Summary 2010 WY 34

Summary of Decision issued March 23, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Excel Construction, Inc. v. HKM Engineering, Inc.

Citation: 2010 WY 34

Docket Number: S-09-0120

Appeal from the District Court of Big Horn County, the Honorable Steven Cranfill, Judge.

Representing Appellant Excel: Patrick J. Murphy of Williams, Porter, Day & Neville, PC, Casper, Wyoming.

Representing Appellee HKM: Matthew F. McLean of Crowley Fleck PLLP, Bozeman, Montana.

Facts/Discussion: This was an appeal from a summary judgment granted to HKM by the district court. The case involves a dispute between Excel and HKM related to a contract for the replacement and improvement of water and sewer lines in Lovell, Wyoming. HKM agreed to be Lovell’s representative during construction. Lovell entered into a separate agreement with Excel to serve as general contractor on the project.

Modify Rissler decision: In Rissler, the trial court granted summary judgment in favor of HKM based upon the economic loss rule which bars recovery in tort when a plaintiff claims purely economic damages unaccompanied by physical injury to persons or property. Excel argued that the Court should modify its ruling in Rissler to permit suit by a contractor against a professional project engineer like HKM on theories of negligence and negligent misrepresentation. It argues that other stated have permitted suit against design and construction management professionals in spite of the economic loss rule. The Court believes that parties to a construction project have the opportunity to allocate the economic risks associated with the work and that they do not need the special protections of tort law to shield them from losses arising from risks including negligence of a design professional, which are inherent in performance of the contract.
Tortious interference with contract: HKM was charged with determining compliance with the contract, approving change orders and otherwise serving as decision-maker for Lovell by the express terms of the agreement. HKM therefore acted as an agent and as an agent with the power to make decisions on behalf of the town. Its actions, if they breached the contract, may entitle Excel to recover against the town for that breach but Excel may not recover from HKM on a theory of intentional interference with a contract for actions taken as the town’s agent.
Misrepresentation: As already noted, the Court’s decision in Rissler, would bar claims against HKM based upon negligent misrepresentation. Excel argued that its claim of misrepresentation is really a claim of intentional misrepresentation or fraud. The claim can only be construed as one for negligent misrepresentation. Excel did not allege that HKM intentionally made representations which it knew to be false, even though fraud must be pled with particularity. In addition, Excel specifically described its claim as one for negligent misrepresentation. The record does not suggest that Excel ever sought to amend its claim to add allegations of fraud. Under the circumstances, the Court can only conclude that Excel made a claim for negligent representation and not for fraud. Under Rissler, this type of claim falls within the bar of the economic loss rule.
Good faith and fair dealing: The Court has recognized that all contracts contain an implied covenant of good faith and fair dealing. Excel did not contract directly with HKM, and therefore no implied covenant. The Court does not construe the clause as creating an obligation on the part of the engineer to act in good faith in all decisions affecting the contractor as might arguably be the case under an implied covenant of good faith and fair dealing. The exculpatory clause would just limit the engineer’s liability to claims that involve an element of bad faith. Excel may not maintain a claim of intentional interference with contract against the agent of a party to its contract, and it did not present a claim of intentional misrepresentation or fraud to the trial court on the pleadings in the case.

Conclusion: The Court declined to modify the economic loss rule in Rissler to permit actions against a design professional based on negligence. Although a party may be able to maintain an action for the intentional tort of interference with contract under Rissler, Excel may not maintain such a claim against HKM for actions taken in its capacity as Lovell’s agent under the Excel-Lovell contract. While a party may be entitled to maintain a claim for intentional misrepresentation or fraud under certain circumstances notwithstanding the economic loss rule enunciated in Rissler, HKM did not present such a claim to the district court, and Excel’s claim for negligent misrepresentation is barred by Rissler. The language of the HKM – Lovell contract did not impose a duty similar to that of the implied covenant of good faith and fair dealing on HKM, but rather limited the exculpatory language contained in that paragraph to claims not involving bad faith. The clause would not have barred tort claims involving an element of bad faith but Excel either could not maintain its intentional tort claims as a matter of substantive law or did not raise them in the trial court.

Affirmed.

D.J. Davis delivered the decision.

Link: http://tinyurl.com/yjq4vuc .

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it was issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. Please note when you look at the opinion that all of the paragraphs are numbered. When you pinpoint cite to a quote, you should cite to this paragraph number rather than to any page number. If you need assistance in putting together a citation using the Universal Citation form, please contact the Wyoming State Law Library.]