managing discovery, allocating liability and damages...

Multi-Party Construction Defect Litigation Managing Discovery, Allocating Liability and Damages, Avoiding Ethical Pitfalls

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TUESDAY, MARCH 6, 2012

Presenting a live 90-minute webinar with interactive Q&A

Eric A. Grasberger, Partner, The Development Law Group, Construction & Design Section, Stoel Rives, Portland, Ore. R. Douglas Rees, Shareholder, Cooper & Scully, Dallas

Russell Clinage, Goins Underkofler Crawford & Langdon, Dallas

71313593.1 0099865-10006

AGREEMENT REGARDING SITE VISIT

(1) Waiver and Release

The undersigned hereby fully releases and waives all claims against [OWNERS] and each oftheir respective owners, principals, partners, affiliate or related entities, directors, employees, agents,consultants, attorneys and insurers (collectively “[Owner]”) for any damages, costs, expenses,injuries (personal injury, death, property damage or otherwise), claims, suits or demands of any kindor nature, including, but not limited to, those for negligence, gross negligence, misrepresentation,breach of contract, breach of warranty or any and all other claims, suits or demands, arising out of orin any way relating to the undersigned’s visit to [PROJECT NAME], [PROJECT ADDRESS] (the“Project”). The undersigned has been advised of the following nonexclusive list of potentiallydangerous conditions: (1) possible water damaged materials including but not limited to molds,fungi and other contaminants; (2) structurally unsupported, unsound and inoperable windows andsliding glass doors and related framing; (3) loose wood flooring; (4) potential general structuralinstability; and (5) the inherent risks associated with property undergoing construction defectinvestigation and repair work. The undersigned represents and warrants that he or she (a) assumesfull responsibility for his or her own safety and health and for all known and unknown risks anddamages in visiting the Project, and (b) has not relied on information given or not given to him or herby [OWNER] regarding the risks or dangers present at the Project.

(2) Prohibition on Substantive Discussions

The undersigned further agrees not to discuss the merits or substance of the defects, thedamages, the repairs, or any actual or potential lawsuit, arbitration or other proceeding, with[OWNER] or any representative of [OWNER] of the Project. To the extent any such prohibiteddiscussions occur, it is agreed that they will not be discoverable or admissible for any purposesin the lawsuit, arbitration or any other proceeding.

Date of Site Visit: ____________________

[signature/name]

[company]

[date]

For:[name of party]

[signature/name]

[company]

[date]

For:[name of party]

[signature/name]

[company]

[date]

For:[name of party]

[signature/name]

[company]_______________________________________[date]

For:[name of party]

Exhibit 1Page 1 of 2

71148309.1 0042642-00001

Visitor Sign-In/Sign-Out Sheet[CASE NAME]

NAME REPRESENTS DATE TIME INTIMEOUT


STOEL RIVES LLP ATTORNEY/CLIENT PRIVILEGE Page 1

71313520.1 0099865-10006

[CASE NAME]EVIDENCE GATHERING PLAN

March 6, 2012

The Consultant(s) shall be responsible for implementing and completing the EvidenceGathering Plan as follows:

I. Pictures

A. The areas should be photographed as follows:

i. Interiors and exteriors;ii. Close-up photos and photos from a distance showing large scale sections

or elevations of the structure; andiii. Before and after shots, and shots of all resultant damage.

Each picture (a log of the photographs or displayed picture) shall list:

i. Date taken;ii. Name of photographer; andiii. Location and elevation (i.e., north, south, east or west).

B. Photograph examples of all repair work and procedures, including, but not limitedto, the equipment used, so that the Owner can, if required, fully explain in thefuture exactly what was done to rectify the problems on a step by step basis andjustify the expense, for each step or procedure.

C. As stated in “A” above, numerous examples of each defective condition shall befully photographed, including close-ups. Relatedly, the condition shall bedocumented with a written log with a narrative of what was found.

D. Use photographs and a corresponding written log to identify the number ofinstances each defective or damaged condition occurred so that we can establishthe pervasiveness of the conditions throughout the structure. For example, acomplete review of all sliders (if determined necessary) would result in a chartand matching photo log indicating the total number of sliders inspected and thenumber that showed x, y or z type or degree of defect.

II. Videotaping

A. Videotape each step of the repair method so that the Owner can show and explainwhat was done (the whole operation need not be videotaped, just severalexamples of each step). Videotape shall be used to compliment the photos ofdefective conditions and damaged materials. If instructed, consultant(s) shallprovide narration on the videotape explaining what is being depicted.


STOEL RIVES LLP ATTORNEY/CLIENT PRIVILEGE Page 2

71313520.1 0099865-10006

III. Physical Samples

A. Preserve samples of resultant damages (i.e., damage wet or rotten materials, etc.).

B. Preserve samples of defective siding, framing and joists (if any is removed),windows, doors, brick masonry and cultured stone, roofing, wood flooringproducts, tile, and sheetrock and store on site in a dry, protected area (such as agarage or storage room).

C. Each sample under “A” or “B” above shall be placed in a thick plastic bag.

D. Samples shall be marked as follows:

i. Date sample was taken;ii. Who took the sample;iii. Identification of the material;iv. Location and elevation (i.e., north, south, east or west);v. From what part of the building (e.g., exterior, interior, floor, wall, etc.).

IV. Consultant shall obtain all other evidence relevant to the defective, damaged ordecayed condition of the structure.

V. ERR ON THE SIDE OF GATHERING TOO MUCH EVIDENCE RATHERTHAN TOO LITTLE.

VI. ENSURE THAT THE OWNERS OR OWNERS’ AGENTS KNOW NOT TODISCARD OR DAMAGE THE EVIDENCE, WHETHER IN STORAGE OROTHERWISE.

VII. STORAGE AREA SHOULD BE LOCKED TO PREVENT THEFT, SABOTAGEOR INJURY.


Attorney Work Product Project Cost Summary

Div # Item

1000 General Requirements 170,686

Supervision, Clean Up & General Conditions 170,686

2000 Demolition 78,471

Exterior --non-masonry 61,896

Interior--window area related, tracked separately 16,575

3000 Cast in Place Concrete -

None -

4000 Masonry 5,430

Masonry Restoration 5,430

6000 Wood & Plastics 251,511

Rough Carpentry repair/replacement at Exterior & Interior 133,265

Finish Carpentry repair/replacement at Interior 13,410

Scaffolding at exterior 104,835

7000 Thermal & Moisture Protection 357,292

Siding & Trim, Weatherproofing and Caulking 329,720

Rainscreen 21,797

Deck Coatings 5,776

8000 Doors & Windows 236,118

Window/Sliding Glass Door installation & handling 22,614

French doors related 1,590

Storefront (Estimated) 211,913

9000 Finishes 185,206

Gypsum Repair 76,100

Gypsum Repair at Holddowns 24,343

Painting at Exterior 56,022

Painting at Interior 13,464

Painting for Repair at Holddowns 15,277

10000 Signage -

Remove & Replace Existing --in GCs

12000 Furnishings 6,443

Window Treatment 6,443

15000 Plumbing -

None -

16000 Electrical 5,508

Misc Electrical Repairs 5,508

SUBTOTAL 1,296,663

17000 Other 91,150

Safety Plan, Insurance & Profit 91,150

TOTAL 1,387,813

Total Project Costs


ATTORNEY WORK PRODUCT

BLDG ONE

COST ALLOCATION SUMMARY

Div # Item Notes

1000 General Requirements 170,686 69,117 49,072 3,240 32,124 13,829 3,304

Supervision, Clean Up & General Conditions 170,686 69,117 49,072 3,240 32,124 13,829 3,304 Spread per overall cost of each category

Allocation percentage 40.49% 28.75% 1.90% 18.82% 8.10% 1.94%

2000 Demolition 78,471 47,059 30,484 928 - - -

Exterior --non-masonry 61,896 30,484 30,484 928 - Allocation based primarily on split between window and siding

columns. Only 4 small decks on this building.

Interior--window area related, tracked separately 16,575 16,575 -

Allocation percentage 59.97% 38.85% 1.18% 0.0% 0.0% 0.0% Holddown demolition cost is in Rough Carpentry

3000 Cast in Place Concrete - - - - - - -

None - - - - - -

4000 Masonry 5,430 - 2,715 2,715 - - -

Masonry Restoration 5,430 2,715 2,715 - Split evenly between decks and siding

-


6000 Wood & Plastics 251,511 105,250 93,449 1,203 - 51,608 -

Rough Carpentry repair/replacement at Exterior & Interior 133,265 40,495 40,495 666 51,608 Holddowns/strapping related tracked as actual.

Finish Carpentry repair/replacement at Interior 13,410 12,337 536 536 - - 92% window related, 8% French door install related.

Scaffolding at exterior 104,835 52,418 52,418 Split evenly two ways

Allocation percentage 41.85% 37.16% 0.48% 0.00% 20.52% 0.00% Carpentry Associated with storefront replacement is included in Div 8000

158 Milgard units and 4 French doors.7000 Thermal & Moisture Protection 357,292 162,387 162,387 10,721 - - 21,797

Siding & Trim, Weatherproofing and Caulking 329,720 162,387 162,387 4,946 - Matches exterior demo allocation because we are replacing what was

taken off.

Rainscreen 21,797 21,797 Based on SF cost for rainscreen application

Deck Coatings 5,776 5,776


8000 Doors & Windows 236,118 22,614 795 795 211,913 - -

Window/Sliding Glass Door installation & handling 22,614 22,614

French doors related 1,590 795 795 Allocations consistent with finish carpentry allocation.

Storefront (Estimated) 211,913 211,913 Off-hours work in occupied spaces.


9000 Finishes 185,206 109,990 31,173 4,423 - 39,620 -

Gypsum Repair 76,100 70,012 3,044 3,044 92% windows, balance split between siding and decks, same as finish

carpentry interior

Gypsum Repair at Holddowns 24,343 24,343 Holddown repair: actual costs tracked

Painting at Exterior 56,022 27,591 27,591 840 Matches siding allocations

Painting at Interior 13,464 12,387 539 539 Matches gypsum and finish carpentry interior allocations

Painting for Repair at Holddowns 15,277 15,277 Holddown repair related

Allocation percentage 59.39% 16.83% 2.39% 0.00% 21.39% 0.00% Painting and Gyp associated with Storefront replacement is included

in 8000

10000 Signage - - - - - - -

Upgrades & BettermentTotal Project Costs

Defective

Window Unit

Related Costs

Siding/Flashing and

Window Install

Related Costs

Decks & Deck

Related Costs

Storefront Defect

Related Costs

Strapping, Bolts and

Holddowns

71310723_1.XLSX..Exhibit 3

Page 2 of 3

ATTORNEY WORK PRODUCT

BLDG ONE

COST ALLOCATION SUMMARY

Div # Item NotesUpgrades & BettermentTotal Project Costs

Defective

Window Unit

Related Costs

Siding/Flashing and

Window Install

Related Costs

Decks & Deck

Related Costs

Storefront Defect

Related Costs

Strapping, Bolts and

Holddowns

Remove & Replace Existing --in GCs - Moved to GCs

12000 Furnishings 6,443 5,938 - 504 - - -

Window Treatment 6,443 5,938 504 Windows and French doors.


15000 Plumbing - - - - - - -

None -

Allocation percentage

16000 Electrical 5,508 2,713 2,713 83 - - -

Misc Electrical Repairs 5,508 2,713 2,713 83 - - Allocation split same as Div 2 and 7.


SUBTOTAL 1,296,663 525,068 372,788 24,612 244,037 105,057 25,101


17000 Other 91,150 36,910 26,205 1,730 17,155 7,385 1,765

Safety Plan, Insurance & Profit 91,150 36,910 26,205 1,730 17,155 7,385 1,765


TOTAL 1,387,813 561,978 398,993 26,342 261,192 112,442 26,866

Project Total Allocation 40.49% 28.75% 1.90% 18.82% 8.10% 1.94%

Math check 0

71310723_1.XLSX..Exhibit 3

Page 3 of 3

1 48% 52%

2 58% 42%

3 70% 30%

4 38% 62%

5 36% 64%

6 70% 30%

7 70% 30%

8 55% 45% $675,000

Masonry / concrete

$700,000 $1,000,000 $300,000

$189,723 $500,000 $310,277

$273,562 $750,000 $476,438

Interior issues

Roofing, waterproofing, thermal

MEP

Section I . Page D

Primary Liability Allocation - Level 1 - Division totals and percentages from section II. pages 1 through 8

$576,337 $1,000,000 $423,663

$699,539 $1,000,000 $300,461

Materials and Misc.

Structural

Scope of Work division Design Defects Totals Construction Defects

$950,578 $2,000,000 $1,049,422

Additional Allocable Costs

Site work, landscaping, drainage

Cost impacts per final replacement scope

$3,500,000 $5,000,000

$7,714,739 $5,035,261

61% $12,750,000 39%

$1,500,000

$825,000 $1,500,000

$800,000Current Legal costs

Anticipated Legal costs $780,000

$1,670,000Sub-total of additional allocable costs

$90,000Relevant interest charges


Section II . Page 5

5. Roofing, Weatherproofing and Thermal allocations

$273,562

Design Defects Construction defects

$476,438Total of Costs for this Division > $750,000

Allocation % Allocation %

$750,000 $273,520 $476,480

Totals per scope

item36%

Liability allocations analysis of the scope division totals shown on section I. page C

64%

Totals Totals

Totals> $750,000 $273,520 $476,480

5A Rule 6 - 1a - Scope specific investigation and repair costs to date $22,000 36% $7,920 64% $14,080

5B Rule 6 - 2b - Anticipated contractor remediation allowances per bid $100,000 36% $36,000 64% $64,000

36% 64%Totals>

5B Rule 6 - 2b - Anticipated contractor remediation allowances per bid $100,000 36% $36,000 64% $64,000

5.1 XXX $3,000 60% $1,800 40% $1,200

5.2 XXX $24,000 30% $7,200 70% $16,800

5.3 XXX $160,000 30% $48,000 70% $112,0005.3 XXX $160,000 30% $48,000 70% $112,000

5.4 XXX $70,000 0% $0 100% $70,000

5.5 XXX $35,000 50% $17,500 50% $17,5005.5 XXX $35,000 50% $17,500 50% $17,500

5.6 XXX $8,000 100% $8,000 0% $0

5.7 XXX $28,000 30% $8,400 70% $19,6005.7 XXX $28,000 30% $8,400 70% $19,600

5.8 XXX $6,000 30% $1,800 70% $4,200

5.9 XXX $3,500 30% $1,050 70% $2,4505.9 XXX $3,500 30% $1,050 70% $2,450

5.10 XXX $55,000 50% $27,500 50% $27,500

5.11 XXX $160,000 50% $80,000 50% $80,000

5.12 XXX $3,500 50% $1,750 50% $1,750

5.13 XXX $2,000 50% $1,000 50% $1,000

5.14 XXX $20,000 50% $10,000 50% $10,0005.14 XXX $20,000 50% $10,000 50% $10,000

5.15 XXX $15,000 20% $3,000 80% $12,000

5.16 XXX $35,000 36% $12,600 64% $22,4005.16 XXX $35,000 36% $12,600 64% $22,400


Item Architect

5.1 Rule 4 60 / 40 XXX

5.2 Rule 3 30 / 70 XXX

5.3 Rule 3 30 / 70 XXX

5.4 Rule 1 0 / 100 XXX

Section II . Page 5a

5. Roofing, Weatherproofing and Thermal > notes on allocationsRule # Contractor

XXX

XXX

XXX

XXX

5.5 Rule 5 50 / 50 XXX

5.6 Rule 1 100 / 0 XXX

5.7 Rule 3 30 / 70 XXX

5.8 Rule 3 30 / 70 XXX

5.9 Rule 3 30 / 70 XXX

5.10 Rule 5 50 / 50 XXX

5.11 Rule 5 50 / 50 XXX

5.12 Rule 5 50 / 50 XXX

5.13 Rule 5 50 / 50 XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX5.13 Rule 5 50 / 50 XXX

5.14 Rule 5 50 / 50 XXX

5.15 Rule 1 20 / 80 XXX

5.16 Rule 6 36 / 64 XXX

XXX

XXX

XXX

XXX


Section I . Page E

Allocation Key - Rules

Liability percentages have been allocated based on rules, described below. The rule governing the allocation percentage for each line item is stated in the column under the

Notes section of each category.

Rule 1: 100/0

The defect is entirely the fault of either Contractor or Architect (or the subs beneath them) and no discovery or reporting by the other party was either reasonable to expect or, if

reasonable to expect, would not have mitigated or prevented the damage from occurring.

Rule 2: 80/20

The defect itself was committed entirely by the fault of either Contractor or Architect, but the defect should have been noticed and reported (in the exercise of reasonable care) by

the other party and, had it been reported, the damage could have been mitigated or prevented.

Rule 3: 70/30

The defect was committed mostly by the fault of one party but the other party had some (but limited) fault of its own, possibly in combination with the fault of not reporting the

primary party’s defect.

Rule 4: 60/40

Both parties had substantial fault in causing the defect, but one party’s role was marginally greater than the other’s.

Rule 5: 50/50

Either (a) both parties committed defects which jointly led to the damage, i.e., neither party’s defect would have alone caused damage requiring repair or replacement, (b) both

parties committed separate defects which led to roughly equal contributing damage which, when combined, requires the repair or replacement at issue, or (c) both parties

committed defects, either of which alone would have required the repair or replacement at issue.

Rule 6: Composite Allocation

This rule applies to certain general or overhead cost categories under each major defect category (e.g., masonry, structural, site, etc.). The allocation percentages applied under this

rule vary for each major defect category and are derived by calculating the weighted composite percentages from the item by item allocations to Architect and Contractor within

each major defect category.


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