Opinion ID: 2743534
Heading Depth: 2
Heading Rank: 2

Heading: Effect of the Architect’s Decision

Text: The Subcontract between Yates and Otis contains a mechanism for resolving disputes about the Subcontract’s terms. It provides that: “If there is . . . a difference in interpretation, the matter shall be referred to the appropriate design professional whose decision the Subcontractor shall implement at no additional cost.” Alabama courts have long recognized the right of parties to designate a third-party expert, such as an architect, to resolve later disputes over ambiguities in the contract. Finish Line v. J.F. Pate & Assocs. Contractors, Inc., 90 So. 3d 749, 758–59 (Ala. Civ. App. 2012). At trial, Yates argued that Chapman Sisson was “the appropriate design professional” because it designed the airport expansion. Yates asserted that Chapman Sisson had issued its “decision” in its letter dated March 29, 2012. That letter rejected the arguments presented in favor of Otis’ reading and concluded that Drawing A180 called for a 40-inch step width. As a result, Yates argued, the Subcontract required a 40-inch step width. The district court rejected that argument. Initially, the court suggested that Chapman Sisson was not “the appropriate design professional” referred to in the Subcontract. The court thought that reference was “ambiguous at best” because 15 Case: 13-14067 Date Filed: 10/17/2014 Page: 16 of 19 the term “‘[a]ppropriate design professional’ is not defined by the contract” and “could as easily refer to a neutral arbitrator or an escalator consultant as to Chapman Sisson.” The court went on to conclude that, even if Chapman Sisson were “the appropriate design professional,” its decision was not binding because it “constituted an arbitrary action and a failure to exercise honest judgment.” The court based that conclusion on the fact that Chapman Sisson had made numerous visits to the project site and reviewed Otis’ bid for the escalator project, yet it did not raise any issue with the 32-inch steps until the Airport objected. In our view, the term “appropriate design professional” is not ambiguous. The Subcontract provides that “[t]he Subcontractor shall be bound . . . by all terms and conditions of the Prime Contract,” and that “[a]ll provisions of this Subcontract and . . . the Prime Contract . . . shall be construed together and harmonized.” The Prime Contract states that the architect “shall decide all questions that may arise as to the interpretation and/or clarification of the specifications or plans relating to the work.” Though the Prime Contract uses the term “the Engineer” in that section, its definitions section makes clear that the term “may be used alternatively with the term ‘Architect.’” So Chapman Sisson is “the appropriate design professional” that the Subcontract vests with binding authority to resolve ambiguities. 16 Case: 13-14067 Date Filed: 10/17/2014 Page: 17 of 19 We also disagree with the district court’s conclusion that Chapman Sisson’s interpretation was not binding. Under Alabama law, the third-party expert’s decision “can be impeached only for fraud, or such gross mistakes as would imply bad faith or a failure to exercise an honest judgment.” Finish Line, 90 So. 3d at 759 (quotation marks omitted). That is a high bar, and justifiably so. If the bar were lower, third-party-expert interpretations would lack the finality they are meant to provide. See id. Here, Chapman Sisson’s interpretation did not amount to fraud or such a gross mistake as to imply bad faith or a failure to exercise honest judgment. As the district court’s decision and Otis’ brief acknowledge, Drawing A180 is ambiguous as to whether it calls for 32-inch or 40-inch escalator steps — which means that it can be reasonably interpreted as calling for 40-inch escalator steps. 7 See Mann v. GTE Mobilnet of Birmingham Inc., 730 So. 2d 150, 155 (Ala. 1999) (explaining that a contract term is ambiguous where it “is susceptible to more than one reasonable interpretation”). Because a reasonable interpretation is 7 There is no support in the record for the district court’s assertion that “[k]nowledge of Otis’ intent to supply escalators with a 32 inch step width [can be] imputed to the Architect by its approval of Otis’ specifications and by allowing Otis to substantially complete installation of the escalators before alleging that the same failed to comply with the contract documents.” The testimony at trial from Chapman Sisson was clear and uncontradicted that its approval of Otis’ shop drawings — per industry custom — did not include a review or an endorsement of the dimensions in those drawings. And the Subcontract clearly states that Yates’ and Chapman Sisson’s reviews of Otis’ shop drawings “shall not relieve [Otis] from responsibility or liability for any mistakes, error, or deviation, or of [Otis’] obligation to perform its work in strict accordance with the Prime Contract.” Finally, the district court reads too much into the delay between the bid and the first time the mistake was recognized. Chapman Sisson recognized the mistake the first time that its employee (Waters) rode the escalators. Nothing in the record suggests that it was aware of, or knowingly accepted, the 32-inch escalator steps before Waters noticed the problem. 17 Case: 13-14067 Date Filed: 10/17/2014 Page: 18 of 19 not a fraud or gross mistake, the district court should not have set aside the thirdparty expert’s binding interpretation.8 See Finish Line, 90 So. 3d at 759. Otis makes two additional arguments as to why Chapman Sisson’s letter was not binding, but neither has any support in the language of the contracts or the law of Alabama. First, Otis points out that Yates’ letter summarizing the arguments in favor of the 32-inch-step interpretation (sent on either March 28 or 29) was not addressed to Chapman Sisson and did not specifically request an official, binding interpretation from Chapman Sisson. True, but nothing in the language of the Subcontract or the Prime Contract says that such a formal invocation is required. The Prime Contract simply says that the architect “shall decide all questions that may arise as to the interpretation and/or clarification of the specifications or plans relating to the work.” Just such a question arose at the meeting on March 26 between the Airport, Chapman Sisson, Yates, and Otis. So Chapman Sisson had authority to settle it. Second, Otis argues that Chapman Sisson’s letter should not be binding because neither Yates nor Otis treated it as binding while they were still working 8 The district court seemed to be under the misimpression that Chapman Sisson had to accept Otis’ interpretation so long as there was a case to be made that Otis’ interpretation was reasonable. That is not what the Subcontract or the Prime Contract said. They gave Chapman Sisson the authority to resolve differences of interpretation. They did not require it to resolve every dispute in favor of the subcontractor if that subcontractor’s reading was reasonable any more than they required that it decide every dispute in favor of the contractor if the contractor’s interpretation was reasonable. Chapman Sisson was to decide between two reasonable interpretations, and it did. 18 Case: 13-14067 Date Filed: 10/17/2014 Page: 19 of 19 on the expansion project. There is no provision either in the contracts or in any decision by any Alabama court suggesting that their reaction to the letter makes any difference.