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How Do We Fight and Who Pays For It?

Last week, we covered the ever-exciting topic of Force Majeure.  All joking aside, this and the other boilerplate provisions can be very impactful on your ability to enforce or defend your rights under an agreement.  Today, we are reviewing attorney’s fees and jury trial waiver clauses.  So, let’s jump right in.    

Attorney’s Fees & Court Costs

In general, the prevailing party in a contractual dispute cannot recover attorney’s fees and/or court costs unless it has been codified in a statute or the two parties agree to it.  The first is self-explanatory, but the second is not always so clear.  An attorney’s fees clause basically says that a losing party will reimburse the winning party for its actual or reasonable attorney’s fees, court costs, and other litigation-related costs and expenses.  Inclusion of this provision can be a useful tool to get the parties to settle a contractual dispute versus using the court system.   

Jury Trial Waiver

Many times an agreement will include a jury trial waiver provision if one or both of the parties prefer a judge to handle any dispute resolution versus using a jury.  Now, why would they do that?  Below are some of the reasons: 

  • A judge may have a higher level of understanding of a particularly complex issue in a contractual dispute.   
  • A judge’s ruling may lead to a more predictable outcome and less prone to being overturned on appeal. 
  • A jury may have an implicit bias against one or both parties (e.g., favoring small businesses over large national corporations). 
  • A jury trial is likely to be more costly. 

 
Another thing to note is that when you see a jury trial waiver clause, you will want to pay attention to the choice of law and forum clauses as well.  These provisions will typically be carefully considered by the party drafting the agreement to be more beneficial to their interests. 
 
If you have a concern or question about these provisions, make sure you talk with your professional business advisors.  If you are going to have to defend your contractual rights, you want to know the rules of the game. 
  
As many of you may have seen, last week, the FTC issued its decision banning non-competes.  We will cover this topic more in depth in next week’s MPL General Counsel Corner. 
 
A few things that may be of interest: 

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.   

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.   

Let’s look at God’s impact on your Contracts!

We have hit a number of the boilerplate provisions over the last few weeks.  As promised, this week we will be looking at the FORCE MAJEURE provision.  Translated from French, it literally means “superior force”.  If you have note read this provision before, check out the sample provision from www.bloomberglaw.com:

“FORCE MAJEURE. Neither Party will be liable for any failure or delay in performing an obligation under this Agreement that is due to any of the following causes, to the extent beyond its reasonable control: acts of God, accident, riots, war, terrorist act, epidemic, pandemic, quarantine, civil commotion, breakdown of communication facilities, breakdown of web host, breakdown of internet service provider, natural catastrophes, governmental acts or omissions, changes in laws or regulations, national strikes, fire, explosion, generalized lack of availability of raw materials or energy.
 
For the avoidance of doubt, Force Majeure shall not include (a) financial distress nor the inability of either party to make a profit or avoid a financial loss, (b) changes in market prices or conditions, or (c) a party’s financial inability to perform its obligations hereunder.”
 
Ok, if your eyes aren’t crossed or you haven’t fallen asleep, you are probably saying:  What does this mean?  In layman’s terms, everything described in the first paragraph are reasons that someone could use for not fulfilling their contractual obligation (e.g. a hurricane hits the Gulf of Mexico and a refinery had to shut down).  Everything listed in the second paragraph are the exclusions. 

You may not be aware of it, but these types of clauses are in a lot more of your agreements than you think.  I can assure you that larger organizations and entities are certainly fine tuning these provisions and will be rolling out revised versions in your next renewal.  I would even suggest that some of the terms in paragraph one may end up in paragraph two (think “epidemic, pandemic and quarantine”).    

If you have a concern or question about this type of provision, it might be time to review your insurance coverages, contracts or any other formal agreements with your professional team of advisors.  You never know when God will decide to act or we have a repeat of 2020. 

A few things that may be of interest: 

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.   

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here. 

WATER, WATER, EVERYWHERE

Keith Howarth owned property in the bed of a valley near a shallow creek.  Falls Township owns Creek Hollow Drive that runs next to Howarth’s property.  The Township had installed an 18-inch storm water pipe that runs under Creek Hollow Drive that dumps storm water onto Howarth’s property.  The storm water discharge created a 14-inch deep ditch that has to be continually filled, and washes garbage and silt onto the property.  Howarth file a lawsuit against the Township claiming continuing trespass, continuing private nuisance, negligence and a violation of the Storm Water Management Act.  The Township raised several defenses including governmental immunity, assumption of the risk, estoppel, and comparative negligence. There was conflicting evidence about when the storm water pipe was installed, but the Township’s own witness established that the pipe was not functioning when Howarth purchased the property, the Township had not maintained the pipe for years, and the Township installed a new pipe after Howarth purchased the property. The Township presented an expert report that found that 78% of the flooding came from the overland flow of water, and 22% came from the pipe. Howarth withdrew his claims for trespass and nuisance, leaving the nuisance claim and violation of the Storm Water Management Act. The trial court granted the Township’s motion for summary judgment on those two claims.

On the negligence claim, the trial court held that the Township could not be held liable for an inadequate storm water system because it was under no duty to build such a system in the first place.  The Township could be held liable for negligent construction or maintenance, but those situations were not alleged.  Since a claim for negligence could not be shown, governmental immunity applied under the Political Subdivision Tort Claims Act.

On the claim for violation of the Storm Water Management Act for failing to manage storm water runoff, the trial court found that that there was no evidence such as an expert report to support the claim that the Township had “altered” or “developed” the land in a way that would increase storm water runoff on Howarth’s property.  

The Commonwealth Court reversed the trial court’s order granting summary judgment to the Township.  Howarth v. Falls Township, 447 C.D. 2021 (filed 2/14/2024).  The Commonwealth Court  found that the Storm Water Management Act requires anyone engaged in “the alteration or development of land” which may affect storm water runoff to take measures to: (1) assure that the  maximum rate of storm water runoff is no greater after development than prior to development; and (2) manage the quantity, velocity and direction of storm water runoff in a manner that adequately protects health and property from possible injury.

The Commonwealth Court held that the trial court erred in holding that Howarth was required to offer expert testimony to establish that the Township’s installation of a new pipe constituted an alteration of land since the Storm Water Management Act did not mandate such a requirement.  The phrase “alteration or development” of land means a “substantial, human-created change to land.” Since the new pipe installed by the Township increased the flow of water onto Howarth’s property, that was enough to establish a human-created substantial change to land.

As for the negligence claim, a storm water system is a utility under the Political Subdivision Tort Claims Act and is an exception to governmental immunity. Howarth’s claim that the Township created an artificial channel of water when it was on notice that Howarth resided at the property, and that the damage to his property was a foreseeable consequence of the installation of a new pipe was sufficient to state a claim for negligence under the common law. Since Howarth stated a claim for negligence under the common law, governmental immunity under the Political Subdivision Tort Claims Act would not apply.    

This is why we make the big bucks! – More Boilerplate

We are moving along these boilerplate provisions.  I hope at the very least you have better insight into what that last part of your agreement means and what to look for.  This week, we will look at the Assignment and Waiver Provisions.  I had originally wanted to put in Force Majeure, but that is a topic in and of itself that will be handled next week.  See below for brief overviews:

Assignment – This clause is one of the more straightforward provisions in an agreement.  Essentially, this section dictates whether a party can assign their rights, obligations and duties in the agreement to another party.  For example, if I am buying a business and negotiating with a seller, I may want to use a business entity to do the purchase.  However, I may not have the business entity created yet.  Therefore, I will want to add into this provision that I am allowed to assign the purchase agreement to a soon to be created entity.  Most times, this section prohibits assignment of the agreement without the other party’s approval.  However, there is typically a caveat that the party being asked to approve the assignment cannot unreasonably withhold or delay consent (i.e., they can’t just say no without a reason).

Waiver – This provision essentially says that both parties to an agreement retains their rights under the agreement even if certain obligations or provisions have been relaxed.  This provision is more commonly referred to as the “No Waiver” provision.  Sorry if this is confusing.  A common example is if a contractor is building a house for the owner and gets delayed in process.  The contractor may ask for changes to the construction schedule, which the owner may grant.  However, the owner will typically grant the changes and say that they are not waiving any other rights under the agreement (i.e., the ability to sue for breach of contract). 

I know these aren’t the most interesting parts of the agreement.  Nonetheless, they are important to the overall integrity of the obligations, duties and responsibilities of each party.  It’s why we as lawyers make the “Big Bucks”, as I have heard from some clients.  As always, your professional business advisors can also provide more insight if you have questions.  Next week we will cover Force Majeure. 
         
Here are a few other things that may be of interest:

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.   

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.   

It’s Time to Play the Blame Game

Indemnification, limitations on liability and reps and warranties.  What are these concepts and why are they important?  If you have been through a transaction in the past or negotiated a complex agreement, you know that these provisions can sometimes be the most negotiated points.  It’s almost like you are playing the blame game before something actually happens. 

Below are quick descriptions of each and why they are important:

Indemnification Clause – Put simply, this clause transfers or assigns risks between parties to an agreement.  A good example of this would be when you rent a car.  Let’s say you rent the car, decide to play demolition derby and you end up hurting someone else or causing damage to another person’s property.  When that person sues you and the rental car company, the rental car company points to the indemnification clause and says the defense is on you not them.  I know this is overly simple, but it is a way for both parties to define what risks they are willing to take on and not take on in the use of a product or service.  In the transaction space, it is typically used to set a timeframe as to when and who is liable for actions against the buyer and seller of acquired assets or company. 

Limitation of Liability – This clause defines the amount of liability the parties to an agreement are exposed to in the event of a legal action related to the contract.  So, if a dispute arises between the parties because of a key term of the agreement, then the limitation of liability will set a good financial starting point for settling the dispute. 

Reps and Warranties – Representations are statements of fact by one or the other party in an agreement.  Warranties are promises by one or the other party that the representations are in fact true.  So, for example, if you buy a business, you will typically ask that the seller actually owns it (seems silly, but you would be surprised how often it is not the case).  The Seller would state this in the Agreement.  The Seller would also promise that it is true.  If you close on the transaction and then another party provides proof that they in fact owned the business, the Seller has violated its reps and warranties and the Buyer can move into a legal action to enforce their rights against the Seller.  Again, this is overly simplistic, but it gives you the basic gist of the importance of this clause. 

Bottom Line – These clauses are important because they help to define who is really at fault in a contract dispute prior to an actual dispute and how you will handle its resolution.  That way you at least have set the rules for the blame game if something happens. 

Next week we will cover Assignment, Waiver, Limitations on damages & Force majeure. 
 
 
Other Items of Interest:

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.   

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.   

IT’S PARTY TIME!

Remember the Lesley Gore tune, “It’s my party, and I’ll cry if I want to”?  Well, if a person doesn’t obtain party status, they could end up crying because obtaining party status allows a person to appeal an adverse decision to the trial court.

The Pennsylvania Municipalities Planning Code [“MPC”], the governing law for zoning, sets forth who can be a party to a zoning hearing:

“The parties to the hearing shall be the municipality, any person affected by the application who has made timely appearance of record before the board, and any other person including civic or community organizations permitted to appear by the board. The board shall have power to require that all persons who wish to be considered parties enter appearances in writing on forms provided by the board for that purpose.”

Sounds simple enough, but the practice of obtaining party status varies widely among zoning hearing boards. Some boards require a person to enter a written appearance on a form provided by the zoning hearing board. Some boards ask at the beginning of the hearing if anyone in the audience wants party status. Some boards do not do anything at all and leave it up to a protestant to ask for party status.

A person “affected” by the application should be given party status. This is not a “bright line” test. Someone who lives next to the property or close by would be affected by the application. However, just showing up for a hearing and asking questions, or just submitting a letter objecting to the application without more, may not be enough to give someone party status. Coppola v. Smith Township Board of Supervisors, 208 A.3d 532 (Pa. Cmwlth. 2019).  The best course of action if someone wants to obtain party status is to take some form of affirmative action either by entering a written appearance if that is required, or by specifically requesting party status at the hearing.

Finally, keep in mind that just because you received party status before the zoning hearing board does not automatically mean that you have standing to file an appeal. The standard to allow someone party status is more liberal than the standard to file an appeal.  To file an appeal, someone needs to be a “person aggrieved”, i.e. a person who has a substantial, direct and immediate interest in the matter. This was the case in South Bethlehem Associates, LP v. Zoning Hearing Board of Bethlehem Township, 294 A.3d 441 (Pa. 2023), where a competitor hotel was given party status by the zoning hearing board to challenge the application of another hotel, but was denied standing to appeal the zoning decision granting variances because the competing hotel’s only interest was to suppress competition.