Washington Construction Law Blog

Here's a good reason not to designate Oregon law as the controlling law in your next contract -- at least if you are a contractor or owner who wants to invoke the protection of the economic loss doctrine (ELD).  At its most basic, the ELD means that a plaintiff may not sue in tort to recover purely "economic loss" as opposed to personal injury or property damage losses.  The sole remedy is instead to sue on the contract -- an option that is often not available to remote plaintiffs who claim injury due to some act or omission of a party with whom no contract exists.

In this Oregon case, for example, a builder built an apartment complex for its customer.  The customer subsequently sold the complex to a third party.  Upon discovering dry rot damage in the complex, the third party sued the original builder for negligent construction.  The Court of Appeals held that ELD did not bar the negligence claim.  Specifically, the Oregon court held that damage to the complex itself was not purely "economic loss" but instead constituted property damage.

The Oregon holding is at odds with Washington law in one clear respect - and possibly a second.  First, Washington does not recognize a theory of negligent construction.  Therefore, the third party could not possibly have made this claim in Washington against the remote builder regardless of the ELD.  Second, Washington courts are far more likely to hold that damage to the project itself is purely "economic loss" in any event. 

Yet another reminder that the best indemnity clause in the world won't necessarily protect you from a defunct - even shady -- obligor.  Here, the seller promised to indemnify the buyer for cleanup costs associated with arsenic pollution on a parcel on the Everett waterfront.  The buyer sued and won a judgment of $600,000 against the corporate obligor.  The court then refused to pierce the corporate veil, leaving the buyer without any recourse.  This is why bonds, personal guarantees and even set-asides are used to back up indemnity promises.

This website has been up and running for about 12 months and traffic is increasing steadily.  I want to thank you very much for visiting and hope you find it useful.

One service message:  I recently noticed that some older links to Washington cases (mainly 90 days+)  have "timed out" due to limitations imposed by other servers.  This means when you click the link, you are channeled to a relatively useless generic start page for Washington courts instead of to the speciifc case I had in mind.

I am exploring solutions to this problem such as embedding PDF versions directly into my entries.  Once the solution is made for future entries, I will also go back and embed more durable links into old entries to fix the past problem.

Happy Holidays to All.

While our Supreme Court doesn't often weigh into this issue, today's case applying the tribal sovereign immunity doctrine to bar a race discrimination claim filed by a pipe-fitter and equipment operator on a construction project is a useful reminder of the potency of this defense for tribal owners.  Any builder looking to do any work in any way related to tribal business needs to craft its contract to obtain a modified waiver of immunity from the client before proceeding with the work.

This dispute between Strand Hunt (SH) and Lake Washington School District arose from a $37 million school renovation project.  SH filed an impact claim of approximately $4.5 million based on alleged delays and "cumulative impacts" to the work.  The trial court granted summary judgment to the owner and Division 1 affirmed, leaving SH with no recovery.

The notable holdings are as follows:

1. Relying on the Mike Johnson case, Division 1 held SH waived its right to claim for "cumulative impacts" because it failed to submit pricing for such indirect impacts when submitting its pricing for direct cost of the changed work.  The Court rejected SH's argument that it was "impossible" for it have ascertained these indirect costs at the time.  The Court also held that the "event" giving rise to the claim for cumulative impact was the changed work itself, not SH's subsequent "realization" that changes had a cumulative effect.
2. SH was not allowed to make a claim for quantum meruit as the contract provided a specific mechanism for pricing of changed work.
3. The contract's terms for pricing of changed work did not violate RCW 4.24.360 (the statute which voids as against public policy any terms which purport to "waive release or extinguish" the right to seek delay costs).
4. Describing the Eichleay remedy as "severely limited," the Court adopted recent federal case law which makes Eichleay applicable only when a true suspension occurs.

Turning largely on the rule that an owner is generally not held to be the third-party beneficiary of the GCs agreements with its subcontractors (unless otherwise stated in the subcontracts), this case results in summary judgment dismissal of defect claims made by an owner against flooring and tile subs hired by the GC.  The GC was not sued -- and there's no explanation in the opinion why that was the case.