The Construction Conversation

The Construction Conversation
Ohio’s Legislative, Administrative, and Judicial Two-Way Newsletter
November, 2016
A Service of Luther L. Liggett, Graff & McGovern, LPA

Legislative: End of Session
The Ohio General Assembly expires at the end of the 2016 calendar year. Of 31 bills introduced affecting the Construction Industry, only 4 passed into law over the two-year session. One of those laws is likely to be overturned by a court as unconstitutional.
All legislation not passed into law expires, and must be re-introduced in 2017 for further consideration. Many bills merely state a position for the legislator to speak upon, with no likelihood of passage. Typical to such legislation is repeal of Prevailing Wage.

Passed into law was House Bill 180 (Rep. Maag, R Lebanon,) to prohibit localities from requiring construction employers to hire local workers. Construction industry employers broadly supported the prohibition, noting that out-of-state competitors did not have to follow the local requirements.

The City of Cleveland sued to pre-empt the legislation by its own ordinance, which requires that 20% of Worker Hours be performed by residents of Cleveland.

The Cuyahoga County Court of Common Pleas issued an injunction against the new statute, upholding the local requirement based on Constitutional “Home Rule” authority. A final decision is pending, but likely to be unchanged.

Also passed was House Bill 512 (Rep. Ginter, R Salem,) to fund grants for lead fixture testing and replacement in schools.

House Bill 17 (Rep. Blessing, R Cincinnati) passed to create civil immunity for design professionals volunteering during an emergency.

House Bill 243 (Rep. Schaffer, R Lancaster) passed to make uniform certain continuing education requirements for architects and landscape architects.

Additional position legislation likely to be reintroduced include House Bill 589 which would regulate Sub-Metering of utilities in multi-family housing, a hot topic for consumer advocates.

Senate Bill 249 (Senator Patton, R Strongsville) will create a Commercial Roofing License, a topic initiated too late in the session, and likely to be reintroduced.

House Bill 17 (Rep. Patmon, D Cleveland) received significant interest at five hearings, to enact statewide registration of Home Improvement Contractors.

House Bill 214 (Thompson, R Marietta) would require plastic pipe be specified for plumbing in public projects, drawing significant objection from design professionals and public agencies.
Administrative: New Money, Separate Prime
The Ohio State University will accept Statements of Qualifications for a 72-bed project at its Medical Center, estimated to cost $60 million. Overall new funding for OSU projects to begin in 2017 exceeds $370 million.

Returning to historic bidding methodology, the Ohio Facilities Construction Commission will accept Separate Bids for the Ohio Department of Transportation’s Outpost Facility in Grafton, Lorain County, Ohio as follow:
$2.9 million General
$409,197 Plumbing
$150,040 HVAC
$556,322 Electrical
Judicial: Corporate Type in Name
A Court of Appeals has ruled that the type of corporate entity need not appear in a corporate name such as “L.L.C.” to preserve limited liability.

When an owner sued, the contractor counterclaimed for additional payment. As a defense, the homeowner asked that the counterclaim be dismissed, as “L.L.C.” did not appear in the subcontract party name, and therefore must be a separate entity.

The Court of Appeals for Cuyahoga County held that there is no legal authority supporting the proposition that a limited liability company must always use the L.L.C. designation on corporate documents to preserve the validity of an agreement.

This would be the same for “Inc.” or “Co.” which are required for purposes of the Secretary of State incorporation, but not for commerce.
Perk v. Tomorrows Home Solutions, LLC, 2016-Ohio-7784.

Legislative: License Board Anti-Trust
Legislation if passed would allow any person turned down by a professional licensing board to ask the Department of Administrative Services to determine if the rejection had the effect of “excluding present or potential competitors from the occupation or industry.”
Because of the end of session, now-Senator Seitz (R, Cincinnati) will re-introduce Senate Bill 366 as a House Bill in January.

The legislation includes the Architects’ and Landscape Architects’ Boards, the Engineers’ and Surveyors’ Board, and the Ohio Construction Industry Licensing Board.
The genesis of the legislation is at the urging of the American Legislative Exchange Council, a conservative organization focused on limited government and free markets, generally anti-licensure.
Judicial: Loser-Pays Unenforceable
While finding that an arbitration provision in a home construction contract is enforceable against the homeowner, the Court of Appeals also found a provision requiring “loser-pays” the winning party’s attorney fees to be unconscionable and unenforceable.

Typically, the prime contractor provides a contract form for an owner in construction. Often the contract includes arbitration as a way of avoiding court. In this case, the homeowner sued for improper work. The contractor moved for a stay of the court action pending arbitration.
A contract may be set aside as unconscionable, and thus its individual provisions are void, if a party is forced to accept terms not negotiated.

The Court of Appeals found that arbitration was understandable and fairly agreed to by the homeowner.

However, the Court found that a loser-pays provision “results in a chilling effect on an aggrieved consumer.” The Court also found such a provision in conflict with the Ohio Consumer Sales Practices Act provisions for award of attorney fees only when a consumer acts in bad faith.
Conte v. Blossom Homes, 2016-Ohio-7480.

Judicial: Contractor Must Await Administrative Action
A developer who sought a demolition permit of a historical landmark building could not circumvent the administrative process of seeking a certificate of appropriateness. Court action accordingly was premature.
The Cincinnati building at issue previously housed King Records, on which basis the building was designated an historic landmark. Known for “hillbilly” music, the company recorded James Brown and Petula Clark.
The developer brought suit in the Court of Appeals for mandamus, to force the City to issue a demolition permit.
The Supreme Court of Ohio rejected the suit on the basis that there can be no “takings” claim until a party completes all administrative processes. Since the developer had yet to ask for the certificate of appropriateness to demolish an historic landmark, judicial action was premature.
St. ex rel. Dynamic Ind. v. Cincinnati, 2016-Ohio-7663.