Home » Commercial Litigation

Category Archives: Commercial Litigation

Drone-Related Liability Exposure Takes Flight

The advent of new technology brings with it new theories of liability and innovation of old liability theories in novel contexts for companies and individuals utilizing that new technology. The increasing use of unmanned aerial vehicles and unmanned aerial systems – collectively, drones – for personal and commercial uses exemplifies this concept. Manufacturers, individual private operators, and commercial enterprises alike face exposure to potentially significant liability relating to the manufacture, use, and operation of drones.

As drone technology has advanced so have the governmental, personal, and commercial applications for which drones are utilized. In addition to governmental use of drones for things like border security and military operations, individuals, for example, may also use drones for sport, photography or personal entertainment. And various companies increasingly rely and/or consider relying on drones for commercial activities like surveillance, infrastructure inspection and survey, product delivery, traffic/activity monitoring, remote site inspections, livestock maintenance, crop surveys, post-loss inspection (e.g., flood or fire damage inspections), and commercial photography. But each of these uses, and the many other innovative ways drones are employed, give rise to potential liability and novel legal issues. Further, perhaps not surprisingly, that potential liability and those novel legal issues may depend, at least in part, on the state in which drones are manufactured or operated; the laws applicable to drone use and associated liability may vary by state, requiring a more focused inquiry for those companies operating in multiple states.

Various law enforcement departments, for example, have used or considered using drones for surveillance of suspects and for property searches. One can readily imagine the utility of such aerial drone technology to search large properties for drug crops, missing persons, suspects or other indicia of criminal activity. But such use naturally generates questions as to the legality or constitutionality of drone use for law enforcement “searches.” Indeed, a number of states have specifically restricted the use of drones by law enforcement without a search warrant (AK, FL, ME, MT, ND, NV, OR, TN, TX, UT, VA, WI). And in the non-law enforcement context, individuals and companies using drones for similar purposes must be cognizant of potential liability for trespassing and invasion of privacy.

The importance of a state-by-state examination of permissible drone use cannot be overstated. Whereas a number of states prohibit the use of drones to capture images of persons or property within certain space limits and/or without the owners’ consent, North Dakota prohibits all private drone use. That is a significant distinction worthy of note. Similarly, some states, like Texas, restrict the use of drones within certain space limits of critical infrastructure facilities and for certain purposes. And many states have yet to adopt specific legislation governing the use of drones for private or commercial purposes.

Separate and apart from drone-specific state law, traditional tort law should also be considered by drone manufacturers and operators. Standard notions of products liability, strict liability, and negligence are all likely equally applicable to drones, creating fertile ground for plaintiffs’ attorneys to pursue litigation for personal injury and property damage proximately caused by drones. Crashes, especially given the complex technology involved and the ability to operate drones beyond line-of-sight of the operator, are, after all, arguably reasonably foreseeable and may proximately cause personal injury and/or property damage. And commercial enterprises operating drones may also have business interruption claims depending on the cause of drone failure or other accident.

Even under circumstances in which a drone operates as designed and does not cause personal injury or property damage, per se, drone operators may still be exposed to liability for potential claims of trespass, nuisance and/or for invasion of privacy. It is not uncommon, after all, for drones to incorporate photographic and/or video recording capabilities. Use of such drones where individuals have a reasonable expectation of privacy may open up additional bases for liability. But the parameters for such liability are not entirely clear (e.g., how many vertical feet above private property are included in the private property owner’s property or curtilage) and may vary by state. In Texas, for example, the Texas Privacy Act provides that an offense is committed when a person uses a drone “with the intent to conduct surveillance on the individual or property captured in the image.” Accordingly, it is important for drone operators to be cognizant of state laws that may be applicable to drones and that likely differ by and between different states.

As more and more individuals and companies incorporate drone technology into their operations, it is reasonable to expect a concomitant rise in litigation asserting claims against manufacturers and operators of drones for resulting damages caused by those drones. With that in mind, it becomes increasingly important for those manufacturers and operators to have a clear understanding of the legal landscape in which they operate.

CO Supreme Court Upholds Developer’s Right to Demand Arbitration of Construction Defect Claims

Last Monday, the Colorado Supreme Court, affirming the lower court’s ruling, issued a decision essentially upholding condominium developers’ right to require arbitration of construction-defect disputes. See Vallagio at Inverness Residential Condo. Ass’n v. Metro. Homes, Inc., et al., Case No. 15SC508 (CO Sup. Ct.) (June 5, 2017). The Court’s 5-2 decision last week, combined with recent state legislation (House Bill 1279) requiring approval by a majority of condominium owners to pursue legal action against condominium developers, may reinvigorate what has been a dormant market for the better part of a decade.

The dispute presented to the Colorado Supreme Court concerned a so-called “right to consent” in which the condominium developer attempted to contractually retain a perpetual right to consent to any subsequent homeowners association’s proposed amendments to the community’s declarations regarding arbitration for construction-defects claims. In short, the condominium developer included contract language preventing homeowners associations from subsequently removing arbitration requirements without its consent (i.e., the original declaration required binding arbitration of construction-defect claims and prohibited any amendment to the binding arbitration provision without the developer’s consent).

The underlying litigation was the product of construction defect claims asserted by unit owners. Unable to resolve their claims informally, the unit owners voted to amend the property declaration to remove the arbitration provision and the homeowners association then filed a lawsuit against the developer. In response, the developer moved to compel arbitration, arguing that the arbitration provision deprived the district court of jurisdiction and that the unit owners’ attempt to amend the provision was invalid because they failed to secure its consent. The homeowners association asserted that the right to consent was invalid under the Colorado Consumer Protection Act (CCPA) and the Colorado Common Interest Ownership Act (CCIOA), the latter of which governs rules between developers and property owners in communities with shared walls.

The Colorado Supreme Court, however, concluded that developers can, in fact, retain a perpetual right to consent. In arriving at its decision, the Court reviewed the language of the CCPA and the CCIOA, as well as the legislative intent underlying each statute. The majority determined that although the CCIOA bars developers from requiring thresholds higher than 67 percent of residents to make changes to contracted declarations, nothing in either law prohibits a developer from including a provision perpetually requiring its consent for particular amendments. Indeed, according to the majority opinion, such an outcome is consistent with the CCIO language and Colorado public policy favoring alternative dispute resolution, including arbitration.

Consequently, according to the Court, the developer is entitled to binding arbitration of construction-defect claims arising from the development and the homeowners cannot modify or amend the associated provisions without the developer’s consent.