Posted on 04.20.16
Maryland Appellate Court Holds Economic Loss Doctrine Bars Contractor’s Tort Claims Against Government’s Design Professional on Public Construction Project
Source: http://www.lexology.com, April 18, 2016
By: Stephen W. Kiefer, Pepper Hamilton LLP
Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 226 Md. App. 420, 130 A.3d 1024, 2016 Md. App. LEXIS 3 ( Md. Ct. Spec. App. Jan. 28, 2016)
The City of Baltimore retained a design professional, Rummel Klepper & Kahl (“RK&K”), to produce a design for construction of a wastewater treatment plant. The City then invited bids for construction of the plant, and contractor Balfour Beatty Infrastructure (“Balfour Beatty”) was the successful bidder. RK&K and Balfour Beatty each had a separate contract with the City, but did not have a contract with one another. After alleged defects in RK&K’s design caused Balfour Beatty to incur delays and increases to the cost of its work, it sued RK&K, but not the City.
Balfour Beatty asserted claims against RK&K for professional negligence, negligent misrepresentation, and information negligently supplied for the guidance of others under § 552 of the Restatement (Second) of Torts. Balfour Beatty alleged that it based its bid and resulting contract with the City on design details specified in RK&K’s design packet, but that flaws in the design delayed Balfour Beatty’s progress and necessitated costly and time-consuming re-work to portions of the project.
RK&K moved to dismiss the complaint, arguing that Balfour Beatty sought to recover solely for economic losses, and Maryland’s economic loss rule barred the tort claims because there is no tort duty to prevent economic loss in the absence of contractual privity or a relationship approaching privity. The trial court granted RK&K’s motion, and Balfour Beatty appealed.
On appeal, the Maryland Court of Special Appeals rejected Balfour Beatty’s contention that, as a bidder utilizing RK&K’s design to compile its bid, Balfour Beatty was a party that would foreseeably rely upon RK&K’s representations and thus was one to whom a tort duty was owed. The court reaffirmed established contours of Maryland’s economic loss doctrine in holding that absent privity, death, personal injury, property damage, or the risk of death or serious personal injury, no tort duty runs from a design professional to a contractor for solely economic losses on a public construction project.
In determining whether to expand a design professional’s duty of care, the court found persuasive that the various parties in a public design-bid-build project have the opportunity to apportion economic risks by defining rights and liabilities in their contracts. The court agreed with RK&K’s argument that permitting a contractor to proceed against a design professional in tort under these circumstances – rather than against the government with whom it contracted under the Spearin doctrine – would disrupt the allocation of rights and liabilities set forth in the various contracts between and among the project participants.
To view the full text of the court’s decision, courtesy of Lexis ®, click here.
The City of Baltimore retained a design professional, Rummel Klepper & Kahl (“RK&K”), to produce a design for construction of a wastewater treatment plant. The City then invited bids for construction of the plant, and contractor Balfour Beatty Infrastructure (“Balfour Beatty”) was the successful bidder. RK&K and Balfour Beatty each had a separate contract with the City, but did not have a contract with one another. After alleged defects in RK&K’s design caused Balfour Beatty to incur delays and increases to the cost of its work, it sued RK&K, but not the City.
Balfour Beatty asserted claims against RK&K for professional negligence, negligent misrepresentation, and information negligently supplied for the guidance of others under § 552 of the Restatement (Second) of Torts. Balfour Beatty alleged that it based its bid and resulting contract with the City on design details specified in RK&K’s design packet, but that flaws in the design delayed Balfour Beatty’s progress and necessitated costly and time-consuming re-work to portions of the project.
RK&K moved to dismiss the complaint, arguing that Balfour Beatty sought to recover solely for economic losses, and Maryland’s economic loss rule barred the tort claims because there is no tort duty to prevent economic loss in the absence of contractual privity or a relationship approaching privity. The trial court granted RK&K’s motion, and Balfour Beatty appealed.
On appeal, the Maryland Court of Special Appeals rejected Balfour Beatty’s contention that, as a bidder utilizing RK&K’s design to compile its bid, Balfour Beatty was a party that would foreseeably rely upon RK&K’s representations and thus was one to whom a tort duty was owed. The court reaffirmed established contours of Maryland’s economic loss doctrine in holding that absent privity, death, personal injury, property damage, or the risk of death or serious personal injury, no tort duty runs from a design professional to a contractor for solely economic losses on a public construction project.
In determining whether to expand a design professional’s duty of care, the court found persuasive that the various parties in a public design-bid-build project have the opportunity to apportion economic risks by defining rights and liabilities in their contracts. The court agreed with RK&K’s argument that permitting a contractor to proceed against a design professional in tort under these circumstances – rather than against the government with whom it contracted under the Spearin doctrine – would disrupt the allocation of rights and liabilities set forth in the various contracts between and among the project participants.
To view the full text of the court’s decision, courtesy of Lexis ®, click here.
