When the king does wrong: failing to fulfill implied duties.

• Author: Grandoff, J. Bert

Although the doctrine of sovereign immunity has long been with us, its application did not become prominent in construction litigation until the decision in Southern Roadbuilders v. Lee County, 495 So. 2d 189 (Fla. 2d DCA 1986), rev. denied, 504 So. 2d 798 (Fla. 1987), when the Second District Court of Appeal reviewed a contractor's claim for payment denied recovery and somberly announced: "The additional costs claimed ... were neither ... in the original contract nor any subsequent legally operative instrument."

On reflection, Florida construction lawyers should have anticipated this decision when, two years earlier, PanAm Tobacco Corp. v. Department of Corrections, 471 So. 2d 4, 5 (Fla. 1984), was decided by the Supreme Court. Although limiting its decision to suits on express, written contracts to which a state agency had statutory authority to enter, the court held: "We therefore hold that where the state has entered into a contract fairly authorized by the powers granted by general law, the defense of sovereign immunity will not protect the state from action arising from the state's breach of that contract."

State and local governments have long had the defense of sovereign immunity available against claims for contract damages that were outside the express terms of the written agreement. One wonders how many millions of dollars were paid to contractors on claims for additional compensation, extra work, or performance outside the express terms of a contract, presented and paid without objection before Southern Roadbuilders gained everyone's complete attention. For this reason, the decision was both significant and surprising to the industry.

A decade after Southern Roadbuilders, the Supreme Court announced its ruling in County of Brevard v. Miorelli Engineering, Inc., 703 So. 2d 1049 (Fla. 1997), reh'g denied (1998). In Miorelli, a design-build firm sued Brevard County to recover extra work it had performed on a spring baseball training facility. The designer's suit was dismissed on sovereign immunity grounds. The theory behind the dismissal was that the claims were for work totally outside the terms of the contract. Without a written change order, the doctrine of sovereign immunity precluded recovery of costs of the extra work. The result was not altered by the fact that Brevard County did not follow its own contract requirements, but directed the engineering firm to perform additional work without following its own procedures. (1)

With the decision in Miorelli, it became abundantly clear that state and local governments had no obligation to pay contract claims that were not a part of the express terms of the original contract or any subsequent written contract amendment. The Miorelli court drew a clear distinction between binding the sovereign to the implied covenants of an express contract and requiring the sovereign to pay for work not contemplated by that contract. The key words overlooked in that opinion are "binding the sovereign to the implied covenants of an express contract." (2) The Miorelli court did not say that a contractor could not recover against the sovereign for breach of implied covenants of an express contract, only that the sovereign did not have to pay for work not contemplated by that contract. This is the critical difference.

The dissenting opinion of Justice Anstead departs from the majority opinion which held that waiver and estoppel can never be applied against the sovereign in disputes arising out of a contractual relationship, and offers, instead, the following: Apply the doctrine of estoppel against the government where justice requires it and where such application does not run afoul of a strong rule of public policy. (3) Perhaps Justice Anstead, in his search for a fair and reasonable outcome to the effect of the Miorelli decision, could have relied on the implied covenant of good faith and fair dealing as a part of every contract, public and private. Good faith and fair dealing is the positive side of the estoppel defense. In other words, if a party does not practice good faith and fair dealing, it is estopped to deny the consequences of its acts.

Miorelli emphasizes the painful result to those who do not recognize the dictates of the sovereign immunity defense. The best intentions of both parties to a public contract are frustrated when in the course of submitting claims it is realized that the public owner is bound to follow the law forbidding unauthorized payment. Yet, the sovereign immunity doctrine (or sovereign immunity defense) continues unimpeded when unwitting contractors, with perhaps the best of intentions, perform work outside of the express terms of the contract at the direction of agents of the government, but without the formalities required by case law.

When the King Does Wrong

In Hargrove v. Town of Cocoa Beach, 96 So. 2d 140 (Fla. 1957), a widow sued for wrongful death of her husband caused by the alleged negligence of a police officer. The issue before the court was whether a municipal...