Howe-Baker Engineers, Ltd. and CB&I, Inc. v. Enterprise Products Operating LLC

• Court: Court of Appeals of Texas
• Decided: April 29, 2011
• Docket: 01-09-01087-CV
• Status: Published

Opinion

Opinion issued April 29, 2011

In The

Court of Appeals

For The

First District of Texas

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NO. 01-09-01087-CV

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Howe-Baker Engineers, Ltd. and CB&I, Inc., Appellants

V.

Enterprise Products Operating, LLC, Appellee

On Appeal from the 129th District Court

Harris County, Texas

Trial Court Case No. 2008-04685

MEMORANDUM  OPINION

          Appellants Howe-Baker Engineers, Ltd. and CB&I, Inc. bring this interlocutory appeal from the trial court’s order denying their motion to dismiss a lawsuit brought against them by appellee Enterprise Products Operating, L.L.C.  Howe-Baker and CB&I contend that the underlying case is a suit for damages arising out of the provision of professional engineering services and that although Enterprise filed a certificate of merit, it failed to comply with the applicable version of Texas Civil Practice and Remedies Code section 150.002.  See Act of May 18, 2005, 79th Leg., R.S., ch. 208, 2005 Tex. Gen. Laws 369, 370 (amended 2009) (current version at Tex. Civ. Prac. & Rem. Code Ann. § 150.002 (West 2011)).  Because we conclude that the affidavit was adequate to support Enterprise’s lawsuit, we affirm.

I.                  Background

Enterprise entered into a single contract with Howe-Baker for engineering design, procurement, construction management, and construction services to build two gas-processing plants in Wyoming and Colorado.  Over two years later, Enterprise filed suit seeking to recover fees it allegedly overpaid and to recover damages for additional out-of-pocket construction costs.  The original petition included causes of action for breach of contract, negligent misrepresentation, fraud and fraudulent inducement, and a declaratory judgment that Enterprise satisfied its obligations under the contract, paid its fees in full, and did not owe Howe-Baker any additional fees.  A supporting affidavit from a professional engineer was attached to Enterprise’s original petition.

Howe-Baker countersued Enterprise for breach of contract, suit on a sworn account, and declaratory judgment, seeking payment of more than $14 million in fees.  Approximately ten months after the suit was initially filed, Enterprise filed its first amended petition joining CB&I as a vicariously liable additional defendant and alleging that Howe-Baker and CB&I were alter egos of each other.  A year later, Howe-Baker and CB&I filed a motion to dismiss, arguing that the trial court should dismiss Enterprise’s lawsuit because the professional engineer’s affidavit did not satisfy the requirements of Civil Practice and Remedies Code section 150.002, which requires the filing of a certificate of merit “in any action for damages alleging professional negligence by a licensed or registered professional.”  After a hearing, the trial court denied the motion to dismiss.  It is from this decision that Howe-Baker and CB&I appeal.

II.               Analysis

An order granting or denying a motion to dismiss for failure to file a certificate of merit is immediately appealable.  See Tex. Civ. Prac. & Rem. Code Ann. § 150.002(f); UOP, L.L.C. v. Kozak, No. 01-08-00896-CV, 2010 WL 2026037, at *3 (Tex. App.—Houston [1st Dist.] May 20, 2010, no pet.) (mem. op.).  We review the trial court’s order granting or denying a motion to dismiss for abuse of discretion.  See TDIndustries, Inc. v. Rivera, No. 01-10-00812-CV, 2011 WL 1233470, at *1 (Tex. App.—Houston [1st Dist.] Mar. 31, 2011, no. pet. h.).  A trial court abuses its discretion when it acts arbitrarily or unreasonably, without reference to guiding rules and principles.  See id.

Enterprise’s third amended petition was the live petition at the time the trial court considered and denied the motion to dismiss.  The allegations contained in the live petition can be summarized as follows:

·        The parties initially agreed to compensation on a time-and-materials basis, and Howe-Baker represented that it would strictly conform to the contract’s requirements and work efficiently;

·        Howe-Baker was inefficient, failed to comply with specifications, and regularly replaced experienced personnel with new personnel unfamiliar with the projects, thus creating inefficiencies and duplicative work;

·        Howe-Baker charged Enterprise for inefficiencies and duplicative work and “grossly over-billed and overcharged Enterprise for its work on the projects”;

·        Contrary to its express representation, Howe-Baker did not have sufficient personnel to perform the services required by the contract, and the use of temporary personnel caused inefficiencies, tremendously poor quality of work, and delay;

·        Howe-Baker’s failure to commit adequate personnel to the projects caused it to fall behind schedule;

·        Howe-Baker promised to complete one of the projects on schedule if Enterprise would commit to a retroactive rate increase;

·        Howe-Baker continued rotating personnel on and off the project, continuing the inefficiencies;

·        Howe-Baker negligently or intentionally issued drawings that it knew were not ready for construction or fabrication;

·        Howe-Baker failed to inform Enterprise that the construction drawings it issued were defective, that CB&I had failed to perform necessary stress analysis of the design, and that 90% of the drawings would later be revised;

·        Howe-Baker knew Enterprise was relying on the construction and fabrication drawings it issued;

·        Enterprise incurred significant additional costs because repeatedly issued and reissued drawings resulted in unnecessarily wasted fabrication and construction;

·        Because of Howe-Baker’s actions, Enterprise paid millions of dollars in fees that it would not otherwise have paid;

·        Enterprise incurred millions of dollars in additional material expenditures, labor costs, contractor fees, fabrication costs, and extended overhead for its contractors.

Based on the foregoing, Enterprise pleaded causes of action for breach of contract, negligent misrepresentation, fraud and fraudulent inducement, declaratory judgment, alter ego, and conspiracy.  Enterprise also separately alleged that CB&I had tortiously interfered with its contracts.

Although the parties dispute whether a certificate of merit was even necessary, Enterprise attached an engineer’s affidavit to its original petition.  Harmon L. Kirkpatrick, P.E., submitted an affidavit which described his qualifications, as will be considered in detail below.  The substance of the affidavit concentrated on engineering services provided, as described by Kirkpatrick, by “Howe-Baker Engineers Ltd. d/b/a Chicago Bridge & Iron,” a reference to Howe-Baker although the remainder of the affidavit referenced that entity as “CB&I.”  The affidavit also focused on only one of the two construction projects governed by the agreement with Enterprise, the design and construction of the Pioneer Gas Plant located near Opal, Wyoming.

Kirkpatrick stated in his affidavit that he reviewed engineering drawings drafted by Howe-Baker for the Pioneer project, along with various related technical documents.  Based on his review of documents and discussions with knowledgeable members of the project team, he stated that Howe-Baker initiated an unusually large number of engineering changes that could significantly increase the cost and time necessary to complete the project.  He further stated that Howe-Baker prepared a flawed design for two high-pressure pipeline injection pumps, in violation of a piping code with respect to flange pressure ratings.  Kirkpatrick specifically identified three alleged acts, errors, or omissions of Howe-Baker on the Pioneer project, including failures to properly design a pipeline pump system, to use proper piping specifications, and of various engineering functions to properly coordinate design and avoid inconsistency between engineered equipment items and the discharge piping system design.  He also stated that Howe-Baker failed to produce engineering documents that satisfied the applicable piping code, and that its failure to properly design the details in the engineering documents could have led, in part, to a system that would not work properly.  He concluded that these acts, errors, or omissions demonstrate that Howe-Baker failed to meet applicable work product standards of design professionals and registered engineers within a reasonable degree of engineering probability.

Howe-Baker and CB&I complain that this affidavit was inadequate to satisfy section 150.002 for three reasons.  They contend that Kirkpatrick failed to satisfy the statutory requirement that he practice “in the same area of practice as the defendant,” that the affidavit fails to specifically assign error to CB&I, and that the affidavit fails to address claims relating to one of the two gas-processing plant projects.  Appellants argue that each of these alleged deficiencies requires the dismissal of Enterprise’s live petition in its entirety.  We consider each argument in turn.

a.     Affiant’s qualifications

Section 150.002, as amended in 2005, is the version of the statute that applies to this case.  Enterprise’s petition was required to be supported by “an affidavit of a third-party licensed architect, registered professional land surveyor, or licensed professional engineer.”  Then as now, it required the filing of a certificate of merit only in actions or arbitration proceedings “for damages arising out of the provision of professional services by a licensed or registered professional.”  Act of May 12, 2005, 79th Leg., R.S., ch. 189, § 2, 2005 Tex. Gen. Laws 348, 348; Act of May 18, 2005, 79th Leg., R.S., ch. 208, § 2, 2005 Tex. Gen. Laws 369, 370 (current version at Tex. Civ. Prac. & Rem. Code Ann. § 150.002(a)).  The affiant was required to be “competent to testify,” hold “the same professional license” as the defendant, and practice “in the same area of practice as the defendant.”  Act of May 18, 2005, 79th Leg., R.S., ch. 208, § 2, 2005 Tex. Gen. Laws 369, 370.  The affiant was also required to “be licensed in this state and actively engaged in the practice of architecture, surveying, or engineering.”  Act of May 12, 2005, 79th Leg., R.S., ch. 189, § 2, 2005 Tex. Gen. Laws 348, 348.

The only complaint on appeal about Kirkpatrick’s qualifications is that Howe-Baker and CB&I contend that he does not practice in the same area of engineering as they do.  They contend that the affidavit fails to establish that he “is currently engaged in the practice of designing cryogenic natural gas-processing plants, much less the design of any industrial facilities,” as they purportedly have been at all relevant times.  Instead, they characterize Kirkpatrick’s sole area of engineering practice as providing consulting and litigation support and his sole experience as managing and supervising similar projects almost twenty years ago.

Enterprise argues in response that the appellants take too narrow a view of the qualifications necessary to satisfy the statute.  It contends that the appellants describe their own “area of practice” too narrowly, failing to acknowledge the broader areas of practice that they share with the affiant.  As to his own qualifications, Kirkpatrick’s affidavit referenced an attached resume.  He stated in the affidavit that the resume correctly lists his education and background experience.  The first sentence of the resume describes his experience as being “in the refining, petrochemical, gas processing and chemical process industries.”  The resume describes his current job as providing “consulting and litigation support services for attorneys, corporations and insurance carriers, which are primarily related to petroleum, chemical and energy facilities.”  His assignments are described as ranging “from technical investigations to process and project engineering and to economic and safety aspects of operating plants, both domestic and overseas.”  Among specifically listed types of assignments listed on the resume are:

·        “Construction disputes — evaluation of construction performance, progress monitoring”;

·        “Engineering disputes — evaluation of engineering errors & omissions, progress monitoring”;

·        “Engineering error analysis — evaluation of adequacy of proposed ‘fixes’”; and

·        “Business interruption cost analysis & BI mitigation analysis.”

An extensive list of “types of plants” includes “gas plants,” “gas treating/processing,” and “large process gas compressors.”  Enterprise also notes that the affidavit established that in connection with its preparation, Kirkpatrick reviewed engineering drawings and other technical documents related to one of the plant projects, and as a registered professional engineer, he routinely uses the same kinds of documents on heavy industrial projects.

The statute specifically requires that the affiant be “competent to testify,” Tex. Civ. Prac. & Rem. Code Ann. § 150.002(a), and accordingly it is instructive to consider the standard used to evaluate the qualifications necessary to support expert opinion testimony.  In that context, “[w]hat is required is that the offering party establish that the expert has ‘knowledge, skill, experience, training, or education’ regarding the specific issue before the court which would qualify the expert to give an opinion on that particular subject.”  Broders v. Heise, 924 S.W.2d 148, 153 (Tex. 1996) (quoting Tex. R. Evid. 702).  Likewise, any analysis of whether a section 150.002 affiant is “practicing in the same area of practice as the defendant” for purposes of the statute requires some consideration of the fit between the relevant practice area of the expert and the substance of the affidavit.  In other words, the affiant and the defendant must share a practice area, evaluated at a level of generality appropriate to the nature of the negligent act, error, or omission being identified.  Cf. id.

Accordingly, an evaluation of whether the affiant and the defendant share the “same area of practice” for purposes of section 150.002 requires comparison of the allegations in the petition, each alleged supporting “negligent act, error, or omission” identified in the affidavit, and the relevant practice areas of the affiant and the defendant in relation to the supporting statements identified in the affidavit.  In reviewing a trial court’s denial of a section 150.002 motion to dismiss, we must review the record “in the light most favorable to the court’s ruling.”  Natex Corp. v. Paris Indep. Sch. Dist., 326 S.W.3d 728, 737 (Tex. App.—Texarkana 2010, pet. filed); cf. Broders, 924 S.W.2d at 151 (“The qualification of a witness as an expert is within the trial court’s discretion.”).

Here, Enterprise’s live petition at the time of the trial court’s ruling stated claims for breach of contract, negligent misrepresentation, fraud and fraudulent inducement, and tortious interference.  In support of those claims, Enterprise alleged that Howe-Baker failed to staff the projects appropriately; failed to perform work timely, efficiently, or in conformance with contract requirements; issued defective construction drawings; and overcharged for its work.  Enterprise alleged that it incurred increased costs as a result.  In support of the petition, Kirkpatrick’s affidavit stated that Howe-Baker initiated an unusually large number of engineering changes that could significantly increase costs, prepared flawed designs for pump and piping systems, and failed to properly coordinate various aspects of the design work.  He concluded that the identified errors represented a failure to meet applicable work product standards of design professionals and registered engineers within a reasonable degree of engineering probability.

The record reflects that the trial court could have reasonably concluded that Kirkpatrick, Howe-Baker, and CB&I shared the same “area of practice” as it relates to the allegations in the petition and the supporting statements in the affidavit.  Kirkpatrick is a registered professional engineer with general experience in the gas-processing industry and specific experience with technical investigations, process and project engineering, and economic aspects of operating plants.  His experience includes evaluation of construction performance, engineering errors and omissions, and the effects of business interruptions.  This area of practice relates to and overlaps with the appellants’ general areas of practice in the field of engineering design services.  They have failed to articulate any specific argument to support their contention that Kirkpatrick’s work in their shared area of practice has no application to their claim to practice in a more specialized field relating to cryogenic natural gas processing plants and the design of industrial facilities.  Accordingly, we conclude that the trial court’s ruling should not be disturbed on the basis of any objection to the qualifications of the section 150.002 affiant.

b.    Lack of negligent act, error, or omission assigned to CB&I

Howe-Baker and CB&I contend that Kirkpatrick’s affidavit is wholly defective because it fails to assign any negligent act, error, or omission to CB&I in its separate capacity.  To the extent they read the statute, as they have argued, to specifically require such information as to each individual defendant, their interpretation is mistaken.  Section 150.002 requires that the affidavit “shall set forth specifically at least one negligent act, error, or omission claimed to exist and the factual basis for each such claim.”  The statute does not specifically require assignment of one such negligent act, error, or omission to each defendant, and the significance of that is plain in the context of Enterprise’s petition, which also does not premise its relevant claims on wrongful acts specifically attributed to CB&I. 

The only claim against CB&I based upon that company’s own actions is a claim that CB&I tortiously interfered with Enterprise’s contracts with general contractors and with Howe-Baker by transferring personnel from the Enterprise projects to other assignments that were more lucrative for CB&I.  This particular claim of tortious interference challenges CB&I’s alleged decisions about the assignment of its employees, and it therefore does not require a supporting affidavit because it does not arise out of the provision of professional engineering services.  See, e.g., TDIndustries, 2011 WL 1233470, at *4 (claim arises out of the provision of professional engineering services “if the claim implicates the engineer’s education, training, and experience in applying special knowledge or judgment”); see also S & P Consulting Eng’rs, PLLC v. Baker, No. 03-10-00108-CV, 2011 WL 590435, at *9 (Tex. App.—Austin Feb. 18, 2011, no pet.) (en banc).  The remainder of Enterprise’s claims against CB&I are premised entirely on allegations of vicarious liability for actions of Howe-Baker, in this case theories of alter ego and conspiracy.  We hold that section 150.002 did not require the plaintiff’s supporting affidavit to set forth a negligent act, error, or omission attributed to a defendant whose alleged liability for a claim covered by the statute is entirely vicarious of the alleged liability of another defendant as to which the affidavit did satisfy the statute.

c.      Lack of negligent act, error, or omission related to Colorado project

Finally, Howe-Baker and CB&I contend that Kirkpatrick’s affidavit is wholly defective because it identifies alleged negligent acts, errors, or omissions with respect to one but not both of the construction projects identified as the subject of the contract at issue in Enterprise’s petition.  The appellants contend that the Meeker Project located in Colorado was an entirely different construction project from the Pioneer Project discussed in Kirkpatrick’s affidavit, and therefore separate supporting allegations of a negligent act, error, or omission were required as to that project.  This argument misconstrues the nature of the claims asserted by Enterprise, which are not directed toward specific errors committed with respect to one or the other of the two projects, but instead are directed toward an alleged breach of the one contract that governed both projects and toward misrepresentations and fraud relating to that single contract.  Section 150.002 does not require a supporting affidavit for every factual allegation in a petition, but instead it requires the identification of “at least one” negligent act, error, or omission in order for the lawsuit to proceed.  The Kirkpatrick affidavit satisfied that requirement and therefore was not defective for lack of specific reference to the Meeker Project.

III.           Conclusion

We conclude that the trial court acted within its discretion by denying the motion to dismiss Enterprise’s petition pursuant to section 150.002 for lack of a supporting affidavit.  Because of our holding in this regard, it is unnecessary for us to reach the other issues raised by the appellants concerning whether the affidavit was required as to some or all of Enterprise’s claim or whether a deficiency in the affidavit, if one existed, would have required dismissal of some or all of the claims.  Accordingly, we affirm the interlocutory ruling of the trial court.  All pending motions are denied as moot.

                                                                   Michael Massengale

                                                                   Justice

Panel consists of Chief Justice Radack and Justices Bland and Massengale.