Big Question

1. The Legal Edge: Solving Today’s Construction ProblemsTexas Housing ConferenceJuly 28-30, 2014Hilton HotelAustin, TX

2. PresentersModeratorBobby Bowling, Tropicana HomesPanel MembersVijay D'Cruz, Locke LordJoe Davis, Husch Blackwell Chris Ryman, Coats | Rose

3. RECENT SUPREME COURT DECISIONS LIMITING REMEDIES FORERRORS BY DESIGN PROFESSIONALSJoe Davis, Husch Blackwell

4. Big Question What is the remedy against a design professional whose error causes economic damage to someone with whom it has no contract (like a visitor, or the general contractor)?

5. “Economic Loss Rule” Tort damages (“liability not based on a contract or a statute”) are unavailable when the plaintiff sues for breach of a contractual duty, rather than a duty imposed by law. “When the injury is only the economic loss to the subject of a contract itself the action sounds in contract alone.” Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494-495 (Tex. 1991).

6. "[W]e have never held that [the economic loss rule] precludes recovery between contractual strangers in a case not involving a defective product." • Sharyland Water Supply Corp. v. City of Alton, 254 S.W.3d 407, 410-20 (Tex. 2011).

7. Negligent Misrepresentation RESTATEMENT (SECOND) OF TORTS §552; McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999).

8. "[W]hile a non-client cannot recover against a lawyer for negligence, a lawyer may be liable for negligent misrepresentation to a non-client when”: • information is transferred by an attorney to a known party for a known purpose”, • liability is not expressly limited or disclaimed but invited, and • the claimant has justifiably relied on a lawyer’s representation of material fact. • McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 794 (Tex. 1999).

9. “[A]n accountant may be liable to a strictly limited group of investors who justifiably rely on negligent misrepresentations in a corporate audit report.” • McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 794 (Tex. 1999).

10. Negligent Misrepresentation RESTATEMENT (SECOND) OF TORTS §552; McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex. 1999).

11. New Texas Supreme Court CaseConcerning Design Professionals Martin K. Eby Constr. Co. v. LAN/STV, No. 11-0810 (Tex.) Argued October 8, 2013 Opinion issued June 20, 2014

12. Martin Eby – Concerns Expressed from the Bench Where is the remedy for the contractor? Why is the remedy against DART legally inadequate? Couldn’t DART sue LAN/STV and pass through damages to the contractor? Will granting a remedy to the contractor turn entire construction site into a tort lawsuit?

13. Martin Eby - Opinion by Justice Hecht • Applied the economic loss rule to bar claims of negligent misrepresentation by a contractors against an architect hired by the owner • Rejected the comment in Restatement (Third) that would allow liability for economic loss caused by negligent design or misrepresentation • Determined that the parties should allocate the risk of design errors by their contracts, rather than asking the Courts to allocate the risk

14. Questions?