Pacific Boring, Inc. v. Staheli Trenchless Consultants, Inc.
Docket: Case No. C14-187RSM
Court: District Court, W.D. Washington; October 5, 2015; Federal District Court
Defendants’ Motion for Summary Judgment on Plaintiff Pacific Boring, Inc.’s remaining claims has been granted, while Plaintiff’s Cross-Motion for Partial Summary Judgment has been denied. Defendants, Staheli Trenchless Consultants, Inc. (STC) and Dr. Kimberlie Staheli, contended that Pacific Boring's claims relitigate matters already decided by Judge Shaffer in King County Superior Court and are inconsistent with Washington law. Pacific Boring countered that the Defendants' arguments relied on unresolved facts from Judge Shaffer’s prior non-finding decisions and sought to dismiss the Defendants’ collateral estoppel defense, asserting that its dismissal would undermine the basis of Defendants' motion. The Court reviewed the submissions and determined oral argument unnecessary, ultimately siding with the Defendants.
The background includes STC's contract with the Northshore Utility District in April 2010 for consulting services on a sewer bypass project, which shifted from micro-tunneling to auger boring. In July 2011, contractors were invited to bid on installing sewer lines, with Pacific Boring, in collaboration with New West, winning the bid under specifications requiring an auger boring method. New West later proposed a design change to open shield pipe jacking, leading to a change order that placed design responsibility on New West. Tunneling began in November 2011, but complications arose that hindered Pacific Boring’s progress.
On December 6, workers discovered a significant sinkhole attributed to excessive cobbles, prompting New West to issue its initial notice of differing site conditions. By January 31, Pacific Boring withdrew its boring machine due to feasibility issues, leading the District to request New West to proceed with auger boring. New West relayed this to Pacific Boring, who deemed it impractical. Subsequently, the parties executed Change Order No. 2, allowing New West to utilize an open cut method, which was successfully completed for segment one, while Pacific Boring ceased further work on that segment.
Prior to segment two, New West sought to employ micro-tunneling due to concerns regarding potential issues similar to those encountered in segment one. After negotiations, Change Order No. 3 was finalized, permitting micro-tunneling, which concluded on April 5, 2012. In May 2012, New West filed a breach of contract lawsuit against the District and Pacific Boring in King County Superior Court, which was met with a countersuit from Pacific Boring. The two cases were consolidated, revealing a shared backdrop of unexpected soil conditions at a sewer project in Kirkland, Washington.
On September 6, 2013, Judge Catherine Shaffer issued partial summary judgment, confirming that Pacific Boring assumed all obligations from New West's contract with the District. The court ruled Pacific Boring’s claims regarding differing site conditions, particularly related to encountering cobbles, boulders, or groundwater, were dismissed. Similarly, New West’s claims regarding these conditions were dismissed with prejudice. Judge Shaffer referenced Change Order No. 1, which assigned design responsibilities to New West, highlighting that the contract clearly required the contractor to handle all encountered cobbles, while limiting the District’s payment for boulders over 36 inches. Groundwater conditions were also acknowledged as disclosed in the Geotechnical Data Report, with no dispute regarding this matter.
No DSC claim exists related to cobbles, boulders, or groundwater. Judge Shaffer ruled on December 13, 2013, dismissing several claims: New West's claim regarding dewatering was dismissed with prejudice, as were all claims from Segment 2 of the Project by New West and Pacific Boring, and claims for defective specifications, including compensation claims related to the District’s auger bore method. The dismissal of Pacific Boring’s differing site condition claim for Segment 2 was based on untimely notice under the contract.
Subsequently, Pacific Boring attempted to consolidate claims against Staheli in King County Superior Court, seeking to add causes of action related to the District's engineer. This motion was denied by Judge Shaffer, who noted that the remaining claims were settled, leading to a dismissal without prejudice. On February 7, 2014, Pacific Boring filed a new action against Defendants STC and Dr. Staheli in this Court.
The parties debate the similarity of issues between the current action and the King County case. Pacific Boring alleges that Defendants solicited bids, misrepresented ground conditions, and manipulated geotechnical reports to avoid liability for unexpected conditions. After starting the project, Pacific Boring encountered unanticipated wet ground, leading to a sinkhole and a claim for differing site conditions. On November 21, 2014, this Court dismissed Pacific Boring's claims for declaratory relief and violations of Washington’s Consumer Protection Act, while claims for professional negligence and negligent misrepresentation remain under consideration for summary judgment.
Summary judgment is warranted when the moving party demonstrates that no genuine dispute exists regarding any material fact and is entitled to judgment as a matter of law, as outlined in Federal Rule of Civil Procedure 56(a) and supported by case law. Material facts are those that could influence the case's outcome based on applicable law. Courts do not assess evidence for truth but rather determine if a genuine issue for trial exists, favoring inferences for the non-moving party. However, the non-moving party must present sufficient evidence on essential elements of their case to avoid summary judgment, with mere minimal evidence being inadequate.
In cases involving collateral estoppel, Washington law applies due to the diversity jurisdiction of the case. Collateral estoppel aims to conserve judicial resources and provide finality, and its applicability is governed by the forum state's laws. In Washington, collateral estoppel is appropriate if four criteria are met: (1) the issue is identical to one previously adjudicated, (2) there was a final judgment on the merits, (3) the party against whom it is asserted was a party or in privity with a party in the prior case, and (4) applying the doctrine does not result in injustice to the party against whom it is applied. Each of these factors will be examined in detail by the Court.
Identical claims of misrepresentation and negligence by the Plaintiff were not raised in the prior State Court case, but the Defendants argue that the ability to relitigate issues is unaffected by differences in claims. They reference a Supreme Court ruling asserting that issues conclusively determined by a competent court cannot be contested in subsequent suits, regardless of the causes of action. Although the Court acknowledges that the claims differ from those in the state court, it finds that several issues previously decided are identical, thus satisfying this factor for collateral estoppel.
Regarding final judgment on the merits, the Plaintiff contends that Judge Shaffer's summary judgment lacked finality due to the absence of a CR 54(b) certification and that the subsequent settlement agreement nullified the previous rulings. The Defendants counter that Washington appellate decisions establish that partial summary judgments can indeed fulfill the finality requirement for collateral estoppel, emphasizing that the CR 54 standard does not apply in this context. The court's determination of finality, as per Washington law, aims to prevent relitigation of resolved issues and promote judicial economy, aligning with the majority of jurisdictions that adopt a pragmatic approach.
Cunningham references multiple sources regarding the factors influencing whether a judgment is considered final for collateral estoppel. Key considerations from Hummus Co. v. Commonwealth Oil Ref. Co. include the nature of the decision, the adequacy of the hearing, and the opportunity for review. The Restatement (Second) of Judgments outlines that a final judgment includes any prior adjudication deemed sufficiently firm for conclusive effect, with factors such as deliberation adequacy, firmness, party representation, reasoned support, and appealability being critical.
In assessing the state court settlement agreement, the Court finds ambiguity regarding any revisions to Judge Shaffer's rulings and notes that the application of collateral estoppel pertains to Judge Shaffer’s earlier partial summary judgments, not the dismissal based on the settlement. Under Cunningham, partial summary judgments can fulfill the Rains factor, promoting judicial efficiency and finality. The Court determines that Judge Shaffer’s prior decisions were sufficiently firm, as the plaintiff was adequately heard, and there was an opportunity for appeal.
Regarding the same-party requirement for collateral estoppel, the plaintiff concedes this point. On the matter of potential injustice in applying collateral estoppel, the burden lies with the plaintiff. The plaintiff's argument against injustice is based on the perceived erroneous rulings by Judge Shaffer, suggesting a preference for litigation in this Court instead of King County Superior Court. However, the defendants contend that the plaintiff had ample opportunity to contest the issues before Judge Shaffer, supporting their position with Thompson v. State Dept. of Lic., which emphasizes that public policy favors avoiding duplicate proceedings when parties had sufficient opportunity to litigate. The Court finds the defendants' argument more compelling, noting that potential errors in prior rulings do not permit collateral attacks.
Collateral estoppel applies in this case, preventing Plaintiff from relitigating issues previously decided by Judge Shaffer in partial summary judgment. Consequently, for the Defendants’ Motion for Summary Judgment, the Court determines that Pacific Boring is barred from contesting Judge Shaffer's prior rulings. Regarding hearsay, Plaintiff claims that Judge Shaffer’s contract rulings are hearsay, but the Court agrees with Defendants that such rulings are admissible for establishing collateral estoppel, referencing Wuerfel v. City of Seattle.
In terms of professional negligence claims against STC and Dr. Staheli, Plaintiff must demonstrate that Defendants owed a duty, breached that duty, caused an injury, and that the breach was the proximate cause of the injury. The existence of a duty can arise from statute or common law. Plaintiff asserts that Defendants had a duty under professional engineering standards and relevant WAC regulations and RCW statutes. However, Defendants contend these regulations and statutes establish obligations to the public, not to Pacific Boring specifically. They argue that actionable duty must be owed directly to the injured party, citing Taylor v. Stevens County to support the notion that a general duty to the public does not constitute a specific duty to individuals. Defendants reference Burg v. Shannon & Wilson, Inc. to illustrate a scenario where a duty owed to the public did not translate into liability for individual claims.
The appellate court determined that the statutory and regulatory provisions related to engineers' ethical obligations do not impose an individual duty to identifiable groups or individuals, only a general duty to public welfare. In the case at hand, the homeowners failed to demonstrate a specific relationship with the engineer beyond this general duty. Although Plaintiff cited the Burg case as potentially allowing claims for professional negligence if a close relationship exists due to a tortfeasor's affirmative conduct, the court clarified that Burg did not directly address the duty owed by engineers to subcontractors.
Plaintiff referenced Donatelli v. D.R. Strong Consulting Engineers, Inc. to support the notion that an engineering firm could incur liability through affirmative conduct with a subcontractor, but this case only considered the relationship between an engineering firm and its direct client. The Defendants countered by citing Berschauer/Phillips Construction Co. v. Seattle School District No. 1, which held that design professionals do not owe a duty of care to contractors in the absence of a contract.
The court discussed the "independent duty doctrine," which allows for tort claims if the injury stems from a breach of a duty independent of contractual obligations. This doctrine emphasizes that the classification of an injury as economic or non-economic is insufficient; the court must assess whether an independent tort duty exists. The Washington Supreme Court noted the importance of limiting duties in contractual relationships to maintain certainty and predictability, as tort law should not be a mechanism for resolving commercial disputes. Recognizing that allowing tort claims for contract disputes could disrupt business activities, the court reiterated the need for parties to manage their contractual relations effectively.
Affiliated FM Ins. suggests that Washington courts recognize a duty of care owed by certain professionals, including engineers, to third parties. However, it also reinforces that a tort remedy may not be available under specific circumstances, as noted in Berschauer and Eastwood cases. The court concludes that Berschauer remains valid law, is more applicable to the current case than the cases cited by Plaintiff, and that Washington law does not support Plaintiff's assertion of a professional duty owed by Defendants. The lack of duty undermines Plaintiff's claim of professional negligence.
Defendants further argue that any potential duty owed to Plaintiff is negated by the Plaintiff's actions, which they claim constitute an intervening cause or assumption of risk. Defendants assert that Plaintiff did not adhere to the District’s design, which bars a defective design liability claim according to relevant case law. The court notes that Plaintiff is estopped from relitigating the issue of deviation from the design. Even if a duty existed, any claim of professional negligence based on defective plans would fail.
Regarding the Spearin Doctrine, the court agrees with Plaintiff that the doctrine is not applicable since Plaintiff's claims are based on negligence and negligent misrepresentation, rather than a warranty claim. For negligent misrepresentation, a plaintiff must prove that the defendant provided false information negligently, which the plaintiff reasonably relied upon, and that this misinformation was the proximate cause of their damages. Proximate cause includes both cause in fact and legal cause, with the latter evaluating whether the connection between the defendant's actions and the resulting harm is sufficiently substantial to warrant liability.
Legal liability in this context is determined through a combination of logic, justice, policy, and legal precedent. Legal causation is identified as a question of law. The Plaintiff's Complaint lacks clarity regarding: (1) the specific false information provided by the Defendants; (2) the reasons this information was false; (3) the negligence involved in providing it; and (4) the justification for the Plaintiff's reliance on it. The Plaintiff claims that the Defendants supplied flawed documents related to ground conditions and that this misled project bidders. Additionally, the Plaintiff asserts that Defendants provided misleading information directly, detailing two instances of alleged negligent misrepresentation: modifications to a GeoEngineer’s report and oral advice about ground conditions. Defendants counter that the first claim fails due to lack of duty, and the second claim fails as the Plaintiff cannot prove causation since the advice was given pre-bid during a brief conversation, which did not cause the Plaintiff’s damages. Defendants argue the Plaintiff failed to uphold its design and engineering obligations and did not clarify the elements of negligent misrepresentation in its Opposition. The Plaintiff's legal analysis does not connect specific facts to its claims, which does not meet the requisite legal standard for demonstrating essential elements of the case.
Plaintiff fails to substantiate its claim and instead critiques Defendants’ arguments, notably asserting that its execution of Change Order 1 was influenced by Staheli’s misrepresentation. However, the Court finds this insufficient to avoid summary judgment since, even when considering all favorable inferences, Plaintiff cannot demonstrate legal causation. Plaintiff is estopped from claiming that the ground conditions deviated from those anticipated in the contract with the District and from asserting that dewatering was not included in the contract. The Court determines that the damages claimed by Plaintiff stem from its own actions rather than Defendants’ statements, thus negating the need to consider Defendants’ assumption of risk defense.
The request for attorneys’ fees is rendered moot as the Court has dismissed the remaining claims. Defendants’ motion to strike the Declaration of Sam Baker is deemed improper due to lack of response opportunity, and the Court opts not to rule on it presently. The Court concludes by granting Defendants’ motion for summary judgment, denying Plaintiff’s cross-motion regarding collateral estoppel, and closing the case. The Court notes procedural discrepancies in evidence citations by Defendants and emphasizes the need for proper citation adherence. Plaintiff's allegations include claims of negligent misrepresentation due to Defendants' actions and solicitations, but the Court does not find these assertions compelling enough to support a claim of negligent misrepresentation.
