| Recent Legal Developments Affecting the Design and Construction Professional |
| ARE TIMING LEGISLATION BECOMES LAW |
ARE Timing in the House of Representatives
Legislation aimed at bringing Michigan statutes in to conformance with NCARB recommended practices in terms of the timing for examination for candidates for architectural licensure was introduced in the Michigan house in early 2009, becoming what was known as House Bill (or "HB") 4793. The bill passed the House on June 10, 2009 (in virtually record time) on a vote of 107-0.
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Why is ARE Timing and Issue in Michigan?
The National Council of Architectural Registration Boards ("NCARB") develops model laws and procedures for use by individual states on questions concerning Architectural licensing. Recently, NCARB changed its recommendations to embrace the proposition that recent graduates could and should begin taking the registration exam immediately upon completion of their education instead of at the completion of their internship period (at least 3 and possibly several more years later).
In many states the timing requirements are set out in board rules such that the change is simply a matter of administrative rule making. However, in Michigan, the licensing statute listed "education, references and experience (i.e.; internship) as prerequisites to be eligible for examination. While the statutory change was simply a matter of moving the experience requirement from the category setting out the requirements for examination to the category setting out the requirements for licensure, it was nevertheless a statutory change and not simply a rules amendment.
Now that the ARE timing legislation has become law, new candidates for Architectural licensure can begin taking the examination immediately upon completion of their education. While candidates must still complete their internship (and thus can not become licensed as Architects any earlier than before), this change has the potential to reduce the overall time investment required to complete the process for some applicants by a substantial margin, without compromising the integrity of the licensing requirements.
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ARE Timing in the Senate
Despite the difficulties the legislature encountered in the course of developing a budget, both parties agreed that bringing the timing for the ARE exam into compliance with NCARB recommendations was sound logic. As a consequence of intensive lobbying efforts over the course of the summer of 2009, HB 4793 came up for vote in the Senate on November 4, 2009, when it passed on a 43 yes, 3 excused vote. The bill went back to the House for concurrence and then on to the Governor where it was signed into law.
Much of the kudos belong to the group of AIA Michigan Associate members who worked so hard to make that legislation a reality.
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Senate Bill 1515 which provides increased penalties for unlicensed design professionals who practice in violation of Michigan law voted to the Senate Floor by the Senate Economic Development and Regulatory Reform Committee
UPDATE . . . . . SB1515 became law - but as yet remains untested
UPDATE . . . . SB1515 passed the House on Thursday, November 13, 2008 and is now on its way to the Governor for consideration and hopefully signature.
UPDATE . . . On November 5, 2005, Senate passed SB 1515 on a 38-0 vote. The bill now moves to the House Committee on Regulatory Reform.
On September 24, 2008, the Senate Economic Development and Regulatory Reform Committee voted 7-0 to move SB1515 to the floor of Senate with favorable recommendations for passage.
While SB1515 does not alter the scope of conduct that is currently permitted under Michigan law, it does increase the penalties for the unlicensed practice of architecture and engineering, making multiple offenses felonies. The bill moves to the Senate floor and thereafter to the House. As an identical bill passed the house earlier this session, prospects for passage are good.
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William Miller v. Allstate Insurance Company, Michigan Supreme Court Docket Number(s) 134393 and 134406
The primary difference between a general business corporation and a professional corporation (a "PC") is the manner in which the stock is held. For a professional corporation, only those individuals who are licensed to practice the business in which the corporation engages may own stock. For an architect or engineer, that means only architects or engineers can own stock in the corporation. However, for over 40 years forming a design practice as a PC was thought to be optional but not mandatory.
In 2006, the Michigan Court of Appeals, in Miller v. Allstate, upset that thinking concluding that a business which could incorporate as a PC must do so. For the hundreds of Michigan design firms that had unlicensed shareholders, not only was it necessary to re-incorporate, it was necessary to divest all unlicensed individuals of stock ownership. Thus, compliance with Miller presented an obvious problem for many Michigan architects and engineers.
On July 2, 2008, the Michigan Supreme Court rendered its decision in Miller. Without deciding the corporate question, the Court concluded that only the Attorney General had standing to challenge corporate status. Although the legal question remains unresolved, unless the AG prosecutes non-compliance, no one else can. The practical effect is render the Court of Appeals decision in Miller moot, restoring the pre-2006 state of the law. Firms which were incorporated after the effective date of the PC statute (the early 1960's) can breath a sigh of relief.
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Keller Construction v. U.P. Engineers, Court of Appeals Docket No. 275379
In Keller, a construction contractor sued an engineering firm for negligent performance of a contract the firm held with the project owner. Relying in long established Michigan precedent, the contractor argued that it was foreseeable that it could be injured if the contract were negligently performed. The contractor also argued that the engineer had interfered with its prospective business relationships by suggesting to local trade contractors they ought not do business with the contractor when it sought to enter into contracts necessary for it to complete the work.
In an unpublished opinion, the Michigan Court of Appeals ruled that a design professional can not be sued for breach of duties that arise from the contract with the owner. Absent a duty to a third party that was independent of that contract, the design professional can't be sued by any third party for claims arising out of the performance of that contract. The court also rejected the interference claims on technical grounds.
As a practical matter, sine almost every design professional duty is created by the contract, the Keller decision has the effect of constricting direct claims against a design professional by anyone other than the owner. Whether this development will reduce the number of claims against design professionals or whether it will simply recast them as owner claims remains to be seen. Additional litigation is virtually certain. However, for now, the ability of anyone other than the design professionals' client to bring a direct claim arising out of performance of the design professionals contract with the owner is decidedly limited.
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Update . . . . After extensive lobbying SB 865 fell victim to horse trading on the literal eve of passage. Forces supporting the bill have re-organized and are moving forward in this legislative session. Currently SB 882 and SB 0035 have both passed the Senate on unanimous votes and are pending in the House.
SB 865 passed the House Judiciary Committee on Wednesday, November 12, 2008 on a 10-0 vote. The bill now moves to the floor of the house for consideration.
The Michigan Statute of Limitations
For many years, Michigan law included both a statute of limitations (which cuts off a claim after it has accrued or arisen) and a statute of repose (which prevents a claim that has not arisen or accrued after the passage of a fixed period of time from ever accruing or arising). Although the respective concepts are contained in two separate statutes, they had historically been read together such that both had some application and effect. While the statute of limitations addressed most claims, the statute of repose created an outer time boundary, beyond which claims could no longer be made.
That remained the state of the law until the Michigan Supreme Court decided Ostroth v. Warren Regency Limited Partnership, 474 Mich 36 (2006). Where the statute of limitations was 2 years and the statute of repose was 6 years, rather than read the statutes together as had been the case for well over a decade, the Michigan Supreme Court read the 6 year statute as exclusive of the 2 year. The case had the net effect of extending the statute of limitations for all claims against Architects and Engineers from 2 years in may cases to 6 years in every case. Because the same limitations statutes apply to contractors, the effects of the Ostroth decision applies to them as well
Senate Bill 865 would remedy that issue and would restore the prior state of the law. Although that bill has passed the Michigan Senate, it remains stalled in the House Judiciary Committee, a victim of a political dispute.
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Additional Information
Please contact us if you wish to discuss how any of these developments impact your practice or if you wish to discuss any of these issues, or other legal issues in further specific regard.
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