No Privity, No Problem: Louisiana Court of Appeals Holds That Project Manager Owes a Duty of Professional Care to General Contractor Despite a Lack of Privity

Lathan Co. v. State, No. 2016-CA-0913, 2017 La. App. LEXIS 2277 (La. App. 1st Cir. Dec. 6, 2017).

On December 6, 2017, the Louisiana Court of Appeals, First Circuit, reversed and remanded the trial court’s decision to grant the appellee’s, Jacobs Project Management Co./CRSS Consortium (“Jacobs”), motion for summary judgment.  In its opinion, the court of appeals held that a project manager owed a general contractor a duty of professional care and thus, could be held liable to a general contractor under Louisiana law, even if the project manager was not in direct privity with the general contractor.

On August 13, 2010, the appellant, The Lathan Company, Inc. (“Lathan”), entered into a public works contract with the State of Louisiana, Department of Education, Recovery School District (“Owner”) to renovate the William Frantz School in New Orleans.  Jacobs, through its contract with the Owner, served as project manager on behalf of the Owner.  Four years later, in August 2014, after filing an original lawsuit against the Owner in 2012 for payment of undisputed amounts due, Lathan filed an amended pleading that alleged inter alia Lathan was entitled to damages from Jacobs under general tort law for negligent professional undertaking and under Louisiana’s Unfair Trade Practices Act.  According to Lathan, Jacobs owed Lathan a duty of conduct in accordance with a standard of care similar to professionals in the industry and that Jacobs breached its duty of care by failing to (i) disclose mold conditions and the existence of an underground fuel tank at the outset of the project; (ii) timely respond to Lathan’s 400+ requests for information; (iii) perform inspections consistent with industry standards; and (iv) review, certify, and/or approve amounts due to Lathan.  Continue reading

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Mississippi Federal District Court Permits General Contractor’s Negligence Claim to Proceed Against Project Consultant Given Consultant’s Contractual Obligations to Owner

S. Indus. Contractors, LLC v. Neel-Schaffer, Inc., No. 1:17CV255-LG-JCG, 2017 U.S. Dist. LEXIS 196804 (S.D. Miss. Nov. 30, 2017)

This case arises out of the West Pier Facilities project at the Port of Gulfport, Mississippi (“Project”).  Southern Industrial Contractors, LLC (“SIC”), the Project’s general contractor, filed suit for negligence against CH2M, the Project’s program manager and consultant, to recover increased costs incurred while excavating and working around underground debris at the Project site.  SIC alleged first that CH2M owed it a duty to ensure that the Project plans, specifications and bidding documents accurately represented the Project’s conditions, and second that CH2M breached this duty by failing to warn SIC of the underground obstructions it had encountered.  SIC argued that, as a result of CH2M’s breach, the Project became much more expensive and time-consuming.  CH2M filed a motion to dismiss the complaint, arguing it owed no duty to SIC.

The court first recognized that Mississippi law imposes upon design professionals, such as architects and engineers, a duty to exercise ordinary skill and diligence, and further, that Mississippi law allows third parties to rely upon the contractual obligations that a design professional owes to a project’s owner.  The court explained that, because of the design professional’s contractual obligations to the owner, the design professional owes a further duty, sounding in tort, to a contractor who relies upon the design to his economic detriment.  The court recognized that whether the design professional owes such a duty to a contractor is a factual determination that must be made on a case-by-case basis. Continue reading

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Use of the Word “in” Indicates Geography; Use of the Word “of” Indicates Sovereignty: Federal District Court in Maryland Holds That Venue Is Proper in Federal Court in Maryland Where Forum Selection Clause Requires Action to be Brought “In the District or County” Where the Prime Contractor Is Located

Pritchett Controls, Inc. v. Hartford Accident & Indemnity Co., 2017 U.S. Dist. LEXIS 192182, 2017 WL 5591872 (D. Md. Nov. 21, 2017)

James W. Ancel, Inc. (“JWA”) was the prime contractor on a project for the Maryland Transit Authority in Baltimore.  JWA subcontracted a portion of the work to Pritchett Controls, Inc. (“Pritchett”).  The subcontract contained a forum selection clause requiring any disputes to be “brought in the District or County where Contractor’s  principal office is located….”  JWA’s principal office is located in Towson, Maryland, which sits in Baltimore County.

As required by Maryland’s Little Miller Act, JWA, as principal, executed a payment bond with Hartford Accident & Indemnity Co. (“Hartford”), as surety.  This case involves Pritchett’s claim against Hartford for payment under the bond.

While performing its work on the project, Pritchett submitted twelve (12) payment applications to JWA totaling $744,799.  It completed its work on March 16, 2017 but never received any payment for its work.  On May 11, 2017, Pritchett submitted a notice of claim to Hartford.  When that claim remained unpaid by July 25, 2017, Pritchett filed this action against Hartford in the United States District Court for the District of Maryland. Continue reading

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Georgia Court of Appeals Holds That Sovereign Immunity Shields County From Contractor’s Claims Based Upon Unwritten Change Orders

Fulton County v. Soco Contracting Company, Inc., 2017 Ga. App. LEXIS 568 (Ga. Ct. App., November 15, 2017) 

Fulton County contracted with SOCO Construction Company (“SOCO”) to build a cultural center near the Fulton County Airport.  The contract specified that the contract sum and the contract time could only be changed according to County procedure, which required “a written, bilateral agreement (Modification) between the County … and the contractor.”

Adverse weather conditions, design delays, change order requests, and a federal government shutdown allegedly delayed the project.  Despite the County’s program manager listing more than 30 change orders in the project’s change order evaluation log, the County never issued any written change orders, including any change orders extending the contract time to account for the delays.  The County also withheld payment from SOCO.

SOCO sued the County for breach of contract and bad faith performance of contract, and it sought attorney fees and injunctive relief.  Continue reading

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West Virginia Supreme Court Applies Doctrine of Severability to Enforce Lease’s Arbitration Provision, Despite Other Provisions Contemplating Litigation in Court

SWN Prod. Co., LLC v. Long, 2017 W. Va. LEXIS 892 (W. Va. Oct. 18, 2017)

Respondents Richard and Mary Long (“Respondents” or “Lessors”) brought a state court action against Petitioner SWN Production Company, LLC (“Petitioner” or “Lessee”) seeking to recover alleged payments owed pursuant to an oil and gas lease (the “Lease”) entered into between Petitioner and Respondent.

Petitioner filed a motion to compel arbitration, relying on the Lease’s arbitration provision, which reads:  “In the event of a disagreement between Lessor and Lessee concerning this Lease, performance thereunder, or damages caused by Lessee’s operations, the resolution of all such disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association.” Continue reading

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