Hill, Inc. v. Herman, Sec. of Labor

• Decision Date: 23 September 1999
• Docket Number: No. 98-3282,98-3282
• Parties: (7th Cir. 1999) CH2M Hill, Inc., Petitioner, v. Alexis Herman, Secretary of Labor, and Occupational Safety and Health Review Commission, Respondents
• Court: U.S. Court of Appeals — Seventh Circuit

Page 711

192 F.3d 711 (7th Cir. 1999)

CH2M Hill, Inc., Petitioner, v. Alexis Herman, Secretary of Labor, and Occupational Safety and Health Review Commission, Respondents.

No. 98-3282

United States Court of Appeals, Seventh Circuit

Argued May 13, 1999

Decided September 23, 1999

Petition for Review of a Final Decision of The Occupational Safety and Health Review Commission. [Copyrighted Material Omitted]

Before Bauer, Manion and Kanne, Circuit Judges.

Kanne, Circuit Judge.

Whenever accidental death occurs, it is human nature to place blame. During a massive construction project on the Milwaukee sewer system, three men died when methane gas located in the tunnel in which they had been working exploded. During the aftermath, the Secretary of Labor ("Secretary") issued a citation to CH2M Hill Central, Inc. ("CH2M Hill"), the firm that Milwaukee had hired as consulting engineer. On administrative review, CH2M Hill argued vigorously that the construction standards under which it had been cited did not apply to it as a professional firm not "engaged in construction" and the initial Occupational Safety and Health administrative law judge agreed with CH2M Hill. However, on review, the Occupational Safety and Health Review Commission ("Commission") concluded the standards did apply to CH2M Hill. On remand, a second Occupational Safety and Health administrative law judge found CH2M Hill had violated the regulations and imposed a series of fines. We agree with the initial administrative law judge's conclusions and reverse.

I. History

In 1977, the Milwaukee Metropolitan Sewerage District ("MMSD" or "District"), a municipal agency, undertook the $2.2 billion Milwaukee Pollution Abatement Program ("Program"). The Program called for the construction of eighty miles of sewer tunnels. MMSD contracted with a variety of companies to ensure completion. MMSD had contracted with S.A. Healy Co. ("Healy") to construct one of the tunnels, CT-7. MMSD also contracted with CH2M Hill to serve as the lead engineering consulting firm for the project.

On November 10, 1988, an explosion occurred in tunnel CT-7. The explosion resulted from the ignition of an unexpectedly high concentration of methane gas in the tunnel. When the tunnel boring machine's methane monitor detected a high concentration of methane, Healy supervisors evacuated its employees, as they had done the day before when a similar concentration had been detected, but did not turn off the electrical power. Contrary to the Healy evacuation plan, the three supervisors re-entered the tunnel after only seventeen minutes had elapsed since the detection. They were killed when the gas exploded, presumably after one of the three attempted to operate the grout pump, which was not explosion-proof. After this accident, the Secretary issued citations to Healy and CH2M Hill.

CH2M Hill's responsibilities regarding this tunnel arose from a relationship between MMSD and CH2M Hill that consisted of a series of agreements. The primary contract was the Master Agreement. In it, CH2M Hill and MMSD specified the firm's general responsibilities for working on the Program. It explained CH2M Hill's responsibilities by stating:

The ENGINEER is responsible for the professional quality, technical accuracy, timely completion and coordination of all designs, drawings, specifications, reports and other services furnished by the ENGINEER under this AGREEMENT. The standard of the ENGINEER's responsibility shall be no higher or lower than the standard for similar services performed under the EPA regulations for the Construction Grants program. ENGINEER shall comply with EPA quality assurance requirements in 40 CFR 30.503. The ENGINEER shall correct or revise any errors, omissions, other deficiencies in his designs, drawings specifications, reports and other services without any additional compensation beyond what would have been received in the absence of such errors or omissions. Any services corrected or reperformed by the ENGINEER shall be subject to this section to the same extent as services originally performed.

The Master Agreement continued by providing a general description of the services that MMSD could ask CH2M Hill to perform. The list was not meant to be exhaustive. These examples focused on activities that CH2M Hill would offer to MMSD, such as recommendations, reports and reviews of information collected by CH2M Hill. CH2M Hill also agreed to "direct, coordinate, and monitor all aspects of the PROGRAM as defined [in the Master Agreement] or in subsequent TASK ORDERS."

In addition to describing what MMSD could call upon CH2M Hill to do, the document also specifically details those matters for which CH2M Hill had no responsibilities. It states:

Visits to the construction site and observations made by the ENGINEER or ASSOCIATE CONSULTANTS shall not relieve a construction contractor of its obligation to conduct comprehensive inspections of the work sufficient to ensure conformance with the intent of the construction contract documents, and shall not relieve a construction contractor of its responsibility for means, methods, techniques, sequences and procedures necessary for coordinating and completing all portions of the work under the construction contract and for all safety precautions incidental thereto.

(emphasis added). The contract continued stating:

[ENGINEER'S or ASSOCIATE CONSULTANTS'] day-to-day inspection or construction management activities will not, however, cause the ENGINEER or ASSOCIATE CONSULTANTS to be responsible for those duties and responsibilities which belong to the construction contractors and which include, but are not limited to, the contractors' responsibilities for the techniques and sequences of construction and the safety precautions incidental thereto and for performing the construction work in accordance with the construction contract documents.

(emphasis added). It also noted that:

The ENGINEER shall act on behalf of the DISTRICT during construction, but the ENGINEER shall not direct or supervise the contractor's personnel, or operate or directly use equipment. The construction contractors shall remain responsible for construction means, methods, techniques, procedures and safety precautions on the construction portions of the PROGRAM.

For individual jobs, MMSD and CH2M Hill created Task Orders explaining CH2M Hill's role in more detail. In Task Order 189, MMSD and CH2M Hill agreed that the firm would consult on the construction of tunnel CT-7. According to this document, CH2M Hill agreed to assist MMSD with bid and award services, basic architectural and engineering services and inspection services. The parties specified:

The level of effort of the ENGINEER represented in this Agreement is less than required to perform the generally accepted practice or standard engineering and management services during construction as the DISTRICT intends to share in the performance of such services. The DISTRICT will provide on the date of the Notice to Proceed and for the life of this Agreement a Staff Engineer. Activities to be performed by the DISTRICT include but are not limited to the following.

. . .

4. Approve or reject the ENGINEER'S recommendations for resolution of claims, disputes and/or deviations from the Contract Documents.

5. Authorized preparation of Contract Modifications and provide administrative approval of Contract Modifications upon completion by the ENGINEER.

(emphasis added). The Task Order specifically forbade CH2M Hill from supervising and directing Healy or any other contractor. The Task Order also did not require CH2M Hill to oversee the means and methods of work or safety, but it did require CH2M Hill, among other things, to "[a]dminister the contracts in accordance with the requirements of the Contract Documents and act as the DISTRICT's representative during construction," review the contractor's submission to ensure compliance, monitor and review project schedules, prepare specifications for contract modifications and inspect the work for conformance with the contract documents. In turn, MMSD had contracted with Healy to control the means and methods of the work and safety for tunnel CT-7's construction. In addition, only MMSD could stop work on the tunnel. While CH2M Hill could note violations of the contract by Healy, it could not require Healy to fix any problems.

As part of these contractual duties, CH2M Hill also "[i]nvestigate[d] and prepare[d] documentation in response to contractor claims of differing site conditions." This process, known as a "differing site condition" ("DSC") procedure, enabled contractors to request modifications in their contracts if once they engaged in their work they discovered that conditions were materially different from those assumed when they submitted their bid to MMSD. CH2M Hill's role in this process was to "[n]egotiate proposed contract modifications with the Contractor's representatives and make specific recommendations. Upon authorization by the DISTRICT, prepare and submit the contract modifications to the DISTRICT for submittal to the agencies for approval." MMSD had to approve any contract modification. It had similar responsibilities with regard to another tunnel, CT-8.

Before the explosion in CT-7, the general contractor for tunnel CT-8 had discovered methane gas during its preconstruction tests. In response to these findings, MMSD invoked the DSC procedure and directed CH2M Hill to investigate the findings. In turn, CH2M Hill hired Engineering- Science, Inc., ("ESI") to conduct the investigation. ESI found that a risk of ignitable concentrations of methane existed, but it could not definitely determine the amount of methane or where the methane was located. Based on these findings and those of another expert hired by CH2M Hill, the firm recommended to MMSD that the project continue and drafted a contract modification for the CT-8 tunnel. MMSD reviewed and approved the...