Court Finds Necessary a Connection between Wrongful Conduct and Training

Facts of the Case

In Texas, a contractor, Briggs Brothers Enterprises Corporation ("Contractor"), was engaged to work on five projects for the same public owner, Fulshear Municipal Utility District ("Owner"). The Contractor sued the Owner, an engineering firm, and an employee of the engineering firm that provided professional services on the projects.

The Contractor sued the Owner alleging it was not paid what it was contractually owed. The Contractor also sued the engineering firm Costello, Inc., and its employee ("Engineering Firm" and "Engineer" respectively and jointly "Engineering Entities"), alleging they tortiously interfered with the Contractor's contract with the Owner ("the Owner Contract").

The Contractor claimed the Engineering Entities tortiously interfered with the Owner Contract by soliciting "baseless and fraudulent" claims of nonpayment from the Contractor's subcontractors. The Contractor alleged that the Engineering Entities encouraged the Owner to stop payment to the Contractor or to terminate the Owner Contract based on these false claims.

The Engineering Entities moved to dismiss the lawsuit. The basis was the Texas certificate of merit statute, ¹ which requires a plaintiff suing for damages arising from the provision of professional services by a licensed or registered professional, such as an engineer, to file a certificate of merit affidavit with the court attesting to the merits of the claim. There was no dispute that the Contractor did not file a certificate of merit.

The Owner indisputably retained the Engineering Firm to provide "engineering, consulting, construction management, inspection services, and other professional services." The services included a review of applications for payment and making recommendations to the Owner about the applications. The Engineering Entities contended these reviews and recommendations were "professional services," which required a certificate of merit under the statute.

The Contractors responded that the acts that allegedly tortiously interfered with the Owner Contract were misrepresentations regarding the project financing and payment of subcontractors. These misrepresentations, argued the Contractor, were not made "in reference to any professional engineering activities."

The driving issue was whether the Contractor's claim against the Engineering Entities was an action for damages "arising out of professional services." The Engineering Entities acknowledged the actual solicitation of false claims from the subcontractors was not a professional engineering service. However, the Engineering Entities argued the certificate of merit statute only requires the acts creating the claim "arise" out of the professional engineering services.

The Engineering Entities argued to the court that what was at issue arose out of engineering services because it would not have taken the actions but for being retained to provide "engineering, consulting, construction management, inspection, and other services." As part of those obligations, the Engineering Entities reviewed applications for payment submitted to the Owner and made recommendations to the Owner regarding the applications.

The Court's Analysis

The court first looked at the definition of engineering from the Texas Occupations Code. The definition of the "practice of engineering" included "engineering review of the construction or installation of engineered works to monitor compliance with drawings or specifications" and "any other professional services necessary for the planning, progress, or completion of engineering service." However, the statute did not resolve the issue for the court.

The court considered the allegations of the complaint against the Engineering Entities. The allegations of the complaint revealed no contractual requirements related to the payment recommendations, nor was the contract with the Engineering Firm attached. Without more, the court could not determine if the Engineering Entities' review of the payment applications "constituted the practice of engineering."

The court's review also concluded that no allegation suggesting review of the payment applications was necessary for the "planning, progress, or completion of any engineering services." The court's language tracked with the Texas Occupations Code defining professional engineering.

The Texas Court of Appeals concluded whether the defendants as professional engineering entities were providing services was not dispositive of whether a certificate of merit was required. The certificate of merit was found to be required only when the services provided implicated "the engineer's education, training, and experience in applying special knowledge or judgment."

The Texas Court of Appeals noted that the review of payment applications "may" require the special knowledge and judgment of a professional engineer. However, the burden was on the Engineering Entities to show to the court that the review process called for the engineer's education, training, and experience.

The Texas Court of Appeals concluded that the allegation available from the record did not show professional engineering was not implicated in the tortious interference claim that would trigger the statute requiring the certificate of merit.

Practice Tip

There are several takeaways from this case. First, it brings home the distinction between general business practices and the specialized services of professionals. This is critical in determining whether the certificate of merit statute has any application.

Parties need to recognize where the court placed the burden to show the allegations of the lawsuit implicated the engineer's specialized knowledge, training, and experience. The burden was squarely placed on the professional seeking to benefit from the statute, and it was not enough to be a professional engineer.

The courts need to understand how the professional learning, skills, and knowledge are implicated in the claim. This court's holding clarifies the need for a direct connection between the alleged wrongful conduct and the professional's specialized knowledge, rather than merely being adjacent to professional services.

It is unknown from the opinion whether the contractor was clever in framing its pleadings, intentionally pleading around the statute, or if it was just lucky. In either event, the nature of the allegations was a significant factor. Regardless of the reason, the failure of the pleadings could have been overcome by the professionals by reference to the contract language or, in absence of explicit contractual requirements related to the payment analysis, expert testimony may have been enough.

Professional design firms would benefit from providing training to their employees on the importance of ethical practices, compliance with professional standards, and clear documentation. These simple steps may have avoided this lawsuit arising from claims that false claims were solicited from the subcontractors.