Protecting Your Company in the Wake of Beacon v. SOM

Industry attention has recently turned toward a decision of the California Supreme Court allowing homeowners to sue an architect they did not hire for claims of negligence. The case was Beacon Residential Community vs. Skidmore, Owings & Merrill. While it may seem like another unique California case involving an architect, there are some important lessons that suggest the glass industry’s legal toolbox may need some new tools.

Let’s start with a quick overview. The case was brought by a condominium owner’s association in San Francisco regarding the Beacon—two 16-story luxury condominium towers completed in 2004. Among the allegations of construction errors were claims that the design and selection of glazing materials made part of the building uninhabitable in the summer due to heat. Relying on those claims, the association sued the prime architects responsible for the building.

The architects challenged the complaint. They had no contract with the owners or the association and said they could not be legally responsible for their claims. The lower court agreed and threw out the complaint. The Court of Appeals overturned, finding that because the architects knew the building would be sold as condominiums, they should have designed for the benefit of the eventual user of the structure. The Supreme Court of California agreed.

An important fact before going further: the court did not find that the architects did anything wrong. The decision is a procedural opinion on what can and cannot be alleged in a complaint. The architects in the Beacon case will still get the chance to defend themselves. Of course, that is probably little solace given the thousands of dollars in defense costs that must now be incurred. Even so, the Beacon decision does not establish liability, it only defines the shape that litigation can take.

Understanding then that the case is about what claims can be brought, we should look at why the court allowed the claim. The primary justification was that the architects knew the units would be sold as homes. Adding that design responsibility to the active role the architects played in construction made it easier for the court to allow the eventual owners to claim the architects did not perform adequately.

Another important fact: most design entities have contracts that try to limit pass-through liability. Such was true in the Beacon case. The architect’s contract with the developer expressly excluded so called “third party beneficiaries.” The court refused to enforce that provision. By sidestepping the contract and imposing its own view of the relationship between architect and owner, the court broadened the parties’ contracted-for liability exposure without their input.

At base, the court imposed a duty of care on the architects because of their input into the design, materials and assembly of the building. Sound familiar? Generally glaziers provide a specialized service to a structure and prime architect in charge. Normally this can help distance trades from the ultimate owners. But the Beacon case can be read to limit that protection.

Legally, Beacon suggests active involvement in design choices and installation to achieve performance goals may form the basis of post-completion claims by owners directly against design/install glazing entities. These claims would rest on the premise the system design, selection and installation play an ultimate and compelling role in user satisfaction with a building. The prospect for that kind of claim is all the more concerning, because at one point in the Beacon opinion the court analogized the 595-unit condominium project to the “mass production and sale of homes” or any other product for which a manufacturer’s liability is absolute.

Practically, the impacts of Beacon case are unknown, but some risks are evident. Architects may seek greater protection from designers and installing trades. Contracts and project development may change in order to distance eventual owners from development entities. The thought that a 600-unit building could be considered a massproduced item suggests contracts and insurance policies may also need careful review as the claims and those who can bring them could change.

Responding to legal and practical issues will require attention to contracting and project management. Careful attention to the project’s end use and users may be required before bidding so the expectation of those who will use a project can be included. Contractual terms regarding assumptions of liability or direct exposure to the eventual owner of the building or unit may be reshaped to address  broader claims. Product selection and sign-off for express performance criteria will go far beyond air/water/structural concerns. Documenting product offerings, approvals and installation will require knowing what was offered and who approved the ultimate selections.

Come to think of it, these are legal tools for every job not just a post-Beacon world.