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Jai Ganesh Lodging, Inc. v. David M. Smith, Inc.

Court of Appeals of Georgia

July 16, 2014


Reconsideration denied July 31, 2014 -- Cert. applied for.

Page 719

Contract, etc. Floyd Superior Court. Before Judge Matthews.

Brinson, Askew, Berry, Seigler, Richardson & Davis, I. Stewart Duggan, A. Franklin Beacham III, Samuel L. Lucas, Lee B. Carter, for appellants.

Temple, Strickland, Dinges & Schwartz, William D. Strickland, Downey & Cleveland, G. Lee Wellborn, for appellees.

BOGGS, Judge. Barnes, P. J., and Branch, J., concur.


Page 720

Boggs, Judge.

Jai Ganesh Lodging, Inc. and Laxesh, L.P. (collectively, " appellants" ) appeal from the trial court's order granting summary judgment in favor of David M. Smith, Inc. (" DMS" ) and B & J Reed Construction, LLC (" B & J Reed" ), an order rescinding its previous order allowing Baron Reed and Jeremy Reed to be added as defendants, and an order excluding the testimony of an expert witness. For the reasons explained below, we affirm the trial court's order excluding the appellants' expert, reverse its order dismissing the appellants' complaint against Baron Reed and Jeremy Reed, affirm the grant of summary judgment on the breach of contract claims, and reverse the grant of summary judgment on the claims of negligent construction.

This case arises from structural damage to a newly constructed Holiday Inn Express resulting from settlement of the rear parking lot, pool areas, and one side of the building itself. The record shows that Laxesh, L.P. owns the real property on which the Holiday Inn Express is located and that Jai Ganesh Lodging, Inc. holds the franchise rights to and operates the Holiday Inn Express. In April 2007, site plans for the Holiday Inn Express were created by Rhodes Engineering Services, Inc., and the site plans list Anil Patel (" Patel" ) as the " owner/developer/24-hour emergency contact" person.[1]

[328 Ga.App. 714] In April 2007, DMS submitted an initial bid for grading work on the Holiday Inn Express site. In May 2007, the principal of DMS, David Smith, suffered a stroke, and told Patel that it would take him six to eight months to recover enough to supervise the grading job for DMS. Part of the job had to be performed with grading work under a separate contract between DMS and G. H. Riddle (" Riddle" ), and Patel did not want to delay the work until Smith recovered. When Riddle was unable to hire another grading contractor,[2] he asked Smith to find someone and enter into a subcontract for the work.

On August 7, 2007, Patel entered into a contract with DMS to be the grading contractor for the project. The contract states that it is between DMS, " the General Contractor," and Anil Patel, " the owner." Two days later, DMS entered into a contract with B & J Reed " to perform certain work as set forth on Proposal Nos. 259, and 260 ... in connection with the construction of a road off of Highway 411, Rome Georgia and a Holiday Inn Express, respectively." Proposal 259 involved the work for Riddle and Proposal 260 involved the work for Anil Patel. After B & J Reed completed the grading work, Jai Ganesh Lodging, Inc. entered into a contract with Enterprise Contractors to construct the hotel.[3] Less than four months after the Holiday Inn opened in July 2008, problems with settling began.

In August 2010, appellants[4]

Page 721

sued DMS, B & J Reed, Baron Reed, and Jeremy Reed and alleged causes of action for breach of contract, negligent construction, and continuing nuisance. All of the defendants moved for summary judgment in their favor on the appellants' breach of contract and negligence claims. After withdrawing its order allowing the appellants to amend their complaint to add Baron Reed and Jeremy Reed as defendants, the trial court granted summary judgment in favor of DMS and B & J Reed on appellants' claims for breach of contract, negligent construction, and continuing nuisance.[5]

1. Appellants assert that the trial court erred in excluding their proffered expert, Steve Horridge, because Horridge had previously been retained by B & J Reed's liability insurance carrier, Auto-Owners Insurance Company (" Auto-Owners" ) to investigate the cause [328 Ga.App. 715] of soil settlement at issue in this case. According to appellants, the trial court misapplied OCGA § 9-11-26 (b) (4) and this court's decision in Heyde v. Xtraman, Inc., 199 Ga.App. 303, 308 (404 S.E.2d 607) (1991). They urge this court to adopt and apply a two-part test for disqualification of experts used in other jurisdictions. See, e.g., Koch Refining Co. v. Boudreaux MV, 85 F.3d 1178, 1181 (II) (A) (5th Cir. 1996).

The record shows that Todd Moore, a claims representative with Auto-Owners, hired SEA Ltd., a forensic engineering firm, and Horridge " to investigate the claims of [appellants]" before suit was filed. According to Foster,

[t]he investigation conducted by Steve Horridge and SEA was done specifically on behalf of Auto-Owners and its insured, B & J Reed, for the purpose of defense of any possible lawsuit and in anticipation of litigation, and discussions with them included our work product, thoughts, mental impressions, and theories of defense with respect to this matter, many of which were not contained in his written report. ... Neither Auto-Owners or its insured consent to the Plaintiffs or their attorneys retaining Auto-Owners' consulting expert as their own, to using his report or opinion or materials, or to calling him as a witness.

According to Moore, he advised Horridge in a telephone call before November 12, 2009, " that Auto-Owners preferred that he not have any contact with the claimant Mr. Patel or his attorney."

Horridge submitted an affidavit to the court in which he averred (1) that he never signed a confidentiality agreement precluding him from working for other persons involving the same subject matter; (2) that he never spoke with or sent his report to an attorney representing B & J Reed while working for Auto-Owners on the assignment; (3) that " Moore was [his] exclusive contact with Auto Owners ... and the only person with whom [he] communicated and who directed [his] work" ; (4) that he " communicated with Moore regarding the progress of [his] work, and the results of [his] investigation" ; (5) that while he spoke with the owners of B & J Reed about facts necessary to his investigation, he never spoke with them about potential strategies or defenses in the event of litigation; (6) that he did not discuss with B & J Reed or Auto-Owners " the strengths or weakness of any side or B & J Reed's anticipated defenses to a lawsuit" ; (7) that he was later retained by Mr. Patel " to provide an engineering design and consulting services for structural remediation of the Holiday Inn Express in order to stabilize the building" ; (8) that he was later retained by [328 Ga.App. 716] appellants' counsel to serve as an expert witness in appellants' lawsuit against B & J Reed, but never gave appellants' counsel a copy of the SEA Ltd. investigative report and refused to discuss the content of the report " unless it was voluntarily produced and disclosed during discovery in this litigation."

The record also includes an e-mail from appellants' counsel to insurers involved with the claim, including the insurer who had retained Horridge, stating:

Suit has been filed. ... If either Defendant is interested in resolving this matter early and/or pursuing mediation at the outset,

Page 722

please let me know. Our expert is Steve Horridge, which we believe will prove to be very problematic for, in particular, Auto-Owners as it relates to its bad-faith refusal to resolve and settle this matter, notwithstanding our previously tendered time-limited, policy-limits demands.

During discovery, B & J Reed voluntarily produced to all parties the SEA Ltd. report prepared by Horridge for Auto-Owners.

Two years after the lawsuit was filed, B & J Reed moved to disqualify Horridge as an expert on behalf of appellants. After conducting a hearing, the trial court granted the motion, but also concluded that " [t]o the extent he is a fact witness as to remediation, the Court is now inclined to allow him to testify so long as he shall not testify as to his ...

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