Getting Served: Legalities and Risks of Airport Contractual Agreements Tuesday, March...

Getting Served: Legalities and Risks of Airport Contractual Agreements

Tuesday, March 12, 20192:00-3:30 PM ET

TRANSPORTATION RESEARCH BOARD

Purpose Discuss research from the Airport Cooperative Research Program (ACRP) Legal Research Digest 30: Contract Risk Management for Airport Agreements and Legal Research Digest 31: Preemption of Worker Retention and Labor Peace Agreements at Airports.

Learning ObjectivesAt the end of this webinar, you will be able to:

• Identify primary risks associated with common contracts used by airports of all sizes

• Identify key issues to consider when drafting or reviewing contractual provisions related to such risks

• Discuss the issues related to labor-harmony or labor-peace agreements• Describe labor laws and preemption relevant to airports and how to

identify and minimize risks

ACRP WebinarGetting Served — Legalities and Risks of Airport

Contractual Agreements

March 12, 2019

Assistant City Attorney, Aviation Department8 years of practice at CLT including 2 years as a legal intern Serves as a member of ACRP’s legal panel Oversees various contract agreements including goods and services, technology, concession agreements and leases.

Elizabeth SmithersCity of Charlotte/Charlotte Douglas International Airport

Five Ways to Get Involved!

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Deadline!

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Lacey D. Corona, Nelson Mullins Broad and CasselPresenting

ACRP Legal Research Digest 30

Contract Risk Management for Airport Agreements

andEric T. Smith, Kaplan Kirsch Rockwell

Presenting ACRP Legal Research Digest 31

Preemption of Worker Retention and Labor Peace Agreements at Airports

Today’s Speakers

Airport Cooperative Legal Research Digest 30

CONTRACT RISK MANAGEMENT FOR AIRPORT AGREEMENTS

Lacey D. Corona, Esq.Nelson Mullins Broad and Cassel

Special Counsel to Orlando International Airport’s (OIA) on its $3.6 billion Capital Improvement Project (including new South Terminal)

General Construction Counsel to OIA, including day-to-day handling of construction, professional service, and maintenance and operational contracts

Peer Review Consultant for major U.S. airport related to $5 billion public-private partnership project

Airport Procurement Disputes and Litigation

Lacey D. CoronaTransportation & Infrastructure Specialist

2

8 TYPES OF CONTRACTS USED BY AIRPORTS OF ALL SIZES

RISKY BUSINESS

Professional Services

Construction

Repair/Maintenance

Tenant and User

Software/Information Technology

Airline Signatory

Ground Transportation

Vendor/Purchasing

3

PROFESSIONAL SERVICE AGREEMENTS

4

Risk: Indemnity

Methods to Mitigate Risk:

Broad indemnity and duty-to-defend language

X Avoid mutual indemnity

PROFESSIONAL SERVICE AGREEMENTS

5

Contractor AirportIndemnification

Sample Provision:A. Consultant hereby agrees to defend, indemnify, and hold

harmless City . . . against all liabilities, claims, judgments,suits, or demands for damages to persons or propertyarising out of, resulting from, or relating to the workperformed under this Agreement (“Claims”) . . . Thisindemnity shall be interpreted in the broadest possiblemanner to indemnify the City for any acts or omissions ofConsultant or its subcontractors.

. . .D. Insurance coverage requirements specified in this

Agreement shall in no way lessen or limit the liability ofthe Consultant under the terms of this indemnificationobligation.

PROFESSIONAL SERVICE AGREEMENTS

6

Risk: Termination

Methods to Mitigate Risk:

Owner right to terminate for cause and for convenience

Distinguish between all or part of the project

X Do not allow lost or anticipated profits on terminated work

PROFESSIONAL SERVICE AGREEMENTS

7

Sample Provision:

The Owner may terminate this Contract inwhole or in part at any time for itsconvenience.

. . .[T]he Contractor shall be compensated by theOwner for the Contractor's reasonable costsactually expended and profit earned on Workthat has been fully completed and acceptedby the Owner. There is no entitlement toanticipatory profits.

PROFESSIONAL SERVICE AGREEMENTS

8

CONSTRUCTION AGREEMENTS

9

Risk: Schedule ImpactsMethods to Mitigate Risk:

Liquidated damages for each day of delay

Limit contractor’s remedies

CONSTRUCTION AGREEMENTS

10

But Limit Indirect Impacts

Allow Relief from Schedule Impacts

Sample Provision:An extension of the Contract Time shall bethe Contractor’s sole and exclusive remedyfor any delay of any kind or nature, except tothe extent the delays were solely caused by(1) material acts or material omissions by theOwner . . . constituting active interference or(2) concealed or unknown conditions . . . Forthese delays, the Contractor is only entitledto the reasonable actual costs that arecaused directly and solely by the delay . . .

CONSTRUCTION AGREEMENTS

11

REPAIR / MAINTENANCEAGREEMENTS

12

Risk: Dispute Resolution

Methods to Mitigate Risk:

Consider mandatory arbitration with expert for highly technical services

Require ongoing performance while dispute is pending

REPAIR AND MAINTENANCE AGREEMENTS

13

Sample Provision:

Unless otherwise agreed in writing, theContractor shall carry on the Work andmaintain its progress during any courtproceedings or arbitration, and theAuthority shall continue to makeundisputed payments to the Contractorin accordance with the ContractDocuments.

REPAIR AND MAINTENANCE AGREEMENTS

14

TENANT AND USER AGREEMENTS

15

Risk: Remedies for Default

TENANT AND USER AGREEMENTS

Methods to Mitigate Risk:

Include clear “non-wavier” language

Airport’s exercise of remedy should not be exclusive of other remedies

16

Sample Provision:

Any efforts by City to mitigatedamages caused by Tenant’s breach ofthis Lease shall not constitute a waiverof City’s right to recover damageshereunder and shall not affect theright of City to indemnification . . .

TENANT AND USER AGREEMENTS

17

SOFTWARE / INFORMATION TECHNOLOGYAGREEMENTS

18

Risk: System Downtime

SOFTWARE / IT AGREEMENTS

Methods to Mitigate Risk:

Include up-time guarantees and downtime penalties

Negotiate source code escrows

19

Sample Provision:

Consultant hereby grants to City a license to use allsource code for the entire Software Program(“Source Code”) for the purposes described in thisAgreement. This Source Code will be placed in anagreed to escrow account with the City identifiedas beneficiary and be accessible to the City on theterms and conditions set forth in the EscrowAgreement . . . The Source Code shall be keptcurrent with the latest release of the SoftwareProgram in use by the City . . .

SOFTWARE / IT AGREEMENTS

20

AIRLINE SIGNATORYAGREEMENTS

21

Risk: Airline Bankruptcy

AIRLINE SIGNATORY AGREEMENTS

Methods to Mitigate Risk:

Ensure any benefits to airline do not apply while in default

Require deposit of at least 3 months rent

22

Sample Provision:AIRLINE shall provide Authority on theEffective Date of this Agreement with acontract bond, irrevocable letter of creditor other similar security acceptable toAuthority (“Performance Security”) in anamount equal to the estimate of three (3)months’ rentals, fees and charges payableby AIRLINE . . . to guarantee the faithfulperformance by AIRLINE of its obligationsunder this Agreement and the payment ofall rentals, fees and charges due hereunder.

AIRLINE SIGNATORY AGREEMENTS

23

GROUND TRANSPORTATIONAGREEMENTS

24

Risks: Property Damage and Personal Injury

Methods to Mitigate Risks:

Require appropriate insurance coverage

Name the airport as an additional insured

GROUND TRANSPORTATION AGREEMENTS

25

Sample Provision:

Company, at its own cost and expense,shall obtain and maintain . . . thefollowing types of insurance naming theAuthority, the City and the members(including, but without limitation, allmembers of the governing board of theAuthority, the Orlando City Council andthe advisory committees of each),officers, agents and employees of eachas additional insured's.

GROUND TRANSPORTAION AGREEMENTS

26

VENDOR / PURCHASINGAGREEMENTS

27

Risk: Performance

VENDOR / PURCHASING AGREEMENTS

Methods to Mitigate Risk:

Require performance bond or letter of credit

Consider requiring a bid bond

28

Sample Provision:

Contractor shall furnish to Authority aPerformance Bond . . . completed on theAuthority’s forms . . . in a penal sum equal toSeven Hundred Fifty Thousand Dollars($750,000.00).

VENDOR / PURCHASING AGREEMENTS

29

RISK MANAGEMENT

30

Contract Language

BondsInsurance

QUESTIONS?

31

Preemption of Worker-Retention and Labor Peace Agreements At Airports

A Brief Summary Of Select Issues and Practical Approaches

Eric T. Smith, Esq.Partner, Kaplan Kirsch & Rockwell, LLP

Washington, D.C.

ACRP Legal Research Digest 31

Partner, Kaplan Kirsch & Rockwell, LLP Practice 100% focused on airport law – narrow but very broad30+ Years in aviation 14 years labor attorneyAdvises airports on contracts ranging from concessions to airline use & lease agreements

Eric T. Smith, Esq.Principal Investigator

THOMAS W. ANDERSON, Metropolitan Airports Commission, Minneapolis, Minnesota;

DAVID BANNARD, Foley & Lardner LLP, Boston, Massachusetts;

JAY HINKEL, City of Wichita, Kansas;

MARCO B. KUNZ, Salt Lake City Department of Airports, Salt Lake City, Utah

ELAINE ROBERTS, Columbus Regional Airport Authority, Columbus, Ohio; and

E. LEE THOMSON, Clark County, Las Vegas, Nevada.

ACRP Project Committee 11-01 Members

11-01 CoverageIntroduction/OverviewFederal Labor Protection Laws, Preemption and Proprietary Rights ExceptionLabor Harmony Agreements and Worker Retention ProgramsApplicability to Airports. The Airport Sponsor – Sources of Risk and Potential ClaimsAppendix A, B and C

Preemption of Worker-Retention and Labor Peace Agreements At Airports

Cover all today??

Brief Overview of Topic and Coverage Of Session

Increase in initiatives to have airports require “labor peace” or “labor harmony” as part of contracts with on-airport businessesConcessions operations largest focusNational initiatives by SEIU and UNITE HereThings may not always be what they appear. The need for a well-informed senior staff, board, council, etc.Legal foundation Real-world examplesPractical implications

Preemption of Worker-Retention and Labor Peace Agreements At Airports

Going to move quickly

Why Is This An Issue ?

Push by multiple labor organizations to penetrate airports Certain tools used to expedite organization efforts Tools implemented via contractual provisions in agreements between businesses and airportAdvocacy/Pressure applied to elected officials and/or senior airport personnelFraught with legal and business risk

Who Should Be Concerned?Elected officials often do not fully appreciate legal and practical risksAirport executives face similar challenges but are also tasked with running airport, maintaining business relationships with on-airport businesses and airlines.

Why This Topic Is Relevant & To Whom This May Be Of Importance

Railway Labor Act (RLA)National Labor Relations Act (NLRA)

Obligatory Legal Baseline Coverage

Focus upon NLRAAppropriate Unit Showing of Interest Petition for ElectionElectionsIndividual Employee Rights

Union Organizing – The (Very) Basics

Card CheckNeutralityRelationship to Labor HarmonyShowing of Interest Petition for ElectionElections

Union Organizing – The (Very) Basics (continued)

Concessions ModelsChallenges FacedAirport ownership/operationUse of Contractual Provisions

How Airports Become A Focal Point

Labor Harmony Implementation – Practical Reality Employee Rights Conflict?

Does requirement have adverse impact upon federally-protected rights?Proprietor Rights & Its Limits

The Core Legal Issue – Preemption

Book vs. Practical Definition

Proactive EducationResponding to Inquiries Contractor ConcernsNegotiating ParametersImplementation Tricky, complex and an art

Handling Issues

Easy Reference Materials Within The Digest

What’s Allowed, What Should The Airport Do, What Can’t The Airport Do? Appendix A

Main headers

Item number one Item number two Item number three Item number four

Implementation of a Labor Harmony Provision –Appendix B

Potential Claims –Appendix C

Eric T. SmithKaplan Kirsch & Rockwell, LLP

esmith@kaplankirsch.com

FOR ADDITIONAL INFORMATION

ACRP is an Industry–Driven Program

Managed by TRB and sponsored by the Federal Aviation Administration (FAA).Seeks out the latest issues facing the airport industry.Conducts research to find solutions.Publishes and disseminates research results through free publications and webinars.

Other Ways to Participate

Become an Ambassador. Ambassadors represent ACRP at events and conferences across the country!

Sponsor or become an ACRP Champion. The champion program is designed to help early- to mid-career, young professionals grow and excel within the airport industry.

Visit ACRP’s Impacts on Practice webpage to submit leads on how ACRP’s research is being applied at any airport.

Report 33: Guidebook for Developing and Managing Airport Contracts

Report 36: Airport/Airline Agreements—Practices and Characteristics

Report 47: Guidebook for Developing and Leasing Airport Property

Report 54: Resource Manual for Airport In-Terminal Concessions

Report 87: Procuring and Managing Professional Services for Airports

Synthesis 30: Airport Insurance Coverage and Risk Management Practices

Additional ACRP Publications Available on Today’s Topic

March 20Energetic Value — The Design and Economics of

Microgrids at Airports

April 18Taking Preparedness Seriously — Emergency

Exercises for Any Airport

May 8Priming the Pump — Cleaner Approaches to

Airport Ground Transportation

Upcoming ACRP Webinars

Today’s Participants• Elizabeth Smithers, City of Charlotte – Charlotte Douglas

International Airport, aesmithers@cltairport.com

• Lacey Corona, Nelson Mullins Broad and Cassel, lacey.corona@nelsonmullins.com

• Eric Smith, Kaplan Kirsch & Rockwell LLP, esmith@kaplankirsch.com

Panelists Presentations

http://onlinepubs.trb.org/onlinepubs/webinars/190312.pdf

After the webinar, you will receive a follow-up email containing a link to the recording