Commercial Division Blog

Posted: January 22, 2020 / Categories Commercial, Negligence, Professional Malpractice

Architect Not Liable to Third-Party Not Known to it When Architectural Plans Created

On January 6, 2020, Justice Masley of the New York County Commercial Division issued a decision in Tutor Perini Bldg. Corp. v. Port Auth. of N.Y. & N.J., 2020 NY Slip Op. 30045(U), holding that an architect could not be held liable to a third-party not known to it when the architectural plans were created, explaining:

STV, the architect engaged by a third-party to generate construction designs three years before plaintiff was engaged as the general contractor for the project, argues that the court mistakenly applied controlling law in finding that plaintiff adequately alleges that, despite having no contract or other privity with STV, plaintiff's tort claims may survive a CPLR 3211 motion as there exists a relationship between it and STV that is so close as to constitute the functional equivalent of privity.

In Ossining, the Court of Appeals discussed its decision in Credit Alliance Corp. v Arthur Andersen & Co. (65 NY2d 536, 551 [1985], amended 66 NY2d 812 [1985]), and clarified that the three-part Credit Alliance test for negligent misrepresentation claims against non privy parties.

As STY correctly argues, however, the applicability of the Credit Alliance test has been further clarified by the First Department as well as the Court of Appeals in the intervening period between the Second Department's issuance of Pile Foundation and the Prior Decision.

In Bri-Den Const. Co., Inc. v Kapell & Kostow Architects PC (20007 WL 6379834 [Sup Ct, NY County August 27, 2007]), an architectural firm was engaged to produce design materials for a construction project and the trial court dismissed the complaint of the general contractor which, after the designs were completed, won the project by submitting the lowest bid (see generally id.). On appeal, the First Department affirmed, holding:

There is admittedly no contractual privity between the parties, and the court properly found that plaintiff contractor failed to state a cause of action under any of the theories set forth in the complaint because it failed to demonstrate the functional equivalent of contractual privity under the three prong Ossining/Credit Alliance test. In Ossining the Court of Appeals rejected the argument that reliance on plans and specifications included in the bid package constituted the functional equivalent of privity, holding that any asserted reliance must be by a known party and not a class of potential parties, such as future bidders. Even were we to find that a class composed of prequalified bidders was sufficiently known for purposes of Ossining, the prequalified bidders were simply not known at the time of the complained-of conduct.

Further, in the context of a negligence claim against an engineering firm surrounding misrepresentations relied on by the purchasers of an apartment unit, the Court of Appeals again contemplated the three-part test espoused in Ossining and Credit Alliance and plainly held that the words known party or parties in the Credit Alliance test mean what they say. That is, the known party or parties have to be known at the time that work product is created in the context of a plaintiff's claim against a nonprivy party.

Accordingly, reargument is granted and, upon reargument, plaintiff's complaint is dismissed as against STV. Here, the architectural plans were created years before plaintiff's involvement in the project and it is of no moment that the plans were created with the knowledge that, at some future date, an unknown contractor would use the plans in the course of completing the project. Contrary to plaintiff's arguments in opposition to this motion, the rule of law set forth in Bri-Den does not foreclose all actions against an architect that creates plans for any construction project where the contractor bidding process has not yet begun. Rather, it relegates claims for negative misrepresentation and professional malpractice to those in privity with, or those that meet the Ossining/Credit Alliance test to raise those claims against the architectural firms, which, in an instance such as this, could have been raised as direct or third-party claims at the appropriate time by an entity other than plaintiff, which lacks standing to pursue its negligent misrepresentation and professional malpractice claims under BriDen and Sykes.

(Internal quotations and citations omitted).

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