its lien rights down the road.

For more information contact Jared M. Scarbrough at jscarbrough@holmwright.com or (480) 477-8589.

Summary of Arizona’s Prompt Payment Law

By Suzette S. Doody

Arizona’s Prompt Payment Act (A.R.S. § 32-1129 et seq.) is a statutory scheme that governs the timing of payments from an owner to the general contractor; from the general contractor to the subcontractors; and from subcontractors to its suppliers for all private construction projects longer than sixty (60) days. The Act requires that an owner identify and disapprove those items that need to be corrected early in the construction process so that contractors, subcontractors and suppliers receive prompt payment for their work.

Central to the Act’s goal of prompt payment is a statutorily limited period of fourteen (14) days to object to any amounts in a general contractor’s payment application. If the owner does not object within fourteen (14) days, the pay application is deemed “approved and certified” and the owner is legally obligated to pay the contractor within seven (7) days. Following payment by the owner, every contractor or subcontractor must pay its licensed subs and suppliers for their labor or materials within seven (7) days of receipt. An owner and general contractor and/or its subcontractors can agree to modify the statutory payment terms only if the contract clearly states the alternative billing cycle.

An owner may decline to approve and certify a billing or estimate or portion of a billing or estimate for the following reasons: unsatisfactory job progress, defective construction work or materials not remedied, disputed work or materials, failure to comply with other material provisions of the construction contract, third party claims filed or reasonable evidence that a claim will be filed, failure of the contractor or a subcontractor to make timely payments for labor, equipment and materials, damage to the owner, or reasonable evidence that the construction contract cannot be completed for the unpaid balance of the construction contract sum or a reasonable amount for retention.

Late payment penalties include interest payments at the rate of 1.5 % per month (18% per annum) on the unpaid balance, for attorney’s fees in the event of litigation or arbitration and also possible suspension of a contractor’s license by the Arizona Registrar of Contractors. In addition, the act allows a general contractor or subcontractor to suspend performance or terminate a contract if the owner fails to timely pay the certified and approved amount.

A general contractor may suspend performance or terminate the contract after providing seven (7) days’ written notice to the owner. Similarly, a subcontractor may suspend performance or terminate a subcontract if: (a) the owner fails to timely pay the certified and approved amount for the subcontractor’s work, and (b) the general contractor also fails to pay for that work after providing three (3) days’ written notice. After complying with the notice requirements, a general contractor or subcontractor that suspends work is not required to provide further services or materials until it receives payment of the certified and approved amount plus demobilization and remobilization costs.

For more information contact Suzette Doody at sdoody@holmwright.com or 480-961-0040.

Arizona Supreme Court Considers Change in Ability to Sue Design Professionals

By Jessica A. Jackson

Arizona’s economic loss rule has historically prevented a party from recovering purely economic damages under tort law unless the tort (i.e. negligence) was accompanied by physical harm—either in the form of personal injury or damage to other property. In the context of suing a design professional, this creates a problem since damages are often wholly economic—it costs money to fix the problem but nobody was hurt. But in April of this year the Arizona Court of Appeals broadened the scope of permissible claims against design professionals in negligence—holding that an owner of a project is not barred by the economic loss rule from bringing an action for negligent design against an architect, even where the damages claimed were purely economic and no personal injury or damage to other property was claimed.

The Arizona Supreme Court granted review of this decision and oral argument was held in November. To view a video and summary of the arguments of the parties before the Arizona Supreme Court, click here. The basic argument on the part of the design professional emphasizes that they should be treated no differently than how Arizona law has historically treated negligence claims in construction defect or products liability cases—i.e., that there must be something more than wholly economic damages to sustain a claim of negligence. They are arguing that the Court of Appeals has dramatically increased the scope of who may now sue design professionals in negligence. The owner of the project argues the opposite—that the Court of Appeals has decided the issue correctly in light of the fact that design professionals owe a duty to use ordinary care, skill, and diligence in rendering professional services.

The Arizona Supreme Court is expected to issue a decision on this case in the next few months and we will provide an update when the opinion is released. In the meantime, for more information or a copy of the decision of the Court of Appeals, contact Jessica A. Jackson at jjackson@holmwright.com or (480) 477-8593.

The Arizona School Retention Trust Issues Model Construction Contracts

By Kirk H. Hays


As part of its pre-paid legal services for Arizona school districts, the Arizona School Risk Retention Trust has issued model construction contracts specifically designed to meet the unique needs of Arizona school districts. The contracts are based on the American Institute of Architects’ (AIA) widely used contracts but have been modified to reflect unique statutory and regulatory requirements applying to school districts, address Arizona specific laws and provide additional legal protections for owners that are not included in the standard AIA contract documents.


For standard Design-Bid-Build projects these contracts include:

• B101-2007 Agreement Between Owner and Architect
• A101-2007 Standard Form Agreement Between Owner and Contractor
• A201-2007 General Conditions

For Construction Manager-At-Risk projects these contracts include:

• B101-2007 Agreement Between Owner and Architect
• A121 CMc-2003 Agreement Between Owner and Construction Manager
• A201-2007 General Conditions

The B101 and A201 documents have been modified to address the unique needs of CM at Risk projects.

As part of its pre-paid legal services, the Trust also provides legal representation to school districts from the beginning of the contracting process. When a school district begins its solicitation process, attorneys can modify the Trust’s model contracts to meet the unique needs of the district and the project. These contracts can then be included in requests for proposals and bid solicitation materials. Legal representation is also provided for contract negotiations and to generate final contract documents for the project. This approach provides significant advantages to school districts over having their architects prepare construction documents because the attorneys can address legal issues outside the expertise of architects and it avoids conflicts of interest between the architects and the school district.

The Trust model contracts will be available for review to Trust members on the Trust’s website sometime in January. Questions about the contracts or specific provisions or requests for copies of the contracts can be addressed to Kirk H. Hays at khays@holmwright.com or (480) 961-0586.