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Monthly Archives: September 2020

16SEP 2020

Ask most Florida Construction Law practitioners, and you will likely hear that liability may not be apportioned in “pure” breach of contract cases via the Comparative Fault Act, section 768.81, Florida Statutes (the “Act”).  If a material breach is a “substantial factor” in causing damages, the breaching party must answer for all damages that were reasonably contemplated by the parties when they formed the contract.  Claimants argue that matters of contract should be governed strictly by the agreement, and risk can be controlled by negotiated terms, including waivers and limitations.  Defendants complain that construction projects are collaborative, multi-party affairs, and strict application of contract principles leads to harsh results for relatively minor comparative fault for the same or overlapping damages.

The notion of apportioning purely economic loss contract damages based on comparative fault is not new.  Since April 2006, Florida has been a “pure” comparative fault jurisdiction with limited exceptions.  Prior to the amendment, tort liability for non-economic damages was purely comparative, but liability for economic damages was typically a combination of joint and several liability with an additional exposure based on comparative fault.

With the 2006 amendment, the Florida Legislature recognized that liability for all damages caused by “negligence” should be borne by a defendant based on its share of fault compared to other parties and non-parties contributing to the loss.  But application of the doctrine was rare in construction cases with no personal injury or damage to property other than the subject of the contract.

In an unreported decision, the U.S. Court of Appeals for the Eleventh Circuit upheld the application of the Act to allow a general contractor to reduce its exposure to the purchasers of a new home by apportioning fault to two non-parties – a developer who sold a new residence to a plaintiff and plaintiff’s construction lender.  Millette v. Tarnove, 435 F. App’x 848, 853-55 (11th Cir. 2011).  However, that decision has no precedential value.

The plaintiff’s weapon-of-choice was dicta tucked away in a footnote in a Florida Supreme Court decision, where the court commented that “Centex-Rooney is a breach of contract action, and thus section 768.81 is inapplicable.”  Gouty v. Schnepel, 795 So. 2d 959, 965 n.3 (Fla. 2001) ( citing Centex-Rooney Constr. Co. v. Martin Cty., 706 So. 2d 20 (Fla. 4th DCA 1997)).  The Gouty case had nothing to do with construction.  But, in the absence of contrary authority, trial judges would often refuse to apportion fault for breach of contract claims in construction cases, relying on the discretion afforded them under the Act to determine the “substance of [the] action.”

Fourteen years later, we have our first appellate decision applying comparative fault in a construction claim for economic losses.  In Broward County, Florida, v. CH2M Hill, Inc., and Triple R Paving, Inc., 4D18-3401, 2020 WL 4197936 (Fla. 4th DCA July 22, 2020), the Fourth District Court of Appeal answered the following questions in a construction defect claim:

WHETHER SECTION 768.81(3) APPLIES TO A BREACH OF CONTRACT ACTION AGAINST AN ENGINEER FOR BREACHING A DUTY OF CARE PROVISION, THUS QUALIFYING THAT ACTION AS A “NEGLIGENCE ACTION” PURSUANT TO SECTION 768.81(1)(c).

AND, WHETHER IN SUCH A CASE, SECTION 768.81(3) CAN EXTEND TO OTHER PARTIES’ BREACH OF CONTRACT CLAIMS, WHERE THOSE OTHER PARTIES ARE NOT PROFESSIONALS UNDER SECTION 768.81(1)(c), BUT WHOSE CAUSES OF ACTION ARE NECESSARILY INTERTWINED WITH THE BREACH OF CONTRACT CLAM AGAINST THE ENGINEER.

The Fourth District Court answered “yes” to both questions.

This case involved the defective design and construction of Taxiway C at the Fort Lauderdale-Hollywood International Airport.  Broward County hired engineering firm CH2M Hill, Inc. (“CH2M”) to design the taxiway in conformance with FAA specifications requiring new taxiways to have a useful service life of twenty years.

The County also contracted with: 1) Triple R Paving, Inc. (“Triple R”) as prime contractor to build the project; 2) URS Corporation (“URS”) as Program Manager to provide on-site representation and over-all management; and 3) Bureau Veritas North America (“BV”) as materials testing and construction inspector, including density testing of the base and subgrade layers beneath the Taxiway’s asphalt surface layer.

Shortly after Taxiway C opened to traffic, the County noticed rutting (i.e., indentations in the surface of Taxiway C), that ultimately led to the redesign and reconstruction of Taxiway C, costing the County millions of dollars.  The County refused to pay Triple R further for its work because its damages, including the cost to repair the failed taxiway, far exceeded any money due under the prime contract.

Triple R sued the County for breach of contract and violation of the Local Government Prompt Payment Act, alleging that the County withheld payment owed to Triple R.  Triple R also brought a claim against CH2M for professional negligence.  The County brought a counterclaim against Triple R for breach of contract and a crossclaim against CH2m for breach of contract and indemnification.  The County also brought claims for breach of contract and indemnification against URS and BV, which both settled at mediation.

Triple R and CH2M each raised affirmative defenses of comparative fault, arguing that fault should be apportioned under section 768.81 among the parties and non-parties, including URS and BV.  Ultimately, the trial court found that Triple R and CH2M breached their contracts with the County, and their breaches were direct and proximate causes of the redesign and reconstruction of Taxiway C.  Further, the trial court found that non-party URS was substantially in breach of its contract with the County and at fault for the Taxiway C damages.

The trial court allocated relative fault to URS, Triple R, and CH2M as follows: (1) 60% to URS; (2) 25% to Triple R; and (3) 15% to CH2M.  The County appealed, arguing that comparative fault is not applicable to breach of contract cases. Instead, contract law governed and required that breaching parties be held jointly and severally liable for the plaintiff’s damages because the separate breaches caused a single, indivisible injury.  The Fourth District Court of Appeal affirmed the judgment.

APPLICABLILITY OF SECTION 768.81

Section 768.81(1) states that “[e]xcept as specifically provided, this part applies to any action for damages, whether in tort or contract.”  § 768.71(1), Fla. Stat. (2018) (emphasis added).  Section 768.81(3) requires apportionment of damages in a “negligence action,” and subsection (1)(c) defines “negligence action” as:

without limitation, a civil action for damages based upon a theory of negligence, strict liability, products liability, professional malpractice whether couched in terms of contract or tort, or breach of warranty and like theories.  The substance of an action, not conclusory terms used by a party, determines whether an action is a negligence action.

(emphasis added).

The Fourth District concluded that a “negligence action” includes professional malpractice, citing the Florida Supreme Court’s decision in Moransais v. Heathman, 744 So. 2d 973, 976 (Fla. 1999) (individual engineers performing professional services for the firm have a duty to the firm’s clients to exercise reasonable professional care).

A professional must render services according to a standard of care used by similar professionals in the community under similar circumstances.  Where a professional services contract provides for a heightened standard of care, such as designing a taxiway in accordance with FAA standards, then the quality of performance must comport with the contractual terms.  See Sch. Bd. of Broward Cty. v. Pierce Goodwin Alexander & Linville, 137 So. 3d 1059 (Fla. 4th DCA 2014); see also CH2M Hill Se., Inc. v. Pinellas Cty., 698 So. 2d 1238 (Fla. 2d DCA 1997).   The gravamen of the County’s action against CH2M was that it failed to adhere to the FAA’s heightened standard of care as required by its contract.  Though the County’s claims were “couched in terms of contact,” the “substance of [the] action” sounded in negligence.

Perhaps more surprisingly, the Fourth District upheld the apportioned award against the contractor.  Though a general contractor is not a professional under section 768.81(1)(c), section 768.81(3) requires a court to “enter judgment against each party liable on the basis of such party’s percentage of fault.”  Applying “a holistic approach to analyzing the complaint,” it found that the contract action against Triple R fell under the umbrella of the “negligence action.”  Because Triple R was to perform the contract according to CH2M’s specifications, the causes of action were “necessarily intertwined.”

The Fourth District distinguished BRE/Cocoa Beach Owner, LLC v. Rolyn Cos., Inc., 2012 WL 12905849 (M.D. Fla. 2012), in which the trial court held that section 768.81 did not apply to a breach of contact action against Rolyn, the general contractor, because it was not a “professional” like CH2M.

The Fourth District harmonized the “substantial factor” test for contract actions with the contributing proximate cause test for tort actions.  Because fault lies at the heart of both claims, apportionment is consistent with holding a defendant liable for the damages that reasonably flow from a breach of contract.

WHAT’S NEXT?

Just how far will this decision reach into the sacrosanct chambers of contract law?  The better question may be: Wwhat is so sacred about contract law to justify exposing a breaching party to damages disproportionate to its fault relative to contributing to others who caused the same loss?  Because contract damages are judged by the reasonable expectations of the parties when contracting, should those expectations reflect an evolving social policy of responsibility proportionate to relative fault?

A breach of the performance requirements in design and construction contracts inherently requires performance to be measured against an agreed standard of conduct.  From that perspective, does the argument of a meaningful distinction between liability for “pure” breach of contract and “pure” comparative fault tort claims based on performance standards become sophistry?

Is the benefit of the bargain between owner and contractor or architect joint and several liability?  Or is the more reasonable expectation that contracting parties be held accountable in relation to comparative fault?

Construction is a complex process from design and planning through completion.  Owners, designers, contractors, and suppliers are necessarily intertwined in the effort and dependent on each other simply to complete the job.  The quip, “in construction, it’s about time, price, and quality – pick any two,” is a wry observation that reasonable expectations should be tempered by experience, and experience teaches that construction is a compromise between vision and execution.

If you have any questions about this opinion or Florida’s comparative fault statute, generally, please contact Dean Meyers of CSK’s construction group at dean.meyers@csklegal.com or 954-343-3912.