Certificate of Merit - 2017 in Review

Part II:  Do Certificate of Merit Requirements Apply to Third-Party Plaintiffs?

By: Nick Nieto

Texas’ Fourteenth Court of Appeals recently shed light on whether third-party plaintiffs are bound by the certificate of merit requirement in Section 150.002 of the Civil Practices and Remedies Code. The statute, entitled “Certificate of Merit,” provides the following:

“In any action or arbitration proceeding for damages arising out of the provision of professional services by a licensed or registered professional, the plaintiff shall be required to file with the complaint an affidavit of a third-party licensed architect, licensed professional engineer, registered landscape architect, or registered professional land surveyor…”

Tex. Civ. Prac. & Rem. Code Ann. 150.002(e) (emphasis added). The statute requires “the plaintiff” in “any action or arbitration proceeding for damages arising out of the provision of professional services by a licensed or registered professional” engineer to file a supporting expert affidavit “with the complaint.” Id. However, section 150.002(a) does not specifically state how, or if, this requirement applies to third-party petitions, cross-claims, or counterclaims. The court in TARSCO addressed this issue. Eng'g & Terminal Services, L.P. v. TARSCO, Inc., 525 S.W.3d 394 (Tex. App.—Houston [14th Dist.] 2017, pet. denied).

In TARSCO, Buckeye Partners, LP (the “Owner”) hired Engineering & Terminal Services, LP (the “Engineer”) to provide engineering services for the construction of petroleum processing facilities in Corpus Christi, Texas. Id. at 396. The Engineer hired two subcontractors to assist with certain portions of its scope of work—TARSCO and Orcus (the “Subcontractors”). Id. A dispute over payment eventually ensued between the Owner and Engineer. Id. The Engineer filed a breach of contract suit against the Owner for the alleged failure to pay for services. Id.

The Owner filed counterclaims against the Engineer in response, complaining in part about work that had been performed by the Subcontractors. Id. The Engineer then filed a third-party petition against the Subcontractors for their allegedly defective engineering and design services. Id. The Engineer sought contribution damages from the Subcontractors to the extent it was liable to the Owner. Id. The third-party petition, however, did not include a certificate of merit. Id. The Subcontractors moved to dismiss the third-party claims due to the Engineer’s failure to file the certificate of merit. Id. The trial court sided with the Subcontractors, dismissing the Engineer’s claims with prejudice. Id.; see Part I of “Certificate of Merit – 2017 in Review” for a discussion on whether claims lacking the requisite certificate of merit should be dismissed with or without prejudice.

The only issue on appeal was whether the trial court erred by dismissing the Engineer’s third-party claims against the Subcontractors for failing to file a certificate of merit with its third-party petition. Id. at 397. The court looked to the Texas Supreme Court decision in Jaster for guidance. Jaster v. Comet II Construction, Inc., 438 S.W.3d 556 (Tex. 2014) (plurality op.). In Jaster, the Court addressed whether the certificate of merit requirement applied to “a defendant or third-party defendant who files a third-party claim or cross-claim against a licensed or registered professional.” Id. at 559. Although it was a plurality opinion, five justices agreed that the third-party claims and cross-claims at issue were not subject to the certificate of merit requirement. Id.

The Subcontractors argued that Jaster was not applicable because it involved a third-party plaintiff that was originally a defendant, as opposed to one that was originally a plaintiff. Id. at 399. They contended this was a material distinction between the two cases. Id. The court disagreed with the Subcontractors’ argument, holding that a certificate of merit was not required. Id. According to the court, while the Engineer was certainly a “plaintiff” when it filed its original petition against the Owner, it did not initiate an action contemplated by the certificate of merit statute (i.e., it did not initiate an action “for damages arising out of professional services by a licensed or registered professional at the time it filed its petition.”). Id. The Engineer’s original petition was for breach of contract based on the Owner’s failure to pay for services. Id.

It was only in response to the Owner’s subsequent counterclaim that the Engineer asserted the third-party claims against the Subcontractors. Id. at 400. “When a party brings in third-party claims, it typically acts in a defensive manner because it is responding to claims or counterclaims brought by other parties.” Id. at 402. In light of this, the court determined that the Engineer was not considered “the plaintiff” when it brought the third-party claims against the Subcontractors, and thus not bound by the certificate of merit requirement in Section 150.002. Id. at 400. “In short, the principle identified in Jaster applies equally to plaintiffs, defendant, or counter-defendants acting as third-party plaintiffs.” Id. at 401.

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