January 14, 2015
California Court of Appeals Rejects Subcontractor Tort Claims Against Engineer Under Economic Loss Doctrine
The development of the so-called “independent duty doctrine” – as a successor to the economic loss rule – is one of the more contentious (and confusing) areas of recent Washington jurisprudence. This decision out of the California Court of Appeals (2nd District), in which the court firmly rejected tort claims by a subcontractor against the project engineer/designer, offers an interesting counterpoint to Washington courts’ recent demarcation of the line between contract and tort claims.
In State Ready Mix, Inc. v. Moffatt & Nichol, 2015 WL 109869 (Cal. Ct. App. Jan. 8, 2015), the project owner (through its project manager) hired Major Engineering Marine, Inc. to construct a concrete travel lift pier. Major, in turn, engaged State Ready Mix to provide the pre-mixed concrete to the project site. Major, after casting, determined that the concrete did not meet the compression strength standard provided by the contract documents.
Major removed and replaced the concrete and sued State Ready Mix for the costs it incurred. In an interesting turn of events, State then brought claims against the project engineer (Moffatt & Nichol) for equitable indemnification and contribution, asserting that Moffatt bore liability because Moffatt drafted the pier plans and reviewed State’s concrete mix design.
The Court of Appeals – upholding the trial court’s dismissal of the State claims — firmly rejected these theories. The court noted the firmly held principle that “A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.” In the court’s view, State – who had no contractual relationship with Moffatt, the project engineer –was improperly attempting to craft a breach of contract claim as a tort claim. The court concluded that the “economic loss rule bars State’s cross complaint because Moffatt has no contractual relationship with State or Major and no facts are alleged that the concrete injured a person or damaged other property.”
Notably – while acknowledging that a tort could lie where duties existed independent of the contract – the court nonetheless took the apparent view that such duties did not exist for run-of-the-mill construction defect claims by and between participants on the same project where the only damage suffered is economic loss. This formulation and result appears largely consistent with the old economic loss rule under Washington law.
The case is also notable for the wide variety of other claims (including one under California’s “good samaritan” law brought by State, all of which were roundly dismissed by the court.