City of Chattanooga, Tennessee v. Hargreaves Associates, Inc.

Citation: Not availableDocket: E2011-01197-COA-R3-CV

Court: Court of Appeals of Tennessee; June 21, 2012; Tennessee; State Appellate Court

Original Court Document: View Document

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The case involves the City of Chattanooga and the Chattanooga Downtown Redevelopment Corporation (CDRC) filing a lawsuit against Hargreaves Associates, Inc. and other defendants related to alleged design and construction errors in Package 2 of the Chattanooga 21st Century Waterfront Plan. The trial court granted summary judgment to the defendants, citing the statute of limitations under Tennessee Code Annotated § 28-3-105 as the basis for barring the plaintiffs' claims. The plaintiffs appealed this decision, but the appellate court affirmed the trial court's ruling. 

The background details the contractual relationships established between the City, CDRC, and Hargreaves Associates, which began on December 2, 2002, for architectural services. CDRC was designated as the owner of the project area and responsible for administering the project, which involved multiple construction packages. River City Company was retained as the development manager to oversee project coordination and communication. Hargreaves was responsible for various aspects of the project's design and oversight, including the approval of construction drawings for Package 2, which included a feature known as "The Passage." Construction commenced shortly after the drawings were approved on November 4, 2003. The dissenting opinion from Judge Franks indicates disagreement with the majority's decision.

Continental Construction Company, Inc. served as the primary construction contractor for the Project, with several other defendants involved in various design and construction tasks, including Moffatt Nichol, Inc., Masonry Specialist Corporation, NABCO Electric Co., and Valley Crest Landscape Development, Inc. Throughout 2004 and 2005, Hargreaves reported multiple construction issues to RiverCity, detailing specific problems through periodic reports.

Key issues reported include:

1. On October 28, 2004, field report No. 156 documented that wall #1 was moving, and the esplanade was settling, causing hairline cracks on wall #1. Hargreaves recommended that Arcadis assess the damage and propose a repair strategy.
   
2. A memo on January 7, 2005, indicated concerns about settling in the north wall and incorrectly placed control joints. Arcadis deemed the cracks not concerning but recommended further observation and epoxy injection.

3. Hargreaves noted on the punch list that the esplanade was settling, which was the responsibility of Arcadis and Stein, and recommended that Dan Kral, RiverCity's Project representative, obtain written confirmation regarding necessary fixes.

4. Weekly updates on January 14 and January 28, 2005, reiterated concerns about these ongoing issues.

5. Daily field report #322 on January 25, 2005, raised concerns about potential water trapping behind the Passage panels. Dan Kral provided an assessment of how water would drain, prompting Hargreaves to inquire about sediment impact on drainage.

6. New RFI No. 62 on February 1, 2005, highlighted that an existing concrete wall on the Passage was out of plumb and alignment, necessitating adjustments to the masonry cladding. A proposed solution involved widening the top cap to accommodate the wall's irregularities, potentially affecting the project timeline and costs. 

These communications indicate ongoing issues with construction quality and concerns about water management in the project.

On February 25, 2005, Hargreaves issued a weekly update highlighting multiple issues with Package 1, including the movement of Passage wall #1, settlement of the esplanade by 1/4 inch, and the need for repairs to pavers. Notable concerns were raised regarding utility enclosure #1's BFP leak, the Passage 150 HP pump butterfly valve, irregularities in Passage wall #2, field test responses, coordination of utility vaults, and drainage outlets attributed mainly to River City. 

On March 1, 2005, Hargreaves prepared a memo addressing the construction flaws of Passage wall #1, indicating that the wall was improperly built with an air gap instead of being solid as specified. Potential solutions included filling the gap with Styrofoam, urea-formaldehyde foam, or lightweight mortar, questioning the structural integrity of such fills. Following this, there were several memos exchanged among involved parties regarding potential solutions to avoid demolishing and reconstructing the walls.

On March 11, 2005, Hargreaves noted continued movement of Passage wall #2 and settlement issues, attributing some responsibility to Arcadis. On March 18, 2005, further updates reiterated the concerns over esplanade settlement, paver repairs, and wall filling material situated below the 100-year flood level. 

On April 1, 2005, Hargreaves emphasized ongoing concerns about the wall filling material. On April 7, 2005, Dan Kral from River City announced an agreement for corrective work between the wall and cladding, with a proposed cost of $36,000, which he estimated could be reduced to $15,000-20,000. Hargreaves’ April 8, 2005 update reiterated prior concerns and noted issues with the Passage vault room vent power connection and other ongoing problems with river jet flow and pump components.

On April 29, 2005, Hargreaves sent field notes to Dan Kral detailing observations from his site visit on April 28. He noted concerns about Valley Crest’s mortar mix, specifically the absence of latex and the potential for efflorescence if a dry mix isn't properly stabilized and set. Additional issues included inadequate riprap at River Walk West, missing expansion joints in wall cladding, dead live stakes in riprap, and poor aesthetics of the Passage paver edge. He also reported a 1/4” movement in Wall East since the last measurement.

On May 3, 2005, Hargreaves communicated to Jay Floyd of Arcadis that Wall #2 had moved an additional 1/4” since the last assessment. He indicated that Wall #3 was still settling and had cracked cladding. He urged Arcadis to take necessary actions before costs escalated.

In a June 10, 2005, update, Hargreaves indicated that Wall #2 was again moving and assigned responsibility to Arcadis and Stein. He noted that both sides of the new bridge were settling, requiring the wall #2 sub-drain to be unblocked, and listed several unresolved issues including problems with the Passage 150 HP pump, wet mortar mix, and damaged fixtures.

On June 24, 2005, Hargreaves issued a punch list recommending repairs and checks including water level control, algae cleaning, fixing joints, checking mortar mix, repairing cladding, and replacing dead/live stakes.

On July 29, 2005, Dan Kral reached out to Hargreaves due to issues at the Passage fountain. Hargreaves contacted Dan Euser, the fountain's designer, leading to a scheduled meeting for August 18, 2005.

On September 6, 2005, Hargreaves sought advice from Jeff Shelden regarding differential settlement at the west end bump out. Shelden recommended removing the existing slab for inspection, ensuring proper installation of filter fabric and riprap, and suggested vibrocompacting the area before re-installing the slab.

Hargreaves submitted recommendations to Dan Kral, while Chattanooga contends that issues with the Project were first reported to the Public Works Department Administrator around July 19, 2007. Prior to this, Chattanooga and CDRC were unaware of any significant construction or design defects. Following the identification of these issues, Chattanooga engaged TWH Architects, Inc. to assess the Project, resulting in a report issued on June 27, 2008, which highlighted concerns regarding passage wall defects, improper installation of concrete pavers, electrical issues, and defects in the amphitheater and sidewalks’ design and construction. Hargreaves noted these concerns had been previously communicated to RiverCity.

RiverCity maintained it kept Chattanooga informed throughout the Project and claimed Chattanooga approved all issues raised. RiverCity asserted that some changes were directed by City employees and that Chattanooga never expressed concerns about RiverCity's performance. After receiving the TWH report, Chattanooga sought mediation, but upon receiving no response, filed a lawsuit on March 19, 2009, against Hargreaves, Continental, and RiverCity, citing multiple recovery theories related to the Project’s design and construction.

Hargreaves responded by asserting an affirmative defense based on the statute of limitations, claiming that Chattanooga was aware of the problems over three years prior to the lawsuit's filing. Hargreaves filed a motion for summary judgment in November 2010, arguing the claim was time-barred under Tennessee law, specifically Tenn. Code Ann. 28-3-105 (2000). MSC, a subcontractor, joined Hargreaves’ motion and included additional legal authority. All original defendants, except Pfists Enterprises, Inc., supported Hargreaves’ motion. A summary judgment hearing took place on March 7, 2011, during which Hargreaves contended that RiverCity acted as CDRC's agent for Project communications, referencing the Agreement between CDRC and RiverCity that mandated coordinated communication through RiverCity.

RiverCity is designated as the principal contact and representative for CDRC in all communications with contractors and consultants involved in a construction project. CDRC must provide RiverCity with copies of any direct communications with these parties and designate RiverCity to receive all project-related correspondence. RiverCity is responsible for notifying CDRC of developments that could adversely affect the project schedule or budget. RiverCity clarified that it was not responsible for the project's design or construction, which CDRC managed directly. Despite ongoing issues during the project, including documented defects and a "call for help" email from RiverCity, a Certificate of Substantial Completion was issued on June 1, 2005. The lawsuit was filed on March 19, 2009, exceeding the three-year statute of limitations for construction defects. The court determined that the Plaintiff had notice of potential claims by July 29, 2005, and therefore granted summary judgment in favor of all defendants, concluding that the Plaintiff failed to file the lawsuit within the statutory period. The trial court's decision was made final on April 25, 2011, and an appeal followed.

Chattanooga raises two primary issues regarding the trial court's summary judgment: first, whether the court incorrectly determined that the statute of limitations for all claims began on or before July 29, 2005; second, whether the court should have allowed additional time for written discovery and depositions under Rule 56.07 of the Tennessee Rules of Civil Procedure instead of granting summary judgment. 

The standard for summary judgment, as per Tennessee law, requires that there be no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. The moving party must either negate an essential element of the opposing party's claim or demonstrate that the opposing party cannot provide sufficient evidence to establish that element at trial. If the moving party meets this burden, the non-moving party must then show evidence beyond the pleadings that factual issues exist that warrant a trial. Summary judgment is inappropriate if the facts allow for multiple reasonable interpretations or if there is any doubt about the existence of a genuine issue for trial.

In the discussion section, it is clarified that Hargreaves was contractually obligated to report any issues regarding the Project to RiverCity, which, in turn, was responsible for communicating these issues to CDRC, who hired RiverCity to oversee the Project's development. RiverCity was tasked with organizing construction meetings, preparing meeting minutes, coordinating with the Project Architect on the punch list at substantial completion, and providing monthly reports to CDRC that included the status of construction, budget comparisons, change orders, and any schedule revisions. Additionally, the contract stipulates that CDRC's designated representative has the authority to make timely decisions on submitted documents to prevent unnecessary delays in the Architect’s services.

RiverCity is identified as the Owner's Designated Representative responsible for reporting to CDRC and authorized to act on its behalf. Thus, Hargreaves and other defendants could rely on RiverCity's knowledge and notice regarding the Project. Any information RiverCity possessed about the Project's issues is imputed to CDRC. Under Tennessee Code Annotated section 28-3-105(1), claims for property damage must be filed within three years of the cause of action. Hargreaves contends that CDRC, through RiverCity, was aware of property damage from October 2004 until September 6, 2005, based on various reports provided by Hargreaves. RiverCity confirmed it kept CDRC and the City of Chattanooga informed about construction status. Hargreaves also claims Chattanooga was aware of the issues through internal discussions but delayed action until 2008, filing a complaint on March 19, 2009. Hargreaves argues Chattanooga had prior knowledge of the issues before March 19, 2006, while Chattanooga asserts the cause of action didn't accrue until then, claiming the reported issues were merely 'minor corrective work' or 'punch list' items, which do not trigger the statute of limitations. Chattanooga supports its position with an affidavit from expert Vance Travis, who defines 'punch list' items as minor corrections required before substantial completion. Hargreaves counters this by comparing their 2005 observations with those in the 2008 TWH Report, which details significant remediation recommendations for various structural issues, emphasizing that these problems were serious and warranted notice beyond the classification of 'punch list' items.

Complete removal of all paving units on sand beds within the water feature is recommended, including the runnel by the Aquarium and all stepped landings to the pool bottom, necessitating the demolition and reconstruction that involves removing and reinstalling the water spider at the pool bottom. For electrical and plumbing repairs, it's advised to remove all niche light fixtures, housings, junction boxes from paving areas, and overhead fixtures under the bridge. Existing electrical panels will be provided with weatherproof housings, and adjustments may be required for pump room equipment in the vault. New lighting will be installed on a truss along the walkway near the Market Street Bridge, which will seek an arts grant for appropriate cladding.

Hargreaves' observations to RiverCity include multiple reports from 2004 and 2005 regarding movement and settlement issues with walls and the esplanade, with recommendations for repair strategies. Specific points include concerns about wall #1's movement and hairline cracks, misplacement of control joints, water migration behind wall cladding, and structural issues with the east concrete wall being out of plumb. Hargreaves proposed a redesign of the wall for stability and reported ongoing issues with the pavers and utility enclosures. Notably, filling materials were consistently reported as below the 100-year flood level, raising red-level concerns. Additional issues included the need for proper vent power connections and potential efflorescence problems due to inadequate mortar mix.

Hargreaves expressed concerns regarding the condition of the Passage's lighting and reported significant issues with Wall #2 and Wall #3, including movement, cracking cladding, and settling, indicating urgent remedial action was required. Subsequent reports documented ongoing problems, such as differential settlement of the bump-out terrace, issues with mortar for pavers, and missing expansion joints. Hargreaves emphasized that the identified problems, which included terms like "demolition" and "reconstruction," could not be classified as minor punch list items. Evidence from emails produced during discovery showed that City employees were aware of construction defects and property damage as early as May 2005, indicating a recognition of these issues well before the lawsuit was initiated. Specific correspondence highlighted concerns about responsibility for correcting construction defects and the long-term implications of inadequate oversight during the final checkout phase. Additionally, affidavits from city officials confirmed awareness of electrical circuit issues in 2005. Under Tennessee law, the statute of limitations in property damage actions begins upon discovery, and a plaintiff cannot toll the statute if they possess information prompting reasonable inquiry into a potential cause of action.

Accrual of the cause of action did not necessitate that Chattanooga had knowledge of the specific type of legal claim; instead, it was sufficient that they had constructive and actual knowledge of construction defects related to the Project. Evidence indicated that Chattanooga was aware of a viable claim against another party at least three years before filing the complaint, thus failing to initiate the lawsuit within the statute of limitations set by Tennessee Code Annotated section 28-3-105. The trial court concluded that the facts were undisputed, confirming that the cause of action had accrued and the statute of limitations had expired, warranting summary judgment. The trial court did not err in denying additional discovery time, as Hargreaves’ motion for summary judgment was submitted one year and eight months post-complaint, and the statute of limitations defense was raised in Hargreaves' original answer in June 2009. Chattanooga had sufficient time to review documents and conduct discovery prior to the hearing. Furthermore, their last-minute request for additional time was deemed too late. The trial court's judgment is affirmed, and the case is remanded for the collection of costs, which are assessed against the City of Chattanooga and Chattanooga Downtown Redevelopment Corporation.