School Board of Broward County v. Pierce Goodwin Alexander & Linville

Citations: 137 So. 3d 1059; 2014 Fla. App. LEXIS 3916; 2014 WL 1031461Docket: No. 4D11-4808

Court: District Court of Appeal of Florida; March 19, 2014; Florida; State Appellate Court

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The school board contracted with an architectural firm for high school renovation design services. Following construction, the school board sued the architect for breach of contract related to several 'change order items' (COIs) necessitated by modifications to meet building code requirements. A jury found the architect did not breach the standard of care concerning COI 51, the most costly COI. For other COIs, where liability was admitted, the jury awarded damages, but the circuit court later granted remittitur on seven of these COIs. The school board's appeal focused on alleged errors by the circuit court regarding COI 51, including the denial of partial summary judgment on the breach of standard of care, the admission of inappropriate expert testimony, and incorrect jury instructions concerning the negligence versus breach of contract standards. The court agreed that the circuit court erred regarding COI 51, reversing that aspect of the judgment, while affirming in part and reversing in part on the liability-admitted COIs and remittitur. The factual background indicated that the design contract was extensive and involved multiple phases, with a peer reviewer monitoring compliance with building codes. Disputes arose concerning fire safety compliance for a third-floor balcony, with the architect proposing an alternative to a required staircase. Although the architect believed the building code official had approved this alternative, it was later determined that the plans were not compliant, leading to the implementation of COI 51.

The school board incurred higher renovation costs due to a contractor's bid that failed to include a staircase, necessitating rework of initial construction plans. Numerous changes (COIs) during the project also contributed to increased expenses, prompting the school board to file a three-count complaint against the architect for breach of contract, breach of contractual indemnity, and breach of common law indemnity. The architect defended against these claims by arguing that the school board's damages constituted 'betterment' and that claims deemed 'First Cost Items' should be barred. 

The applicable standard of care became a critical issue, with the school board asserting it required code-compliant plans, while the architect claimed it was based on ordinary and reasonable skill. The case, initially in the general civil division, was moved to the complex civil litigation division as trial approached. The school board filed two motions for partial summary judgment regarding COI 51, seeking a ruling on breach of duty, both of which were denied due to factual disputes. The architect filed a counterclaim for declaratory judgment to clarify the standard of care.

Due to the case's complexity and management by multiple judges, the cross-motions for summary judgment were addressed only after jury selection. Ultimately, the circuit court ruled that damages were limited to those from 'negligent performance,' barring the school board from presenting evidence on code compliance issues. Consequently, the jury was instructed on negligence rather than breach of contract, aligning with the architect's request.

The jury was instructed to focus solely on damages and not on the design plans' compliance with codes. They found no breach of duty by the architect regarding COI 51. Before the trial, the circuit court had granted partial summary judgment on liability for fifty-five other COIs, allowing the jury to only determine damages and granting the architect the option for setoff for first costs or betterment credit. The jury awarded damages for the admitted COIs, but the circuit court later granted remittitur on seven of those, leading to an appeal by the school board.

The school board contended that the standard of care was based on code compliance of the initial design plans, while the architect and circuit court maintained that the standard was ordinary and reasonable skill—perceived as a negligence standard. The school board argued that the circuit court imposed a higher burden of proof than the contract required, while the architect claimed the school board's approach implied a strict liability standard. The circuit court denied the school board's summary judgment motions regarding COI 51 before the trial.

The court noted that the interpretation of the contract is a legal question, reviewed de novo. Discussion on architects' obligations highlighted their legal requirement to comply with codes, contrasting with the ethical constraints on lawyers and doctors regarding guarantees of outcomes. Building codes, ordinances, and regulations often allow for interpretation, and there is typically a designated authority for final interpretations of these codes.

The final authority on building code interpretation in this case is the building code official employed by the school board, as stipulated in the contractual agreement. When disputes arise between an architect and an owner or contractor regarding building code interpretations, there is a defined process to resolve these conflicts with the final authority. The school board asserts that (1) a dispute occurred between the architect and the peer reviewer regarding code interpretation; (2) the architect failed to obtain a formal interpretation from the building code official before submitting design plans; (3) oral statements from the building code official were inadequate, requiring a written interpretation; and (4) the architect assumed liability for potential non-compliance by not securing written interpretation prior to bidding.

In contrast, the architect argues that they are not held to a standard of perfection, asserting that the design plans were created with ordinary skill and met the applicable standard of care. Common law dictates that professionals must provide services in line with the standard of care prevalent among similar professionals in analogous circumstances. Architects have a duty to ensure that site plans and building designs comply with relevant codes and ordinances, and they can be held liable for breaches of this duty in tort and contract.

Common law does not imply a guarantee of a flawless plan, as long as the architect employs the customary skill of peers in the community to ensure code compliance. If a contract specifies a heightened standard of care, the architect must adhere to those terms, as any obligations exceeding ordinary standards must meet contractual expectations.

The school board contended that the standard of care for architects was elevated by specific contract provisions requiring experienced personnel and adherence to Florida professional standards, applicable laws, and building codes. Key provisions included obligations for the Project Consultant to provide services with care and diligence (2.1.3), ensure compliance with laws and guidelines (2.1.4), and deliver all services consistent with governmental regulations (2.1.5). However, the architect asserted, and the circuit court concurred, that the relevant standard of care was dictated by section 8.1.1, which mandates that the Project Consultant indemnify the Owner against liabilities resulting from the Consultant's negligent or wrongful acts. 

The court emphasized that contract interpretation requires examining phrases as part of the whole document, ensuring provisions are construed to avoid conflict where possible. Clear and unambiguous contracts reflect the parties' intent, which is a legal question for the court. If inconsistencies arise, the court must resolve them to uphold the contract's meaning, assuming every clause serves a purpose. The architect claimed section 8.1.1 pertained to first-party liability, while the school board argued it related to third-party liability. The court aligned with the school board, interpreting section 8.1.1 as applicable to third-party liability. Indemnity, in this context, is understood as the obligation to compensate for losses incurred by another party.

Indemnity contracts are governed by standard contractual construction rules and must reflect the parties' express intentions. In Wendt v. La Costa Beach Resort Condo. Ass’n, the court interpreted section 8.1.1 of the indemnity clause to require the Project Consultant to indemnify the Owner against liabilities arising from third-party claims, rather than first-party claims. This interpretation is supported by additional provisions in sections 8.1.2 and 8.1.3, which clearly indicate that claims against the Owner pertain to actions involving third parties. The court clarified that section 8.1.1 does not limit first-party liability to negligence, as the terms "negligent, reckless or intentional wrongful" modify "acts" rather than "omission, error, misconduct, or commission." The contract’s language suggests that the architect bears the risk for non-compliant design plans with respect to building codes. Furthermore, the rights to indemnity for negligence do not restrict the remedies available for breach of performance under article 2. The court affirmed that the architect is obligated to provide code-compliant design plans throughout all phases of performance, exceeding merely the standard of ordinary and reasonable skill.

All three sections of the contract mandate that design plans comply with applicable codes and only briefly reference 'customary professional standards,' indicating that the architect committed to a higher standard of care. The architect's argument that meeting code compliance suffices for professional duty is rejected. The circuit court's misinterpretation led to erroneous jury instructions regarding the standard of care and improperly limited expert testimony to a negligence standard, prompting a reversal for a new trial concerning COI 51.

Regarding damages, the jury awarded compensation for COIs-liability-admitted, but the architect sought remittitur for ten of these. The circuit court granted remittitur for seven COIs—11, 19, 46, 56, 57, 73, and 93. The architect argued that the jury's full damage awards were unsupported for COIs 46, 56, 57, 73, and 93, as the school board's expert indicated these should reflect 'first costs.' For COIs 11 and 19, while the school board's expert claimed no 'first cost' existed, she relied on the architectural expert, who did not provide an opinion on the matter. The architect's expert, however, asserted that 'first costs' were relevant to both COIs.

The school board contended remittitur was inappropriate, arguing the jury's awards were not excessive and that it had presented credible evidence warranting the full amounts claimed. On appeal, both parties reiterated their prior arguments, but the remittitur order lacked justification and a transcript of the hearing, which is required for proper review. Previous rulings mandate that trial courts articulate clear reasons for granting remittitur, as conclusive justifications without factual support are inadequate. Consequently, without a clear rationale for the remittitur, the appellate court faces challenges in its review.

Mr. Justice Drew outlined the requirements for challenging a jury verdict in Hodge v. Jacksonville Terminal Company, stating that the record must show impropriety or the trial judge must independently determine that the jury was influenced by extraneous factors. Neither party sought to transfer jurisdiction to the circuit court for a remittitur explanation, leading the court to independently review the record regarding the circuit court's remittitur decision. The architect's motion, which focused on the concept of 'first cost,' was acknowledged by the circuit court, emphasizing that damages awarded to the school board should exclude costs that would have been incurred had the original design matched the final plans.

The legal principle governing damages in breach of contract cases aims to restore the injured party to their pre-breach position, not to improve it. If the school board would have incurred construction costs under compliant plans, awarding them additional costs due to changes in design would unjustly enhance their position. The excerpt notes the absence of Florida cases directly addressing 'first cost,' but references a relevant case, Lochrane Engineering, which similarly explored the correct measure of damages related to design negligence.

Connection to the sewer system was estimated to cost $94,820. The defense expert suggested two repair options for the inadequate septic system: adding a secondary tank and enlarging the drain fields for approximately $8,000, or installing an aerobic system for around $25,000. The trial court ruled against the developer-seller, the septic tank contractor, and the engineer, awarding $45,000 in damages, which included $3,000 for temporary system functionality, $25,000 for the aerobic system installation, and $17,000 for a feasibility study. The Fifth District reversed the feasibility study damages and directed a revised judgment of $28,000. 

The court analyzed damages concerning the engineer’s liability, using a hypothetical scenario involving insufficient drain field design. It stated that while the owner must cover the cost of any additional required work, the engineer could still be liable for damages if the cost of future repairs exceeded what it would have cost to install an adequate system initially. The court noted insufficient evidence existed to determine any cost difference between repairing the system later and an adequate original installation, necessitating a reduction in damages against the engineer. The Fifth District's reasoning echoed principles from past cases, including Soriano v. Hunton, where liability was limited to costs that would not have been incurred had the original design been adequate.

The remittitur in this case is analyzed under an abuse of discretion standard, as established in Rowlands v. Signal Constr. Co. The circuit court must order remittitur if the trier of fact disregards evidence or misinterprets the merits regarding damages, including taking improper elements into account. The developer-seller’s cross-claim against the engineer should not have been dismissed solely due to the absence of affirmative evidence from the cross-claimant, as the claim was supported by evidence presented by other parties.

The school board contended that the jury could accept or reject expert testimony regarding "first cost" related to Change Order Items (COIs), but the record indicates the school board's expert led to conclusions about "first cost" without asserting entitlement to the full amounts paid for those COIs. The school board argued for deducting "first cost" in calculating damages, and the record supports that the jury ignored evidence or misconceived the merits for COIs 46, 56, 57, 73, and 93, making remittitur appropriate for those items.

For COIs 11 and 19, both sides had competent evidence regarding the applicability of "first cost." Thus, the jury's award for those COIs was valid, and remittitur was improperly granted. The judgment favoring the architect regarding COI 51 is reversed, and the case is remanded for a new trial under the contract's agreed standard of care. The court affirms the remittitur order and damages judgment for COIs 46, 56, 57, 73, and 93, while reversing the remittitur for COIs 11 and 19, directing the trial court to honor the jury's verdict for those items. The court also notes that it will not address whether the architect could rely on oral approval from the building code official, as there was no explicit ruling on that issue, and neither party appealed the denial of cross-motions for summary judgment. Additionally, the school board did not differentiate between the breaches in its claims throughout the proceedings.

The architect successfully argued before the circuit court that the standard of care required was the preparation of plans with ordinary and reasonable skill, aligning with a negligence standard. This argument was based on section 8.1.1, which the architect characterized as a first-party indemnity agreement that necessitated proof of negligence causing damages. The school board's claim for contractual indemnity under count 2, related to additional construction costs, was viewed as a first-party claim. Section 8.1.4 acknowledges the architect's voluntary indemnification of the school board, with obligations that persist beyond contract termination, but does not clarify whether this indemnity is first-party or third-party.

The contract's Article 2 outlines "Project Consultant Services and Responsibilities," with section 2.1 detailing "Basic Services." A damage expert for the school board connected certain change order issues (COIs 11 and 19) to COI 51 but refrained from opining on whether COI 51 resulted from non-compliant design plans, showing deference to the school board's architectural expert. In contract damage cases, the objective is to restore the injured party to their pre-breach position, implying the plaintiff should consider "first cost" expenses in damage calculations. However, neither party addressed the burden of proof regarding "first cost" in the appeal or circuit court, leaving that issue unexamined.

The court referenced the Lochrane Engineering case, noting that liability for professional negligence can often be pursued through tort or breach of contract without altering the analytical approach. While the court agreed with the school board that the awarded amounts for COIs were not excessively high, it disagreed that a finding of excessiveness is always required to support remittitur.