• ACEC/VA Signs Onto Maryland Amicus Brief

  • Last month, ACEC/VA was asked to join other A-E industry groups in an amicus brief to be filed in connection with a professional liability case pending before the Maryland Court of Appeals, Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl LLC. In this case, the contractor, Balfour Beatty, sued the project engineer, RKK, alleging both professional negligence and negligent misrepresentation. As is usual and customary on a design-bid-build project, Balfour Beatty and RKK each had its own contract with the owner, the City of Baltimore, and thus, there was no contractual privity between Balfour Beatty and RKK. As such, RKK owed no contractual duties to Balfour Beatty. However, in its appeal, Balfour Beatty attacks the economic loss doctrine in Maryland, arguing that a contractor who purportedly relies on the design drawings and specifications prepared by a design professional pursuant to the contractor’s contract with the project owner should be permitted to pursue a claim directly against the design professional that prepared those documents. The amicus brief supports the proposition that a contractor should be barred from suing the design professional where, as is the case here, the contractor has allegedly suffered economic loss but no other injury (such as personal injury or damage to real property).

    The engineering community has a significant interest and stake in the outcome of this appeal. If the Court of Appeals were to adopt the position advocated by Balfour Beatty, it would undermine the ability of design professionals providing services in Maryland to enter into contracts with their clients that define the contracting parties’ relationship and apportions project-related risks and responsibilities between and amongst themselves based on the results of their contract negotiations. RKK is requesting the Court of Appeals to affirm the judgments of the trial court and the Maryland Court of Special Appeals, confirming that Maryland law recognizes the importance of the private ordering of relationships through contracts to retain predictability and certainty in the allocation of risk in the A-E-C industry. If the Maryland Court of Appeals were to side with Balfour Beatty, it is feared that courts in the District of Columbia would follow suit, as D.C. courts often look to Maryland appellate courts when D.C. law is silent or unsettled on an issue.

    This case strikes at the heart of the economic loss rule, which promotes certainty by “preventing parties from recovering in tort to extricate themselves from prior freely negotiated agreements.” Maryland courts have long applied the economic loss rule to construction claims, recognizing the importance of settled expectations to the construction industry. Balfour Beatty attacks this principle, rejecting the fundamental boundaries between tort and contract law, which would subject the construction industry to significant hardship by eliminating predictability and certainty in the allocation of risk and responsibility on a construction project. 

    The focus in this case is the public policy considerations underpinning Maryland’s long-established, and prudent, application of the economic loss rule to bar claims for economic loss damages in the absence of contractual privity. Arguments for upholding this rule include:

    •    The economic loss rule is based on sound public policy and encourages parties to allocate risk and responsibility in a manner that reflects the commercial realities of a construction project. The Court of Appeals should reject Balfour Beatty’s efforts to disrupt the private ordering of relationships in the construction industry.

    •    The economic loss rule in Maryland requires privity or a “privity equivalent” to recover economic loss damages, which guards against the potentially limitless exposure that would result in the absence of such a mandate. In the construction industry, there is no “privity equivalent” between a contractor and a design professional separately retained by an owner, unless a contract establishes such a relationship. To find otherwise would expose design professionals to potentially limitless claims for economic loss damages from various members of the construction team, and, as a result, increase the cost of both public and private procurements of design services.

    ACEC/VA understands the importance of this issue to the engineering community. While Virginia courts have in years past held onto to the proposition that the lack of privity of contract should bar a party in the construction chain from being able to sue the project’s architect/engineer under a negligent misrepresentation theory, in more recent years, the tide appears to be turning as Virginia courts have become increasingly more liberal. While a Maryland Court of Appeals’ ruling in favor of Balfour Beatty may not have a direct impact on A/E firms here in Virginia in the near term, we fear what might happen down the road.

    For additional information regarding this issue, contact Nancy Israel at 804-477-6573 or nisrael@acecva.org