ConstructionRisk Report (November 2025)

Inside this Issue

• A1 - Attorneys Fees of $8 Million Awarded Pursuant to Prevailing Party Contract Clause
• A2 - Mutual Waiver of Consequential Damages Clause was not Applicable to Damages Court Found Were Cause Directly by Design Professionals Deficient Plans

Article 1

Attorneys Fees of $8 Million Awarded Pursuant to Prevailing Party Contract Clause

See similar articles: Attorneys Fees | prevailing party

The court granted plaintiff’s motion for attorneys fees after reducing certain amounts. In doing so, the court denied the defendant (Flatiron’s) request for an evidentiary hearing to probe the fees and question the Plaintiff (AECOM’S) expert, because the court stated there is no need to do so when a record has been fully developed through briefs, affidavits, and depositions.  The dispute arose out of a Teaming Agreement whereby AECOM was hired by Flatiron to serve as lead designer for the C-470 Express Lanes project in Colorado.  AECOM filed suit against Flatiron for $5.3 million in unpaid fees, and Flatiron countersued -- alleging negligent misrepresentation and breach of the subcontract.  Flatiron claimed damages of $263 million based on AECOM’s alleged  “Botched [ ] bid design” for the project. The court granted summary judgment to AECOM on Flatiron’s negligent misrepresentation claim and breach of subcontract claim. Having ruled against Flatiron on the counterclaims the court ordered Flatiron to pay AECOM’s attorneys’ fees and litigation costs in defending against the Flatiron claims pursuant to the fee-shifting provision in the subcontract.  After a four-week jury trial, the jury found in favor of AECOM on all claims and awarded it over $5 million in compensatory damages.  Under the prevailing party attorneys’ fees clause of the contract, AECOM was entitled to its costs of defending against the Flatiron claim but not the costs of pursuing its affirmative claims for damages against Flatiron.    AECOM sough almost $10 million in attorneys fees, and the court ultimately awarded it $8,293,733.56.

AECOM Tech. Servicesk Inc. v. Flatiron/AECOM, LLC, 2025 U.S. Dist. LEXIS 40755 (Colorado 2025).

The Fee-Shifting Provision or prevailing party clause provided the following:

“If the Party submitting the claim prevails on more than half of the claims it makes, then each party shall pay its own costs of such litigation. If the Party submitting the claim to litigation prevails on less than half of the claims it makes, then the Party submitting the claim to litigation shall pay both Parties' costs of such litigation, including reasonable attorneys' fees.”

AECOM agreed to withdraw from its attorneys’ fees claim those costs associated with making its affirmative claim as a plaintiff.  Flatiron argued that the court should deny the AECOM fee motions.  One reason asserted by Flatiron was that AECOM should not be permitted to fees incurred from litigating its fees and costs motions – i.e., “fees on fees.”  The court rejected that reason because the Ten Circuit Court generally allows recovery of fees for an attorney’s work in seeking attorney’s fees.   Having concluded that AECOM was entitled to recover attorneys fees the court analyzed the amounts claimed to determine that they were reasonable.  In doing so, the court stated:

“Of course, "[t]his does not mean [] that the trial court should simply award the full amount billed by the prevailing party's attorneys." W. States Mechanical Contractors, 834 F.2d at 1548. While "the trial court is not responsible for independently calculating a 'reasonable' fee," it retains "discretion to adjust or even deny a contractual award of fees if such award would be inequitable or unreasonable." Id. at 1548-49. "The district court may choose to use" "the familiar factors from the federal cases awarding fees in a statutory context" "not to compute a reasonable fee, but to assist in determining if the fees claimed are unreasonable or inequitable." Id. at 1550.”

With these principles in mind, the Court proceeded to address various fee reductions advocated by Flatiron.  The hourly fees for the 18 AECOM attorneys were significant – up to $765/hr.  The court revised two of the attorneys down to a lower effective hourly rate but did not question the rates charged by the others.

Comment:

This case demonstrates the significance of including a prevailing party attorneys’ fees clause in a contract.  If a firm is required to pay fees because the contract mandates it, those fees are not insured damages.  They are created by “contractual liability” and are excluded from coverage pursuant to the contractual liability clause in the insurance policy.

When reviewing design professional contracts, our office routinely either deletes the prevailing party clause completely, or in the alternative we revise the clause to read something like the following:

“Prevailing party is the party who recovers greater than 67% of its total claims in the action or who is required to pay no more than 33% of the other party’s total claims in the action when considered in the totality of claims and counterclaims, if any. In claims for monetary damages, the total amount of recoverable attorney’s fees and costs shall not exceed the net monetary award of the Prevailing Party.”

 

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 ConstructionRisk 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 Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 27, No. 7 (November 2025).

Copyright 2025, ConstructionRisk, LLC

Article 2

Mutual Waiver of Consequential Damages Clause was not Applicable to Damages Court Found Were Cause Directly by Design Professionals Deficient Plans

See similar articles: Consequential Damages | direct damages | mutual waiver

An architect (HKS Architects) was sued by its client (Orlando Health, Inc,) for negligent breach of contract – alleging serious design defects required immediate repairs.  HKS filed a third-party complaint against its engineer subcontractor (BBM) alleging that the Sub was the responsible party because it committed the structural design errors. Both HKS and NNM moved for summary judgment against the hospital, arguing that the damages sought were “consequential damages”, which had been waived by contract.  The court denied the motion, finding that at least some of the damages sought by the hospital “flowed directly and necessarily from HKS’s breach of contract….” Orlando Health, Inc. v HKS Architects, Inc.  2025 WL 1919349, (Florida 2025).

Both the prime agreement as well as the subcontract contained waivers of consequential damages.  As a result of design errors, much of the completed construction work had to be removed to do necessary remediation.  The hospital seeks $1.2 million to demolish and reinstall previous work-in-place materials.  It also claimed $160,00 for “extended project management costs” and it claimed $75,000 in other costs for peer review services.

The court stated that the parties didn’t define the term “consequential damages” as used in their contracts.  The court looked to case law for definitions of the term and stated:

“Florida courts have defined “consequential damages” as damages that “do not arise within the scope of the immediate buyer-seller transaction, but rather stem from losses incurred by the non-breaching party in its dealings, often with third parties, which were a proximate result of the breach, and which were reasonably foreseeable by the breaching party at the time of contracting.” Keystone Airpark Auth. v. Pipeline Contractors, Inc., 266 So. 3d 1219, 1222–23 (Fla. 1st DCA 2019) (emphasis removed) (quoting Hardwick Props., Inc. v. Newbern, 711 So. 2d 35, 40 (Fla. 1st DCA 1998)); see also Consequential Damages, Black's Law Dictionary (12th ed. 2024) (defining the term as “[l]osses that do not flow directly and immediately from an injurious act but that result indirectly from the act”). “The most common form of consequential damages is lost profits.” Hardwick Props., 711 So. 2d at 40. Other examples of losses typically regarded as falling into this category are reputational damage, see, e.g., Schauer v. Morse Operations, Inc., 5 So. 3d 2, 7 (Fla. 4th DCA 2009), rental expenses, Bartram, LLC v. C.B. Contractors, LLC, No. 1:09-cv-00254-SPM/GRJ, 2011 WL 1299856, at *1 (N.D. Fla. Mar. 31, 2011), and loss of use, id.”

***

In the case at bar [ ], the need for extensive repairs to the hospital did arise “within the scope of the immediate transaction” between Orlando Health and HKS. HKS was not contracted to monitor the drawings or other activities of someone else who was the direct cause of the damage. Instead, HKS was obligated to provide structural engineering plans for the project, and there is no dispute that the need for repairs was caused solely by deficiencies in those plans.

***

At oral argument, Orlando Health averred that Movants’ contention that these repair costs are “consequential” rather than direct is a novel one in the industry. That may well be true; the Court's research has uncovered no case where such an argument was made by an architect or engineer who was sued based on repair costs due to defective plans. However, similarly situated defendants in some cases have conceded that such costs are direct damages that fall outside a consequential-damages waiver…. Atl. City Assocs., LLC v. Carter & Burgess Consultants, Inc., 453 F. App'x 174, 178–80 (3d Cir. 2011) (case in which the defendant architect successfully argued on appeal that “[l]ost rental income,” “[a]dditional payments to contractors due to delay,” and “[a]dditional administrative costs” were barred by contract's waiver of consequential damages but did not challenge the trial court's conclusion that “[a]dditional construction costs to fix errors” were not so barred).

***

Based on the definitions of the relevant terms and the facts of this case, the Court finds that Orlando Health's costs of remediation and repair are not consequential damages that were waived in the Agreement. HKS was contractually obligated to provide plans, including structural engineering plans, for the construction of a hospital in a large project coordinated among many sophisticated parties. The costs of remediation and repair did not “result indirectly from” HKS's plans, nor did they arise from “dealings with third parties” in either the more “traditional” sense (such as lost profits or loss of reputation) or the causative way described by the Keystone Airpark court. Instead, the costs to repair and remediate are the “direct, natural, logical[,] and necessary consequences of” HKS's deficient plans. Thus, recovery of these damages is not barred by the consequential damages waiver in the Agreement.

Risk Management Comment:

The AIA contracts contain a mutual waiver of consequential damages clause.  That clause is somewhat generic, however, and does not define what is included within consequential damages.  When reviewing contracts, we like to add a more comprehensive mutual waiver that reads like the following:

Mutual Waiver of Consequential Damages. Consultant and Client waive all consequential or special damages, including, but not limited to, loss of use, profits, revenue, business opportunity, or production, for claims, disputes, or other matters arising out of or relating to the Contract or the services provided by Consultant, regardless of whether such claim or dispute is based upon breach of contract, willful misconduct or negligent act or omission of either of them or their employees, agents, subconsultants, or other legal theory, even if the affected party has knowledge of the possibility of such damages.  This mutual waiver shall survive termination or completion of this Contract.

 

 

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 ConstructionRisk 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 Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk Report, Vol. 27, No. 7 (November 2025).

Copyright 2025, ConstructionRisk, LLC