August 9, 2012 Advisory Engineers and other professionals who provide peer review consulting services for municipalities in Massachusetts can breathe easier after the decision of the Massachusetts Appeals Court in Meridian at Windchime, Inc. v. Earth Tech, Inc., 81 Mass. App. Ct. 128 (2012).
In Meridian, the developer of a subdivision in North Attleborough claimed that the townâ€™s peer review consultant, Earth Tech, negligently failed to discover deficiencies in work performed by the developerâ€™s contractor (who was out of business). As a result, the developer needed to correct these deficiencies at a considerable cost. Although Earth Tech owed the developer no duty under its contract with the town, the developer argued that Earth Tech was still liable for the foreseeable consequences of its failure to perform under the contract. The developer reasoned that because Earth Tech was the sole engineering inspector approved by the town, the developer reasonably relied on Earth Tech™s inspections as its â€œbest protection against costly problems down the road.
Nutter obtained a dismissal of Meridians claims on summary judgment in Bristol Superior Court. Meridian appealed, and Nutter obtained a favorable decision from the Massachusetts Appeals Court, which affirmed the Superior Courtâ€™s decision.
The Appeals Court found that, absent a contractual relationship, a professional employed by a town to inspect the construction of a subdivision does not owe a duty of care to a developer or its contractor unless the developer reasonably relied on the professionalâ€™s services to the town and the professional was aware of this reliance. Focusing on the reasonableness of the developerâ€™s reliance on Earth Tech, the Appeals Court distinguished Meridian from the Supreme Judicial Courtâ€™s holding in Craig v. Everett M. Brooks Co., 351 Mass. 497 (1967). In Craig, the plaintiff relied on the services performed by an engineering firm on behalf of a third party. The SJC held that the plaintiffâ€™s reliance was reasonable because the engineering firm knew that the services it provided were intended to enable the plaintiff to perform its job successfully.
Here, the Appeals Court found that the developerâ€™s reliance in Meridian differed from the plaintiffâ€™s reliance in Craig in three crucial respects. First, the contract between Earth Tech and the town specifically provided that Earth Tech did not bear responsibility for the contractorâ€™s construction choices. Second, at the outset of the project, Earth Tech informed the developer in writing that Earth Tech would not be responsible if the contractor deviated from the approved subdivision plans. Finally, the developer hired its own project engineer, yet chose to rely on Earth Tech in lieu of relying on the advice of its own engineer. In view of these facts, the developerâ€™s reliance on Earth Tech was not reasonable.
The Meridian decision is a victory that preserves the role of peer review consultants. The case suggests, however, that the most prudent course of action for peer review consultants entering into a municipal contract is to specify in the contract that the consultant does not have control over a developerâ€™s work or the means and methods of construction, and to provide written notice to developers whose work the consultant will be overseeing that it will not be responsible for deviations from the approved plan.
This advisory was prepared by Julie Pruitt Barry, a member of the Real Estate/Land Use and Environmental Litigation practice group at Nutter McClennen & Fish LLP. She was assisted in drafting this advisory by Nutter summer associate Jori Gravelyn. For more information, please contact Julie or your Nutter attorney at 617.439.2000.
This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.