Georgia Court Enforces Limitation of Damages Clause in Engineering Agreement

Lanier at McEver, L.P. v. Planners and Engineers Collaborative, Inc.
2007 GA App LEXIS 539 (Ga. Ct. App., May 16, 2007)

In this case, the Court of Appeals of Georgia affirmed a decision limiting an owner/developer’s damages against the project engineer to the fees paid for the engineer’s services.

The court held that a damages limitation clause that limits the amount of damages an engineer could possibly pay to an owner/developer is neither a violation of public policy nor an unenforceable penalty. Lanier, was the owner/developer of an apartment complex. Lanier hired the defendant engineering firm PEC, to design various aspect of the apartment complex, including the storm sewer and sanitary sewer drainage and management system. The engineering agreement contained a limitation of liability provision stating that the total aggregate liability of PEC and its subconsultants to Lanier “shall not exceed PEC’s total fee for services rendered on this Project.” Following construction of the Project according to the plans and specifications prepared by PEC, problems arose with the storm water system that required modification and repair by the owner. As a result, Lanier sued PEC for negligent design, breach of express contractual warranty and litigation expenses.

PEC filed a motion for partial summary judgment based on the contractual limit on the damages Lanier could recover to the amount of fees it paid PEC. The trial court agreed, granted the partial summary judgment motion and concluded that the limitation of liability clause was enforceable.

On appeal, the Georgia Court of Appeals affirmed. The Court found no conflict between the damages limitation clause and public policy. The clause did not release PEC from all liability, but rather was only a limit on any potential recovery. Moreover, the damages limitation clause did not prohibit a third party who might suffer injuries as a result of PEC’s design or construction from recovering against PEC. Finally, the clause was not a liquidated damages penalty, but merely a cap on the damages that a trier of fact could potentially award. In sum, the damages limitation clause did not release the engineer from liability for wrongful conduct, permit negligent design or release the engineer from liability for damages to persons or property caused by the engineer’s actions. Instead, the clause merely limited the Owner’s potential recovery to the fee it paid its engineer for its work on the project.

Click here to view full opinion as PDF (provided with the permission of LexisNexis).

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