Coghlin Electrical Contractors, Inc. v. Gilbane Building Co.

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SJC-11778
COGHLIN ELECTRICAL CONTRACTORS, INC. vs. GILBANE BUILDING
COMPANY & another;1 DIVISION OF CAPITAL ASSET MANAGEMENT AND
MAINTENANCE, third-party defendant.
Worcester. March 2, 2015. - September 2, 2015.
Present: Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, &
Hines, JJ.
Contract, Public works, Construction contract, Delivery,
Warranty, Indemnity. Warranty. Indemnity. Public Works,
Construction management at risk.
Civil action commenced in the Superior Court Department on
July 17, 2013.
A motion to dismiss a third-party complaint was heard by
Brian A. Davis, J.
The Supreme Judicial Court granted an application for
direct appellate review.
John W. DiNicola, II (Michael Brangwynne with him) for
Gilbane Building Company.
James A. Sweeney, Assistant Attorney General, for Division
of Capital Asset Management and Maintenance.
The following submitted briefs for amici curiae:
1
Travelers Casualty & Surety Company of America.
2
David J. Hatem, Cheryl A. Waterhouse, & Amanda E. Mathieu
for American Council of Engineering Companies of Massachusetts &
another.
Shannon A. Reilly for Construction Industries of
Massachusetts.
Joel Lewin, Robert V. Lizza, Jonathan T. Elder, & Robert T.
Ferguson, Jr., for Associated General Contractors of
Massachusetts, Inc.
Hugh J. Gorman, III, & Jeffrey J. Pyle for Columbia
Construction Company.
GANTS, C.J. This case requires us to resolve three issues
regarding a public construction contract that implements the
construction management at risk delivery method, pursuant to
G. L. c. 149A: (1) Does the owner who furnishes the plans and
specifications in a public construction management at risk
project give an implied warranty of their sufficiency for the
purpose intended, as the owner does under our common law in
traditional design-bid-build construction projects? (2) If so,
did the parties to the construction management at risk contract
in this case disclaim the implied warranty? (3) If they did
not, did the indemnification provision in the contract prohibit
the construction manager at risk (CMAR) from filing a third-
party complaint against the owner in a case brought by a
subcontractor seeking reimbursement of additional costs, thus
requiring the CMAR to file a separate complaint against the
owner to recover the additional costs caused by an insufficient
or defective design under the implied warranty?
3
We conclude: (1) under our common law, a public owner of a
construction management at risk project gives an implied
warranty regarding the designer's plans and specifications, but
the scope of liability arising from that implied warranty is
more limited than in a design-bid-build project; (2) the
construction management at risk contract in this case did not
disclaim the implied warranty; and (3) the indemnification
provision in the contract did not prohibit the CMAR from filing
a third-party complaint against the owner that sought
reimbursement under the implied warranty for damages claimed by
the subcontractor arising from the insufficiency of or defects
in the design.2
Background. The Division of Capital Asset Management and
Maintenance (DCAM) is the owner of a construction project to
build a psychiatric facility at the site of the Worcester State
Hospital (Project). DCAM entered into a contract with
Ellenzweig Associates (Designer) to prepare the Project's
designs. See G. L. c. 7C, § 44 ("Designer" is individual or
other entity "engaged in the practice of architecture, landscape
architecture, or engineering" and registered in discipline
2
We acknowledge the amicus briefs submitted by American
Council of Engineering Companies of Massachusetts and
Massachusetts Chapter of the American Institute of Architects;
Associated General Contractors of Massachusetts, Inc.;
Construction Industries of Massachusetts; and Columbia
Construction Company.
4
required for project). When the designs were partially
completed, DCAM entered into a contract with Gilbane Building
Company (Gilbane) as the CMAR.3 Gilbane entered into a
subcontract with Coghlin Electrical Contractors, Inc. (Coghlin),
to perform electrical work. The subcontract incorporated by
reference the terms of the contract between DCAM and Gilbane.
On July 19, 2012, approximately one month before it
substantially completed its work, Coghlin submitted to Gilbane a
request for equitable adjustment of the contract price. Nearly
one year later, on July 17, 2013, Coghlin filed a complaint in
the Superior Court against Gilbane, alleging, inter alia, that
Gilbane committed a breach of its subcontract with Coghlin by
causing Coghlin to incur additional costs resulting from various
scheduling, coordination, management, and design errors.4
Gilbane then filed a third-party complaint against DCAM,
asserting that, "in the event that Coghlin proves its claims
against Gilbane," DCAM committed a breach of its contract with
3
The contract between Gilbane Building Company (Gilbane)
and the Division of Capital Asset Management and Maintenance
(DCAM) states that Gilbane "is an independent contractor and is
not an agent or employee of, or a joint venturer with, DCAM."
4
Coghlin Electrical Contractors, Inc. (Coghlin), also named
Gilbane's surety under a payment bond, Travelers Casualty and
Surety Company of America, as a defendant in its complaint. See
G. L. c. 149, § 29.
5
Gilbane by refusing to pay Gilbane the amounts claimed by
Coghlin.
Because DCAM's liability on the third-party complaint is
contingent upon Coghlin prevailing on its complaint, we recite
the relevant factual allegations in both the complaint and the
third-party complaint.5 In October, 2009, Coghlin began
performing electric work on the first of two sets of buildings
and, for the first year, was generally able to perform on
schedule. However, beginning around November, 2010, various
errors, omissions, and changes severely affected Coghlin's
performance, causing Coghlin to incur a forty-nine per cent
increase in labor hours. Coghlin's increased costs resulted
both from Gilbane's alleged mismanagement of the Project, such
as its failure to issue monthly schedules and coordinate the
5
The judge declined to convert the motion to dismiss into a
motion for summary judgment, so we do not consider the affidavit
and the attached correspondence submitted by Gilbane with its
opposition to the motion to dismiss as part of the record on
appeal, and rest solely on the allegations in the pleadings, as
well as the contracts referenced in the pleadings. See Marram
v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 45 n.4 (2004)
(where offering memorandum and subscription agreement were not
attached to complaint but plaintiff had notice and "relied on
them in framing the complaint," attachment of such documents to
motion to dismiss did not convert motion to one for summary
judgment). See also Sher v. Desmond, 70 Mass. App. Ct. 270, 281
n.14 (2007) (attached correspondence in support of motion to
dismiss did not convert motion into summary judgment motion
where judge did not give notice to parties "that the judge
intended to treat the motion to dismiss as one for summary
judgment").
6
various subcontractors, and from design defects and changes. As
to the design, Coghlin alleged that the ceilings in the project
were designed to leave two feet of space between the ceilings
and the bottom of the structural steel, but "[w]hen Project work
began, it was revealed that the design required approximately
five feet of mechanical and electrical work to be placed in the
ceiling area." After six weeks of attempting to resolve the
discrepancy, Coghlin was directed to place the electrical work
as high as possible in the ceiling, and was told that the
Designer and Gilbane would address the issue later. Coghlin
also alleged that, "[w]hen wall framing began, based upon design
changes and for other reasons not related to Coghlin's
performance, it became evident that the floors would not be
framed in a logical and sequential fashion." In addition,
Coghlin alleged that the Designer specified that Coghlin use
certain specific electrical fixtures on the Project, but the
Designer rejected them when Coghlin filed the product
submittals.
In its third-party complaint, Gilbane claims that it
performed its work in accordance with the contract, and that
DCAM has not paid Gilbane for the amounts sought by Coghlin.
DCAM filed a motion to dismiss the third-party complaint. After
conducting a hearing, the judge allowed the motion and judgment
was entered in favor of DCAM.
7
In his decision, the judge recognized that Gilbane's third-
party complaint effectively alleged that DCAM should indemnify
Gilbane for "damages caused by design changes and design
errors," that were "unrelated to any wrongdoing on Gilbane's
part," for which Gilbane may be liable to Coghlin. The judge,
citing J. Lewin & C.E. Schaub, Jr., Construction Law § 7:3, at
452 (2012) (Lewin & Schaub, Jr.), acknowledged that
Massachusetts common law "traditionally has been protective of
construction contractors in circumstances where the owner has
supplied erroneous or, perhaps, ambiguous plans and
specifications." See Lewin & Schaub, Jr., supra at § 7:3, at
464 (2014-2015) ("where a party provides a contractor with a set
of plans and specifications for construction to follow, there is
an implied warranty that those plans and specifications are
adequate and sufficient"). The judge concluded, however, that
the implied warranty of the owner applies only where the
construction project uses the traditional design-bid-build
construction method, in which the owner retains a designer to
design the project, construction bids are submitted based on
that design, and the general contractor who wins the contract is
expected to build the project in accordance with the plans and
specifications of the design. The judge determined that this
implied warranty does not apply where, as here, the construction
project uses the construction management at risk method, given
8
the "material changes in the roles and responsibilities
voluntarily undertaken by the parties" to such contracts.
The judge also determined that the indemnification
provision in the contract between DCAM and Gilbane, which
requires Gilbane to indemnify, defend, and hold harmless DCAM
from all claims, damages, losses, and expenses "arising out of
or resulting from the performance of the Work," as defined in
the contract, imposes liability on Gilbane for any damages it
might win in its third-party claims against DCAM. The judge
concluded that, because Gilbane effectively is suing itself in
its third-party complaint, Gilbane's third-party claims create
"an impermissible 'circuity of obligation'" (citation omitted).
Gilbane appealed, and we allowed its motion for direct appellate
review.
Discussion. "We review the allowance of a motion to
dismiss de novo," accepting as true the facts alleged in the
plaintiff's and the third-party plaintiff's complaints as well
as any favorable inferences that reasonably can be drawn from
them. Galiastro v. Mortgage Elec. Registration Sys., Inc., 467
Mass. 160, 164 (2014). To survive a motion to dismiss, the
facts alleged and the reasonable inferences drawn therefrom must
"plausibly suggest . . . an entitlement to relief." Flagg v.
Alimed, Inc., 466 Mass. 23, 26-27 (2013), quoting Iannacchino v.
Ford Motor Co., 451 Mass. 623, 636 (2008).
9
1. Construction management at risk contracts under G. L.
c. 149A. a. Construction project delivery methods. The
construction management at risk contract at issue in this case
differs from contracts made pursuant to the conventional design-
bid-build method. In a design-bid-build project, "the owner
retains an engineer or an architect on a separate contract to
complete the design of the public facility," and once the design
is complete, the design is made available to potential bidders
and the construction contract is advertised for bid. Associated
Subcontractors of Mass., Inc. v. University of Mass. Bldg.
Auth., 442 Mass. 159, 165 n.8 (2004), quoting D. Gransberg, The
Cost of Inaction: Does Massachusetts Need Public Construction
Reform? at 3 (1999). Contractors submit prices, and the project
is awarded to the "lowest responsive and responsible bidder."
Associated Subcontractors of Mass., Inc., supra, quoting
Gransberg, supra. The construction services contract between
the owner and the contractor allocates to the contractor the
responsibility of "selecting, coordinating, and administrating
the work of all of the various subcontractors." Lewin & Schaub,
Jr., supra at § 2:6, at 14. "[T]he risk of the design is
allocated to the engineer or architect, while the risk of
construction is allocated to the contractor." Id. at 14-15.
On January 1, 2005, § 27 of the "Act further regulating
public construction in the Commonwealth" became effective, see
10
St. 2004, c. 193, § 27, authorizing public agencies to use two
additional delivery methods: design-build and construction
management at risk. In a design-build project, the owner
contracts with a single party that assumes both the design and
the construction responsibilities. See G. L. c. 149A, § 15
("Design build" defined as "construction delivery system that
provides responsibility for the delivery of design services and
construction services within a single contract"); Lewin &
Schaub, Jr., supra at § 2:6, at 15. By replacing two entities
with one, owners may reduce delays and focus responsibility on a
single entity. See J. Sweet & M.M. Schneier, Legal Aspects of
Architecture, Engineering and the Construction Process § 14.09E
(9th ed. 2013) (Sweet & Schneier) ("Owners are often frustrated
when they look to the designer who claims that the contractor
did not follow the design, with the latter claiming that the
problem was poor design"). In Massachusetts, a public agency is
only authorized to use the design-build method for certain
public works projects, not public building projects. G. L.
c. 149A, § 14.
The construction management at risk method is available to
public agencies for the "construction, reconstruction,
installation, demolition, maintenance or repair of any building
estimated to cost not less than [$5 million]." Id. at § 1.
Similar to the design-bid-build method, the owner enters into
11
separate contracts, one with the designer and one with the CMAR.
Id. at § 3 (public agency must procure services of designer, who
is "independent of the owner's project manager and [CMAR],"
before submitting application to use construction management at
risk method). However, in the construction management at risk
method, the owner may contract with the CMAR before the design
has been completed. Id. at § 7 (total dollar amount for CMAR
services is based on design documents "which are no less
developed than [sixty] per cent"). See Office of the Inspector
General, Experience of Massachusetts Public Agencies with
Construction Management at Risk Under M. G. L. c. 149A, at 9
(Oct. 2009) (OIG Report) (CMAR "selected during the design stage
of the project"). By contracting during the design phase, the
owner may "involve the [CMAR] in project planning and . . .
benefit from the [CMAR's] expertise." Lewin & Schaub, Jr.,
supra at § 17:42, at 1226. See P.L. Bruner & P.J. O'Connor,
Jr., On Construction Law, § 6:59 (2002) (Bruner & O'Connor, Jr.)
(CMAR "provides preconstruction services tailored to introduce
construction expertise into the design phase"). The CMAR
provides its services in exchange for a guaranteed maximum price
(GMP), representing the maximum amount that the owner will pay.
See G. L. c. 149A, § 2; id. at § 7. Absent a change order, the
CMAR is generally responsible for any costs that exceed the GMP.
See Lewin & Schaub, Jr., supra at § 17:42, at 1227.
12
b. Implied warranty of the designer's plans and
specifications. We now consider whether the owner in a
construction management at risk contract made pursuant to G. L.
c. 149A impliedly warrants the sufficiency of the designer's
plans and specifications. In design-bid-build projects, "[i]t
is well established that where one party furnishes plans and
specifications for a contractor to follow in a construction job,
and the contractor in good faith relies thereon, the party
furnishing such plans impliedly warrants their sufficiency for
the purpose intended." Alpert v. Commonwealth, 357 Mass. 306,
320 (1970). See United States v. Spearin, 248 U.S. 132, 136
(1918) ("if the contractor is bound to build according to plans
and specifications prepared by the owner, the contractor will
not be responsible for the consequences of defects in the plans
and specifications"). See also Richardson Elec. Co. v. Peter
Francese & Son, 21 Mass. App. Ct. 47, 50 (1985) ("There is
implied in a set of construction plans and specifications a
warranty that they are accurate as to descriptions of the kind
and quantity of work required"). This implied warranty between
the owner and the contractor "is a representation that the
design is defect-free," and the contractor "need only show that
the defect exists and that he suffered damages as a result
thereof" in order to recover. Bruner & O'Connor, Jr., supra at
§ 9:82, at 670, 671 n.5, quoting Harrington, Thum, & Clark, The
13
Owner's Warranty of the Plans and Specifications for a
Construction Project, 14 Pub. Con. L. J. 240, 259-260 (1984).
In design-bid-build projects, the implied warranty of the owner
"is not overcome by the usual clauses requiring builders to
visit the site, to check the plans, and to inform themselves of
the requirements of the work." Spearin, supra. However, the
implied warranty does not absolve a contractor of all liability
related to design; where the contractor does not rely in good
faith on the designer's plans and specifications, the contractor
is responsible for the increased costs arising from design
defects. See Alpert, supra. Consequently, where a contractor
encounters an "obvious omission, inconsistency, or discrepancy
[in the design], he should take steps, by way of his own
investigation, or by putting questions to the owner (or owner's
representatives), to bridge gaps in the documents." Richardson
Elec. Co., supra at 52. Compare John F. Miller Co. v. George
Fichera Constr. Corp., 7 Mass. App. Ct. 494, 498 (1979) (if
discrepancy is subtle, and if reasonable, conscientious
contractor examining design "might miss a requirement which is
out of sequence or ineptly expressed, the burden of the error
falls on the issuer of the specifications").6
6
Because the issue is not raised, we do not address the
distinction between "performance" specifications and "design"
specifications. See J. Lewin & C.E. Schaub, Jr., Construction
Law § 7:4, at 467 (2014-2015) (design specifications "describe
14
Until today, we have not considered whether the owner's
implied warranty of the designer's plans and specifications
applies in public construction management at risk projects. See
generally Bruner & O'Connor, Jr., supra at § 6:67, at 617
("Because construction management is a newer approach and has
not been the subject of as many court decisions, there is less
certainty as to interpretation of the contract documents, and
less uniformity as to the extent and allocation of
responsibilities, and it is more difficult to predict
liabilities"). When we adopted the implied warranty as part of
our common law, public agencies were generally limited to using
the design-bid-build method, see Lewin & Schaub, Jr., supra at
§ 17:41, at 1225; OIG Report, supra at 1, where the owner "is in
control of the design development process" and the contractor
"has no ability or opportunity to contemporaneously,
meaningfully, or otherwise influence the process of design
development and is required to construct in strict conformance
with the furnished project design." Peterson, One Small Step in
the materials to be used in the work and the manner in which the
contractor's work is to be constructed in detail" while
performance specifications "focus on the result to be achieved"
and give contractor discretion as to how to complete final
product). We assume for the purposes of reviewing the allowance
of the motion to dismiss that the designs at issue in this case
contain design specifications. See id. at 468 (contractor
"cannot rely on an implied warranty to shield itself from
liability arising out of defective performance specifications").
15
Mindset, One Giant Leap for the Construction Law Industry: How
the Judicial Stage Is Set for IPD and the Only Thing Missing Is
Willing Participants, 39 N. Ky. L. Rev. 557, 561-562 (2012),
quoting Hatem, Design Responsibility in Integrated Project
Delivery: Looking Back and Moving Forward 14 (Jan. 2008)
(unpublished manuscript).
The relationship between the owner and the CMAR is
different from the traditional relationship between the owner
and the general contractor in a design-bid-build project. The
act defines "construction management at risk" as
"a construction method wherein a construction management at
risk firm provides a range of preconstruction services and
construction management services which may include cost
estimation and consultation regarding the design of the
building project, the preparation and coordination of bid
packages, scheduling, cost control, and value engineering,
acting as the general contractor during the construction,
detailing the trade contractor scope of work, holding the
trade contracts and other subcontracts, prequalifying and
evaluating trade contractors and subcontractors, and
providing management and construction services, all at a
[GMP], which shall represent the maximum amount to be paid
by the public agency for the building project, including
the cost of the work, the general conditions and the fee
payable to the construction management at risk firm"
(emphasis added).
G. L. c. 149A, § 2. Unlike design-bid-build projects where the
designer designs and the contractor builds, the CMAR may provide
consultation regarding the design of the project and therefore
may influence the project's final plans and specifications. See
OIG Report, supra at 9 ("final design may reflect or incorporate
16
substantial input from the [CMAR]"). Additionally, the CMAR
agrees to a GMP and has the opportunity when negotiating the
contract to consider the risk of incurring additional costs.
See id. at 32 (construction management at risk contracts contain
"CM Contingency," which is monetary amount intended to cover
risk of "project costs that are not associated with scope
changes or latent conditions encountered during the construction
phase"). See also Bruner & O'Connor, Jr., supra at § 9:84, at
678 ("If . . . it can be clearly established that the contractor
did or should have accounted for possible errors in the plans
and specifications when pricing the work, then it appears
inappropriate to hold the owner to this implied warranty
standard").
As significant as these differences in relationship are, we
are not persuaded that the relationships are so different that
no implied warranty of the designer's plans and specifications
should apply in construction management at risk contracts made
pursuant to G. L. c. 149A and that the CMAR should bear all the
additional costs caused by design defects. See OIG Report,
supra at 12-13, 58 ("Owner-generated design changes and
incomplete or flawed plans and specifications may . . . warrant
change orders that increase the contract price" and "owner is
also responsible for the cost of change orders, which increase
the original GMP"). See also Hackenbrach, An Overview of Major
17
Project Delivery Methods and Their Design Risk Allocation, in
Shared Design § 3.01[C], at 3-11 (2011) (CMAR generally bears
risk that actual costs to complete project may exceed price it
has agreed upon with owner, "unless it can show that the costs
increased due to owner-directed changes, the owner's actions or
omissions, or other circumstances which the contract treats as
within the owner's responsibility"). The CMAR may consult
regarding the design of the project, but the owner, through the
designer, ultimately controls the design and is the final
arbiter of it; unless the contract states otherwise, the owner
is generally under no obligation to accept the CMAR's
suggestions regarding the plans and specifications. The implied
warranty derives in part from the basic principle that
"responsibility for a defect rests on the party to the
construction contract who essentially controls and represents
that it possesses skill in that phase of the overall
construction process that substantially caused the defect."
Sweet & Schneier, supra at § 16.02A. Although the CMAR may be
more likely to bear some responsibility for a design defect than
a general contractor in a design-bid-build project, we adhere to
this basic principle by applying the implied warranty to public
construction management at risk contracts, where the owner
maintains control of the design by contracting a separate
designer and may be able to transfer liability to the designer
18
responsible for the defect. See Hackenbrach, supra at 3-12 ("In
a 'textbook' [construction management at risk contract], the
[CMAR] does not bear the risk of design deficiencies, as the
owner retains a separate design professional and the [owner's
implied warranty] applies . . .").
Nor are we persuaded that the Legislature, when it enabled
the construction management at risk method in public building
projects by enacting G. L. c. 149A, intended to abolish the
owner's implied warranty and to require the CMAR to bear the
entirety of the risk arising from design defects. The statute
states that the CMAR "may" provide "consultation" regarding the
design but is not required to do so. Ordinarily, to "consult"
means to discuss, give advice, or confer. See Milton v.
Massachusetts Bay Transp. Auth., 356 Mass. 467, 474 n.8 (1969),
quoting Webster's Third New International Dictionary 490 (1963)
("consult" defined as "to deliberate on," "discuss," "to ask
advice of," "to take counsel," and "confer"). The possibility
that the CMAR may consult regarding the building design does not
suggest that the CMAR should be the guarantor against all design
defects, even those that a reasonable CMAR would not have been
able to detect. Although the statute requires a GMP for the
CMAR's services, the GMP may be established when only sixty per
cent of the design documents have been developed. The
Legislature could not reasonably have intended that the CMAR, by
19
agreeing to a GMP, would bear all the risk arising from the
design when the CMAR may not have seen as much as forty per cent
of the design documents before agreeing upon a GMP. Even where
a CMAR is given substantial consultative responsibilities
regarding the design, the owner remains free to reject the
CMAR's advice and suggestions. In addition, under G. L. c. 7C,
§ 51 (e), "[a] public agency shall not enter into a contract for
design services unless the public agency or the designer . . .
has obtained professional liability insurance covering negligent
errors, omissions and acts of the designer," and the total
amount of insurance "shall at a minimum equal the lesser of [$1
million] or [ten] per cent of the project's estimated cost of
construction, or such larger amounts as the public agency may
require." The statute does not permit a lesser amount of
professional liability insurance in construction management at
risk projects. Based on the language of G. L. cc. 149A and 7C,
we understand that the legislative intent in providing the
construction management at risk alternative was to permit the
CMAR a greater consultative role regarding the project's design,
not to eliminate the owner's responsibility for design defects.
Although the owner's implied warranty applies in a public
construction management at risk contract, the differences
between the responsibilities of a general contractor in a
design-bid-build project and those of a CMAR affect the scope of
20
the implied warranty. The general contractor in a design-bid-
build project may benefit from the implied warranty where it
relied on the plans and specifications in good faith, but the
CMAR may benefit from the implied warranty only where it has
acted in good faith reliance on the design and acted reasonably
in light of the CMAR's own design responsibilities. The CMAR's
level of participation in the design phase of the project and
the extent to which the contract delegates design responsibility
to the CMAR may affect a fact finder's determination as to
whether the CMAR's reliance was reasonable. The greater the
CMAR's design responsibilities in the contract, the greater the
CMAR's burden will be to show, when it seeks to establish the
owner's liability under the implied warranty, that its reliance
on the defective design was both reasonable and in good faith.
See generally Sweet & Schneier, supra at § 14.04 ("all of the
modern variations [on the design-bid-build method] have as a
common denominator: a blurring of the lines of
responsibility"). Therefore, the CMAR may recover damages
caused by the breach of the implied warranty, but only if it
satisfies its burden of proving that its reliance on the
defective plans and specifications was reasonable and in good
faith. The amount of recoverable damages may be limited to that
which is caused by the CMAR's reasonable and good faith reliance
21
on design defects that constitute a breach of the implied
warranty.
2. Express disclaimer of implied warranty. Having found
that there is an implied warranty of the designer's plans and
specifications in construction management at risk contracts made
pursuant to G. L. c. 149A, we now consider whether the contract
between DCAM and Gilbane expressly disclaims the owner's implied
warranty. See Daniel O'Connell's Sons v. Commonwealth, 349
Mass. 642, 647-648 (1965) ("express disclaimer" of owner's
responsibility for accuracy of geological data precluded
liability based on contractor's reliance on such data); D.
Federico Co. v. Commonwealth, 11 Mass. App. Ct. 248, 252 (1981)
(implied warranty not recognized "where the contract terms
specifically precluded warranty of, or reliance on" designer's
quantity estimates). See also White v. Edsall Constr. Co., 296
F.3d 1081, 1085 (Fed. Cir. 2002) ("Only express and specific
disclaimers suffice to overcome the implied warranty that
accompanies design specifications"); Lewin & Schaub, Jr., supra
at § 7:3, at 466 ("implied warranty [of design sufficiency]
. . . may be mitigated by an express disclaimer of liability").
We find no express disclaimer of the implied warranty of
the designer's plans and specifications in the contract between
DCAM and Gilbane. We note that DCAM, on appeal, concedes that
"the Superior Court's dismissal in this case does not negate
22
principle that the owner remains liable to the [CMAR] for design
changes, errors and omissions which flow from the work of the
designer" and that "[i]f Gilbane is found liable to Coghlin and
the liability flows from design issues rather than other aspects
of [Gilbane's] responsibilities, then there would have to be an
allocation of that liability between Gilbane, [DCAM] and the
[D]esigner." DCAM and Gilbane agree that the contract does not
impose full responsibility for design defects on Gilbane, and
the contract supports their interpretation.
As the judge recognized, the contract delegates extensive
responsibilities to Gilbane to "carefully study" and "carefully
compare" all design-related documents; "take field measurements
and verify field conditions," compare them to the designs, and
"report to the Designer any questions, errors, inconsistencies,
or omissions." Gilbane must "review" the designs "on a
continuous basis" with a group of architects or engineers in
order to "discover inconsistencies, errors and omissions," and
"review the design documents for clarity, consistency,
constructability, maintainability/operability and coordination
among the trades." Gilbane also must attend Project meetings
with DCAM and the Designer and "consult with DCAM and the
Designer concerning planning for construction of the Project."
Although Gilbane undertakes significant design-related
obligations, there is no express abrogation of the implied
23
warranty. See White, 296 F.3d at 1085, citing Spearin, 248 U.S.
at 137 ("general disclaimers requiring the contractor to check
plans and determine project requirements do not overcome the
implied warranty, and thus do not shift the risk of design flaws
to contractors who follow the specifications"). The contract
instead states that the "recommendations and advice of [Gilbane]
concerning design modifications and alternatives shall be
subject to the review and approval of DCAM," and, the Designer
"shall decide all questions which may arise as to the
interpretation of the [designs] and as to the fulfillment of
this Contract on the part of [Gilbane]." Such provisions show
that the Designer and DCAM maintain authority and control over
the Project's design. In comparison, when describing some of
Gilbane's design-related responsibilities, the contract states:
"[Gilbane] shall consult with DCAM and the Designer
regarding the selection of materials, building systems and
equipment, and shall recommend alternative solutions
whenever design details affect construction feasibility,
schedules, cost or quality (without, however, assuming the
Designer's responsibility for design) and shall provide
other value engineering services to DCAM" (emphasis added).
In stating that Gilbane shall recommend alternative design-
related solutions, without assuming "the Designer's
responsibility for design," the plain language of the contract
supports, rather than disclaims, the implied warranty.7
7
The "No Personal Liability; Consequential Damages"
provision of the "Miscellaneous Provisions" article, stating,
24
Thus, in the absence of an express disclaimer, the owner's
implied warranty of the designer's plans and specifications
applies. Here, Gilbane has undertaken extensive design review
and consultation obligations while the Designer remains
responsible for producing the designs. If Gilbane is found
liable for additional costs to Coghlin, Gilbane may be able to
recover, but only to the extent that the additional costs were
caused by Gilbane's reasonable and good faith reliance on the
defective plans and specifications that resulted in a breach of
the owner's implied warranty, despite Gilbane's own contractual
design responsibilities.
3. Indemnification provision. Section one of the
indemnification provision of the contract provides in pertinent
part:
"To the fullest extent permitted by law, [Gilbane] shall
indemnify, defend . . . and hold harmless DCAM and their
officers, agents, . . . employees, [and] representatives
. . . from and against all claims, damages, losses and
expenses, including but not limited to court costs and
attorneys' fees, arising out of or resulting from the
performance of the Work, including but not limited to those
arising or resulting from: labor performed or furnished
and/or materials used or employed in the performance of the
Work; violations by [Gilbane] . . . of any Laws; violations
of any provision of this Contract by [Gilbane] . . . ;
injuries to any persons or damage to any property in
"In no event shall DCAM or [Ellenzweig Associates (Designer)] be
liable to the [CMAR] except for obligations expressly assumed by
DCAM or the Designer under the Contract Documents," does not
constitute a specific or express disclaimer of the implied
warranty of the designer's plans and specifications.
25
connection with the Work; or any act, omission, or neglect
of [Gilbane's] Personnel.[8]
"[Gilbane] shall be obligated as provided above, regardless
of whether or not such claims, damages, losses and/or
expenses, are caused in whole or in part by the actions or
inactions of a party indemnified hereunder. . . ."
Section two of the provision, titled "Designer's Actions,"
states:
"The obligations of [Gilbane] under Section [one] above
shall not extend to the liability of the Designer, its
agents or employees, arising out of (i) the preparation or
approval of maps, Drawings, opinions, reports, surveys[,]
Change Orders, designs or Specifications, or (ii) the
giving of or the failure to give directions or instructions
by the Designer, its agents or employees provided such
giving or failure to give is the primary cause of the
injury or damage."
The judge concluded that the indemnification provision
required Gilbane to indemnify DCAM for "any liability" that
might be imposed upon DCAM as a result of Gilbane's own third-
8
"Work" is a defined term in the contract:
"The Work consists of all the work identified in the
Contract Documents. The Work comprises the completed
construction required by the Contract Documents and
includes all labor, tools, materials, supplies, equipment,
permits, approvals, paperwork, calculations, submittals,
and certificates necessary to develop, construct and
complete the Work in accordance with all Laws, and all
construction and other services required to be supervised,
overseen, performed or furnished by [Gilbane] or that the
Contract Documents require [Gilbane] to cause to be
supervised, overseen, performed or furnished. [Gilbane]
shall provide and perform for the Contract Price all of the
duties and obligations set forth in the Contract
Documents."
26
party claims. Thus, according to the judge, Gilbane's third-
party complaint created an impermissible "circuity of
obligation," because Gilbane may not seek damages from DCAM when
DCAM would have a right to be indemnified by Gilbane for those
same damages. Furthermore, the judge rejected Gilbane's
contention that section two excluded any obligation to
indemnify, defend, and hold harmless DCAM for design defects,
and found that section two only excused Gilbane from the
obligation to indemnify, defend, and hold harmless the Designer,
as one of DCAM's "agents [or] representatives."
The judge's reasoning was premised on his conclusion that
Gilbane did not have the benefit of the implied warranty of the
designer's plans and specifications. We instead interpret the
indemnification provision in light of the implied warranty and
conclude that, although broad in scope, the indemnification
provision does not cover claims, damages, losses, and expenses
arising out of the Designer's work, as opposed to Gilbane's
design-related duties. Here, the contract states that the
indemnification provision is triggered by claims, damages,
losses, and expenses "arising out of or resulting from the
performance of the Work," which we interpret to mean Gilbane's
performance. See Bruner & O'Connor, Jr., supra at § 10:58
("Nearly every indemnity provision contains language limiting
the indemnitor's obligation to loss occasioned in some way or
27
another to the activities or work of the indemnitor").9 As part
of its "Work" under the contract, Gilbane is responsible for
"construction and other services required to be supervised [and]
overseen," but Gilbane does not "supervise" or "oversee" the
Designer's work. See Department of Community Affairs v.
Massachusetts State College Bldg. Auth., 378 Mass. 418, 430
(1979), quoting Fluet v. McCabe, 299 Mass. 173, 179 (1938) ("to
supervise" means "to oversee, to have oversight of, to
superintend the execution of or performance of [a thing], or the
movements or work of [a person]; to inspect with authority; to
inspect and direct the work of others"). Rather, the contract
provides that Gilbane's recommendations are subject to the
review and approval of DCAM and that the Designer has authority
over the interpretation of the designs. Gilbane reviews and
consults regarding the designs, but the contract expressly
declares that Gilbane does not assume the "Designer's
responsibility for design." In light of the implied warranty of
the designer's plans and specifications, and the contractual
definition of "Work," we conclude that claims, damages, losses,
and expenses that arise out of the Designer's performance, as
9
In its brief, DCAM states that the contract "requires
Gilbane to defend DCAM from all claims "arising out of the
performance of Gilbane's work." Moreover, DCAM describes the
contractual definition of "Work" as defining "'Work' for which
Gilbane is responsible."
28
opposed to Gilbane's design consultation and review performance,
do not trigger the indemnification provision.10
Furthermore, we conclude that section two of the
indemnification provision exempts Gilbane of its obligations to
defend, indemnify, or hold harmless both the Designer and DCAM
for additional costs caused by design defects. The judge
interpreted this section as exempting only the Designer from
Gilbane's duties under section one of the indemnification
provision. But where the owner, through the implied warranty,
is legally responsible for the designer's plans and
specifications, and where the CMAR has a contractual
relationship with the owner but not the designer, the apparent
purpose of this provision can be wholly accomplished only by
interpreting it to include both the designer and the owner who
impliedly warrants the designer's plans and specifications. See
Key Constr., Inc. v. State Auto Prop. & Cas. Ins. Co., 551 F.
Supp. 2d 1266, 1268, 1270-1271 & n.2 (D. Kan. 2008) (applying
Oklahoma law, subcontractor not required to indemnify contractor
for losses or injuries caused by architect's plans and
specifications, where indemnification provision stated that
10
Because Gilbane has plausibly alleged that the claims of
Coghlin, for which it seeks recovery from DCAM, arise out of
design defects attributable to the Designer, and are therefore
outside of the triggering language of the indemnification
provision, we do not address DCAM's circuity of obligation
argument.
29
subcontractor's obligations "shall not extend to the liability
of the Architect"). If we were to interpret section two as the
judge did, the Designer effectively would be indemnified by
Gilbane for increased labor and material costs arising from
defects in its design, even though the contract expressly
declares that Gilbane has no duty to indemnify the Designer.
The reason is that Gilbane can only sue DCAM, not the Designer,
to recover these additional costs under its contract, and would
be barred from doing so under the judge's interpretation, thus
negating any possibility that the Designer would need to defend
a third-party claim brought by DCAM to recover these damages.
Therefore, we conclude that Gilbane is exempt from its
obligations to indemnify, defend, and hold harmless DCAM for
damages caused by defects in the Designer's plans and
specifications that constitute a breach of the implied warranty,
and that the indemnification provision does not bar Gilbane's
third-party complaint.
4. Third-party complaint. DCAM contends that, even if it
may be found liable to Gilbane for defects in the Designer's
work, the third-party complaint was properly dismissed, because
Gilbane may only bring a claim against DCAM after Coghlin wins a
judgment against Gilbane based at least in part on a finding of
"liability" attributable to the Designer's work. According to
DCAM, Gilbane's filing of a third-party complaint against DCAM
30
is inconsistent with its duty to defend DCAM under the
indemnification provision. It contends that compliance with
that provision requires Gilbane first to defend against
Coghlin's claims to final resolution. Pursuant to this
argument, only if Gilbane is found liable to Coghlin, and that
liability is attributable to the Designer's work, may Gilbane
pursue a claim against DCAM.
Rule 14 of the Massachusetts Rules of Civil Procedure, as
amended, 385 Mass. 1216 (1982), seeks to avoid the duplicative
efforts that DCAM's interpretation would dictate, by allowing a
defendant to file a third-party complaint against a party "who
is or may be liable" to the defendant "for all or part of the
plaintiff's claim against him." "Because Rule 14 expressly
allows what is in effect anticipatory litigation, a third-party
defendant may not and should not object on the grounds that the
defendant's liability has not yet been established." Reporters'
Notes to Rule 14, Mass. Ann. Laws Court Rules, Rules of Civil
Procedure, at 335 (LexisNexis 2014-2015). Where the claims
alleged do not trigger the indemnification provision, and a two-
step procedure would run counter to the purposes of rule 14 and
common practice in construction law, we shall not interpret the
duty to defend or any other obligation in the indemnification
provision to require Gilbane to forebear from filing suit
against DCAM until a judgment has been obtained in the Coghlin
31
suit, unless there is express language in the contract requiring
these two steps. See Sweet & Schneier, supra at § 2.06 ("In
construction disputes, it is common for the defendant to assert
a counterclaim against the plaintiff or to make claims against
third parties arising from the same transaction"). See, e.g.,
Campbell Hardware, Inc. v. R.W. Granger & Sons, 401 Mass. 278,
279 (1987) (public construction dispute in which subcontractor
sued general contractor for additional work performed and
general contractor brought third-party action against public
owner). There is no such express language in the contract
between DCAM and Gilbane. Therefore, we decline to prevent
Gilbane from bringing its third-party complaint.
Conclusion. Because Gilbane's third-party complaint
against DCAM plausibly states a claim for relief, we vacate the
allowance of the motion to dismiss and the entry of judgment,
and we remand the case to the Superior Court for further
proceedings consistent with this opinion.11
So ordered.
11
We acknowledge that Gilbane has requested that we take
judicial notice of the contract between DCAM and the Designer as
a public record, even though it was neither referenced in nor
appended to the pleadings. In light of our reversal of the
dismissal in this case, we need not decide the issue.