Construction & Public Contract Law Section Blog: Melchert and the Wisconsin Supreme Court: Weighing In on Establishing Immunity for Government Contractors:

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  • Construction & Public Contract Law Section Blog
    January
    10
    2017

    Melchert and the Wisconsin Supreme Court: Weighing In on Establishing Immunity for Government Contractors

    Cameron E. Smith

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    Cameron Smith talks about a recently argued Wisconsin Supreme Court case – Melchert v. Pro Electric Contractors. “The case gives the Court the opportunity to expound on two key aspects of immunity from liability for government contractors,” Smith writes.

    Wis. Stat. section 893.80(4) provides that no suit may be brought against governmental entities “or against its ... agents ... for acts done in the exercise of legislative, quasi-legislative, judicial or quasi-judicial functions.”

    In 2013, the Wisconsin Supreme Court decided Showers Appraisals,1 adopting a test based largely on the court of appeals’ decision in Estate of Lyons2 to help courts determine when governmental immunity applies to contractors on state and local projects.

    The recently argued Melchert v. Pro Electric3 offers the Supreme Court another chance to weigh in.

    Establishing Immunity

    To establish immunity under the Showers Appraisals test, a contractor for a governmental entity must show that: (1) it is an “agent” of that governmental entity; and (2) the act that gives rise to liability is the type of act (i.e., “legislative, quasi-legislative, judicial or quasi-judicial”) for which immunity is available under section 893.80(4). Showers, 350 Wis. 2d 509, ¶¶2, 34.

    The first step under Showers Appraisals, then, is to determine whether a contractor is a governmental “agent.” To do so, the court considers:

    1. Whether the governmental authority approved reasonably precise specifications;
    2. Whether the contractor’s actions conformed to those specifications; and
    3. Whether the contractor warned the supervising governmental authority about any possible dangers that were known to the contractor but not to the government officials.

    Melchert Facts

    The Wisconsin Supreme Court is now poised to apply its Showers Appraisals test to the facts of the Melchert case.

    On Aug. 22, 2012, Pro Electric augured a hole 14 feet deep and 30 inches wide to install the base for a new traffic signal on a WisDOT project.4 WisDOT’s contract for the project specified the location, depth, and size of the traffic signal base, and that base be “excavated by use of circular auger.”5 The contract also generally required that the contractor follow Diggers Hotline requirements and locate utilities in order to avoid utility damage. See WisDOT Std. Spec. s. 107.22.6 However, while auguring, Pro Electric severed a clay sewer lateral. Dr. Randall Melchert and others sued Pro Electric, alleging that the severed sewer lateral caused water damage to their property.

    Cameron Smith wi cameron.smith dot gov Cameron E. Smith, U.W. 2013, is an assistant general counsel with the Wisconsin Department of Transportation, where he specializes in construction contracts, real estate, and environmental issues related to highway improvement projects.

    In front of the circuit court, there was no evidence presented that Pro Electric failed to comply with WisDOT’s plans and specifications. It was also undisputed that the sewer lateral was severed during installation of the traffic signal base. Moreover, the record indicated that no one knew about the damage at the time because the augur hole was deep and narrow, and because the clay pipe was similar to the clay material being excavated.

    The circuit court entered summary judgment for Pro Electric and, applying the Showers Appraisals test outlined above, the court of appeals affirmed.

    “Reasonably Precise Specifications”

    The result provides an interesting contrast to Showers Appraisals. In that case, flood damage allegedly resulted from how the contractor scheduled and performed its storm sewer work. Under the terms of the construction contract, this work was left to the contractor’s own “means and methods.” Showers, 2013 WI 79, ¶ 12. The Supreme Court held that therefore the contractor was not a governmental agent entitled to immunity.

    In Melchert, Pro Electric (or at least WisDOT’s prime contractor) was operating under essentially the same “means and methods” clause. See WisDOT Std. Spec. s. 105.5.1(4). However, Pro Electric was carrying out contractual requirements for the specific bid item that not only pinpointed where and how deep to augur, but also that the contractor must use a circular augur to perform the excavation. Based on these precise specifications, and despite general contractual language requiring compliance with Diggers Hotline, the court of appeals determined that Pro Electric was WisDOT’s agent for the work in question. Melchert, 2015 WI App 37, ¶ 8.

    Comparing the Supreme Court’s decision in Showers and the court of appeals’ decision in Melchert, we start to see some contours forming of what might qualify as “reasonably precise specifications” for the purposes of determining whether a contractor was acting as a governmental agent.

    Diggers Hotline

    The second step of the Showers Appraisals test is to determine whether the damage-causing act is one which qualifies for governmental immunity. For an act to qualify for immunity, it must be an “exercise of legislative, quasi-legislative, judicial or quasi-judicial functions.” Wis. Stat. § 893.80(4).

    The courts characterize this as the difference between “ministerial” and “discretionary” acts – there generally is no immunity when the government fails to perform a duty required by law (i.e., ministerial), but generally enjoys immunity for actions that require a balancing of public and private interests (i.e., discretionary).

    Attorneys for Dr. Melchert argued that the Diggers Hotline statute, Wis. Stat. section 182.0175, has a role to play in this analysis. Specifically, Melchert argued that the Diggers Hotline statute imposes a ministerial duty on excavators to refrain from backfilling excavations until an inspection is conducted and any necessary repairs have been made. Wis. Stat. §§ 182.0175(2)(am)6., 6m. By failing to complete these statutory requirements, Melchert argued that Pro Electric’s work could not be covered by immunity.

    The court of appeals, however, noted that Melchert “does not point to anything in the record explaining how Pro Electric backfilled the hole versus how they should have done it ....” Melchert, 2015 WI App 37, ¶ 13. The court concluded, therefore, that the case’s summary judgment record “does not support a causal connection” between allegations of negligence based on noncompliance with the Diggers Hotline statute and the alleged injury. Because the facts regarding Pro Electric’s compliance with the Diggers Hotline statute do not seem thoroughly developed, it is hard to see the Supreme Court reaching a definitive conclusion in this case.

    Conclusion

    The Melchert case gives our Supreme Court the opportunity to expound on two key aspects of contractor immunity in the wake of Showers Appraisals:

    First, a contractor is only eligible for immunity when acting as a government agent, and can only be an agent when following “reasonably precise specifications” issued by the government. This case will examine whether contractual requirements amount to “reasonably precise specifications” when they include location, depth, and method, but also general disclaimers for utility locations.

    Second, even if a contractor is a government agent, only “discretionary” functions are eligible for immunity, not failing to comply with ministerial duties. Thus, although the factual record is somewhat lacking, the Supreme Court may also weigh in on whether the Diggers Hotline statute imposes a ministerial duty.

    As of the publication date of this post, the Wisconsin Supreme Court’s decision in Melchert is pending. This post will be updated to include a brief discussion of the Supreme Court’s decision once it is made.

    For an update on this topic by Chase Horne, see his June 7, 2017, blog post.  

    Endnotes


    1 Showers Appraisals, LLC v. Musson Bros., 2013 WI 79, 350 Wis.2d 509, 835 N.W.2d 226.

    2 Estate of Lyons v. CNA Ins. Co., 207 Wis.2d 446, 558 N.W.2d 658 (Ct. App. 1996).

    3 Melchert v. Pro Electric Contractors, 2015 WI App 37 2015 WI App 37, 363 Wis. 2d 654, 862 N.W.2d 902, review granted 371 Wis. 2d 610 (Wis. June 16, 2016) (unpublished).

    4 For this post, the facts of the case have been taken from the court of appeals’ decision, 2015 WI App 37,¶¶ 2-3.

    5 It’s not uncommon for WisDOT to specify some aspects of a contractor’s “means and methods” as a way to mitigate construction impacts. Auguring, as opposed to open-cut trenching, often makes sense in the busy right-of-way around an intersection.

    6 It should be noted that neither the parties nor the court of appeals reference this contractual language. Instead, attorneys for Dr. Melchert relied on language found on a detail drawing for a different bid item. The court of appeals was not willing to apply that language to the bid item at issue here. Melchert, 2015 WI App 37,¶ 14.





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