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Print articleBridges, Natural Disasters and Liability - The Skanska Decision (Part 2)
June, 2022 - Alexander L. Turner
In the last edition of The Site Report, we discussed the legal issues surrounding the damage caused by Skanska's construction barges to the new Pensacola Bay Bridge ("Bridge") between Pensacola, Florida and Gulf Breeze, Florida during Hurricane Sally. In response to hundreds of lawsuits filed in state court by local residents and businesses who were negatively impacted by the closing of the Bridge, Skanska filed an action in federal court pursuant to the Limitation of Vessel Owner's Liability Act, 46 U.S.C. § 30501, et seq. (the “Limitation Act”) to either exonerate Skanska, or limit its liability in the state court actions. In December 2021, following a four day bench trial in October 2021, the Northern District of Florida held that Skanska's negligence caused the damage to the Bridge, and that Skanska was not entitled to have its liability in the state court actions limited by the Limitation Act. See In Re Skansa USA Civil Southeast Inc. and Skanska USA, Inc., as Owners of Barge KS 5531 Praying for Exoneration From or Limitation of Liability, 2021 WL 6622423 (N.D.Fla., Dec. 29, 2021). As Paul Harvey used to say, now for the rest of the story.
Following Skanska bringing its action in federal court, the federal court initially ruled that Skanska was operating under maritime law at the time of the incident. This allowed the action to remain in federal court for trial on Skanska's liability pursuant to the Limitation Act. However, the time leading up to trial was anything but uneventful. The court determined that, during the discovery period in the litigation, Skanska improperly deleted communications between five of its employees regarding preparations for the storm, including the movement and mooring of Skanska's construction barges. Skanska argued that gaps in its procedures for protecting project-related phone data as the reason why this information was inadvertently deleted. Finding that the deletion of this information constituted spoliation, the federal court issued a discovery sanction against Skanska for $92,000..
With the federal court's ruling on Skanska's question regarding the Limitation Act, the state court actions are able to now proceed pending Skanska's appeal. The issue of whether the plaintiffs in the state court actions can recover for purely economic damages is an issue to be resolved by the state court. The issue boils down to which "economic loss rule" applies -- the federal or state version of the rule.
The economic loss rule as a general principal states that a plaintiff cannot recover damages for an economic loss in the absence of a personal injury or property damage. The conflict arises here between federal maritime law and state law. Under federal maritime law, the Robin's Dry Dock rule states that one who damages property owes no duty to persons claiming economic loss who do not have a proprietary interest in the damaged property. If the Robin Dry Dock rule is found to apply, then the recovery by the state court plaintiffs whose claims are solely based on the economic impact the nine-month closure of the Bridge caused them will be barred because they do not have any proprietary interest in property that was damaged as a result of Skanska's negligence. See Robins Dry Dock v. Flint, 275 U.S. 303 (1927). Under Florida state law, the Florida Supreme Court in Tiara Condominium Assoc., Inc. v. Marsh & McLennan Cos., 110 So.3d 399 (2014) held that the economic loss rule is only applicable in the context of products liability cases. Accordingly, because the state court actions are not products liability cases, plaintiffs whose claims are solely based on the nine-month closure of the Bridge will not be able to proceed with their claims. Plaintiffs whose economic losses are linked to a barge coming aground and damaging their property or seawall will not be affected by this analysis, and should be able to proceed with their economic loss claims regardless of which economic loss rule the state court applies.
In response to Skanska's attempts to limit its liability, a local state representative sponsored legislation that would remove Skanska's maritime law defense on future Florida Department of Transportation ("FDOT") projects that span navigable waters. Florida House Bill 157 ("HB 157") would require that contractors on state road projects that span navigable waters have a liability insurance policy for third-party damages. The amount of the coverage would be set by the FDOT. The insurance coverage would only be required to cover personal injury or damage to property, but not economic damages. While HB 157 died in committee, that does not bar it from being resurrected in the future. If a version of HB 157 is passed in the future, that will add considerable cost to future FDOT projects that span navigable waterways.
There has been other litigation over the Bridge project. In October 2020, FDOT informed Skanska that, on behalf of its bond holders, it intended to seek $135,000,000 in lost toll revenue on behalf of its bond holders. Skanska challenged Florida's demand for lost toll revenue, and a state court ruled that the bondholders cannot require FDOT to make Skanska reimburse them for lost toll revenue. While this is a win for Skanska, FDOT did inform Skanska that FDOT intends to charge Skanska $35,000 per day the bridge was closed to traffic during the nine-month repair period.
There are two important takeaways from this incident:
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Following Skanska bringing its action in federal court, the federal court initially ruled that Skanska was operating under maritime law at the time of the incident. This allowed the action to remain in federal court for trial on Skanska's liability pursuant to the Limitation Act. However, the time leading up to trial was anything but uneventful. The court determined that, during the discovery period in the litigation, Skanska improperly deleted communications between five of its employees regarding preparations for the storm, including the movement and mooring of Skanska's construction barges. Skanska argued that gaps in its procedures for protecting project-related phone data as the reason why this information was inadvertently deleted. Finding that the deletion of this information constituted spoliation, the federal court issued a discovery sanction against Skanska for $92,000..
With the federal court's ruling on Skanska's question regarding the Limitation Act, the state court actions are able to now proceed pending Skanska's appeal. The issue of whether the plaintiffs in the state court actions can recover for purely economic damages is an issue to be resolved by the state court. The issue boils down to which "economic loss rule" applies -- the federal or state version of the rule.
The economic loss rule as a general principal states that a plaintiff cannot recover damages for an economic loss in the absence of a personal injury or property damage. The conflict arises here between federal maritime law and state law. Under federal maritime law, the Robin's Dry Dock rule states that one who damages property owes no duty to persons claiming economic loss who do not have a proprietary interest in the damaged property. If the Robin Dry Dock rule is found to apply, then the recovery by the state court plaintiffs whose claims are solely based on the economic impact the nine-month closure of the Bridge caused them will be barred because they do not have any proprietary interest in property that was damaged as a result of Skanska's negligence. See Robins Dry Dock v. Flint, 275 U.S. 303 (1927). Under Florida state law, the Florida Supreme Court in Tiara Condominium Assoc., Inc. v. Marsh & McLennan Cos., 110 So.3d 399 (2014) held that the economic loss rule is only applicable in the context of products liability cases. Accordingly, because the state court actions are not products liability cases, plaintiffs whose claims are solely based on the nine-month closure of the Bridge will not be able to proceed with their claims. Plaintiffs whose economic losses are linked to a barge coming aground and damaging their property or seawall will not be affected by this analysis, and should be able to proceed with their economic loss claims regardless of which economic loss rule the state court applies.
In response to Skanska's attempts to limit its liability, a local state representative sponsored legislation that would remove Skanska's maritime law defense on future Florida Department of Transportation ("FDOT") projects that span navigable waters. Florida House Bill 157 ("HB 157") would require that contractors on state road projects that span navigable waters have a liability insurance policy for third-party damages. The amount of the coverage would be set by the FDOT. The insurance coverage would only be required to cover personal injury or damage to property, but not economic damages. While HB 157 died in committee, that does not bar it from being resurrected in the future. If a version of HB 157 is passed in the future, that will add considerable cost to future FDOT projects that span navigable waterways.
There has been other litigation over the Bridge project. In October 2020, FDOT informed Skanska that, on behalf of its bond holders, it intended to seek $135,000,000 in lost toll revenue on behalf of its bond holders. Skanska challenged Florida's demand for lost toll revenue, and a state court ruled that the bondholders cannot require FDOT to make Skanska reimburse them for lost toll revenue. While this is a win for Skanska, FDOT did inform Skanska that FDOT intends to charge Skanska $35,000 per day the bridge was closed to traffic during the nine-month repair period.
There are two important takeaways from this incident:
- If you do find yourself in litigation, or anticipate that you will be involved in litigation, do not destroy documents because you think that they are bad for your case. What you think is bad may not be. Let your counsel deal with any fallout that those documents may cause. It is also best to have a document retention policy in place for all project documents in order to avoid inadvertent document destruction. In all likelihood, if you try to hide what you perceive to be bad acts by destroying documents, you will be caught, and the court will sanction you. It will also damage your case in front of the jury. Remember the saying -- the cover-up is often worse than the crime.
- Failure to follow a project-specific preparedness plan in place for a natural disaster can result in numerous costly litigations and governmental actions that go beyond the obvious civil tort claims. Even though it was ultimately successful, Skanska had to engage in costly litigation to defeat Florida's claim for lost toll revenue. However, even though it defeated this claim by the state, it will likely have to engage in additional litigation related to Florida's $35,000 a day delay claim, which if it loses, Skanska would be liable to the state for approximately $9,450,000. If Skanska's barges had caused environmental damage, then Skanska would also be looking at additional litigation and proposed fines from both state and federal environmental agencies.
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