Donatelli v. D.R. Strong Consulting Engineers, Inc.

Citations: 163 Wash. App. 436; 261 P.3d 664Docket: No. 65568-0-I

Court: Court of Appeals of Washington; July 25, 2011; Washington; State Appellate Court

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Professional engineers must exercise reasonable skill and judgment when providing engineering services, a duty that remains intact despite the economic loss rule, now referred to as the "independent duty doctrine." D.R. Strong Consulting Engineers, Inc. sought summary dismissal of negligence and negligent misrepresentation claims from Steven and Karen Donatelli, arguing that these claims were barred by the economic loss rule. The trial court denied this motion, leading to discretionary review by the court. 

Subsequently, the supreme court modified existing case law through opinions in Eastwood v. Horse Harbor Foundation, Inc., and Affiliated FM Insurance Co. v. LTK Consulting Services, Inc., clarifying that professional engineers could be held liable in tort regardless of the independent duty doctrine. Consequently, the appellate court affirmed the trial court’s denial of D.R. Strong's motion for partial summary judgment and remanded for further proceedings.

The Donatellis owned property in King County intended for development into two short plats and had contracted D.R. Strong for engineering services. After initial preliminary approval in October 2002, the project stalled, leading to the expiration of that approval in 2007. D.R. Strong later assisted in obtaining new approval, but a market crash in 2008 caused financial difficulties for the Donatellis, ultimately resulting in foreclosure.

The Donatellis subsequently filed suit against D.R. Strong for breach of contract, violations of the Consumer Protection Act, and claims of negligence and negligent misrepresentation. While the trial court dismissed the CPA claim, it denied summary judgment on the negligence claims, which D.R. Strong contested based solely on the economic loss rule. The court held that this rule does not prevent the assertion of tort claims in such contexts. The trial court's decisions were upheld, emphasizing that where there is a contractual relationship, the economic loss rule typically limits recovery to contract remedies, but exceptions apply in tort claims.

The application of the economic loss rule is a legal question that does not necessitate the trial court's assessment of genuine material fact issues for summary judgment. The cases of Eastwood and Affiliated clarify this legal question concerning the independent duty doctrine, which supersedes the economic loss rule, particularly concerning tort claims against professional engineers. The Washington Supreme Court, in Eastwood, redefined the economic loss rule as the "independent duty" doctrine, asserting that tort injuries are actionable if they stem from a tort duty that exists independently of contractual obligations. A majority opinion indicated that the independent duty doctrine allows for recovery of damages even if an economic loss defense is presented.

In Affiliated, the court addressed a scenario involving the Seattle Monorail, which suffered fire damage due to a faulty grounding system recommended by LTK Consulting Services. The Monorail's operator, Seattle Monorail Systems (SMS), had its insurer, Affiliated FM (AFM), pursue a negligence claim against LTK after subrogating SMS's rights. LTK contended that the economic loss rule barred the lawsuit due to purely economic damages, leading to a summary judgment in its favor by the U.S. District Court. AFM appealed, prompting a certified question to the Washington Supreme Court regarding the ability of a non-privity party to sue in tort for property damage. The court's decision included multiple opinions, with varying levels of agreement among the justices.

LTK, by agreeing to provide engineering services, assumed a duty of reasonable care towards its clients, regardless of the economic loss rule defense. This conclusion is based on the independent duty doctrine from Eastwood, which applies to professional engineers. The plurality opinion, written by Justice Chambers and supported by four justices, reinforces that engineers must exercise reasonable skill and judgment in their work, interpreting the case as a clear instance of professional negligence where a duty exists to use the skill and care typical of the profession. Justice Chambers concurs that LTK owed this duty to SMS as a concessionaire and clarifies that the case does not involve the independent duty doctrine or economic loss rule.

A majority of the supreme court determined that professional engineers owe a tort duty of reasonable care to clients, consistent with Washington law, and this duty exists even with a contractual relationship. The plurality's stance on the independent duty doctrine does not affect this conclusion. Steven Donatelli signed a contract with D.R. Strong for engineering services that limited liability to $2,500 or the fee charged, unless waived by the client for an additional fee; however, Donatelli did not waive this limitation.

In their complaint, the Donatellis allege negligence, claiming D.R. Strong failed to complete the project timely and competently, taking over five years and charging more than double the initial estimate. They assert that this negligence resulted in damages exceeding $1,500,000. Additionally, for the fourth cause of action, they allege negligent misrepresentation, stating that D.R. Strong inaccurately represented the project completion timeline and costs, which led them to rely on these statements and suffer similar damages.

D.R. Strong's motion for partial summary judgment contended that the Donatellis’ claims of negligence and negligent misrepresentation were precluded by the economic loss rule. However, D.R. Strong did not assess if there were any genuine issues of material fact as required for summary judgment. The ruling analyzed whether D.R. Strong could secure judgment as a matter of law based on the independent duty doctrine, which clarifies that claims arising from extra-contractual duties are not barred by the economic loss rule. The court determined that D.R. Strong was not entitled to judgment on the Donatellis’ negligence claims, affirming the denial of summary judgment.

D.R. Strong attempted to differentiate the case from precedent set in Eastwood but found these arguments unconvincing. Although the distinctions were factually accurate, they did not undermine Eastwood's applicability, which requires courts to evaluate if the injury stems from a breach of a tort law duty separate from the contract. The court also noted that earlier economic loss cases could still align with the independent duty doctrine, as the plaintiffs’ claims were linked to their contracts.

In addressing Affiliated, D.R. Strong suggested that the ruling only allowed recovery for fire loss damages under negligence. However, the court disagreed, asserting that the lead opinion in Affiliated applied the independent duty doctrine broadly, not limited to property damage. The plurality opinion supported this interpretation without restricting the duty of care to property damage alone. 

Furthermore, D.R. Strong referenced a footnote in the lead opinion, arguing it upheld the Berschauer/Phillips ruling. The court clarified that the footnote was a response to a dissenting opinion and did not imply that Affiliated and Eastwood altered the Berschauer/Phillips rule. D.R. Strong's interpretation of these cases was deemed incorrect.

In Berschauer/Phillips, a general contractor sued an architect, engineering company, and construction inspector for negligence due to inadequate design and faulty inspections, resulting in unexpected costs and construction delays. The supreme court ruled that the contractor could not pursue tort claims for these delays, emphasizing that allowing such claims would undermine contractual risk allocations and disincentivize negotiation in the construction industry. In contrast, the current case involves a contract between the Donatellis and D.R. Strong, which provided an opportunity for them to allocate risks, aligning with the logic of Berschauer/Phillips. However, the independent duty doctrine allows for claims to be actionable despite existing contracts if a separate duty exists. The court does not need to determine if prior court of appeals cases are distinguishable, as the denial of summary judgment is supported by the principles established in Eastwood and Affiliated, which were decided after the trial court's ruling. Ultimately, the court concluded that the independent duty doctrine does not bar the tort claims in this case and affirmed the denial of partial summary judgment, remanding for further proceedings without addressing issues of duty breach, causation, or damages.

Professional engineers and land surveyors are held to a standard of reasonable diligence, skill, and ability, particularly concerning the search for existing easements on properties, as established in App. 476, 591 P.2d 809 (1979). In Burg v. Shannon, Wilson, Inc., 110 Wn. App. 798, 43 P.3d 526 (2002), it was affirmed that these professionals have statutory duties under chapter 18.43 RCW and chapter 196-27 WAC towards their clients, employers, and the public in special relationships. They are expected to exercise the skill, diligence, and judgment of a prudent practitioner, achieve agreed-upon goals with clients, and promptly communicate any progress or changes that could impact project objectives. Additionally, they must maintain competence in relevant technology and regulations, and inform clients or employers when a project is unlikely to succeed based on their professional assessments. The document also references a concurrence/dissent that critiques the independent duty inquiry, asserting it does not undermine previous case law, which maintains that tort remedies may not be applicable in certain situations.