Opinion ID: 474514
Heading Depth: 2
Heading Rank: 2

Heading: Bechtel's Tort Liability

Text: 40 On cross-appeal, Bagwell claims that the district court erred in failing to find that Bechtel was liable to Bagwell in tort for Bagwell's damages. The district court held that Middle South, as Bechtel's principal, was solely liable for the entire amount of damages awarded Bagwell. While Bagwell concedes that Bechtel has no liability to it under the contract as an agent for a disclosed principal, see Shemper v. Hancock Bank, 206 Miss. 775, 40 So.2d 742 (1949), Bagwell nevertheless claims Bechtel is liable to it in tort. Bagwell argues that in the contract between Middle South and Bechtel, Bechtel assumed the traditionally separate roles of architect, engineer, construction manager, and general contractor, and that under Mississippi law these persons owed a duty to third parties, including subcontractors, to perform their duties nonnegligently. 41 Under its contract with Middle South, Bechtel was given wide-ranging powers to act on behalf of Middle South. 16 Moreover, Bechtel was expressly described as Middle South's agent in the fireproofing contract between Middle South and Bagwell. 17 With respect to the fireproofing contract, Bechtel prepared the specifications, accepted bids on the job, and authorized payment under the resulting contract. Bagwell claims that Bechtel actually exercised architect and engineer functions in its actions respecting the fireproofing contract. 42 In some instances, Mississippi has held architects and engineers liable to third parties for their negligent acts or omissions. See State ex rel. National Surety Corp. v. Malvaney, 221 Miss. 190, 72 So.2d 424 (1954); see also Mayor v. Clark-Dietz and Associates--Engineers, Inc., 550 F.Supp. 610 (N.D.Miss.1982); Nims v. Frady, 461 F.Supp. 736 (N.D.Miss.1978); Owen v. Dodd, 431 F.Supp. 1239 (N.D.Miss.1977). In Malvaney, the Mississippi Supreme Court stated: 43 The architect, by his contract with the trustees, assumed the obligation to supervise the performance of the contract and to preserve the retainage funds to insure the completion of the contract, and it was apparent that his failure to exercise due care and diligence to ascertain if there were outstanding bills for labor and material before approving the release of the retainage funds might result in loss to the surety by depriving it of its rights under the doctrine of subrogation to resort to such funds upon the default of the contractor. The architect, therefore, undertook the performance of an act which, it was apparent, if negligently done would result in loss to the surety, and the law imposed upon him the duty to exercise due care to avoid such loss. Malvaney, 72 So.2d at 431. 44 In a related context concerning the tort liability of agents to third parties under Mississippi law, we held: 45 Stanley [a contractor] thus became the agent of Callon insofar as Callon chose to fulfill its obligation under the contract to prepare a drill site. If Stanley, in fact, acted incompetently or recklessly or even negligently in preparing the drill site at an incorrect location, then, under his contract with Callon, Stanley might be liable. Callon Petroleum Co. v. Big Chief Drilling Co., 548 F.2d 1174, 1179 (5th Cir.1977). 46 Thus under Mississippi law, architects, engineers, and possibly others who act as agents are not immune to third-party suits in tort. 18 47 It appears to us, however, that under Mississippi law the liability of an architect or an engineer to a third party in this type of case depends on there being a breach of the duty owed by the architect or engineer to his principal or employer, generally the owner or developer of the project being constructed. At least this would seem to be so where, as here, the damages sought are for economic losses of the same general type as contract or quasi-contract damages (as opposed to damages for physical harm to persons or property) and there is no third-party beneficiary of the architect's or engineer's contract with the owner nor any special factor establishing on the part of the architect or engineer any duty other than that owed under or arising from his contract with the owner. 19 A district court, interpreting Mississippi law, aptly articulated this concept: 48 Because of this contractual obligation to the owner, the architect owes a further duty, sounding in tort, to the contractor who relies upon the design to his economic detriment. Owen v. Dodd, 431 F.Supp. 1239, 1242 (N.D.Miss.1977); see Engle Acoustic & Tile, Inc. v. Grenfell, 223 So.2d 613 (Miss.1969). Prosser succinctly described the relationship as follows: 49 [B]y entering into a contract with A, the defendant may place himself in such a relation toward B that the law will impose upon him an obligation, sounding in tort and not in contract, to act in such a way that B will not be injured. The incidental fact of the existence of the contract with A does not negative the responsibility of the actor when he enters upon a course of affirmative conduct which may be expected to affect the interests of another person. 50 W. Prosser, Handbook of The Law of Torts, Sec. 93, p. 622 (4th ed. 1971). Accordingly, by breach of its contractual duty to the City to provide an adequate levee and bridge design, Clark-Dietz breached a tort duty to Basic and is liable to Basic for the extra construction expenses proximately caused by the negligent design. Mayor and City Council of Columbus, Mississippi v. Clark-Dietz and Associates--Engineers, Inc., 550 F.Supp. 610, 624 (N.D.Miss.1982). 20 51 We find that on the facts of this case Bagwell has not established a breach by Bechtel to Middle South. Bagwell accuses Bechtel of violating Bechtel's obligation to Middle South to perform its services in accordance with good engineering and construction practices. Bagwell's brief lists the following as breaches by Bechtel to Middle South of this obligation: 52 Bechtel did not permit Bagwell to perform its fireproofing work in advance of the placement of obstructions by other trades, as was represented in the bid documents and prebid meetings.... Bechtel did not schedule Bagwell's work sufficiently in advance so as to enable Bagwell effectively and efficiently to organize and plan its work. 53 .... 54  ... [R]ather than address the merits of Bagwell's claim, Bechtel 'consistently haggled over minutia while assuring Bagwell that it would be fairly compensated.'  (Quoting the district court's opinion.)While Bagwell may have suffered adverse effects from these managerial decisions by Bechtel, such adverse consequences to Bagwell do not establish a breach by Bechtel of its contract with Middle South or of any duty to Middle South arising therefrom. Nor is it established that Middle South did not in fact profit from Bechtel's decisions, even considering the damages for which Middle South is liable to Bagwell. On a huge, complicated construction project such as Grand Gulf, with many different subcontractors working, the owner may reasonably determine that the project as a whole will be completed faster and at substantially less overall cost if it changes the scheduling agreed on with one or more subcontractors, notwithstanding that the owner will ultimately have to bear the thus increased costs of one of the subcontractors. The latter costs may be far less than the total savings to the owner arising from the change. If the owner can reasonably so determine, then so can the party it has charged with acting in its stead and for its interests with respect to the project. Indeed, such a representative may have a duty to the owner to take just such action on its behalf. 21 Bagwell has presented no substantial evidence of a breach of duty by Bechtel to Middle South, nor has it demonstrated any ultimate harm suffered by Middle South as a result of Bechtel's complained of actions. Having failed to establish a breach by Bechtel of a duty to Middle South, Bagwell cannot recover from Bechtel in tort. We decline to reverse the denial of such recovery.