Keith Cramer recently won complete summary judgment in a commercial construction defect case against an architectural firm.
The case concerned the construction of a retail home improvement box store. Part of the construction required use of a particular stone veneer panel. The firm’s client was the architect and engineer of record. The construction plans specified that installation of the stone veneer was to be performed according to the manufacturer’s specifications. After construction was complete, the stone veneer began falling from the building creating a severe safety hazard. The owner of the store demanded that the contractor remove and replace all of the stone veneer at a cost of more than $400,000. Following replacement, the contractor sued the stone manufacturer, distributor, and the architect. Claims against the firm’s client included negligent misrepresentation and breach of contract on an intended third party beneficiary theory. One of the complicating factors in the litigation was that the installation method specified by the manufacturer and incorporated into the plans by the architect did not conform to literal construction code requirements for the particular type of stone veneer and no variance was obtained for the installation. The plaintiff argued that the architect negligently supplied false information regarding installation and attachment methodology which caused the stone veneer to fail.
Following discovery, Keith filed an extensive motion for summary judgment arguing that the economic loss doctrine precluded recovery on the negligent misrepresentation claim and that the plaintiff could not factually prove its third party beneficiary theory. The plaintiff vigorously opposed the motion for summary judgment arguing that negligent misrepresentation is an exception to the economic loss rule and that a contractor is an intended third party beneficiary of the architect-owner contract.
The economic loss doctrine is a principle that shields a defendant from purely economic losses where there are no personal injuries or damage to other property as a result of a negligent act, particularly in a commercial or professional setting. The purpose of the economic loss doctrine is to keep the risk of liability reasonably calculable in commercial and business transactions.
One of the tactics used by Keith was to compare the underlying complaint in the seminal economic loss doctrine case regarding design professionals in Nevada, Terracon Consultants Western, Inc. v. Mandalay Resort Group, 125 Nev. Adv. Rep. 8, 206 P.3d 81 (2009), with the allegations in, and evidence supporting, the plaintiff’s negligent misrepresentation claim against the firm’s client. This strategy was successful. The Court held that plaintiff’s negligent misrepresentation claim was really no more than an attempt to disguise a negligence claim that would otherwise have been barred by the economic loss rule. The Court also agreed with Keith that the plaintiff could not factually prove that the plaintiff contractor was an intended third party beneficiary of the owner-architect contract.
This was a significant win for the client which was facing substantial potential liability for the allegedly defective stone veneer.
To read the Court’s decision, please click here.