Vermont District Court Declines To Apply Exception To Economic Loss Rule To Contractor’s Claims Against Architect

Hunt Construction Group, Inc. v. Brennan Beer Gorman / Architects, P.C.
2008 U.S. Dist. LEXIS 93754 (D. Vt. 2008)

In declining to apply an exception to the economic loss rule, the Court dismissed a contractor’s negligence claims against the project architect (and other design professionals).

In 2005, Spruce Peak Realty, LLC (“Owner”), retained Plaintiff, Hunt Construction Group (“Contractor”), to construct a resort hotel in Stowe, Vermont. Owner and Contractor executed a contract setting forth their respective rights and responsibilities on the Project. Owner then contracted with an architect, mechanical, electrical and plumbing engineers, a structural engineer, and an interior designer (collectively, the “Design Professional Defendants”). Contractor was to build the Project according to the plans and specifications the Design Professional Defendants provided under contracts with Owner.

Contractor alleged the Design Professional Defendants negligently failed to provide the plans and specifications on time, submitted plans and specifications that were replete with errors and omissions, and failed to respond promptly to Contractor’s requests for information and corrected drawings. Contractor also alleged these errors and omissions constituted misrepresentations of information that the Design Professional Defendants knew Contractor needed in order to comply with its own contractual obligations with Owner. Contractor did not allege that it suffered any physical harm, such as property damage, personal injury, or loss of life. Rather, Contractor sought damages for purely economic loss due to the increased costs and delays created by the Design Professional Defendants’ alleged negligence.

The Design Professional Defendants filed a Motion to Dismiss, alleging that the Economic Loss Rule barred all of Contractor’s claims. While it admitted that its Complaint sought only economic damages, Contractor argued that because Defendants were professional architects and engineers, an exception to the economic loss rule applied. Under that exception, the Vermont Supreme Court has acknowledged “there might be recovery for purely economic losses in a limited class of cases involving violation of professional duty.” EBWS, LLC v. Britly Corp., 181 Vt. 513, 524, 928 A.2d 497, 507 (Vt. 2007).

In analyzing whether the limited exception applied, the Court stated that the “key” factor determining whether a claim falls within the professional services exception is the relationship between the parties. EBWS, 181 Vt. at 524-525, 928 A.2d at 508 (Vt. 2007). Vermont law requires “a special relationship between the alleged tortfeasor and the individual who sustains purely economic damages sufficient to compel the conclusion that the tortfeasor had a duty to the particular plaintiff and that the injury complained of was clearly foreseeable to the tortfeasor.” Springfield Hydroelectric, 172 Vt. at 316, 779 A.2d at 71 (quoting Aikens v. Debow, 208 W. Va. 486, 541 S.E.2d 576, 589 (2000)). The Court explained that whether or not such a special relationship exists “turns on whether there is ‘a duty of care independent of any contractual obligations.'” Id. at 316, 779 A.2d at 71-72 (quoting Grynberg v. Agri Tech, Inc., 10 P.3d 1267, 1269 (Colo. 2000)); accord EBWS, 181 Vt. at 524, 928 A.2d at 507-508 (2007).

The Court went on to hold that the Design Professional Defendants’ contracts with Owner established their duties of care, not any special relationship with Contractor. Accordingly, the Court granted the Design Professional Defendants’ Motion to Dismiss and dismissed Plaintiff Contractor’s claims in their entirety.

Click here for full text opinion provided courtesy of LexisNEXIS.

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