Orange County Branch Newsletter

January 2016

ASCE Smart Brieft

Engineers Beware!! California Courts Have Held Engineers Owe A Duty Of Care And Are Liable to Contractors For Plans And Specifications Used in the Bidding Process

DECEMBER 23, 2015

 By James C. Earle  | Ervin Cohen & Jessup LLP | Reprinted from ASCE SmartBrief

In a detailed explanation of an Engineer’s duties and responsibilities, the United States District Court for the Northern District of California held that an engineer that prepares plans and specifications relied upon by contractors in preparing their construction bids for a project owes a duty of care to those bidding contractors. The court held that an engineer can be liable to the contractors for breach of professional duty and/or negligent misrepresentation. (See Apex Directional Drilling, LLC v. SHN Consulting Eng’rs & Geologists, Inc., 2015 U.S. Dist. LEXIS 105537 (N.D. Cal. Aug. 11, 2015)

The contractor, Apex Directional Drilling, LLC (“Apex”), encountered problems on a municipal sewage construction project (“Project”). Apex entered into a contract with the City of Eureka, California (“Eureka”) to install a new wastewater pipeline utilizing a drilling technique known as “horizontal directional drilling” (“HDD”). This is a technique that can only be successful in soil that is sufficiently stable and dense. Eureka, prior to entering into the contract with Apex, hired SHN Consulting Engineers & Geologists, Inc. (“SHN”) to serve as lead engineer and project manager for the Project.

SHN conducted geological studies and prepared plans, reports and specifications describing the conditions on the Project. Eureka and SHN furnished a report, the Geotechnical Baseline Report (“GBR”), to potential contractor bidders to allow the bidders to prepare an estimate of the cost to complete the work. The GBR indicated that “the majority of the subterranean region targeted by the project was composed of stable soils suitable for HDD.”

Apex, relying on the GBR, submitted the lowest bid and was awarded the contract. Subsequently, Apex ran into problems when it encountered mud and flowing sands that were not soils described in the GBR. Thereafter, Apex reported these different soil conditions to Eureka and SHN. Apex submitted change order requests to Eureka seeking reimbursement for the cost overruns resulting from the adverse soil conditions. Eureka, in reliance upon recommendations from SHN, rejected the Apex change order requests. Eureka then terminated Apex.

Apex sued Eureka and filed a separate complaint against SHN asserting claims for breach of professional duty and negligent misrepresentation. SHN moved to dismiss Apex’s complaint for failure to state a claim. The court refused to dismiss Apex’s claims finding that SHN owed a duty of care to Apex.

In addition, the court observed that the California Supreme Court specifically contemplated the availability of claims for negligent misrepresentation in cases involving information provided by engineers. The court concluded that Apex fell firmly within the category of plaintiffs that may recover from SHN based upon alleged misstatements in the GBR, which were intended to influence the substance of bids.

This case provides notice to all Engineers that Contractors have separate and distinct causes of action against Engineers for misrepresentations associated with faulty plans and specifications that were relied upon during the bidding and construction process.

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