News

Tennessee Infrastructure Needs $45 Billion for Next 5 Years

Tennessee's annual estimate of costs for needed roads, schools, parks and other infrastructure is now $45 billion in the five years between 2016 and 2021 reports the Chattanooga Times Free Press. This is an increase of about $2 billion, or 4.7 percent, from last year, according to the Tennessee Advisory Commission on Intergovernmental Relations, or TACIR, a research institution that explores solutions for state and local governments.
 
In its latest report issued Monday, TACIR hopes that the infrastructure inventory could help local communities to woo federal dollars under President Donald Trump's pending infrastructure plan. The report includes a statewide overview chapter with information by type of infrastructure, the condition and needs of our public-school facilities, the availability of funding to meet reported needs and a comparison of county-area need, including one-page summaries for each Tennessee county.
 
Costs for current infrastructure needs fall into six general categories:
  • Transportation and utilities: $24.8 billion
  • Education: $10.4 billion
  • Health, safety, and welfare: $6.9 billion
  • Recreation and culture: $1.8 billion
  • General government: $767 million
  • Economic development: $360 million
Preliminary discussions of Trump's infrastructure plan indicate states could receive rural infrastructure funds if they have plans for investing the money. The TACIR news release said the report "could provide a foundation for meeting this or similar requirements." The report in its entirety can be found here.
 
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The Protest Movement as a Tool for Social Change: Fifty Years Post-King

The Ben F. Jones Chapter of the National Bar Association presents a dynamic day of programming in recognition of 50th anniversary of the death of Dr. Martin Luther King in Memphis. This program explores the protest that brought Dr. King to Memphis in 1968 and the legacy that his untimely death has left on the fabric of the city. The event will focus on the protest movement in its current state as well as provide updated information on the law surrounding assembly, protest and municipal responsibility.
 
The program features local historical figures who worked with Dr. King, representatives of the media, City of Memphis, local activists, attorneys and judges.
 
Speakers and producers include:
  • Barbara Arnwine, Esq., CEO and Founder of the Transformative Justice Coalition, Washington, D.C. 
  • Judge Earnestine Hunt Dorse, Municipal Court Judge, Memphis
  • Bill Cody, Burch, Porter and Johnson, Memphis
  • Earle Schwartz, Memphis Bar Association President, Memphis
  • Judge Bernice Bouie Donald, United States Circuit Judge of the United States Court of Appeals for the Sixth Circuit, Memphis
When: Feb. 23, 9 a.m. CST
 
Where: Fogleman Business Center, First Floor Amphitheater, 330 Innovation Dr., Memphis, Tennessee 38152
 
Contact Florence Johnson by email or call her at 901-725-7520 for more information.
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TBA Gears Up for 2018 Mock Trial Tournament

The Tennessee Bar Association will host the upcoming Tennessee High School Mock Trial Tournament on March 23 and 24 in Nashville. The Mock Trial is a two-day, single-elimination bracket-style competition where 16 high schools face-off against each other in the Davidson County Courthouse. Each team is scored on their trial preparation and skills. 

We need TBA volunteers to help be bailiffs and jurors (scorers) for the event. After signing up, we will send you a Volunteer Memo with all the information you need for competition including; parking, hotel, downtown map, courthouse rules, and reimbursement information. Come be a part of the Young Lawyers Divisions’ March Madness! Feel free to contact YLD Director Stephanie Vonnahme with any questions.

To volunteer for this event, click here.

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Construction Industry Faces Shortage of Workers Amid Unprecedented Growth

A recent WSMV story highlights concerns of builders in middle Tennessee regarding a shortage of construction workers. The area has seen unprecedented growth, with an estimated 75 people a day moving into the Nashville area alone.
 
"What used to take us about 120 days on average to build a house is now taking us 180 days plus," said Dave McGowan, the owner of Regent Homes, a locally owned home building company in Nashville. "There's a shortage of bricklayers. There's a shortage of different tradesmen from everything, from people who do our carpet work and do our floor work. All the people that really requires skill, there's a true shortage of those people," he continued.
 
This comes at a time when several planned, large-scale construction projects including repaving Interstate 440 and Nashville's proposed metro transit upgrade, will only further exacerbate the problem. Nashville is also on the short list of cities for Amazon's second headquarters, Amazon HQ2, an 8.1-million square foot campus that will create an estimated 50,000 new jobs for the area and a huge need for skilled construction laborers.
 
One way to build the workforce is through high school recruitment. Go Build Tennessee, a nonprofit comprehensive workforce development initiative that seeks to address the problem by getting teens interested in joining the construction workforce, routinely visits area schools to inform young people, parents, educators and influencers about shortages and opportunities in the various construction related trades.
 
"If they are able to go to trade schools and learn that skill set, they would be able to have a job," McGowan said. With only one person replacing every five leaving the construction field, Tennessee will certainly be tasked with finding new and novel ways to address these challenges.
 
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Don't Forget: Winter CLE Blast Tomorrow!

Need CLE hours fast? We can help! The annual Winter CLE Blast is less than a day away. With this program, you can complete up to 11 hours of Dual CLE credit on your own time. Our registration desk will be open from 7 a.m. to 6:45 p.m. on Feb. 21, providing you the flexibility to create your own schedule and take as many or as few hours as you need. Payment will be determined at checkout depending on the number of hours you attend. 

Highlights

  • Flexible to your schedule
  • Up to 11 Hours of CLE
  • Ethics Credits
  • Compliance CLE
  • Live Credit Hours

When: Feb. 21, registration begins at 7 a.m., CST

Where: Tennessee Bar Center, 221 4th Ave N., Nashville, TN 37219

 

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Construction Law Forum 2018

CLE on construction law will be held Jan. 26 at the Tennessee Bar Center in Nashville. Topics will include available insurance products and particular coverages involved in a construction project, coverage for defective work, drafting complaints to invoke coverage, dealing with exclusions, payment and performance bonds, indemnity agreements necessary to obtain bonds, retainage issues, and conflicts of interest when representing insureds in construction litigation. 
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The Indemnity Agreement — A Benefit to the Surety and Contractor

Indemnity agreements are a standard document in the surety and insurance industry, but for those outside the industry, they can be relatively unknown. If you are outside the construction arena, they can be near impossible to understand and they can be difficult to navigate when your construction client is required to provide a bond to secure its bidding, payment and performance obligations under a construction contract.
 
Surety bonds are third-party contracts between the principal/contractor, the surety and the obligee. By providing the principal/contractor with the bond, the surety is guaranteeing to the obligee that money is available to cover the cost of damages as a result of the principal’s failure to adhere to the terms of the underlying contractual obligation and the bond provided. The surety issues a bond with the assumption that the surety will not lose money if a claim is made against the bond.
 
So, if the surety guarantees to the obligee that money is available to cover any losses or damages where the principal/contractor is at fault, how can the surety assume that it will not lose anything? The surety will look to the ever-important indemnity agreement. While this may sound overwhelming, the indemnity agreement is a necessary component of the construction industry, and understanding the indemnity agreement can assist you and your client, the contractor, in the operation of its business. 
 
An presentation during the upcoming Construction Law Forum will address this and other questions regarding the indemnity agreement. To register for this CLE opportunity, click here
 
Elizabeth "Beth" Stengel is a West Tennessee Delegate for the Tennessee Bar Association's Construction Law Section. Stengel is a shareholder in the Memphis office of Evans Petree. She holds degrees from the University of Tennessee and the University of Memphis College of Law. Stengel can be contacted at 901-474-6138 or bstengel@evanspetree.com.
 
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Tennessee Retainage Law — BETTER WATCH OUT!

Most Tennessee commercial construction contracts allow for “retainage” to be withheld from monthly payments until the end of a project. However, Tennessee has some of the most restrictive retainage laws in the country, the violation of which can subject an owner or contractor to both criminal and civil penalties. These laws have in the last few years been amended to include these penalties. Many in the construction industry (and their lawyers) are unaware of these laws and recent cases. 

A presentation at the upcoming Construction Law Forum aims to address this and provide a comprehensive discussion of the retainage laws and how lawyers can best advise their clients. To register for this CLE opportunity, click here

David K. Taylor is a Middle Tennessee Delegate for the Tennessee Bar Association's Construction Law Section. Taylor is a partner in the Nashville office of Bradley Arant Boult Cummings. He holds degrees from Davidson College and the University of Alabama College of Law. Taylor can be contacted at 615-252-2396 or dtaylor@bradley.com.

 

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Construction Law Forum 2018 This Friday!

The Tennessee Bar Association will host the 2018 Construction Law Forum in Nashville on Jan. 26, 2018. This event provides six hours of CLE, including an hour of ethics, and will be focused on understanding insurance coverage and surety bond issues as related to construction projects. These matters can be perplexing— who is covered, what is covered, who is a necessary party to any dispute, and how to trigger coverage. This CLE will address these problems in a way that's informative for all attorneys, regardless of construction law experience. 
 
Do not miss this opportunity to fulfill CLE requirements while networking with attorneys who share your focus and cultivating relationships with fellow practitioners. Section members receive a discounted rate for the program. Here's the key info: 
 
When: Jan. 26, 2018; registration begins at 8 a.m., CDT
 
Where: Tennessee Bar Center, 221 4th Ave N., Nashville, TN 37219
 
Topics include:
Available insurance products and particular coverages involved in a construction project
Coverage for defective work
Drafting complaints to invoke coverage
Payment and performance bonds
Indemnity agreements necessary to obtain bonds
Conflicts of interest when representing insureds in construction litigation
 
Speakers/Producers include:
Jeremy Alpert, Glankler Brown PLLC, Memphis
Briton Collins, Kennerly, Montgomery & Finley PC, Knoxville
James (Tim) Crenshaw, Schulman LeRoy & Bennett PC, Nashville 
Michael Derrick, Shuttleworth PLLC, Memphis 
Timothy Gibbons, Chambliss, Bahner & Stophel PC, Chattanooga
Elizabeth Stengel, Evans Petree PC, Memphis 
William Tate, Howard Tate Sowell Wilson Leathers & Johnson PLLC, Nashville
David Taylor, Bradley Arant Boult Cummings, Nashville
 
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Visitation Today, Services Tomorrow for Nashville Attorney

Nashville lawyer Thaddeus Earl Watkins died on Nov. 19. He was 60. Born in Memphis, Watkins earned his law degree from the University of Memphis Cecil C. Humphreys School of Law. During his 30-year career as an attorney for the State of Tennessee, he served as counsel for the State Fire Marshall’s Office, the State Board of Architectural and Engineering Examiners, the Tennessee State Capitol Commission and the Department of Commerce and Insurance before being appointed to the Tennessee Department of General Services. Visitation will be held tonight from 5 to 7 p.m. at Marshall Donnelly Combs Funeral Home, 201 25th Ave N. A second visitation will be held tomorrow at 10 a.m., with services to follow at 11 a.m. at Christ Church Cathedral, 900 Broadway. In lieu of flowers, please make donations to the National Alliance for the Mentally Ill (NAMI) or a charity of choice.
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Supreme Court: Home Inspector Liability Doesn’t Extend to 3rd Parties

The Tennessee Supreme Court ruled this week that a home inspector is not liable for the injuries of a social guest of a homeowner who was injured when a railing collapsed shortly after purchase. The majority of the court’s justices found that the inspector did not voluntarily assume a duty to third parties like the plaintiff, who was a guest of the homebuyer. Justice Roger A. Page wrote the majority opinion, while Justice Holly Kirby filed a separate opinion concurring in part and dissenting in part. Justice Sharon G. Lee filed a third opinion in dissent.
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The Consumer Financial Protection Bureau Targeting Affiliated Businesses

The Consumer Financial Protection Bureau (CFPB) recently took action against Meridian Title Corporation (Meridian) for violation of a long-standing provision of the Real Estate Settlement Procedure Act (RESPA). CFPB has been delegated with the enforcement of RESPA.  
 
According to the release, Meridian is a real estate settlement agent and a title insurance agency located in South Bend, Indiana, which was found to have steered “consumers to a title insurer owned in part by several of [Meridian’s] executives without making disclosures about the business affiliation.” 
 
When directed to its affiliated provider, the settlement agent/title agent “was able to keep extra money beyond the commission it would normally have been entitled to collect based on an understanding with the affiliated provider, to add to its bottom line,” according to Director Richard Cordray.
 
Receiving “anything of value” pursuant to a referral agreement has long been a violation of RESPA, but if the referring entity meets the definition of an “affiliated business,” then the referring entity must “generally disclose its relationship to the consumer.” Theoretically, this permits the consumer to exercise independent judgment regarding whether to use that provider. The penalty for Meridian’s failure to disclosure resulted in an order that required the regional company to pay $1.25 million to 7,000 “harmed consumers” and an order to desist from such conduct in the future.
 
Unfortunately, many affiliated providers of services for title agencies and lenders have become lax and brush off this continuing obligatory disclosure to the consumer.
 
This action is noteworthy because the CFPB has identified and taken action against a relatively minor player in the title industry. This should reinforce the importance of compliance by every title agency and lender. Lenders who enjoy affiliated business arrangements with title insurance providers are apt to trivialize this RESPA requirement when dealing with the consumer, especially when the lender views the provider as a business partner through its relationship as a member in the provider’s limited liability company.
 
As with many consumer protection regulations, the consumer often fails to appreciate the value of choosing services through a provider that does not share in the financial interest of the lender. This is especially true when an owners title policy is issued simultaneously with a loan policy. The interest of the consumer and lender are not necessarily the same.
 
Paul "Kelley" Hinsley is an eastern delegate and past chair of the executive council for the Tennessee Bar Association's Real Estate Section. Hinsley holds degrees from the University of Tennessee at Knoxville and the University of Tennessee College of Law.

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Mechanics' and Materialman's Liens: What Contractors Need to Know

Construction Law Chair Josh Jenkins and Executive Council member Mary Beth Hagan, both of the Hagan Law Group, were recently at the Tennessee Bar Center to give a presentation on mechanics’ and materialman’s liens. The purpose of the seminar was to provide information to contractors and subcontractors in Tennessee about their lien rights on projects and the related timing considerations and requirements for perfecting and enforcing a lien in the event of non-payment.
 
This presentation is part of what will be an ongoing project of the Construction Law Section, with plans to offer future seminars in Tennessee’s eastern and western regions. Video of the recent presentation is available now for viewing.

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Global & Tennessee Specific Trade & Investment Perspectives & Policies for 2018 & Beyond

 
The International Law Section of the Tennessee Bar Association is sponsoring a free seminar “Global & Tennessee Specific Trade & Investment Perspectives & Policies for 2018 & Beyond” to be held on Thursday, Nov. 2 from 6:00 p.m. – 7:30 p.m. at Nashville School of Law, Appellate Courtroom, 4013 Armory Oaks Drive, Nashville, Tenn. 
 
The speakers on the panel include:
  • Terry Olsen, Chair of the TBA International Law Section, as Moderator
  • Clay Banks, Regional Director of Tennessee Department of Economic & Community Development
  • James Forde, Prosperity and Economics Officer of British Consulate General, Atlanta
  • Ms. Joanne Chu, Director of Hong Kong Economic and Trade Office (New York)
  • Mr. Michael Kwan, Deputy Director of Hong Kong Economic and Trade Office (New York)
The seminar will provide an overview of the global & U.S. trade & investment landscape as it concerns Tennessee for 2018 & beyond, and both policy & legal views of the ever-changing global standard of Tennessee in the international investment environment.
 
Attendees will also have the opportunity to have direct interactive discussions with the speakers at the end of the seminar.
 
The panel discussion will last from 6pm thru 7pm, and then followed with a FAQ session for attendees, along with a light reception of beverage & desserts. 
 
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Lawsuit Filed Against Knoxville Developer

A lawsuit alleging misrepresentation has been filed against prominent Knoxville developer Richard E. “Rick” Dover, the Knoxville News Sentinel reports. Royal Properties, Inc., which represents the owners of the historic Pryor Brown garage building in Knoxville, is suing Dover for alleged dishonesty over the costs of turning the building into condominiums and commercial space. He is also accused in the lawsuit of tricking the owners into deeding him the property and of using the property as his own personal storage. Dover had six felony convictions in Texas related to financial fraud more than 20 years ago, but built a career in Knoxville after that.
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TBA Construction Section Offers Free Seminar on Mechanics', Materialman's Liens

The TBA's Construction Law Section will to offer a free one-hour seminar on what contractors need to know about mechanics’ and materialman’s liens on Oct. 12 at 8 a.m. The purpose of this seminar is to provide information to contractors and subcontractors in Tennessee about their lien rights on projects and the related timing considerations and requirements for perfecting and enforcing a lien in the event of nonpayment. Please RSVP to Trisha Rogers no later than Oct. 10.

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Mechanics' and Materialman's Liens: What Contractors Need to Know

Free Seminar, Oct. 12, 8 a.m. Central Daylight Time

The Construction Law Section of the Tennessee Bar Association is pleased to offer a free one-hour seminar on what contractors need to know about mechanics’ and materialman’s liens. The purpose of this seminar is to provide information to contractors and subcontractors in Tennessee about their lien rights on projects and the related timing considerations and requirements for perfecting and enforcing a lien in the event of nonpayment. Speakers will include Joshua A. Jenkins and Mary Beth Hagan, both of Hagan Law Group PLLC.  A light breakfast will be provided. Please RSVP to Trisha Rogers no later than Oct. 10, 2017.

 

When: Oct. 12, 8 a.m., Central Daylight Time

Where: Tennessee Bar Center, 5th Floor Terrace Room, 221 4th Ave N., Nashville, TN 37219

 
Parking for the Tennessee Bar Center is available at the Commerce Street Garage, located at 310 Commerce Street (between Third and Fourth Avenues on Commerce Street, across from the AT&T Building).
 
To walk to the Bar Center from the parking garage:
 
• Take the back elevator to the third floor. Turn right out of the elevator to the walkway, which will lead you to Fourth Avenue.
 
• Turn right onto Fourth Avenue, walk 1-1/2 blocks north, and the Bar Center will be on your left.
 
• If you are attending an event at the Tennessee Bar Center, be sure to bring your parking ticket so we can validate it for you. Ask our receptionist on the second or fourth floor for information.

 


 
Please contact Jarod Word, sections and committees coordinator with any Legal Practice Tips or Section Connect ideas you feel will benefit other section members.

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Judge Dismisses Lawsuit Against Chattanooga, Electric Power Board

A Hamilton County judge dismissed a lawsuit filed by a lighting company against the city of Chattanooga and the Electric Power Board, alleging that they conspired to block implementation of a new energy-efficient street lighting system, the Times Free Press reports. Circuit Court Judge J.B. Bennett ruled that the suit was not based on appropriate claims against a municipality and public officials. Bennett gave plaintiffs Global Green Lighting and its owner Don Lepard, 30 days to submit a new lawsuit.
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Chattanooga Lawyer Named to Board of National Legal Group

Chattanooga lawyer Marc H. Harwell has been elected to the Board of Directors of the Federation of Defense and Corporate Counsel. An attorney with the firm of Leitner, Williams, Dooley & Napolitan PLLC, Harwell also serves as the appointed chair of the group’s Construction Section and vice chair of its Transportation Section, Admissions Committee and Projects and Objectives Committee.

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Developers of Nashville Twin-Tower Project Head to Trial

The developers of a twin-tower project in Nashville are heading to trial over their controversial effort to buy a small parking lot in the footprint of their development, the Nashville Business Journal reports. The trial is scheduled for January 2018 and will see out-of-state investors clash with the Atlanta-based owner of the lot. The project was approved by the Metro Planning Commission last year and would be among the five tallest buildings in Nashville – 10 to 25 stories above Metro zoning restrictions for the area.
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Item of Interest

Below is an article that was published in the the Disability Section Connect. We thought it had information that would be of interest to those of you in this section as well.  

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Turn Your Expertise into a Magazine Article

It’s no surprise that some of the best articles in the Tennessee Bar Journal have come from TBA section members. Your membership in this section shows that you have a keen interest in trends, developments and case law in this practice area. Sharing this knowledge with your colleagues is one of the best traits of the profession.

How can you become a Journal author? Think of and refine your topic. It should be of interest to Tennessee lawyers, which is a broad criteria. This could mean you might explain a new state law, explain a complicated area of law, or take a larger issue and connect it to what it means for Tennessee attorneys and the justice system. Find a global issue within your particular experience or knowledge and tell about it and how it affects Tennessee law. Then take a look at the writer’s guidelines at http://www.tba.org/submit-an-article, which will tell you about length, notes and other details. Once it’s in the proper format, send it in! It goes to the editor, Suzanne Craig Robertson, who will then get it to the seven members of the Editorial Board for review.

If you are published, you may apply for CLE credit for your work under Supreme Court Rule 21 Section 4.07(b). For details on claiming the credit, check with the Commission on CLE & Specialization at http://www.cletn.com/.

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TBA Convention in Kingsport is Just Around the Corner

Registration is open for the 2017 TBA Annual Convention. This years programming offers plenty of opportunities to make new friends and renew acquaintances with colleagues from across the state. The highlight comes Thursday night with the Kingsport Karnival at the downtown Farmers Market. Along with fabulous food and drink, there will be live music from two bands, an aerialist, juggler, magician, body and face painters, caricaturist and more. Plus, you'll have access to the fabulous Kingsport Carousel, the delightful project of community artisans. Special thanks to Eastman for support of this event! 

This years convention also offers 12 hours of CLE programming, highlighted by sessions on the Hatfields and McCoys, The Neuroscience of Decision-Making, and the popular Better Right Now wellness program. It is all set at the beautiful MeadowView Marriott Conference Resort & Convention Center. To receive the TBA $129 room rate, you must book your reservation by May 23. Book your room online now or call 423-578-6600.

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Call For Submissions — Law Practice Pointers

One of the benefits of being a TBA Section Member is having access to information from experienced practitioners to assist in your day-to-day practice. The sharing of this information amongst colleagues is one of the best traits of the profession. It is also a way of helping each other to maneuver the evolving legal market and strengthen your legal practice.

How can you help your fellow Section Members?  If you have some Law Practice Pointers you would like to share with your fellow section members, write an article between 300-500 words and submit it to the Section Coordinator for review and approval. These Law Practice Pointers can be related to a court opinion, piece of legislation, or current event or industry trend that affects the practice of law as it relates to the specific Section. The main requirement is to make sure the article gives lawyers practical tips, based on experience, to include in their day-to-day practice.

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Update on Retainage Laws

One of the most widely used “end of the project” leverage tools used by owners is retainage. Many times retainage can equal a contractor’s profit margin on a job. Getting withheld retainage back at the end of the job is essential. Far too often owners (and architects) forget that retainage is the contractor’s approved and earned money. In addition, since most prime contractor’s subcontract out the majority of the work (and in turn withhold retainage), much of the retainage is actually subcontractor retainage. Almost all construction contracts also set out the conditions under which retainage will be released, and give the owner the right to withhold retainage in the event of a dispute.

Tennessee’s retainage laws are located in the Prompt Pay Act (T.C.A. § 66-34-101, et. seq.) and can be summarized as follows: for any public or private project, retainage cannot exceed 5%; (2) if the prime construction contract exceeds $500,000, it is mandatory that the owner place the retainage into a separate, interest bearing escrow account with a third party; (3) the prime contractor is responsible to its subcontractors, if retainage qualifies to be escrowed (regardless of the subcontract amount), to ensure that a “project retainage account” is created; and (4) when deposited, retainage becomes the “property” of the contractor/subcontractor. These laws are mandatory and cannot be “waived” in the contract. The failure of an owner (or prime contractor) to comply is not only a criminal violation (Class C misdemeanor), but if the escrow mandate is ignored, the owner has to pay the contractor a daily penalty of $300 from the very first day that retainage was withheld and not escrowed. Legal fees for a bad faith violation can also be recovered. To be clear, this escrow rule also potentially exposes the prime contractor to the same $300 a day penalty from each and every subcontractor, regardless of the amount of the subcontract. In a recent case that settled, an owner who refused to escrow only $50,000 in retainage ended up paying the contractor a $300,000 penalty (1000 days X $300).

Most contracts allow an owner with set off or withhold retainage in the event of a dispute (defective work, liquidated damages, liens, a defunct contractor). There are provisions in the PPA which set out when an owner is required to release retainage (T.C.A § 66-34-204). Before a recent case, the “consensus” among lawyers was that these contract provisions govern. However, in Beacon4, LLC v. I & L Investments, LLC, 2016 WL 4545736 (Tenn. App. 2016)(cert. denied), the Eastern Court of Appeals held that notwithstanding and regardless of what the contract says about the ability of an owner to withhold retainage, an owner retainage release must occur within the earliest of the 3 statutory 90 day periods (issuance of a U&O permit; issuance of a certificate of substantial completion from the project architect; or when the owner begins to use or could have used the improvement). Yet another recent case held that the PPA is a “remedial” statute which should be liberally construed in favor of the beneficiaries of the retainage and prompt pay laws. Aarene Contracting LLC v Krispy Kreme Doughnut Corp, Case No. E2016-01155-COA-R3-CV (December 20, 2016).

To make these rulings clear, assume there is $100,000 in properly escrowed retainage, but it is discovered near the end of the project that the entire roof is defective and will cost $500,000 to repair. Assume further that the owner and lender did not require a performance bond. Under this scenario, the normal strategy of the owner (and lender)  would be to use the retainage to help pay for the repairs or, at the minimum, hold on to the retainage until the dispute is resolved. However, arguably under Beacon, even if the contractor is financially unstable (or even out of business), the owner would be required to fork over the $100,000 even when there is no guaranty that this money will be around when the dispute is finally resolved.

— David Taylor, a Nashville attorney with Bradley Arant Boult Cummings LLP is a member of the TBA Construction Law Section's Executive Council

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