On April 20, 2012, the Department of the Navy awarded Bilbro with a contract for the renovation of the Watkins Hall at Naval Support Activity Monterey, California. Bilbro "contracted with FPBA to provide architectural design services for the Project and FPBA contracted with Sparling, whereby Sparling, as an acoustical consultant, was to provide guidance and review of acoustical issues on the Project. Bilbro also entered into a "written subcontract with Alpha designating Alpha as a construction subcontractor on the Project.
On April 3, 2013, Bilbro notified Alpha that it received the 100% design approval and was ready to proceed with construction. Alpha commenced the performance of its services pursuant to the approved drawings and under the Alpha Subcontract. After Alpha completed its work, the Navy noted that 23 of the rooms in the Watkins Hall exceeded Navy's noise level requirements. To address the exceeding noise levels, Bilbro, FPBA and Sparling provided Alpha with various suggestions . . . on how to reduce the noise levels in the individual rooms. As a result, Alpha purchased new equipment, removed prior installations, installed new materials, purchased additional supplies and to remobilized its crew at least on four separate occasions during the period of August 2014 through May 2015. The solutions did not effectively reduce the noise levels and the Navy refused to accept the Project. On May 22, 2015 Bilbro terminated Alpha's Subcontract and withheld $323,352.00 still owing.
Alpha alleged in a complaint for negligence that FPBA and Sparling were negligent by, failing to meet the applicable standard of care due in performing their professional services, failing to properly inspect the designs on the Project prior to their approvals, failing to detect problems with the designs prior to the completion of the work, failing to retain properly-trained professionals, failing to effectively manage the job site and various subcontractors, failing to provide proper and effective solutions to address the elevated noise levels, and negligently performing services.
Under California law, to establish a claim for negligence a plaintiff must plead (1) duty; (2) breach of duty; (3) causation; and (4) damages.
The threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion.
A duty of care may arise through statute, contract, the general character of the activity in which the defendant engaged, or the relationship between the parties. There was no contract between the parties. Courts are reluctant to impose duties to prevent economic harm to third parties because as a matter of economic and social policy, third parties should be encouraged to rely on their own prudence, diligence and contracting power, as well as other information tools. However, courts sometimes impose a duty to prevent pure economic loss when there is a “special relationship” between the parties.
To assess special relationship, California courts balance six factors: (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the policy of preventing future harm.
Alpha could not have performed its contract with Bilbro without utilizing the plans that FPBA reviewed. Thus, FPBA's performance was intended to affect Alpha. This factor weighs in favor of imposing a duty of care. . It was also foreseeable that any negligence in the recommendations and drawings modified by FPBA would adversely affect Alpha, which was contractually obligated to use FPBA's plans. FPBA had knowledge that its actions could cause Alpha injury. Moral blame, has no application in this case because the relationships involve arm's length transactions and Alpha alleged no facts to support a claim that FPBA acted in bad faith.
Alpha was a sophisticated actor and had a responsibility to protect itself. However, in this case, Alpha was contracted by Bilbro to use plans and specifications provided by FPBA. While these allegations did not relieve Alpha of its duty to protect itself, they favored giving less weight to this factor.
To resolve a motion for summary judgment, the Court found that Alpha was contractually obligated by Bilbro to use FPBA's plans and had alleged sufficient facts to infer that FPBA owed them a legal duty of care. The court held that Alpha had alleged facts sufficient to find that there was a special relationship between Alpha and FBPA.