DESIGN PROFESSIONAL PROJECT DOCUMENTATION AND CLAIMS: EMERGING LEGAL TRENDS. Brennan, Manna & Diamond, LLC

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1 DESIGN PROFESSIONAL PROJECT DOCUMENTATION AND CLAIMS: EMERGING LEGAL TRENDS 1 Brennan, Manna & Diamond, LLC Robert A. Hager, Esq. Oswald Insurance All Ohio Design Professional Conference April 27, 2016

2 PART ONE DISCOVERY BURDENS AND RESPONDING TO SUBPOENAS: JUST SAY NO? 2

3 WHAT IS DISCOVERY? Exchange of information between the parties in a lawsuit Includes information regarding witnesses, documents and other evidence each party may use to present its case at trial Enables parties to evaluate opponents case and prepare response prior to trial Permits a full and fair hearing after consideration of all the facts Prevents trial by ambush 3

4 E-DISCOVERY What is e-discovery? e-discovery is one of the formal processes of exchanging information before trial Involves request, retrieval and production of ESI ( Electronically Stored Information ) 4

5 WHY IS IT IMPORTANT TO DISCUSS E- DISCOVERY? of information created today is first generated in digital format. Electronic documents and communications are an integral part of most businesses. of corporate records are stored in electronic format. of electronic information is never printed on paper. 5

6 HOW DOES THE SUBPOENA DISCOVERY PROCESS WORK? Subpoenas are commonly used in civil litigation to obtain evidence from individuals, corporations, and other entities who are not parties to a lawsuit 6

7 FIRST STEPS IN RESPONDING TO A SUBPOENA Alert key employees (general counsel, corporate officers, etc.) Calendar deadlines Contact your insurance representative Consider engaging outside counsel 7

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9 DO YOU IMMEDIATELY RESPOND TO THE REQUEST? o Begin document collection and review? o Provide the requested documents (or testimony)? 9

10 OR DO YOU JUST SAY 10

11 BENEFITS OF RETAINING OUTSIDE COUNSEL Counsel Can Help You Determine Appropriate Response Options: Issue a Litigation Hold Serve specific written objections Move to Quash or Modify Move for a Protective Order Attempt to informally resolve the issue 11

12 COMPLY WITH OR RESIST THE SUBPOENA? Fed.R.Civ.P. 45 bestows broad enforcement powers upon the court to ensure compliance with subpoenas, while avoiding unfair prejudice to persons who are the subject of a subpoena's commands. The Rules afford nonparties special protection against the time and expense of complying with subpoenas. Rule 45(c)(1) expressly states that the court issuing the subpoena must enforce the duty of the party or attorney responsible for issuing and serving a subpoena to take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena. 12

13 COMPLY WITH OR RESIST THE SUBPOENA? Does the subpoena request the production of sensitive or proprietary information? Courts may quash or modify a subpoena that seeks trade secret or other confidential commercial information Issues may be resolved by using a confidentiality agreement or protective order: Documents produced can only be used for the purpose of the litigation Limit on who can view the documents Require the documents to be filed under seal Prompt return or destruction of the documents at the conclusion of the lawsuit 13

14 COMPLY WITH OR RESIST THE SUBPOENA? Are large volumes of documents and/or ESI (Electronically Stored Information) sought? Recipient must produce responsive materials in the form in which they are ordinarily maintained or in a reasonably usable form Recipient does not need to produce the same ESI in more than one form Recipient does not need to provide ESI from sources that are not reasonably accessible because of undue burden or cost, such as electronic data stored on backup tapes 14

15 COMPLY WITH OR RESIST THE SUBPOENA? Does the attorney-client privilege, work product doctrine or some other recognized privilege or protection apply? Even potentially responsive documents may be withheld from production based on the attorney-client privilege, work product doctrine or some other recognized privilege or protection Counsel should conduct the pre-production document review Only those non-privileged documents that fall within the scope of the subpoena should be produced Materials withheld on privilege grounds will require the creation of a privilege log, absent agreement or court order 15

16 COMPLY WITH OR RESIST THE SUBPOENA? Grounds for Objections: Insufficient time to comply Seeks irrelevant evidence Requests privileged or other protected information. Undue burden or expense Requests trade secret or other confidential business information Requests unretained expert's opinion or information Vague or ambiguous requests Improper service Issued out of the wrong court 16

17 COMPLY WITH OR RESIST THE SUBPOENA? Have you been adequately served? Were witness fees required and tendered at the time of service? Is production required more than 100 miles from where the subpoena recipient lives, works, or regularly transacts business in person? Other technical defects on the face of the subpoena? Does the subpoena allow reasonable time to comply? 17

18 CAUTION: OBJECTIONS MAY BE WAIVED Fed. Rule 45(c)(2)(B) provides that an entity served with a subpoena has fourteen (14) days (or before the time specified for compliance) to serve the party seeking the documents with written objections. Bailey Indus., Inc. v. CLJP, Inc., 270 F.R.D. 662 (N.D. Fla. 2010) Nonparty recipient of subpoena waived objection to subpoena on basis of proprietary information or trade secret from nonparty recipient's counsel to subpoena's proponent, which indicated he might need to redact certain information was insufficient Redacted documents were not themselves proper written objection since they stated no objection and provided no explanation for redactions 18

19 DISCOVERY BURDENS AND RESPONDING TO SUBPOENAS: JUST SAY NO? In summary: Counsel is available to assist Burdensome requests may be quashed or limited Confidential and privileged documents must be protected Timely objections must be asserted or else waived 19

20 PART TWO PROJECT SAFETY: A DESIGN PROFESSIONAL RESPONSIBILITY? 20

21 DESIGN PROFESSIONAL LIABILITY FOR PROJECT AND SITE SAFETY Generally design professionals are not liable for construction site injuries Limited exceptions where there is a contractual duty to supervise work Personal injury attorneys are now looking at design professionals as potential defendants 21

22 McKean v. Yates Eng'gCorp., No CA COA, 2015 WL (Miss. Ct. App. Sept. 1, 2015), reh'g denied (Mar. 1, 2016) Employees of subcontractor, who were injured when scaffolding collapsed at construction site, brought negligence action against architect, engineer, and property owner. Court granted summary judgment to defendants. The Court of Appeals held: Engineer's design drawings for construction of scaffolding were not the cause of scaffolding's collapse; Engineer had no duty to inspect scaffolding; Architect had no duty to ensure that scaffolding design was adequate. 22

23 LeBlancv. Logan Hilton Joint Venture, 463 Mass. 316, 974 N.E.2d 34 (2012) Estate of maintenance electrician, who was electrocuted as he began work upon transmission equipment at hotel, brought wrongful death action against owner, architect, architect's consultant, electrical subcontractor, general contractor, manufacturer of electrical switchgear equipment, and equipment's installer. Trial Court granted summary judgment in favor of architect and consultant on co-defendants' cross-claims. The Supreme Judicial Court held: expert testimony was not required to establish professional standard of care; genuine issues of material fact regarding causation precluded summary judgment for design professionals where, as here, there was evidence that the Design Team actually knew of the deficiencies but failed to fulfill its contractual duty to report the deficiencies to Hilton, and where the deficiencies presented so obvious a risk to the safety of any person who would operate the switchgear... 23

24 DESIGN PROFESSIONAL LIABILITY FOR PROJECT AND SITE SAFETY What does your contract say about safety? Safety and supervisory responsibilities should be clearly addressed 24

25 AIA DOCUMENT B101 CONTAINS THE FOLLOWING PROVISIONS: The Architect shall advise and consult with the Owner during the Construction Phase Services. The Architect shall have authority to act on behalf of the Owner only to the extent provided in this Agreement. The Architect shall not have control over, charge of, or responsibility for the construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, nor shall the Architect be responsible for the Contractor s failure to perform the Work in accordance with the requirements of the Contract Documents. The Architect shall be responsible for the Architect s negligent acts or omissions, but shall not have control over or charge of, and shall not be responsible for, acts or omissions of the Contractor or of any other persons or entities performing portions of the Work In accordance with the Architect-approved submittal schedule, the Architect shall review and approve or take other appropriate action upon the Contractor s submittals such as Shop Drawings, Product Data and Samples, but only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. Review of such submittals is not for the purpose of determining the accuracy and completeness of other information such as dimensions, quantities, and installation or performance of equipment or systems, which are the Contractor s responsibility. The Architect s review shall not constitute approval of safety precautions or, unless otherwise specifically stated by the Architect, of any construction means, methods, techniques, sequences or procedures. The Architect s approval of a specific item shall not indicate approval of an assembly of which the item is a component. 25

26 Yow v. Hussey, Gay, Bell & DeyoungInt'l, Inc., 201 Ga. App. 857, 412 S.E.2d 565 (1991) Worker brought action against architect/engineer for personal injuries sustained at construction site when he stepped into uncovered storm drain. Yow court held that in the face of these AIA contract provisions, the architect/engineer did not expressly or impliedly have control over or assume any responsibility for construction site supervision or safety, including alerting construction workers and others affected by the construction of potential hazards at the site. Under this circumstance of a total absence of contractual responsibility for site supervision and safety, [the architect/engineer] could not be held liable in tort for claims of common law simple negligence regarding site safety. 26

27 DESIGN PROFESSIONAL LIABILITY FOR PROJECT AND SITE SAFETY Ohio courts have similarly held that an architectural/engineering firm is not liable in tort for construction site injuries unless it actively participates in construction work or explicitly assumes responsibility for project safety. See, e.g., Nicholson v. Turner/Cargile, 107 Ohio App. 3d 797, 806 (10th Dist.1995). In Nicholson, the survivors of a group of ironworkers killed in a structural steel collapse alleged that the defendant architectural/engineering firm failed to stop or prevent workers from installing cantilevered beams with an unsafe leveling procedure. 27

28 DESIGN PROFESSIONAL LIABILITY FOR PROJECT AND SITE SAFETY In affirming summary judgment granted in favor of the design firm, the Nicholson court explained: an architect or engineer generally has no duty to the employees of independent subcontractors, unless the architect or engineer actually participates in subcontractors work or explicitly contracts for safety responsibilities. Id. at 805. Provisions to those similar in Yow shielded the architectural/engineering firm from liability from the negligent construction procedure that was employed. Id. at The Nicholson court held that because on-site inspections were for the purpose of insuring that the construction met with the architect s design specifications, [the architectural/engineering firm] did not have a contractual duty to make the construction site safe for the general construction workers. Id. at

29 DESIGN PROFESSIONAL LIABILITY FOR PROJECT AND SITE SAFETY Lack of safety responsibility may permit early dismissal Design professionals should not actively participate in contractor work, including project safety Limit contract responsibilities to supervise work Read your contract and confirm no responsibility for site safety 29

30 PART THREE WHAT IS THE ECONOMIC LOSS DOCTRINE AND HOW CAN IT BE USED TO RESOLVE CLAIMS EFFECTIVELY? 30

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32 ECONOMIC LOSS DOCTRINE Court-developed doctrine adopted by a majority of U.S. states and jurisdictions Prohibits a tort recovery (negligence, strict liability, etc.) when damage results in economic loss, but does not cause personal injury or damage to any other property Precludes contracting parties from asserting tort causes of action as a means to recover economic or commercial losses arising out of a contract 32

33 WHAT ARE ECONOMIC LOSSES IN THE CONTEXT OF CONSTRUCTION? Cost to repair or replace defective materials Lost profits, revenue, and costs Economic Losses Cost to repair damage to a structure Loss of use or delay in utilization of property for its intended purpose Diminution in value of a damaged structure not repaired 6 Bruner & O'Connor Construction Law 19:10. 33

34 ECONOMIC LOSS DOCTRINE Owner Contractor Architect Subcontractor #1 Subcontractor #2 Consultant 34

35 HOW DOES THE ECONOMIC LOSS DOCTRINE WORK IN OHIO? Floor Craft Floor Covering, Inc. v. Parma Cmty. Gen. Hosp. Ass'n, 54 Ohio St. 3d 1, 560 N.E.2d 206 (1990) Flooring contractor sued hospital and architect to recover damages caused by defect in flooring Court dismissed claim against architect for failure to state claim Court of Appeals affirmed Ohio Supreme Court held that flooring contractor could not sue architect for economic injury due to allegedly defective plans and specifications in absence of direct contractual relationship between contractor and architect 35

36 HOW DOES THE ECONOMIC LOSS DOCTRINE WORK IN OHIO? Internatl. Fid. Ins. Co. v. TC Architects, Inc., Ohio-4869 Surety and assignee of construction contractor brought action against architects on construction project alleging architects caused delays that led contractor to default on contract with property owner Architects moved for summary judgment. Court granted the motion Court of Appeals held architects had no contractual privity with contractor and could not be liable to contractor for negligence 36

37 HOW DOES THE ECONOMIC LOSS DOCTRINE WORK IN OHIO? The exception: Clevecon, Inc. v. Ne. Ohio Reg'lSewer Dist., 90 Ohio App. 3d 215, 628 N.E.2d 143 (1993) Contractor which constructed sewer project asserted malpractice claims to recover delay damages from architect Court denied architect's motion for summary judgment and for directed verdict Court of Appeals held: lack of privity between contractor and architect was not absolute bar to malpractice action seeking economic loss damages; whether architect's control over project was sufficient nexus to substitute for privity of contract was fact question precluding summary judgment. 37

38 HOW DOES THE DOCTRINE WORK IN OHIO? Life Time Fitness, Inc. v. Chagrin Valley Eng'g, Ltd., No. 1:13CV566, 2014 WL , at *1 (N.D. Ohio Dec. 4, 2014) Design of the parking area of a Life Time Fitness health-club facility Chagrin Valley provided civil engineering services Plaintiffs filed lawsuit seeking to hold Chagrin Valley liable for alleged damages related to the deterioration, reengineering, and remediation of the parking lot Plaintiffs claimed Chagrin Valley failed to meet standard of care Negligence claims and breach-of-contract claim premised upon the same facts and circumstances 38

39 HOW DOES THE DOCTRINE WORK IN OHIO? Judge Christopher Boyko held: Plaintiffs negligence claims are also barred by the economic loss rule since they allege only monetary damages incurred in remediating the damage to the parking surface. Plaintiffs would be bound to recover only for injuries contemplated by the original agreement. LTF Real Estate Company FCA Construction Company, Ltd. H.C. Nutting Chagrin Valley Engineering, Ltd. 39

40 HOW DOES THE DOCTRINE WORK IN OTHER JURISDICTIONS? In Bilt Rite Contractors, Inc. v. Architectural Studio, 581 Pa. 454, 866 A.2d 270, 287 (Pa.2005), the Pennsylvania Supreme Court held that a building contractor can maintain a claim for negligent misrepresentation against a design professional without privity of contract, stating: [W]e hereby adopt Section 552 [of the Restatement (Second) of Torts] as the law in Pennsylvania in cases where information is negligently supplied by one in the business of supplying information, such as an architect or design professional, and where it is foreseeable that the information will be used and relied upon by third persons, even if the third parties have no direct contractual relationship with the supplier of information. 40

41 HOW DOES THE DOCTRINE WORK IN OTHER JURISDICTIONS? Trinity Contracting, Inc. v. Mun. Sewage Auth. of Twp. of Sewickley, No. 523 C.D. 2015, 2015 WL (Pa. Commw. Ct. Dec. 15, 2015) Contractor filed suit against township's municipal sewage authority and design professional for breach of contract and negligent misrepresentation relating to construction of sewage treatment plant Court entered judgment in favor of contractor. Parties appealed 41

42 HOW DOES THE DOCTRINE WORK IN OTHER JURISDICTIONS? Appeals court cited Bilt Rite Contractors, Inc. and held that design professional negligently misrepresented geotechnical information to contractor where: Design professional had actual notice of geotechnical data 14 months before bid solicitation but failed to revise project design in light of that data Design professional represented to contractor that project could be constructed as originally designed despite knowing that geotechnical report showed otherwise Court determined it was not contractor's burden to independently verify representations that township and design professional made to contractor during bidding process 42

43 HOW DOES THE DOCTRINE WORK IN OTHER JURISDICTIONS? GongloffContracting, L.L.C. v. L. Robert Kimball & Associates, Architects & Engineers, Inc., 2015 PA Super 149, 119 A.3d 1070 (2015) Steel subcontractor brought action against architect for negligent misrepresentation, alleging it incurred numerous problems on construction project due to improper roof design Architect filed motion for judgment on the pleadings based on the economic loss doctrine Court granted the motion Appeals Court reversed and held architects are potentially subject to liability for negligent misrepresentation claims when it is alleged that those professionals negligently included faulty information in their design documents 43

44 WHAT SHOULD THE ECONOMIC LOSS DOCTRINE MEAN TO YOU? Although exceptions may apply, the Economic Loss Doctrine is a powerful tool which may be used to avoid or limit claims by third parties 44

45 PART FOUR STATUTES OF LIMITATION: AM I PROTECTED? 45

46 STATUTE OF LIMITATIONS What are statutes of limitation? Statutes of limitations are laws passed by a legislative body to set the maximum time after an event when legal proceedings may begin. Represents a filing deadline after which all claims are barred. 46

47 RATIONALE The statutes reflect the general idea that as more time passes after an event, the more likely it is that evidence will be lost, destroyed, or forgotten Bring claims within a reasonable amount of time i.e. within a short enough time period to avoid the problems of defective memory, lost evidence, lost witnesses, or other similar problems 47

48 HOW DO STATUTES OF LIMITATIONS WORK? For the most part, each state s statute has the same function: The statutes serve as a defense when a lawsuit is filed. If you are sued after the period of time specified in the statute of limitations for a claim passes, the court will dismiss the claim against you. However, the statutes vary by state in two ways: 1. By time period; and 2. By what act or event sets the statute in motion 48

49 STATUTES VARY BY WHAT ACT OR EVENT SETS THE STATUTE IN MOTION Some statutes state, or have been interpreted by state courts to mean, that the statute of limitations begins to run or start from the time of the negligent act. Other statutes state, or have been interpreted by state courts to mean, that the statute of limitations begins to run or accrues when the party discovered, or should have discovered, the damage or injury giving rise to the claim. 49

50 OHIO STATUTE OF LIMITATIONS FOR PROFESSIONAL NEGLIGENCE The applicable statute of limitations in Ohio for a claim of professional negligence against architects and engineers is R.C (D) The statute provides that claimants have four years to bring their claims, but the statute does not explicitly indicate when the four year period begins to run 50

51 OHIO CASES Life Time Fitness, Inc. v. Chagrin Valley Engineering, LTD, 2014 U.S. Dist. LEXIS (N.D. Ohio Dec. 4, 2014) Plaintiff asserted a professional negligence claim based on the alleged failure to design the parking lot in a manner which complied with the highest industry standards and in a manner demonstrating good professional skill and judgment. Claimed Chagrin's negligent design caused them to suffer monetary damages incurred in remediating the damage to the parking surface. Chagrin responded that the statute of limitations has expired on negligence claims. 51

52 Chagrin argued that the negligence claims accrued at the time the design was completed, which was on April 8, 2008 or when the when the act is committed based on Flagstar Bank, F.S.B. v. Airline Union's Mtge. Co., 128 Ohio St.3d 529, 536, 947 N.E.2d 672 (2011). Plaintiffs argued that their negligence claims accrued at the time of injury based on a delayed-damages rule from Kunz v. Buckeye Union Ins. Co., 1 Ohio St.3d 79, 81, 437 N.E.2d 1194 (1982). Plaintiffs suggested they were not injured until the parking lot failed in January The Court held that claims for professional negligence against engineers for design services accrue at the time the engineering design was complete. Plaintiffs had until April 8, 2012 to bring the cause of action and were barred from bringing their claims for professional negligence. 52

53 CONCLUSION FROM OHIO CASE LAW The four year period in R.C (D) accrues when the architect or engineer committed the negligent act i.e. when the architect or engineer finished its design and turned it over to the owner. 53

54 COMPARE OHIO TO WISCONSIN InCrawford v. Shepherd, a Wisconsin court applied Wis. Stat (5) in determining whether a plaintiff s claim of negligence in construction against an architect was time-barred. The statute provided that claimants had 6 years to bring their claims. The Wisconsin court determined that the 6 period in the statute began to run when the claimant discovered, or should have discovered, his damage or injury. Crawford v. Shepherd, 86 Wis.2d 362, 272 N.W.2d 401 (App.1978). 54

55 STATUTES VARY BY TIME PERIOD 55 State Statute Language of Statute Washington RCWA (1)(g) The applicable statute of limitations expires, regardless of discovery six years after the termination of the [design] services. Pennsylvania 42 Pa.C.S.A West Virginia W. Va. Code Illinois ILCS CH 735 5/ Michigan M.C.L.A An action brought against any person lawfully performing or furnishing the design, planning, supervision or observation of construction must be commenced within 12 years after completion of construction Claims in tort for professional negligence shall be brought within two years Actions against any person for an act or omission of such person in the design, planning, supervision, observation or management of construction shall be commenced within 4 years A person shall not maintain an action against any state licensed architect or professional engineer performing or furnishing the design unless the action is commenced within six years

56 WHAT SHOULD THE STATUTE OF LIMITATIONS MEAN TO YOU? Which state statutes of limitation may apply to your project? When does the statute begin to run? 56

57 THE STATUTE OF LIMITATIONS TIES INTO DISCOVERY Among other things, the statutes affect how long you should retain your records or documents in connection with a project. The amount of time you must retain documents can vary widely amongst the states; therefore, it is important to fully understand how the statute of limitations may apply when creating a document retention policy. 57

58 CONCLUSION 58

59 QUESTIONS? Contact Information: Robert A. Hager Brennan, Manna & Diamond, LLC 75 E. Market Street Akron, Ohio (330)

60 PART FIVE WARRANTY CLAIMS 60

61 IMPLIED WARRANTIES What is an Implied Warranty? Implied warranties are warranties that the law presumes you have given to the other party. Even if you never make any written warranty or guaranty, some state courts will find you liable for certain, implied warranties unless you explicitly disclaim them. 61

62 HOW DO IMPLIED WARRANTIES WORK? Implied warranties are not uniformly applied in different jurisdictions. Just as with the economic loss doctrine, whether implied warranties apply may have a great impact upon the ultimate success of parties to litigation, so it is important to recognize when and how an implied warranty may apply to your project based on state law. 62

63 OHIO S TAKE ON IMPLIED WARRANTIES Ohio law does not recognize the existence of any implied warranties by architects. To the contrary, Ohio law is clear that an architect s undertaking does not imply any warranties or guarantee a perfect plan or satisfactory result. See Craft Gen. Contractors, Inc. v. City of Urbana, 10th Dist. No. 81AP-346, 1982 WL 3960 at *4 (Feb. 2, 1982) See also Menifee v. Ohio Welding Products, Inc., 1st Dist. Hamilton No. A , 1984 WL 4171, *4 (Jan. 4, 1984) aff'd, 15 Ohio St.3d 75, 472 N.E.2d 707 (1984) 63

64 COMPARE OHIO TO ARIZONA In North Peak Construction, LLC v. Architecture Plus, Ltd, a general contractor sued an architect for breach of implied warranty and negligence. 254 P.3d 404 (Ariz. Ct. App. 2011). The plaintiff, a general contractor, sued the architect after plaintiff was required to demolish construction work built pursuant to the Architect s plans. The architect s plans built plaintiff s home facing an unfavorable direction. The demolition and reorientation increased the cost of the project by approximately $160, Plaintiff alleged the Architect breached the implied warranty by providing deficient and substandard workmanship in designing and orienting the custom home on the lot without maximizing the views of the city. The court held that even without privity of contract, breach of implied warranty is a valid cause of action against a design professional and can be brought in addition to a claim for negligence. 64

65 WHAT SHOULD IMPLIED WARRANTIES MEAN TO YOU? Just as design professionals must be aware and attentive of whether the economic loss doctrine may apply, and what statute of limitations applies to a project, design professionals must be aware and attentive of what implied warranties may apply to a project. States vary in recognizing whether implied warranties apply to design professionals; thus, it is recommended that you consult your attorney in determining what warranties may apply. 65