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Two
cases recently addressed when a design professional can
be found liable for unfair or deceptive trade practices.
While both cases addressed the same issue, they applied
different statutory frameworks and, therefore, reached different
conclusions.
Kansas: Liability Imposed
The
Kansas Supreme Court determined a professional engineering
company that sells its services to a consumer and is found
to have engaged in a deceptive act in the performance of
those services can be liable under the Kansas Consumer Protection
Act. Moore v. Bird Engineering Co., 41 P.3d 755 (Kan.
2002).
The
plaintiff, a property owner, had purchased a vacant piece
of land and planned to build a new home on it. The property
had a creek running across it, and the property owner wanted
to be sure that he would have year-round access to the residence
before construction began. The property owner contacted
the defendant, a professional engineering company, to determine
whether building a high-water bridge across the creek would
be feasible. The defendant confirmed the feasibility of
building the bridge and gave an approximate cost estimate.
Based
on the defendant's assurances, the property owner retained
the defendant to design the bridge. The parties had several
discussions regarding the bridge's design and construction.
During these discussions, the property owner informed the
defendant that the bridge had to have a load-bearing capacity
of 32,000 pounds, sufficient for small fire trucks. Upon
completion of the design documents, the defendant represented
to the property owner that his load-bearing requirements
had been satisfied. During construction of the bridge, however,
numerous structural problems were encountered, including
a crack in the abutment and movement of the wing wall.
An
independent investigation into the structural problems revealed
that they were caused by the bridge's design. The load-bearing
capacity of the bridge was found to be only 8,000 pounds
- 24,000 pounds less than what the defendant had represented
the load-bearing capacity of the bridge to be. The bridge
had to be re-designed and modified.
The
property owner sued the defendant to recover the costs of
repairing the bridge. In his complaint, the property owner
asserted that the defendant had engaged in a deceptive act
in violation of the Kansas Consumer Protection Act by misrepresenting
that the bridge had a load capacity of 32,000 pounds when,
in fact, the bridge's capacity was only 8,000 pounds. The
Kansas Consumer Protection Act provides in K.S.A. §50-626
(b) (1):
Deceptive
acts and practices include,… whether or not any consumer
has in fact been misled,… representations made knowingly
or with reason to know that: (A) Property or services
have sponsorship, approval, accessories, characteristics,
ingredients, uses, benefits or quantities that they do
not have; [and]… (D) property or services are of
a particular standard, quality, grade, style or model,
if they are of another which differs materially from the
representation.
The
court held that these provisions, by their plain terms,
applied to a professional engineering company that sells
its engineering services to a consumer.
The
court also held that the engineering company had engaged
in deceptive acts and that the homeowner was not required
to prove that the engineering company had an intent to deceive
when it made the statements.
In
so holding, the court upheld a District Court judgment in
favor of the property owner that not only awarded him the
actual damages incurred in repairing the bridge plus prejudgment
interest but also a civil penalty of $5,000 and attorney
fees pursuant to the Kansas Consumer Protection Act.
North Carolina: No Liability
In
the other case, a federal appeals court held that an architect
who renders professional services is exempt from claims
under the North Carolina Unfair Trade Practices Statute.
RCDI Construction, Inc. v. Space/Architecture Planning
& Interiors, P.A., 29 Fed. Appx. 120, 2002 WL 53927
(4th Cir. 2002).
The
owner of a hotel construction project hired an architect
to investigate existing conditions at the construction site,
which had been damaged by a catastrophic discharge of water,
and to make recommendations for repairing the damage. After
inspecting the hotel site, the architect recommended terminating
the general contractor, gutting the building and reconstructing
the hotel. The architect also solicited the owner to hire
it to design the reconstruction of the hotel.
Based
on the architect's recommendations, the owner terminated
its contract with the general contractor. The general contractor
sued the owner for breach of contract, and the owner counter-claimed
against the general contractor, alleging that the damage
to the hotel was a result of defects in construction. The
lawsuit was settled. The general contractor agreed to pay
the owner $6.7 million to repair the damage caused by the
discharge of water and to forgo $421,000 in payments due
under the construction contract.
Later,
the general contractor sued architect, alleging, among other
things, that the architect had violated the North Carolina
Unfair Trade Practices Statute by recommending that the
owner terminate the general contractor and then soliciting
the owner to hire it to design the reconstruction of the
hotel. The architect moved to dismiss the general contractor
on the grounds that it was exempt from the statute. The
North Carolina Unfair Trade Practices Statute, N.C. Gen.
Stat. §75.1.1., provides:
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(a) |
Unfair
methods of competition in or affecting commerce, and
unfair or deceptive acts or practices in or affecting
commerce, are declared unlawful. |
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(b) |
For purposes of this section, "commerce" includes
all business activities, however denominated, but does
not include professional services rendered by a member
of a learned profession. |
A
U.S. District Court granted the architect's motion to dismiss
the general contractor's claim and ruled that the architect
was entitled to the "learned profession" exemption
provided by the statute. RCDI Construction, Inc. v. Spaceplan/Architecture,
Planning and Interiors, P.A., 148 F.Supp.2d 607 (W.D.N.C.
2001). The 4th U.S. Court of Appeals affirmed.
The
District Court found that the architect was a learned professional
who had rendered professional services to the owner. The
court noted that North Carolina courts consistently have
viewed architects as " 'learned professionals' who…
by the nature of their profession owe a special duty to
the public." The court also found that in making recommendations
to the project owner and soliciting the project owner's
future business (i.e., offering to perform professional
services), the architect had engaged in the "practice
of architecture" as defined by North Carolina's architecture
licensing statute. Accordingly, the court held that the
architect was entitled to the "licensed professional"
exemption as a matter of law.
As
these cases illustrate, a design professional's liability
for unfair or deceptive trade practices is governed by the
applicable statute, and the language of deceptive trade
practices statutes can vary from state to state. While the
statute in some states shields design professionals from
liability for unfair or deceptive practices, other statutes
are more encompassing and can be applied to design professionals
who render services to consumers.
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