California Supreme Court Rules Against SOM

in: Government Affairs / 6 Comments

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Beacon v. SOM Architects: California Supreme Court Rules Against SOM – and All California Architects

The decision is in and, as they say, it’s all over but the shouting … and the lawsuits that are sure to come.

Last week the California Supreme Court ruled that architects owe a duty of care to future homeowners in the design of residential buildings where the architect is a principal architect on the project (meaning that the architect is not a subordinate to other design professionals).

This issue, the scope of an architect’s duties and to whom those duties are owed, was the central issue before the Supreme Court. Recognizing the consequences for the profession were grave should the California Supreme Court rule in favor of Beacon, and because of the seriousness of this matter, the AIACC engaged the legal assistance from one of its allied partners—the law firm of Collins, Collins, Muir & Stewart (CCMS).

CCMS agreed to assist the AIACC with the preparation and filing of an amicus curie brief to the California Supreme Court. The amicus curie brief filed with the California Supreme Court clearly outlined why an architect should not be held liable for claims from a third party with whom they did not have a contract. In addition to the amicus brief filed on behalf of the AIACC, amicus briefs were filed by the California Building Industry Association, the Civil Justice Association, the Consumer Attorneys of California, and the Executive Council of Homeowners. The case was argued to the Supreme Court on May 7, 2014 and on July 3, 2014, the Court issued its opinion.

The case
SOM designed a condominium project for a developer client in San Francisco, California. Due to the mild Bay Area climate, the project did not include providing an air conditioning system for the individual condominium units in the design. The allegation: glazing specified by the architect resulted in an extremely high solar heat gain, rendering some of the condominium units uninhabitable during days of higher than normal temperatures. It is SOM’s claim the installed glazing was the result of a developer-led value engineering decision which led to the installation of improper glazing.

However, glazing was not the issue. As a result of the original lawsuit in which Beacon sued SOM in the lower court, (even though SOM had no contract with Beacon, and SOM prevailed at trial, but then lost on appeal in the appellate court), the matter went before the California State Supreme Court for determination as to whether an architect can be liable for claims from a third party with whom they did not have a contract. Simply stated, this case will determine: are architects accountable to third party purchasers of property for negligent design?

From a legal perspective, the issues trace to a line of cases which states professionals do not owe a duty to those with whom they are not in contract. Starting with Bily v. Arthur Young & Co., a 1992 decision by the California Supreme Court that held that professionals (in that case, an accountant) did not owe a duty to anyone other than their client. This was then developed further in the 2001 decision of Ratcliff v. Vanir. Finally, in 2004 there was the case of Weseloh Family Limited Partnership v. K.L. Wessel Construction Co. Each of these decisions has progressively improved the position of design professionals relative to the duties they owe to their clients or others.

This issue is important because if third parties who are not in privity of contract with the design professional are allowed to file suit, the door opens for contractors, construction managers, subsequent owners, and others to sue the design professional. Having this type of exposure to liability would not only increase liability to the design professional, but create a scenario of torn loyalties; making it difficult for the architect to properly serve their client, the owner, if doing so may subject the architect to liability claims by the contractor. The recent case involving SOM reverses the recent history of cases by indicating that, in fact, architects may have a duty to those with whom they are not in contract.

This has a national effect, not only on those firms which practice in California and in other states, but if California adopts a rule that architects owe duties to those with whom they are not in contract, such a case would be instructive to other jurisdictions. The rationale used by the California Court in crafting such a rule would provide a template to courts and litigants in other states of how to hold architects liable for duties that they never before had.

The court held that the architect did owe a duty of care to future homeowners based on common law interpretation of duty
The Court held that architects owe a duty of care to future homeowners in the design of residential buildings where the architect is a principal architect on the project, meaning that the architect is not a subordinate to other design professionals. The Court based its ruling on a common law (historical case precedent) understanding of the scope of a professional’s duty. In doing so, the Court traced through a history of cases where professionals were held to owe a duty to third parties with whom the Architect did not contract, where certain tests were met; these tests are known as the Biakanja factors, originating from the 1958 Supreme Court case of Biakanja v. Irving. Those factors are: the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm. While there are procedural considerations specific to the Beacon case that informed the ultimate decision, the end result was a finding of duty.

Prior case law distinguished by the court
Prior to the Beacon case, there were two decisions that were frequently looked to by architects to address the scope of professional duties: Bily v. Arthur Young & Co. and Weseloh Family Ltd. Partnership v. K.L.Wessel Construction Co., Inc. In each of those cases, the professional was held to not owe a duty to the individuals that filed suit against them. Bily involved financial auditors and Weseloh involved engineers. The Beacon Court spent time distinguishing the facts between those in the Beacon case and the circumstances in both Bily and Weseloh.

As to Bily, the Court focused “on three considerations that drive the analysis and distinguish this case from Bily: (1) the closeness of the connection between defendants’ conduct and plaintiff’s injury; (2) the limited and wholly evident class of persons and transactions that defendant’s conduct was intended to affect; and (3) the absence of private ordering options that would more efficiently protect homeowners from design defects and their resulting harms.” Applying those considerations, the Court held that as the only architects on the project SOM and HKS were closely connected to the alleged design defects. SOM and HKS had been involved in the original design, as well as the considerations to modify the HVAC for the units and the decisions to substitute the windows originally specified. The Court stated, “Among all the entities involved in the Project, defendants [SOM and HKS] uniquely possessed architectural expertise.” As such, the Court reasoned “an architect cannot escape such liability on the ground that the client makes the final decisions.”

As to the second consideration, the Court disagreed that a finding of a duty would create “‘liability in an indeterminate amount for an indeterminate time to an indeterminate class.’” Rather, the Court found that at the time of providing their professional services, SOM and HKS knew that the residential units would ultimately be sold as condominiums. The Court went on to state that by undertaking the design of these units, SOM and HKS intended to influence the transaction of the sale of those units and could therefore determine the scope of their liability and make rational decisions regarding their involvement. By this the Court was saying that the architects knew that they would affect the sale of these units and that the foreseeable buyers of the units were the population of people that could be harmed by the architect’s negligence and who might seek redress against the architects.

Third, on the issue of “private ordering” the Court held that purchasers of residential units are not positioned to take precautions against design defects. Homebuyers rely on the expertise of the builders and designers that the homes will be designed and built in a fashion that makes them habitable. The Court stated, “A liability rule that places the onus on homebuyers to employ their own architects to fully investigate the structure and design of each home they might be interested in purchasing does not seem more efficient than a rule that makes the architects who designed the homes directly responsible to homebuyers for exercising due care in the first place.”

The Court went through a similar process to distinguish the Beacon case from the Weseloh case. Again, the Court focused on the fact that SOM and HKS were the sole entities providing architectural services. Moreover, the Court noted, SOM and HKS not only provided their services in the form of design documents, but also “applied their expertise to ensure that construction would conform to approved designs.” The Court also indicated that Weseloh has limited application in that it is not so broad as to state that architects never have a duty to third parties. Rather, Weseloh only says that an architect’s role can be so limited and subordinate to other design professionals that the architect will not, in those limited circumstances, have liability to third parties.

What does this mean for practicing architects?
Weseloh and Bily remain good law in that they were not overturned by the Supreme Court. But, they have been reined in to more specific or limited circumstances. Under the Beacon case, it is clear that architects on residential projects who serve as the primary designer can be sued by downstream homebuyers with whom the architect did not contract.

In practical terms, this raises the bar not so much for the actual designs, but in your design process and your relationships with your clients. When designing a project, you need to be sure to consider the implications of each facet of the design. Like an author critical of each word they write, you need to see the whole building and how all of your elements will work together and what impact that can have on not just your client, but the ultimate end user of the project. From there, you need to communicate these items. When a builder or developer requests a change for cost savings reasons, you need to inform them of the implications of those changes. Changing windows may impact the heat gain; changing insulation may impact the energy costs; changing mechanical systems may impact the acoustical considerations.

So, what can architects do to protect themselves in the future? Ironically, what they should have done all along; the same things a wise architect does: stating with client selection and the management of expectations. After that, simple things like making sure all parties to the contract are clear on the contract terms; follow-up (say what you’re going to do for them, go do it, and then tell them what I did). And most importantly; communication and documentation – this is the single most important thing as an architect you can do to protect yourself. It not only documents who, where, why, when, and how, but may also provide the court judicial guidance and a key piece of evidence as it seeks to determine if you were at fault.

To read the filed Amici brief, click here.

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Kurt Cooknick, Assoc. AIA

Kurt T. Cooknick, Assoc. AIA, is the Director of Regulation and Practice. With experience in the profession and over 15 years as an advocate on behalf of the architectural profession in California, he is passionate about protecting and advancing the profession.

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  1. avatar
    Brice List

    I would be shocked and surprised if SOM did not have sufficient documentation of correspondences to the developer saying, hey this is a bad idea…and the response being “listen, if you want to get paid make the change”. We can advocate all day long, but if the glass/HVAC substitutions were still code compliant than what grounds do we have to insist on the more costly option?

  2. avatar
    Chuck Collings

    It’s seems that the discussion of what glass was used or what was value engineered is completely irrelevant. Isn’t the only question whether or not the building met all applicable codes, including Californias energy code, at the time of completion?
    If the building, as constructed, met all applicable codes then no laws were broken and there wasn’t any negligence.
    If any substitution resulted in the building no longer being code compliant then the architect is liable.

  3. avatar
    Oscia Wilson

    It seems like a natural extension for this ruling to be applied in commercial and institutional settings, as well. What protection would we have in situations where we inform the client that their cost-savings decisions will have a harmful effect on the building performance and they choose to do it anyway? We certainly don’t have the power to force clients to spend money on certain items if they aren’t code-required.

  4. avatar
    Peter Hopkinson, FAIA, NCARB

    This appears to be a significant setback for the profession in California. I would be very pleased to be on your list of architects who are very interested in being included and informed in the discussion that will follow soon. Initial questions that arise to me are;

    1), Who made the decision to require no HVAC, and then either determine or change the glass spec, and when when, in the design and/or construction phase?

    2), When was the architect informed? Did the architect agree?

    3). Whether yes or no, what was the architect’s response to the developer-client?

    $

  5. avatar
    Jack Andersen, AIA

    With fees continuing to go lower, is there any end to the liability and risk that the architect assumes?? Our laws in the US are based on what is fair; assuming that rewards should be proportional to the risks, this decision puts things way out of balance against the architect.

  6. avatar
    Donald Wardlaw

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    I doubt the expectations of future, unknown occupants can be known, let alone met, though they might be imagined.

    I don’t think the issue is clear negligence such as failure to meet code requirements, or to meet specific scope of work requirements.

    There will need to be a discussion at the contract negotiation/proposal stage about the future liability of the project and what kinds of liability each party should bear.

    In my opinion this will end up in a new layer of insurance and indemnifications.

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