S. Indus. Contractors, LLC v. Neel-Schaffer, Inc., No. 1:17CV255-LG-JCG, 2017 U.S. Dist. LEXIS 196804 (S.D. Miss. Nov. 30, 2017)

This cases arises out of the West Pier Facilities project at the Port of Gulfport, Mississippi (“Project”). Southern Industrial Contractors, LLC (“SIC”), the Project’s general contractor, filed suit for negligence against CH2M, the Project’s program manager and consultant, to recover increased costs incurred while excavating and working around underground debris at the Project site. SIC alleged first that CH2M owed it a duty to ensure that the Project plans, specifications and bidding documents accurately represented the Project’s conditions, and second that CH2M breached this duty by failing to warn SIC of the underground obstructions it had encountered. SIC argued that, as a result of CH2M’s breach, the Project became much more expensive and time-consuming. CH2M filed a motion to dismiss the complaint, arguing it owed no duty to SIC.

The court first recognized that Mississippi law imposes upon design professionals, such as architects and engineers, a duty to exercise ordinary skill and diligence, and further, that Mississippi law allows third parties to rely upon the contractual obligations that a design professional owes to a project’s owner. The court explained that, because of the design professional’s contractual obligations to the owner, the design professional owes a further duty, sounding in tort, to a contractor who relies upon the design to his economic detriment. The court recognized that whether the design professional owes such a duty to a contractor is a factual determination that must be made on a case-by-case basis.

The court then assessed SIC’s claim pursuant to this Mississippi law. To determine whether CH2M was a design professional, the court assessed CH2M’s contract with the Project owner. The court explained that this inquiry was permissible without turning the motion to dismiss into a motion for summary judgment because the contract was central to SIC’s claims and referenced in its complaint. Pursuant to the contract, CH2M was obligated to (1) assess the Project’s adherence to state and federal law; (2) provide oversight throughout the design, bid award, construction and permitting phases; (3) review the plans and specifications; (4) support the processing of proposed change orders; (5) provide technical engineering and construction management oversight to evaluate the technical aspects of the construction work as it progressed; and (6) evaluate the constructability of the design. Despite these obligations, the contract provided that CH2M had no responsibility for the accuracy or sufficiency of design documents. The court concluded that it was unclear from this language whether CH2M qualified as a “design professional” because, while CH2M disclaimed any liability for errors in design, it also assumed duties to the owner to ensure that the design was accurate and could be constructed.

Next, the court assessed whether the duty arose in light of the facts of the case. This inquiry depended on (1) whether SIC actually relied on CH2M’s contractual obligations, and (2) whether such reliance was reasonable. The court concluded, however, that there was insufficient information in the record to determine these issues as a matter of law. Given these uncertainties, the court denied CH2M’s motion to dismiss and permitted SIC’s claim of negligence to proceed.