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Archive for the ‘Construction and Design Professional’ Category

Professional Negligence Claim Against Georgia Design Professional Survives Economic Loss Rule

Posted on: November 27th, 2017

By: Cheryl H. Shaw

Georgia’s economic loss rule bars recovery in tort for economic losses arising from a contract.  The idea behind the rule is that simple: When a dispute involves strictly economic losses, the parties should resolve their claims based on the standards set out in their contract and not judicially-created tort duties.  The economic loss rule offers significant protection to design professionals, but a recent decision by the Georgia Court of Appeals signals further erosion of that protection.

In Atlantic Geoscience, Inc. v. Phoenix Development & Land Investment, LLC,[1] a residential developer hired an engineering firm to perform an environmental site assessment for a 45-acre property under consideration for purchase and development.  The engineer’s report concluded that an adjacent landowner had encroached on and was using a small portion of the property as a “soil/stone storage yard,” but did not recommend any additional investigation.  Relying on the report, the developer bought the property and began pre-development work.

During discussions with the adjacent landowner the following year, it came to light that the “encroachment” was actually a “landfill” that rendered the property not viable for development as originally planned.  Business deals fell through, the developer was unable to secure financing, and the bank ultimately foreclosed on the property.

The developer sued the engineer for professional negligence, a tort-based claim. The engineer moved for summary judgment under Georgia’s economic loss rule which provides that “a contracting party who suffers purely economic losses must seek its remedy in contract and not in tort.”  The engineer argued the developer did not suffer any personal injury and did not claim any injury to property or diminution in value; instead, the developer sought to recover the money it would have received had the development proceeded as intended, plus pre-development expenses (i.e., purely economic losses).  Thus, the engineer reasoned, the claims were barred by the economic loss rule.

The trial court agreed with the engineer, but the Court of Appeals reversed, citing the “misrepresentation exception” to Georgia’s economic loss rule and holding that the case, at its core, involved the engineer’s alleged misrepresentation in failing to disclose the presence of the landfill.  It was of no consequence that the alleged misrepresentation was made by the engineer in breach of its professional duties: “Georgia law permits the recovery of certain types of economic losses in an action, such as this, were the plaintiff alleges professional negligence resulting in a misrepresentation.”[2]  The Court then sent the case back to the trial court to determine liability and damages.

The Atlantic Geoscience case is further evidence that Georgia’s economic loss rule does not insulate design professionals from the tort of negligent misrepresentation; thus, an allegation of misrepresentation can allow plaintiff to escape the rule’s operation. This can result not only in increased exposure to direct clients, but liability to third-parties who claim economic losses as a result of the design professional’s services.  Against this backdrop, it is important for design professionals to understand how the laws of each state apply and utilize contractual provisions that help mitigate risk.  For more information, contact Cheryl H. Shaw at [email protected].

[1]   341 Ga. App. 81 (2017).

[2]   Id. at 86.

 

Fault Not Attributable to US Army Corps of Engineers in Hurricane Katrina Death: A Lesson in Apportionment

Posted on: November 1st, 2017

By: Cheryl H. Shaw

82-year old Frances Robinette died in a New Orleans nursing home four days after Hurricane Katrina struck. Robinette had been a resident of the facility for two years and suffered a host of medical issues including congestive heart failure and dementia.  Shortly after Katrina made landfall, water entered the nursing home and the facility lost all electrical power. Temperatures soared to over 100 degrees with no running water or working toilets. Staff moved residents to the second floor and attempted to keep them cool with damp washcloths and cardboard fans, but efforts were unsuccessful. Robinette died of heat stroke and dehydration.

Robinette’s family filed a wrongful death action against the nursing home, alleging the facility violated a mandatory evacuation plan by leaving Robinette and more than 100 other residents behind in “extreme conditions.” Following a two-week trial, the jury found the nursing home 100% at fault for Robinette’s death and awarded the family over $1.3M in damages.

On appeal, the nursing home argued the US Army Corps of Engineers (who was not named as a defendant in the lawsuit) should have been listed on the verdict form and the jury should have been allowed to assign a percentage of fault to the Corps for negligent design, construction, and maintenance of the city’s hurricane protection system. It was wrong, the nursing home argued, for the trial court to exclude evidence of the Corps’ alleged negligence and to refuse to allow the jury to assign fault to the Corps for the role it played in Robinette’s death.

Noting Louisiana’s pure comparative fault system creates a mandatory right to quantify the fault of “all persons” who caused or contributed to a plaintiff’s damages, the Court agreed with the nursing home that evidence of the Corps’ alleged fault should have been admitted at trial. However, the Court went on affirm the jury’s verdict, concluding that any negligence by the Corps was not the “cause in fact” of Robinette’s death. The Court reasoned that Robinette did not die because storm water flooded the building, but because of sweltering heat caused by the nursing home’s failure to evacuate and the inadequacy of its back-up generators: “We cannot say that but for the conduct of the Corps of Engineers, Mrs. Robinette would not have died from heat stroke on the second floor of the [nursing home] five days after the City of New Orleans had issued a mandatory evacuation order.” Robinette v. Lafon Nursing Facility of the Holy Family, 223 So. 3d 68 (2017).

Georgia’s apportionment rules are different from Louisiana’s and do not contemplate a “cause in fact” standard, but Robinette serves as a good reminder of some basic principles. In Georgia, a notice of non-party fault must be filed at least 120 days before trial and state why the non-party is believed to be at fault. O.C.G.A. § 51-12-33.  Additionally, a defendant seeking to apportion fault to a non-party must be prepared to shoulder the burden of proof regarding the applicable standard of care. If the non-party is a professional (like an architect or an engineer), expert testimony may be required. See Union Carbide Corp. v. Fields, 315 Ga. App. 554 (2012).

Apportionment is an important tool in a defendant’s arsenal.  Every percentage of fault the jury attributes to another entity is a percentage of damages you do not have to pay. FMG’s team of experienced Construction Law litigators can help you in defending—and avoiding—liability claims.  If you have questions or would like more information, contact Cheryl H. Shaw at [email protected].

When is Engineering Required? City of Atlanta Issues New Code Interpretation

Posted on: October 18th, 2017

By: Cheryl H. Shaw

The City of Atlanta recently published its second International Residential Code interpretation of 2017, confirming that structural designs utilizing Structural Composite Lumber (SCL) must be designed and sealed by an engineer licensed to practice within the State of Georgia. The stated purpose of the binding interpretation is to provide consistency between the Office of Building staff and design professionals who issue construction documents in multiple jurisdictions.

In issuing the interpretation, the City noted the IRC’s requirement that structural elements which do not conform to the prescriptive requirements of the code must be “designed in accordance with accepted engineering practice.” To this end, while visually-graded lumber is regulated by span tables within the code, SCL, a proprietary engineered wood product, does not have span tables or design values represented within the IRC. Instead, design values are furnished by manufacturers. Although manufacturers have created design software that is widely available, the only party authorized to provide an “engineered design” for structural elements is an engineer.

Accordingly, all residential construction documents submitted for permit that utilize SCL must be designed and sealed by a licensed Georgia professional engineer. In addition to identifying the type, size and manufacturer of the SLC, the engineer must provide other design-specific information.  A link to the interpretation with a complete list of requirements can be found here: 2007-IRC-002. The requirements apply to Laminated Veneer Lumber (LVL), Parallel Strand Lumber (PSL), Laminated Strand Lumber (LSL), and Oriented Strand Lumber (OSL).

Unnecessary engineering can increase construction costs, but failing to obtain required engineering can result in costly delays. Understanding when engineering is required—and when it is not—is critical to the success of your project. FMG’s Construction Law practice group is here to help. If you have questions or would like more information, please contact Cheryl H. Shaw at [email protected].

 

LOL (Limitation of Liability) Clauses in A&E Contracts: He who laughs last, laughs best

Posted on: October 11th, 2017

By: Cheryl H. Shaw

It’s no coincidence that the abbreviation for “Limitation of Liability” is LOL. That’s the reaction design professionals often get when they include an LOL clause in a contract proposal. LOL or “exculpatory” clauses limit the designer’s liability for future claims—usually to the cost of services or a fixed dollar amount. Clients frequently balk at these clauses, but since the client reaps the bulk of the rewards for a successfully completed project (vs. the designer who’s “reward” is limited to his fee), shouldn’t the client also shoulder the bulk of the risk?

In Georgia, design professionals can contractually limit their liability for negligence. However, the LOL clause must be narrowly drafted so it does not violate Georgia’s anti-indemnity statute1. This means, among other things, that the clause should limit the designer’s liability to his client only, and not to third-parties who are “strangers” to the contract. Attempts to avoid liability to third-parties may render the entire clause unenforceable even if the claim is actually asserted by the client.

Additionally, because an LOL clause contemplates satisfaction of future claims and waives substantial rights, it must be “explicit, prominent, clear and unambiguous” in the contract. In determining if a clause is sufficiently prominent, Georgia courts consider several factors, including whether the clause is contained in a separate paragraph; whether the clause has a separate heading; and whether the clause is distinguished by features such as font size.

In one case, the Georgia Court of Appeals found an LOL clause unenforceable where it was “camouflaged” in the same font as the surrounding contract provisions and was listed under the heading “miscellaneous” instead of having its own separate paragraph. Conversely, an LOL clause contained entirely in its own paragraph, in bold and underlined text, and announced in a heading that clearly informed the reader of the clause’s content was sufficiently prominent.

A well-crafted LOL clause can be an effective tool to cap exposure in the event a lawsuit is filed and should be considered when negotiating contracts for professional services. If the client does, in fact, “laugh out loud” in response to your proposal, one strategy is to provide the option: You can either perform the services without an LOL clause for one fee, or you can lower the fee if the client will accept the clause.

FMG’s Construction Law practice group is here to assist you in drafting these important contact provisions. If you have questions or would like more information, please contact Cheryl H. Shaw at [email protected].

Homebuilder Defamed By Online Reviewer

Posted on: August 8th, 2017

By: Ze’eva R. Kushner

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After approximately three years of litigation, a jury in Gwinnett County, Georgia recently found that a homebuilder had been defamed by an individual’s online review of the homebuilder and awarded the plaintiffs $120,000 in damages and $12,000 in legal fees.

As we all know, it can be difficult to determine the identity of individuals posting “anonymous” reviews on the Internet. After Kudzu.com rejected a request to remove the bad review of the homebuilder Georgian Fine Properties, LLC, one of the owners of the business, Richard S. Jacobs, made it his business to figure out who had written the negative review of his company. Mr. Jacobs figured out the identity of the author of the inflammatory review, which made it possible to bring the lawsuit against that person. As it turned out, the defendant author had never purchased a home from Georgian Fine Properties, LLC and had never been a customer or client of the business.

The Gwinnett County jury was not persuaded by the argument that the review was the personal opinion of the defendant and thus was constitutionally protected speech. Nonetheless, the homebuilder did not succeed at recovering the $1,000,000 dollars in damages allegedly having resulted from a drop in sales despite an upswing in the housing market following the publication of the defendant’s critical review. Instead, the jury reduced the damages and legal fees award by close to a factor of ten.

Even if defendant appeals the jury verdict, businesses may have recourse against “anonymous” online individuals who write unflattering reviews. The Construction Law practice group attorneys are here to assist you. Please contact Ze’eva R. Kushner at [email protected] for more information.