Claims & Disputes

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In a recent case, Donatelli v. D.R. Strong Consulting Engineers, Inc., 312 P.3d 620 (Wash. 2013), a sharply divided 5-4 opinion by the Washington Supreme Court provides further evidence that the line between Washington’s “economic loss” rule and “independent duty” doctrine remains quite blurred. 

The case arose out of an agreement between property owners, the Donatellis, and D.R. Strong Engineers, Inc. (“D.R. Strong”) for the development of the owners’ property into two short plats. Initially, D.R. Strong orally agreed to help with the county permitting process and to manage the project through recordation of the plats. According to the Donatellis, D.R. Strong told them the project would be completed in 1.5 years. After obtaining preliminary county approval for the project, which would last 60 months, D.R. Strong sent the Donatellis a written contract for engineering services. The contract detailed the engineering services and estimated fee, but was silent as to D.R. Strong’s project management role. The Donatellis alleged that D.R. Strong assumed extensive managerial responsibilities on the project and charged them four times the initial estimate. 

 

The county’s preliminary approval expired with the project incomplete. Before D.R. Strong could obtain a new preliminary approval, the Donatellis suffered financial hardship and the property was lost to foreclosure. The Donatellis then sued D.R. Strong, claiming over $1.5 million in damages and alleging breach of contract, Consumer Protection Act (“CPA”) violations, negligence, and negligent misrepresentation. The trial court granted summary judgment on the CPA claims, but denied summary judgment on the negligence claims, finding that “‘professional negligence claims can be stated even in the context of a contractual relationship.’” Id. at 622 (quoting trial court). The Court of Appeals affirmed the trial court’s ruling under the independent duty doctrine, based on the notion that engineers owe duties to their clients independent of any contractual relationship. See Donatelli v. D.R. Strong Consulting Eng’rs, Inc., 163 Wn. App. 436, 443, 261 P.3d 664 (2011). 

 

The issues for the Washington Supreme Court included whether the independent duty doctrine applied to preserve the owners’ claims for negligence (despite factual questions regarding the scope of D.R. Strong’s work) and negligent misrepresentation (predicated on D.R. Strong’s alleged misrepresentations made to induce the Donatellis to contract). The Supreme Court affirmed the Court of Appeals’ ruling and thus refined application of the independent duty doctrine to extend the reach of tort-based claims beyond any contractual agreement. 

 

In my latest Daily Journal of Commerce Construction column, I discuss generally the grounds for, and the potential consequences of, certification challenges on LEED-rated projects. As LEED-certified projects grow in popularity and abundance in the Pacific Northwest and elsewhere, all project participants need to know the basis for challenging LEED certification and the impacts arising from…

In a case of first impression in Idaho, the Supreme Court in American Bank v. Wadsworth Golf Construction Co. of Southwest, No. 39415 (Idaho Aug. 16, 2013) (slip op.), determined that priority of lien filings on a property remain subject to a lien priority analysis even after a statutory lien release bond is filed…

The Oregon Supreme Court will review two recent Court of Appeals decisions related to statutes of limitation and repose on construction projects. In the first case, Sunset Presbyterian Church v. Brockamp & Jaeger, Inc., the Oregon Supreme Court will address the following questions: (1) When the construction contract includes an accrual provision, is the …

On September 26 and 27, 2013, The Seminar Group will present its 18th Annual Oregon Construction Law seminar in Portland, Oregon. I will be speaking about Integrated Project Delivery, which is an emerging project delivery method emphasizing collaboration among project participants. Three of my partners also will be presenting: Guy Randles, program co-chair, will speak …

Washington’s lien laws, like those of other states, set forth pre-claim notice requirements that, if not satisfied, may result in the forfeiture of lien rights. The applicable statute, RCW 60.04.031, presents an interesting array of “if-then” scenarios in which the notice requirements are imposed. Generally, unless falling under one of three exempted categories, RCW 60.04.031…

The Oregon Court of Appeals recently applied the so-called “economic loss rule” to a construction dispute (Marton v. Ater Construction Co., 256 Or App 554, __ P3d __ (2013)). Among other issues, the court decided whether the prime contractor’s negligence claim against its subcontractor was barred under the economic loss rule.

Under the…

In my latest Daily Journal of Commerce Construction column, I discuss the need to know Oregon construction contracting law to avoid unwanted consequences. In Oregon, construction contracts are subject to a wide variety of legal requirements, many of which are often ignored or, in some cases, violated with disastrous results. Following link will provide a summary…

Can parties waive both the commencement and length of the statutory limitation periods for construction defect actions?  Yes, answered the Fourth Appellate District, by allowing the parties to contractually preclude the application of the “delayed discovery” rule that normally triggers the commencement of the limitation time period and affirming case law permitting the shortening of the 10-year latent limitation period to four years.  The court did hold, however, that such waiver and shortening is permitted where there are sophisticated parties, in a commercial context, and perhaps that the contract must even be highly negotiated (or at least such negotiation is available).

On June 3, 2013, in Brisbane Lodging, L.P. v. Webcor Builders, Inc. (Cal. Ct. App., June 3, 2013, No. A132555) 2013 WL 2404154, the appellate court reviewed the trial judge’s granting of summary judgment in favor of the general contractor (“Webcor”) on the grounds that a provision in the 1997 version of the AIA 201 (General Conditions to the prime agreement between Owner and Contractor) unambiguously barred all claims, contract and tort, brought more than four years after substantial completion of the project, rather than four years after the Owner discovered the alleged breach or defect and within the 10-year statute of repose.  The key language for both the trial court and the appellate court was found in provision 13.7:

“13.7 Commencement of Statutory Limitation Period

“13.7.1 As between the Owner and Contractor:

“.1 Before Substantial Completion. As to acts or failures to act occurring prior to the relevant date of Substantial Completion, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion ….” (AIA A201, Article 13.7.1.1 (Article 13.7.1.1), bolding and capitalization omitted.)