Do's and Don'ts

Part I of this article addresses what environmental consultants can do and should not do in attempting to avoid malpractice claims. Part II of this article, which will appear in our November '00 issue, covers the need to carefully screen potential clients, avoid or clear potential conflicts of interest and think twice before collecting from debtor clients.

Substantial damage awards against environmental consultants have raised the question of what consultants can do to avoid malpractice claims. Juries have hammered environmental consultants with a $2,716,000 damage award for negligent misrepresentation, a $250,000 damage award for breach of contract and a $234,000 damage award for unjust enrichment and negligence ? Titanium Indus. v. S.E.A., Inc., 691 N.E.2d 1087 (Ohio Ct. App. 1997) (reversing $2,716,000 award for negligent misrepresentation and $250,000 for breach of contract); Delta Envt'l Consultants of North Carolina, Inc. v. Wysong & Miles Co., 510 S.E.2d 690 (N.C. Ct. App. 1999) (reversing $234,000 award for unjust enrichment).

Moreover, spiraling environmental professional litigation heavily influenced the recent changes to the American Society for Testing and Materials E 1527 Phase I and E 1528 Transaction Screen standards, which became effective July 1, 2000. Although malpractice claims cannot be avoided under all circumstances, there are things that consultants should always try to do and other things they should never do when attempting to avoid such claims.

Environmental consultants should:

  • Carefully negotiate a scope of work with their clients;
  • Stay within the scope of work while maintaining dialogue with their client and their client's environmental legal counsel throughout the project. Report findings orally to their clients, followed by a draft report before finalizing any report;
  • Expressly disclaim and limit the amount of their liability and explicitly restrict reliance upon the their work;
  • Thoroughly understand the nature and breadth of, and carefully apply all applicable standards, policies or regulations;
  • Carefully craft in conjunction with their clients' legal counsel, if available and practicable, all written conclusions to avoid giving a legal conclusion or opinion; and
  • Consult with their clients' legal counsel, if available, before reporting to governmental authorities any environmental condition discovered during their work.

Scope of work

Environmental consultants invite the possibility of high litigation costs when they fail to carefully negotiate and draft a scope of work with their clients, especially if the client later sustains damage for an environmental condition and seeks to blame the consultant. If a written scope of work is not fully executed with the client, disputes can quickly deteriorate into a "he said/she said" affair -- after memories have faded, documents have been lost and witnesses become unavailable. Usually only lawyers benefit from the exorbitant cost of reconstructing the scope of work from the submission of extrinsic evidence in the form of witness testimony and documentation -- to the extent any is still available.

Consultants should do what they agreed to do in writing for their client -- no more and no less. Consultants should also state in writing what they will not be doing for the client, to the extent possible, especially if the client may be expecting something the consultant is not providing. A fully executed scope of work does little good if the consultant does not stay within the perimeters of the document. Consultants should always send experienced and reliable people to do any fieldwork, studies, audits or assessments. Malpractice claims often arise after the client faces an environmental condition that could or would have been resolved had the consultant done what had been agreed upon with the client. Consultants should amend, in writing, the scope of work if the client requests any change from what were originally agreed upon and before conducting any work contrary to the scope of work.

Reports

Throughout the duration of any project, consultants should maintain an open dialogue with their clients and, if available, their clients' environmental attorneys. To avoid any surprises for their clients and to allow flexibility for their clients to make business decisions that could be adversely affected by environmental conditions, consultants should first verbally report findings to their clients. Thereafter, consultants should provide a draft report to their clients and, if available, their clients' knowledgeable environmental attorneys to review. They should allow their clients to suggest changes and raise questions about the draft report before finalizing any report.

Consultants should consider consulting with their client's legal counsel before discussing findings with their clients, allow their client's legal counsel to review draft reports and the final report before transmitting the same to their clients. Consultants

Environmental consultants invite the possibility of high litigation costs when they fail to carefully negotiate and draft a scope of work with their clients.

should avoid sensitive and troublesome issues that may raise liability concerns for the consultants and should choose their words carefully to avoid any pitfalls that may arise from statements in the final report. If possible and practicable, consultants should have an attorney review questionable statements.

Disclaimers

Carefully crafted written disclaimers and limitations of liability are more important than ever before because of court rulings that purport to shift the standard of liability for consultants closer to strict liability and away from a negligence standard. For example, consultants may be deemed a responsible party as an operator under federal environmental law by exacerbating environmental contamination during pre-acquisition environmental investigation activities. (K.C. 1986 Ltd. Partnership v. Reade Mfg., 33 F.Supp.2d 1143 W.D. Mo. 1998). This unfortunate circumstance could render the consultant strictly liable for response costs. While disclaimers and liability limitation provisions may not completely protect consultants from liability under this scenario from enforcement or liability to the government, consultants can still attempt to shield themselves by contract from liability to their client and third parties. Further, consultants must understand that client indemnities are only as good as t he financial wherewithal of the client.

Third party reliance

Consultants must be careful to prevent any third party from relying on the consultants' work without the consultants' express consent. Consultants should make it clear in their agreement and written reports that their work is intended to be for the exclusive use and benefit of their clients and no one else. If a consultant knows or should have known, based on particular circumstances, that third parties may rely on the

Consultants should be very careful in analyzing whether they have a spill reporting obligation and should always consult with their clients' legal counsel, if available, before making that decision.

consultants' work, the consultant cannot sit idly by allowing third parties to rely on the consultants' work. The consultant must explicitly limit the use of any report and must take affirmative steps to limit reliance by others upon the consultant's work. (Grand Street Artists v. General Elec. Co., 19 F.Supp.2d 24 2 D.N.J. 1998).

Standards

Environmental standards and regulations can be technical, complicated and ambiguous and are rarely characterized as models of clarity. For this reason alone, consultants must not only be thoroughly versed in and understand the nature and breadth of applicable standards, regulations, guidance documents and policies, but they must adhere closely to them. Consultants can avoid traversing this pitfall by using, if available and practicable, the insight of their clients' legal counsel to construe and interpret such constructions, resolve ambiguities and analyze and develop a plan for satisfying the standards and requirements.

Consultants should be thoroughly versed in the new revised American Society for Testing and Materials E 1527 Phase I and E 1528 Transaction Screen standards that became effective July 1, 2000. Spiraling environmental professional litigation heavily influenced the revision of these standards. These revised standards introduce new "business environmental risk" and "historical recognized environmental condition" concepts, resolve certain problems arising from the definition of "recognized environmental condition," elaborate on what exactly constitutes proper documentation in a Phase I environmental site assessment report, revise the Phase I report format and table of contents to be consistent with writings prepared in standard practice and provide guidance on the selection of a Phase I environmental professional. To obtain a copy of these new revised standards go to www.astm.org. (See also Choosing the Right Environmental Consultant www.instrm.org/bfnews/v2i2/6consult.htm).

Consultant conclusions

Clients may ask environmental consultants to step outside their scientific bailiwick to make legal conclusions as to whether an environmental condition may be a statutory or regulatory violation, may result in the assessment of penalties, and if so, the possible penalty amount, may require a response to, or result in liability for, the condition, or the potential cost of that response or liability. The new ASTM Phase I Standard raises additional concerns in exercising consultant judgment as to not only recognized environmental conditions (i.e., potential for Superfund designation) but also historical recognized environmental conditions and business environmental risks.

Needless to say, consultants should be extremely careful in choosing their words when drafting conclusions and recommendations in any report. Where appropriate economically, consultants should consider having legal counsel review draft conclusions to ensure that they are not crossing over into the realm of a legal opinion. Should they make an improper legal opinion or conclusion and it is wrong and the client relies on the statement to their detriment, the consultant should anticipate a negligent misrepresentation claim for damages.

Reporting violations

Many federal and state pollution laws, regulations and local ordinances require people who own, operate or control a pollution activity to report pollutant spills or releases. Heavy fines and even jail time may result if spills go unreported. Many of these reporting requirements do not apply to environmental consultants who merely observe environmental conditions because consultants do not own, operate or control the pollution activities they observe. The language of the reporting requirement controls its application.

There are some rare exceptions when a consultant may need to report an environmental condition. For instance, an environmental consultant failed to report to the New York State Department of Environmental Conservation within two hours after observing petroleum contaminated dirt in the excavation pit of a removed underground storage tank. An administrative review board concluded that the consultant was subject to a New York regulation requiring any person who has knowledge of a spill, leak or discharge of petroleum to report the same within two hours. (www.dec.state.ny.us/website/ohms/decis/middletr.htm).

Consultants should be very careful in analyzing whether they have a spill-reporting obligation and should always consult with their clients' legal counsel, if available, before making that decision. Nothing would raise the ire of a client more than having a consultant needlessly reporting a pollution incident. This is the type of incident that could trigger a malpractice claim by a disgruntled client.

Conclusion

Environmental consultants should not expect to avoid malpractice claims under all circumstances. They can implement in their practices, however, safeguards decrease the likelihood of clients' bringing such claims.

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This article appeared in Environmental Protection, Volume 11, Number 10, October 2000, Page 46.

This article originally appeared in the 10/01/2000 issue of Environmental Protection.

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