California Supreme Court Holds Design Professionals Owe a Duty of Care to Future Homeowners

by Wilson Elser
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The California Supreme Court in Beacon Residential Community Association v. Skidmore, Owings and Merrill LLP (July 3, 2014), held – based on common law principles – that an architect owes a “duty of care” to future homeowners in the design of a residential building. (July 3, 2014), held – based on common law principles – that an architect owes a “duty of care” to future homeowners in the design of a residential building.

The trial court initially sustained the demurrer of the design professionals on the basis that an architect can make recommendations but not final decisions on a construction project and therefore does not owe a duty of care to future homeowners, relying on Weseloh Families, Ltd. Partnership v. K. L. Wessel Construction Co., Inc. (2004) 125 Cal.App.4th 152 (Weseloh).  The Court of Appeals reversed the trial court’s decision and found a common law and statutory basis for a duty of care in its decision on December 14, 2012.  The California Supreme Court granted review on February 27, 2013.

The Beacon project involves a 595 unit condominium project located in San Francisco, California.  The Plaintiff, Beacon Residential Community Association (“HOA”), sued numerous parties involved in the construction of the condominium project including Skidmore, Owings, and Merrill LLP (“SOM”) and HKS, Inc. (“HKS”) which were the design professionals that provided architectural and engineering services for the Beacon project.  Plaintiff alleged that negligent architectural design work performed by defendants resulted in numerous defects causing water infiltration, structural cracks, fire separation and “solar heat gain” which made the units uninhabitable during certain periods due to high temperatures. SOM and HKS were named as direct defendants in causes of action alleging violation of statutory building standards, negligence per se, and professional negligence.  According to the allegations in the compliant, the defendants were paid more than $5 million for their work on the project which included “providing original design services at the outset” and “an active role throughout the construction process including coordination efforts and attending weekly site visits and inspections.”

In finding the existence of a common law duty of care, the Supreme Court reviewed the factors set forth in Biakanja v. Irving (1958) 49 Cal.2d 647, 650, which determines whether a party owes a duty of care to a third party.  The court also explained why its decision in Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, provides a useful comparison in finding a duty of care as against the design professionals who were principal architects on the project.  Whereas, in Bily, the court found that auditors did not owe a duty to third party investors, in Beacon an analysis of the factors supports finding a duty of care. 

Unlike the auditor in the financial reporting process, in Beacon the defendants had a primary role in the design of a project which was a “close connection” to the injury alleged by plaintiff.  Plaintiff’s complaint contained specific allegations regarding the defendant’s review and approval of the specifications, including a significant reduction in the number of ventilation ducts that may have impacted the heat gain in the building.  The court noted that while the architect does not actually build the project or make final decisions in construction, it is the architect who has the specialized training and expertise and professional judgment upon which the owner relies and it was alleged that defendants applied this specialized skill in both design and implementation.

In contrast to Bily, the court found that extending a duty of care to future homeowners did not raise the prospect of liability to an “indeterminate amount for an indeterminate time to an indeterminate class.”  Rather, at the time the defendants performed their work, they were aware that the condominiums would be used as residences and the importance of providing safe and habitable housing to a defined class of home buyers, as contrasted with the uncertainty of the unknown investors in Bily.

The Beacon court also found that the average home-buyer was more analogous to the “presumptively powerless consumer” in a product liability case as compared to the sophisticated investors and creditors in Bily.  From a public policy perspective, the court reasoned that finding a duty of care from design professionals to homebuyers will support the chief interest of homebuyers in purchasing homes free of defects.

In reaching its conclusion, the court factually distinguished the Weseloh Families, Ltd. Partnership v. K. L. Wessell Construction Co., Inc. (2004) 125 Cal.App.4th 152, decision of the Fourth District Court of Appeal.  In Weseloh, the design professional was hired by the subcontractor who built the retaining walls on the project for a modest fee of approximately $2,000.  In Weseloh, the design professional did not have a relationship with the property owner and was not involved in the supervision of the construction of the retaining walls that failed.  Moreover, the services provided in Weseloh were to a subcontractor which itself was an engineering firm and not to the general contractor or property owner.  In Beacon, it was alleged that the defendants were the “sole entities” providing architectural services on the project and those services were for both the design and implementation for a substantial fee.

Finally, the court in Beacon, did not decide whether the Right to Repair Act, which was passed by the California Legislature as Senate Bill 800 (Civil Code Section 895), was dispositive of the issue given its determination that there was a common law duty of care owed by the design professionals. To what extent the design professional must assume a rule of principal architect or become involved in the construction phase before a duty will run to the ultimate purchaser of the condominium remains an open question.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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