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A dispute arose among a second tier-subcontractor, a first tier-subcontractor and the prime contractor on a U.S. Naval Shipyard project in Maine. It was resolved through arbitration. The second-tier sub then filed litigation in court against Stantec Consulting Services (successor in interest to the original engineering firm that was hired by the Navy to perform the design, engineering and supervision).   The complaint asserted negligence and negligent representation. In applying Maine’s economic loss doctrine, the court held since there was no personal injury or property damage asserted, but only assertion of inadequate engineering design causes economic loss, the suit must be dismissed. Fletch’s Sandblasting & Painting, Inc. v. Fay, Spofford, Thorndike, d/b/a Stantec, 2019 WL 847731 (Main, 2018).

The dispute was over fireproofing installed in part by the second tier sub. The appellate court stated:

“The Maine Superior Court has held that the economic loss doctrine precludes tort recovery even when there is no privity of contract between the parties, pointing out that in [citation omitted] the parties were not in privity…. And Maine’s tort law treatise warns that the economic loss doctrine is often implicated in cases asserting liability against architects, engineers and contractors. [station omitted].

For the fireproofing at issue here, Stantec sold no physical product (unlike the window manufacturer in Peachtree). It did contract with the Navy to provide design and engineering services, but it had no contractual relationship with Fletch’s. Fletch’s entered into a subcontract with the prime contractor on the project, but not with Stantec. Fletch’s asserts no damages beyond the failures of the fireproofing product as it was applied in accordance with its subcontract with the prime contractor, and the expenses of attempting to remedy the failures—i.e., Fletch’s asserts no personal injury and no damage to other property such as its equipment.

…. There was no privity of contract between Fletch’s and Stantec, but Fletch’s did have the opportunity to negotiate the terms of its subcontract with the prime contractor and thereby establish its risks and liabilities on the construction project. Likewise, Stantec had a contract with the Navy, which presumably established its risks and liabilities for the engineering and design services.”

 

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 21, No. 5 (June 2019).

Copyright 2019, ConstructionRisk, LLC