Summary
holding that negligence claim against contract manager of construction project was barred by the economic loss doctrine
Summary of this case from Commonwealth Construction v. EndeconOpinion
C.A. No. 99C-10-065 WCC
Submitted: January 23, 2002
Decided: June 27, 2002
On Defendant EDIS Company's Motion to Dismiss. Granted.
Richard L. Abbott, Esquire, Wilmington, DE.
Marc P. Niedzielski, Esquire, Department of Justice, Wilmington, DE.
Dawn C. Stewart, Esquire, Washington, DC.
Donald L. Logan, Esquire, Wilmington, DE.
Dear Counsel:
The Court has before it a Motion to Dismiss filed by EDIS Company (EDIS) relating to the negligence claim included in International Fidelity Insurance Company's (IFIC) amended complaint. In essence, EDIS asserts that Count II of the Complaint is barred by the economic loss doctrine. The Court agrees, and the Motion will be granted.
IFIC is a surety company that issued payment and performance bonds relating to electrical work to be done by Mattes Electric, Inc. (Mattes) in the construction of a training facility at the Delaware Technical and Community College (Del Tech) Wilmington campus. Mattes defaulted, and a dispute has arisen concerning IFIC's obligation under the bonds. EDIS was hired by Del Tech to act as the contract manager of the project, and in an amended complaint filed on August 27, 2001, IFIC asserts that they negligently performed this responsibility which led to IFIC suffering damages. In particular, IFIC claims that EDIS's failure to obtain an executed contract between Del Tech and Mattes provided the basis for Mattes to quit the project, not pay his suppliers or sub-contractors and has lead to claims being made against the bonds issue by IFIC. There is no contractual relationship between IFIC and EDIS and thus the asserted liability is strictly based on a negligent tort action. EDIS now requests dismissal based upon the economic loss doctrine, and IFIC argues the doctrine is not applicable to the facts of this case or the exceptions of negligent misrepresentation or professional malpractice apply.
On June 13, 2002, this Court issued an extensive decision on the economic loss doctrine and the applicability of the negligent misrepresentation exception in the case of Christiana Marine Service Corporation v. Texaco Fuel and Marine Marketing Inc. And Texaco, Inc. While the cases are factually different, the case law and the reasoning in the Christiana Marine decision have equal application here and are relied upon in deciding this motion. The economic loss doctrine "prohibits recovery in tort for losses unaccompanied by a bodily harm or a property damage." The doctrine in its purest form forbids plaintiffs from recovering in tort for losses suffered that are solely economic in nature. Economic loss is "any monetary loss, costs of repair or replacement, loss of employment, loss of business or employment opportunities, loss of good will, and diminution in value." While initially a doctrine related to product liability actions, the courts have expanded the doctrine's application beyond its original scope to nearly any kind of dispute arising from a commercial transaction where the alleged damages do no harm to a person or to property other than the bargained for item. The doctrine has become a significant shield for defendants to protect against increasing tort claims, which result when contract provisions limit a plaintiff's recovery, or where no contract exists at all.
Christiana Marine Service Corp. V. Texaco Fuel and Marine Marketing Inc., and Texaco, Inc., Del. Super. C.A. No. 98C-02-217, Carpenter, J. (June 13, 2002) (Mem. Op.).
Hon. Sheldon Gardner, Matthew Sheynes, The Moorman Doctrine Today: A Look at Illinois' Economic-Loss Rule, 89 Ill. B.J. 406, 406-11 (200 1) (discussing case law dealing with the economic loss doctrine, future developments, and innocent fraud or negligent misrepresentation exclusion).
Danforth v. Acorn Structures, Inc., 608 A.2d 1194, 1195 (Del. 1992) (citing Moorman Mfg. Co. v. National Tank Co., 435 N.E.2d 443, 448 (Ill. Supr. 1982).
Hon. Sheldon Gardner, Matthew Sheynes, The Moorman Doctrine Today: A Look at Illinois' Economic-Loss Rule, 89 Ill. B.J. at 406. See also Danforth, 608 A.2d at 1196(quoting Moorman Mfg. Co. 435 N.E.2d at 449) (noting that economic loss is defined as "damages for inadequate value, costs of repair, and replacement of the defective product, or consequent loss of profits — without any claim of personal injury or damage to other property.").
As a result of the above, the Court first rejects IFIC's argument that the doctrine of economic loss is only applicable in a "defective product" context. The doctrine, over time, has been expanded to other commercial transactions, and there is no reason to excuse the type of transaction present in this litigation. Secondly, the Court finds that if IFIC suffered any damages relating to any party in this litigation, it clearly is only economic in nature. If there is an obligation under the bonds, IFIC will be forced to pay money to compensate for Mattes' failure to perform. Thus, if EDIS was in some manner negligent, the only damages that they caused IFIC to suffer were monetary in nature and fit the definition of economic loss. As such, unless EDIS' conduct falls within an exception, the economic loss doctrine would prevent recovery by IFIC.
The first exception claimed by IFIC is that relating to negligent misrepresentation. This exception was extensively addressed in the Christiana Marine decision and requires the finding of two elements. First, the plaintiff must show that the defendant supplied information to the plaintiff for use in business transactions with third parties and second, the defendant must be in the business of supplying such information. Neither of these requirements have been asserted nor can they be established by the plaintiff under the facts of this case. At best, this case involves the discovery of a lack of an executed contract after a claim under the bonds was made. IFIC never relied upon any information provided by EDIS since there was never any such communication. In fact, in their complaint there is no assertion that there was any contact between IFIC or EDIS until this litigation arose.
Simply put, by any reasonable interpretation of the facts of this case, even in the light most favorable to IFIC, the negligent misrepresentation exception is not applicable.
In a final desperate attempt to maintain the negligence count, IFIC cites to a footnote in the Danforth decision in which the Supreme Court indicated that in that case they were not addressing whether the economic loss doctrine would bar recovery when the claim relates to professional malpractice. Unfortunately what was intended by the statement is not further reflected in the opinion. However, this Court finds that at a minimum some duty by the defendant to the plaintiff would be required consistent with the Supreme Court of Illinois opinion in 2314 Lincoln Park West Condo. Ass'n v. Mann, Gin, Ebel Frazier, Ltd. This obligation and duty must be one generally recognized by the profession as traditionally owed the client or the group of persons the client intended to benefit. There is no dispute that there was no professional relationship or duty between EDIS and IFIC and no relationship between EDIS's client, that is Del Tech, and IFIC to infer an intended benefit. This Court does not believe that the economic loss doctrine can be overcome by a general claim of malpractice when no relationship between the parties exists. As such, this Court finds that to the extent an exception is recognized by the Supreme Court, the facts of this case will not support its application here.
See 2314 Lincoln Park West Condo. Ass'n, Ill., 555 N.E.2d 346 (1990).
Finding that the economic loss doctrine would generally bar recovery and the exceptions to the doctrine are not applicable, the negligence claims set forth in Count II of IFIC's amended complaint are dismissed.
IT IS SO ORDERED this 27th day of June, 2002.