Legal Update: The Coghlin v. Gilbane Appeal and Its Impact on Construction Managers at Risk under Chapter 149AMarch 31, 2015
On March 2, the highest court in Massachusetts heard arguments in the appeal of Coghlin v. Gilbane, a case involving the rights and obligations of construction managers on Chapter 149A projects. The case garnered wide attention last summer when the Worcester Superior Court dismissed Gilbane’s pass-through claims against the Division of Capital Asset Management and Maintenance (“DCAMM”), on grounds that the claims were barred by the construction management at-risk (CMR) contract procured under Chapter 149A. The Massachusetts Supreme Judicial Court (SJC) took direct appellate review of this first-of-its-kind decision and is expected to issue a ruling this summer.
The case involved the construction of a psychiatric facility in Worcester, Massachusetts, where Gilbane served as DCAMM’s construction manager at-risk for the project. When Coghlin – Gilbane’s electrical subcontractor – brought suit against Gilbane seeking more than $5 million in damages, Gilbane did what contractors in Massachusetts have done for decades: it filed a third-party complaint to pass Coghlin’s claims through to the project owner.
But this case was different – at least according to the Worcester Superior Court. Acknowledging the traditional construction law principles that make public owners liable for (and protect contractors from) flawed designs, the Superior Court concluded that those bedrock legal rules do not apply to CMR contracts under Chapter 149A. The court differentiated CMR projects from the “traditional design-bid-build project delivery method,” stating that a construction manager working under a CMR contract “takes on additional duties and responsibilities for the project,” including – in this case – “an ongoing duty to review the design documents for clarity, consistency, constructability, maintainability/operability, coordination among the trades, [and] coordination between the specifications and the drawings.” The court considered this difference to be significant, stating that when “something goes wrong,” the construction manager has a broad obligation to indemnify the owner from all types of claims and damages, including those caused by the owner.
For these reasons, the Superior Court stated that the traditional construction law principles – like those holding owners responsible for defective plans and specifications – “simply are inapplicable” to CMR contracts. With this view of CMR contracts, the Superior Court dismissed Gilbane’s claims against DCAMM, effectively placing design liability on Gilbane. Gilbane appealed to the Appeals Court
Recognizing that the case involved a novel issue of first impression, the SJC granted Gilbane’s application for direct appellate review, and heard oral arguments on March 2nd. Hinckley Allen has filed an amicus curiae or “friend of the court” brief on behalf of Associated General Contractors of Massachusetts, Inc., urging the SJC to overturn the Superior Court’s decision. Construction Industries of Massachusetts, Inc., Columbia Construction Company, and the Massachusetts Chapter of the American Institute of Architects (along with the American Council of Engineering Companies of Massachusetts) also filed amicus briefs on the case.
If upheld on appeal, the Superior Court’s decision would have a substantial impact on the rights and obligations of construction managers under Chapter 149A. Although the “risk” of CMR contracts has not traditionally been understood to include risk of liability for design, this would be the case in Massachusetts. By extension, any time a contractor has increased involvement in the design process (think: “lean construction”), it would risk being assigned responsibility for design when “something goes wrong.”
Nevertheless, it is not clear how the SJC will rule. Although the Superior Court took a different view of owner liability in the case of CMR contracts, DCAMM acknowledged in its appeal brief that it would remain liable to Gilbane for design changes, errors, and omissions that flow from the work of its designer. According to DCAMM, if Coghlin’s damages flow from design issues, there would have to be an allocation of that liability to Gilbane, DCAMM, and DCAMM’s designer. With this design-liability issue seemingly resolved, much of the oral argument focused on whether the case should be tried in one or multiple lawsuits.
So, although the Coghlin v. Gilbane case came into the SJC like a lion, it might very well go out like a lamb. The SJC might decide that the CMR contract does not change the traditional lines of liability in construction cases that have existed in Massachusetts for a hundred years. If true, come summer, construction managers in Massachusetts might have good news to go along with good weather.PDF