Doug Houser: From Rea & Associates Studio, this is unsuitable. A management and financial services podcast for entrepreneurs, tenured business leaders and others who are ready to look beyond the suit and tie culture for meaningful, measurable results. I'm Doug Houser.
Be careful it's lawsuit city out there and you never know when you might be the target of legal turmoil. Fortunately, on this episode of unsuitable, Don Gregory, director and chair of the construction law practice at Kegler Brown Hill and Ritter are here to provide us with some tips that will help keep you out of trouble before trouble finds you.
Welcome to unsuitable, Don.
Don Gregory: Thank you. Doug. You're no trouble at all.
Doug: Ah, I don't know about that. I'm always in some sort of trouble, particularly with three daughters, but we do the best we can.
Don: Well, there's a couple years there. Just send them to a nunnery and everything will be fine. They'll turn out great when they come back.
Doug: We actually threatened that with my youngest at one time, but she's now 17. We threatened that at one time. She's, yeah.
Don: How'd that work for you?
Doug: Not well because she's honest, she is a wonderful child but a couple of months ago she told us that she was going to go very far in life because she is highly ambitious and she has loose morals. Just what you want to hear from your 17-year-old daughter.
Don: It's a great combination.
Doug: She's probably right though, actually.
Don: Continued good luck with that. I'm sure they'll be fine.
Doug: Yes.
Don: I'm sure they'll be fine.
Doug: Don, you've been, you're well respected and you are the guru in central Ohio in terms of construction law and long admired you for that. We have many mutual connections. You're involved in many organizations throughout the community. Want to ask you specifically though about Mary Tebeau, who heads up the Builder's Exchange and who's been a recent podcast guest.
Don: Yes, I noticed she was on. And she was on before me. Which obviously shows beauty before age or something. But I know Mary quite well from the construction industry, but perhaps more importantly, we used to run marathons together. She did her first marathon with me. We did Boston together.
Doug: Wow.
Don: Even more importantly perhaps I badgered her into introducing me to my wife.
Doug: Wow.
Don: When we're having a really good day, I've got Mary to thanks. Other days, well, you know.
Doug: Maybe not so much.
Don: Maybe. Maybe Mary's not responsible. But it's all good. She runs a great organization there and was glad to see that you had her on. But she will always remind me, I'm sure that she got on here before I did.
Doug: Oh, okay. Well maybe what we'll have to do is just have you on more frequently than her, so you can one-up her on that.
Don: Well do that at your own risk.
Doug: Okay. That's good to know. What do we see going on out there in the construction segment right now in terms of legal cases? Anything new that's come up recently that folks should be aware of?
Don: Well, we're still fighting about time and money. As you know, labor is a problem and it's tough to get a project in on time and on budget. We have the inevitable disputes over that that continue. The good news is people are making money out there, particularly the grade A contractors and it's good to see. Far cry from where we were 10 years ago or so. It's a nice problem to have I suppose. The courts continue to grind through with a number of different cases and issues and so forth. But what we also see is less and less cases get tried all the time.
Doug: Interesting.
Don: It's probably down to less than 1 percent of disputes that are filed end up in a trial itself. And I'd say for construction it's even less than that.
Doug: Really?
Don: Most things resolve sooner or later. And that's a trend that has continued over the years for a variety of reasons.
Doug: More mediation, arbitration, those types of things? Or other things as well?
Don: I would say a number of factors. One is that everything gets mediated anymore and most things resolve at mediation. I know that I handle a lot of mediations myself as a mediator and of course any meaningful construction dispute that we have does go to mediation at least once. That resolves a lot of things. It's a therapeutic exercise and allows people to have a pragmatic resolution of the case and they can shape it rather than let a judge or jury or a court of appeal shape it for them later.
Don: Arbitration is still alive and well, although that was around back when we had higher rates of trials and so forth. Mediation's part of it, another part of its just litigation's expensive and people like to try to avoid that when they can. E-discovery has really changed the game and it's quite costly to deal with all the electronic documents that we deal with in today's world.
Doug: Interesting. I would've thought the opposite. Expound on that a little bit.
Don: Well, the volume of documents that are available these days, it's just so huge compared to the old days. And so while you can have certain efficiencies when reviewing the documents and keywords and all that type of stuff, it's a lot to digest. It's a lot to manage and so it adds to the cost, therefore modest-sized disputes get very expensive to try to resolve. If there's a lot of zeros involved, maybe it's justified. If there's not, it makes it tough to justify.
Doug: Yeah. Now obviously, as you indicated, the times are very different from the great recession we saw 10, 11 years ago. How has that changed in terms of what you're seeing, the types of disputes and things like that?
Don: We certainly had a lot of bet the company kind of cases in the lean times, a lot of payment disputes. There were also more bid disputes. People were fighting about getting that job because they were desperate to get it. There were more bid disputes. Now, people just move on to the next job that bids tomorrow and nobody worries about it. The nature of the disputes certainly has changed depending on whether the economy is struggling or flush.
Doug: Okay. Now we're certainly seeing, particularly here in central Ohio, the size of jobs continues to escalate. We have a number of jobs that are well in excess of a 100 million or more. In fact, at the power breakfast earlier this month, we referred to the billion-dollar belt and all the, as you're well aware, the multi-hundred million dollar jobs that are around. What type of additional risks does that bring into play when we see these massive type of jobs going on?
Don: Well, just because it's a massive job with a large contractor utilizing large subcontractors, it doesn't mean that the labor shortage magically goes away. And in fact it puts more of a demand on that. We have huge projects like the hospital project at OSU or some of the data centers that are moving fast and furious and some of these large projects that it's very difficult to find the subcontractor community that can provide the amount of labor that's necessary to deal with that project. And so that's created its own dynamic. And during the lean times, she would have 13, 14 subcontractors bidding on a scope of work. Now they're begging to get two or three that would think about participating. The dynamics change, particularly in central Ohio on our bigger jobs.
Doug: Yeah. I was talking to a client yesterday who's bidding on part of the package for the new Hilton tower and they had estimated, not they the client, but then, the Franklin County who owns the, I think owns the project, had estimated 20 million for this part of the package and two bidders and the low bid on it was well in excess of 30 million. That's the kind of thing that you're seeing.
Don: That's where we are now.
Doug: Yeah. Now, what types of risks does that bring from a legal perspective when you see these large jobs that are more certainly may be more complex in terms of the management of those jobs?
Don: Well certainly is schedule driven and to the extent, you can't finish on time or you need to go through some extraordinary efforts, accelerate your workforce, work overtime, that sort of thing to stay on course. That's where big money is expended on a project of that size. When you take this labor shortage and the drive to finish projects sooner rather than later before prices escalate and then you start having a delay on the project that may have been your fault but most likely was not. And everybody starts to push and shove about some of the big dollars that get incurred when you have labor overruns driven by the schedule issues. And so obviously the bigger the project, the bigger the scale of those losses and nobody's interested in bearing them, they want somebody else to pay them. And that's kind of where we come in.
Doug: It's the finger-pointing. It's always over here, over there, et cetera.
Don: And nothing's more complex than construction. When you think about it, dozens and dozens of contractors involved doing very complex activities and somebody has to coordinate all that and that's never easy.
Doug: No, not at all. And there are so many unforeseen risks and occurrences that things that can happen and not always within control.
Don: I like to say that construction is a problem in progress.
Doug: There you go.
Don: And what separates the successful from the unsuccessful is the ability to manage those problems. And that's where it comes down to good people.
Doug: So true. Yeah. So true. Now we also see, we're seeing a lot more folks that larger contractors coming from out of town as well that we're not maybe as familiar with. Then all of a sudden we see subs that we both know in the region working for folks they've never worked for before. Have you seen additional risks or trying to sneak stuff into contracts or maybe just contracts that they're not familiar with? That kind of thing happening?
Don: Well, certainly when you're working for someone new, that's a different set of risks for both sides. And a lot of times when someone blows into a hot market like Columbus, maybe a one-off project that they're doing or they have some big plans for increasing their presence in the marketplace that may or may not be realistic, a lot of times those people do not have the sense of loyalty to the subcontractor community that the regulars do. That, no, we're going to be here next year, we're going to be here 10 years from now. We were here 30 years ago and so we have to treat them with a certain level of fairness. A lot of times that goes out the window with a one-off out of town contractor and so the risk certainly goes up and then people really are looking at the fine print in the contract because that's really all you have. And that's far different than a relationship based thing because you need That sub to give you a number on the next project and the one after that.
Doug: Yeah. And now probably more than any other time too, you want to pay attention, people are so busy they sometimes forget to look at the details in some of those contracts.
Don: It's easy to look past the details when you're too busy. And sometimes when times are good you can weather that just because there's a momentum and there's enough money in the job and you can make it up on the next job, that type of thing. But if you're too casual with that, you can get a bit, even in this environment. And we certainly see plenty of examples of that.
Doug: Yeah. Any recent cases that have been decided in Ohio that have had an impact on the industry in particular, in terms of anything that poses a risk or people should be aware of?
Don: Well we've been involved in a couple of cases that have come out of Ohio Supreme Court the last couple years. One was basically saying that the CGL coverage, the insurance policy that most contractors provide on work basically doesn't cover construction defects. And even if you thought you were covered for that, you weren't. And so that was a big decision for the business community and most particularly the insurance industry who's been taking premium on those policies for years.
Don: There also was a case that dealt with the statute of repose, which is the amount of time that it takes, basically the last date that you can file a lawsuit for construction defects. And the Supreme Court came out with the, probably a fairly contractor-friendly decision, limited to 10 years, which is a long time but a lot better than what it could have been well beyond that.
Don: And there was also a case that we argued that dealt with liquidated damages and when they would be enforceable, which is a big deal on projects that don't finish on time. And so we had the landmark case on liquidated damages in Ohio Supreme Court that one of my partners prevailed on. There've been a number of busy cases coming down like there normally are.
Doug: Yeah. Good stuff. What about outside of the construction segment in terms of legal things? What about, we see so much with cyber-attacks and all this kind of stuff now and electronic documents as you refer to. What kind of things can get you in trouble if you're a business owner from that perspective just in general?
Don: Well there's a lot of cases that are won or lost based on the electronic communications, the emails, the texts and so forth. And it's always amazing to me what people will put in writing to each other.
Doug: Even texts, can be discovered?
Don: They are discoverable not as easy emails, but they can and are in the bigger cases recoverable. And people think that all this stuff just vaporizes. Well, it never really goes away as you know. And so it's amazing what people will put in these emails and it can make or break a case. It really, really can.
Doug: Wow.
Don: And so my one rule and this applies to any kind of business, any kind of individual, it's a very simple rule, but I think it covers this pretty well, which is never put anything in an email that you don't want your mother or a judge or a jury to read. You follow that one rule, you'll be fine. But it's amazing the number emails I see that violate that simple rule.
Doug: That's great advice. Maybe can you share with us a couple that you've seen without revealing, of course, anything confidential but just in general terms.
Don: Well, the one that I have that's still visually there is that, had a contractor doing work on a public project for an entity of the state of Ohio and the bureaucrats at the state decided they were going to have a Halloween party and apparently one of the participants in the party decided to dress up like my Southern Ohio contractor client.
Doug: Oh no.
Don: And had a hard hat that they put on. It was the name of his company and one of those monkey masks like out of Planet of the Apes or something like that. And a big pillow for the beer belly and all that sort of stuff. And then they started to circulate around with pot shots against him on this particular project and making fun of him and his company.
Doug: Because they were from Southern Ohio.
Don: Just a simple, country boy from Southern Ohio. And they had, he had his cigar and he did like his cigars. I got to say, actually it wasn't all that far off but the point is they were making fun of him in this manner and they were sending around to other people in these emails. And so when we tried the case, which we did, we had a lot of fun with that one.
Doug: Yeah, I'm sure that didn't look too well for those folks that were with the state in that case.
Don: Not particularly professional. There's just lots of examples where people will put something very emotional in an email or even the kind of snide comment that maybe would get by at the water cooler, maybe in a half-serious way where maybe you understand the tone and so forth but when it comes across in black and white in email, it's quite harsh and it can be really devastating. And there's a lot of people that have been very uncomfortable on the witness stand when they've said things that they really probably wish they had not put in writing, where they believed them or not.
Doug: Wow. And like you said, even texts, I think people sometimes get probably even less professional, shall we say in a text too.
Don: Absolutely right.
Doug: Well you've been certainly involved in many, many trials. Probably, I don't know, several hundred I would imagine in your career, if not more. What are some of the craziest things you've seen out there in your experience?
Don: Well, when you're a civil lawyer like myself just fighting about money, you're tossed in with the criminal matters that come before judges who handle both. And I think it was my first big jury trial, I think I was 28 years old, 29 tops. And I was trying for a contractor out of Detroit against what's now my current firm, which was representing a public entity in central Ohio and it was going six, seven weeks, which is the longest jury trial at that time in this county and right in the middle of it, as boring as it was, construction cases are not normally known for their sex appeal. There was a knock on the door in the courtroom and what do you do when you hear a knock on the door?
Doug: Yeah, you answer the door.
Don: I was examining a witness. I was the closest to the door. I went to open up the door and let the person knocking come in. And fortunately for me and the jurors and everyone else, it wouldn't open. It was locked and then we hear this clanging and banging and all this ruckus. We were trying in a courtroom right next to the Sheriff's office and what had happened was one of the inmates had overpowered the deputy sheriff, taken his gun and was trying to break out through our courtroom and that's who was banging on the door.
Doug: Oh my gosh.
Don: I was trying to let them into our courtroom. Fortunately, I failed at that, but they then darted by and then jumped off the second floor into this little atrium at the old courthouse, like John Wilkes Booth style. Crashed down on the floor and then limped out on High Street and then a gunpoint took some poor woman in a red pickup truck hostage and made her drive him to the south end at which time she finally tired of having a gun pointed in her direction and showing how tough she was. She must've been a Southsider herself and she went, she pulled the gun out of his hand and threw it out the window and then drove about a block further up and told him to get out.
Doug: Oh my gosh.
Don: Then you flash forward about 25 years later, I'm in the same courthouse, different courtroom, different case obviously, and right in the middle of a very boring cross-examination. I'm in the, behind the dais and asking a question to the witness, the witness stand jury, they're trying to stay awake in the jury box and all of a sudden I hear the clang and bang and a big ruckus again. And another defendant has broken loose because he didn't like the sentencing in the adjoining courtroom. He broke loose from the deputies and he came right between me and the witness right through the courtroom this time.
Don: The judge stands up and says, "Jurors seek sanctuary in the jury room." And they all scurry to the jury room and this fellow who was getting ready to be sentenced and was rather unhappy about his sentence, I think, he then comes zipping by us and he's like one of those comic book characters, where the legs kind of spin because they're moving so fast and he's just doing that as he goes right between us in the courtroom and dashes out into the lobby, and goes for the elevator, which time they taser him. And you kind of hear a groan and a moan from that. And the incident's come to an end. You never really know what's going to happen in the courtroom, whether it relates to your case or not.
Doug: Well, thankfully you're not seeing too much of that hopefully with construction law, although I know and certainly I've been involved in cases in the past where there's been fraud committed and folks sent to prison. It's not, it can happen.
Don: It's calmed down a little bit. I remember one of my first cases, I was taking a deposition and our client was this Italian plumber. There were a lot of Italians in the trades in those days. And like most plumbers, he had his big Popeye type arms and strong but short type fellow. Well someone had asked a question in a deposition that he thought impugned the integrity of him and his family. He took exception and so he jumped up, pounded on this big thick conference room table and tried to take a swing at the fellow on the other side. And it was a big roundhouse. But he was still so short that he couldn't get the short arms all the way across the table. It just barely missed the guy on the other side. Meanwhile, the court reporter went underneath the table and she's cowering under there and then everybody's grabbing their respective clients and things settled down. But things are a little calmer these days than perhaps in the early years.
Doug: Yeah. Yeah. Thankfully we don't have too many of those here in Rea & Associates.
Don: Not so much anymore in our shop either.
Doug: No. We get occasionally people upset. But talk a little bit about how the legal practice has changed in terms of being a trusted advisor. Have you seen that evolve over the last 25, 30 years?
Don: It's certainly changed a lot. I'm dating myself now when I talk about when I first started practicing, there was carbon paper and then it went to faxes and then it went to Federal Express, then it went to email. And so the speed of the practice has sped up as any professional services have. And I think what is sometimes lost in that is some of the deliberative thought. It's more reaction and reaction time and people's expectations. What do you think? And you're like, what do you think about what? Well about the email I sent you five seconds ago. And so that is definitely changed. People still were looking for a trusted advisor then. They're looking for a trusted advisor now. But perhaps their patience in waiting for results and the expectations are a little bit different. And people more likely now to look for specialization. They're more likely to look for that silver bullet where in the old days maybe it was more like, well, we hear you have a good reputation, you're trusted. That's good enough. Now it's not good enough anymore.
Doug: Interesting. Yeah, that's really a great point that you make there. I think we see much the same even in our business as well. But great advice. One last question I got to ask you, what were you doing last Friday in the courtroom? I hear there's a good story here.
Don: Well, it's a story that started about 30 years before last Friday, but last Friday I was testifying as an expert witness in an attorney malpractice case and I was an expert witness called on behalf of the lawyer who supposedly committed malpractice. Well, why I was I doing that? I was doing that because a couple of years before I had been on the other side from him in the underlying cause. And my client prevailed, went poorly for the other side who then was unhappy, sued their lawyer. And then I came back for the second round as an expert witness in the case. But the reason it started 30 years before was I helped pass the prompt payment act in Ohio, which said that you would pay contract, contractors would pay their subcontractors within 10 days after they were paid, if not, 18% interest in attorney's fees and some serious stuff.
Don: It really helped the dynamic of payment in the industry. But when people were first getting used to it, there were a number of people still had bad habits in town. I won't mention who they were, but you might be able to guess a few and that we had to sue one of them on behalf of a number of different clients. Well, the first case goes to trial and it was for a roofer in town. Old school guy, I really liked him and his ethics and he was a principle guy and he said, "I'm going to make my stand." We made our stand, tried the case, won it, got 18% interest in attorney's fees. It was the first victory under the prompt payment act and then people started paying promptly because they didn't want to get whacked for.
Doug: Wow, this really can happen.
Don: Serious stuff. Well then you go 25 years after that and I get a call, someone has a prompt pay problem and we're at the biggest subcontractor. Woman-owned business hadn't really represented her in the past, but the reason I agreed to take on her case is she was the daughter.
Doug: Oh my gosh.
Don: Of the person that I tried the first prompt payment case.
Doug: Wow.
Don: And so she came to me with it and we went forward with the case, the other side thought maybe she wouldn't have the resources to see it through. But what they didn't appreciate was I had a sense of loyalty to her and her family. And so we tried it and that was the case that we won and we really whacked the other side with their 18 percent interest, six figures legal fees, et cetera, et cetera.
Doug: Wow.
Don: That then led to the malpractice case, which had me then testify last Friday. I'm answering questions rather than asking them in the courtroom up in Delaware County on Friday.
Doug: Oh my gosh.
Don: The jury came back at the end of the day, I was the last witness in the case and they found in favor of the lawyer on the other side.
Doug: That there was no malpractice.
Don: There was no malpractice and he recovered his fees. "And that was the end of the story," said Lady Justice.
Doug: That's awesome.
Don: I had the final say.
Doug: Yeah, great stuff. Well, that's, certainly, you've got, we could talk for hours, Don, about all the experience and just the, I think the sage advice that you can provide for folks. We'll have to have you on for 2.0 so you can one up on Mary in terms of that.
Don: Anything to get an edge on Mary because she's probably a little bit faster than I am these days. 2.0 would be just fine.
Doug: I love that. Great advice and certainly you've pointed out many of the benefits to having a counsel like yourself and truly somebody who is that trusted advisor. I appreciate it and thank you for coming on. If you want more business tips and insight or to hear previous episodes of unsuitable, visit our podcast page at www.reacpa.com/podcast. Thanks for listening to this week's show. You can subscribe to unsuitable on iTunes or wherever you get your podcasts, including YouTube. I'm Doug Houser. Join us next week for another unsuitable interview from an industry professional.
Disclaimer: The views expressed on unsuitable on Rea Radio are our own and do not necessarily reflect the views of Rea & Associates. The podcast is for informational and educational purposes only and is not intended to replace the professional advice you would receive elsewhere. Consult with a trusted advisor about your unique situation so they can expertly guide you to the best solution for your specific circumstance.
