Engineer’s exposure to contractor claims. Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl,, LLP. Court of Special Appeals of Maryland (2016), by Hugh Anderson

Summary: Design-bid-build City of Baltimore wastewater treatment plant upgrade project. The engineering firm Rummel Klepper  & Kahl prepared the design  and project timeline estimates. Fru-Con Construction (predecessor to Balfour Beatty Infrastructure) was the successful bidder. BBI ultimately filed a $10 million lawsuit against RKK, alleging negligence and similar tort claims based on contentions that BBI had experienced delays and complications as a result of errors in the design, and that BBI had relied to its detriment on flawed timeline projections. BBI stated that RKK was aware that BBI and other bidders would rely on the design and schedule documents, and that therefore the engineer owed a duty to the bidders. BBI asserted that although there was no contract between BBI and the engineer, that nonetheless an “intimate nexus” existed between the two during the project, tantamount to a direct contract.

The engineering firm filed a motion to dismiss, arguing that the losses that BBI sought  to  recover  were  purely  economic  in  nature  and  therefore  could  not  be recovered in a tort action under Maryland law. The trial court granted the motion to dismiss, and the contractor appealed.

Decision: The Maryland Court of Special Appeals affirmed the dismissal of the contractor claims in a very thorough decision. The court held that in Maryland, in the absence of privity of contract, death, personal injury, property damage, or the risk of personal injury or death, there is no duty of care by an architect or engineer to a contractor. The court rejected the proposed “intimate nexus” argument.

The court noted that in construction, contracts allocate the risks and provide mechanisms for bringing claims. The economic loss doctrine forces the parties to pursue rights under the applicable contracts, rather than under a negligence/tort theory. The court discussed the rights that contractors enjoy under the Spearin Doctrine, under which the contractor may rely on the soundness of the design that it is required to follow, and may bring a breach of warranty claim against the owner if the design is flawed.

In rejecting the “intimate nexus” idea, the court remarked on the beneficial aspects of insulating the engineer from contractor claims, especially on public projects. Exposing the engineer to tort liability would “create a chilling effect on the design professional’s neutrality and ability to communicate effectively” regarding the project, especially in regard to public safety. The court also reiterated the importance of the written contracts and case law providing remedies to contractors—factors not found in other contexts in which the intimate nexus rule had been enforced (such as accountants’ duties to certain third parties).

Comment: As the Maryland court noted, there are a few jurisdictions where the courts have recognized an equivalent to privity of contract in certain situations. For example, there are Ohio cases from the 1990s that held that if the design professional supervises the work, or exercises excessive control over the contractor (for example, stop work orders), then the relationship would be deemed the equivalent of having a direct contract relationship. The EJCDC contracts create a limited, arm’s length role for the engineer that avoids the “intimate nexus” problem.

Maryland is in the ranks of states that strongly support the economic loss doctrine as a defense by design professionals against contractor claims. As discussed in other case summaries over the years, the status of the economic loss doctrine is ambiguous in some states, and in some states contractors are relatively unrestricted in their ability to assert claims directly against design professionals.