Monthly Archives: October 2010

All Asbestos is not Created Equal: (Ohio Association of Civil Trial Attorneys, Quarterly Review Fall 2010)

Practical Application of Ohio Tort Reform

Co-Author:  Douglas R. Simek

House Bill 292

Under Ohio law, a plaintiff must bring a personal injury action within two years from the date of injury. Prior to the enactment of Am.Sub.H.B. 292 (“H.B. 292”), a cause of action for bodily injury caused by exposure to asbestos accrued upon the date on which the plaintiff is informed by competent medical authority that the plaintiff has an injury that is related to the exposure, or upon the date on which by the exercise of reasonable diligence the plaintiff should have known that the plaintiff has an injury that is related to the exposure, whichever date occurs first1.

On September 2, 2004, H.B. 292 took effect. H.B. 292 establishes minimum causation requirements for alleging a tort action resulting from exposure to asbestos as a result of the tortious act of one or more defendants. H.B. 292 requires a plaintiff to prove that the conduct of a particular defendant was a substantial factor in causing the injury or loss on which the cause of action is based2. In determining whether exposure to a particular defendant’s asbestos was a substantial factor in causing the plaintiff’s injury or loss, the trier of fact in the action shall consider, without limitations, all of the following: (1) the manner in which the plaintiff was exposed to the defendant’s asbestos; (2) the proximity of the defendant’s asbestos to the plaintiff when the exposure to the defendant’s asbestos occurred; (3) the frequency and length of the plaintiff’s exposure to the defendant’s asbestos; and (4) any factors that mitigated or enhanced the plaintiff’s exposure to asbestos3.

It was the intent of the General Assembly in enacting 2307.96 of the Revised Code to establish specific factors to be considered when determining whether a particular plaintiff’s exposure to a particular defendant’s asbestos was a substantial factor in causing the plaintiff’s injury or loss. The consideration of these factors involving plaintiff’s proximity to the asbestos exposure, frequency of the exposure, or regularity of the exposure in tort actions involving exposure to asbestos is consistent with the factors listed by the Court in Lohrmann v. Pittsburgh Corning Corp4Lohrmann v. Pittsburgh Corning Corp.

 

The decision in Lohrmann v. Pittsburgh Corning Corp. explains why a de minimis rule limiting asbestos exposure claims is absolutely essential to sound judicial management of asbestos litigation. In Lohrmann the court affirmed directed verdicts for several asbestos defendants whereproof of ex-posure to those defendant’s products was “insufficient. . .as a matter of law.” The Court held that allowing an asbestos plaintiff to create a jury question on causation with “any evidence” of exposure, no matter how slight, “would be contrary to the. . .law of substantial causation.” Rather, there had to be a point at which a causation allegation became too remote or too minimal as a matter of law. That point was established by reviewing a plaintiff’s evidence concerning his or her regularity, frequency, and proximity of exposure to the particular defendant’s product.

The General Assembly further stated that by its enactment of the Lohrmann factors it intended to clarify and define for judges and juries that evidence which is relevant to the common law requirement that plaintiff must prove proximate causation. It noted that the Lohrmann factors were of great assistance to the trial courts in the consideration of summary judgment motions and to juries when deciding issued of proximate causation5.

 


Ohio Supreme Court Decisions Interpreting H.B. 292

In Ackison v. Anchor Packing Company6, the Ohio Supreme Court found constitutional the statutory provisions codified at H.B. 292, and held that these provisions, which required plaintiffs bringing certain asbestos-related tort claims to make a prima-facie showing of physical impairment and support that evidence with a written opinion of a competent medical authority, are remedial and procedural and could be applied without offending the Retroactivity Clause of the Ohio State Constitution. The Court also found that the statutory definitions of “competent medical authority,” “substantial contributing factor,” and “substantial occupational exposure” did not affect accrued substantive rights as applied to Plaintiffs’ claims7.

H.B. 292 enacted certain provisions that established threshold requirements for filing a complaint alleging exposure to asbestos. Among these requirements are that no person shall bring or maintain certain kinds of asbestos claims (including claims alleging a nonmalignant condition) without filing with the court certain qualifying medical evidence of physical impairment, and that such evidence must be supported by the written opinion of a competent medical authority stating that the claimant’s exposure to asbestos was a substantial contributing factor to his medical condition8. H.B. 292 provided definitions for many of its key terms9.

In Ackison, Plaintiffs brought suit against the deceased Plaintiff’s former employer and other defendants, alleging that his illness and death were caused by his asbestos exposure in the workplace10. In dismissing the case for failure to prove prima facie evidence under H.B. 292, the trial court determined that Plaintiffs’ wrongful death claim failed under R.C. 2307.92(D), that Plaintiffs’ non-malignant a/k/a pleural thickening claim failed under R.C.2307.92(B), and that Plaintiffs’ claim for esophageal cancer had not accrued pursuant to R.C. 2305.10, because there

was no evidence that Plaintiffs had been informed by competent medical authority that the esophageal cancer was caused by asbestos exposure11.

Plaintiffs appealed the decision of the trial court, and the fourth appellate district court of appeals reversed and reinstated the case finding that the retroactive application to Ackison’s claim of the H.B. 292 evidentiary requirements was unconstitutional12. Thereafter, the court of appeals certified that its decision conflicted with three cases from the Twelfth District Court of Appeals, each of which held that retroactive application of the H.B. 292 standards was not unconstitutional13. The Ohio Supreme Court accepted jurisdiction and recognized the conflict on the following question: “Can R.C. 2307.91, 2307.92, and 2307.93 be applied to cases already pending on September 2, 2004?14”

The Ohio Supreme Court recognized that although Ackison advanced other claims in her complaint, the only cause of action at issue in the appeal was her claim for nonmalignant asbestosis15. Thus, the Court did not address Plaintiffs’ claim for esophageal cancer. In examining the statutory requirements set forth in H.B. 292 for filing a complaint alleging exposure to asbestos, the Court found that it created a procedure for the prioritization, administration and resolution of a cause of action that already exists, and did not impose any new substantive burdens on the claimants16. For example, the Court examined the term “competent medical authority” as defined under the House Bill, and found that prior to the enactment of R.C. 2307.91,

the term was not defined by either statute or case law, and therefore the definition did not alter any vested substantive right possessed by the Ackisons17. The Court also disagreed Plaintiffs’ contention that the House Bill’s definition of “substantial contributing factor,” altered the standard of causation for asbestos-exposure cases, as established previously in Horton, finding that the provisions of H.B. 292 at issue addressed only the prima facie showing of whether or not a plaintiff’s claimed injuries are genuinely asbestos related, and did not involve the more detailed inquiry of whether a particular defendant’s product was the cause of the plaintiff’s illness18.

The Ackisons also argued that the statutory definition of“substantial occupational exposure” found in R.C. 2307.91(GG) was an unconstitutional attempt to adopt a test for causation, the so-called Lohrmann test, which the Ohio Supreme Court rejected in Horton. The Court stated that while H.B. 292 defined this term in R.C. 2307.91(GG), the bill simultaneously enacted R.C. 2307.96. R.C. 2307.96 legislatively adopted Lohrmann test as a substantive requirement for proving an asbestos-related claim, and the General Assembly explicitly made that provision prospective only, acknowledging the that it was a substantive change from the Court previously held in Horton.

Based on this, the Supreme Court stated that “[b]ecause the General Assembly confined its adoption of the Lohrmann test to the prospective provisions in R.C. 2307.96, we cannot conclude that its simultaneous adoption of R.C. 2307.91(GG) was substantive in nature.”

The Ohio Supreme Court ultimately held that the requirements in R.C. 2307.91, 2307.92 and 2307.93 pertaining to asbestos-exposure claims are remedial and procedural and may be applied without offending the Retroactivity Clause of the Ohio Constitution to cases pending on September 2, 2004.

In Adams v. Goodyear Tire and Rubber19, the Eighth District Court of Appeals held that pursuant to R.C. 2307.941(A)20, the asbestos premises liability statute, a premises owner is not liable for any injury resulting from asbestos exposure unless the exposure occurred to an individual who was physically on the premises owners’ property. Clayton Adams worked at Goodyear Tire & Rubber from 1973 to 1983. While working at Goodyear, Mr. Adams allegedly worked with asbestos-containing products and carried asbestos home with him on his clothing21. In their Complaint, Plaintiffs’ alleged that Clayton’s wife Mary washed the clothing, shook it out, and breathed in the asbestos dust22. Mary Adams was diagnosed with mesothelioma in March 200723. Mary and Clayton Adams filed suit against Goodyear and numerous other defendants for damages related to Mary’s asbestos exposure in June 200724. Based on asbestos premises liability statute, the trial court granted summary judgment to Goodyear, from which Plaintiffs appealed25.

On appeal, Plaintiffs-Appellants argued that R.C. 2307.941 did not apply to the Adams case, since Mary Adams herself was never on Goodyear’s premises26. Plaintiffs-Appellants also asserted that the negligence claims were not governed by R.C. 2307.94127. Defendant-Appellee, along with various amicus curiae countered that Appellants’ position would render R.C. 2307.941 meaningless. The Court of Appeals, Eighth District agreed with Defendant-Appellee, and overruled assignment of error number 1, finding that Plaintiffs’ interpretation of R.C. 2307.941 would render the statute meaningless. The Court stated that in reading the statute as a whole, “it is clear that the focus is on the presence of asbestos on the premises, not the presence of the individual on the premises.” The Court thereafter held that because R.C. 2307.941 barred recovery for injury where the individual was not exposed to asbestos on the defendant’s property, Mary’s claims failed as a matter of law. The Court further stated that based on their analysis of R.C. 2307.941(A)(1), Goodyear did not owe Mary a duty of care since her exposure did not occur on Goodyear’s premises and therefore the negligence claim failed as a matter of law28.

Senate Bill 120

On April 9, 2003, Am.Sub.S.B. 292 (“S.B. 120”) took effect. S.B. 120 applies only to causes of action that accrue on or after the effective date of the act. Any cause of action that accrues prior to the effective date of S.B.120 is governed by the law in effect when the cause of action accrued. S.B. 120 is better known at the several liability statute. Each defendant who is determined by the trier of fact to be legally responsible for injury or loss to person or property or wrongful death and to whom fifty per cent or less of the tortious conduct is attributable shall be liable to the plaintiff only for that defendant’s proportionate share of the compensatory damages that represent economic loss2930. The proportionate share of a defendant is calculated by multiplying the total amount of the economic damages awarded to the plaintiff by the percentage of tortuous  conduct as determined by section 2307.23 of the Revised Code.

In determining the percentage of tortious conduct attributable to a party in a tort action under section 2307.22, the trier of fact must return a general verdict accompanied by answers to interrogatories that specify: (1) the percentage of tortious conduct that proximately caused the injury or loss to person or property or the wrongful death that is attributable to the plaintiff and to each party to the tort action from whom the plaintiff seeks recovery in this action; and (2) the percentage of tortious conduct that proximately caused the injury or loss to person or property or the wrongful death that is attributable to each person from whom the plaintiff does not seek recovery in this action (i.e., former manufacturers of asbestos-containing products that are bankrupt)31. The sum of the percentages of tortuous conduct as determined pursuant to division (A) of this section must equal one hundred percent32.

Practical Application of Ohio Tort Reform

The majority of Ohio’s asbestos cases are filed in Cuyahoga County, Ohio. When H.B. 292 took effect in 2004, there were approximately 39,000 cases pending on the Cuyahoga County asbestos docket33. Since the Ohio Supreme Court upheld the constitutionality of H.B. 292 in Ackison, the Cuyahoga County Court of Common Pleas has disposed of approximately 30,000 asbestos cases. Most of those cases have been administratively dismissed pursuant to the provisions of H.B. 292. At the end of September, 2009, there were 7,194 asbestos cases pending on the Cuyahoga County asbestos docket34. Today the asbestos docket consists of mesothelioma and lung cancer cases. Plaintiff’s cases are grouped for trial according to the Plaintiff’s law firm representing them, and about 5 cases are “worked up” together and case management deadlines are established that apply to each case in the trial group.

The practical application of Ohio tort reform has made the trial of an asbestos case more complicated than before, due to the Defendants’ ability to assert Plaintiff’s exposure to other entities’ asbestos-containing products35 as an affirmative defense at trial36. Since the jury is obligated to apportion liability to the Defendants in the case and other entities, at trial the Defendants have the burden of “proving up” these alternative exposures to apportion liability to other Defendants or entities37.

For example, a plaintiff might allege exposure to asbestos containing products while working as a mechanic performing brake and clutch repairs. The manufacturers of the friction products would be the trial defendants. However, the plaintiff may have worked in a steel mill or other industrial setting where he was exposed to asbestos-containing thermal insulation products during his working life, and those sources of potential exposure may be an alternative cause of his mesothelioma, or it may be the cause of his mesothelioma. If the trial defendants seek to place the thermal insulation products on the verdict form to apportion liability, the defendants will need to prove that the plaintiff was exposed to asbestos-containing thermal insulation products manufactured by a defunct bankrupt entity38 that was a substantial factor in causing his mesothelioma. If the plaintiff was exposed to thermal insulation products, most often the plaintiff has filed a claim for compensation with the specific bankruptcy trust that manufactured the specific product. The defendants will seek to admit the bankruptcy claim form documents at trial as evidence that plaintiff admitted that he was exposed to thermal insulation products. Whether or not the bankruptcy documents are admissible at trial is another issue; however, the Cuyahoga County asbestos court has ruled that these bankruptcy documents are discoverable. These documents might be admissible at trial if the defendant can successfully make an offer of proof that the plaintiff alleged exposure to a specific bankrupt defendant’s asbestos-containing product

that was a substantial factor in the development of plaintiff’s disease. Remember, the level of proof necessary for a plaintiff to maintain a claim against a bankruptcy trust is different than the level of proof necessary to demonstrate substantial factor causation under the Horton case. Each

bankruptcy trust has unique requirements that the plaintiff must satisfy in order to make a claim. Most bankruptcy trusts require an affidavit of exposure attesting to the plaintiff’s exposure to specific product(s). Whether or not the plaintiff’s exposure would satisfy the Horton substantial

factor test will depend on the specific facts of each case, and the ability of defense counsel to persuade the Court that the burden has been met.

Similarly, other jurisdictions have ruled that bankruptcy documents are discoverable/admissible. Proving plaintiff’s alternative exposures to other asbestos containing products at trial is a tedious task since it involves reading bankruptcy documents to the jury in addition to the bankrupt’s discovery responses from prior asbestos cases. You run the risk of boring the jury to death, but it is obviously important to your client to “prove-up” the most alternative exposures at trial to reduce the amount of damages that are apportioned to your client, if any. Sometimes you might have a plaintiff expert in the case that will admit that plaintiff’s exposure to asbestos-containing thermal insulation products are a substantial factor in the development of plaintiff’s mesothelioma. In fact, some plaintiff’s experts will admit that plaintiff’s exposure to thermal insulation products alone was enough to cause plaintiff’s mesothelioma39 Plaintiff’s experts opine the general theory that there is no safe level of asbestos exposure, and each and every exposure to asbestos is a substantial factor in the development of plaintiff’s disease. On cross-examination, plaintiff’s experts usually concede that each exposure to thermal insulation products is substantial given their general opinion that “every fiber counts”.

The only viable way to differentiate between defendants and products in an asbestos case is to analyze each on the basis of the dose40 delivered to the Plaintiff. One of toxicology’s central tenets is that “the dose makes the poison.” This notion was first attributed to sixteenth century philosopher physician Paraclesus, who stated that: “[a]ll substances are poisonous—there is none which is note; the dose differentiates a poison from a remedy.” Even water, in sufficient doses, can be toxic41.

On October 3, 2007, the Supreme Court of Ohio decided thecase of Terry v. Caputo42, in which the Court explained the evidentiary threshold necessary to establish causation in a tort action involving exposure to a toxic substance43 A plaintiff is required to establish: (1) that the toxin is capable of causing the medical condition or ailment at issue (general causation), and (2) that the toxic substance was in fact the cause of the claimant’s medical condition (specific causation)44. Expert testimony is required to establish both general and specific causation. In Horton v. Harwick Chemical Corp.45, the Supreme Court made it clear that causation must be established in regard to each Defendant, as explained in the Syllabus: “For each defendant in a multidefendant

asbestos case, the plaintiff has the burden of proving exposure to the defendant’s product and that the product was a substantial factor in causing the plaintiff’s injury.” Applying both Terry and Horton to an asbestos case, the plaintiff must demonstrate, via expert testimony, that asbestos exposure is capable of causing the disease the plaintiff suffered, and that the plaintiff’s disease was actually caused by exposure to an asbestos product manufactured by a specific defendant. Therefore, dose and peer-reviewed literature are often the most reliable sources to prove general causation in an asbestos case. Whether a plaintiff can prove specific causation is often determined by plaintiff’s testimony regarding specific products, and whether plaintiff alleged exposure to specific products based on the filing of a potential workers compensation claim or submissions to the bankruptcy trusts. A Plaintiff must establish, by expert testimony, the degree of risk posed by each defendant by analyzing the type of asbestos fiber in the product, the amount of dust released by that product in a given activity, the amount of asbestos in the dust released during the activity, the individual plaintiff’s relative exposure to the product during that particular activity, as well as the ventilation and other relevant environmental factors that existed during the activity46.

Conclusion

The Ohio legislature previously characterized the asbestos landscape in Ohio as “an elephant mass” of cases when it promulgated H.B. 292 in 2004. Application of H.B. 292’s prima facie medical requirements has reduced the Cuyahoga County asbestos docket from approximately 39,000 cases to less than 8,000 cases. The Court has focused its resources on the malignancy docket, primarily mesothelioma cases. Most case have fewer defendants, although given the ability of defendants to apportion liability to other entities as an affirmative defense at trial, the trial of an asbestos case has become increasingly complex. Aside from defending our client’s products at trial, as defense counsel we are now required to prove up alternative exposures of a plaintiff to other asbestos-containing products at trial to reduce the proportion of liability of our client. How much alternative exposure evidence to submit to a jury is a strategic question that requires some deliberation depending upon how many co-defendants and other entities you seek to include on the verdict form. You definitely jeopardize losing the jury’s attention by presenting too much information on other products at trial, but it is obviously necessary to reduce your client’s share of liability if there is a verdict for the plaintiff. A keen understanding of the several liability statute and its practical application by the asbestos court is probably the most important factor in reducing your clients’ potential liability at trial. Good luck.

Endnotes

1 R.C. § 2305.10.

2 R.C. 2307.96(A).

3 R.C. 2307.96(B).

4 Lohrmann v. Pittsburgh Corning Corp. (4th Cir. 1986), 782 F.2d 1156.

5 H.B. 292, Statement of Findings and Intent, Section 5.

6 (2008), 120 Ohio St.3d 228.

7 Id.; See also R.C. 2307.91.

8 R.C. 2307.92.

9 R.C. 2307.91.

10 Ackison (2008), 120 Ohio St.3d 228.

11 Id., at 229.

12 Id., at 230.

13 See Wilson v. AC&S, Inc.

(2006), 169 Ohio App.3d 720; Staley v. AC&S, Inc. (2006), 2006 WL

3833883; and Stahlheber v. Lac D’Amiante Du Quebec, LTEE.

(2006), 2006 WL 3833888.

14 Ackison v. Anchor Packing Co. (2007), 113 Ohio St.3d 1465.

15 Ackison (2008), 120 Ohio St.3d 228.

16 Ackison (2008), 120 Ohio St.3d 228.

17 Id., at 235.

18 Id., at 238.

19 (Ohio App. 8 Dist.), 2009 WL 280398.

20 R.C. 2307.941 provides as follows:

The following apply to all tort actions for asbestos claims brought

against a premises owner to recover damages or other relief for

exposure to asbestos on the premises owner’s property: (1) A

premises owner is not liable for any injury to any individual

resulting from asbestos exposure unless that individual’s alleged

exposure occurred while the individual was at the premises

owner’s property.

21 Id.

22 Id.

23 Id.

24 Id.

25 Id.

26 Id.

27 Id.

28 On June 17, 2009, the Ohio Supreme Court accepted the Adams

appeal for review and the case was orally argued on December

15, 2009. A decision is expected in approximately June of 2010.

29 R.C. 2307.22(A)(2).

30 If the trier of fact determines that more than fifty per cent of the

tortious conduct is attributable to one defendant, that defendant

shall be jointly and severally liable in tort for all compensatory

damages that represent economic loss. R.C. 2307.22(A)(1).

31 R.C. 2307.23(A)(1) and (2).

32 R.C. 2307.23 (B).

33 Retired Judges Leo M. Spellacy and Harry A. Hanna have been

assigned by the Ohio Supreme Court to oversee the Cuyahoga

County asbestos docket. By agreement of the parties, the

Cuyahoga County asbestos docket has consisted of a “malignancyonly

docket” since approximately 2000. In addition, there is a

Master Asbestos Case Management Order which governs all

Cuyahoga County asbestos cases. Unless exigent circumstances

apply, all malignancy cases are placed on and 11-month case

management order track, with the goal of an individual case

reaching trial in 330 days.

34 Based on calculations by the Cuyahoga County Court of Common

Pleas.

35 Because of its many useful properties, asbestos has been

incorporated into some 3,000 different products in our

industrialized society. Asbestos is a naturally occurring mineral,

which is conventionally divided into two mineralogic groups. The

amphiboles include crocidolite, amosite, tremolite, anthophyllite,

and actinolite. Among the amphiboles, only crocidolite and

amosite have received widespread commercial utilization. The

other group of asbestos minerals is the serpentine group, of which

chrysotile asbestos is the sole variety. Pathology of Asbestos-

Associated Diseases, Roggli, et al., Second Edition.

36 R.C. 2307.23(C).

37 The Cuyahoga County Court has tried approximately five asbestos

cases under the several liability statute since 2003: Ronald Werts

(04-541869); Walter Cox (05-560894); James Bier (05-578389);

Robert Connell (06-609220); and Clyde Fischer (07-615514). The

only substantial jury award (total jury verdict of $8,010,000) was in

the Clyde Fischer case; however, pursuant to R.C. 2315.18,

noneconomic damages were limited to $250,000, thereby

reducing the total verdict to $4,290,000.

38 Nationally, asbestos personal injury litigation has already

contributed to the bankruptcy of more than seventy companies,

including nearly all manufacturers of asbestos textile and

insulation products, and the ratio of asbestos-driven bankruptcies

is accelerating. H.B. 292, Statement of Findings and Intent,

Section 5.

39 There are marked differences in the potential for various types of

asbestos fibers to produce mesothelioma. While amosite is the

most common fiber type associated with mesothelioma among

U.S. workers, crocidolite appears to pose the greatest risk among

the commercially available species, followed by amosite.

Whereas the epidemiological association between exposure to

commercial amphibole asbestos is indisputable, the

mesotheliogenic potential of chrysotile has been much debated.

Pathology of Asbestos-Associated Diseases, Roggli, et al., Second

Edition.

40 Dose refers to the amount of a chemical that enters the body, and,

according to most toxic tort practitioners is the single most

important factor to consider in evaluating whether an alleged

exposure caused a specific adverse effect.

41 Borg Warner Corp. v. Flores, 232 S.W.3d at 770.

42 Terry v. Caputo, 115 Ohio St.3d 351, 2007-Ohio-5023.

43 Terry, syllabus at 1.

44 Id., syllabus at 2, 3.

45 Horton v. Harwick Chemical Corp. (1995), 73 Ohio St.3d 679.

46 Other courts that have grappled with the issue of specific

causation have found that expert testimony of the nature

described above is required. See Borg-Warner v. Flores,

(September 29, 2006) Case No. 05-0189; Merrell Dow

Pharmaceuticals, Inc. v. Havner (1997), 40 Tex.Sup.Ct.J. 846, 953

S.W.2d 706; Georgia Pacific v. Stephens, Texas First Dist. Ct of

App. 2007, Texas App. Lexis 6555; and Gregg v. V-J Auto Parts, Co.,

596 Pa 264, 943 A.2d 216 (2007).

Payment Defending the Architect Against Contractor Claims for Wrongful Certification of Sufficient Grounds (April-June 2010 Litigation Quarterly)

 

To Terminate Contractor for Cause Under the Standard Form of Agreement Between Owner and Contractor Where the Basis for Payment is a Stipulated Sum–AIA Document A141 (2007 EDITION)

In the majority of commercial construction projects, the design professional agrees to administer the construction contract between the owner and contractor.  These services typically include observing the contractor’s work for purposes of recommending payment to the owner, responding to the contractor’s requests for information, and evaluating the contractor’s requests for change orders for additional money and extensions of the contract time.

In the Standard Form of Agreement Between Owner and Contractor Where the Basis for Payment is a Stipulated Sum, American Institute of Architects (“AIA”) Form A101-2007 Edition) (the “Prime Contract”), the architect’s construction administration duties derive from the A101 and the general conditions, which are incorporated by reference into the contract.  Of all of the construction administration services provided by the design professional, few services are more certain to lead to litigation than addressing whether sufficient grounds exist to justify the owner’s termination of the general contract.

This article briefly examines the state of Florida law on the architect’s duties regarding certification and the defenses available to the architect to claims by the contractor that the architect wrongfully certified its termination.  Finally, the article concludes with some practical advice to the architect and its counsel about minimizing the potential for being drawn into litigation over certification and maximizing the potential for a successful defense if sued by the contractor.

AIA Document A201- 2007 Edition

The intention of the AIA documents, 2007 Edition, is to establish a tri-partite relationship between the owner, contractor, and design professional.  The relationship is created by incorporating a single set of standard general conditions into both the owner-contractor agreement, e.g., A101, and the owner-architect agreement, e.g., B101.

The architect’s construction administration functions are set forth in A101, B101, and the general conditions.  The standard general conditions are contained in AIA Document A201, General Conditions of the Contract for Construction (“A201-2007”), which include the architect’s duty, upon the owner’s request, to certify whether sufficient grounds exist to justify the owner’s termination of the contract for cause.1

Paragraph 14.2 of the Conditions, Termination by the Owner for Cause,  provides that:

The Owner may terminate the Contract if the Contractor:

1.             persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials;

2.             fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors;

3.             persistently ignores laws, statutes, ordinances, or other rules or regulations; or

4.             otherwise is guilty of substantial breach of a provision of the Contract Documents.

Paragraph 14.2.2 provides:

When any of the above reasons exist, the Owner, upon certification by the Architect that sufficient cause exists to justify such action, may without prejudice to any other rights or remedies of the Owner and after giving the Contractor and the Contractor’s surety, if any, seven days’ written notice, terminate employment of the Contractor.

Traditionally, the General Conditions have provided that the architect administering the Prime Contract makes the initial decisions in all claims between the owner and the contractor.However, the 2007 General Conditions allow the owner and contractor to choose someone other than the architect to serve as the “Initial Decision Maker” for most claims arising between them.2 If, however, the owner-contractor agreement fails to identify a third party selected to serve this function, the architect will, by default, serve as the Initial Decision Maker, as it has traditionally done.3

The owner’s request that the architect certify grounds sufficient to justify termination of the contract is a “Claim” under Article 4.3 of the General Conditions.4 While there is no Florida law on this particular issue, the New Jersey Supreme Court has squarely addressed the matter5, and the reasoning is solidly based on the broad definition of “claims” in the general conditions.  Therefore, in addition to the duties conferred by Article 14.2, in its role as Initial Decision Maker, the architect is tasked with deciding if sufficient cause exists to justify the owner’s termination of the Prime Contract for cause.6

Article 14.2.2 provides that when any of the enumerated grounds for default exist, the owner may terminate the contract. However, before the owner can do so under the contract, the Independent Decision Maker must certify that sufficient cause exists to justify such action based on the grounds provided in the termination for cause provision.7 This is “without prejudice to any other rights or remedies of the owner” existing under common law.8

In other words, the owner may have additional bases to terminate the owner-contractor agreement based upon common law principles, or the owner may have the independent right to terminate the contract under common law for prior, material breaches based on the same conduct for which it requests certification.

What Should An Architect Do When Faced With A Request To Certify Grounds For Termination?

The Initial Decision Maker is called upon to exercise independent judgment in deciding whether to certify a termination. In fulfilling this role, the design professional should conduct a due diligence investigation and, within a reasonable amount of time, render adecision.  The claims mechanism in Article 4 provides a timeline for the Architect’s decision, which can be extended by the Architect’s request for additional information.

No matter what the architect ultimately decides, the decision will likely result in legal action against him. Certainly, the decision to certify grounds for termination will result in a disgruntled contractor and the decision not to certify will result in a disgruntled owner, leaving the architect with a Morton’s Fork.

As set forth in Article 4.2.2, the architect’s decisions must be consistent with the intent of the contract documents and without partiality to either the contractor or owner.9 Inmany cases, however, the considerations at issue will involve the drawings and construction administration provided by the architect, placing the architect in the awkward position of judging its own performance.  This potential conflict and the fact that architects’ fees are paid by the owner may cause considerable unease in the contractor over whether the architect can truly serve as an impartial arbiter in the certification process.

The design professional’s only option under these circumstances is to render a decision in good faith and with impartiality to both the owner and the contractor.  Having said that, that the architect will be sued for certifying or not certifying termination is a near certainty.  When asked to address certification, the architect should keep this in mind and position itself for the successful defense of the litigation.  There are several important defenses available to the architect that derive from both the contract and common law, and the architect is a unique position to be able to strengthen those defenses with its approach to the certification and the certification itself.  Some of the pertinent defenses are discussed briefly below.

No Proximate Cause

It does not necessarily follow from the architect’s certification that the owner must terminate the contract or that the owner necessarily relies on the architect’s certification in deciding to terminate the contractor.  The certification is a condition precedent to termination of the contractor’s employment under Article 14.2.2.  Often, the owner will have its representative and its own counsel involved in evaluating whether to terminate the contractor.

More sophisticated owners will often have an owner’s representative administer the owner’s duties under the Prime Contract.  Often, the owner’s representative is as qualified as the architect to evaluate the bases for certification identified by the owner and will have the knowledge to do so from his involvement in the project.  In those cases, the architect’s certification, while a condition precedent under the contract, is a formality to the owner’s decision to terminate.  When a sophisticated owner employs an owner’s representative, counsel for the architect should explore whether the owner truly terminated based on the architect’s certification or whether it exercised independent judgment in terminating the contract, relying on the opinions of its representative.

If the owner terminates the Prime Contract on a basis not certified by the architect, it has presumably exercised its common law termination right.  In such cases, the architect’s defenses to a wrongful certification claim by the contractor or a professional negligence or indemnity claim by the owner should include that the architect’s certification was not the proximate cause of any damages.

The damages flowing from the architect’s certification, as opposed to the owner’s independent termination, may be speculative.  The independent basis for the common law termination provides an opportunity for the architect to argue that the owner’s termination on the independent basis was the cause of any damages, rather than its termination based on the architect’s certification.

Prospective Release or Waiver

Generally, when the architect performs thisfunction, the contract provides that the architect “will not be liable” for the consequences of a decision rendered in good faith.10 Because the general conditions are incorporated into both the Prime Contract and owner architect agreement, this language should provide the basis for a release or waiver of any claims by the contractor or owner against the architect for a good faith certification. However, the enforceability of one type of exculpatory provision in favor of the design professional – the limitation of liability clause — has recently been called into question11, and the practitioner should advise the architect accordingly.

Arbitral Immunity

When the architect agrees to serve as the Initial Decision Maker, it becomes an arbiter of claims between the owner and contractor.  Article 4.3.2, Decisions of the Architect, identifies the architect as the initial arbiter of claims,12 and Article 4.4, Decisions of the Architect, provides that the architect’s decisions are final and binding, subject to arbitration or litigation.  These provisions make clear the role of architect as arbiter, and the architect’s counsel should assert arbitral immunity as a defense.

Generally, arbitral immunity is absolute immunity from suit.  However, the key issues of whether arbitral immunity for certification is immunity from suit or from liability and whether the immunity is absolute or qualified have not been addressed by Florida courts.

The Florida Supreme Court has addressed the architect’s immunity for decisions regarding the quality and quantity of the contractor’s work. 13 In that context, the Court held that the immunity conferred on the architect, as arbiter, is qualified, and the architect is immune from liability unless decision was rendered fraudulently or with such gross error as to amount to fraud.14

Because the architect may be called to assess the quality of its own design and construction administrative services when evaluating certification and because the architect is paid by the owner, the Florida high court would most likely hold that arbitral immunity is qualified.  In our opinion, the immunity should be suit immunity, and the contractor should be required to specifically plead the factual basis for a claim that the architect has rendered its certification fraudulently, or so grossly in error that the error amounts to fraud.

Sovereign Immunity

During the construction phase of the project, the architect is appointed by the owner as its limited agent for certain construction administration functions.15 These functions arguably include addressing whether grounds exist to justify termination of the contractor upon the owner’s request.

When the project involves a public owner, the architect may be entitled to sovereign immunity, as an agent of the State of Florida or its political subdivisions.16 For governmental agents, the immunity is qualified suit immunity.  To circumvent the immunity and establish tort liability, the claimant must plead and prove that the agent acted outside the course and scope of its agency or acted with willful and wanton disregard of the claimant’s rights.

A key issue in the agency analysis will typically be whether to apply tort or contract law principles to the agency determination.  The tort concepts of agency turn on the control retained or exercised by the principal over the purported agent.  The determination is often one a disputed fact requiring resolution by the judge or jury.

However, under the standard tri-partite contractual relationship created by the AIA 2007 documents, the contract law concepts of actual and apparent agency may be more appropriate to the application of sovereign immunity from contractor claims based upon wrongful certification.  This is because the contract documents clearly identify the architect as the owner’s representative for certain construction administration functions, and, by incorporating the general conditions into the Prime Contract, the contractor  agrees to accept the architect as the owner’s representative.  The issue of agency, therefore, is not necessarily one of control, but one of the owner’s appointment of the architect as agent and the delegation of certain authority to the architect to act on the owner’s behalf.

Once again, Florida courts have not addressed the issues of agency involved in the architect’s certification of grounds to terminate a construction contract with a public owner.   Nevertheless, counsel for the architect should raise sovereign immunity as a defense to the contractor’s claim based on wrongful certification.

Risk Minimizing Strategies

The architect has two important opportunities to eliminate or minimize its exposure to the contractor’s claim for wrongful certification.  The first is at the contracting stage, and the second is when the architect is requested by the owner to address certification.

At the contracting stage, the architect should take the opportunity to eliminate or minimize its risk by reviewing the Prime Contract, the owner architect agreement and the General Conditions and eliminating its role as the Initial Decision Maker for claims and disputes its certification of grounds sufficient to justify termination as a condition precedent to the owner’s contractual termination for cause rights.

The architect should also suggest to the owner that it negotiate with the contractor to include a “Termination for Convenience” clause in the Prime Contract or make the termination for cause provisions as broad as possible to afford the owner greater latitude in terminating the contractor.  For instance, the phrase “persistently or repeatedly” can be deleted from subsection 1 of Article 14.2 to allow termination for only one reasonable period during which the contractor fails to provide sufficient manpower or materials.

During the construction phase, if the architect has not agreed to act as Initial Decision Maker or to address certification, it can and should simply refuse to do so.  If the architect then voluntarily assumes the duty to address certification, it should require the owner to defend, indemnify, and hold it harmless for any claims arising out of or related to the decision and require the owner to prospectively release the architect from any claims arising out of or related to the decision.   Because limitations of liability operate to prospectively exculpate design professionals from exposure to damages greater than an agreed to amount or arising from agreed to conditions, the practitioner should counsel the design professional about the possibility that the risk shifting and exculpatory provisions may not be enforceable.  Nevertheless, the architect should insist on them when agreeing to assume the certification duty.

If the architect agrees to provide the service, it must be objective and conduct a bona fide, due diligence investigation into the bases for certification and termination requested by the owner.  Upon receipt of the owner’s request for certification, the architect should immediately notify the contractor and its performance and payment bond surety of the owner’s request and solicit their participation in the investigation.

The architect’s initial acknowledgment of the owner’s request should call attention to the gravity of the consequences of termination, including the likelihood of litigation to result from termination.  It should also remind the owner of its common law right to terminate the Prime Contract based on any prior, material breaches by the contractor and, if applicable, remind the owner that some of the bases for certification may involve legal analysis and judgment which is outside of the architect’s expertise.

The architect should advise the owner to consult its own counsel and owner’s representative before terminating the contract and remind the owner while certification is a condition precedent to the owners’ contractual termination rights, the owner is not required to terminate upon receiving the certification, and it should exercise its own independent judgment in determining whether the terminate the contract for cause.  Again, a copy of the acknowledgment and request should be provided to the contractor’s performance and payment bond surety.

If the architect certifies, it should assume that the certification letter will be an exhibit at trial and craft the language accordingly.  The letter should include the following key provisions:

a.   A quote or paraphrase of Quote of the waiver and release provision in the general conditions for decisions made by the Architect in “good faith”;

b.   If the contractor refuses to meaningfully participate in the due diligence process, a reminder of the Architect’s invitation and the contractor’s refusal;

c.   A description of the investigation conducted by the Architect and the reasoning by which the Architect arrived at the conclusion that one or more of the bases for certification and termination requested by the Owner exist;

d.   A caveat that some of the Architect’s opinions may be legal in nature, and that the Owner should consult with counsel before terminating the contract and that certification does not require termination; and

e.   A reminder that the Owner may have a common law right to terminate the contract for cause and, if applicable, a contractual right to terminate the contract for convenience.

The architect should once again copy the payment and performance bond surety with the certification letter.  While the owner’s request and the architect’s certification may not create a duty on the surety’s part to perform under the bonds, they may persuade the surety to intervene and attempt to avoid the inevitable litigation that follows termination.

By employing these strategies, the architect can eliminate or reduce its exposure to wrongful certification claims by a contractor.  If litigation ensues, by employing these strategies and asserting these defenses, the architect should be a strong position to defend the contractor’s claim for wrongful certification.17

1           AIA Commentary to A201-2007, http://www.aia.org/aiaucmp/groups/aia/documents/pdf/aias076835.pdf

2           A101 – 2007 § 6.1.

3           Id.

4

5           Ingrassia Construction Company, Inc. v. Vernon Township Bd. of Education, 345 N.J. Super. 130, 137-138, 784 A.2d 73, 78 (N.J. Super. 2001). See also Bolton Corp. v. T.A. Loving Co., 94 N.C. App. 392 (1989)(Architect’s determination of certification is prima facie correct, and the burden is upon the other parties to show fraud or mistake).

6           A201 – 2007 § 1.1.8.

7           A201 – 2007 § 14.2.1.

8           A201 – 2007 § 14.2.2.

9           A201 – 2007 § 4.2.12.

10         A201 – 2007 4.2.11 provides that “The Architect will interpret and decide matters concerning performance under and requirements of the Contract Documents on written request of either the Owner or Contractor.”

Paragraph 4.2.12  provides:

Interpretations and decisions of the Architect will be consistent with the intent of and reasonably inferable from the Contract Documents . . . When making such interpretations and decisions, the Architect will endeavor to secure faithful performance by both Owner and Contractor, will not show partiality to either and will not be liable for results of interpretations or decisions so rendered in good faith. [Emphasis supplied].

11         See Witt v. La Gorce Country Club, 2009 WL 1606437 (Fla. 3d DCA 2009).  Cf. Fla. Power & Light Co. v. Mid-Valley, Inc., 763 F.2d 1316 (11th Cir. 1985).

12         A201 – 2007 §4.3.2, Decision of Architect.  Claims . . . shall be referred initially to the Architect for action as provided in Paragraph 4.4.  A decision by the Architect, as provided in Subparagraph 4.4.4, shall be required as a condition precedent to arbitration or litigation of a Claim between the Contractor and Owner as to all such matters arising prior to the date final payment is due.

A201 – 2007 § 4.4, Resolution of Claims and Disputes.

If a Claim has not been resolved after consideration of the foregoing and of further evidence presented by the parties or requested by the Architect, the Architect will notify the parties in writing that the Architect’s decision will be made within seven days, which decision shall be final and binding on the parties but subject to arbitration.  Upon expiration of such time period, the Architect will render to the parties the Architect’s written decision relative to the Claim.

13         See Duval County v. Charleston Engineering & Contracting Co., 101 Fla. 341, 352 (Fla. 1931). See also, Willcox v. Stephenson, 30 Fla. 377, 11 So. 659 (Fla. 1892): James A. Cummings, Inc. v. Young, 589 So. 2d 950 (Fla. 3d DCA 1991).

14         Id.

15         Cite to Article 2 – Owner’s representative.

16            Florida Statute § 768.28(9)(a) (2010).