Two cases recently addressed when a design professional can be found liable for unfair or deceptive trade practices. While both cases addressed the same issue, they applied different statutory frameworks and, therefore, reached different conclusions.
Kansas: Liability Imposed
The Kansas Supreme Court determined a professional engineering company that sells its services to a consumer and is found to have engaged in a deceptive act in the performance of those services can be liable under the Kansas Consumer Protection Act. Moore v. Bird Engineering Co., 41 P.3d 755 (Kan. 2002).
The plaintiff, a property owner, had purchased a vacant piece of land and planned to build a new home on it. The property had a creek running across it, and the property owner wanted to be sure that he would have year-round access to the residence before construction began. The property owner contacted the defendant, a professional engineering company, to determine whether building a high-water bridge across the creek would be feasible. The defendant confirmed the feasibility of building the bridge and gave an approximate cost estimate.
Based on the defendant's assurances, the property owner retained the defendant to design the bridge. The parties had several discussions regarding the bridge's design and construction. During these discussions, the property owner informed the defendant that the bridge had to have a load-bearing capacity of 32,000 pounds, sufficient for small fire trucks. Upon completion of the design documents, the defendant represented to the property owner that his load-bearing requirements had been satisfied. During construction of the bridge, however, numerous structural problems were encountered, including a crack in the abutment and movement of the wing wall.
An independent investigation into the structural problems revealed that they were caused by the bridge's design. The load-bearing capacity of the bridge was found to be only 8,000 pounds - 24,000 pounds less than what the defendant had represented the load-bearing capacity of the bridge to be. The bridge had to be re-designed and modified.
The property owner sued the defendant to recover the costs of repairing the bridge. In his complaint, the property owner asserted that the defendant had engaged in a deceptive act in violation of the Kansas Consumer Protection Act by misrepresenting that the bridge had a load capacity of 32,000 pounds when, in fact, the bridge's capacity was only 8,000 pounds. The Kansas Consumer Protection Act provides in K.S.A. §50-626 (b) (1):
Deceptive acts and practices include,Â… whether or not any consumer has in fact been misled,Â… representations made knowingly or with reason to know that: (A) Property or services have sponsorship, approval, accessories, characteristics, ingredients, uses, benefits or quantities that they do not have; [and]Â… (D) property or services are of a particular standard, quality, grade, style or model, if they are of another which differs materially from the representation.
The court held that these provisions, by their plain terms, applied to a professional engineering company that sells its engineering services to a consumer.
The court also held that the engineering company had engaged in deceptive acts and that the homeowner was not required to prove that the engineering company had an intent to deceive when it made the statements.
In so holding, the court upheld a District Court judgment in favor of the property owner that not only awarded him the actual damages incurred in repairing the bridge plus prejudgment interest but also a civil penalty of $5,000 and attorney fees pursuant to the Kansas Consumer Protection Act.
North Carolina: No Liability
In the other case, a federal appeals court held that an architect who renders professional services is exempt from claims under the North Carolina Unfair Trade Practices Statute. RCDI Construction, Inc. v. Space/Architecture Planning & Interiors, P.A., 29 Fed. Appx. 120, 2002 WL 53927 (4th Cir. 2002).
The owner of a hotel construction project hired an architect to investigate existing conditions at the construction site, which had been damaged by a catastrophic discharge of water, and to make recommendations for repairing the damage. After inspecting the hotel site, the architect recommended terminating the general contractor, gutting the building and reconstructing the hotel. The architect also solicited the owner to hire it to design the reconstruction of the hotel.
Based on the architect's recommendations, the owner terminated its contract with the general contractor. The general contractor sued the owner for breach of contract, and the owner counter-claimed against the general contractor, alleging that the damage to the hotel was a result of defects in construction. The lawsuit was settled. The general contractor agreed to pay the owner $6.7 million to repair the damage caused by the discharge of water and to forgo $421,000 in payments due under the construction contract.
Later, the general contractor sued architect, alleging, among other things, that the architect had violated the North Carolina Unfair Trade Practices Statute by recommending that the owner terminate the general contractor and then soliciting the owner to hire it to design the reconstruction of the hotel. The architect moved to dismiss the general contractor on the grounds that it was exempt from the statute. The North Carolina Unfair Trade Practices Statute, N.C. Gen. Stat. §75.1.1., provides:
| (a) | Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. | |
| (b) | For purposes of this section, "commerce" includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession. |
A U.S. District Court granted the architect's motion to dismiss the general contractor's claim and ruled that the architect was entitled to the "learned profession" exemption provided by the statute. RCDI Construction, Inc. v. Spaceplan/Architecture, Planning and Interiors, P.A., 148 F.Supp.2d 607 (W.D.N.C. 2001). The 4th U.S. Court of Appeals affirmed.
The District Court found that the architect was a learned professional who had rendered professional services to the owner. The court noted that North Carolina courts consistently have viewed architects as " 'learned professionals' whoÂ… by the nature of their profession owe a special duty to the public." The court also found that in making recommendations to the project owner and soliciting the project owner's future business (i.e., offering to perform professional services), the architect had engaged in the "practice of architecture" as defined by North Carolina's architecture licensing statute. Accordingly, the court held that the architect was entitled to the "licensed professional" exemption as a matter of law.
As these cases illustrate, a design professional's liability for unfair or deceptive trade practices is governed by the applicable statute, and the language of deceptive trade practices statutes can vary from state to state. While the statute in some states shields design professionals from liability for unfair or deceptive practices, other statutes are more encompassing and can be applied to design professionals who render services to consumers.