Case Background
St. Paulus Evangelical Lutheran Church, a California non-profit religious corporation based in San Francisco, filed a lawsuit against Merker Architectural Group, Inc. (MAG) and its principal architect Marc Dana Merker on August 9, 2022, in the Superior Court of California, County of San Francisco.
Cause
The dispute arose from a contract between St. Paulus and MAG for the design of tenant improvements at 950 Gough Street in San Francisco. The church's original place of worship at that location was destroyed by fire in 1995. The property was later sold to Maracor Development Inc., which built a mixed-use residential complex while reserving approximately 12,000 square feet on two levels for St. Paulus to construct a new sanctuary, fellowship rooms, a commercial-grade kitchen, and offices.
St. Paulus retained MAG and Merker to design these tenant improvements. The parties entered into a contract governed by Work Authorization No. 01 dated April 1, 2015, for initial space programming and conceptual design, and Work Authorization No. 02 dated March 1, 2019 (revised May 1, 2019), covering design development and construction documents. MAG and Merker were responsible for preparing all drawings, specifications, and documents needed to secure building permits and complete construction.
St. Paulus alleged that MAG and Merker produced deficient design documents that failed to meet regulatory requirements, refused to address plan check comments from the San Francisco Planning Department, abandoned the project by refusing to communicate with the church's construction contractor, and made unauthorized changes to the design documents without the church's knowledge or approval. Despite paying over $530,000 in architectural fees, St. Paulus never obtained a building permit, and the tenant improvements were never constructed.
Injury
The church was unable to build its new sanctuary and remained displaced from its historic location, forced to lease temporary spaces for its congregation. The delays also caused construction costs to escalate significantly.
Damages Sought
St. Paulus sought damages exceeding $2 million, including the return of all architectural fees paid, fees paid to engineers and consultants, past and future leasing costs for temporary spaces, increased construction costs due to delays, prejudgment interest, attorney's fees, and disgorgement of profits.
Key Arguments and Proceedings
Legal Representation
Plaintiff: St. Paulus Evangelical Lutheran Church
· Counsel for Plaintiff: David Buoncristiani | Rebecca D. Takacs
Defendant: Merker Architectural Group, Inc. | Marc Dana Merker
· Counsel for Defendant: Jean A. Dalmore | Bruce N Furukawa | Eryk R. Gettell | Paul John B. Badum | Robert K Clay | David A Ericksen | Jerome Pandell | Merker Architectural Group Inc. (Pro Se) | Chad S. Tapp
Claims
St. Paulus brought four causes of action. The first claim was breach of contract against MAG, alleging the firm failed to deliver design documents that met contractual and regulatory standards, refused to correct deficiencies identified by the city, exceeded the agreed-upon budget, disengaged from the project, and made unauthorized design changes.
The second claim was breach of the implied covenant of good faith and fair dealing against MAG, alleging the firm intentionally avoided communication with St. Paulus and its agents, secretly contacted the San Francisco Planning Department without authorization, and submitted unauthorized design revisions to the city.
The third claim was design professional negligence against both MAG and Merker individually, alleging they breached their professional duty of care by producing defective, unconstructable designs and refusing to address an extraordinary number of plan check issues, rendering the entire design worthless.
The fourth claim, initially styled as negligent misrepresentation in the complaint, evolved at trial to include breach of fiduciary duty and concealment. The jury was asked to decide whether MAG and Merker were in a fiduciary relationship with St. Paulus, whether they acted knowingly against the church's interests, and whether they concealed material facts.
Defense
MAG and Merker filed a general denial on May 1, 2023, and raised thirty affirmative defenses. Key among these were that their professional services met the applicable standard of care, that St. Paulus's own negligence and the negligence of third parties caused the alleged damages, and that the contract's limitation of liability clause capped any recovery at the total compensation MAG received. They also argued comparative fault, failure to mitigate damages, waiver, laches, assumption of risk, and that all work performed complied with applicable contracts and specifications. The Defendants further contended that they made full disclosure of all relevant information and that St. Paulus ratified their actions.
Jury Verdict
On March 11, 2026, a twelve-member jury returned a verdict largely in favor of St. Paulus. The presiding juror signed all verdict forms on March 11, 2026, and the verdict was filed with the Court on March 12, 2026.
On breach of contract, the jury found that a contract existed between the parties, that St. Paulus performed its obligations under that contract, that MAG failed to perform its contractual duties, and that this failure harmed St. Paulus. The jury rejected the Defendants' affirmative defense that the limitation of liability provision in Work Authorization No. 2 applied.
On breach of the implied covenant of good faith and fair dealing, the jury again found in favor of St. Paulus on every element. The jury determined that MAG's conduct prevented the church from receiving the benefits of the contract, that MAG failed to act fairly and in good faith, and that St. Paulus suffered harm as a result. The jury once more rejected the limitation of liability defense.
On professional negligence, the jury found both MAG and Marc Dana Merker individually negligent in providing architectural services to St. Paulus. The jury determined that the professional negligence of both Defendants was a substantial factor in causing harm to the church. The jury rejected the limitation of liability defense on this claim as well.
On breach of fiduciary duty, the jury found that both MAG and Merker stood in a fiduciary relationship with St. Paulus. The jury determined that both Defendants knowingly acted against the church's interests, failed to obtain informed consent, and that their conduct was a substantial factor in causing harm.
On the concealment claim, the jury found in favor of the Defendants, determining that neither MAG nor Merker intentionally failed to disclose facts that St. Paulus did not know and could not reasonably have discovered.
On punitive damages, the jury found that Marc Dana Merker did not engage in conduct with malice, oppression, or fraud, and therefore awarded no punitive damages. Similarly, the jury found that neither Merker nor Robert Kent Clay engaged in malicious, oppressive, or fraudulent conduct on behalf of MAG, resulting in no punitive damages against the employer.
The jury awarded the following damages with responsibility allocated at 80% to Merker Architectural Group, Inc. and 20% to Marc Dana Merker across all categories. Architectural fees paid to MAG totaled $536,624.59. Fees paid to engineers and consultants amounted to $216,487.20. Past leasing costs for temporary spaces came to $193,540. Costs related to improvements to temporary spaces were $98,136. Future economic loss for increased construction costs was set at $375,000. The jury awarded no damages for future leasing costs. The total damages awarded came to $1,399,787.79.
The jury set the prejudgment interest accrual date at January 1, 2022, and calculated prejudgment interest on each category of past economic loss: $128,789.90 on architectural fees, $51,956.93 on engineering fees, $46,451.76 on past leasing costs, and $23,552.64 on temporary space improvement costs. Interest rates were set at 10% for breach of contract and breach of the implied covenant, and 7% for professional negligence.
Court Documents
