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Welcome to our ninth issue of The Site Report for 2025! In this edition, we address the rising prevalence and costs of data centers, a contractor licensing issue addressed by the Georgia Court of Appeals in Certain Underwriters v. Galey Construction, the latest from the Department of Labor on independent contractors, the prospect of water-free data centers, the financial impacts from operational technology events, and how tariffs are affecting construction projects.
Congratulations to Stephanie Eaton!
Stephanie Eaton, Member, Co-Chair of the Construction Practice Group and Co-Editor of this e-newsletter, has recently been appointed as Vice Chair of the Construction Law Committee of DRI. DRI is the premier global membership organization for legal professionals dedicated to protecting the interests of businesses and individuals in civil litigation. Membership in DRI provides access to resources and tools for attorneys who strive to provide high-quality, balanced, and excellent service to their clients and corporations. Join us in congratulating Stephanie on this honor.
NC SuperVision
If you are interested in labor and employment issues, please join us for our SuperVision symposium in Winston-Salem, North Carolina at Truist Stadium on Friday, October 24. Our SuperVision series, which we provide at no charge to attendees, is tailored to human resources professionals, business leaders, and anyone who manages employees. We focus on delivering valuable education, offering cutting-edge insights, and providing practical solutions for HR challenges in the ever-evolving area of labor and employment law. Whether you are navigating complex employment investigations, leave and accommodations issues, or changes under the new administration that affect your industry and operations, SuperVision is provided as a resource for you. This has made SuperVision™ a go-to event for business professionals throughout the region. Click here to learn more and register.
West Virginia Environmental Hot Topics
Join Trinity Consultants and our own Jason Wandling and David Yaussy on November 18 in Charleston, West Virginia, for this complimentary training designed to help facilities and environmental professionals stay ahead of evolving requirements in West Virginia. Click here to learn more.
Thank you for reading.
Stephanie U. Eaton - Co-Chair, Construction Group; Vice Chair of Southern Offices, Litigation Department; Editor, The Site Report
and
Julian E. Neiser - Co-Chair, Construction Group; Vice Chair of Northern Offices, Litigation Department
| | The Rise of Data Centers and Electricity Demands on Virginia, Ohio and North Carolina | | |
By Jason E. Wandling
Data centers have generated unprecedented controversy across the country over the past two years, but have attracted the most attention in Virginia, North Carolina, and Ohio. Each of those states is currently experiencing a strong surge in electricity demand driven by the expansion of data centers, which has caused consternation among existing power utility customers and their new neighbors. This piece examines the experiences of data centers in each of those states.
Click here to read the entire article.
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Why this is important: This recent case from the Georgia Court of Appeals, McMillan v. Rondriguez, 2025 WL 1822463 (Ga. Ct. App. July 2, 2025), is an important reminder of lesson No. 1: Always double-check that your contractor is licensed for your specific project before any work is performed and before loans are issued for construction projects. In this case, the fact that the contractor was unlicensed voided the construction loan, albeit under atypical circumstances.
The case involved a wealthy owner who wanted to construct a “doomsday” bunker. The owner paid his contractor about a quarter of the budgeted amount for the project, and the contractor loaned the remainder of the funds necessary to erect the bunker. The owner signed a promissory note agreeing to pay the contractor back. A central problem to the litigation was that the contractor was not licensed, which the owner knew, but apparently disregarded.
A secondary problem was that the land on which the bunker was to be constructed was subject to a municipal order preventing development of the site, thus preventing the parties from obtaining a permit. Lesson No. 2: Always double-check zoning and permitting and other pertinent restrictions before entering into contracts to ensure that the construction project is permissible.
The lack of a permit did not stop the contractor, who began but did not finish the construction. Lesson No. 3: Always plan for projects that the original contractor cannot or does not complete.
When the contractor demanded payment, the owner refused. The contractor’s threat to foreclose was met with a lawsuit alleging that the promissory note was void since the contractor was unlicensed. Lesson No. 4: Before threatening to take legal action, consider arguments against you and the cost to defend the other side’s valid claims.
Ultimately, both the trial court and appellate court ruled in favor of the owner. Since the contractor could not legally construct the bunker, the contractor also could not finance the project. Lesson No. 5: When obtaining financing for a project, financial institutions will usually want proof that the contractor is licensed for the type and cost of the project, so don’t apply for a construction loan before you check yourself. --- Stephanie U. Eaton
| | Why this is important: The construction industry continues to be a frequent target of cyber fraud and e-mail hacking schemes due to the frequency and high volume of electronic funds transfers that occur on projects and the opportunity seen by hackers to divert those funds. This case is yet another example of one of those schemes playing out, and it highlights the importance to construction businesses of ensuring (1) they have secured their electronic systems against external access; (2) they take affirmative steps to verify initial payment process setup, and especially any mid-project changes to established payment procedures; and (3) they have appropriate insurance coverage available, which most often requires purchasing a policy endorsement or separate “cyber” policy altogether. Spilman’s Construction and Technology Practice Groups work closely together to advise construction businesses on how to implement appropriate safeguards for their systems, how to protect against hacker schemes to divert payments, and how to respond when a hacker infiltrates a project owner, general contractor, subcontractor, or supplier’s systems. --- Steven C. Hemric | | |
“A recently released agenda flags the removal of the Biden-era regulation, itself a replacement for guidance from the first Trump administration.”
Why this is important: While the Department of Labor has signaled that a new rule for classifying independent contractors is in the pipeline, it could still take several years for those new guidelines to move through the review process and for a new rule to be finalized.
In the construction context, this rule is particularly relevant to determining whether workers are classified as subcontractors or as employees of the contractor. In turn, the nature of this relationship affects the contractor’s obligations to the workers in terms of benefits, as well as the contractor’s liability for certain actions performed by the workers.
The independent contractor rule, which is part of the Fair Labor Standards Act, has been in flux for the past five years. The first Trump administration instituted what is generally described as an employer-friendly framework in early 2021. By 2022, the Biden administration announced plans to replace that framework with an “economic realities” test focused on protecting workers who are routinely misclassified and who, as a result, miss out on benefits that they should be receiving from their employers. That set of guidelines went into effect in 2024.
The Department of Labor stopped enforcing the Biden administration rule in May 2025. While that announcement did not repeal the 2024 rule, the Department directed the agency to instead follow enforcement guidelines that predate the 2024 rule.
During this period of transition, employers should still be aware of and in compliance with state laws governing the classification of independent contractors. In addition, local, state and federal courts may also have their own rules and tests for classifying workers. --- Jamie L. Martines
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“Microsoft plans to pilot water-free facilities by 2026, but can the industry truly eliminate cooling water without sacrificing energy efficiency?”
Why this is important: This article examines water-free data centers as an emerging solution to address water scarcity concerns in the industry. Traditional data centers consume substantial amounts of water for cooling through evaporation, averaging 1.8 liters per kilowatt hour. As water resources become increasingly strained, some operators are moving beyond efficiency improvements to pursue complete water elimination from their cooling processes.
Microsoft leads this initiative with plans to pilot water-free data centers starting in 2026, while companies like NOVVA and Vertiv have developed similar concepts. The technical approaches include liquid immersion cooling using non-conductive fluids, which is highly efficient but expensive, and mechanical cooling systems that are more affordable but consume significantly more electricity.
This creates a trade-off between water and energy sustainability. Operators with renewable energy access may find the increased electrical consumption acceptable to achieve zero water usage. Enhanced designs can improve mechanical cooling efficiency through sealed server cabinets or hybrid direct-to-chip systems using mechanically chilled fluids.
While the technology exists, widespread adoption remains unlikely due to cost and complexity. Water-free data centers will likely remain specialized applications, with success depending on a careful balance between water elimination, energy efficiency, and economic viability. --- Shane P. Riley
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“A report from industrial cybersecurity firm Dragos highlights growing risks of business interruption and supply-chain disruptions.”
Why this is important: Information Technology (IT) does and should always garner attention and resources to ensure protection, maintenance, and versatility in the modern era. Operational Technology (OT), which covers physical processes often in critical infrastructure, is increasingly coming under attack by cybercriminals seeking to disrupt and hold hostage as many systems as they can. Cyberattacks, whether employing ransomware, malware, or corrupting and disrupting operational technology, are likely to cost companies billions of dollars in annual aggregated fees for ransom payments, insurance claims, and other forms of increased protection. Cybersecurity firms are using probability statistics and a decade's worth of cyber breach and insurance claim data to estimate that business interruptions to operational technology could reach a global aggregated total of 31 billion dollars (USD) over the next 12 months. Attacks have successfully targeted supply chain operations and online transaction capabilities. “The three OT security controls most associated with risk reduction were maintaining a comprehensive incident-response plan, using defensible architecture and performing continuous monitoring to preserve visibility into a network.” Preparation is key. Run audits and update systems regularly. Thinking that a hack has not occurred because all systems are running is not a safety plan. Having appropriate protocols in place in the event of a breach from staff to third-party vendors can make the difference between a few hours and dollars or months and millions worth of downtime. --- Sophia L. Hines
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“With second-half outlooks cloudy, construction execs are split on whether the import levies can ultimately deliver long-term resilience for U.S. builders.”
Why this is important: Tariffs continue to be a hot topic in the construction industry, with experts split on whether tariffs will lead to long-term benefits and whether the promised increase in project demand due to onshoring of the supply chain will actually come to fruition. What everyone agrees on in the meantime, however, is that (1) tariffs are raising costs right now and (2) everyone in the industry has to implement plans to adapt. Adaptation to the current tariff landscape is taking many forms, including contractors diversifying their sourcing methods and parties across the project chain rolling out new tariff-specific contract language. Some project owners and contractors are also reconsidering their preferred project delivery methods and typical allowance line items in efforts to mitigate and/or spread out some of the risks imposed by tariff fluctuations. Spilman’s Construction Practice Group is at the forefront of these efforts and is positioned to be a resource for project owners, general contractors, subcontractors, and suppliers alike as the industry continues to deal with tariff impacts. --- Steven C. Hemric
| | Featured Attorneys Question and Answer | | |
Jason E. Wandling
Member
Charleston, WV
office 304.340.3857
jwandling@spilmanlaw.com
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David L. Yaussy
Member and Chair, Environmental Practice Group
Charleston, WV
office 304.340.3829
dyaussy@spilmanlaw.com
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Q: As we all know, there are different issues that come up with most construction projects. Environmental issues can be one of the most time-consuming and costly items that need to be addressed. As two people well-versed in the environmental law area with decades of environmental law experience and Jason being a former General Counsel for the West Virginia Department of Environmental Protection (DEP), what are your best practice suggestions when it comes to handling environmental issues that arise during construction project planning and administration?
A: Earth-disturbing construction activities will usually involve some amount of environmental permitting. Site preparation will often require a construction stormwater discharge permit to prevent dirt and sediment from running off into nearby streams. Construction affecting wetlands may require a Section 404 permit from the U.S. Army Corps of Engineers, which can involve review of the proposed project by a host of federal and state agencies. Projects funded, in part or in whole, by federal funds may require evaluation under the National Environmental Policy Act (NEPA). Each of these is not only a source of delay in and of itself; it also provides a basis for legal challenges that can forestall projects for long periods of time.
Each of these permits and approvals can add significant time to a construction schedule. The Trump Administration has proposed a number of changes to regulations that are intended to reduce delays caused by project reviews. For example, NEPA review is being significantly curtailed, and the scope of what is a water of the United States, for which a Section 404 permit is required, is being reduced. Clearer and more definite environmental regulations and oversight will likely speed up construction projects, particularly for energy projects.
Some environmental issues associated with construction projects should be resolved before the property is leased or purchased. Most of the uncertainty associated with construction or land-use projects involves land that is, or could be, contaminated, and deciding whether the purchaser of property will assume responsibility for remediating that contamination. Each state has its own way of defining contaminated property, sometimes referred to as brownfields, and it is difficult to generalize with any accuracy whether and to what extent liability will attach to the new owner or lessee. For most states, and for purposes of federal Superfund liability, purchasers and lessees can protect themselves by performing site investigations prior to purchase or lease. The initial investigation, referred to as a Phase 1, explores the history of the site to see if there are records revealing possible present or past sources of contamination, such as the former presence of an underground storage tank at the site or past use of the property as a dry cleaners. There is also a site visit to look for evidence of possible contamination, such as stained soils or disposal areas. If the Phase 1 report notes Recognized Environmental Conditions, or indicia of possible contamination, the potential purchaser or lessee may elect to do a Phase 2 investigation. The Phase 2 will involve testing the soil, groundwater, and/or existing structures for the presence of contaminants.
The purpose of the Phase 1 and Phase 2 is to determine the presence and extent of contamination. The new owner cannot interfere with ongoing or future remediation and will be bound by any property restrictions that have been imposed to reduce exposure at the site. The payoff is in the lack of future liability at the site. If properly done, the purchaser or lessee generally can take possession without being responsible for any contamination that it does not contribute to.
The most effective way to avoid costly delays for permitting projects is to engage with the regulator as early as possible, at the very outset of project planning. At Spilman, we can arrange for face-to-face meetings with the regulators you’ll be dealing with in order for all parties to come to an early consensus on what will be expected from both sides. This general rule applies no matter whether you anticipate needing a simple construction permit or whether you plan to build a several-hundred-acre industrial facility: early and frequent discussions are the key to success.
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