Enforceability of limitation and waiver of liability clauses in a teaming agreement, after parties have entered into a subcontract, by Hugh Anderson

Issue: Enforceability of limitation and waiver of liability clauses in a teaming agreement, after parties have entered into a subcontract. URS Corp. v. Transpo Group, Inc. United States District Court for the Western District of Washington (2015).

Summary: On a design-­‐build highway project, the design-­‐builder, Flatiron, withheld payment from the lead design firm, URS, asserting that certain signs that were part of the project failed to meet project criteria. URS in turn withheld payment from the sign consultant, Transpo. Eventually URS sued Transpo, contending that deficiencies in Transpo’s services had resulted in damages of about $1.5 million.

During the project formation stage, URS and Transpo had entered into a teaming agreement for the pursuit of the work on the project. This teaming agreement included a clause waiving consequential and indirect damages, indicating that the

clause would survive the termination or expiration of the teaming agreement. Subsequently, Flatiron awarded the design work to URS, and URS entered into a subagreement with Transpo regarding sign-­‐related services. The subagreement did not contain a waiver similar to the one in the teaming agreement, and contained a typical integration clause asserting that the subagreement superseded all prior agreements regarding the same subject matter. As the litigation commenced, the court was called upon to decide whether the limitation on liability in the teaming agreement applied as a defense to URS’s claim for damages.

Decision: The court pointed out that whether the damages that URS sought from Transpo were indeed consequential or indirect damages, in whole or in part, was an issue that was not before the court, and would need to be determined in a different proceeding.

The court concluded that the subject matter of the teaming agreement and the subagreement were not the same—the teaming agreement involved pursuit of the work, and the subagreement involved the provision of sign-­‐related services. If the subject matter of two contracts is not the same, the integration clause of the second contract will not supersede the first; rather, the second contract must expressly revoke and supersede the first contract, by name. This had not been done in the subagreement. The court’s final conclusion was that the because the teaming agreement does not cover the same subject matter as the subagreement, the teaming agreement’s provisions regarding limitations on damages survive and “may be applicable” to the URS-­‐Transpo dispute.

Comment: Like many interim court decisions, this one is somewhat unsatisfying. Even if the court is correct that the teaming agreement provisions survive, do they in fact apply to the dispute? Typically the limitation provisions in a teaming agreement would apply only to transgressions in seeking an award of contract—why was that point not addressed, rather than merely acknowledging that the provisions “may be applicable”?

In a general way, one might assume that both the teaming agreement and the subagreement do indeed apply to the same subject matter (signs on the highway project) and hence the standard integration clause would be sufficient to supersede the teaming agreement. To avoid results like the one here, the safest course would be to expressly name the teaming agreement and declare it revoked and superseded (perhaps reserving any pending claims, such as disputes over costs incurred in pursuit of the award of contract).