Beacon Residential Community Association v. Skidmore, Ownigs, & Merrill LLP 2014 No. S208173 (Cal. Sup. Ct)
By: Richard H. Glucksman, Jon A. Turigliatto and David A. Napper
July 10, 2014
In a seminal ruling the California Supreme Court issued its decision on July 3, 2014 that an architect owes a duty of care to future homeowners where the architect is the principal architect on the project. The Court further held that the duty of care exists even when the architect does not actually build the project or exercise ultimate control over construction.
Design professionals Skidmore, Owings & Merrill LLP and HKS Inc. (collectively “Design Professionals”) provided architectural and engineering services for construction of The Beacon residential condominiums in San Francisco, California (“Project”). The Beacon Residential Community Association (“Association”) eventually brought a construction defect action against various entities including the Design Professionals. The Design Professionals were the only architects on the Project and played an active role throughout the construction process, coordinating the design and construction teams, conducting weekly site visits and inspections, recommending design revisions as needed, and monitoring compliance with design plans. The Design Professionals demurred, contending they owed no duty of care to the Association. They further contended that even if the architect initiated the substitutions, changes, and other elements of design, so long as the final decision rested with the owner there is no duty owed by the design professionals to the future condominium owners.
In a landmark decision, the California Supreme Court in a unanimous decision held that an architect owes a duty of care to future homeowners where the architect is the principal architect on the project. The Supreme Court defined “principal architect” to mean the architect, in providing professional design services, is not subordinate to any other design professional. The Court further held that the duty of care extends to such architects even when they do not actually build the project or exercise ultimate control over construction. The Supreme Court reasoned that even if the architect does not actually build the project or make final decisions on construction, a property owner typically employs an architect in order to rely on the architect’s specialized training, technical expertise, and professional judgment.
The Court examined a large body of decisional authority wherein builders, contractors, and architects have been found to owe a duty to care to third parties even in the absence of privity. In order to determine whether design professionals owe a duty of care to the homeowners association and its members in the absence of privity, the Court applied the factors in Biakanja v. Irving(1958) 49 Cal. 2d 647 and distinguished the holdings in Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370 and Weseloh Family Ltd. Partnership v. K.L. Wessel Construction (2004) 125 Cal. App. 4th 152.
Applying the Biakanja factors, the Court found (1) the Design Professionals’ work was intended to benefit the homeowners living in the residential units that the Design Professionals’ designed and helped to construct; (2) it was foreseeable that these homeowners would be among the limited class of persons harmed by the negligently design units; (3) the Association members suffered injury – the design defects made their homes unsafe and uninhabitable during certain periods; (4) in light of the the Design Professionals’ role as the sole architects on the Project, there is a close connection between the Design Professionals’ conduct and the injury suffered; (5) because of the Design Professionals’ unique and well-compensated role in the Project (approximately $5 million), as well as their awareness that future homeowners would rely on their specialized expertise in designing safe and habitable homes, significant moral blame attaches to the Design Professionals’ conduct; and (6) the policy of preventing future harm to homeowners reliant on architects’ specialized skills supports recognition of the duty of care.
The Court distinguished the facts in this case with those presented in Weseloh by comparing the role and work performed by the design professionals in each case. In contrast to Weseloh, wherein the defendant engineer was not the principal design professional on the project, the two critically distinguishing facts in this case were that (1) the Design Professionals did not provide their specialized services to another entity who in turn provided architectural expertise to the plans and specifications supplied by the Design Professionals; and (2) the Design Professionals further applied their expertise to ensure that construction would conform to approved design.
The Supreme Court’s decision in Beacon Residential weakens the defenses typically employed by design professionals at the pleading stage in construction defect actions. For the past decade, design professionals have broadly asserted the Weseloh case to attack the pleadings in construction defect actions. The Supreme Court has narrowly defined Weseloh’s application and established a framework for determining when a design professional owes a duty of care to homeowners. Although Beacon Residential involved a condominium association, the duty would likely extend to owners of single family residences who would be similarly reliant on the skill of the design professional.
Pursuant to Beacon Residential, design professionals now have potential exposure to direct claims by homeowners and condominium associations for design defects. Plaintiff homeowners must only allege a causal link between the design professional’s negligence and their claimed defects/damages to ensure their complaint is sufficiently plead. Consequently, design professionals are less likely to prevail at the demurrer stage of the litigation and will be forced to defend against homeowner claims for design defects. Builders that retain design professionals should carefully review the design professional’s contract agreements for defense and indemnity obligations that may be owed by the builder to the design professionals.