• Economic Loss Rule Upheld in Maryland Court of Appeals

  • In Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, the Maryland Court of Appeals confirmed that the Economic Loss Rule is alive and well in Maryland. Generally, the Economic Loss Rule prevents parties from asserting tort claims (e.g., negligence and negligent misrepresentation) against parties with whom they do not hold a contract in order to extricate themselves from the terms of their contracts. In Balfour Beatty, a contractor on a design-bid-build project asserted claims against the owner’s engineer based on alleged deficiencies in the design documents. The engineer moved to dismiss the contractor’s claims, arguing that – as there was no contract between the contractor and the engineer – the contractor’s claims were barred by the Economic Loss Rule and should be dismissed. The trial court and the Maryland Court of Special Appeals (an intermediate appellate court) agreed with the engineer.

    When the contractor appealed the case to the Maryland Court of Appeals, several organizations (American Council of Engineering Companies of Maryland, American Council of Engineering Companies of Virginia, American Council of Engineering Companies, American Society of Civil Engineers, American Institute of Architects, Maryland Society of Professional Engineers, Inc., National Society of Professional Engineers) representing the interests of design professionals came together to file an amicus brief, sharing their perspective with the Maryland Court of Appeals on the importance of contracts in the construction industry for the fair and equitable management of risk and responsibility between parties involved in a construction project.

    On February 22, 2017, the Maryland Court of Appeals affirmed the lower courts’ decisions and adopted the logic and reasoning advanced in the amicus brief, finding that the intricate web of contracts on complex construction projects justified continued application of the general rule requiring parties to assert claims along lines of contractual privity. The Court’s decision cites several cases highlighted for the Court only in the amicus brief (and not the briefs of the contractor and engineer), evidencing the significant impact the amicus brief had on the outcome in this case. This decision benefits design professionals in Maryland, and elsewhere, who manage risk through contracts and rely on courts to enforce their bargained-for expectations.

  • Written by

    Jonathan C. Shoemaker, Esquire
    Partner
    Lee & McShane, PC

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