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Inside This Issue:

  • Copyright Infringement of Design Documents
  • Pennsylvania Jury Rejects Expert Testimony and Claim for Personal Injury Resulting from Mold
  • Requirements of Expert Affidavit of Lawsuit Merit

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Copyright Infringement of Design Documents

When an architect’s drawings were used to complete a project by a different architect when the original project developer transferred the project to a new developer, the original architect successfully sued the new developer for the unauthorized use of his design documents. The original architect (“NSI”) performed professional services for the original developer (“Strutt”) in three separate phases. In the first phase, NSI delivered to Strutt a proposed letter agreement under which NSI agreed to develop a schematic building footprint for an assisted living center called Satyr Hill. Although Strutt never executed the agreement, both Strutt and NSI fully performed according to its terms.

Next, NSI submitted a proposed letter agreement to provide additional architectural services to develop the exterior elevations for the project and attend a zoning exception hearing. Again, all terms of this proposed agreement were performed by Strutt and NSI although Strutt never actually signed the agreement. After this, NSI created four architectural drawings depicting the building footprint, the floor plans, and the exterior elevations. These were incorporated by Strutt’s civil engineer into the development plan for the project and submitted to the zoning board which granted the request for a zoning exception.

While the zoning application was pending, NSI submitted a third proposed letter agreement to Strutt offering to create the design and working drawings for the remaining development of the project. This proposal stated,“If the above is acceptable, we will prepare a Standard AIA Agreement.” Consistent with its record, Strutt did not execute the letter agreement. Several months later, NSI submitted a revision to this proposed agreement along with a “revised AIA Contract for Satyr Hill Catered Living per our recent discussions.” The AIA Contract provided in relevant part that: “[t]he Architect’s Drawings, Specifications or other documents shall not be used by the Owner or others on other projects, for additions to this Project, or for completion of this Project by others unless the Architect is adjudged to be in default under this Agreement, except by agreement in writing and with appropriate compensation to the Architect.” Once again, Strutt failed to sign this agreement. One month later, Strutt advised NSI to cease performing services because Strutt’s potential business partner had backed out of the project and Strutt lacked sufficient expertise to go forward with the project alone.

In an interesting twist, Strutt asked NSI if it might know of any potential buyers of the project that could complete it. NSI then successfully solicited buyers on behalf of Strutt and as a result a group called “Morningside Development” took over. Ironically, however, Morningside decided to consider different architects to complete the project. NSI advised Morningside that if it did so it had no authority to use the NSI drawings without its express written consent. Morningside thereafter entered into a design-build contract for construction of the project and provided the design-builder (“Hamil Commercial”) with a copy of the NSI drawings. The design-builder in turn gave the drawings to its subcontracted architect (“EDG Architects”). Morningside then met with EDG and instructed it to avoid any modifications to the original plans and drawings that would necessitate obtaining a new zoning exception. After the project was completed, NSI Architects filed suit against Morningside alleging copyright infringement for unauthorized use of NSI’s design documents.
In their defense, the defendants argued that they could not be held liable because they had an “implied nonexclusive license” to use the NSI drawings. They argued that the totality of NSI’s conduct implied the existence of such a license. In analyzing whether such an implied license had been created, the court concluded that an implied license is created when three conditions are met, including “(1) a person (licensee) requests the creation of a work, (2) the creator (licensor) makes that particular work and delivers it to the licensee who requested it, and (3) the licensor intended that the licensee copy and distribute the work.”

The third element of this test was not met in this case, said the court, because NSI did not intend that its copyrighted drawings be used on the project for which they were created independent of NSI’s continued involvement. Nothing about NSI’s representations or conduct suggested that it intended either the original developer or Morningside to use its plans without NSI’s future involvement or express consent. In fact, NSI specifically advised Strutt to the contrary. The court made particular note of the fact that NSI submitted an AIA agreement to Strutt that stated NSI’s intention that its drawings not be further used without its express consent. For these reasons, the court held that NSI did not grant a implied license to the defendants to use its drawings.
Nelson-Salabes v. Morningside Development, 284 F.3d 505 (4th Cir. 2002).

Risk Management Note: Several lessons are learned from this case. It demonstrates the importance of using agreement forms such as those of the AIA that preserve the copyright interest of the architect. It demonstrates the importance of getting things in writing but shows that even when written agreements are not signed, the actions of the parties in performing in a manner consistent with the terms and conditions of the unsigned contract may be evidence of the contractual intent of the parties. Another issue is the importance of choosing clients that are financially sound and have experience with similar projects and contracts so that expectations may be managed and the project may be completed as anticipated by the design professional. Finally, it is somewhat surprising that the architect here apparently did not obtain any written assurances from Strutt before it assisted Strutt in finding another developer to buy the project, and that it likewise did not obtain any written assurances of the new developer, Morningside, before introducing it to the project.

This question of who owns the copyright is so important that it will be covered in greater detail in either a future issue of the ConstructionRisk.com Report or in the new Arch Insurance Group, “Design Professional Briefings.”
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Pennsylvania Jury Rejects Expert Testimony and
Claim for Personal Injury Resulting from Mold

Reported by Gordon & Rees, LLP

In Traub v. Crawford & Company, et al., No. 1995-153-C-153 (Pa. Comm. Pls., Lehigh Cty.), plaintiffs, Mr. and Mrs. Traub, made a claim for storm damage in 1994 to their insurer, Great American Insurance Companies (“Great American”). Great American retained an independent adjuster with Crawford & Company (“Crawford”) to assess the damage. The adjuster allegedly instructed the Traubs to perform minimal clean up and allow the house to dry naturally. The Traubs claimed that based on this advice, their home became contaminated by mold causing permanent respiratory and cognitive damage.

The Traubs settled their claims against Great American for $1.4 million to cover the replacement value of the home and personal property in March 1995. The Traubs then filed suit against Great American, Crawford and named the individual adjuster for personal injuries. Great American settled with the Traubs for an undisclosed amount. The claim for negligence against Crawford and the individual adjuster went to trial in May, 2002.

Crawford challenged the scientific and medical sufficiency of plaintiffs’ expert testimony regarding an alleged link between plaintiffs’ mold exposure and impaired cognitive function. The court found that the testimony of well-known plaintiffs’ experts, neuropsychologist, Wayne Gordon, Ph.D. and physician, Eckardt Johanning, M.D., passed the expert witness standards put forth in Frye regarding their credentials and substantive testimony leaving it to the jury to determine the weight of the evidence. This is one of the first trial courts to permit this type of expert testimony.

Dr. Johanning testified to the Traubs’ alleged medical conditions, including Mr. Traub’s Restrictive Airway Disease Syndrome (RADS), which he claims is related to mold exposure. Dr. Gordon testified to cognitive impairments. Both experts relied on peer reviewed literature and the methodology of clinical differential diagnosis for cognitive impairments from mold exposure.
Plaintiffs’ alleged that Crawford and the named adjuster held themselves out as experts when giving the Traubs advice on the storm damage which allegedly resulting in the loss of their home and personal property due to mold damage. As such, the plaintiffs’ claimed Crawford was responsible for their alleged physical injuries due to mold exposure.

Though the jury found Crawford and the adjuster negligent, the jury did not find a substantial connection between the their negligence and plaintiffs’ injuries. The jury awarded the plaintiffs nothing in damages in their verdict rendered on July 3, 2002. In a separate matter, the subsequent purchasers of the Traubs’ house also have a personal injury lawsuit pending for mold allegedly still existing in the house after the sale.
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This article and is reprinted with permission from the April-August 2002 newsletter by the law firm of Gordon & Rees. The newsletter is titled “Coverage, Claims and Technical Information Today: Breaking the Mold.” For further information contact: Gordon & Rees, LLP; Embarcadero Center West; 275 Battery Street, Suite 2000; San Francisco, CA 94111; (415) 986-5900; Fax: (415) 986-8054; Sara M. Thorpe (sthorpe@gordonrees.com) or Laura L. Geist (lgeist@gordonrees.com).

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Requirements of Expert Affidavit of Lawsuit Merit

Statutes in several states require that law suits against design professionals be accompanied by an affidavit of merit by an expert, attesting there is a reasonable probability that the defendant did not exercise the requisite standard of care. The issue to be decided by the court was whether the state statute required each defendant to receive an affidavit specifically naming that defendant and identifying his specific culpability. Where the affidavit failed to identify the defendant by name but instead referred only to the “defendant architects and engineers,” an appellate court held that this was a sufficient affidavit.

The state statute provides: “In any action for damages for personal injuries . . . plaintiff shall . . . provide each defendant with an affidavit of an appropriate licensed person that there exists a reasonable probability that the care, skill or knowledge exercised or exhibited in the treatment, practice or work that is the subject of the complaint, fell outside acceptable professional or occupational standards or treatment practices.” This statute was designed, says the court, as a tort reform measure to weed out frivolous lawsuits at an early stage and to allow meritorious cases to go forward. The statute requires that an appropriate licensed professional attest that there exists a reasonable probability that there was a deviation in the standard of care in the activity that is the subject of the complaint against the defendant. In this case, since the affidavit states that there was a deviation from the standard of care by “defendant architects and engineers, respectively,” and since there was no dispute that the firm of “O’Donnell & Naccarato was the only engineering firm who performed the work on the project, the court concluded that it was not necessary under the circumstances to actually name the firm in the affidavit.

Another argument that the court rejected was that the affidavit was too generic and insufficiently specific. The court quoted from a New Jersey Supreme Court decision that stated: “The content of the expert’s affidavit is summary in nature, and the required statement of opinion that the defendant’s work or treatment fell outside acceptable professional standards need not be accompanied by the same detailed explanation and analysis that ordinarily would be contained in an expert’s report required to be furnished pursuant to [the state statutes].” Medeiros v. O’Donnell & Naccarato, Inc., 790 A.2d 969 (N.J. Super. A.D. 2002).

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ABOUT THIS NEWSLETTER & A DISCLAIMER

This newsletter Report is published and edited by J. Kent Holland, Jr., J.D., a construction lawyer and risk management consultant for environmental and design professional liability.  The Report is independent of any insurance company, law firm, or other entity, and is distributed with the understanding that ConstructionRisk.com, LLC, and the editor and writers, are not hereby engaged in rendering legal services or the practice of law.  Further, the content and comments in this newsletter are provided for educational purposes and for general distribution only, and cannot apply to any single set of specific circumstances. If you have a legal issue to which you believe this newsletter relates, we urge you to consult your own legal counsel. ConstructionRisk.com, LLC, and its writers and editors, expressly disclaim any responsibility for damages arising from the use, application, or reliance upon the information contained herein.

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