On May 3, 2016, Division 2 of the Washington Court of Appeals issued a decision that renders seemingly moribund the economic loss rule and extends the reach of the independent duty doctrine (“IDD”) against design professionals. The case of Pointe at Westport Harbor Homeowners’ Association v. Engineers Northwest, Inc. P.S., 193 Wn. App. 695,
KIRO 7 Interviews Joe McCarthy on Pitfalls of Washington Condo Act – Developers Beware!
Joseph McCarthy, a real estate attorney in Stoel Rives’ Seattle office, was recently interviewed by television station KIRO 7 in Seattle for a segment titled “Law meant to protect Wash. homeowners instead pushing up condo prices.” The piece discusses how the consumer warranties contained in the Washington Condominium Act, found at Chapter 64.34 RCW, fostered
Recent Survey Lauds Integrated Project Delivery (IPD), But Are There Risks with IPD?
According to an October 15, 2015 report published in the Engineering News-Record, covering the broadest survey performed to date on IPD, the industry is moving toward more collaborative contracting schemes, with what appears to be an overwhelmingly positive response strongly supporting risk and reward sharing multi-party agreements. Conducted by the University of Minnesota and
Court of Appeals affirms Brightwater judgment, reviews law regarding differing site conditions and surety obligations
On November 9, 2015, Division One of the Court of Appeals affirmed a 2012 King County trial court judgment that joint-venture tunneling contractor Vinci Construction Grands Projets/Parsons RCI/Frontier-Kemper (VPFK) was liable to King County for $144 million in damages and attorney fees.
The case arose from the Brightwater project, a wastewater treatment plant north of Woodinville with a tunnel system that conveys wastewater to the plant and treated water to a marine outfall in Puget Sound. VPFK was awarded a $212 million contract to build two segments of the 13-mile tunnel system. Unfortunately, VPFK’s two tunnel-boring machines broke down several hundred feet beneath Lake Forest Park and Bothell. The machines required extensive repairs that threatened to delay the completion of the overall project.
VPFK repaired one machine and completed one tunnel segment, but King County did not accept the lengthy delay and additional cost proposed for the repair of the second machine. King County hired Jay Dee Coluccio to complete the remaining tunnel segment between Shoreline and Lake Forest Park. The Brightwater project began full operation in late 2012.
King County sued VPFK and its sureties for approximately $156 million, based on its costs arising from project delays and design modifications. VPFK counterclaimed for approximately $70 million, arguing that its delays were excused by differing site conditions and defective project design. King County acknowledged some of VPFK’s claims totaling about $4.7 million.
After a nearly three-month trial, the jury awarded $156 million in damages to King County, offset by $26 million to VPFK for its counterclaims. The court awarded King County its attorney/expert fees in the approximate amount of $14 million, for a net judgment of $144 million.
The trial and appeal involved a number of interesting issues, two of which are summarized here.
Key Aspects of Joint Check Agreements
Joint checks are a useful tool in the construction industry to give owners and prime contractors peace of mind that lower-tier subcontractors or suppliers are being paid and potential lien claims are avoided. But joint check agreements and the subsequent actions can result in unintended consequences and liability. In my recent article for the Daily
New Amendment to Washington’s Contractor Registration Act
A recent legislative amendment to the Washington Contractor Registration Act (the “CRA”) underscores the need for residential property developers to assess whether the development activities they perform on their Washington projects constitute those of a “contractor” and thus require registration with the Department of Labor and Industries. On April 22, 2015, Washington Governor Jay Inslee
Contract Conflict Bears a Cautionary Tale
In the haste to get design and construction moving on real estate projects, one may lose sight of important lien priority issues when negotiating and executing contracts. In my recent article for the Daily Journal of Commerce, I discuss a notable Washington appellate case that addresses a lien priority issue in the context of
Beware of LEED Minimum Program Requirements
In my latest Daily Journal of Commerce Construction column, I discuss some the potential risks for project teams to consider when drafting construction agreements under the current version of the LEED building rating program (3.0). Version 3.0 provides for Minimum Program Requirements ("MPRs") which a project must comply with to be certified under the LEED
Pay Attention to Your Contract Terms and Scope – Recent Washington Supreme Court Decision Reshapes Independent Duty Doctrine
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.
Are LEED certification challenges on the horizon?
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