The Federal Highway Administration (FHWA) has long held that the federal government’s so-called “Buy America” requirements apply neither to steel and iron manufactured products with less than 90 percent steel or iron, nor to other “miscellaneous” manufactured products. The FHWA had used a so-called “blanket waiver” of the Buy America requirements to support its interpretation.

The United States District Court for the District of Columbia recently rejected that assessment. Therefore, at least for now, any new federal aid project must adhere to the full text of the Buy America Act, unless the project owner obtains a specific project waiver for a given product.

The history of this issue goes back to enactment of the Surface Transportation Act of 1982 and implementation of its governing regulations in 1983. Since that time, the FHWA has held its position that it is in the public interest to waive the Buy America Act requirements except for steel and iron manufactured products. That position held true through multiple revisions of the act over several decades, culminating in a memorandum in December 2012 in which the FHWA determined that it was in the public interest to “waive application of Buy America to manufactured products other than steel and iron manufactured products.”

The FHWA’s rationale was that for many projects, so-called “off the shelf” products were being subjected to Buy America’s requirements, making purchasing for construction projects difficult and more expensive to both contractors and public project owners because of the difficulties in administering such a requirement.

In December 2015, the D.C. court weighed in on the issue, in the case of United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union v. FHWA. In that case, the court vacated the FHWA’s December 2012 memorandum and the waiver of the full requirements of Buy America. In its opinion, the court analyzed the FHWA’s two exemptions – manufactured products made up of less than 90 percent steel or iron, and miscellaneous, or “off-the-shelf” steel or iron products. The court ultimately determined that the FHWA’s process for exempting those segments of products was flawed, and further that picking 90 percent, as opposed to any other threshold, and without any apparent analysis, was arbitrary and capricious.

The court’s decision is a victory for domestic manufacturers and distributors of products that are used for federally funded U.S. highway projects, because it means that, at least in theory, projects must now use products that comply with the full text of the Buy America requirements. That means more products manufactured in the United States, benefitting those manufacturers and distributors.

There are two important issues that owners and contractors should consider as new projects are let for the upcoming construction season. First, the court’s decision has the potential to increase the cost of construction projects for the public, because domestic products tend to be, but are not always, more expensive than those produced overseas.

Second, contractors could find themselves in a “gotcha” situation if they follow “standard” practice in buying out their projects, without recognizing that the game has changed. Prudent contractors will carefully review project specifications and ensure that they are purchasing, or requiring their subcontractors to purchase, only those products that strictly adhere to Buy America requirements. Failure to do so can lead to rejection of submittals, rejection of work, or in drastic situations, removal and replacement at the contractor’s own cost.

Finally, it is important to note that even though the court struck down the FHWA’s blanket waiver, public owners can still apply for a project-specific waiver, if there is a product, for example, that is either not manufactured in the United States or one that is prohibitively expensive. Additionally, the FHWA could seek to revise its rule to reinstate a blanket waiver that will pass muster with the court.

For a complete list of the original FHWA memorandum, the court’s decision striking down the memorandum, and a list of frequently asked questions, see the FHWA’s Buy America website at .

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt, and a co-chairman of its construction and design practice group. Contact him at jvermilyea@schwabe.com, or follow him on Twitter – @NWConstLaw.

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In the years leading up to the Great Recession, commercial construction work was plentiful. Federal, state and local government coffers were flush with tax receipts; and the bounty of work meant that contractors had strong leverage in negotiating contracts, changes and claims.

The recession and its aftermath changed all that. The dearth of both commercial and public work shifted the balance of power in contract negotiations so that owners were much more able – and willing – to impose much more restrictive payment, insurance, notice and other requirements.

Even though the recession has ended, government owners in particular have continued these restrictive – some might say Draconian – practices. Contractors who perform work on government projects would be wise to recognize these contract provisions and practices, and to prepare accordingly, in preparing bids or proposals, selecting and managing subcontractors, and managing their operations during the course of construction. Failure to be mindful of the “gotchas” in a public works contract can leave contractors performing extra work without compensation, eating their internal costs for delays caused by others, or facing liquidated damages in circumstances where the owner previously gave routine time extensions.

Courts in both Oregon and Washington have adopted a rule of “strict adherence” when it comes to the interpretation of contract terms. This comes into play most often when a contractor is requested or directed to perform extra work, but does not seek or obtain a change order or contract modification exactly as required by the contract, either because it is not documented correctly or it is not submitted in a timely manner. Traditionally, contracting parties would “work it out” at the end of a project, even if there was a dispute over scope or amount. That practice is largely a thing of the past. Now, if the change is not properly documented, an owner can refuse to pay for the work, unless the owner has somehow waived the contract requirement. This puts the onus on the contractor to make sure it carefully follows the contract procedures to be paid for such changes.

Public owners are imposing increasingly strict rules on contractors in other ways as well. For example, some owners have begun imposing record retention requirements that mandate that a contractor keep all records related to a given project in a particular way, or waive any claims related to the project. In and of itself, this is not problematic; contractors have always had the obligation as well as the practical need to keep records of their work. However, some owners have gone a step further and are now requiring that prime contractors take affirmative steps to ensure that all of their subcontractors, sub-subs, and suppliers also adhere to the required record-keeping rules. That means that the prime contractor is now potentially in the business of monitoring its subcontractors’ internal business practices. The consequences of failing to do so can be that the contractor’s right to be paid for disputed items could be waived, even for meritorious claims, simply because a subcontractor did not properly keep records that may or may not be related to the disputed claims.

Another example of public owners’ stricter – some might say unreasonable – approach to contract operations is a recent notice issued by the Oregon Department of Transportation in which the agency notified contractors that it would no longer issue extensions of time to complete paving projects at the end of the construction season. In other words, when the paving season ends, ODOT will begin to assess liquidated damages, even in circumstances where ODOT acknowledges it has routinely granted contract time extensions to allow paving work to be completed the following spring to avoid the potential for paving work being performed during adverse weather.

For contractors working for government agencies, these trends mean a few things. First, contractors need to know and understand how risk-shifting, notice and payment provisions will work in practice when bidding or proposing on work so they can account for the costs and risks they will be undertaking.

Next, contractors should have well-trained personnel who carefully document and communicate all events for which delay or change notices may be needed to ensure that all contract requirements are strictly adhered to.

Finally, contractors should not expect an agency will continue to act reasonably simply because “that’s how it’s always been done.” Public owners have been signaling for some time that they intend to require strict adherence to contract language, whether reasonable or not.  Prudent contractors would do well to listen.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt, and a co-chairman of its construction and design practice group. He has nearly 20 years of experience advising construction businesses throughout the Northwest. Email him at jvermilyea@schwabe.com, or follow his latest tweets @NWConstLaw.

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The construction industry has undergone a sea change over the last 15 years. I wrote a column in this space back then about the rise of technology and the coming age of “paperless” projects, and the potential impacts that change would have on the industry. In that piece, which the 91��Ƶ published in January 2003, I posed a number of potential issues related to the cost of technology, the security of data, and the nature of the third-party provider.

In large measure, those questions have been put to rest. In the intervening 12 years, technology has improved by leaps and bounds. Where we used to communicate by “snail mail” and then fax machines, we now communicate via email and PDF documents. We have the ability to scan hard copies using software programs that have amazing optical character recognition abilities. And we have dramatically decreased the amount of physical space that is required to hold all the records from a construction project. All of these advances lead to cost savings and efficiencies in managing construction projects.

Yet, while we have reduced the amount of physical paper, we have dramatically increased the amount of sheer data that is generated on a given project. This increase is, in large measure, due to the substitution of emails and text messages for phone conversations. So how does this affect contractors when they end up in disputes on projects?

On the one hand, the increased use, in particular, of email to communicate has resulted in many “agreements” being memorialized that would previously have been made on a telephone call. Those phone call conversations were often eventually forgotten, leading to battles over whose memory of an agreement was better. When those discussions and agreements—over scope changes, time extensions, material substitutions, and the like—are communicated via email, though, it can be much easier to track what the actual “deal” was on a given issue.

Still, an email exchange is no substitute for a formal contract communication. Informal communication can lead to misunderstandings, emotional reactions that may not be warranted, and beliefs about agreements that may or may not have ultimately been reached. That is particularly true when the terms and conditions of a contract require particular types of notice to be documented and delivered in particular ways, such as on a formal change order request delivered to, and accepted by, a person with actual authority to bind the other side to a change in the contract. Failure to follow the contract, and thinking that an informal communication is “good enough,” can lead to a major problem in the event of a dispute later in the project.

The reliance on technology can also lead to a false sense of security. Too many times, I have been told by clients that they agreed with the other side about some important issue and that there is an email covering the subject, only to find that the email doesn’t exist or the discussion doesn’t support with the client’s memory.

The best practice is to always convert these “informal” discussions to formal contract documents. If the discussion involves a change in scope, with price and time implications, it should be converted to a formal change order or change request. If the contractor is being delayed as the result of a circumstance beyond its control, a formal notice of delay and possible cost impacts should be prepared and sent.

In other words, the informal electronic communications that we have come to rely so heavily on should be used to supplement formal contract communications. They should not be seen as a substitute for those important documents, which ultimately form part of the contract itself.

Prudent members of the construction industry should have clear and well-communicated policies in place for the use of electronic communications, including when an issue has risen to the level that requires a more formal document than is prescribed in the contract documents. Taking a proactive approach, and recognizing that email is a tool, but not a panacea for all potential issues that may arise on a project, can result in much cleaner contract documentation and a reduction in claims, disputes, and the need to pay your friendly attorney a visit at the end of the project.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt, and a co-chairman of its construction and design practice group. He has nearly 20 years of experience advising construction businesses throughout the Northwest. Email him at jvermilyea@schwabe.com, or follow his latest tweets @NWConstLaw.

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Construction contracting is an adversarial process. Three principal players, multiple contractual relationships and profit motives can and often do lead to conflicts. These conflicts generally center around issues of money, time and scope. The advent of alternative delivery methods, increased focus on the importance of relationships, and better understanding of the costs of dispute resolution have reduced the number and extent of disputes on construction projects, but they still arise.

When disputes occur, clients are often shocked at the cost and time it takes to ‎get to ‎resolution. In order to make informed business decisions, it is important to ask the right questions to understand the true value of an opportunity to resolve a dispute early. Failing to adequately evaluate a case can cost needless time and money, and lead to an unsatisfying result.

1. What does the contract say? Construction disputes are, generally speaking, contract disputes. Yet parties often forget to look there first to answer key questions. The contract is your best guide to answer questions about scope, delays, how changes will be compensated, whether claims have been waived or not, and myriad other issues. A good contract will address those questions and help you make the first assessment about your case.

2. Are there prevailing party attorney fees? Fees can and often do drive decision-making in construction litigation. That is particularly so in “smaller” disputes, where the cost of litigating can outpace the “value” of a case. The case can quickly become more about winning to recover fees, rather than about the merits. Conversely, a dispute without attorney fees at issue is much less “valuable” for either side, because win or lose, each side will have to eat its fees. The incentive to continue the fight may therefore be much less.

Prevailing party attorney fees in Oregon are allowable in two basic scenarios: either the parties have agreed via contract that the prevailing party is entitled to recover its attorney fees, or there is a statute, such as a lien statute, that expressly grants the right to recover those fees. Understanding how the contract works as well as whether there are any applicable statutes is key to incorporating fees into the decision-making process.

3. Where is the case filed? Is the dispute in state or federal court? Is it in your local county or is it in the remote location of your project? The forum and venue of your dispute can have a significant impact on the cost of the dispute. If you are located in Portland, but the project, all the subcontractors (potential witnesses), the opposing party and the owner are located in Medford, you will spend a lot on travel to conduct discovery in the case. If the contract or applicable statute requires that the dispute proceedings take place in the remote location, it will likely increase costs even further.

4. Who are the opposing parties and opposing counsel? Oregon’s construction industry is relatively small, as is the construction bar. Over time we all get to know each other, either through direct contact or by reputation. How a contractor and its attorney approach disputes will impact the cost, length and overall value of the dispute. In any case, each party can only control, at most, half of the equation.

You can assess your case, you can determine your own costs, and you can ultimately decide what, if anything, you are willing to do to resolve the case. But the other side may assess the case differently, or not at all, or may have unknown pressures that drive it to different conclusions about the value of the case. These and other factors can make the case more difficult and more costly, and they are largely out of your control.

This is one of the most frustrating things that litigants confront – the disbelief that the other side doesn’t “get it,” or won’t be reasonable. It is important to remember that you only have a full understanding of and control over your own part of the case. Attempting to understand or control the unknowable or uncontrollable is an exercise in frustration and will often push the parties further from potential resolution.

5. How complex is the case and how much is at stake? These two concepts are both separate and intertwined. They each contribute to the effort it takes to litigate a case and the cost to get to resolution. A simple payment dispute is likely less complicated and less costly than a multi-party dispute involving schedule delays and scope disputes. Those cases will involve more expansive discovery as well as the need for experts. Having a good understanding of the issues and what it will take to assess the facts will assist the decision-makers when it comes time for important decisions, such as whether and when to attempt to settle, or whether to take the case through a trial or arbitration hearing.

6. How much will it cost to litigate? Trying to forecast litigation costs is a very tricky business because so many factors are beyond one party’s control. However, experienced attorneys are generally able to give rough estimates early on, and those estimates can be refined as the case evolves. All the factors discussed here, and more, go into the development of a litigation forecast. These budgets are by their nature imprecise, but they can give an important general understanding of the cost of litigating, which in turn helps with the overall evaluation of the case.

These are certainly not all of the factors that a contractor, or any litigant, should review when evaluating whether to pursue, or how to defend, a dispute, or whether to settle if an opportunity presents itself. They can, however, be an important part of your first steps. In any litigation scenario, these and other factors should be discussed with your attorney so you can collectively make informed business decisions about how to proceed.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt, and a co-chairman of its construction and design practice group. He has nearly 20 years of experience advising construction businesses throughout the Northwest. Contact him at jvermilyea@schwabe.com, or follow him on Twitter – @NWConstLaw.

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As the public has come to understand in the post-election flurry of political maneuvering, the president of the United States has (arguably) broad power to act via executive order so long as it does not violate the Constitution or statutory or common law.

Since 1900, sitting presidents have issued an average of 44 executive orders per year. Some are very high-profile, such as President Obama’s recent one addressing immigration; most, however, do not garner nearly the same level of attention. Nevertheless, they still ultimately have the force of law and can have sweeping impacts. That is certainly the case with the Fair Pay and Safe Workplaces executive order, which President Obama issued on July 31.

The order applies to all federal contracts for the procurement of goods and services, including construction, where the value of the contract exceeds $500,000. Federal contractors will now have significant new reporting obligations, and prime contractors will also have significant new policing and record-collection obligations, to ensure that their subcontractors are complying with the order’s new requirements. The consequences of failure to properly report the information sought could be significant and devastating for contractors.

All federal contracting agencies must now require, as part of any solicitation, that offerers represent whether they have had any adverse determinations, awards, decisions or judgments within the prior three-year period arising from a host of federal labor laws or their state equivalents. This information is then used as part of the agency’s determination, prior to award of any contract, whether the contractor is a “responsible” bidder or offerer.

The laws that are part of this new reporting requirement include the Occupational Safety and Health Act, the Davis-Bacon (prevailing wage) Act, the National Labor Relations Act, the equal employment opportunity executive order of 1965, the Civil Rights Act of 1964, the Family and Medical Leave Act, the Americans with Disabilities Act and others. Additionally, any violation of any equivalent state law must also be reported, even though the requirement to report applies only to federal contracts.

In addition, all contractors must require their subcontractors with over $500,000 in value to provide the same information to the contractor, looking back three years prior to the contract award. Also, the contractor must, in consultation with the agency, make a determination whether the subcontractor “is a responsible source that has a satisfactory record of integrity and business ethics.” The subcontractor must update the information every six months.

After the contract is awarded, every contractor must provide the contracting agency with an update of all of the contractor’s and its subcontractors’ information. If the contractor or a subcontractor is found to have violated one of the applicable laws in the prior six months, the agency must consider taking corrective action. That corrective action could be an agreement that the contractor or subcontractor take remedial actions, or that the contractor or subcontractor avail itself of “compliance assistance” depending on the nature of the violation, or it could be a decision by the agency not to exercise an option on a contract, termination of the contract, or in some cases a referral to the agency’s suspending and debarring official.

The order also requires that each agency create a new position of “labor compliance advisor” to “consult” with contractors as to whether corrective action should be taken with respect to a subcontractor.

The order requires that the Federal Acquisition Regulations (FAR) be amended to reflect the intent of the order, and requires the Department of Labor to issue guidance to help agencies determine what violations of the various labor laws constitute “serious, willful or pervasive” violations of the labor laws. The order also directs the creation of a database within the Office of Management and Budget to track the adverse determinations contemplated in the order, to be used by contracting officers in evaluating the information given them by contractors and subcontractors, and by contractors in submitting information to contracting agencies.

The order also bars the use of most mandatory pre-dispute arbitration agreements in disputes with employees exceeding $1 million that arise from claims of sexual assault or harassment or claims arising from Title VII of the Civil Rights Act, which governs equal employment opportunities.

The order will take effect in 2016, after rules have been written to implement it. The reporting requirements look back three years, meaning that we are already within the window for compiling and reporting the required information. Any contractor that does business with the federal government should first ensure that it is acting in compliance with the various labor laws that are listed in the executive order.

In the event that a contractor finds itself in a dispute involving one of these laws, or a state equivalent, that contractor should now account for the reporting requirements imposed by this executive order, and the potential for an adverse responsibility determination, when evaluating how to approach the dispute. And finally, contractors should keep careful records and prepare to report the applicable information once final rules are written and the order is implemented in 2016.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt, and a co-chairman of its construction and design practice group. He has nearly 20 years of experience advising construction businesses throughout the Northwest. Contact him at jvermilyea@schwabe.com, or follow him on Twitter – @NWConstLaw.

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Few issues in recent years have raised so many questions and caused so much consternation in the world of construction contracting as the issue of progress payment retainage. Retainage is money that is owed by an upstream contracting party to a downstream party, but “retained” until the final payment on a construction project is delivered.

The reasons for retainage are many: ensuring satisfactory completion; protecting against the risk of potential default; protecting against the need to correct defective work; protecting against risks presented by third parties. Thus, for the upstream party, retainage provides a useful tool for hedging against risk.

For the downstream party, retainage is viewed in a much different light. For subcontractors, the retainage withheld by prime contractors often represents all of the subcontractor’s profit on a given project. When multiplied over several projects – and particularly in light of the smaller margins caused by the recession – the amount of retainage withheld can be significant and have a substantially negative impact on operations.

The law on retainage is relatively straightforward. In circumstances where the contractor/subcontractor has provided a payment and performance bond, the maximum amount that the upstream party can withhold is 5 percent of the total amount of a given progress payment.

However, in circumstances where there is no bond in place, the amount that can be withheld as retainage is subject to negotiation between the parties. Because there is a law that mandates payment and performance bonds on public improvement projects in most circumstances, retainage withheld by public agencies is rarely more than 5 percent, and in the case of highway projects administered by ODOT, the amount is often less.

There is no real “standard” amount of retainage on un-bonded private projects. Many lenders require 10 percent retainage be withheld from prime contractors, and many primes withhold the same amount from un-bonded subcontractors. However, many withhold a significantly higher amount of retainage, and some have called 10 percent retainage on un-bonded subcontractors the “standard” – though this is largely based on perception and anecdote.

In 2013, the issue of retainage is likely to be taken up by the Legislature. This is at the behest of trade organizations that assert that the amount of retainage that can be withheld on any progress payment, regardless of contractual role and regardless of whether a payment and performance bond is in place, should be capped at 5 percent.

This is not the first time the retainage issue has arisen recently. In 2011, a limitation on retainage was proposed as part of a larger bill addressing other aspects of public contracting. That bill did not pass.

Going farther back, to the mid-1970s, the policy debate about the merits of allowing retainage versus restricting it were very similar to the issues being discussed today. Advocates in favor of allowing retainage to be decided by the parties pointed to the risks that prime contractors and owners undertake when agreeing to pay large sums of money to lower-tier contractors. Those primes and owners assume the risks without guarantees that those parties will be in a position to complete their work, correct deficient work, or pay their own subcontractors and suppliers. Thus, they argued, retainage was necessary to protect the upstream parties against defaults in performance, to pay claims and to ensure that any deficiencies could be corrected.

Conversely, the opponents argued that retainage is a drain on cash flow, monies withheld for retainage were misused, final payments were often improperly delayed, and ultimately the idea of retainage was fundamentally unfair.

In the end, the two sides reached a compromise, leading to the existing law: Retainage on bonded work is capped at 5 percent, and retainage on non-bonded work is subject to negotiation between the parties.

That compromise is what will be front and center in the debate that will likely take place in 2013, and the echoes of 1975 will surface in the halls of the state capitol as the same arguments are made by both sides again. How the Legislature will respond, and where a compromise may result, is anyone’s guess.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt. He practices in the firm’s construction and design group. Contact him at 503-796-7468 or at jvermilyea@schwabe.com.

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In 2011, the Oregon Legislature passed Senate Bill 961, a partial ban on a requirement of subrogation waivers in construction contracts. Since the legislation became effective in June 2010, much confusion, overstatement, hand-wringing, and general angst has ensued.

I was present during many of the meetings where bill language was hashed out, and so I have some understanding of the proponents’ intent in passing the legislation. Armed with that information, here is an attempt to set the record straight about SB 961 and answer some of the questions that have arisen since it became law.

First, no, this is not the end of indemnity as we know it. Indemnity provisions in construction contracts remain unchanged by the new law, as does ORS 30.140 – the statute that governs construction indemnity provisions. The new law renders void any construction contract clause that requires a party to waive its right to subrogate claims against another party or its right to seek indemnity or contribution for claims that are paid by one party, but that are caused by another.

In other words, you can’t prevent someone else from seeking reimbursement from you if you cause an accident and the other person has to pay for it initially. So, if there is an accident, and a person is injured, and a claim is made via one party’s insurance policy, that party can seek reimbursement from any other party that was negligent and was a “cause” of the person’s injury, and that right cannot be prevented by contract.

The legislation has exceptions to the rule for claims arising out of property damage or that are covered by so-called “wrap-up” insurance policies. Thus, if an accident damages work while the project is ongoing, the property insurance or wrap policy in place for such situations will cover the loss, and the parties will not be able to seek reimbursement from each other. So, subrogation waivers are not entirely void, but their application is restricted somewhat.

What is subrogation?

The word, according to Merriam-Webster, refers to “the assumption by a third party of another’s legal right to collect a debt or damages.” The term is most often used when an insurance carrier pays a claim on behalf of its insured.

If a different party is partially responsible for the claim, the insurance carrier is “subrogated” to the rights of its insured, and may seek reimbursement, via a claim for indemnity or contribution, from another party that is at least partially responsible for the accident and should therefore contribute to the cost of resolution.

Why was this bill proposed?

Senate Bill 961 was proposed as a way to close a perceived gap in Oregon law surrounding the issue of indemnification. In the early 1990s, ORS 30.140 – the so-called “anti-indemnity” statute – was enacted. That statute bars a provision in a construction contract that requires one party, usually a subcontractor, to indemnify, or pay for, a claim that is caused by the sole negligence of another.

In essence, the Legislature enacted a “you break it, you buy it” approach to negligence and indemnity in construction contracts – at least in cases where the party seeking indemnity is “solely negligent.” However, ORS 30.140 does not explicitly address the flip side of indemnity clauses, which require subrogation waivers.

The general understanding has been that a subrogation waiver cannot require a party to give up a right to seek indemnity for damages that party did not cause but must nevertheless pay for. Over time, subrogation waivers, which had generally been limited to claims arising out of property damage and were covered by builders’ risk policies, began expanding in scope. Contracts began appearing with broad subrogation waivers that restricted indemnity rights for any claims on a construction project, not just those covered by builders’ risk insurance.

Bill proponents asserted that these broad waivers were causing insurance premiums to rise, because this is essentially a transfer of the risk of an accident to a party that must pay, but cannot seek reimbursement. Despite the general belief that the existing statute rendered these provisions void as a matter of law, the proponents felt that it was necessary to close a perceived gap in the law.

What are the ramifications of the new law?

The most immediate one is that contractors at all levels, as well as project owners and design professionals, should review, or have their attorney review, their contract forms to ensure that their contracts comply with the new law.

Already, stories are emerging about contractors and subcontractors battling over the language of subrogation waiver provisions in light of the new law. Consult someone who understands them when negotiating a contract.

Long-term ramifications are unclear. Some observers believe there will be a wave of litigation as this bill’s meaning is sorted out over time. That was the case with ORS 30.140, which gave rise to the case of Walsh v. Mutual of Enumclaw, decided by the Oregon Supreme Court in 2005.

The fact that the Legislature chose to create this new law could cast doubt on the conventional wisdom that broadly written subrogation waivers were already covered by ORS 30.140 and the Walsh decision. This raises the question whether such provisions are actually enforceable if they were in place for the six years prior to passage of SB 961. Some owners and contractors will likely assert that position, and the courts will ultimately have to decide if the Legislature’s action was the enactment of new law, or merely the clarification of existing law. Stay tuned.

Jeremy Vermilyea is a shareholder with the law firm of Schwabe, Williamson & Wyatt. He practices in the firm’s construction and design group. Contact him at 503-796-7468 or at jvermilyea@schwabe.com.

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