In Beacon Residential Community Association. v. Skidmore, Owings & Merrill, LLP, the California Supreme Court held that a principal architect – that is an architect that is not subordinate to other design professionals – can be held liable to a plaintiff for negligence without privity of contract. The principal architect can be held liable even when it does not actually build the project or exercise ultimate control over the construction. In holding so, the court expanded the scope of duty owed by design professionals to third parties, distinguishing the limitations for design professionals established ten years ago in Weseloh Family Ltd. Partnership v. K.L. Wessell Construction Co., Inc. and similar precedent.
The case involved a 595 unit condominium building in San Francisco. The HOA sued the developer and various other parties, including the two architectural firms on the project, for construction design defects. The principal alleged defect was “solar heat gain,” which purportedly made the condos uninhabitable and unsafe during certain periods. Plaintiff alleged the solar heat gain was caused in part by the architects’ improper design.
The architects in question provided the original design services and played an active role throughout the construction process by conducting weekly site visits and inspections, recommending design revisions as needed, and monitoring contractor and subcontractor compliance with the design plans. The architects were paid almost $5 million for their services.
The architects filed demurrers, which were sustained on the grounds that the HOA was not in privity of contract with the design professionals, and thus the architects owed no duty of care to the HOA. The Court of Appeal reversed, holding that under both common law and SB 800 the architects owed a duty of care to the HOA.
The California Supreme Court affirmed the Court of Appeal and held that the principal architects on the construction project owed a duty of care to the HOA, even though the architects were not in privity with the HOA. Based on the plaintiff’s alleged facts, the court found the architect owed the future homeowners a duty of care under common law and thus did not reach the issue of whether there was a legislative intent in SB 800 to impose a duty of care to future homeowners.
The court noted the requirement of privity of contract to maintain a negligence claim has been eroded and it is well settled an architect can be held liable to third parties for foreseeable injuries (typically in the context of physical injuries). In this context, based on a balancing of factors, the court ultimately determined a duty was owed.
The court distinguished this case from Bily v. Arthur Young & Co., where the court held that independent auditors did not owe a duty of care to its client’s investors. In Bily, the court limited the auditor’s duty of care to those third parties who were specific intended beneficiaries of the report and who were known to the auditor, in order to prevent potential limitless liability.
The court found Bily inapplicable here because of the closeness of the architects’ conduct and the plaintiff’s injury, the fact that requiring a duty of care to a well-defined class of future homeowners will not incur infinite and undefined liability for the architects, and that requiring a duty of care from the architect protects the unsophisticated future homeowner in the most efficient way.
The court also distinguished this case from Wesloh, where the court ruled that no duty of care was owed to a property owner by a design engineer from whom a retaining wall contractor purchased a retaining wall design. The court found Wesloh distinguishable because, in this case, the architects were the sole design professionals and had applied their expertise to not only the design, but to ensure the construction would conform to the design plans. The court noted that Wesloh merely stood for the proposition that a subordinate design professional’s role can be so minor as to foreclose the design professional’s liability in negligence to third parties.
This case certainly increases the potential liability of design professionals in construction defect cases. Whereas design professionals often previously avoided liability based on lack of privity, HOAs and property owners will now have the power to sue principal design professionals in construction defect cases regardless of privity.
That said, the court’s decision was guided by the fact these particular architects had such a high level of involvement and oversight in the project. Sub-consultants or other design professionals who have limited involvement may still not owe a duty to third parties.
For more information about the case and its potential impact, contact Chris Schmitthenner, a Partner in LGC’s San Diego office.