Florida’s Fourth District Court of Appeals Reaffirms The Undertakers’ Doctrine As A Source Of Consultant’s Liability To Third Parties In Professional Negligence Claims

The Fourth District Court of Appeals has doubled-down on a liability-widening legal theory with the potential to open the courthouse doors to hundreds, or thousands of lawsuits against private contractors and consulting firms.

Background

Recently, 1,000 homeowners with properties in a designated area of the City of Miramar filed a class action lawsuit against the City of Miramar and Kimley-Horn and Associates, Inc., alleging that the City of Miramar had improperly treated the water flowing to the homeowner’s houses and causes irreversible damage to all copper pipes in the area.

On two isolated occasions, the City of Miramar contracted Kimley-Horn and Associates, Inc., to analyze the water plant’s treated water. On the first occasion, Kimley-Horn determined the alkalinity and hardness levels were below recommended levels which resulted in corrosive finished water. Kimley-Horn recommended that the City include corrosion control inhibitors. Later, after residents of the City of Miramar complained about premature plumbing failures, the City contracted Kimley-Horn and Associates who told the City that the finished water was not contributing to any accelerated corrosion but that the potential non-water related causes contribution.

Subsequently, Plaintiff sued Kimley-Horn and Associates, Inc., under three theories: (1) professional malpractice, (2) negligence, and (3) negligent misrepresentation.  The thrust of the claims against Kimley Horn was that Kimley-Horn undertook to render services for the City to protect Plaintiff’s copper pipes. Therefore, the homeowner Plaintiffs allege that Kimley-Horn had a duty to analyze treated water, advise the City that its water treatment measures caused corrosion to copper pipes, and recommend the City add calcium carbonate to the water.  The homeowner’ Plaintiffs alleges that Kimely-Horn breached its duty by failing to provide such consulting services with the degree of care, knowledge and skill consistent with a professional planning and design engineering consultant.  The homeowner Plaintiffs accordingly sought damages against Kimley Horn for corrosion to their copper pipes.

The lower court dismissed Plaintiffs Complaint with prejudice, finding that Kimley-Horn owed no duty to the homeowner Plaintiffs. On appeal, the Fourth District reversed and held that a professional who provides professional services owes a duty to third-parties to perform the requested services in accordance with the standard of care used by similar professionals in the community under similar circumstances.

Depending On The Nature of The Services Provided, Consulting Firms May Owe a Duty  (And are Subject to Potential Liability) to Infinite Third-Party Beneficiaries

The general rule in Florida is that when a consultant contracts to provide professional services, the parties to the contract are in privity and a consulting firm’s duty extends only to the parties in privity of contract. There is generally no liability to those who are not in privity of contract with a professional consulting firm. And although non-parties to that contract could potentially sue the consulting firm or consultants for negligence if the consultant’s conduct directly caused personal injuries or property damage, the consultant’s duties were still defined by the scope of their agreement with their principal. Here, however, the Fourth District Court of Appeals extended the consulting firm’s duty to 1,000 Plaintiff homeowners on an intended third-party beneficiary theory and using the “undertaker doctrine” as the source of the consultant’s legal duty.

In extending the consultant’s legal duty to the Plaintiff homeowners, and reversing the lower court’s dismissal of the complaint, the Fourth District Court of Appeals relied upon its own prior opinion in Trikon Sunrise Assocs., LLC v. Brice Bldg. Co., 41 So. 3d 315, 318 (Fla. 4^th DCA 2010), in which it held “[a] professional duty may arise in favor of a third-party as a result of a matter of law or as a result of a contract between parties, or by virtue of a gratuitous undertaking.” The central premise is that liability does not necessarily require privity of contract nor is the scope of the contract itself determinative of duty, but rather the overall “undertaking” and larger purpose for which the consultants were retained is now to be considered. However, a closer examination of the genesis of this “duty” reveals that the quoted sentence from Trikon is citationless within the Trikon opinion itself, meaning there is no cited legal authority from which the Fourth District Court of Appeal drew upon to conclude that a consultant could be held liable upon an ”undertaking” theory. That of course raises questions of how grounded this new basis for a legal duty may be in other jurisdictions, but that is a discussion for another day.

The implication of the Fourth District Court of Appeals’ holding is that any consultant who undertakes to render professional services to a City or other agency may be potentially liable to persons who may incidentally benefit from such services under an intended third-party beneficiary theory, which creates the necessary standing for suit. No longer is potential liability determined by just a view of the contract between the consultant and its principal, but the “undertaking” doctrine permits a much broader view of the role of the consultant and the overall scope of the work to determine if the consultant’s duty extends well beyond its’ expectations. In fact, another implication of this holding is that the duties owed by a professional extends to classes (meaning hundreds or thousands) of plaintiffs, who are unforeseen at the time of contracting, such that class actions for aggregate damages may now be brought against professionals. Of course, damages to this extent and degree are not contemplated by a professional at the time of contracting–but this holding gives a serious warning of the greatly expanded liabilities for those professionals practicing in the State of Florida.

The outcome here is, of course, not expressly limited to the contract at issue in the case nor contracts between consulting firms and governmental agencies. The Fourth District Court of Appeal’s holding could seemingly extend to any subcontractor, contractor or firm who contracts with any other entity for work that may impliedly benefit an infinite amount of third-parties. Indeed, this holding has the potential to open the courthouse doors to numerous class action lawsuits alleging breaches of professional services and construction contracts in a variety of contexts. Now, under the holding in Antezana v. Kimley-Horn, if there is some conceivable, albeit indirect connection between a Plaintiff’s alleged harm and a professional’s performance of a services contract, a duty of care on the professional might be found and the claim could withstand dismissal.

All is not lost, of course. Confining risk and liability can still be done, but for consulting and professional services firms and contractors of any kind, a thorough and careful review of each contract is plainly warranted to curtail liability to unintended third-parties. Examination and re-writing of existing contract provisions or perhaps the inclusion of new provisions which better define the parties’ respective roles, work scope, risk shifting and liability to others, should all be on the table.

If you would like an evaluation of your risks, and a means to insulate your firm from the broad effects of this recent ruling, contact the Weinstein Trial Firm PLLC.