As design professionals, we work hard to meet all our clients’ needs. We want to deliver a project that makes the best use of their available space and budget, meets their schedule, and stands up to the test of time. We want to have laser-like focus on understanding what our client wants and coming up with solutions to make that happen, because meeting client expectations is job #1. In some states, liability from an unusual source may push us to make it job #2, and consider the contractor’s needs, as well. A recent article from Civil Engineering magazine examines an interesting liability situation where an engineer faces potential liability for the contractor’s delay. In some states, the economic loss doctrine establishes a legal “shield” that bars a contractor from suing a designer for financial damages when the contractor does not have a contract with the designer, but in states that don’t recognize the doctrine, there’s a strong potential for unanticipated liability to arise.
The case described in the article involves an $8.4 million contract between the Greater LaFourche Port Commission and James Construction Group for the construction of a steel sheet piling bulkhead and mooring bits in Port Fourchon, Louisiana. Picciola & Associates, Inc., was retained by the port to provide professional engineering services on the project, including design and construction administration.
The dispute involves a portion of the project referred to as the Delmar Site, which comprised a bulkhead, two crane pads, and a crane pad foundation. The contract called for James to pay liquated damages of $2,000 per day if it failed to complete the Delmar Site within 210 days of the notice to proceed. However, the location of the Delmar Site was moved, and James received a change order that increased the contract price and contract time. As a result, James was 133 days late in finishing the Delmar Site, and the port withheld $266,000 in liquidated damages as well as the contract balance, prompting James to sue both the port and Picciola.
James and the port have settled their dispute, but the construction company has continued its separate suit against Picciola, arguing that James detrimentally relied on incorrect plans and information from Picciola, including alleged statements to the effect that the contractor would not be required to complete the Delmar Site within 210 days of the notice to proceed and that the liquidated damages would be waived. Picciola contends that it had been acting as an agent of the port and had no separate duty of care to James. While Picciola’s initial motion for summary judgment was granted by the trial court, who found that the designer was acting as a professional engineer on behalf of the port and therefore owed no separate duty of care to James, an appellate court decision has sent the dispute back to trial, citing Louisiana law that allows James to assert a cause of action in tort based on Picciola’s alleged negligence.
If Louisiana recognized the economic loss doctrine, James wouldn’t have a claim against Picciola. The contractor’s claim would be with the port, and the port, if it believed that Picciola had been negligent in performing its services for the port, could bring a claim against Picciola for damages arising from that negligence. The engineer would be liable, not because it didn’t take care of the contractor, but only to the extent it didn’t take care of its client. It’s not possible to determine whether Picciola did anything wrong just by reading the appellate court’s decision, but it’s worth noting that thus far the port hasn’t brought any claim against the engineer.
While the jury sorts through all the questions of fact in this case, the question we all should be asking is: if an engineer acts as an owner’s representative and makes decisions on behalf of the owner, should the engineer be exposed to financial liability for third parties that may arise from those decisions? If designers have to worry about those risks, will they truly be able to act in their clients’ best interests, or will they make decisions based on the possible financial outcome for the contractor? Laws that require designers to have mixed loyalties on a project aren’t in anyone’s best interest, and this case is a prime example of why the economic loss doctrine is so important in helping design professionals keep our focus on doing what’s best for our clients.