Why the Project Delivery Method Matters in Construction Litigation

The most common theme in construction litigation is a dispute between owners, contractors, and designers as to who was responsible for a construction defect that caused delays or additional costs.  In these cases, the matter is often determined by which construction delivery method was being used by the parties involved.

Most construction is done on a design-bid-build model, meaning that the owner hires a designer (architect/engineer) to put together plans and specs, and then the owner hires a contractor to build to those plans and specs.  When the owner hires the contractor, they are given an implied warranty (the Spearin doctrine) that if the contractor builds in accordance with the plans and specs that the design is sufficient so that the contractor will achieve the intended purpose.  In other words, if an owner gives the contractor plans and specs that will result in a building envelop, the owner can't then blame the contractor when the contractor builds in accordance with the faulty design.

By contrast, some construction is done on a design-build basis in which the owner hires one firm that is responsible for both the design and construction of the building.  In that instance, if something goes wrong, the owner doesn't have to figure out who is at fault - they have one firm that carries all of the responsibility.  Notably, even in cases where the construction was generally done on a design-bid-build basis is not necessarily dispositive, because sometimes contracts will leave specific aspects of the construction (such as HVAC) to be done on a design build basis.  In those instances, the designer will provide most of the design for the building, but will intentionally exclude certain systems, with the understanding that the contractor (or more likely his sub) will likely design the particulars of their solution anyway.

When litigating this issue, take a look at the plans and specs to find out whether the roof was being done on a design-build basis as that will be critical to your analysis.  Part of that analysis is looking to see whether the contract provides a "design spec" or a "performance spec" for that aspect of the work.  A design spec allows the contractor to determine the means and methods of construction (how to perform the work), but tells the contractor the specific materials or sizes that are required.  Where a design spec is used, the owner (and by extension, the architect) retains responsibility for the design being used.  A performance spec, by contrast, simply dictates the desired outcome, but leaves it to the contractor to determine how to achieve that outcome.  In these instances (even where the contractor still has to provide shop drawings for their solution to be approved), the contractor ultimately bears all responsibility for all aspects of meeting the defined objective.

For more information on construction or professional liability matters contact attorney Ken Rubinstein at 603-410-1500 or any member of Preti Flaherty's Professional Liability Practice Group.

US Supreme Court Upholds the Enforceability of Forum Selection Clauses in Construction Contracts

The United States Supreme Court in Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, No. 12-929 (Dec. 3, 2013) reiterated the priority and enforceability of forum selection clauses in construction contracts.  The Supreme Court reversed the decision of the Fifth Circuit upholding the trial court’s decision not to enforce the forum selection clause contained in a construction agreement between Atlantic Marine, a Virginia corporation, and J-Crew Management, Inc., a Texas corporation.  The parties’ subcontract included a forum-selection clause, which stated that all disputes between the parties would be litigated in Virginia.  When a dispute arose, J-Crew filed an action in the United States District Court for the Western District of Texas.  Atlantic Marine responded by filing a motion to dismiss the case or in the alternative to transfer the case to Eastern District of Virginia.  The trial court denied both motions and the Fifth Circuit upheld the denials on the basis that Atlantic Marine bore the burden of proving that transfer was appropriate and had failed to meet its burden.

In reversing the Fifth Circuit’s decision, the Supreme Court concluded that “[w]hen the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause” unless there are “extraordinary circumstances unrelated to the convenience of the parties,” which the Court found lacking in the instant case.  The Court noted that the “enforcement of valid forum-selection clauses, bargained for by the parties, protects their legitimate expectations and furthers vital interests of the justice system.”  Thus, when considering the appropriate forum for a dispute, “a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.”  The Supreme Court found that the Fifth Circuit erroneously placed the burden on the party seeking to enforce the forum selection clause rather than the “party acting in violation of the forum-selection clause,” who should have borne the burden of showing that public-interest factors overwhelmingly disfavor a transfer.

This is a very important decision from the Supreme Court that once again reiterates the priority of forum selection clauses in determining where disputes should be litigated.  This is a good reminder when entering into a contract to pay attention to the forum selection clause included and where a potential dispute down the road may be litigated because courts are going to hold you to the forum identified in those clauses.

For more information on professional liability matters, contact attorney Nathan Fennessy at 603-410-1500 or any member of Preti Flaherty's professional liability practice group.