Expert Commentary

Contractor Obligated To Care for Its Collaborative Partner, the Designer

A ruling, which I think can fairly be characterized as unique, came out of Arizona and has garnered some national attention. A court in Arizona has held that a contractor that made claims to the project owner that the problems on the project were due to "faulty" design may be liable to the designer for negligently making those assertions. The ruling was handed down by the U.S. District Court for theDistrict of Arizona in Meadow Valley Contractors, Inc. v. C&S Eng'rs, Inc., 2012 U.S. Dist. LEXIS 86976 (D. Ariz. 2012).


Design Liability
February 2013

The town of Springerville, Arizona (the Owner), owned an airport and decided it needed to resurface the airport's runways. The Owner retained C&S Engineers, Inc. (the Engineer), to prepare the design documents for the resurfacing work. The Owner subsequently contracted with Meadow Valley Contractors, Inc. (the Contractor), to perform the resurfacing work in accord with the design documents. At some point following the start of work on the project, the Contractor asked the Owner to suspend work on the project because the design documents were "faulty."

The project troubles continued to the point that the Contractor sued the Engineer. When it was sued, the Engineer counterclaimed against the Contractor alleging that the Contractor failed to "evaluate and implement the requirements" of the design. More importantly, the Engineer claimed the Contractor "negligently represented" that the design documents were faulty. The Engineer alleged that the faulty design assertion by the Contractor to the Owner resulted in the Engineer expending $250,000 for testing and other efforts to demonstrate to the Owner "the soundness and feasibility" of the design documents.

Duty of Care

The Contractor attacked the claim of negligence against it by the Engineer by arguing that it did not owe a duty of care—a legal duty—to the Engineer. In absence of a legal duty, the Engineer's claim of negligence against the Contractor would fail as a matter of law.

The Engineer responded that the Contractor did owe it a duty because both entities were contracted to the Owner on the same project. The court concluded:

... [G]iven [the Contractor] and [the Engineer]'s "joint status" as contractors on the Project, and the need for them to work together responsibly to complete the Project, [the Contractor] was under an obligation to use care when it made representations about [the Engineer]'s actions.

As a significant point in the Court's opinion, it noted that, under the law of the State of Arizona, architects owe a duty of care toward contractors that use the architect's designs even if the two have no contractual relationship with each other. As a side note, the reader should be aware that the duty of the architect to the contractor does not exist in all states. In any event, the court held:

And given the collaboration required, between [a contractor and a design professional] to complete a project, each must exercise appropriate care before assessing the blame for the failures to the other. In short, [the Engineer] has alleged facts which make it plausible that [the Contractor] had a duty of care toward [the Engineer] to complete the Project. [The Engineer]'s negligence claim will not, therefore, be dismissed.

Caveats

A couple of observations are appropriate at this point before reaching a conclusion of the general acceptance of this holding. First, this holding was issued by a federal district court sitting in Arizona. Therefore, this is a federal trial court holding. It was not a ruling by the Arizona Court of Appeals, its supreme court or, for that matter, an Arizona trial-level court. As a result, the opinion may be persuasive to other courts, but it is not necessarily binding.

Second, what appears to be a key consideration supporting the court's holding, the legal duty running from design professionals to contractors for project losses, is not a universally accepted proposition. Many states hold that there is no duty, and one of the predominant reasons is the economic loss doctrine.

Last of all, this was a ruling made on the pleadings. The court was assuming that the Engineer's allegations were true and then only deciding whether the allegations of the claim were legally sufficient.

Even with those caveats, this holding is worthy of consideration.

Conclusion

The Engineer raised enough points that this ruling should cause contractors to take a pause before blaming design professionals for problems on projects. We do not know what evaluation the contractor in this case did prior to expressing the opinion that the design was "faulty." Regardless, with the potential liability lurking, contractors should be wary of asserting to others—particularly the owners—that the problems on the project are attributable to their collaborative partners, the design professionals. The holding gives the design profession one more arrow in its quiver in the effort to force a meaningful evaluation of its design and potential liability. And, in the event the appropriate standards are not met, a potential argument for a remedy in tort exists.


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