Posts By: Chris Wielinski

Austin Principal Shelly Masters wrote an article for the May edition of Construction News magazine examining how climate-driven stress is reshaping the landscape of construction disputes, particularly regarding product performance and liability. As extreme weather becomes more intense and more predictable, she explains how courts are increasingly focused on foreseeability and risk allocation when systems fail. The article highlights key pressure points, including contractor performance obligations, expanding warranty exposure, and the growing intersection with product liability claims, emphasizing the importance of intentional contract structuring, clear risk allocation, and disciplined project documentation from the outset.

Extreme heat, deep freezes, and record rainfall are no longer “once-in-a-generation” anomalies. They are becoming regular events that expose weak links in building envelopes, mechanical systems, and hybrid products that combine materials, adhesives, coatings, and other chemicals. The practical result is more disputes that look like ordinary construction-defect cases involving leaks, cracking, delamination, corrosion, or loss of performance, but are litigated through a climate-driven lens: what conditions were foreseeable, who owned the risk, and what did the contract and warranty actually promise.

Initial contract and plan/specification disputes are often framed around the owner, architect, and engineer teams. But when a building system fails under foreseeable climate stress, owners pivot to a contractor nonperformance theory. Bartush-Schnitzius Foods Co. v. Cimco Refrigeration illustrates the shift. The contractor sought payment, but because the refrigeration system could not maintain the contractually required temperatures, the court treated that deficiency as failure of a core performance obligation. The owner’s breach of performance claim became the focal point and undermined the contractor’s nonpayment claim. The contract made temperature performance the essential benefit of the bargain, and the contractor was responsible for delivering it.

Warranty language has become even more critical because product performance disputes increasingly get pushed back onto the contractor. Owners want long-term durability, but climate-driven failures often surface later as latent or progressive defects, such as water intrusion behind a façade, seal failures inside units, roof systems that appear sound until a heatwave, or materials that fatigue after repeated freeze-thaw cycles. Two themes matter most. First, long warranties can extend exposure far beyond what manufacturers intended, and they can bind the contractor if the contract language adopts or expands those promises. Christie v. Hartley Construction shows that an express long-term promise can override typical statute of repose protections. Second, warranty language does not necessarily eliminate exposure for latent failures that are not reasonably discoverable. Courts focus on what the parties promised and what was reasonable, and what is considered reasonable keeps expanding as extreme weather becomes more foreseeable.

HTRF Ventures v. Permasteelisa is a cautionary example for façade and high-performance building envelope contracts. There, the court read a design-build subcontract as imposing an independent obligation that effectively captured a ten-year performance requirement, beyond a simple pass-through of a manufacturer’s warranty. For contractors and subs, the takeaway is to separate workmanship/installation warranties from manufacturer product performance warranties in writing, avoid incorporation language that automatically expands the contractor’s warranty period to whatever appears in the specs, and make manufacturer warranty issuance a closeout deliverable directly to the owner. Otherwise, courts may treat the contractor as the guarantor when the product fails years later.

Climate stress also reshapes the product-liability conversation. Many states impose strict liability for defective and unreasonably dangerous products, and the core fight becomes whether the product was designed for its foreseeable climate. Bennett v. CMH Homes is a useful analog, where the court treated heat exposure as a foreseeable condition for exterior siding and allowed design-defect theories to proceed. Manufacturers will argue misuse or “conditions outside the intended range,” while claimants will point to marketing, typical exterior exposure, and modern weather data. As weather data changes, so does what is “foreseeable.”

Another problem area is whether a contractor becomes a “seller” when it supplies and installs a product, particularly on turnkey projects. Some states pull installation contractors into the distribution chain by statute, which changes early case strategy entirely. Prompt tender to the manufacturer, a clear record of who selected the product, and documentation that the installer did not control the alleged defect are key to defending contractor liability.

Insurance is often the real battleground once pleadings are filed. Coverage can turn on how causation is framed, such as a sudden event loss versus deterioration, workmanship, or maintenance, and exclusions and endorsements can eliminate coverage contractors assume they have. What defines an “occurrence” remains a nationwide split, although cases like Lamar Homes in Texas reflect the broader trend of recognizing an occurrence where unintended property damage results.

Scheduling delays are increasingly common due to climate-related events. Extreme rainfall, deep freezes, and heat stoppages drive delay claims, but contractors must still prove the event was unusually severe for the location and affected critical path activities, including long-lead materials. Weather benchmarking provisions tied to objective historic data are appearing more often because they reduce hindsight fights over what was “normal.” Following the contract’s notice and documentation requirements remains essential, especially when owners demand acceleration after excusable delay.

Worker safety is another area where “extreme” is becoming standard. Federal law increasingly supports heat illness prevention programs through OSHA, and some states impose more detailed temperature rules. Contractors should treat the most developed state-plan requirements as the benchmark for site plans, training, and documentation.

Climate stress is turning ordinary product performance into higher-stakes, multi-party litigation. The most practical risk controls are front-end: define climate assumptions in the contract, separate workmanship warranties from manufacturer performance warranties, align insurance and tender strategy between parties, and document submittals, product specifications, weather impacts, and maintenance records in a way that will survive a claim years later.

About the Author

Shelly Masters is an experienced trial attorney in our Austin office, representing clients in construction, commercial, employment, and product liability matters, with more than twenty years of experience handling complex, multi-party cases nationwide and resolving millions of dollars in disputes. She also advises and trains clients on risk management, drawing on current litigation trends to help prevent and navigate future challenges. If you have any questions, Shelly can be reached at 512-615-1139 or smasters@cokinoslaw.com.

About Cokinos | Young

Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.

San Antonio attorney Christian Trevino wrote an article for the April edition of Construction News magazine. Christian examines the evolution and practical impact of differing site conditions (DSC) clauses in construction law. Tracing their origins to early federal projects, he explains how these provisions allocate risk when unforeseen site conditions arise. The article outlines the two primary types of DSC claims and underscores the importance of contract language, proper documentation, and timely notice in preserving recovery. Ultimately, Christian highlights that while DSC clauses promote fairness and efficiency, their effectiveness depends on careful drafting, strong project administration, and a clear understanding of how courts interpret these provisions.

Construction projects are all about risk vs. reward—a constant evolution of mitigation and allocation. Everyone is asking the same question: how do I decrease my risk and maximize my profit? From bidding projects to finalizing contract negotiations, today, more and more of a party’s risk portfolio is being determined on Teams calls rather than in jobsite trailers. Once the ink is dry, owners, general contractors, and subcontractors alike live in a world of constant adjustments to comply with contractual obligations and complete the project within a set time and budget. But what happens once ground is broken? What happens when you find that the ground beneath you isn’t really what you thought it was? Who pays for it? Why? These critical questions are generally answered by differing site condition (DSC) clauses.

Beginning in 1926, the federal government began inserting DSC provisions to alleviate some of the risk for subsurface conditions in federal projects. In doing so, the resulting bids were more competitive, as parties were no longer forced to price in heavily weighted contingencies to expect the unexpected, and a tenet of construction law was formed. In the 100 years since, DSC clauses have continued to evolve in their formation, application, and adjudication.

Today, a DSC clause relieves the contractor of assuming the risk of encountering unanticipated or unusual site conditions and provides a remedy—typically through a change order or claim—allowing the parties to mitigate their risk of loss when the unexpected happens. Common examples of differing site conditions include unanticipated soil conditions, unexpected water conditions (whether static or permeable), quicksand, muck, and rock formations that are either excessive or insufficient for the planned work, as well as artificial or manmade subsurface obstructions. Notably, DSCs are not limited to buried, subsurface conditions that cannot be seen. DSCs can also include conditions above the surface, including drywall, man-made structures, preexisting structures, fixtures, and rock formations.

A claim for a differing site condition will depend on the condition encountered and the contract language. Generally, there are two types of DSCs: Type I and Type II. A Type I claim depends primarily on the interpretation of the contract documents as compared to the actual conditions encountered at the project site. A Type II claim, by contrast, focuses on whether the conditions encountered were so unusual as to be abnormal for the particular locale. Although the distinction between the two types is important for classification purposes, the overall approach for evaluating and making these claims is largely the same.

Industry-standard contract documents reflect this framework. The American Institute of Architects (AIA) publishes nearly 200 contracts and forms recognized throughout the design and construction industry as the benchmark documents for managing transactions and relationships involved in construction projects. One of the more common contract documents, the A201-2017 General Conditions of the Contract for Construction, contains the governing conditions, representations, and obligations for performance under a construction contract. Specifically, Section 3.7.4 of the A201-2017, in relevant part, states:

If the Contractor encounters conditions at the site that are (1) subsurface or otherwise concealed physical conditions that differ materially from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual nature that differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents, the Contractor shall promptly provide notice to the Owner and the Architect before conditions are disturbed…

The purpose behind Section 3.7.4 of the A201-2017 is straightforward: it allows the parties to press pause and assess the conditions and their impact(s). From here, the Architect will make a determination on time and cost impact, including the issuance of any necessary change orders. If either party disputes the Architect’s determination, that party is allowed to submit a claim in accordance with the dispute resolution procedures found in the contract.

DSC provisions are intended to promote equity and transparency in construction contracts, but no two DSC provisions are exactly the same. A seemingly routine contractual provision can still be revised to contain waiver language or stringent notice requirements that impact a contractor’s ability to recover. Before signing your contract, thoroughly review your DSC provisions—what are you representing about site inspections, what all is in the contract documents, how fast you have to give notice, do you have to stop work, and are you actually entitled to both time and money? Even the most unambiguous of contract clauses can be interpreted differently, especially by those with competing interests. That’s why the careful drafting and negotiation of your contracts is so critical, but the project administration can be just as important. Questions such as what constitutes a “material” difference and what is “unusual” are fact-specific inquiries that require proper documentation, timing, and consistency in project records. It is one thing to have a tool in your tool belt; it is another to know how to use it. The better your documentation, the stronger your claim.

Courts have generally allowed parties to enjoy the benefit of their bargains with respect to express contract negotiations and differing site conditions, but equity remains a close consideration. Courts are forced to answer fundamental questions: What was reasonable? What differs materially? What is truly unforeseeable? The introduction of differing site conditions into contract clauses has brought risk-sharing, lower aggregate costs, and a greater emphasis on the pre-construction phase to construction projects across the country, but the law on differing site conditions is not settled yet. As technology continues to advance, parties will have more detailed and reliable information upon which to base their contract negotiations—a development that may serve to the detriment of those with less bargaining power. In the next 100 years, contracting dynamics on construction projects are sure to evolve with this increase in information and use of technology. But the next time a DSC comes up, before you start x-raying the ground, give us a call—we’d be glad to help.

About the Author

Christian Trevino is an attorney in Cokinos | Young’s San Antonio office, focusing on construction law and commercial litigation. Raised around his family’s construction business, he brings firsthand industry insight to matters involving mechanics’ liens, construction defects, contract disputes, and negotiations. Christian earned his bachelor’s degree in Economics from Texas A&M University and his law degree from the University of Texas School of Law, where he held multiple leadership roles. He can be reached at 210-293-8738 or ctrevino@cokinoslaw.com.

About Cokinos | Young

Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.

Houston Principal and General Counsel Craig Power authored an alert on AI use, addressing its growing prevalence and the significant discovery risks it may pose in litigation. The alert highlights a recent decision holding that AI-generated chats are not protected by the attorney-client privilege or work product doctrine, potentially exposing sensitive strategies and communications. Clients are encouraged to exercise caution and consult counsel before using AI platforms in connection with legal matters.

The employment of AI in our business and personal lives is increasing in scope and at a rate few of us would have predicted just a short time ago. However, as with many new frontiers, that rapid growth can bring with it unexpected and unintended consequences.

When clients use an AI platform (whether a free version or a paid subscription), it is becoming more and more common for a litigation opponent to request that the entire chat—both the information the client input and the AI platform’s output—be produced in discovery. Some courts confronting discovery fights over that information are ruling that these chats are not protected from discovery and must be handed over to your litigation opponent. Because the consequences are so significant, this client alert discusses a recent decision, which concludes that a client’s AI chats are not protected from discovery under the attorney-client privilege or the attorney work product doctrine.

In United States vs. Heppner, the Federal District Court for the Southern District of New York dealt with these issues in a criminal case. The nature of the case does not matter for our purposes because the legal theories and privileges in question are the same in federal civil and criminal cases. Heppner was charged with securities fraud, wire fraud, and other criminal violations. He utilized the AI platform “Claude” in preparing reports outlining defense strategies and what he might argue about the facts and the law. Some of that input was based on information Heppner had learned from counsel, and Heppner shared the AI results with his counsel.

The government had seized Heppner’s electronic devices and a trove of documents, including the AI inputs and results. Heppner sought to retrieve those items, insisting, in part, that their confidentiality was protected by the attorney-client privilege because the materials included information he had received from his counsel. Without belaboring the Court’s discussion and reasoning, suffice it to say the Court concluded that the communications to and from Claude by Heppner were not between an attorney and client, so the communications were not privileged. As a side note, the court stated that the attorney-client privilege is premised on an expectation of confidentiality, and the Claude user agreement clearly disclaimed such confidentiality. Even without that disclaimer, however, once the information was input into Claude, it was no longer a confidential communication solely between an attorney and client, worthy of attorney-client privilege protection.

Heppner next argued that the materials were protected from discovery by the attorney work product privilege. That privilege provides qualified protection for materials prepared by, or at the behest of, counsel in anticipation of litigation or for trial. The Court observed that the materials in question were Heppner’s and were not prepared by, or at the behest of, counsel. While the materials reflected Heppner’s thoughts on his defense strategy, absent his lawyer’s role in formulating that strategy or directing the AI research, there was no work product protection for the AI inputs and the reported results. The Court rejected Heppner’s claims of attorney-client and work product privileges, and allowed the government to retain Heppner’s case-strategy documents.

AI can be a great tool, but we are beginning to experience unexpected, certainly unintended, implications of its use. If you wish to use it in connection with your legal issues or matters, you would be well served by consulting with your counsel about what the consequences might be. However, we discourage you from inputting our communications, strategies, and/or legal theories into any AI platform, as we have special AI for lawyers here that preserves privilege when we are the ones using it.

About the Author

Craig Power serves as the firm’s General Counsel and focuses his practice on complex commercial and construction litigation, as well as bankruptcy and debtor-creditor matters, representing clients nationwide. He also leads the firm’s Commercial Litigation practice group and is a frequent author and speaker on bankruptcy and collection issues. Craig can be reached at 713-535-5528 or cpower@cokinoslaw.com.

About Cokinos | Young

Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.

San Antonio attorney Justin Rorick wrote an article for the March edition of Construction News magazine. In this article, Justin covers a significant jurisdictional win in the Texas Business Court, where the court upheld the aggregation of related claims in a complex construction dispute. In Cadence McShane Construction Company, LLC v. Ryan BB-Blockhouse Creek, LLC, the court confirmed that claims arising from a single project and interconnected contracts can be combined to meet the jurisdictional threshold, strengthening the Business Court’s role in resolving multi-party construction litigation efficiently.

In a significant victory for contractors navigating complex multi-party disputes, the Texas Business Court recently affirmed its jurisdiction over third-party claims in a high-stakes construction litigation. The ruling in Cadence McShane Construction Company, LLC v. Ryan BB-Blockhouse Creek, LLC, No. 25-BC03B-0002, marks an important development in the application of jurisdictional thresholds under the newly established Business Court system. This decision not only reinforces the court’s role in handling intricate commercial matters but also provides a roadmap for general contractors to efficiently consolidate related claims. As counsel for the prevailing party, Cadence McShane Construction Company LLC (CMC), we delve into the case’s background, key legal battles, the court’s reasoning, and the broader implications for the construction industry and complex commercial litigation in Texas.

Case Background: A Multifaceted Construction Dispute

The litigation stems from the development of a 347-unit apartment complex in Leander, Texas, known as the Blockhouse Creek project. CMC, serving as the general contractor, entered into a Prime Contract with the property owner, Ryan BB-Blockhouse Creek, LLC (Ryan). The project involved a network of subcontracts with 18 specialized subcontractors, each governed by a uniform subcontract agreement that incorporated the terms of the Prime Contract.

Tensions escalated in February 2025 when CMC filed suit against Ryan, alleging wrongful termination and non-payment for work performed. Ryan countered with claims of project mismanagement and construction defects, including improper installation of roofs, window systems, stucco, and balconies. These allegations implicated not only CMC but also its subcontractors. In response, CMC brought third-party claims against the 18 subcontractors, seeking indemnification and contribution based on the interconnected contracts.

The case was filed directly in the Third Division of the Texas Business Court, which has specialized jurisdiction over business-related disputes. However, Ryan challenged this venue through a plea to the jurisdiction, arguing that the third-party claims did not independently meet the Business Court’s jurisdictional requirements and could not be aggregated to satisfy the amount in controversy threshold under Texas Government Code Section 25A.004(d)(1).

Key Legal Issues: Interpreting “Qualified Transactions” and Aggregation of Claims

At the heart of the dispute was the interpretation of Texas Government Code § 25A.004, which outlines the Business Court’s supplemental jurisdiction. Specifically, subsection (d)(1) grants jurisdiction over claims arising out of a “qualified transaction” if the amount in controversy exceeds $10 million. Section 25A was recently amended to lower the amount in controversy to $5 million in cases filed after September 1, 2025 (excluding interest, exemplary damages, penalties, and attorneys’ fees).

Ryan vigorously argued that each third-party claim against the subcontractors was separate and distinct, lacking a unified “qualified transaction,” because Ryan terminated CMC and assumed the subcontracts. They argued that aggregation was impermissible because the claims did not constitute a single, cohesive dispute. CMC, on the other hand, asserted that all claims (original, counter, and third-party) arose from “one construction project carried out through a network of related contracts.” This interconnectedness, CMC argued, qualified the entire litigation as a series of related transactions under the statute.

The timing of the case added another layer of complexity. The Texas Legislature’s House Bill 40 (HB40), effective September 1, 2025 (the same piece of legislation which amended the qualified transaction threshold from $10 million to $5 million), amended Section 25A.004 to explicitly define a “qualified transaction” as including a “series of related transactions.” Additionally, new subsection (i) clarified that the amount in controversy for jurisdictional purposes is “the total amount of all joined parties’ claims.” These amendments bolstered CMC’s position, emphasizing the Legislature’s intent to allow aggregation in multifaceted disputes.

The Court’s Ruling: A Win for Consolidated Jurisdiction

In a decisive order, the Business Court denied Ryan’s plea to the jurisdiction, upholding its authority over the third-party claims. The court adopted CMC’s framing, concluding that the claims collectively arose from a qualified transaction involving a single construction project and its web of related contracts. As such, it was unnecessary to evaluate each third-party claim’s amount in controversy individually, as the aggregate value of the joined claims satisfied the threshold.

The ruling highlighted the practical realities of construction litigation, where defects and delays often involve multiple parties under interdependent agreements. By rejecting Ryan’s narrow interpretation, the court prevented the fragmentation of disputes, which could otherwise force parallel proceedings in different venues, which would be inefficient and costly for all involved and fly in the face of the intention behind the creation of the business courts, which is to attract companies to Texas by providing efficiency and predictability in complex commercial litigation disputes.

Notably, the decision referenced the recent HB40 amendments, interpreting them as confirmatory of the aggregation approach. This alignment with legislative updates underscores the Business Court’s role as a forward-looking forum for resolving complex business matters.

Implications for Contractors and the Texas Business Court

This jurisdictional victory has far-reaching implications for the construction sector in Texas. First and foremost, it empowers contractors like CMC to bring comprehensive actions in the Business Court, even when individual claims fall below monetary thresholds. By allowing aggregation, the ruling facilitates the resolution of disputes arising from large-scale projects in a single, specialized venue with judges experienced in commercial law.

For property owners and developers, the decision signals potential challenges in contesting jurisdiction, particularly in projects with layered subcontracting. It may encourage more strategic forum selection, with parties opting for the Business Court’s expertise over traditional district courts.

Broader still, this case exemplifies the evolving landscape of Texas’ judicial system. Established to handle high-value business disputes, the Business Court is proving itself in complex construction matters, which often involve intricate contractual networks and significant economic stakes. As more cases test its boundaries, we anticipate a uniform approach emerging favoring predictability, efficiency, and aggregation.

Contractors should take note: When drafting agreements, emphasize the interrelated nature of project contracts to strengthen jurisdictional arguments and perhaps incorporate consent to the Business Court’s jurisdiction. Additionally, staying abreast of legislative tweaks, such as those in HB40, is crucial for leveraging the Business Court’s advantages before a dispute even arises.

In conclusion, this decision is a testament to the efficacy of Texas’ Business Court in promoting efficient and predictable justice. For CMC, it paves the way for a merit-based resolution of the underlying claims. As the construction industry continues to grapple with rising complexities, from supply chain disruptions to defect litigation, this ruling offers a playbook for asserting jurisdiction in multi-party battles.

As a special thank you, trial counsel Stephanie O’Rourke and Tracy Glenn were pivotal in securing this landmark victory. Their expertise in navigating the intricacies of construction litigation and the Texas Business Court system exemplifies the highest standards of legal excellence.

About the Author

Justin Rorick is a results-driven litigator in the San Antonio office of Cokinos | Young, focusing on high-stakes commercial and construction disputes across Texas. Drawing on experience in government, private, and nonprofit roles, he brings a strategic approach to complex litigation. Justin can be reached at 210-293-8708 or jrorick@cokinoslaw.com.

About Cokinos | Young

Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.