Where a project owner assessed liquidated damages against its construction contractor for untimely completion, the contractor filed a claim against the project engineer asserting that the delay was due to defective plans and specifications, and also that the contractor had relied upon representations by the engineer that the contractor would not be held to the project schedule. In Greater LaFourche Port Commission v. James Construction Group, LLC, 2012 WL 4320228 (Louisiana 2012), the court rejected the Engineer’s argument that because the engineer’s representations were within the scope of its contractual authority for its client it could have no liability to the contractor.  Moreover, the court found that where the damage sued for by the contractor is not for the defective work itself but rather the losses caused by the Engineer’s allegedly defective work, a tort (negligence) action can be brought by the contractor against the engineer, even though it may not assert a cause of action against the Engineer based on the Engineer’s alleged breach of contract with its client, the Port Commission.   The court concluded that genuine issues of material fact exist to be determined by jury – including whether the Engineer was independently negligent in its performance of services and in its representations to the contractor as to whether the Port would agree to waive the LD provision.

Comment: Based on prior court decisions cited by the court, it appears that the “economic loss doctrine” is not a defense in Louisiana, and that design professionals have an independent duty to third parties for purely economic losses such as those claimed by the contractor in this case.  Allowing a design professional to be sued by a contractor for how it exercises its professional services and renders professional opinions for the benefit of its client, the project owner, could have a chilling effect on the ability of the designer to make proper decisions for its owner.  If a designer has to worry about being sued by a contractor who feels plans and specifications are not clear and complete, or is dissatisfied with constructability of plans and specifications, or disgruntled with a decision not to grant substantial completion, a designer would have a personal financial stake that could cause it to act contrary to the best interests of its client.  The reasoning of the Louisiana court is unfortunate.


About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 15, No. 2 (Feb 2013).

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