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Monthly Archives: April 2012

26APR 2012

Time’s up! That’s never a phrase we want to hear. It evinces memories of school tests and entrance exams. Well, in the legal arena, deadlines are all the more critical. Litigants often fight over filing deadlines for cases, or statutes of limitation, in the prosecution and defense of claims. Most recently, the First District Court of Appeal issued an April 17, 2012 opinion in a matter addressing this very issue in William G. Graney, P.E. v. Caduceus Properties, LLC, 1D11-2700, 2012 WL 1290841 (Fla. 1st DCA 2012).

The case involved an appeal of a judgment entered in favor of Caduceus Properties (“Caduceus”) and Tallahassee Neurological Clinic (“TNC”) for claims arising out of the design, construction, and installation of a heating, ventilation, and air conditioning (“HVAC”) system. In 2003, TNC and Gordon (a professional architect) contracted to design improvements to the subject building. Gordon subcontracted with KTD (an engineering design consulting firm) and Graney (a professional engineer and principal of KTD) to design the HVAC system for the TNC clinic in the same building. TNC separately contracted with Kelly Brothers Sheet Metal to install the HVAC system.

The building’s HVAC system began to fail soon after a certificate of occupancy was issued. In 2006, Caduceus sued Gordon to recover damages for the malfunctioning HVAC system. On March 7, 2007, Gordon filed a third-party complaint against Graney and KTD. Four years later in 2010, Caduceus and TNC initiated a direct action against third-party defendants Graney and KTD. Graney and KTD moved for involuntary dismissal prior to trial based upon a statute of limitations defense. The trial court denied the motion, and ultimately entered judgment in favor of Caduceus and TNC.

The First District, however, reversed this decision, reasoning that a four-year limitations period applied because the claims against Graney and KTD were “founded on the design, planning or construction of an improvement to real property” and are, therefore, governed by section 95.11(3)(c), Florida Statutes, and thus, began to run “from the date of actual possession by the owner, the date of issuance of the certificate of occupancy . . . or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor . . . whichever is latest.” Id. The Court reasoned that the parties knew about the problems with the HVAC system by September 2005, one month after the certificate of occupancy was issued. Thus, the limitations period ran in September 2009. But Caduceus and TNC initiated their direct action against KTD and Graney on June 3, 2010, almost nine months after the statute of limitations had expired.

The Court then considered whether the direct action related back to the original complaint and third party action. The Court held that it did not because Caduceus and TNC were aware of the roles Graney and KTD served in the design and approval of the HVAC system from the time the system began to fail in September 2005. Further, the Court noted that another party, Gordon, filed a third party complaint against KTD and Graney, which shows that Caduceus and TNC should have known how KTD and Graney’s conduct impacted on the case.

In rejecting Caduceus and TNC’s relation back argument, the First District expressly rejected, and certified conflict, with the Fifth District’s holding in Gatins v. Sebastian Inlet Tax Dist., 453 So. 2d 871 (Fla. 5th DCA 1984), a case that held that if a third party complaint is filed within the applicable limitation period, the party may amend or file a direct action to make third party defendants formal defendants pursuant to the relation back doctrine as long as the new action raises the same issues that are raised in the third party complaint. The First District also commented that permitting relation back in this context would circumvent the purpose of a statute of limitations, which it identified as protecting defendants from unfair surprise and stale claims.”

By certifying direct conflict with Gatins, the Florida Supreme Court now has the option to accept or reject jurisdiction over this matter. If the Supreme Court denies jurisdiction, then the current District split will remain unresolved. However, if the Supreme Court accepts jurisdiction, litigants may have a clearer idea of precisely when time’s up in multi-party construction claims.

24APR 2012

Since the mid 1980s, the design professional community relied upon Florida Power & Light Company v. Mid-Valley, Inc., 763 F. 2d 1316 (11th cir. 1985) as an accurate statement of Florida law allowing individual design professionals to limit their liability for professional negligence by contract.

The design professional world was turned on its head with the decision in Witt v. La Gorce Country Club, Inc., 35 So. 3d 1033 (Fla. 3d DCA 2010), which held that a limitation of liability clause was unenforceable by the individual design professional.

In Witt, Gerhardt M. Witt and Associates, Inc., a design company, entered into various contracts with La Gorce Country Club, Inc. for hydrogeologic consulting services and overall project coordination relative to the design and construction of a reverse osmosis water treatment system. The system was intended to desalinize water used to irrigate an exclusive golf course on Miami Beach.

During the fourteen month period the system was in use, its performance deteriorated and irrigation became laden with salts. Ultimately, the system failed completely and the golf course was burned by salts in the water.

The Country Club filed suit against the design company, as well as against Gerhardt M. Witt, the design company’s principal, alleging professional negligence. Although Witt, individually, attempted to insulate himself from liability under a limitation of liability provision in his contract with the Country Club, the court ultimately found the provision to be unenforceable by Witt. Unfortunately, the Supreme Court of Florida did not have the opportunity to evaluate the decision in Witt. Witt filed a petition with the Supreme Court to accept discretionary jurisdiction based upon a direct conflict. However, the petition was voluntarily dismissed by the parties as part of the settlement of the case.

In the context of Witt, it is important to recognize two competing public policies. On the one hand, parties are free to contract for rights and remedies as long as the underlying purpose of that contract is legal and does not offend public policy. Exculpatory clauses, including limitation of liability clauses, are valid and enforceable in Florida, as long as they clearly and unambiguously express the parties’ intent to exonerate one party from its own negligence.

On the other hand, design professionals have an ethical duty to protect the health, welfare and safety of the public. They often have greater responsibilities to their clients than non-professionals because of the fiduciary nature of the professional/client relationship. The fiduciary relationship is commonly utilized as the basis for the exception in the professional licensing statutes providing for individual liability, in spite of traditional corporate protections.

So impactful was the decision in Witt, that the Florida legislature has several times taken upon itself to limit the effect of the decision. Unfortunately, the various proposed bills have died before coming to fruition. At this point, any attempt to limit the effect of the Witt decision has not been re-introduced, and the movement appears to have lost steam.

So what’s the take away?

Design professionals need to be aware of Witt and its impact on an individual professional’s ability and inability to insulate him or herself from liability by way of an otherwise enforceable limitation of liability clause. Whether the legislature will limit or eviscerate Witt is yet to be seen. In the interim, design professional organizations should lobby the legislature in an effort to return previously proposed bills to the floor.

19APR 2012

When public construction projects are delayed by the government, contractors are often unable to bid on additional jobs and perform other work during the delay period. As a result, contractors often seek damages from the government for extended home office overhead during this delay, commonly referred to as Eichleay damages. However, courts have continually limited contractors’ ability to recover these costs by imposing burdensome requirements, which has essentially made these damages unrecoverable.

Florida courts often follow the decisions of the United States Court of Federal Claims as persuasive authority, given its jurisdiction over claims against the government. In Redland Company v. United States, the United States Court of Federal Claims determined that a contractor was not entitled to home office overhead damages for project delays caused prior to the commencement of construction. The court also clarified the strict requirement that a contractor prove it was on “standby” during the delay period, which means that the contractor was ready to resume work immediately and at full speed throughout the delay. In order to resume work immediately and at full speed, the contractor must keep at least some of its workers and necessary equipment at the site ready to resume the work on the contract, even if the equipment is idle and the delay is for an indefinite period of time. Additionally, any subcontractors on the job must also be immediately available to resume the work. Given the fact that the contractor does not know when it may resume work, these requirements are very burdensome and risky for a contractor to undertake, especially if the delay period may be significant. Accordingly, if the government stops or suspends a construction contract, contractors must be aware of these requirements and the ability to recover Eichleay damages in order to analyze its risks and determine how to allocate their workforce.

For a more extensive analysis of this decision, continue reading.

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17APR 2012

The Magazine of University of Florida’s School of Building Construction recently published an article written by David Salazar. The article is a primer on the difficulties a contractor faces when dealing with change order work. Additionally, the article sets forth the inevitable problems a contractor encounters and provides some risk management tips that can help the contractor manage these problems.

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12APR 2012

The Florida Legislature recently passed legislation that is very favorable for developers. More specifically, the legislation appears to eliminate future exposure of developers to claims for common law implied warranties of fitness and merchantability related to subdivision improvements of roads, drainage systems, retention ponds and underground pipes surrounding homes.

In mid-March 2012, the Florida House of Representatives passed House Bill 1093, a companion to Senate Bill 1196.  Both bills sought to vacate the Fifth District Court of Appeal’s holding in Lakeview Reserve Homeowners v. Maronda Homes, 48 So. 3d 902 (Fla. 5th DCA 2010), which provides that a homeowner’s association has a claim for breach of the common law implied warranties of fitness and merchantability, also known as the warranty of habitability, against a developer for defects in systems that the court found were “essential services” to a home, such as roads, drainage systems, retention ponds, and underground pipes surrounding the home.  Notably, it was argued that the Fifth District was the only court in the nation to expand these common law implied warranties to include “essential services.”  While the case is presently pending before the Florida Supreme Court, this case may be rendered moot if Governor Rick Scott signs the bill into law.  If enacted, the Lakeviewholding will be eliminated from Florida law and common law implied warranties will not apply to “essential services” by statute.

This bill will have the effect of ending future exposure of developers to claims for subdivision improvements.  According to legislative staff analyses, there is a potential that the bill may apply retroactively, but this matter will need to be tested in the courts.  Carriers who insure developers will benefit if this bill is enacted because they will be able to more clearly identify what potential defects may create liability for common law implied warranties.

10APR 2012

Developers must take precaution when making promises regarding completion of construction, especially in light of new Florida case law holding that a claim against a developer for breach of promise to deliver a completed condominium is measured from the date of filing a surveyor’s certificate of substantial completion and not the certificate of occupancy.

In Tranquil Harbour Dev., LLC v. BBT, LLC, 79 So. 3d 84 (Fla. 1st DCA 2011), reh’g denied(Feb. 13, 2012), the parties to a purchase agreement disputed whether the developer kept its promise to deliver the completed condominium unit within two years.  The First District held it was legal error to use the date on which a Certificate of Occupancy was issued to determine if an alleged promise to complete construction within two years was properly achieved.  Instead, “the recording of the surveyor’s certificate of substantial completion was the relevant event” for measuring compliance with an alleged two year promise to complete construction because, under Fla. Stat. § 718.104(4)(e), a surveyor’s certificate of substantial completion must be recorded before a condominium’s “[c]ompleted units . . . may be conveyed to purchasers.”  The Court deemed the word “convey” as a synonym of “deliver” and thus the Court determined that, as a matter of law, the developer was not able to deliver the completed unit until the surveyor’s certificate of substantial completion was recorded.

This case helps clarify how to evaluate compliance with contractual promises to complete construction.  The benefit of such clarity is that it helps evaluate the value, or lack thereof, of claims that relate to promises to complete construction within a certain time.

05APR 2012

Is the cause of action for Contribution still a viable claim? A recent federal court suggested that Contribution between comparatively at-fault parties is no longer a viable claim in light of the availability of comparative fault defenses to liability.

In Mendez-Garcia v. Galaxie Corp., 8:10-CV-788-T-24 EAJ, 2011 WL 5358658 (M.D. Fla. Nov. 3, 2011), the United States District Court for the Middle District of Florida addressed a trend recently observed in Florida courts with respect to claims for contribution.  The Plaintiff brought suit against Galaxie Corporation (“Galaxie”), a company that buys and sells used steel processing and soil handling equipment, for injuries suffered while operating a Galaxie product. Galaxie filed a third-party claim against the Plaintiff’s employer, Nanotec Metals, Inc. (“Nanotec”), for breach of contract, negligence, common law indemnification and contribution.

The trial court held that common law contribution was procedurally improper in light of the availability of comparative fault arguments.  Fla. Stat. § 768.31(2)(a) provides that “when two or more persons become jointly or severally liable in tort for the same injury to a person . . . there is a right of contribution” among them. However, Florida’s comparative fault statute, Fla. Stat. § 768.81(3), provides that in negligence cases, “the court shall enter judgment against each party liable on the basis of such party’s percentage of fault and not on the basis of joint and several liability.”  To allocate fault to a non-party, “a defendant must affirmatively plead this fault and prove it at trial ‘by a preponderance of the evidence.’” In light of Florida’s comparative fault statute, the Mendez-Garcia court held that “a defendant’s allegations of a non-party’s negligence should be pled in the form of an affirmative defense, and not alleged separately in a third-party complaint.”  The Court then stated that “[t]hird-party claims for contribution are now essentially obsolete.”  See also T & S Enters. Handicap Accessibility, Inc. v. Wink Indus. Maint. & Repair, Inc., 11 So. 3d 411, 412-13 (Fla. 2d DCA 2009) (reaching the same conclusion regarding contribution).

In the context of construction litigation, third-party practice is prevalent because construction projects typically involve many related parties, such as owners, developers, architects, engineers, general contractors, subcontractors, and materialmen, among others.  However, based on Mendez-Garcia and the T & S holdings, claims for common law contribution may no longer be viable in light of the availability of comparative fault defenses to liability.  It is therefore critical for insurers, insureds, and private entities to strategize with counsel to determine whether the filing of a third-party complaint should include a claim for contribution in addition to the assertion of comparative fault based defenses.  It is also critical to explore alternative theories of third party liability, such as subrogation or indemnification, wherever appropriate, to ensure the most economical and efficient results for the client.

03APR 2012

A Florida federal court recently issued a favorable decision for design professionals holding that design professionals do not automatically owe a duty or obligation towards design build contractors.

In Recreational Design & Const. Inc. v. Wiss, Janney, Elstner Associates, Inc., 10-CV-21549, 2011 WL 5117163 (S.D. Fla. Sept. 20, 2011), a design-build contractor sued independent engineering firms hired by the city to evaluate work performed by the design-build contractor for professional negligence.  The firms found that a waterslide was structurally unsafe and recommended repair. Based on this recommendation, the city red-tagged the project, despite the design-build contractor’s initial tests that found the slide to be safe. The contractor later re-did work at its own cost.

The Court held that the independent engineering firms hired by the city for inspection purposes had no duty or special relationship with the design-build contractor.  According to the Court, the design-build contractor bore sole responsibility to plan and design the municipal pool project and waterslide.

It is important to clarify that the hiring of a design firm to review, evaluate and perform field inspection services will not automatically create a duty or obligation on the part of that consulting design professional’s firm toward the design-build contractor.  This promotes clarity and avoids the need to account for potential liability in this narrow category of services rendered by design professionals.