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Limitation Of Liability Provision In Architect’s Contract Also Limited Professional Negligence Claim

In DMK Development Group, LLC v. Cole + Russel Architects, Inc., 2020 WL 2306894 (S.D. Ohio May 8, 2020), a federal district court in Ohio held that a contractual provision limiting an architect’s potential liability to the amount of the architect’s fee was not limited strictly to breach of contract claims. The Court held the professional negligence claim overlapped the breach of contract claim, and therefore, the limitation provision also applied to the professional negligence claim.

DMK Development Group, LLC (“DMK”) and Cole + Russel Architects, Inc. (“Cole”) entered into a primary agreement obligating Cole to perform specified architectural services related to the development of two senior housing communities (“the Project”). The agreement included a provision that limited Cole’s liability to the amount of its fee:

“[DMK] agrees to limit [Cole’s] liability for any and all claims, losses, costs, expenses and/or damages of any nature whatsoever from negligent errors or omissions or causes . . . so that the total aggregate liability of [Cole] shall not exceed the amount of [Cole’s] fee . . . this limitation shall apply to any and all liability or cause of action however alleged or arising . . . .”

Disputes arose over the Project and DMK filed suit on April 26, 2019. The Complaint asserted claims for breach of contract, professional negligence, and indemnity against Cole related to the alleged failure to properly design and prepare construction documents.

Cole filed a Motion for Partial Judgment on the Pleadings, arguing the total potential liability was capped at the amount Cole received in professional fees from DMK under the contract. DMK argued that the “limitation of liability” provision only applied to the breach of contract claim and did not apply to the professional negligence claim. DMK contended the professional negligence liability arose from Cole’s independent “professional” duty as an architect and was thus unrelated to the contractual provision.

The Court granted Cole’s Motion and held the limitation of liability applied to DMK’s professional negligence claim. The Court rejected DMK’s argument the claim arose from a professional duty independent of the contract, holding the limitation of liability provision applied because the professional negligence claim sounded in contract, not in tort. The Court distinguished a tort claim from a contract claim, noting that an action based in tort requires a breach of a duty imposed by law based on the parties, not a contractual obligation, and that a tort claim requires additional damages that are attributable to wrongful acts outside of the breach of contract.

The Court acknowledged that architects are required to comply with professional standards of care apart from their contracts, but noted that when an architect’s contractual obligations do not differ from their professional obligations, the resulting professional negligence cause of action will merge into the contractual claim. The Court compared this case with the economic loss doctrine, reasoning that absent a contractual relationship between DMK and Cole, DMK only suffered economic harm and thus would not be able to recover under the negligence claim.

This holding is helpful for Ohio architects and engineers seeking to limit their potential damages. The Court reinforced the principle of freedom of contract between two sophisticated entities that bargained over the terms. This should remind architectural and engineering entities in Ohio to include limitations of liability provisions in their contracts in order to ensure any potential recovery is limited to strictly the contractual terms.