By Michael C. Loulakis and Lauren P. McLaughlin
As we have discussed in many installments of our legal column in Civil Engineering magazine, The Law, over the years, the Spearin doctrine has been the pillar of construction law in the United States for more than a century. Based on a U.S. Supreme Court case, this doctrine creates an implied warranty that the owner will provide adequate plans and specifications to its contractors and that the contractor will not be responsible for the consequences of defects in those plans and specifications. While Spearin remains on solid ground around the country, there have been some interesting recent developments at the state level.
For years Texas was one of the few holdouts that refused to adopt the Spearin doctrine, choosing instead to follow its own Lonergan doctrine. Under Lonergan, owners who submitted plans were not seen as having implied a guarantee that those plans were adequate. Instead, the court placed the risk of imperfect specifications on the contractors, reasoning that a contractor could refuse to bid on a project if it found the designs unsatisfactory. The Texas Supreme Court reaffirmed its support of Lonergan 10 years ago in El Paso Field Services L.P. v. MasTec North America Inc. In that case, the court relied on Lonergan and the principles of freedom of contract to hold a contractor liable for unforeseen soil conditions in a pipeline construction project. In that case, the contract did not include an express guarantee of specifications by the owner, the court ruled.
However, the Texas legislature recently passed Senate Bill 219, which became effective Sept. 1. This law codifies the central protections of the Spearin doctrine, establishing that contractors in Texas are not responsible for design defects provided to them and that they are not liable for the accuracy, adequacy, sufficiency, or suitability of plans or specifications furnished by the owner or another third party.
Consistent with case law decided under the Spearin doctrine, this protection may not be waived. The law does, however, require a contractor to notify an owner upon discovery of a design defect and holds contractors accountable if they should have discovered the defect using “ordinary diligence.”
On Sept. 2, 2020, Washington state’s Supreme Court issued a ruling in a case that clarified the application of the Spearin doctrine as an affirmative defense. In Lake Hills Investments LLC v. Rushforth Construction Co. Inc. d/b/a AP Rushforth, et al., Lake Hills — the developer of a mixed-use property in Bellevue, Washington — sued the builder, AP Rushforth, for alleged delays and defective work. AP Rushforth claimed any delay or defective work was due to defects in the design specifications and sought to use the Spearin doctrine as an affirmative defense to shield it from liability.
The jury returned a mixed verdict in which AP Rushforth prevailed on six of the eight disputed claims and was awarded $9.2 million. The Court of Appeals reversed that decision, indicating that the jury instructions prejudiced Lake Hills because they did not explicitly state that a successful Spearin defense requires the design defects to be the sole cause of the damages and delays.
The Washington Supreme Court then reversed the Court of Appeals and reinstated an award in favor of AP Rushforth. The court stated that the rationale behind the Spearin doctrine’s “defective design defense is fairness based on control.” The court stated that when damages are solely attributable to the design, the affirmative design defense is a complete defense, but when “the defects were caused by a combination of deficient performance and deficient design,” it is appropriate to allocate proportional liability for damages. The court noted that while the jury instructions were “potentially misleading,” there was no prejudice to the owner, as the jury had the opportunity to weigh the evidence on each of eight separate claims.
As we discussed in our November 2015 column (“State court upholds Spearin in CMAR projects,” page 84), Massachusetts was the first state court to consider the application of Spearin to projects delivered through construction management at risk, known as CMAR. In Coghlin Electrical Contractors Inc. v. Gilbane Building Co., Coghlin (the electrical subcontractor) sued Gilbane (the CMAR) on a project to build a psychiatric facility in Worcester, Massachusetts. Gilbane brought a third-party claim against the state of Massachusetts (the owner), alleging that its design changes were responsible for Coghlin’s claims and that Spearin was applicable.
The trial court disagreed, finding that there was no implied warranty of the adequacy of the plans in a CMAR project.
The Massachusetts Supreme Judicial Court overruled the lower court and reaffirmed Spearin principles, finding that despite the differences in approaches, the CMAR and design-bid-build project delivery methods are not so different that the implied warranties of the plans and specifications should disappear. The court held that a public owner of a CMAR project gives an implied warranty regarding the designer’s plans and specifications.
Just as the Washington court did in the Lake Hills case, the Massachusetts court focused on the concept of control, finding that the party who controls the design should be responsible for any defects associated with it.
In a recent dispute between a subcontractor and a general contractor over the installation of a glass and aluminum curtain wall, Illinois courts at the trial and appellate levels resoundingly affirmed that the Spearin doctrine also applies to subcontractors suing general contractors. In Christopher Glass & Aluminum Inc. v. Tishman Construction Corp. of Illinois, the general contractor, Tishman, consulted with a potential curtain wall subcontractor, Christopher Glass & Aluminum and its vendor, U.S. Aluminum, about fulfilling rigorous specifications for a curtain wall in a mixed-use development project. After the meeting, Tishman awarded the subcontract to CGA and required the exclusive use of a particular USA system for the curtain wall that CGA and USA had suggested. Notably, the subcontract did not include language that would have allowed a functional equivalent or similar system.
CGA could not fulfil the technical design requirements using the USA system, and after numerous delays, Tishman terminated CGA for default and sued CGA.
At trial, CGA successfully argued that the Spearin doctrine absolved it of liability because the subcontract required CGA to install that particular USA system, which did not meet other design requirements. The trial court agreed and awarded CGA $1.6 million.
On appeal, Tishman argued that Spearin should not apply for three reasons: CGA recommended the use of the USA system in the first place, the requirements were listed in the subcontract and not in the specifications, and the reference to the specific system was a performance specification and not a design specification. CGA again prevailed at the appellate level.
The appeals court found that CGA was bound to follow the terms of the contract, which explicitly required the USA system, and that the location of the requirements in the subcontract versus the design documents was “a distinction without a difference.” The court also felt it had “no authority to relieve Tishman of its contractual choice” to require the specific system versus generically requiring any system that fulfilled the design requirements. The fact that CGA and USA had touted their system was immaterial; Spearin protected the subcontractor from design liability.
While we limited our discussion to the four states above, readers should remember that there are generally several cases each year from courts around the country that discuss the Spearin doctrine. This is particularly true in the federal government contract arena, in which design defects form the basis for many contractors’ claims.
Readers should also pay attention to Spearin cases on design-build projects. The case law to date has favored design-builders when owners have had design defects in their bridging documents, but there are many nuances to this issue that will likely play out in future cases. We intend to report on those cases if and when they arise.