In United States of America v. Osborne, No. 4:11-CV-1029, 2017 WL 1135640 (N.D. Ohio March 27, 2017), the Northern District of Ohio denied a Motion for Summary Judgment filed by Third-Party Defendant William R. Gray Associates, Inc. (“Gray”) based on the permit procurement obligations in Gray’s agreement for engineering services with Third-Party Plaintiff City of Willoughby (the “City”).
On March 27, 2002, the City contracted with Gray for Gray to provide engineering services for the construction of a road, along with sewer and utility improvements (the “Project”). Gray’s agreement provided, “The Engineer shall perform or furnish professional engineering and related services in all phases of the Project to which this Agreement applies. The Engineer shall serve as the City’s prime professional for the Project.” In Exhibit “A”, Basic Services under Commercial Development Plans and Industrial Development Plans, include: “Permit Applications and Reviews from various review agencies.”
In July 2011 (nine years later), the United States of America and the State of Ohio brought an action against the City for discharging pollutants from the Project into the waters of the United States and the State of Ohio without a prior permit. On August 9, 2011, the City filed a Third-Party Complaint against Gray, asserting Gray breached its contract with the City by failing to procure the proper permit for discharging pollutants into the waters.
Gray argued wetlands work was not included in Gray’s agreement for engineering services with the City based on extrinsic evidence outside the agreement. The Court rejected Gray’s argument, holding the Court would not look to extrinsic evidence because the terms of the agreement were not ambiguous, and Gray, as the “prime professional,” was required to perform all professional engineering services in all phases of the Project. The Court further held the term “permit applications” in the agreement had a plain and ordinary meaning and contained no restrictions. The Court interpreted the plain meaning of permits to incorporate all permits necessary for the Project, including wetlands permits.
The Court’s decision in Osborne demonstrates the pitfalls in a design professional relying on representations made regarding the interpretation of an agreement for engineering services that are in conflict with the plain terms of the agreement. Although most standard form agreements, such as those provided by the AIA, specifically enumerate the duties of the design professional, many agreements drafted by owners may not be as thorough and coherent. In these cases, design professionals should be wary to trust the representations made by owners regarding the interpretation of the agreement, and should seek counsel to determine the exact scope of services the design professional is required to provide.