Background
Bizzack Construction, LLC won a state contract to build a section of highway in West Virginia, which included several bridges. Bizzack hired TRC Engineers, Inc. to act as the “lead designer” and to provide construction management and inspection services for the project. For one specific bridge, TRC subcontracted the design work to AECOM Technical Services, Inc. During construction, a crucial support pier (Pier 4) was found to have moved several inches shortly after it was built, indicating a major structural problem.
Investigations revealed that AECOM’s design had overlooked certain forces acting on the pier. To fix the problem, the newly built pier and its supporting embankment had to be demolished and reconstructed based on a new design, causing significant delays and costs. Bizzack sued both TRC and AECOM for negligence and breach of contract related to the design and inspection failures.
After a period of discovery, Bizzack settled its claims with the designer, AECOM. Subsequently, the district court granted summary judgment to the remaining defendant, TRC. The lower court concluded that Bizzack, by settling with AECOM, had also waived its claims against TRC. Bizzack appealed that decision.
The Court’s Holding
The U.S. Court of Appeals for the Sixth Circuit vacated the district court’s judgment and remanded the case for further proceedings. The court held that Bizzack had not waived all of its claims against TRC. The appellate panel closely examined the settlement agreement between Bizzack and AECOM. It found that the agreement only released TRC from claims based on TRC’s vicarious responsibility for AECOM’s design errors—what the agreement called “Pass-Through Claims.” Crucially, the settlement explicitly stated that Bizzack did not release any claims it might have against TRC arising from TRC’s own acts or omissions.
The court then determined what claims Bizzack still had against TRC. It noted that TRC had two distinct roles: one related to design (which it subcontracted to AECOM for Bridge 1) and another for construction management and on-site inspection (which TRC performed itself). While the settlement covered the design-related failures attributable to AECOM, it did not cover TRC’s alleged failure to properly perform its own inspection duties. The court found that Bizzack’s claims for TRC’s negligent inspection and breach of its inspection-related contractual duties survived the settlement. Because the district court had not considered the merits of these surviving claims, the case was sent back for that purpose.
Key Takeaways
- A settlement agreement releasing one defendant does not automatically release a co-defendant, especially when the agreement contains a clear reservation-of-rights clause preserving claims against that co-defendant.
- A lead contractor can be held directly liable for its own contractual duties, such as inspection and quality control, even if a separate subcontractor is responsible for a design defect.
- At the summary judgment stage, a party’s claims are defined by the evidence gathered during discovery, not just the allegations in the initial complaint, so long as the defendant had adequate notice of the claims being pursued.
Why It Matters
This decision highlights the critical importance of precise language in settlement agreements, particularly when multiple defendants are involved. The case serves as a reminder for contracting parties that release clauses must be carefully drafted to avoid unintended consequences, and that reservation-of-rights clauses are powerful tools for preserving claims. For the construction industry, the ruling clarifies that a lead engineering firm cannot entirely delegate its liability; it remains accountable for the duties it performs itself, such as on-site inspection, even when a subcontractor’s design is the primary source of a problem. This reinforces the principle of separate liability for separate failures in complex construction projects.