Inside this Issue
- A1 - Architect Not Liable for Implied Warranty of Habitability
- A2 - Scaffolding Collapse: Engineer, Architect, and Project Owner Not Liable for Injuries
- A3 - Architect’s Copyright Infringement Case Dismissed because no Evidence of Substantial Similarity
- A4 - A Claim Under the Negligent Misrepresentation Exception to the Economic Loss Doctrine May Be Predicated on Implied Representations
Article 1
Architect Not Liable for Implied Warranty of Habitability
See similar articles: Condominium | Habitability | Implied Warranty | Warranty
Problems developed at a condominium complex several years after construction because air and water infiltration was damaging interior flooring and finishes. The condominium association filed suit against a number of the parties involved in the design and construction of the complex, alleging that the parties had breached the implied warranty of habitability. The condo association attributed the air and water infiltration to latent defects in the design, materials, and construction of the buildings that were not discovered until 2007.
The architect had completed the drawings in 2000 and, although not discussed in the Appeals court's decision, the statute of limitations for filing a negligence (tort) claim against the architect had already run. The estimated cost of repairs exceeded $4 million, and the association alleged that the developer-seller, the original general contractor, and the successor general contractor were all either bankrupt or out of business, and thus incapable of satisfying a $4 million award.
The trial court dismissed the claims against several of the parties, including the architect, and the condo association appealed. The Appeals court affirmed the dismissal of the claim against the architect, providing a comprehensive discussion of the warranty of habitability and its application to design professionals. Board of Managers of Park Point at Wheeling Condominium Ass’n v. Park Point at Wheeling, LLC, 2015 IL App (1st) 123452.
The Appeals court began by explaining that the implied warranty of habitability arose because under the common law doctrines of caveat emptor ("buyer beware") and merger, a new home buyer had little or no recourse against a builder who erected a defective residence. The buyer took the property at his own risk and if he failed to discover defects before taking possession, caveat emptor prevented a law suit against the builder. Under the merger doctrine, all agreements between a new home seller and buyer merged in the deed, and once the buyer received the deed, he had no basis for a complaint unless the deed included an express warranty.
However, the doctrine of caveat emptor is based on an expectation that the buyer and seller have comparable skill and experience and bargaining positions. Creating an implied warranty of habitability for the sale of a new residence was a judicial response to the fact that by the middle of the twentieth century, this was no longer true. Home building methods and governmental regulations had become more complex, builders had grown in scale and become specialized, and the ordinary home buyer did not have the skill or training to make a meaningful inspection and discover latent defects.
The term “habitability” is unfortunate because it implies that the warranty is satisfied as long as the house is capable of being inhabited. The warranty is actually more extensive, as it encompasses the holding that a home buyer has a right to receive what was bargained for and what the builder-seller agreed to provide — a house that is reasonably fit for its intended use as a residence. The court listed the three public policy reasons for the implied warranty: (1) home buyers are unusually dependent on the competency and integrity of the builder; (2) the buyer is making the largest single investment of his or her life; and (3) fairness dictates that the repair costs of defective construction should be borne by the builder-seller who created the latent defects.
Turning to the issue of whether an architect could be held liable under the implied warranty of habitability, the court noted that Illinois and a number of other jurisdictions had already addressed this issue and had concluded that a design professional cannot be sued under an implied warranty theory for providing professional services. The court cited cases in several other jurisdictions where courts have declined to find that design professionals impliedly warrant that their work will be merchantable, fit for a particular purpose, or fit for its intended use. While such implied warranties are customary in the sale of goods (i.e. materials and equipment), most jurisdictions have rejected their application to professional services. Design professionals preparing drawings and specifications for construction projects are performing a professional service, they are not selling goods.
The court quoted extensively from a Minnesota case, where claims were filed against the architect after an addition to a municipal building allowed water to seep into the basement. Distinguishing the architect’s role from that of a builder or contractor, the Minnesota Supreme Court stated:
“… we must bear in mind that the (architect) was not a contractor who had entered into an agreement to construct a house for the (owner), but was merely an agent of the (owner) to assist him in building one. The responsibility resting on an architect is essentially the same as that which rests upon the lawyer to his client, or upon the physician to his patient. The undertaking of an architect implies that he possesses skill and ability, including taste, sufficient to enable him to perform the required services at least ordinarily and reasonably well; and that he will exercise and apply in the given case his skill and ability, his judgment and taste, reasonably and without neglect. But the undertaking does not imply or warrant a satisfactory result.
...
Architects, doctors, engineers, attorneys, and others deal in somewhat inexact sciences and are continually called upon to exercise their skilled judgment in order to anticipate and provide for random factors which are incapable of precise measurement. The indeterminable nature of these factors makes it impossible for professional service people to gauge them with complete accuracy in every instance... Because of the inescapable possibility of error which inheres in these services, the law has traditionally required, not perfect results, but rather the exercise of that skill and judgment which can be reasonably expected from similarly situated professionals.
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Adoption of the city’s implied warranty theory would in effect impose strict liability on architects for latent defects in the structures they design. That is, once a court or jury has made the threshold finding that a structure was somehow unfit for its intended purpose, liability would be imposed on the responsible architect in spite of his diligent application of state-of-the-art design techniques.” City of Mounds View v. Walijarvi, 263 N.W.2d 420 (Minn.1978).
The Appeals court pointed out that the principle that an architect does not warrant or guarantee perfection in his or her plans and specifications is long standing, citing to a Michigan case from 1898. Chapel v. Clark, 76 N.W. 62 (Mich.1898). The holding in Chapel was that an architect is only expected to exercise ordinary skill and care, and performing to that standard sometimes results in defects or unsafe conditions."
Extension of the Warranty of Habitability
The Park Point condominium association based their argument that the court should allow a claim against the architect on a previous Illinois case, Minton v. The Richards Group of Chicago, 452 N.E.2d 835 (1983). In Minton, the implied warranty of habitability was extended to the painting subcontractor who caused the alleged latent defects because the buyers had no recourse against the insolvent builder-seller. The condominium association contended that the work of architects is similar to the work of general contractors and subcontractors, noting an architect can create latent defects in a completed building and that the public policy underlying the implied warranty of habitability is to protect new homeowners from latent defects by holding the responsible party liable.
The Appeals court disagreed however, finding that the Minton holding should be limited to subcontractors who were involved with the physical construction or the construction-sale of the property. The court emphasized that the implied warranty of habitability of construction arises between the builder-seller and the buyer because of their “unusual dependent relationship.” The architect's role in the design of the condominiums did not create such a relationship. The fact that the builders of the condominium complex were insolvent did not justify expanding the Minton holding to an entirely different category of defendant.
Comment:
The Appeals court summarized the case law into two principles. First, the implied warranty of habitability of construction is traditionally applied only to those who engage in construction and sales of new homes. Second, design professionals perform their services pursuant to contracts that set out their obligations, and courts have consistently declined to heighten their express contractual obligations by implying a warranty of habitability of construction.
The Appeals court specifically reject the condo association's argument that design professionals and builders are similar because both are already subject to the implied obligation to perform their tasks in a “workmanlike” manner. Citing to Black's Law Dictionary, the court noted a workman is a person who is “employed in manual labor, skilled or unskilled." Thus the term “workmen” does not include professional persons such as design professionals, and design professionals are not obligated to perform their professional services in a workmanlike manner. Architects and engineers should be careful not to agree to contract provisions that require them to perform their services in a "good and workmanlike manner." While the phrase is seemingly innocuous, a court could find that it imposes a higher standard than the professional standard of care.
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. 18, No. 3 (March 2016).
Copyright 2016, ConstructionRisk, LLC
Article 2
Scaffolding Collapse: Engineer, Architect, and Project Owner Not Liable for Injuries
See similar articles: Construction Defect | Duty of Care | Duty to Warn | Expert Witness | Inspect | Inspection | Scaffolding | Site Observation | Site Safety | Site Visits | Workers compensation
J. Kent Holland, J.D.
ConstructionRisk, LLC
Summary judgment was granted and sustained on appeal for all defendants in this case where three employees of a contractor were injured when scaffolding failed under the weight of a concrete slab that was being poured. The laborers suit against contractor was dismissed based on the protections of the workers compensation statute. Their suit against the engineering firm and architectural firm involved in designing and observing the project were dismissed because they were not involved in actual supervision and control of the contractors work. Suit against the project owner was dismissed because after an owner surrenders the property to the contractor for construction, the contractor assumes a duty to warn or otherwise protect his employees, and that duty does not fall on the owner. Citing the AIA B141 agreement, the court found the engineer “was not obligated to inspect the scaffolding to ensure that it was in compliance” with the plans and specifications. The court notes that the engineer that designed the scaffolding is not subject to liability because it created a design that was impossible to build and, rather than seeking clarification regarding that design, the contractor used its own design to “splice” supporting posts without the knowledge of the engineer. Thus, even if the design was inadequate, it was not the cause of the collapse. It is important to note that the plaintiff’s expert witness (an engineer) submitted an affidavit stating that in his opinion the “defects in the scaffolding caused the collapse.” That part of his testimony inadvertently helped the engineer and architect defendants. Another aspect of his affidavit opined that the architect had a duty to inspect and supervise the construction of the scaffolding. The court excluded that testimony because it found as an engineer this expert was not qualified to offer an opinion on what an architect was required to do. McKean v. Yates Engineering Corp., 2015 WL 5118062 (Mississippi 2015).
This decision has so many lessons learned that this short article cannot begin to do justice at explaining all its gems of wisdom. The balance of the article will just hit a few highlights. Get a copy of the decision if you want to learn more.
The court said there was no authority to support the conclusion that either the architect or engineer had an absolute duty to inspect the scaffolding and formwork to ensure the engineer contractor followed his design. In fact, unless expressly required by contract, there would be only limited circumstances in which an engineer has a duty to notify or warn workers or employees of the contractor or subcontractor of hazardous conditions on the construction site. Since there was no written contract between the contractor and the engineer that designed the scaffolding, there certainly was no express contractual requirement imposed on the engineer.
The court did not stop there in its analysis of the engineer’s potential duty to the laborers, however. It considered the seven factors outside of contractual responsibility that may determine whether supervisory powers go beyond the provisions of the contract.
Those factors are:
(1) actual supervision and control of the work; (2) retention of the right to supervise and control; (3) constant participation in ongoing activities at the construction site; (4) supervision and coordination of subcontractors; (5) assumption of responsibilities for safety practices; (6) authority to issue change orders; and (7) the right to stop the work.
The court found no evidence that the engineer did anything to fall within any of those seven factors. According to the court, the engineer “unequivocally said that he did not visit the construction site to determine whether [the contractor] followed his design.” He had only one initial visit and then a visit after the formwork collapsed.
Owner has no Liability
The plaintiffs asserted that the owner breached its duty as owner of the property to provide them with a reasonably safe working environment. They also claimed that the owner was vicariously liable for the contractor’s behavior based on agency relationship. The court rejected both arguments. The state code provides that an owner of property is not liable for injury of an independent contractor’s employees resulting from dangers of which the contractor knew or reasonably should have known. In addition, the state common law protects business owners from injuries sustained by “independent contractors” on a work site. Once the property owner has given the property to the contractor to begin construction the contractor assumes the duty to warn or otherwise protect its employees and agents on the property, and that duty is removed from the Owner.
The court found that as a matter of law, the owner had no duty to warn the plaintiffs about the condition of the scaffolding that the contractor designed and built.
Architect has no Liability
The plaintiffs asserted that the architect had a contractual duty to inspect the formwork and scaffolding before the subcontractor poured the concrete for the second-floor slab. They further assert that the architect’s conduct created a duty “to ensure the integrity of the concrete formwork.” In rejecting these arguments the court quoted from the AIA B141 contract that applied to the services. The court said that the unambiguous language of the contract sates that the architect is not responsible for construction methods or safety precautions in connection with the work. As explained by the court, “the scaffolding was a means to build the project's second-story floor”, and nothing in the contract made the architect responsible for ensuring that the engineer’s scaffolding design was adequate.
Moreover, the court concluded that the architect had no contractual duty to inspect the scaffolding before the concrete was poured. It quoted the contract that stated the architect “shall visit the site at intervals appropriate … to determine that the Work when completed will be in accordance with the Contract Documents.” The court noted that the contract documents do not include any drawings or specifications related to the scaffolding. They merely stated, “Adequate bracing and forming is required.” None of this suggested a duty of inspection to ensure compliance.
Another important point made by the court is that the general authority to “reject” non-conforming work did not create a special duty, because the architect “had no authority to stop the work. Only [the owner] had the authority to stop work on the project. “
Finally, since there was no evidence that the architect undertook to supervise any aspect of the scaffolding, it had no duty to warn the plaintiffs that the scaffolding the contractor built was inadequate.
Comment: This decision should be a “go-to” case for teaching and explaining a number of important principles, including (1) the importance of using language consistent with the AIA owner-architect agreement, (2) use of expert witnesses, (3) the difference between site visits/observation and inspection, and (4) site safety responsibilities and liabilities, and the standard of care imposed on various parties.
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. 18, No. 3 (March 2016).
Copyright 2016, ConstructionRisk, LLC
Article 3
Architect’s Copyright Infringement Case Dismissed because no Evidence of Substantial Similarity
See similar articles: Copyright | copyright Infringement | Expert Opinion | Expert Witness
J. Kent Holland, J.D.
ConstructionRisk, LLC
Where two architects competed for the design of a condominium building, the unsuccessful prospect sued the chosen architect for copyright infringement of its design, claiming the architect had copied the design and had created a design that was so substantially similar to its own as to be a copyright infringement. The suit was dismissed by summary judgment and this dismissal was affirmed on appeal, with the court finding that the experts for the defendant provided evidence that the designs were not substantially similar, and the expert for the plaintiff failed to present sufficient evidence of copying or substantial similarity. The court explained the areas of alleged substantial similarity and found that viewing the evidence most favorably to the plaintiff only shows that the two projects in question incorporate nine of the same concepts but does not establish that the two designs have a similar overall, or that the designs arrange or compose elements and spaces in a similar manner. Humphreys & Partners Architects v. Lessard Design, Inc., 790 F.3d 532 (4th Cir. 2015).
Humphreys & Partners Architects (“HPA”) claimed that the design, development, ownership, and construction of Two Park Crest, an apartment building in McLean, Virginia infringed HPA’s architectural copyright embodied in Grant Part, a condominium building in Minneapolis, Minnesota. HPA registered the Grant Park design as an architectural work with the U.S. copyright office. The building was built in 2004, years before the Two Park Crest building was constructed in 2012. After Two Park Crest was built, HPA filed this copyright infringement suit. After discovery was completed in the suit, the parties filed cross-motions for summary judgment.
Lessard argued it was not liable because it did not copy the design and the two designs are not substantially similar. Lessard supported its motion with three expert reports from different architects who concluded that the two designs were not substantially similar.
HRA’s expert did not state that he knew or could prove that the design had been “copied.” HRA’s theory for why it believed copying had taken place was that “the speed in which Lessard created the Two Park Crest design is direct evidence of copying, and that the similarities between the two designs in circumstantial evidence of copying. HPA’s expert identified nine characteristics shared by both design—for example, “both designs are for similar multi-family buildings that are approximately twenty stories tall, that have two elevator lobbies connected by a service corridor, and that provide direct access two units from the elevator lobbies.” HPA argued that the presence and arrangement of these nine features infringed its copyright.
Were the Expert Reports Adequate for Consideration. The first issue that the court dealt with was the admissibility of the expert reports and whether they should have been relied upon for the summary judgment motion. HPA asserted that the reports were inadmissible hearsay. In response to that Lessard provided declarations from the experts verifying the contents of the reports in stating that they would testify at trial to the substance thereof. The District trial court denied HPA’s motion to strike, concluding that the expert declarations cured any HPA objection.
The appellate court agreed and in addition stated that for summary judgment purposes the expert reports were sufficient for consideration and the ultimate admissibility of the reports was immaterial because Lessard submitted decorations made, ”under penalty of perjury” from the experts attesting that they “would testify to the matters set forth in there reports.” The court stated that “subsequent verification or reaffirmation of an unsworn expert’s report, either by affidavit or deposition, allows the court to consider the unsworn expert’s report on a motion for summary judgment.”
The Substantive Issues Concerning the Design.
The trial court granted summary judgment because it found that no reasonable jury could find that the two projects in question were “extrinsically (i.e., objectively) similar.” The trial court concluded:
“The two designs are not extrinsically similar for two independently sufficient reasons. First, neither the nine features that [Plaintiff’s expert] identified nor their arrangement in Grant Park is eligible for copyright protection. And second, those features are presented and arranged differently in the Two Park Crest design. With respect to the arrangement of the nine features in the two designs, the court *537 noted that Appellees’ experts had provided detailed explanations as to how the two designs differ with respect to their size, footprints, floorplans, and exterior appearances. HPA’s expert, in contrast, “offer[ed] no evidence as to what makes the two arrangements extrinsically similar.”
In reviewing this, the appellate court explained that where direct evidence of copying is lacking, the “plaintiff may prove copying by circumstantial evidence in the form of proof that the alleged infringer had access to the work and that the supposed copy is substantially similar to the author’s original work.” To show substantial similarity, the plaintiff must establish that the two works are both “extrinsically” and “intrinsically” similar. The “extrinsic inquiry” is that of an objection that looks at external criteria of substantial similarity between the works. In contrast, the “intrinsic inquiry” looks to the “total concept and feel of the works.”
Rather than attempt to paraphrase how the court evaluated the evidence, it may be better to just quote from the decision at length as follows:
To support its case, the plaintiff relied on two declarations of its CEO. The court found the only relevant statements on those declarations, however, were assertions that “[t]he Court can see that the two floor plans are very similar,” and that “the Court can see that [the two buildings] have a very similar appearance.” Those statements were deemed insufficient to create a genuine dispute of material fact because they are conclusory. The CEO identified no specific, objective similarity between the two designs to support his conclusion that the buildings’ floor plans and appearances are similar.
The plaintiff also submitted three declarations—two from individuals who worked with the plaintiff on the Grant Park project, and one from the plaintiff’s Director of Design—describing the creation, originality, and benefits of the Grant Park design. These declarations were deemed by the court insufficient to create a genuine dispute for trial because none contains an assertion about the similarity between the Grant Park and Two Park Crest designs.
Finally, the plaintiff relied on its expert’s declaration and deposition testimony in which the expert stated in his declaration that “[t]he two designs have an extrinsic similarity in that the ideas and expression of the ideas used in the projects have substantial similarities[,] ... includ[ing] such things as building floor plan layout, exit circulation, building size, and composition of the major elements that make up the exterior expression of the designs.” He also listed nine features shared by both designs—for example, the stairwells in both designs are located adjacent to elevator lobbies—and stated that these characteristics are “examples of the arrangement and composition of spaces and elements that represent substantially similar features of Humphreys’ Grant Park design.” And the expert stated in his deposition that the “the overall expression of the idea of those [nine] elements is very similar in the two projects.”
The court found that the expert’s declaration and deposition testimony were insufficient to show that the designs are extrinsically similar. Like the other declarations for the plaintiff, the expert offered no specific similarity between the designs’ overall form or arrangement of individual elements. He identified nine shared features and stated that these characteristics show that the two designs arrange and compose both spaces and elements in a substantially similar manner. But the mere presence of these nine features in both buildings does not create an issue for trial because the plaintiff did not, and could not; claim “any protectable interest in any individual component” of the Grant Park design. The expert also failed to explain how specifically the two designs were similar in their floor plans, exists, sizes, or arrangement of individual elements. His conclusory assertions were found by the court to be, as a matter of law, insufficient to show that any aspect of the defendant’s project was substantially similar to a protected element of the plaintiff’s design.
In its final summation of its decision, the appellate court concluded that the plaintiff failed to carry its burden of identifying a specific similarity between the defendant’s project and protected elements of the plaintiff’s design. Even if the defendant’s design incorporated nine of the same concepts as the plaintiff’s design, the court found that this does not establish that the two designs have a similar overall form, or that the designs arrange or compose elements and spaces in a similar manner. The court, therefore, affirmed the summary judgment in favor of the defendant architect.
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. 18, No. 3 (March 2016).
Copyright 2016, ConstructionRisk, LLC
Article 4
A Claim Under the Negligent Misrepresentation Exception to the Economic Loss Doctrine May Be Predicated on Implied Representations
See similar articles: Actual Misrepresentation | Economic Loss Doctrine | Express Misrepresentation | Negligent Misrepresentation
This dispute concerned Pennsylvania’s application of the Economic Loss Doctrine and its interpretation of the exception allowed by Section 552 of the Restatement (Second) of Torts. Gongloff Contracting, L.L.C., (“Gongloff”) was a second-tier subcontractor on a convocation center being constructed for a university in Pennsylvania. Under its contract with the firm hired to do the structural steel fabrication and erection, Gongloff agreed to provide all labor, materials, and equipment to erect the structural steel for a fixed fee.
Gongloff experienced numerous problems with the steel erection, including three shut-downs allegedly caused by the design engineer’s defective design. Attempts to redesign the structure and address its structural inadequacies substantially increased Gongloff’s costs and Gongloff submitted 81 change order requests for work that was beyond the scope of its original bid. After it stopped receiving payment on its invoices, Gongloff laid off its crew and left the job-site; it subsequently sued the design engineer for negligent misrepresentation. The trial court ruled that Gongloff could not pursue its negligent misrepresentation claim because it had not identified any specific negligent misrepresentations by the engineer. Gongloff appealed and the Appeals court reversed the ruling. Gongloff Contracting, L.L.C. v. L. Robert Kimball & Assocs., Architects and Eng’rs, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015)
Negligent misrepresentation differs from intentional misrepresentation (fraud) in that the speaker does not have to actually know his or her words are untrue, but must have failed to make a reasonable investigation of their truth. The elements of a claim for negligent misrepresentation are:
(1) a misrepresentation of a material fact; (2) made under circumstances in which the misrepresenter should have known its falsity; (3) with an intent to induce another to act on it; and (4) which results in injury to a party acting in justifiable reliance on the misrepresentation.
Although Pennsylvania law generally bars claims brought in negligence that result solely in economic loss, a narrow exception in Section 552 of the Restatement (Second) of Torts, “Information Negligently Supplied for the Guidance of Others” provides:
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. Restatement (Second) of Torts § 552(1).
The Pennsylvania Supreme Court has adopted Section 552 and has specifically held that it applies in cases where information is negligently supplied by one in the business of supplying information, such as an architect or design professional, and where it is foreseeable that the information will be used and relied upon by third persons, even if the third parties have no direct contractual relationship with the supplier of information. Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270 (Pa. 2005).
In Excavation Technologies, Inc. v. Columbia Gas Company of Pennsylvania, 936 A.2d 111 (Pa. Super. 2007), the Appeals court explained the Supreme Court’s justification for potential Section 552 liability in disputes against architects and other design professionals, quoting the following passage from Bilt-Rite:
A design professional is typically responsible for the preparation of plans and specifications (information) that are supplied to and used by potential bidders in formulating a bid for a project. Additionally, a design professional may make representations to the contractor while performing administrative responsibilities... The design professional is paid a fee for using his or her skills and training to provide information that is relied on by others prior to and during construction. If the plans and specifications prove to be erroneous, the contractor is at grave risk of suffering economic loss. Under these circumstances, it is quite clear that the design professional is supplying information in his or her professional capacity, as part of his or her business, for the guidance of others in a business transaction. Furthermore, a design professional’s negligent misrepresentation could injure a third party in a variety of ways.
Gongloff had raised two issues in its appeal:
- Does Section 552 of the Restatement (Second) of Torts require that a design professional make an explicit negligent misrepresentation of a specific fact for a third party to recover economic damages?
- Did Gongloff properly allege that Kimball [the design engineer] either “expressly” or “impliedly” represented that the structure could safely sustain all required in situ loads?
The Appeals Court reviewed the allegations of the complaint and determined that Gongloff had alleged sufficient facts to meet the Bilt–Rite exception to the economic loss doctrine, stating:
We are persuaded that Excavation Technologies, interpreting the reach of Bilt-Rite, could reasonably be understood to subject architects to liability for Section 522 negligent misrepresentation claims when it is alleged that those professionals negligently included faulty information in their design documents. The design itself can be construed as a representation by the architect that the plans and specifications, if followed, will result in a successful project. If, however, construction in accordance with the design is either impossible or increases the contractor’s costs beyond those anticipated because of defects or false information included in the design, the specter of liability is raised against the design professional.
Comment:
In disagreeing with the design engineer’s contention that Gongloff needed to identify a specific (express) misrepresentation to proceed with its claim, the Appeals court distinguished between the requirement for an “actual” misrepresentation versus an “express” misrepresentation. A claim for negligent misrepresentation requires an actual misrepresentation; in other words, the claimant’s loss cannot be due to its erroneous assumptions. However the word “express” contemplates a higher degree of exactitude than the word “actual.” Gongloff was not required to explicitly pinpoint the specifics of the faulty design, i.e., it was not required to identify an express representation by the engineer. While the engineer might prove later in the litigation that Gongloff’s allegations were unsubstantiated, Gongloff was entitled to proceed to trial with its claim.
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. 18, No. 3 (March 2016).
Copyright 2016, ConstructionRisk, LLC
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