All posts by Dean Meyers

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.

07MAY 2020

The Supreme Court of Florida issued its opinion in Florida Highway Patrol v. Jackson, 2020 Fla. LEXIS 108 (Fla. Jan 23, 2020), which answered the following certified question of great public importance:

Does rule 9.130 [(A)(3)(C)(XI)] permit an appeal of a non-final order denying immunity if the record shows that the defendant is entitled to immunity as a matter of law but the trial court did not explicitly preclude it as a defense?

The Court’s answer to this question was “no.” But this opinion stands for much more than just a negative answer to a certified question. Indeed, this opinion has significant implications upon procedural and substantive areas of construction law, which may affect agents of the state of Florida, including Construction Engineering and Inspection professionals and consultants (“CEI”).

Procedurally, the Court recognizes that Fla. R. App. P. 9.130 insufficiently protects the public and governmental interests as “it leaves too great a risk that erroneous denials of operational sovereign immunity will go unreviewed until it is too late.”   Id. at * 19. By extension of this risk, the Jackson Court announced that “courts should determine entitlement to sovereign immunity as early as the record permits.” Id. at * 18. In fact, on that basis, courts can address a motion for summary judgment asserting entitlement to sovereign immunity even if there are outstanding disputes as to, say, the existence of a duty of care. Id. at 17-18. Accordingly, and in an effort to remedy the risk of erroneous denials going unreviewed until it is too late, the Court amended Fla. R. App. P. 9.130 to expand appellate review of nonfinal orders denying sovereign immunity. Jackson, 2020 Fla. LEXIS 108 at * 19; In re Amendments to Fla. Rule of Appellate Procedure 9.130, No. SC19-1734 (Fla. Jan. 23, 2020). The new form of Fla. R. App. P. 9.130 cements the policy mentioned above because it allows an appeal of a nonfinal order denying a motion for summary judgment due to entitlement to sovereign immunity. Meanwhile, under the old rule, the order was only appealable if the trial court order determined – as a matter of law – that a party was not entitled to sovereign immunity. As such, the new rule focuses on what was argued in the motion as opposed to what was written in the order.

This opinion also provides much needed clarity to a murky substantive area of construction law – the sovereign immunity doctrine. “In Florida, sovereign immunity is both an immunity from liability and an immunity from suit.” Jackson, 2020 Fla. LEXIS 108 at * 16. To that end, the Court highlights Wallace v. Dean, 3 So. 3d 1034 (Fla. 2009) as the proper predicate for understanding sovereign immunity as including immunity from suit. Id. In Dean, the Court delineates the differences between a lack of liability under tort law and the presence of sovereign immunity. Dean, 3 So. 3d at 1044. For example, the absence of a duty of care under tort law results in a lack of liability. Id. That’s it; nothing more. Id. On the other hand, sovereign immunity does not cloak the State’s actions as non-tortious, but instead simply means that the State has not consented to suit in its courts with regard to a certain type of claim. Id. at 1045. The takeaway is that a duty of care and sovereign immunity are separate and distinct issues, which should not be conflated.

Reliance on Dean should be limited to the guiding principle of not conflating absence of a duty of care with the presence of sovereign immunity.   The outcome of Dean, including the existence of a duty of care, is somewhat of an anomaly, due in part to its unique underlying factual predicate. Ordinarily, there is no common law duty with regard to how governmental bodies carry out their functions or enforce their police powers as this is a duty to the general public as a whole, not an individual. Dean, 3 So. 3d at 1049; Trianon Park Condo. Ass’n v. City of Hialeah, 468 So. 2d 912, 919 – 20 (Fla. 1985). Without a duty of care there is no liability under tort law. Yet in Dean, the court found the presence of a duty of care to an individual because the sheriff deputies did not attempt to enforce any law, and were not engaged in the protection of the general public; instead, they affirmatively sought to provide a service (a 911 safety check) to a specific individual.   Dean, 3 So. 3d at 1040. Since a duty of care existed, the Dean court was tasked with separately and subsequently addressing the issue of sovereign immunity and whether the actions of the deputies waived the immunity. Id. at 1044.

Potential Future Implications

Going forward, and under Florida Highway Patrol v. Jackson, agents of the state, including CEI professionals and consultants, might be able to seek expeditious adjudication of a motion for summary judgment on the basis of sovereign immunity and/or appellate review of non-final orders denying sovereign immunity. By virtue of subsection (10)(e), CEIs are, in certain situations, agents of the Florida Department of Transportation. Fla. Stat. § 768.28 (10)(e) (2019). As such, agents of the Florida Department of Transportation are statutorily provided a form of sovereign immunity. Fla. Stat. § 768.28 (9)(a) (2019).

Notably, several wrinkles remain in the above application and doctrine of sovereign immunity. Given the scope of work, CEIs seemingly only have a duty to the general public, which means no duty to any individual plaintiff. As such, there should be no exception for gross negligence or malice because there is no duty in the first place. We will continue to monitor and provide significant updates on the application of Florida Highway Patrol v. Jackson at the trial and appellate court levels.

If you have any questions about this opinion or the sovereign immunity doctrine, generally, please contact Dean Meyers at dean.meyers@csklegal.com or 954-343-3912.

 

14APR 2020

On April 3, Florida Governor Ron DeSantis issued Executive Order 20-91, the Safer At Home Order, restricting all “movements and personal interactions outside of [the] home to only those necessary to obtain or provide essential services or conduct essential activities” through April 30. 

The effects may be far-reaching for Florida’s construction industry.  In 2018, Florida’s real estate industry accounted for $227.3 billion or 21.9% of Florida’s gross state product, with more than half coming from new home construction.  Protracted local lockdown of planning and permitting could cause substantial damage to Florida’s economy, particularly if it occurs in densely populated areas.

Defining Essential Services:

Section 2 of Order 20-91 defines “essential services” based the U.S. Department of Homeland Security’s (“DHS”) “Guidance on the Essential Critical Infrastructure Workforce,” v.2 (March 28, 2020) as well as those listed by Miami-Dade County in multiple local orders.  Governor DeSantis refers to websites of Florida’s Division of Emergency Management and Department for the most recent list of essential services exempted from the order.  

DHS considers the following as essential critical infrastructure workforce regarding construction-related services:

  • Residential/Shelter Facilities and Services: “Workers performing housing construction related activities to ensure additional units can be made available to combat the nation’s existing housing supply shortage” and “[w]orkers supporting the construction of housing, including those supporting government functions related to the building and development process, such as inspections, permitting and plan review services that can be modified to protect the public health, but fundamentally should continue and serve the construction of housing (e.g., allow qualified private third-party inspections in case of government shutdown); and
  • Commercial Facilities: “Workers who support the supply chain of building materials from production through application/installation […]”

The Safer at Home Order includes as essential those services defined in Miami-Dade’s Emergency Order 07-20.  In the local order, Miami-Dade County exempts “contractors and other tradesmen, […] who provide services that are necessary to maintaining the safety, sanitation, and essential operation of residences and other structures,” as well as “open construction sites, irrespective of the type of building,” and “architectural, engineering, or land surveying services.”

The statewide order supersedes any conflicting orders of local officials, and those entities may not relax the restrictions.  However, local governments are free to restrict “essential activities” further based on local conditions.  

However, even “essential services” can be prohibited if they involve known exposure to the virus.  Building Department functions for unincorporated Miami-Dade County are one example.  On March 19, that Building Department was temporarily shut down because an employee tested positive for COVID-19.  Without a Chief Building Official, or her designee, reviewing plans and issuing permits, nascent projects cannot be pushed forward into active construction.  When projects stall, the economic impact ripples through many sectors of the economy, including lending, development, design, contracting, manufacturing, distribution, supply, and government agencies that rely on fees and taxes.  Fortunately, Florida law provides at least two potential solutions – private providers and government outsourcing.  Each is discussed briefly below.

Building Departments Plan Review & Inspection Functions: Plan review and inspection services may be provided by Florida-registered architects and engineers, in lieu of building officials.  Private providers may then step in to process permits and inspections, in accordance with Florida Statute 553.791 “Alternative Plans Review and Inspections.”  In construction hot-spots, the practice is more common, allowing developers to move projects forward by avoiding backlogged local building departments.  This same process is available to transition a project that has stalled in government plan review and permitting.

Government Outsourcing: Primarily under the authority of the Municipal Home Rules Power Act (“MHRPA”), codified in Chapter 166 of the Florida Statutes, some local governments have taken to outsourcing building department functions, including plan review, permitting, and inspection services.  For local governments that have pre-existing professional service contracts with design professional firms that include performance of building department functions, those firms are de facto building departments.  To keep current projects active and new ones moving towards permitting, local governments may consider engaging firms to bridge the gap.  

In either scenario, the building official maintains police power to shut down a construction site that presents a heightened risk for spreading COVID-19.  Those officials must first determine COVID-19 is “a condition on the building site” that “constitutes an immediate threat to public safety and welfare” before they can issue a stop-work order, per Florida Statute 553.791 (15)(c).  Thus, a stop-work order is possible but unlikely so long as there are no infected people on the building site.  Following CDC guidelines on COVID-19 prevention will help protect one’s project from a stop-work order. With scientists, government, and health providers concerned about rebounding virus in the Fall, planning ahead is key to a successful project.  These alternatives may well provide the antidote to a collapsing construction economy in Florida.

If you have any questions about essential services, building departments plan review and inspection functions, or government outsourcing generally, please contact Dean Meyers at dean.meyers@csklegal.com or 954-343-3912 or contact Kéran Billaud at keran.billaud@csklegal.com or 954-343-3906.