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Contractor sued its client, the project owner, and sued the construction manager (CM) that was under contract to the owner – alleging that the CM failed in its obligation and duty to oversee and administer the project according to industry standards thereby impeding the contractor’s performance and adding extra costs and delay to its work. A trial court granted the CM summary judgment – finding the CM owed no independent duty of care to the contractor. This was reversed on appeal with a detailed analysis explaining that a CM with no contractual privity with the contractor can nevertheless be held liable because it has a high degree of control and power and knows its services will benefit the contractor as well as the project owner – and therefore owed a duty of care. Lathan Company v. State of Louisiana, 237 So 3d 1 (Louisiana App. 2017).

The court began its analysis by reviewing case precedent that has held an engineer that designed and supervised construction and prepared plans owed a duty to the general contractor’s surety to adequately supervise work to ensure completion in accordance with the contract plans and specifications (Calandro v. Butler, 249 So.2d 254 (1971). The court in that decision noted that a “third party who is not in privity may, nevertheless, have an action in tort against an architect or engineer [because] an engineer or architect must be deemed and held to know that his services are for the protection, not only of the interests of the owner” but also to third parties who must “rely on the architect or engineer to produce a completed project conformable with the contract plans and specifications.”

The court also cited a U.S. District Court decision from the Fifth Circuit that adopted a balancing test to be applied on a case-by-case basis in deterring whether a cause of action exists by a third party not in privity of contract. Factors include the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury and the closeness of the connection between the defendant’s conduct and the injury.

In the current case, the contractor focuses on the management responsibilities and supervisory authority of the CM (Jacobs Project Management Company/CSRS Consortium). The court stated that although an affidavit may demonstrate that Jacobs didn’t draft the specifications or prepare design documents, there was evidence from the contractor establishing that Jacobs was to provide design management services, and document quality assurance/quality control reviews for schematic design, design development, and construction documents phases of the project.

The court concluded that the evidence submitted established that although Jacobs wasn’t responsible for signing change orders or construction change directives (CCDs), and was not required to respond to Requests for Information (RFIs), it was responsible for coordinating the management of invoices, contracts, and change orders. “Thus, if Jacobs improperly delayed the processing of invoices and RFIs, as alleged herein, it is foreseeable and to a degree certain that the project would be delayed, and thereby, adversely affect the work and profits of the general contractor….”

In conclusion, the court found, “Jacobs must be deemed and held to know that is services were not only for the protection or interests of the owner but also for third parties, including, specifically [construction contractor].” For these reasons, the court reversed the trial court’s grant of summary judgment and held that the contractor claim against the CM may go forward to trial.

 

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. 20, No. 9 (Oct 2018).

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