In September 2021, the Washington Supreme Court issued its decision in Lake Hills Investments, LLC v. Rushforth Construction Co., Inc., 198 Wash.2d 209 (2021). This case is significant because it establishes a comparative fault rule that applies when construction defects result from a combination of flaws in the design provided by the owner’s consultants and deficiencies in the performance by the contractor.
Lake Hills Investments (Lake Hills) retained AP Rushforth (AP) as the contractor to construct a mixed-use project. A dispute arose during the project. Lake Hills filed a lawsuit against AP for breach of contract, alleging that AP’s performance was delayed and defective. AP filed a counterclaim alleging that Lake Hills underpaid AP. Also, AP asserted an affirmative defense under the Spearin doctrine, alleging that the alleged performance issues resulted from Lake Hills providing a defective design concept, rather than viable plans and specifications.
The Spearin doctrine asserted by AP stems from the U.S. Supreme Court’s decision in United States v. Spearin, 248 U.S. 132 (1918). In Spearin, the Court confirmed that a project owner impliedly warrants the adequacy of the plans and specifications to the contractor. The U.S. Supreme Court held that “if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.”
At the Lake Hills trial, the court gave the following jury instruction concerning AP’s Spearin doctrine affirmative defense: “AP has the burden to prove that Lake Hills provided the plans and specifications for an area of work at issue, that AP followed those plans and specifications, and that the [construction] defect resulted from defects in the plans or specifications. If you find from your consideration of all the evidence that this affirmative defense has been proved for a particular area, then your verdict should be for AP as to that area.”
The jury found that AP had performed defective work, but that Lake Hills had also breached the contract. The jury rendered a net verdict of $9.2 Million in favor of AP, including $5.8 Million in attorney fees and costs. Lake Hills appealed, focusing on the above quoted jury instruction. On appeal, the Court of Appeals concluded that the jury instruction was prejudicial to Lake Hills. The Court of Appeals determined that, in order to benefit from the Spearin doctrine, the law required AP to prove that construction defects were “solely” caused by defective or insufficient plans. As a result, the Court of Appeals determined that the jury instruction was misleading and prejudicial to Lake Hills.
On review, the Washington Supreme Court reversed the Court of Appeals’ decision. The Supreme Court ruled that the Spearin doctrine does not require an all or nothing result for either the owner or the contractor. Rather, it comes down to a matter of fairness based on control. “An affirmative design defect defense is a complete defense if the damage is solely due to the design. However, if the defects were caused by a combination of deficient performance and deficient design, then it is not a complete defense.” Lake Hills, supra.
In other words, the Court held that when a contractor alleges a Spearin doctrine defense in a construction dispute involving a combination of deficient design and deficient performance, the court should apply a comparative fault type of standard. This is significant because contractors in Washington now do not have the burden of proving that defects were “solely” caused by ineffective designs, and owners do not have to risk losing their entire claim if a jury wants to hold the owner responsible for a defective design. The Court’s decision allows a middle ground standard that cuts both ways for the owner and contractor.
Other states may follow the Lake Hills decision’s application of the Spearin doctrine.
