Greg Shelton, an attorney with Horack, Talley, Pharr & Lowndes, has litigated a wide array of construction disputes involving high-rise hotels, condominium projects, wastewater treatment facilities, nuclear power plants, highway projects and manufacturing facilities. He is certified by the Florida Bar as a specialist in the field of construction law.
In 2010, he was appointed by the North Carolina Bar Association’s Construction Law Section as managing editor of the N.C. Construction Law Deskbook, the definitive treatise on construction law in the state. The sixth edition was released in September 2013.
Shelton, 46, was born in Tallahassee, Florida, and moved to the Charlotte area in 2000. He lives in Tega Cay, South Carolina, with his wife and two sons.
What made you decide to go into construction law? I started working in Tallahassee for a lawyer who was a lobbyist for the Associated General Contractors of Florida. He was a lobbyist and did a lot of lien work. That’s where I started. When I got down to Miami there were a lot of condominium defect cases going on. I stepped into one that had been going on for 10 years. It was a very complex case of a condominium in Coral Gables. There were a couple of million dollars at stake and the parties were fighting pretty hard. From doing a few of those large commercial construction cases you learn a lot. Every project is a learning experience and you get an accumulation of knowledge that lets you step into a construction case and not have to learn much. You know the lingo, as opposed to a standard litigator who may not know to check into specifications on a built-up roof.
You were just appointed chairman of the Charlotte Council of the Associated Builders and Contractors of the Carolinas for a one-year term. What does that entail? We call it the ABC. It’s an organization that began in the 1950s. They are politically involved in making sure that the statutes and codes work for the construction industry. They are also very big on the labor force, apprenticeships and training. That’s a trade group comprised of owners down to laborers, but it’s more owners, subs, general contractors and suppliers, along with affiliate members such as insurance salesmen, attorneys and leasing companies for rental fleets and trucks. It’s a diverse group of people. They don’t have a structure that keeps people from advancing. For example, I’m an affiliate member. I don’t build buildings but I litigate cases that rise out of construction disputes. I was the chairman of the Government Affairs Committee for three years.
We meet every month and go over reports from the various subcommittees and preside over meetings and luncheons. We focus on the different subcommittees on what they need to be doing, what their goals are, etc.
What kind of clients do you deal with at Horack Talley? Clients range from developers to large general contractors that may be building a hotel, a high-rise, a bank or a fast-food restaurant to larger subcontractors that are hired to do the actual work. General contractors these days don’t do a lot of the actual work; they have subcontractors with specialized knowledge who do the work for them. The general contractor is more the conductor of the orchestra. I have some clients who do telecommunications and fiber optics, that type of thing. Sometimes I do residential but it has to be a pretty big house to support litigation. A lot of people will call up with something like a garage door (problem) on a new house where the subcontractor took off. My advice is just to go to Home Depot and get it fixed because it will be a lot cheaper than litigation and a lot less of a headache. And residential cases tend to take on a family law (aspect). It’s very personal. People go home every day to that problem so there’s a lot of emotional involvement built up. So if there’s not a lot of expense, it’s just better to fix it.
In some cases I’ll do a residential case but I’m very upfront with the client about the realities of litigation. You’re talking about a minimum of a year before you are actually in court and often the issue isn’t worth more than $40,000 or $50,000. So it’s not even worth pursuing unless there is some greater principle involved, such as setting a precedent. Sometimes it’s important to fight the little fights so you don’t have to fight the big fights.
Are there any changes in construction law or in the field of development that readers might be interested in? Construction is changing in that public entities are not able to fund projects as they used to because the tax revenues are going down. You’re seeing a lot of states passing public/private partnership acts and those allow a project to go forward with private money. You’re going to see more roads and large public infrastructure projects done that way.
International construction, particularly in states like Florida, but I think that will be more and more prevalent in the Carolinas. You’re going to see a lot more of an international flair from Europe and South America. You see a lot of manufacturing going on here. I think a lot of that is diversification. Take a company like Toyota and they want their plants near where their materials are. And I’m seeing a little bit more of residential and small commercial development that is unleashing now after so many years of people hunkering down.
What are some of the bigger issues now in comparison with what took place during the recession? Before the recession, companies were much more likely to take cases to court. Now, they are a little more hesitant to do that. A lot more of my work now is drafting contracts and creating clauses that prevent disputes. I have a saying that arguments cost money. So if you can draft a contract to prevent the argument from happening, that saves you money. It’s better to spend a few extra dollars on the front end and make sure that the contract works for your contractor and who you are dealing with and you can save tens of thousands of dollars. And if there is a dispute, you are in a stronger position.
From 2000 to 2008, it was Katy bar the door. You had buildings going up that went up very quickly. I don’t think the skill was there – they just needed a warm body. The result is that you have a lot of water getting into a lot of buildings, complexes in particular because you have a lot of different interfaces between windows, siding, masonry and brick. That has to be done pursuant to the manufacturer’s specifications. If you don’t have somebody who knows, if it is the first time they are putting up (a building), they aren’t going to know how to do it. So water finds its way in and starts eating its way into the structure. You have mold, which freaks people out. You have a serious problem that could have been prevented but I think the demand was so high back in that era that you are going to find as we go on the problems are starting to manifest. It usually takes six to seven years after the construction for somebody to really see what’s going on. It’s a matter of supply and demand. If you don’t have experienced workers, they are going to find somebody to do it. The sales drive the building and became more important at the time than the actual construction. The key is knowing who the good developers are and buying your condo from them.
When was there more litigation, during or after the recession? The problem with the recession was that there wasn’t a lot of money with which to chase money. It was as if one day, they just shut the water off and everybody was just looking around wondering where they were. People weren’t writing checks to chase claims or money that was owed because even if you got a judgment there was no guarantee that the person you were suing would have money. It was a very unusual event. We did have a downturn in 2001 but it was nothing like what we saw five years or six years ago. That was the issue then. Now, people are returning to a traditional, standard development environment. A lot can go wrong with the project. Construction involves a lot of different people, companies, technology, weather and money. There are some owners out there who are more predatory and they make a lot of money by holding onto funds and coming up with reasons not to pay. Does the electrical subcontractor have access to put in his work when the plumber is working in the walls? There are interference issues. Can you compact soil that has been rained on for a month? No, it’s mud. A lot can and does go wrong. A lot of times the companies are able to just work through it and a lot of times they aren’t.
What are some of the biggest issues facing developers now? There are several things going on. For developers, one challenge is the availability of good land to develop. Where I live, what used to be woods or an old farmhouse is now being developed. There’s just not as much land to work on, particularly with larger projects, such as schools. That’s one issue.
How about immigration law and the shortage of construction workers? I don’t know how the executive order on immigration is going to affect things. A lot of crews are Hispanic contractors. I’m actually the treasurer of the Hispanic Contractors Association. Language can be problematic. For example, you need a superintendent over a crew to explain what the instructions are for installing a window or putting in masonry. So, groups are trying to focus on getting folks out into the field as a vocation. In the U.S. there is a mentality that you have to go to college. But really, you can make a good living with having a good trade such as HVAC, plumbing and fixing things. The ABC is trying to train people to do things safely.
As far as safety violations, that will depend on the crews that you’ve got. If it is somebody that hasn’t been here very long, they may not even know what OSHA is. You’re going to have people up on roofs without harnesses. There are a lot of trade groups out there trying to address that.
Do you foresee more construction workers coming back into the industry? I think that is more complex than I can answer because I don’t know where people are going to go. I know immigration policy has affected the landscaping and masonry industries and a lot of the construction crews. I know company owners are always looking for labor. You have labor companies that essentially act as the employer that will send laborers to go do the work. That’s one way they are addressing the situation, because construction is seasonal and you have a lot of people coming in and out. So you have companies that work as brokers to handle the supply and demand of workers.
What’s one of the most interesting cases you’ve worked on? I had a case that involved a large hotel in town and I was representing the general contractor. We had 19 or 20 subcontractor claims and I was dealing with about 20 different sub-lawsuits. There were all kinds of issues going on with the project so it was a real challenge to organize our position to ensure we handled what we needed to with all these mini-lawsuits. There were a lot of lien and bond claims and insurance issues involved. That case had pretty much everything in it. As with most projects, it’s up and operational now. Everything pretty much settled before trial. We see that a lot. Larger construction cases usually don’t go to trial because the people making the decisions are in business looking at risk vs. reward. There is a pretty high risk in taking any case to trial. Usually they will settle the case. One example I give is buying a car. The lawyers go look at the car, kick the tires, look under the hood and drive it around a little bit. Then you know if you have a car that’s worth $100 or $100,000. Before trial, by the time you’ve gone through discovery, taken the depositions of witnesses, looked at documents and taken reports from experts, the lawyers and the clients then go into negotiations. They are posturing, of course. But they usually get to a result that everybody can live with.
What kind of problems can be caused by a boom in construction? The biggest problem would be the workforce and who is constructing your building. The recession did have the bright side of weeding out a lot of bad contractors. But, when you’re in a boom, if you’ve got a truck and a sign you can get your license and become a general contractor. There are financial requirements – you can’t just go in and build a nuclear power plant with a pick-up truck. But you are going to find a lot more people going into it because there is a higher demand. So you will have a much larger swath of talent levels and professionalism. There are some companies in town that have been around for a long time. Some of them are really large and some are medium-sized, but they’ve been around. Those companies know how to build a project. But with a boom in the economy, there is a fight for scarce resources, which is a qualified labor force.
The best advice I can give anybody is to know who you are dealing with. In construction, it’s all about risk – some risk you can’t control, but you can control for the most part who you are dealing with. Is the contractor going to work with you or is he going to hit you with a lot of change orders (which are requests for more money). You can get some contractors whose mode of operation is to come in with a low bid to get the work and then submit a lot of change orders. You shouldn’t necessarily go with the lowest bidder. You should go with the best bidder. If you have to spend a little more money to have peace of mind, then it’s worth the money.
Is there anything you’d like to talk about that you think I’ve missed? I think what we’ve seen in the economy is the illusion or feeling that everything is coming back. I don’t think it will ever come back to where it was. It was an unnatural state in 2005 – the financial incentives, mortgage laws and lending practices were artificial. We’ve kind of gotten back to a normalized financial environment. It will look like everything is revving forward and then all of a sudden, things drop off again. It’s like an outboard motor that is cruising across the lake and then it sputters out and you need to start cranking again. That’s how it’s been. I don’t know if people are hesitant because of what happened a few years back or if there are bigger factors out there from the Fed to the IMF that affect it.
But I have noticed there are a lot more cars on the roads and a lot more small commercial and single-use buildings going up. I think we have some larger buildings coming here near I-277. So it does seem to be stronger than it has been for a more sustained period of time.