Lynn Maynard Gollin – Gordon & Rees LLP – August 25, 2014
In March 2014, Florida’s Fourth District Court of Appeal issued The School Board of Broward County, Florida v. Pierce GodwinAlexander & Linville, 137 So. 3d 1059 (Fla. 4th DCA 2014), an opinion that addresses two legal issues of interest to parties involved in construction disputes – an architect’s standard of care and the “first cost” defense.
Architect’s Standard of Care
As a matter of law, Florida courts have uniformly applied a standard of care upon professionals that requires that the professional render services in a manner “used by similar professionals in the community under similar circumstances.” Moransais v. Heathman, 744 So.2d 973, 976 (Fla. 1999). See also, Pierce Godwin, 137 So. 3d at 1065 (and cases cited therein). An architect owes a duty of care to the client to render design services that are in compliance with applicable laws, including local ordinances. Id. See Robsol, Inc. v. Garris, 358 So. 2d 865, 866 (Fla. 3d DCA 1978).
In Pierce Godwin, the architect and the school board entered into a contract wherein the school board argued the architect agreed to “perform under a standard of care higher than the common law standard” discussed above. 137 So. 3d at 1066. The architect argued that the “design plans were prepared with ordinary and reasonable skill in accordance with the standard of care applicable to architects” and no higher standard of care needed to be met. Id. The Fourth District court found otherwise stating, “[w]here an express provision within a professional services contract provides for a heightened standard of care, however, the professional must perform in accordance with the terms of the contract.” Id. See also, CH2M Hill Southeast, Inc. v. Pinellas County, 698 So. 2d 1238, 1240 (Fla. 2d DCA 1997).
School board contracts are not custom made for each project and the terms of design contracts are generally known throughout the design community. But it is “all in how you say it” and it appears that in this case, at least from the architect’s perspective, it was not said well with respect to the applicable standard of care required.
Calculating Damages – First Costs
The affirmative defense of “first costs” is raised by a defendant to ensure that the damages awarded to the plaintiff (school board in Pierce Godwin) “do not include costs for construction that the school board would have incurred if the initial design plans matched the final design plans.” Id. at 1070. The Fourth District indicated in Pierce Godwin that it was not familiar with a defense referred to as “first costs.” However, when circumstances warrant, most experts and claims consultants apply “first costs” in their damages calculation.
The purpose of the defense is to ensure that as a result of a contract breach, the damages are awarded fairly; e.g., the amount of damages awarded does not exceed what a party is entitled to receive to return the contracting parties to the same position that they were in before the breach occurred. Id. at 1070. In other cases, “first costs” have been referred to as “betterment” or “added value.” Furthermore, courts in Florida have awarded damages, reduced by “first costs” in several reported cases, as have courts throughout the country. The court in the Fifth District summed up its viewpoint on “first costs” in connection with damage calculations finding, “[i]f defective construction can be repaired, the proper measure of the owner’s damages is the cost to repair which substantially gives the owner that to which he is entitled either under an express or implied contract.” Lochrane Engineering, Inc. v. Willingham Realgrowth Inv. Fund, Ltd, 552 So.2d 228, 231 (Fla. 5th 1989).
One Last Thought
Though the issue has not been directly decided by the Florida Supreme Court, numerous district courts in Florida have determined that design professionals’ duties, in certain circumstances, run to third parties with whom the professional is not in privity. Trikon Sunrise Assocs., LLC v. Brice Bldg. Co., 41 So. 3d 315, 318 (Fla. 4th DCA 2010). See also, A.R. Moyer, Inc. v. Graham, 285 So.2d 397, 402 (Fla. 1973); In Re: Standard Jury Instructions—Contract and Business Cases, 116 So. 3d 284, 305 (Fla 2013) (discussing application of Restatement (Second) of Contracts § 302 (1981), collecting cases). Now that the application of the economic loss doctrine has been limited by the Florida Supreme Court, it is probable that third-party beneficiary claims in contract disputes will be pursued. See Tiara Condo. Ass’n, Inc. v. Marsh & McLennan Cos., Inc., 110 So. 3d 399, 407 (Fla. 2013) (limiting use of the economic loss rule to the product liability context).