U.S. District Court in Delaware Allows Contractor’s Tort Claims Against Engineer to Proceed – Also Holds Owner Not an Indispensable Party

Kuhn Construction Company v. Ocean and Coastal Consultants, Inc.
2010 U.S. Dist. LEXIS 71057 (D. Del. July 15, 2010)

Diamond State Port Corporation (“DSPC”) engaged Ocean and Costal Consultants, Inc. (“OCC”) to prepare engineered drawings, plans, and specifications for a project at the Port of Wilmington in Delaware. In soliciting bids, DSPC utilized the bid documents designed and prepared by OCC. Kuhn Construction Company (“Kuhn”) relied upon those documents to prepare its bid for work on the project. As the lowest bidder, Kuhn entered into a contract with DSPC.

Following award of the contract, Kuhn claimed that OCC: 1) changed the contract requirements through alterations in the drawings; 2) despite having specific knowledge of existing subsurface conditions at the project, did not include this information in the bid documents, or otherwise disclose it; and 3) failed to specify certain quality requirements for welding. Kuhn filed suit against OCC and against Waite, the consultant that OCC retained to provide information regarding the welding quality.

Kuhn alleged negligence and negligent misrepresentation claims against OCC and Waite, and fraud and misrepresentation, interference with existing contracts, and common law conspiracy claims against OCC. OCC moved to dismiss the entire case pursuant to Federal Rules of Civil Procedure 12(b)(7) and 12(b)(1). OCC contended that Kuhn failed to join the owner DSPC, which was an indispensable party. OCC further contended that, although DSPC’s joinder would have destroyed diversity and removed subject matter jurisdiction from the court, joinder was appropriate because DSPC was an indispensable party. Conversely, Kuhn argued that because the claim against DSPC was a contract claim, whereas the claims against OCC and Waite were tort claims, complete relief could be awarded without joining DSPC.

The United States District Court for the District of Delaware denied OCC’s motion. The court first refused to dismiss Kuhn’s negligence and negligent misrepresentation claims, because Kuhn alleged facts sufficient to suggest that it suffered a pecuniary loss caused by reliance, and that both OCC and Waite were in a business relationship from which they could expect pecuniary benefits with respect to Kuhn. In refusing to dismiss Kuhn’s claim, the court relied upon Outdoor Technologies, Inc. v. Allfirst Fin., Inc., Civ. No. 99C-090151, 2001 Del. Super. LEXIS 351 (Del. Super. Aug. 31, 2006), which held that a pecuniary duty is not dependant on contractual privity; rather, it arises when the parties are in a business relationship, from which they expect pecuniary benefits.

The court next determined that DSCP was not an indispensable party. According to the Court, even if DSCP could be liable for negligent misrepresentation, it was not required that they be added to the case, because joint tort feasors are not necessary parties under Rule 19(a) of the Federal Rules of Civil Procedure. Similarly, the court determined that in claims for fraud and misrepresentation, while there may be some overlapping obligations, all persons involved in the contract need not be parties to the action.

The court also found that, because interference is an independent tort claim, complete relief could be granted by having the allegedly tortious actor in the claim, although the signatory on the contract is not part of the case. Finally, the court held that conspirators are liable on a joint and several basis. As such, Kuhn could obtain complete relief without joining all possible co-conspirators. The court noted that, if OCC believed that liability properly rested with DSPC, OCC could simply bring them in, under Federal Rule 14, as a third-party defendant who is or may be liable to it for all or part of the claim against it.

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