January/February 2023 - 105

BRIAN S. WOOD, PARTNER,
SMITH CURRIE
LEGALLY SPEAKING
Is the Inspecting Engineer Liable to the
Geotechnical Subcontractor for Negligence?
Design and engineering professionals performing inspection
services are typically shielded from liability for claims brought
by parties with whom they have no contract. Architects and
engineers (AEs), however, may be liable to contractors where
the AE exercises a significant degree of authority and control
over the contractor or subcontractor, including by
administering the contract, rejecting nonconforming work
and withholding payments. In a 2022 case, a state appeals
court addressed the issue of whether an owner's engineer was
liable to a subcontractor for negligence and bad faith in the
performance of its inspections of deep foundations.
In Southeast Caissons, LLC v. Choate Construction Company, the
Court of Appeals of North Carolina decided a dispute arising
from the construction of a 174,000 sq ft (16,200 sq m) concrete
parking deck at Wake Technical Community College (owner)
in North Carolina. The structure was designed to be
supported by drilled shafts seated into bearing rock. The
owner engaged a contractor, Choate Construction Company,
to construct the parking deck. The owner also contracted with
Falcon Engineering to evaluate bearing capacity; observe
drilling operations; and record drilled pier dimensions,
reinforcement, and rock bearing materials. Falcon was to
prepare inspection reports for each drilled pier.
Choate included in its bid proposal to the owner a payment
schedule that specifically included payment for " drilling in
'rock' or 'not in soil' as auger refusal or when a drill advances
no more than 2 in (50 mm) in five minutes with full torque and
crowd force of the rig being applied. " The prime contract,
however, did not include a distinction between drilling in soil
or rock (not in soil), and instead used one set price for drilling to
design depths, regardless of the type of material being drilled.
Southeast Caissons submitted a bid to Choate for the
installation of drilled shafts. Following a meeting with
Southeast, Choate sent Southeast a formal subcontract that
did not incorporate the terms, conditions and exclusions
included in Southeast's. Instead, just like the prime contract,
the subcontract used one set price for both drilling in soil and
rock (not in soil) instead of using a higher price for drilling in
rock. Southeast did not sign the subcontract and commenced
negotiations with Choate. Southeast ultimately proceeded
with work without a formally executed subcontract.
At a preconstruction meeting, the parties discussed the
process for determining when shafts had reached competent
bearing material. The parties agreed the shafts would be
drilled to hard rock, at which point Falcon would inspect the
bottom of the drilled shaft to confirm the suitability of the rock.
Southeast later submitted a claim for additional costs
associated with drilling through large quantities of rock. After
the owner rejected Southeast's claim, Southeast sued Choate
for breach of contract and other counts, and Falcon for
negligence and bad faith. Southeast alleged that Falcon
" discontinue[d] the measurement of auger refusal on its field
drilled shaft reports " thereby " arbitrarily and capriciously
denying [its] rock pay. "
Falcon moved for summary judgment, arguing that,
pursuant to the owner/Falcon agreement, Falcon was not
required to record auger refusal in its inspection reports.
Falcon acknowledged it had noted auger refusal on a few
inspection reports but alleged that it discontinued the use
because Falcon's inspectors determined Southeast was not
actually demonstrating true auger refusal. Falcon further
argued that it did not have a duty to record, observe or
determine entitlement to rock pay based on auger refusal.
The trial court granted summary judgment in favor of
Falcon, effectively dismissing it from the case. Southeast
appealed. Southeast argued on appeal that Falcon breached its
duties of care by " arbitrarily changing the term [auger refusal]
to [partially weathered rock] on its drill logs more than
halfway through the project; and failing to record on its drill
logs any issues with plaintiff's qualification of auger refusal if
Falcon truly believed such issues existed. "
The court's analysis began with determining whether
Falcon owed a duty to Southeast. In doing so, the court
analyzed Falcon's role in the project, finding that its role was
limited to monitoring the excavation of caissons and
determining whether adequate end bearing material had
been reached. Relevant to the court's analysis was the fact
that, unlike the architect, Falcon did not prepare the plans and
specifications for the project and did not have the authority to
release, revoke, alter or increase the requirements of the
contract; control Southeast's means or methods; stop work; or
authorize or withhold payments. The court held that
Southeast failed to show that Falcon exercised enough control
or authority over Southeast's work as required to overcome
the lack of contractual privity. As Falcon owed no duty to
Southeast, dismissal was proper.
The court also upheld summary judgment in favor of
Falcon on Southeast's claim for bad faith. Southeast argued
DEEP FOUNDATIONS * JAN/FEB 2023 * 105
January/February 2023

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