Designer Won't Pay $30 Million In Damages Thanks To Liability Cap

Friday, November 02, 2018 6:37 am
November 2018 - Volume 40 Number 11

Negligence --- Defective Design

US Nitrogen, LLC v. Weatherly, Inc., 2018 U.S. Dist. Lexis 160449 (Ga, September 19, 2018)

A project owner tried to recoup $30 million in damages from its project engineer due to faulty design, but a district court enforced a clearly worded limitation-of- liability clause.

US Nitrogen, LLC (USN) hired Weatherly, Inc (Weatherly) to provide engineering services related to the design and construction of an ammonium nitrate solution plant. Construction cost more time and money than anticipated, and, after completion, USN discovered cracks in the concrete foundations. Weatherly suggested several repairs or modifications. But two different engineering companies that USN consulted recommended that USN remove and redesign the entire foundation, rather than make the Weatherly-suggested repairs. As a result, USN hired replacement designers to redesign and reconstruct the foundations.

In addition to the foundation issues, USN determined that Weatherly’s designs for certain piping systems were incomplete and erroneous. USN instructed Weatherly to stop work on the piping design and hired another company to complete that work.

USN argued that, under the parties’ contract, Weatherly was responsible for the design defects and for more than $30 million in costs and expenses it incurred correcting them. It sued Weatherly for breach of contract, professional negligence, negligent or fraudulent misrepresentation, bad faith, and breach of express warranty.

Weatherly moved for partial summary judgment based on the contract’s limitation-of-liability provision, which capped the damages USN could seek against Weatherly. According to this provision, USN could seek no more than 15% of the contract price in direct damages and was prohibited from recovering consequential damages. The court agreed with Weatherly on all accounts, and granted its motion for summary judgment.

Limitation of damages vs. indemnification provision

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