In an interesting ruling by the United States District Court for the Southern District of Mississippi, a program manager was held to be potentially liable for negligence. Despite language in the defendant’s agreement with the project owner which disclaimed liability for its work on the project, the court found that there was a question of whether the entity was operating as a design professional and had a duty of professional skill and diligence to a third-party contractor.
In Southern Indus. Contrs., LLC v. Neel-Schaffer, Inc., the Plaintiff, Southern Industrial Contractors, served as the general contractor for the West Pier Facilities Project in the Port of Gulfport, Miss. (the Project). Southern Industrial brought both contract and negligence claims against several entities, including the Project’s owner, consultants and engineers, alleging that the defendants failed to provide notice of a large underground debris field at the project site, causing delay and a significant increase in costs for the project.
Southern Industrial claimed that one defendant, CH2M Hill, Inc., the program manager and consultant on the Project, had a duty to make sure that the plans, specifications and bidding documents accurately represented the conditions of the Project site. Southern Industrial claimed that CH2M fell below the standard of care in failing to disclose, warn and/or provide information in the pre-bid documents necessary to construct the Project and in continuing to conceal information about the underground obstructions. CH2M filed a motion to dismiss, alleging that, inter alia, it owed no duty to Southern Industrial, and accordingly, could not sustain liability on the negligence count.
In Mississippi, a design professional such as an architect or engineer has a duty to exercise ordinary professional skill and diligence. Third parties may also rely on a design professional’s contractual obligation to a project owner, which would extend the duty to exercise ordinary professional skill and diligence to a contractor who relies upon that party’s design to their economic detriment. This duty can be created in one of three ways:
- by contract;
- assumed through the party’s conduct on the project or through contracts with the project owner; or
- by common law.
CH2M asserted that its work as a program manager and consultant on the Project was not that of a design professional. In support of this contention, CH2M cited case law from other jurisdictions holding that generally, many of the considerations which warrant creation of a legal duty on architects and engineers to third parties are not present with program managers.
The District Court examined the extent of CH2M’s involvement on the Project. The Court found that per its agreement with the owner, CH2M agreed to provide various forms of support, including an assessment of the Project’s adherence to state and federal law and oversight throughout the Project’s design, bid, procurement, construction, permitting and closeout phases. CH2M also was to review plans, specifications and cost estimates, and support in processing proposed change orders.
However, CH2M’s agreement also contained some disclaimer language. Specifically, the agreement provided that CH2M was to have no responsibility for the accuracy or sufficiency of the documentation prepared by design professionals, but that it would review the designs and notify the owner of any errors, discrepancies or inconsistencies. The agreement also specified that any review of constructability, value engineering or any other review or tasks involving design would not render CH2M liable for the duties of the retained design professionals.
Yet, the presence of this disclaimer language in the agreement was not sufficient to, at least at this stage of trial, shield CH2M from professional negligence liability. The District Court denied the motion to dismiss, finding that whether or not CH2M was considered to be a “design professional” under Mississippi law was unclear. The Court reasoned that despite CH2M’s attempt to disclaim liability for any errors in the Project’s design, it also appeared to assume some duties to ensure that the designs were accurate and could in fact be constructed. This conflicting information prevented the Court from determining whether CH2M owed a duty to Southern Industrial as a matter of law.
In sum, the scope and extent of activities performed by a program manager may create a duty of professional skill and diligence, upon which a third-party contractor may rely.
