The Small Business Administration (“SBA”) has issued a SBA Information Notice stating that the change made to size determinations in the Small Business Runway Extension Act (“SBREA”) is not yet effective. The SBREA did not contain an effective date, and the Small Business Act requires that the SBA’s Administrator make size determination changes effective through a rulemaking process.

The SBA Notice states that until SBA changes its regulations, concerns must report their receipts based on a 3-year average and not based on the SBREA’s new 5-year average: “The change … is not presently effective and is therefore not applicable to present contracts, offers, or bids until implemented through the standard rulemaking process.” The SBA Information Notice is linked here.

 

Individuals frequently sign contracts without reading and understanding the significance of an arbitration provision which may be included and the type of dispute to which it will apply.  In a 2017 decision, the Mississippi Court of Appeals addressed for the first time “whether a challenge to the validity of an arbitration clause may be brought post-arbitration.” [Click here for Decision] In that case, the contractor had entered into an agreement for services with an attorney that included an arbitration provision.  It provided the arbitration provision would apply to “any disputes between the parties which arise from, or is related to, a claimed breach of this agreement, the professional services rendered by Davis & Feder, P.A., or any claim for legal and or professional malpractice…”

The contractor claimed the law firm mishandled the contractor’s claims and sued the law firm for malpractice.  The parties proceeded to arbitration where an award was issued in favor of the law firm and denied the contractor any relief.  The contractor then sued the lawyer for malpractice in state court claiming the arbitration award should be vacated because the arbitration clause in the contract was unconscionable and the arbitrator exceeded his authority.  The trial court disagreed with the contractor and the contractor appealed.  The Mississippi Court of Appeals affirmed the decision of the trial court finding the contractor had waived its right to challenge the arbitration provision in the contract.  The Court, citing supporting decisions from a number of other jurisdictions, found that “participation in arbitration proceedings waives the right to object to an arbitrator’s authority.”

The lesson to be learned from this case is if you what to challenge an arbitration provision you need to raise the issue before and not after the arbitration proceeding.

On December 17, 2018, the Small Business Runway Extension Act was signed into law by President Trump and became P.L. 115-324. The new law amends the Small Business Act at 15 USC§632(a)(2)(C)(ii)(11) by enlarging the period in which small business size status must be determined for those concerns whose size is determined on the basis of gross receipts. Prior to the new law, that period was required to be “not less than 3 years”. Now, that period has been increased to a period of “not less than 5 years.” This legislative change was introduced in H.R. 6330, which you can find here. Providing for a “longer view” of revenues was thought necessary to prevent businesses from prematurely out-sizing their small business status due to recent periods of rapid growth.

Pursuant to the Small Business Administration’s (“SBA”) regulations at 13 CFR Part 121, the size of a concern must be “small” as of the date it submits its initial offer that includes price. The SBA’s regulation at 13 CFR §121.104(c) defined the “period of measurement” for size as a concern’s 3 most recently completed fiscal years. On the basis of the newly amended Small Business Act, the “period of measurement” would be a concern’s 5 most recently completed fiscal years.

On December 11, 2018, the United States Secretary of Transportation announced the award of grants to pay for ninety-one (91) infrastructure revitalization projects through the DOT’s Better Utilizing Investments to Leverage Development (“BUILD”) program. Projects funded through BUILD grants include road, rail, port, and transit infrastructure projects.

The two projects awarded in Mississippi include (1) a $13 million grant to fund road reconstruction and bridge replacements along 2.6 miles of Holly Springs Road and (2) a $25 million grant to fund road and bridge improvements of approximately 9 miles of SR 19 from SR 492 to Philadelphia.

Projects in Mississippi’s neighboring states were also awarded. Two projects in Alabama will be funded for a total $28.2 million; one project in Arkansas will be funded for $25 million, two projects totaling $41.4 million will be funded in Louisiana, and one project for $25 million will be funded in Tennessee.

For a list and description of all 91 awards, please see the link to the DOT announcement here.

On August 16, 2018, the Mississippi Supreme Court laid to rest any confusion regarding how public authorities are to address the situation where the apparent low bidder’s bid exceeds the “allocated funds” by more than ten percent (10%). [Click here to see Decision]. The procurement in question involved bids for a construction project in the City of Clarksdale (“the City”). The bids received exceeded the “allocated funds” by more than ten percent (10%). Hemphill Construction Company, Inc. was the second low bidder and protested the award to the apparent low bidder and demanded the City reject all bids and re-advertise. Rather than reject the bids, the City increased its budget to provide the necessary funds to award the contract to the apparent low bidder. The Mississippi Supreme Court found that the City’s action to increase the “allocated funds” after bids were opened violated the procurement laws and remanded the case back to the trial court for further proceedings.

This decision makes clear that public authorities cannot change the “allocated funds” for a Project after bids are opened and then discovers the apparent low bidder’s price exceeds the “allocated funds” by more than ten percent (10%). However, if the apparent low bidder’s price is within ten percent (10%) the public authority can utilize Miss. Code Ann. § 31-7-13(d)(iv) to negotiate with the low bidder.

 

 

If you have been involved in a construction related arbitration and received an award, you should know it can only be challenged under the limited grounds set forth in the Mississippi Construction Arbitration Act, Miss. Code Ann. §§ 11-15-101, et seq. One of the grounds for challenging an arbitration award is there has been an “evident miscalculation” by the arbitrator. Miss. Code Ann. § 11-15-135(1)(a).

The Mississippi Supreme Court, in a case of first impression, was recently asked what qualifies as an “evident miscalculation” in D.W. Caldwell, Inc. v. W.G. Yates & Sons Construction Company [click here for the Supreme Court decision]. In that case, D.W. Caldwell, Inc. (“Caldwell”) had secured an arbitration award against W.G. Yates & Sons Construction Company (“Yates”). When Caldwell went to confirm the arbitration award, Yates objected claiming that there was an “evident miscalculation” in the arbitration award. The circuit court, over the objection of Caldwell, allowed Yates to offer documents from the arbitration and testimony to establish the “evident miscalculation” and reduced the arbitration award.

The Court, citing its past decisions, reminded the circuit court that its review of arbitration awards was extremely limited and restricted to the exceptions identified in Miss. Code Ann. § 11-15-135. Based upon the language of the statute, the Court concluded that “the ‘evident’ (plain, obvious, or clearly understood) miscalculation must be apparent from nothing more than the four corners of the award and the contents of the arbitration record.” Otherwise, “[l]ooking to evidence beyond ‘the face’ of the award or the arbitration record allows the parties to retry the matter in front of a trial judge.” The Court went on to provide guidance as to what might be considered by the circuit court in a proceeding to confirm an arbitration award holding “courts requested to confirm, modify and/or vacate arbitration awards are not at liberty to permit the examination of witnesses.” The Court therefore reversed the decision of the circuit court and remanded the case directing it to confirm Caldwell’s arbitration award.

The significance of this decision is that parties to arbitration should make sure that the hearing record is complete. However, even if the record is complete, thoughtful consideration should be given as to whether there are sufficient grounds to seek modifying or vacating the arbitration award before making such a request to a court.

 

The Mississippi Legislature has passed and on April 2, 2018, sent to the Governor HB 1306 for his signature. [Click here for link to House Bill 1306.] This legislation provides that "[a] provision in any contract, subcontract, or purchase order for the improvement of real property in this state or to provide materials therefor, is void and against public policy if it makes the contract, subcontract, or purchase order subject to the laws of another state, or provides that the exclusive forum for any litigation, arbitration or other dispute resolution process be located in another state." This means that Mississippi residents do not have to travel to foreign jurisdictions to have disputes resolved on projects located in Mississippi or have the laws of a foreign jurisdiction apply to a dispute arising out of or related to the improvement [construction or repair] of real property in this state.

This legislation provides Mississippi residents with a "home court" advantage that previously did not exist. HB 1306 will be effective for contracts entered into on or after July 1, 2018.

Representative Bell has introduced House Bill No. 1306 [Click here to view House Bill No. 1306] that would require construction claims for projects located in Mississippi be litigated or arbitrated in Mississippi. This requirement would apply regardless of whether or not the contract had a provision that required the claims to be resolved in another jurisdiction. This is an important bill for Mississippi contractors since many foreign contractors frequently include a venue provision forcing Mississippi contractors to litigate or arbitrate their claims in the foreign contractor’s home state. Without this legislation, the cost to pursue a claim against a foreign contractor could be cost prohibitive and potentially force Mississippi contractors to settle their claim for pennies on the dollar. Mississippi Contractors should keep their eye on this litigation and encourage its passage.

A question frequently asked by owners and contractors is when enough is enough and termination is justified. As a preliminary matter, immediate termination for a non-compliant contractor or subcontractor is never a good idea. Mississippi jurisprudence requires that notice (preferably in writing) should be given to the non-compliant party with an opportunity to cure the alleged defect. The decision to terminate is never easy and viewed by the court as an extreme remedy. Nonetheless, the court has also recognized that termination may be warranted where repeated attempts to cure have been ineffective.

Any notice of termination should be in writing identifying the "material breach" justifying the termination and entitlement to damages associated with completing the terminated scope of work. The owner or contractor should also secure a number of quotes/prices to complete the work. This will assist the owner or contractor from being accused of securing an unreasonable or excessive price to complete the terminated scope of work. Remember, any change in the original scope of work or "betterment" could be grounds for the terminated party to challenge all or a portion of the claimed damages.

Generally, most attorneys would say that you do not need a transcript of an arbitration hearing. However, there are exceptions–one of which was made apparent in a recent decision by the Mississippi Court of Appeals. In The City of Hattiesburg v. Precision Construction, LLC [Link to Decision] the City of Hattiesburg ("the City") attempted to challenge an arbitration award to Precision Construction, LLC ("Precision") alleging evident and material miscalculations in the award after Precision had filed a motion to confirm an arbitration award in its favor. Miss. Code Ann. § 11-15-123 provides that a party may request reconsideration of the arbitration award under limited circumstances if the request is made "within twenty (20) days of the receipt of the award". In response to Precision’s motion to confirm, the City filed a motion to amend, modify and/or correct the arbitration award under Miss. Code Ann. § 11-15-135. The trial court affirmed the award to Precision and the City appealed.

The City’s appeal of the award to Precision was unavailing in part due to the absence of a record.

…[T]here is no record of the arbitration hearing, so we cannot know whether the documents on which the City now relies were even presented at the hearing. The arbitrator’s decision indicates that no such argument was made. The concept of an "evident miscalculation" presupposes that the parties presented the arbitrator with evidence from which a "correct" calculation could have been made. If his calculations were consistent with the evidence and argument presented, then there is no miscalculation. Because there is no record of the hearing, it is impossible for us to say that the arbitrator made an "evident miscalculation." See Godeau v. Picheloup Constr. Co., 567 So.2d 697, 800 (La. Ct. App. 1990).

It may, therefore, be prudent to request a transcript of an arbitration hearing as a precautionary measure in the event a challenge to the arbitrator’s award is necessary.