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Economic loss doctrine precludes negligent misrepresentation claim against design engineer.

April 1, 2012
Kuhn Construction Company v. Ocean and Costal Consultants, Inc. & Robert F. Waite, P.E., P.C., D. Del., C.A. No. 09-622-SLR, Mem. Op., February 14, 2012

In this construction defect case, the court dismissed claims of negligent misrepresentation, fraud and misrepresentation, interference with existing contracts and common law conspiracy against the defendant design engineer. The plaintiff general contractor claimed the design engineer made errors in the plans and specifications resulting in the plaintiff's damages. Of note is the court's finding that the economic loss doctrine applied to bar the plaintiff's negligent misrepresentation claim. The economic loss doctrine is a judicially created doctrine that allows a party to recover in tort only if losses are accompanied by bodily harm or property damage. In other words, the doctrine prevents plaintiffs from recovering in tort for losses suffered that are solely economic in nature. Here, the losses were solely economic, and the doctrine applied on its face to bar recovery in tort. Delaware recognizes a narrow exception to this doctrine where a plaintiff can show that (1) the defendant supplied information to the plaintiff for use in business transactions with third parties, and (2) the defendant is in the business of supplying information. The court found that the design engineer, like architects and engineers generally, was not in the business of supplying information because the information it provided was ancillary to the finished product -- in this case a wharf. Thus, the exception did not apply, and the plaintiff was barred from bringing tort claims. The plaintiff had argued application of the exception based on a 1990 Delaware Superior Court decision Guardian Construction Co. v. Tetra Tech Richardson, Inc., 583 A.2d 1378 (Del. Super. 1990), which the court declined to follow. The court reasoned that Delaware courts have clarified, refined and narrowed the scope of the exception in the twenty-plus years since Guardian, and providing drawings in connection with a construction project is considered to be information incidental to the sale of a finished tangible product.

Case Law Alert - 2nd Qtr 2012

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Art C. Aranilla
Special Counsel
(302) 552-4354
acaranilla@mdwcg.com

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