In 22 Gramercy Park, LLC v. Michael Haverland Architect, P.C., 2020 WL 4141384 (N.Y. Cty. Sup. Ct. July 20, 2020), a New York court held an architect that was sued for design defects could not seek common law indemnification from an engineer, but could seek contribution.
22 Gramercy Park, LLC (“Gramercy”) is the owner of a condominium built in New York in 2004 to 2012. The sole member of Gramercy is Eric Ellenbogen (“Ellenbogen”). Ellenbogen contracted with Michael Haverland (“Mr. Haverland”) to serve as the architect. Ellenbogen contracted with Lehr Associates Consulting Engineers, LLP (LACE) to serve as the mechanical engineer.
After construction was complete, defects were discovered in the building’s HVAC system. A unit owner and the condominium’s Board of Managers (“the Board”) made repairs, including removing ceilings and walls, installing access panels, and replacing or servicing the existing air conditioning units throughout the individual units. The Board and the unit owner engaged in pre-suit negotiations with Gramercy and Ellenbogen and eventually settled the dispute. Gramercy and Ellenbogen then sued Mr. Haverland to recover the amount of the settlement, $273,869.75.
Mr. Haverland filed a Third-Party Complaint against LACE, asserting claims for common law indemnification and contribution pursuant to New York’s contribution statute. Mr. Haverland alleged LACE was responsible for designing the HVAC system. LACE moved to dismiss the claims, arguing that Mr. Haverland could not recover because it did not owe a duty to Mr. Haverland, as LACE’s contract was with Ellenbogen.
The Court agreed with LACE as to the common law indemnification claim, but refused to dismiss the contribution claim. The Court held there was no contractual relationship between Lace and Mr. Haverland that could support an indemnity claim, emphasizing that an engineer hired by the owner does not owe the architect a duty.
The Court held, however, that Mr. Haverland could pursue a contribution claim because the underlying complaint fell squarely within New York’s statute allowing recovery in the form of contribution when the plaintiff claims “injury to property” and seeks relief in forms other than economic losses. N.Y. C.P.L.R. § 1401. The Court noted the underlying complaint alleged that the design and construction defects caused property damage and required remedial work, which itself would damage the property, such as removing walls and ceilings. The Court held the underlying complaint adequately alleged the presence of property damage, not just purely economic damages.
This holding is important for two reasons. First, it reinforces the law in New York that design professionals do not owe each other a duty in the absence of privity of contract. Design professionals may owe contribution, however, if there is damage to property, which can be very broad and include damage caused by repairs themselves.