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November 2015 Law Alert

MONTHLY LAW ALERT
 

GENERAL CONTRACTORS ARE "INNOCENT SELLERS" ENTITLED TO INDEMNITY FROM MANUFACTURERS/SUPPLIERS? 
by Poston Pritchett

At least one Texas company believes that general contractors should be considered “innocent sellers” under Chapter 82 of the Texas Civil Practice and Remedies Code, which would entitle general contractors to indemnity from suppliers providing defective materials to construction projects. The case is Centerpoint Builders GP, LLC, et al. v. Trussway, Ltd., and oral arguments were presented to the Texas Supreme Court last month for consideration of this very topic.

Chapter 82, sometimes referred to as the Innocent Seller Statute, is most widely understood to be a products liability statute that allows the seller of a product to seek indemnity from the manufacturer if the seller sells a defective product unaltered by the seller. For example, a Big-Box store that sells a defective lawnmower manufactured by another company can seek indemnity from the lawnmower manufacturer if the Big-Box store is sued. The idea being that the Big-Box store was merely an innocent seller that did not contribute to the creation of the defective lawnmower and should not be responsible for the injury caused by the lawnmower.

In the case currently before the Texas Supreme Court, the general contractor, Centerpoint, purchased premade trusses from Trussway for construction of an apartment complex. During construction, and while the trusses were laying on their side, a drywall subcontractor stood on the trusses to install drywall above them when he fell through the trusses and was injured. Centerpoint settled with the subcontractor and then sued Trussway, alleging that Centerpoint was a “seller” under Chapter 82 and entitled to indemnity from Trussway, the “manufacturer” of the defective product, or trusses.

This is not the first time the Texas Supreme Court has heard arguments over whether a builder could be considered a seller, having previously determined that a builder could be a seller entitled to protection under Chapter 82 if the builder is selling things like prefabricated homes. However, that is not the case here as the “defective product” is not the actual final product but merely a part of the final product.

It is expected that the Texas Supreme Court will issue its opinion on this case within the next several months and we will provide you with an update when it comes. For further information, please contact Poston Pritchett via email or at 713.850.4227.


HERO DEFEATED - NOW WHAT?
by Tony Stergio

Houston’s HERO ordinance, which was designed by the current administration to protect against discrimination based upon sexual preference and gender identity (and other protected characteristics), was defeated at the recent polls.  As such, it’s no longer an enforceable ordinance.  Further, outgoing Mayor Annise Parker has indicated that she will not take any action to try and reinstate the law or implement a new non-discrimination ordinance.
 
Employers should be aware, however, that existing discrimination laws are increasingly being used to litigate issues related to gender orientation and sexual preference.  In addition, both OSHA and the EEOC have issued guidance material on bathroom usage by transgender employees, an issue that was at the forefront of the HERO debate.  So while HERO is gone, the issues it addressed will still be a concern for employers going forward.

For further information on OSHA or EEOC issues, contact Tony Stergio via email or at 713.850.4214.


CHANGES IN DISCLOSURE REQUIREMENTS FOR CONTRACTORS UNDER TEXAS LOCAL GOVERNMENT CODE SECTION 176
by Katy Gray

Texas Local Government Code Section 176 has been amended to expand upon the disclosure requirements for vendors/contractors who are contracting or seeking to contract with a local government entity. It is important for contractors to recognize these changes so that they may effectively modify their record retention policies regarding gifts/benefits given to local government officers in order to remain in compliance with Section 176, and to avoid any potential penalties.

According to Section 176.003 (a)(2)(B) the aggregate value of the gift that triggers a disclosure requirement has decreased from $250.00 to $100.00 for the 12-month period prior to the vendor contracting or seeking to contract with a local government entity. Additionally, Section 176.001 (4)(c) expands the definition of a local government officer to include any agent “…who exercises discretion in the planning, recommending, selecting, or contracting of a vendor.” This could include an employee, architect, or engineer hired by the local government entity to assist the entity with choosing a contractor; however, Section 176.0065 (1) requires the local government entity to both maintain a list of the local government officers and to make the list available to any vendor required to disclose conflicts.

Section 176.013 enumerates the potential penalties for a failure to disclose including a Class A, B, or C misdemeanor, depending on the value of the contract, and/or allowing the government entity to void the contract entirely. It is important to keep all disclosures up-to-date, pursuant to Section 176.006 (d), in order to avoid any of the penalties for a failure to disclose.

Katy Gray can be reached via email or at 713.850.4255.

SOCIAL MEDIA AND LEGAL ETHICS PRESENT TRICKY PROBLEMS
by Elaine Howard

Few states have conclusively issued social media guidance as to ethical removal of posts and comments, including Texas.  I’m sure there are many people and companies that have a few social media posts they would, in hindsight, like to remove.  With companies, the problematic posts can take the form of controversial tweets, as well as a history of customer complaints in a comments or reviews section.  However, the mere fact that a person or client is in control of the privacy settings and content does not mean that removal of content either before or during litigation can be done without consequences.  If the information is relevant to an anticipated or existing lawsuit, regardless of whether it is a paper copy, email or Facebook post, parties and counsel have a duty to preserve it.  For example, if prior customer complaints on a product are relevant to a claim, and the company permanently deletes its complaint section, the company may face legal consequences.

In one Virginia case, an attorney and a client were both fined for intentionally deleting photographs on a social media page, deleting the accounts, and then representing in discovery that the client did not have the accounts.  In a New Jersey case, the court instructed the jury that the information deleted by the client from social media could be assumed to be adverse to the client (an “adverse inference instruction”).  And in other proceedings, attorneys have been disciplined under some circumstances for counseling clients to “clean up” social media, particularly where that destroys relevant evidence.

Florida recently issued an advisory opinion in which the ethics committee attempted to deal with one particularly troublesome area.  The Florida committee answered the question of when an attorney may ethically advise a client to scrub the client’s own social media to remove or alter posts that could potentially harm the client’s claims.  In the advisory opinion, the committee stated that an attorney may advise the client to increase privacy settings (so as to conceal content from the public).  A Florida attorney may also advise a client to remove from social media information relevant to the foreseeable claim or litigation as long as an appropriate record is maintained and no rules or substantive laws regarding the preservation or spoliation are broken.  These guidelines could be different pre- or post-litigation.  Thus, a client in Florida may be advised to take action to make the information harder to find, but if the information is requested and relevant, it is subject to discovery. 

A party to a potential lawsuit, either an individual or a company, should be careful when editing social media content if the content is reasonably likely to be relevant to the lawsuit.  For information on updating your social media policies, please contact Elaine Howard via email or at 713.850.4249.


Founded in 1990, Andrews Myers is a recognized business law firm in Texas.  The firm focuses on the concentrated disciplines of construction, commercial real estate, corporate and business transactions, with additional emphasis on related issues   including bankruptcy and insolvency, employment and capital formation. A seasoned team of attorneys provides timely and cost-effective solutions to the most complex problems facing entrepreneurs and middle-market industry leaders throughout the state and the nation. For more information please visit www.andrewsmyers.com.

 
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