Author Archives: Ali Salamirad

CREATION OF SALAMIRAD, MORROW, TIMPANE & DUNN LLP

Ali Salamirad, Christopher G. Morrow, Michael J. Timpane and Jonathan J. Dunn are pleased to announce the creation of Salamirad, Morrow, Timpane & Dunn LLP. The firm concentrates its practice in construction, government contracts, surety, commercial and bankruptcy law, and represents many of the largest and most respected companies in their industries. The Firm combines the existing practice of Salamirad Morrow P.C. with the substantial practice of Jonathan J. Dunn, the former lead partner of the Construction Practices group at Sedgwick LLP’s Irvine office. Mr. Dunn is a renowned trial lawyer who represents a variety of companies, contractors and sureties in some of the most significant disputes in the country, as well as in various transactional matters.

In addition, the Firm is pleased to recognize Michael J. Timpane as a named partner. Mr. Timpane founded and is the managing partner of the firm’s fast growing San Francisco office. Joining Mr. Dunn from the Sedgwick firm is Andrew C. Harris, a talented and highly respected construction and surety lawyer with a proven track record of achieving outstanding results for his clients. The Firm is also pleased to announce the association of Aaron H. Reisner, who brings 11 years of practice in construction law, and newly admitted California bar member Brianna Frazier, a recent graduate of Georgetown University Law School.

WHY THE ENFORCEABILITY OF YOUR SETTLEMENT AGREEMENTS AND RELEASES COULD BE IN JEOPARDY

In today’s tough economic environment, many contractors are just one missed pay cycle away from financial ruin. Because many suppliers, subcontractors and contractors are teetering on the verge of insolvency, the seldom invoked legal doctrine of “economic duress” can play a critical role in your company’s success. This article explains what the “economic duress” doctrine is and why it is important both when you are negotiating the amount you intend to pay your creditors, and when you determine what to accept from a third party that owes you money. 

 
In Rich & Whillock, Inc. v. Ashton Development, Inc. (1984) 157 Cal.App.3d 1154, the California appellate court specifically addressed a contractor’s ability to utilize the economic duress doctrine in the context of undisputed contract funds. Rich & Willock was an underground contractor that agreed to perform excavation work for Ashton Development. The contract expressly excluded blasting. When Rich & Whillock encountered rock, the owner directed the contractor to blast the unforeseen materials and bill the owner for the extra costs incurred. Rich & Whillock invoiced the owner as the project progressed and accounted for the extra costs with daily time sheets. Once the work was completed, Rich & Whillock submitted a final billing in the amount of $72,286.45 for the undisputed extra work. The owner refused to pay. 
 
When the contractor asked the owner why he was not being paid, the owner said he had run out of money and could not pay the amount claimed. The subcontractor informed the owner that he would “go broke” if he was not paid because they were a new company, the project was a big job for them, they had rented most of their equipment and they had subcontractors waiting to be paid. 
 
Against these facts, the owner offered to pay Rich & Whillock $50,000 or nothing, and told the contractor that if it did not accept this amount as a “compromise” he would get nothing, and could sue for the full amount. 
 
Not surprisingly, Rich & Whillock accepted the $50,000 compromise – but only after again complaining that the deal was “blackmail” and that they were only signing it to survive. 
 
Four months after receiving its final payment, Rich & Whillock filed a lawsuit to recover the balance. After a bench trial, the court found that Rich & Whillock were due the additional $22,286.45 because the settlement and release was unenforceable under the economic duress doctrine. The owner appealed.
The Court of Appeal affirmed the trial court’s ruling and held that “[t]he underlying concern of the economic duress doctrine is the enforceability in the marketplace of certain minimal standards of business ethics.” After acknowledging that reasonable settlements of good faith disputes are desirable, the Court made clear that the rules are entirely different when dealing with a debt that is due (not reasonably disputed) and a contractor that is experiencing financial difficulty. 
 
The Court went on to explain why the doctrine is necessary: “The necessity for the doctrine in cases such as this has been graphically described: ‘Nowadays, a wait of even a few weeks in collecting on a contract claim is sometimes serious or fatal for an enterprise at a crisis in its history. The business of a creditor in financial straits is at the mercy of an unscrupulous debtor, who need only suggest that if the creditor does not care to settle on the debtor’s own hard terms, he can sue. This situation, in which promptness in payment is vastly more important than even approximate justice in the settlement terms, is too common in modern business relations to be ignored by society and the courts.”
It is not surprising that Rich & Whillock was decided in 1981, which was also a time of great economic turmoil in California. Because many in the construction industry are again one payment cycle away from shutting their doors, the economic duress doctrine should be considered whenever resolving a claim for undisputed monies due and owing.
If you are the party looking to pay less than the principal amount due, consider these pointers. First, do not threaten your subcontractor and avoid “take it or leave it” negotiation tactics. Second, expressly include a waiver of any claims based on economic duress in your release document.
If you are the party being offered less than the principal amount due you, or nothing, and are facing financial ruin, consider accepting what is being offered then bringing an action to recover the balance. If you decide to take this route, be certain to communicate and document your position to the payor that you are only accepting the proposed settlement because refusing to accept the amount would ruin your company. 
 
Either way, be aware that the current economic climate threatens the enforceability of settlement agreements and releases in California. 
If you have any questions regarding this article, feel free to email the author at as@salamiradmorrow.com.

TERESA POLK JOINS SALAMIRAD MORROW P.C.

Salamirad Morrow P.C. is pleased to announce the addition of veteran construction, surety and real estate litigator Teresa Polk to its growing practice.  Teresa brings thirty years of experience handling the prosecution and defense of a variety of claims and lawsuits related to the construction and surety industry.  In addition to her work as a respected litigator, Teresa has significant experience as an accomplished appellate lawyer.

MATT STEINER (1955-2013)

It is with the heaviest of hearts that we share with you news that our friend and colleague Matt Steiner passed away on Friday, June 21, 2013. Matt was generous with his time and spirit, and the sound of his infectious laugh will be greatly missed. Given the scope of his career as a preeminent construction litigator, we trust that many of you were fortunate enough to work with Matt at some point. For those of you that weren’t as fortunate, please click here http://tinyurl.com/ocl4qbu to see a copy of a legendary brief that Matt filed opposing a request for a trial continuance. The brief says a lot about the type of person and attorney Matt was. Please keep Matt, his wife Heidi and their children in your prayers.

SALAMIRAD MORROW P.C. PARTNER MICHAEL TIMPANE TO MODERATE A PANEL FOR THE AMERICAN BAR ASSOCIATION

On May 23, 2013, Salamirad Morrow P.C. partner Michael Timpane will be moderating a panel for the American Bar Association Section of Dispute Resolution titled “Insurance Issues and Mediation: The Role of Insurance In Mediation and Settlement.”  The panel speakers include Althea Garvey, the Los Angeles Claims Regional Vice President of the Global Claims Relationship Group at AIG and Jeff Kichaven, a highly regarded mediator.  To sign up for this telephonic program, visit the American Bar Association website:  http://tinyurl.com/mg4ok9y

NEW CONSTRUCTION LITIGATION FORM INTERROGATORIES

NEW CONSTRUCTION LITIGATION FORM INTERROGATORIES           

There is a new form on the block…                          

In January 2013, The Judicial Council of California decided to adopt the use of a new form interrogatory which is geared at streamlining discovery issues in construction litigation cases.               

The Civil and Small Claims Advisory Committee recommended the use of the form, while the Consumer Attorneys of California opposed its adoption. The Advisory Committee argued that construction litigation practitioners have urged adoption of form interrogatories for several years, with the goals of eliminating the need for parties to craft special interrogatories for the most commonly asked questions, standardizing those questions so that parties will be aware of what information will have to be provided in the action and, as a result, decreasing the number of motions to compel filed in the courts.                 

In opposition, the CAOC asserted that the interrogatories would change the nature of the litigation in smaller cases and are not needed in larger construction cases, which are frequently handled in mediation, where a more informal approach to the exchange of information occurs, or as complex litigation matters, in which a Case Management Order is used to guide discovery.                 

The Practitioner’s Scoop…               

One of the main changes to the new construction litigation form interrogatory is the term INCIDENT has been replaced by your choice of either CONSTRUCTION CLAIM or CONSTRUCTION DEFECT CLAIM, depending on what type of case is being handled. The definitions of these terms have been crafted to better fit the circumstances of a construction litigation claim, whereas INCIDENT was over broad and vague in relation to construction claims and related more to personal injury cases.    

The form removes all personal injury questions and covers many relevant construction issues. For instance, the form requests information about the licensing of design professionals, subcontractors and contractors. Although Interrogatory 303.7 may not completely eliminate the need to request a contractor’s license history from the CSLB, if its box is checked, then the responding party must provide their entire license history.     

The interrogatories question the scope of work of contractors and subcontractors, and ask questions regarding change orders, additional work claims and directives. The interrogatories contemplate inadequate plans and specifications claims -including questions regarding their sufficiency and the contractor’s diligence in obtaining more information.    

Other topics introduced on the new forms are manufacturers and products, insurance policies, damages to the subject property, appraisals of the subject property, improvements made to the subject property, past claims made for damages to the subject property, and individual homeowner claims.   

Also—choose wisely— although more construction oriented, once a litigator chooses to use the construction litigation interrogatories he or she cannot use other form interrogatories (such as General Form Interrogatories) in the same action.  

Finally, the interrogatories specifically state that they are not intended for use in residential cases involving six or more single-family homes or housing units. Also, the interrogatories are not to be used without leave of court in cases that have been deemed complex under California Rule of Court 3.400 et seq.  

Will these forms change the face of construction litigation? Doubtful. But they are now an available tool in the construction litigator’s toolbox.  

Have a look at the new construction litigation form interrogatories here: 

http://www.courts.ca.gov/documents/disc005.pdf

MICHAEL TIMPANE TO SPEAK AT THE 2013 NASBP MEETING AND EXPO

Salamirad Morrow P.C. partner Michael Timpane will be a featured speaker at the National Association of Surety Bond Producers’ 2013 Annual Meeting and Expo scheduled for April 21-23, 2013 at the Fairmont Hotel in San Francisco, California.  Mr. Timpane will be speaking on the morning of April 23, 2013 on an esteemed panel discussing the opportunities and pitfalls presented by contracting with the Federal Government. To get more information about this conference, visit the NASBP site by clicking here http://www.nasbp.org/2013AnnualMeeting/Home/

SALAMIRAD MORROW P.C. LAUNCHES ITS NEW WEBSITE

Salamirad Morrow P.C. launches its new website that includes the Firm’s construction and surety industry blog.
On January 24th 2013, Salamirad Morrow P.C. launched its newly designed website that includes the Firm’s construction and surety industry blog. The Firm hopes to keep the followers of the blog up to date on legal issues impacting the construction and surety industry, as well as interesting and industry relevant matters for which the Firm’s is currently engaged.