Important Update – The Impact of Coronavirus on the Construction Industry

Since our post on March 18, a lot has happened from both a health and regulatory standpoint as far as the impact from the outbreak of COVID-19 (“coronavirus”) on local and state construction practice.  Here is an update, as of today, March 25.

On March 23, Governor Charlie Baker issued an emergency order requiring all businesses and organizations that do not provide “COVID-19 Essential Services” to close their physical workplaces and facilities to workers, customers and the public as of Tuesday, March 24th at noon until Tuesday, April 7th at noon.

The order appended a list of designated essential services, based on federal guidance and amended to reflect the needs of Massachusetts’ unique economy, including

“Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)”

“Workers – including contracted vendors – involved in the construction of critical or strategic infrastructure including public works construction, airport operations, water, sewer, gas, electrical, nuclear, oil refining and other critical energy services, roads and highways, public transportation, solid waste collection and removal, and internet, and telecommunications systems (including the provision of essential global, national, and local infrastructure for computing services)”

“Workers who maintain, ensure, or restore the reliable generation, transmission, and distribution of electric power”

“Workers to ensure continuity of building functions”

The industry therefore largely interpreted the order to mean that most construction work was deemed a COVID-19 Essential Service and would be permitted to continue unimpeded.

Notably, the order also provided that it

supersedes and makes inoperative any order or rule issued by a municipality that will or might in any way impede or interfere with the achievement of the objectives of this Order.  With respect to work or travel in particular, any order or rule issued by a municipality is hereby made inoperative to the extent: (1) such municipal order or rule will or might interfere with provisions of this Order ensuring the continued operations of COVID-19 Essential Services; or (2) such municipal order or rule will or might interfere with the free travel anywhere within the Commonwealth of any person who is a member of any COVID-19 Essential Workforce where such travel is made in connection with the ongoing operation of COVID-19 Essential Services.”

On its face, this order appeared to supersede and render inoperative prior directives from municipalities, including the City of Boston, which had ordered a systematic shut down of most construction work.  Industry participants quickly appealed to the Governor’s Office for clarification.

**ALERT**

Yesterday, March 25, 2019, the Governor’s Office, through its Chief Legal Counsel, issued written guidance regarding the effect of the March 23 emergency order insofar as the order intersects with municipal efforts to address the COVID-19 crisis.

Importantly, the guidance provides that “all construction projects are to continue operations during the state of emergency, but to do so with allowance for social distancing protocols consistent with guidance provided from the Department of Public Health … Local policies, regulations, or directives that provide otherwise are in direct conflict with the Order and should be withdrawn … construction projects should continue as long as they observe social distancing protocols and otherwise can continue to operate safely.”

According to this guidance, Massachusetts cities and towns may not impose a ban on construction and may not order work to cease on existing projects, as such actions are in violation of the emergency order.   However, all projects in the Commonwealth must adopt and implement COVID-19 Guidelines and Procedures for all Construction Sites and Workers at all Public Work, which are enclosed with the letter.

Industry participants are cautioned that, until cities and towns take formal action to withdraw the orders currently in place, the restrictions in cities such as Boston will remain in effect.  The situation remains fluid and there is likely to be further, imminent instruction from city and state authorities.  Indeed, just a few hours after the Governor’s Office released its guidance, the City of Boston responded with its own bulletin, stating that, “[d]ue to the public health emergency in Boston and across the Commonwealth of Massachusetts, this pause is still in effect until further notice.”

The Mirick O’Connell Construction Practice Group will continue to monitor these events.

Posted in Construction, Contracts | Tagged , , ,

The Impact of Coronavirus on the Construction Industry

The outbreak of COVID-19 (“coronavirus”) has impacted all industries, including construction.  First and foremost, we are in the midst of a public health crisis, and the safety and well-being of all project participants should be top of mind.  We are also looking at significant economic risk and uncertainty.  Our state and federal governments have issued emergency orders.  The City of Boston this week announced a complete shutdown of construction projects, with other jurisdictions likely to follow suit.

The impacts to the construction industry and its participants are widespread and range from quarantines and labor shortages to disruptions in the local, national and global material supply chains.  All parties, whether owners, contractors, subcontractors or suppliers, should already be in the process of creating protocols for their field and office teams, proactively establishing communications with customers and vendors, and carefully reviewing and confirming all contract and regulatory requirements, which in some cases are changing daily.

The general protocols to consider include: reinforcing good personal hygiene; encouraging employees to stay home if sick; restrictions on travel; and preparedness planning, data security and working remotely.  In addition, the following concepts bear particular attention in light of these circumstances and their unique application in the practice of construction.

Delays and Extensions of Time

Most construction contracts, including standard form documents such as AIA and ConsensusDocs, contain provisions addressing the contracting parties’ rights and obligations in the event of schedule delay, including delays occasioned by “force majeure” (translated from French as “superior force”).  While most of these provisions do not reference infectious disease specifically, they commonly allow for the contract time to be extended in the event of causes outside of the contractor’s control, including a force majeure.

It is recommended at this juncture that project participants review these provisions carefully to determine their rights in light of the coronavirus impacts, and, importantly, to ensure compliance with notice and other procedural requirements.  Many of these clauses contain strict requirements for particular notice to specified recipients, to be issued promptly upon recognizing the cause of delay, regardless of whether the impact is ultimately borne out.  It is recommended here that parties create a form of notice that can be adjusted on a per-project basis, in order to establish a written record and advance notice of impacts.

Material Escalations

Contractors are beginning to receive notifications regarding delays and impacts to the supply of construction materials, and they are well-advised to review their contracts for protection against this disruption, usually in the form of material escalation clauses.  These clauses will typically specify the materials subject to escalation and define the events that trigger the clause.  The methodology for implementing the price increases is variable, and may utilize unit pricing, benchmark pricing or incremental increases based on other factors.

Given the fluidity of the current landscape, contractors should be careful to include language particular to the coronavirus impact, establishing procedures for documenting and proving actual cost increases.  The price escalation should address not only increases in price, but also corresponding adjustments in the schedule.

Termination and Suspension

Most commercial construction contracts contain language that defines the grounds upon which the owner may terminate the contract or suspend the work.  These clauses usually describe the rights of the parties regarding procedures for demobilization, remobilization, adjustments and entitlements.  It is recommended that contractors remain vigilant, be aware of these clauses, their rights in the event of an owner-directed termination or suspension, and any notice requirements to preserve adjustments that will have to made or sought in the contract sum and/or contract time.

Insurance

For each project participant affected by coronavirus impacts, there may be unique insurance considerations depending on the nature and extent of particular losses and claims.  Potential claims lie with policies that are written on an “all-risk” basis, for example, builder’s risk insurance policies, as well as business interruption insurance policies that may afford coverage, for example, for losses sustained by civil authority orders.  It is recommended that participants review their policies, with their insurance professionals to the extent possible, and determine their rights and potential loss mitigation procures that may be available.

Safety and OSHA

Obviously, worker health, safety and welfare is a priority for all employers.  These are not just moral obligations, they are memorialized in several state and federal laws and regulations.  For example, OSHA contains a duty for all employers to provide employees with a place of employment “free from recognized hazards that are causing or are likely to cause death or serious physical harm.”  The current landscape presents unique risks and challenges, which are sometimes changing by the hour or even the minute.  There are several trusted resources for employers to review recommendations for best practices, including, but not limited to, directions from OSHA, DOL, CDC and others.

Mirick O’Connell will continue to monitor the impacts of the coronavirus global pandemic on the construction industry and its participants.

Posted in Construction, Contracts | Tagged , , , , , ,

Executive Order Loosens Open Meeting Law Requirements During Coronavirus Emergency

Governor Baker signed an Executive Order relieving government boards and committees from compliance with certain Open Meeting Law requirements during the novel Coronavirus (COVID-19) emergency. The Order gives public bodies greater leeway to hold closed-door and remote meetings, so that government agencies may conduct business while also complying with public health recommendations regarding social distancing.

Under the Order:

  • Public bodies may hold meetings without providing physical public access so long as the public has access to deliberations through alternative means.
  • Alternative means include telephone or video conferencing and other methods of providing real-time public access to government meetings.
  • When public participation at a meeting is required by law (such as a public hearing), the alternative means of public access must allow for active, real-time participation (such as an open conference call or live stream video with a comment option).
  • Public bodies may allow for remote participation in meetings by all members, including the chair, with no members being physically present at the meeting location.
  • All other provisions of the Open Meeting Law remain in effect (posting meeting notices, recording and approving meeting minutes, executive session requirements, etc.).

The Order is effective immediately and remains in effect until rescinded or until the Governor’s State of Emergency is terminated.

Please contact one of our attorneys with any questions about the Executive Order.

Mirick O’Connell will continue to update clients about legal issues associated with the Coronavirus pandemic.

Posted in Municipal, Open Meeting Law, Town Meeting | Tagged ,

SJC Reverses Appeals Court on Standing Requirements Under the Zoning Act – With Record Speed

All zoning conformities are alike, to rephrase Tolstoy’s famous opening line, but each zoning-related injury is injurious in its own way.

Such has been the time-honored tenant of Massachusetts law for abutter standing under the Zoning Act.  To successfully challenge a local zoning decision, an abutter must first identify a particularized injury that establishes standing.

Last Friday the Supreme Judicial Court (SJC) reaffirmed this principle. Acting with uncharacteristic speed, the SJC overturned an Appeals Court decision the day following oral arguments. While the SJC’s written opinion has not been published — or likely even written — as of this date, its swift judgment has induced a collective sigh of relief in the development community.

In Murchison v. Sherborn Board of Appeals, 96 Mass. App. Ct. 158 (2019), the abutter-plaintiffs appealed the local building department’s issuance of a foundation permit for construction of a single-family residence on the lot across the street, alleging that the construction would violate the lot width requirement under the town’s zoning bylaws.  After the Zoning Board of Appeals upheld the issuance of the building permit, the plaintiffs sought judicial review of the board’s decision under the Zoning Act.  The Land Court dismissed the plaintiffs’ petition for lack of standing, finding that the plaintiffs failed to establish any particularized harm that would result from the proposed construction and concluding that the plaintiffs “simply do not want any construction on [the lot].”  Murchison v. Novak, No. 16 MISC 000676 (KFS), 2018 WL 2769307, at *5 (Mass. Land Ct. June 5, 2018).

The Appeals Court reversed the Land Court’s decision, holding that the plaintiffs had, in fact, sufficiently identified an injury.  The striking thing about the Appeals Court’s decision is that it suggests local zoning bylaws define the bounds of a zoning-related injury.  The following passage from the decision shows the Appeals Court’s equivalence of bylaw nonconformity with injury:

It does not matter whether we, or a trial judge, or the defendants, or their counsel, would consider the district “overcrowded.”  What matters is what the town has determined.  If the plaintiffs’ interpretation of the bylaws is correct… then the proposed development would be closer to their house directly across the street than the bylaws’ provisions permit, and, given that particularized harm, they are entitled to enforce those provisions.

Murchison v. Zoning Bd. of Appeals of Sherborn, 96 Mass. App. Ct. 158, 164–65 (2019) (emphases added).

While there is no doubt that zoning bylaws reflect the values of a community – correlating strongly with prevailing community notions of what might constitute an injury – the suggestion that a town intends to establish the rigid parameters of an injury through its zoning bylaws is belied by the frequency with which town boards issue variances and special permits allowing deviations from zoning bylaws.

The Appeals Court’s decision also stands in stark contrast to previous articulations of the Zoning Act’s requirement that abutters demonstrate an individualized injury.  As the SJC previously held in Sweenie v. A.L. Prime Energy Consultants:

The language of a bylaw cannot be sufficient in itself to confer standing: the creation of a protected interest (by statute, ordinance, bylaw, or otherwise) cannot be conflated with the additional, individualized requirements that establish standing.  To conclude that a plaintiff can derive standing to challenge the issuance of a special permit from the language of a relevant bylaw, without more, eliminates the requirement that a plaintiff plausibly demonstrate a cognizable interest in order to establish that he is aggrieved.

451 Mass. 539, 545 (2008) (internal quotations omitted).  The practical result of the Appeals Court’s decision would have been that abutters could obstruct development merely by alleging a violation of local zoning bylaws, regardless of whether such violation demonstrably harms the abutter.

While the development community will pay close attention to the SJC’s forthcoming written decision, the news of the SJC’s reversal represents a significant reassurance; the existence of a zoning nonconformity alone does not constitute an injury for standing purposes — further inquiry into the legitimacy of a plaintiff’s alleged injury remains necessary.

Posted in Zoning | Tagged , ,

PFAS Concerns Mounting for Cities and Towns as MassDEP Proposes Maximum Contaminant Level in Drinking Water

Many of our readers will be aware that on December 27, 2019, the Massachusetts Department of Environmental Protection (MassDEP) proposed a Maximum Contaminant Level (MCL) for PFAS in drinking water of 20 parts per trillion (0.02 ug/L or ppt) for six PFAS chemicals combined.  To that point, PFAS generally was not regulated in Massachusetts drinking water.  MassDEP’s MCL proposal follows its adoption last year of a reportable concentration for PFAS, also at 20 ppt, for soil and groundwater contamination under Massachusetts General Laws, Chapter 21E and the Massachusetts Contingency Plan (310 CMR 40.0000).  Massachusetts has been more proactive from a regulatory standpoint than many states in attempting to deal with the PFAS problem. 

As MassDEP does so, however, the implications, potential costs, and concerns for Massachusetts cities and towns that provide public drinking water are coming into sharper focus.  Earlier this week, the Massachusetts Municipal Association (MMA) submitted comments on MassDEP’s proposed MCL for PFAS in drinking water.  While the MMA expressed support “for the intent of the draft regulations to protect public and environmental health,” its anxiety over costs and unfunded mandates was clear.  “As the full scope and cost of the need for remediation is not yet known, the MMA remains deeply concerned over how municipalities could pay for what has already been and what will continue to be exorbitant clean-up costs.”  The MMA added that any new regulatory standard should not result in “new unfunded mandates.” 

While MassDEP and Gov. Charlie Baker’s administration deserves credit for attempting to address the PFAS problem head on, there is little denying that MassDEP is setting PFAS targets that, in many cases, cities and towns will now have to pay to achieve.  The Baker administration deserves further credit for including $23.9 million in its FY2019 closeout budget to assist communities with this work.  However, there is no doubt that more robust State funding and assistance will be necessary.  In the meantime, and outside of the limited state funding available, municipalities and their water rate payers will be left to shoulder the costs of PFAS testing and, if necessary, any remediation, as well as the expense of pursuing any potentially responsible parties for those clean-up costs.  As testing becomes more widespread and the magnitude of those costs is better understood, expect increased pressure on the Commonwealth for greater funding and a more comprehensive approach to PFAS testing and remediation in our cities and towns. 

Posted in 21E, Drinking Water, Drinking Water, Environmental, Hazardous Materials, Municipal, Uncategorized | Tagged , , , , , , , | Leave a comment

Building the Boroughs: A Year in Review

Building the BoroughsIn 2019, Mirick O’Connell’s permitting attorneys were proud to help our clients, large and small, with local approvals in Marlborough for 6 great projects.

Thank you to our clients and the City of Marlborough for a wonderful year!

Click here to learn more.

Posted in Contracts, Economic Development, Environmental, Marlborough, MetroWest, Permitting | Tagged , , , , , , , , | Leave a comment

Building on Lands Formerly Used as Railroad Right-of-Ways- An Amendment That May Simplify the Permitting Process

Railroad tracksFor the last forty-five (45) years, obtaining a permit to build any type of structure on any former railroad right-of-way in the Commonwealth of Massachusetts has been far from seamless. Massachusetts General Law c.40 §54A, enacted by the legislature in 1973, required that any purchaser of any lands formerly used as a railroad right-of-way or any property appurtenant thereto formerly used by any railroad company in the Commonwealth, must, after a public hearing, obtain consent in writing from the secretary of the executive office of transportation to the issuance of any such permit.

The problem with the statute including “any property appurtenant to any right-of-way formerly used by a railroad company” is that it was too broad and extremely difficult to track down which properties were ever appurtenant to railroad property in a fifty (50) year title exam. It was creating large hassles for existing and potential new property owners to obtain consent from the Massachusetts Department of Transportation (the “DOT”) for the issuance of a desired building permit. Additionally, if the DOT declined to consent to the issuance of the desired permit, the property owner would be entitled to compensation, provided however, that the property owner originally purchased the property prior to January 1, 1976. Nearly forty-five (45) years later, and based on statistics that people only tend to hold title to property for an average of nine (9) years, this clause of the statute will likely benefit very few property owners at this point.

Fortunately, on August 10, 2018, the legislature approved an amendment (St. 2018, c. 228, §10) which makes this process a little less burdensome. So what changed?

  1. The language in the original statute regarding any property “appurtenant” to railroad right-of-way property was removed, thus subjecting fewer properties to the requirements of the statute.
  2. The term “former railroad right-of-way” is now defined as:
    1. any property formerly owned in fee by a railroad company and used as a railroad right-of-way; or
    2. any property formerly subject to an easement held by a railroad company and used as a railroad right-of-way.
  3. Existing and new potential property owners subject to the statute still need to obtain consent from the DOT as to the issuance of a permit but the DOT now has discretion as to whether a public hearing is needed. The new act retains the language regarding compensation for the property owner if the DOT declines consent to the issuance of a permit.

While the new act does not eliminate all of the hassle for existing and potential property owners (and title examiners), it does reduce the amount of properties subject to the requirements of the statute and helps provide for a more flexible permitting process.

Posted in Permitting, Railroad Right-of-Way, Zoning | Tagged , , , ,

MassDEP Working on a Drinking Water MCL for PFAS

Several weeks ago, I posted that the Massachusetts Department of Environmental Protection (MassDEP) proposed a new groundwater standard for PFAS contamination under the Massachusetts Contingency Plan regulations (310 CMR 40.0000).  Public comment on the proposed regulations remains open through July 19, 2019.  MassDEP’s close look at how, at what level and where to regulate PFAS continues, as it does for the Environmental Protection Agency, and state environmental agencies across the country.  With its groundwater standard in the works, MassDEP is looking to set a Maximum Contaminant Level (MCL) for public water systems (PWSs).  The focus here is less on how to remediate PFAS contamination in soil and groundwater, and more on setting drinking water standards for PFAS.  Up to this point, PWSs have not been required to test, report and remediate PFAS in drinking water.  That’s about to change. 

On April 11, 2019, MassDEP held the first in a series of stakeholder meetings aimed at promulgating an MCL for PFAS.  The video is available here, MassDEP’s PowerPoint presentation here.  I expect MassDEP will announce its next stakeholder meeting shortly.  Here are my takeaways to this point: 

  • Setting an MCL is going to be a process, and it will take some time.  To its credit, MassDEP is trying to juggle a number of concerns:  the developing toxicology and science of PFAS, the need to act promptly, and the desire to get it right, among others.  We may see a proposed MCL for PFAS in the fall.  I will be surprised if there’s an MCL in place before the end of the year.
  • Analytical feasibility is a big concern.  In setting an MCL of parts per trillion at which PWSs (including many municipalities) will be required to test, report and treat PFAS, MassDEP wants to make sure laboratories are able to reliably test at those levels. 
  • Treatment feasibility is another concern.  Once a PWS detects PFAS, MassDEP wants to know that treatment, such as carbon filtration, will work to address it.  More data and guidance at the federal level would be helpful here.
  • Open questions remain on how the MCL will be applied, to whom, and whether it will vary by class.  MassDEP is seeking input on the application of the MCL to community water systems; non-transient, non-community water systems (e.g., schools, institutions, medical facilities); and transient non-community systems (e.g., restaurants, hotels).  MassDEP is considering variable implementation of the MCL based on class, size and source water (surface vs. groundwater).

The last takeaway is how in flux all of this is.  The data is developing, federal guidance is slow in coming, public concern is growing, and policy makers are really just starting to confront the practical and financial impacts of testing and treatment for many small water systems.  One thing is for certain – none of this is going away anytime soon. 

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Appearance of Bias Not Enough to Invalidate Appraisal – Unless the Contract Says Otherwise

SkyscraperWhen parties enter a contract involving an appraised value of real estate, they need eventual finality with respect to that appraised value, but they also want fairness in the appraisal process. In Buffalo-Water 1, LLC v. Fidelity Real Estate Company, LLC, 481 Mass. 13 (2018), the Supreme Judicial Court of Massachusetts recently considered the question of whether the appearance of bias alone is sufficient to invalidate a contractually binding appraisal.

The dispute arose out of a sale leaseback of commercial property in Boston’s Financial District.  The defendant, Fidelity Real Estate Company, LLC, sold the subject property to the plaintiff, Buffalo-Water 1, LLC, and leased the property from Buffalo-Water retaining the option to re-purchase it during the last year of the lease for the greater of a fixed amount and a percentage of the property’s fair market value.

The lease provided that if Fidelity exercised its option, the fair market value would be determined through a relatively common approach: First, the parties would attempt to agree on the value.  If they couldn’t agree, the parties would each appoint a qualified appraiser, and the two appraisers would determine the value, or, if the two appraisers could not agree and their appraisals differed by five percent or less, the value would be the average of the two appraisals.  If the two appraisers could not agree and their appraisals differed by more than five percent, the two appraisers would appoint a third appraiser to make a binding determination of the value.

So, just how much did the initial two appraisals differ after Fidelity exercised its option to re-purchase and the parties failed to agree on a fair market value?  A lot.

Buffalo-Water’s appraiser valued the property at $36 million, while Fidelity’s appraiser valued the property at $17 million.  Enter the third appraiser, who valued the property at $22.9 million.

After initially disputing the third appraiser’s determination on the basis of purported “factual errors” in the appraisal, Buffalo-Water discovered that the employer of the third appraiser, a large real estate services company, had a national representation contract with Fidelity, prompting Buffalo-Water to file a lawsuit seeking to invalidate the appraisal.

The third appraiser’s contract with the parties included provisions relating to conflicts of interest, disclosure of prior services, and compliance with certain codes of professional ethics.  Emphasizing that Buffalo-Water’s complaint did not allege that the third appraiser had a personal interest in the outcome of his valuation or that the third appraiser actually knew of his employer’s contract with Fidelity, the SJC held that no contractual breach occurred.

The SJC then considered Buffalo-Water’s argument that the appearance of bias should invalidate the appraisal.  As the SJC explained, a contractually binding appraisal may be overturned under existing Massachusetts common law principles where the appraisal was tainted by “fraud, corruption, dishonesty or bad faith.”  The SJC found that the appearance of bias falls short of these four thresholds and that “[a]llowing appraisals to be invalidated based on the appearance of bias alone would considerably diminish the finality of appraisals without significantly improving their over-all integrity.”

Towards the end of its decision, the SJC alludes to an important takeaway lesson: “When parties negotiate a contract that provides for a binding appraisal, they are free to include provisions that establish more stringent impartiality requirements than those in our common law and specify that the appraisal will be invalid where those requirements are not met.”

In other words, if just the possibility of bias is a particularly serious concern for a party entering a contract with a binding appraisal component, that party should consider requiring more expansive grounds for invalidating the final appraisal or more specific requirements for the appraiser’s eligibility or both.  Without such additional provisions in a contract, and absent demonstrable “fraud, corruption, dishonesty or bad faith,” Massachusetts courts will not disrupt the finality of a contractually binding appraisal.

Posted in Contracts, Lease | Tagged , , ,

BREAKING: MassDEP Announces Proposed Revisions to the Massachusetts Contingency Plan, Including a Reportable Concentration for PFAS at 20 ppt

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The Massachusetts Department of Environmental Protection (MassDEP) announced proposed revisions to the Massachusetts Contingency Plan (310 CMR 40.0000).  This begins a 3-month public comment period that will end July 19, 2019, and will include four public hearings.

According to MassDEP, the proposals include:

  • clarification and modification of provisions related to notification, Imminent Hazards, Tier Classification and Extensions, Remedial Additives, Status Reports, Remedial Monitoring Reports, Temporary Solutions, Active Exposure Pathway Mitigation Measures, Exposure Point Concentrations, Activity and Use Limitations, and public involvement;
  • new adequately regulated provisions for disposal sites with Radioactive Materials;
  • updates to Reportable Concentrations (RCs) and numerical cleanup standards (Method 1) for a limited number of chemicals; and
  • the addition of RCs and Method 1 standards for six perfluoroalkyl substances—Perfluoroheptanoic Acid (PFHpA), Perfluorohexanesulfonic Acid (PFHxS), Perfluorooctanoic Acid (PFOA), Perfluorooctane Sulfonate (PFOS), Perfluorononanoic Acid (PFNA) and Perfluorodecanoic Acid (PFDA)—emerging contaminants of concern for exposure in drinking water.

Perhaps the most meaningful and groundbreaking revision is the last – a proposed RC for PFAS.  PFAS are a family of emerging contaminants best known for their widespread use in firefighting foam and waterproofing and “non-stick” coatings.  Some observers have called PFAS a “coming tsunami” in environmental law.  Massachusetts’ experience with PFAS is not uncommon – according to MassDEP, at least 14 Massachusetts public water sources have had PFAS detections to date.  Expect more detections as standards are set and testing becomes more widespread.

A further primer on PFAS will have to wait for another post, but the takeaway is that MassDEP has set an aggressive RC of 20 parts per trillion (0.02 ug/L, or ppt) for six PFAS chemicals combined.  By way of comparison, in May 2016, the U.S. Environmental Protection Agency (EPA) issued a lifetime Health Advisory of 70 ppt for the combination of two PFAS chemicals, PFOS and PFOA, in drinking water.  More than two dozen other states have proposed rules addressing PFAS in various forms, although only New Jersey has set a binding drinking water standard of 13 ppt for PFNA.  Massachusetts will shortly join that list.  In addition to establishing an RC for PFAS under the MCP, expect a revised drinking water guideline to follow from MassDEP shortly.

Follow these pages for more updates as this story and public comment and hearing process unfolds.

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EPA Issues Interpretive Statement: Groundwater Discharges are Not Subject to the Clean Water Act

In a not-so-stunning development, the EPA on Monday issued an Interpretive Statement putting to rest speculation on EPA’s position as to whether groundwater discharges are subject to federal jurisdiction under the Clean Water Act (CWA).  The answer:  “No.” 

EPA’s 57-page Interpretive Statement carefully details the agency’s position.  EPA relies on the text of the CWA (focusing on broad review of the statute and the distinction it draws between navigable waters and groundwater, rather than a narrow reading of any particular provision), the legislative history of the CWA, and rulings from Fifth, Sixth and Seventh Circuits in Rice v. Harken Exploration Co., 250 F.3d 264 (5th Cir. 2001), Village of Oconomowoc Lake v. Dayton Hudson Corp., 24 F.3d 962 (7th Cir. 1994), and Kentucky Waterways Alliance v. Kentucky Utilities Co., 905 F.3d 925 (6th Cir. 2018). 

I think EPA has the better side of this argument and offers a more faithful reading of the CWA and its legislative history.  While the distinction between navigable waters and groundwater might appear arbitrary from a regulatory standpoint, there’s little doubt the CWA makes and Congress intended that distinction.  The Interpretive Statement, not surprisingly, also reflects the strong emphasis that EPA Administrator Wheeler has placed on “cooperative federalism” – that certain issues are the appropriate subject of federal regulation while others are purposely left to the states. 

While EPA’s Interpretative Statement is important in setting guidance for the regulated community, it is notably limited and does not apply in the Fourth and Ninth Circuits, where those circuit courts of appeal have ruled that “hydrologically connected” groundwater can be subject to federal jurisdiction under the CWA.  Of course, the real test will come in the U.S. Supreme Court in the pending Hawai’i Wildlife Fund v. County of Maui case.  It will be fascinating to see how the Maui case unfolds, and whether the Court will be able to muster a majority to draw a bright line as EPA has done, or whether its ruling will be more narrowly tailored to the facts in that case.  Stay tuned… 

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Third Party Beneficiary Rights in Construction Contracts

Last week the United States District Court in Massachusetts issued an important decision concerning third party beneficiary rights in construction contracts.  In Arco Ingenieros, S.A. de C.V. v. CDM International Inc., Civil Action No. 18-12348-PBS, a design-builder incurred damages due to delays and other issues, and it sued one of the project engineers alleging several counts, including breach of contract.  Facing a motion to dismiss, the design-builder argued that it had standing to bring the claim as a third party beneficiary of the contract between the project owner and the engineer.  The Court disagreed.

Massachusetts generally follows the Restatement (Second) of Contracts for determining whether a third party may recover on a contract, which is that only intended third parties who derive a benefit from a contract can sue to enforce that contract.  The right is not extended to parties that incidentally benefit from or rely on the contract.  Whether a third party is an intended beneficiary is determined by looking at the contract terms.  If the terms are ambiguous, courts will look at extrinsic evidence, such as other documents or exchanges between the parties.

In this case, a federal agency was undertaking rebuilding efforts in El Salvador following a tropical storm.  The project owner hired CDM International Inc. (“CDM”) to provide initial site analysis and prepare a preliminary design, among other services.  The owner then hired Arco Ingenieros, S.A. de C.V. (“Arco”) through a competitive bid process as the project design-builder.  Arco relied in part on the preliminary design by CDM in preparing its bid and performing the work.  Arco alleged the project was delayed because of errors and omissions in the preliminary design prepared by CDM.  Arco sued CDM alleging several counts, including breach of contract, tortious interference, and misrepresentation.

CDM filed a motion to dismiss the breach of contract claim on the grounds that Arco was not an intended beneficiary of the contract between CDM and the owner.  The court looked at the particular contract language and held that the contract did not reflect any intent to benefit the design-builder.  Rather, the contract listed the services to be provided by CDM, all of which served to benefit the owner and its reconstruction project.  The Court held that Arco was an incidental beneficiary and did not have standing to sue on the contract.

This decision is consistent with other jurisdictions which generally do not support third party beneficiary status in the construction context without a clear indication of intent.  As the Court states, “[t]his is because significant construction projects generally involve multiple contracts that are ‘inevitably intertwined’ to ensure the project is completed in a timely manner according to the agreed-upon specifications.”

This decision is important for two reasons.  First, it reinforces significant and necessary risk protections for construction project participants.  In order to successfully deliver a project, several parties need to work intricately and collaboratively, and need to be able to rely on one another in a dynamic working environment.  If each was exposed to the others’ contract requirements, the level of risk would be untenable.  Second, it reinforces that contract drafting and due diligence is imperative in order to identify and mitigate this type of exposure.  Had the contract between CDM and the owner been drafted differently, for example with specific flow down clauses or third party beneficiary clauses, the Court may well have denied the motion to dismiss, and CDM may have been left exposed.

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