Cameron Sheldon | Ahlers Cressman & Sleight
The Washington State Supreme Court’s recent decision in Lake Hills Invs., LLC v. Rushforth Constr. Co. No. 99119-7, slip op. at 1 (Wash. Sept. 2, 2021) marks the first time in over 50 years that it has ruled on the Spearin doctrine. The Court’s opinion clarified the contractor’s burden when asserting a Spearin defense and affirmed the jury’s verdict in favor of contractor AP Rushforth Construction Company (AP). The decision is a major win for Ahlers Cressman & Sleight PLLC attorneys Scott Sleight, Brett Hill, and Nick Korst, who represented AP throughout its long-running dispute with Lake Hills Investments, LLC (LH), including the two-month jury trial and the appeal. Leonard Feldman of Peterson | Wampold | Rosato | Feldman | Luna and Stephanie Messplay of Van Siclen Stocks & Firkins also represented AP on appeal.
At trial, the owner—Lake Hills Investments, LLC (LH)—asserted it was entitled to $3 million in liquidated damages and $12.3 million for defects it alleged were caused by AP’s deficient workmanship. AP denied responsibility for the delays and most of the defects and requested payment of $5 million. Regarding LH’s defect claims, AP argued as an affirmative defense that the defects were caused by deficiencies in the plans and specifications provided by LH. This affirmative defense was rooted in the Spearin doctrine, which states that when the contractor follows plans and specifications provided by the owner, the contractor is not responsible for defects caused by the plans and specifications.
After much back and forth over how to instruct the jury on the defect claims, the trial court instructed the jury as follows:
For its affirmative defenses, AP has the burden to prove that LH provided the plans and specifications for an area of work at issue, that AP followed those plans and specifications, and that the [construction] defect resulted from defects in the plans and specifications.
The jury returned a verdict in favor of AP. The jury awarded AP $5 million on its payment claim, rejected LH’s liquidated damages claim, and awarded LH $1.5 million for defects (some of which were conceded by AP), finding that AP had performed defective work on six of the eight areas of claimed defects. But the jury awarded no damages for certain defects, indicating that it may have agreed with AP that the cause of the defect was LH’s defective plans and specifications. Ultimately, the court awarded AP a net judgment of over $9 million, including nearly $6 million in attorneys’ fees, expert fees, and costs.
LH appealed, claiming the trial court issued incorrect jury instructions regarding AP’s affirmative defense. The Court of Appeals agreed, holding:
[P]roof of any defect in the plans and specifications for that area contributing to a construction defect would let AP avoid all liability for that area even if Lake Hills proved AP’s deficient performance caused some of the damage. This instruction incorrectly understated AP’s burden of proof.
According to the Court of Appeals, the instruction as given “clearly misstated the law,” and the instruction would have adequately stated the law had it included the word “solely” as LH requested. The court reasoned that the instruction provided to the jury allowed the jury to absolve AP of all liability for an area, even if only part of the defective work resulted from defective plans and specifications.
AP petitioned the Washington State Supreme Court for review. On June 24, 2021, the Supreme Court heard oral arguments. A recording of the parties’ oral arguments can be found here: https://www.tvw.org/archives/.
The Supreme Court reversed the Court of Appeals and ruled that although the wording of the trial court’s Spearin instruction was “potentially misleading,” it was not prejudicial to LH because it allowed the jury to apportion fault between LH and AP and “the jury had every opportunity to award LH damages based on claims for each breach of contract.” No. 99119-7, slip op. at 18. The Court explained that a Spearin affirmative defense can be used to absolve the contractor of all liability or only a portion of liability:
An affirmative design defect defense is a complete defense if the damage is solely due to the design. However, if the defects were caused by a combination of deficient performance and deficient design, then it is not a complete defense.
Id. at 16. The Supreme Court recognized that the Spearin defense may be used by a contractor to reduce liability rather than totally escape it. The Supreme Court rejected the all-or-nothing reasoning of the Court of Appeals. While the Court of Appeals viewed the Spearin defense instruction as improperly allowing the jury to absolve AP of fault so long as deficiencies in LH’s plans and specifications contributed in some way to the defects, the Supreme Court understood that the instructions as a whole intended for the jury to apportion liability appropriately between AP and LH based on whether the defects were caused by the work AP performed or the plans and specifications LH provided.
The Supreme Court’s reversal means the jury verdict stands and the case will not be retried. However, the Supreme Court remanded the case to the Court of Appeals to consider LH’s arguments on to the trial court’s award of attorneys’ fees, which the Court of Appeals did not reach in its earlier decision.
The Supreme Court’s opinion is the first time the Court has considered Spearin in 50 years, and it provides an essential clarification of the contractor’s burden when asserting a Spearin defense. In particular, the Court’s decision reaffirms clear precedent limiting a contractor’s liability for defects when the contractor follows the owner’s plans and specifications, as well as Washington’s public policy allocating risk and liability between contractors, owners, and architects (among others) on construction projects. Importantly, the opinion indicates that a contractor can still use a Spearin defense to reduce its liability even if some defects were caused in part by its own deficient work.