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Anchorage v. Integrated Concepts and Research Corporation

United States District Court, D. Alaska

March 4, 2015

ANCHORAGE, a Municipal Corporation, Plaintiff,
v.
INTEGRATED CONCEPTS AND RESEARCH CORPORATION; PND ENGINEERS, INC.; CH2M HILL ALASKA, INC.; GEOENGINEERS, INC., Defendants,
v.
CH2M HILL ALASKA, INC., Third-Party Plaintiff,
v.
TERRACON CONSULTING, INC. Third-Party Defendant.

ORDER

SHARON L. GLEASON, District Judge.

There are currently several motions pending before the Court. This Order addresses (1) PND Engineers' Motion for Summary Judgment - Economic Loss Doctrine at Docket 91 and (2) CH2M Hill's Motion for Summary Judgment at Docket 94. The motions have been fully briefed and oral argument was held on October 28, 2014.

After both PND's and CH2M Hill's motions were submitted, the Court granted the Municipality's (MOA) motion to amend its complaint. MOA's First Amended Complaint adds a negligent misrepresentation claim against PND, and negligence and negligent misrepresentation claims against CH2M Hill.[1] It also adds GeoEngineers, Inc. as a defendant.[2] The First Amended Complaint expands on the nature of the damages sought, including with respect to MOA's allegations of property damage and costs to prevent risks to persons and/or property.[3] For example, MOA's professional negligence claim against PND in MOA's initial complaint alleged that "Plaintiff's real property has been damaged and rendered unusable...."[4] The same claim in MOA's First Amended Complaint alleges that "Plaintiff's property has been damaged, Plaintiff's property has been lost, and costs have been occurred and will continue to be incurred to prevent risks to persons and/or property...."[5]

STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(a) directs a court to "grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." "The moving party initially bears the burden of proving the absence of a genuine issue of material fact."[6] In cases where the non-moving party bears the burden of proof at trial, the moving party "need only prove that there is an absence of evidence to support the non-moving party's case."[7] If the moving party meets this burden, then the non-moving party must present specific evidence demonstrating the existence of a genuine issue for trial, i.e., "evidence from which a jury could reasonably render a verdict in the non-moving party's favor."[8] The non-moving party may not rely on mere allegations or denials.[9] When considering a motion for summary judgment, a court must accept as true all evidence presented by the non-moving party and draw "all justifiable inferences" in the non-moving party's favor.[10] If the evidence provided by the non-moving party is "merely colorable" or "not significantly probative, " summary judgment is appropriate.[11]

DISCUSSION

I. PND's Motion

PND asserts that MOA's initial complaint sought solely economic damages in tort from PND, and maintains that MOA cannot pursue such claims against PND and its subcontractor, CH2M Hill, because they are precluded by Alaska's economic loss doctrine.[12] This doctrine generally bars tort recovery for purely economic losses. PND asserts that its summary judgment motion "concerns no issue of fact. Rather, it concerns the legal issue of whether [MOA] can assert tort claims against PND for its alleged economic loss."[13] PND maintains that Alaska applies a "nature of the damages test" to distinguish contract claims from tort claims and Alaska's economic loss doctrine "confines claims for economic loss to the law of contracts."[14] Since there was no contractual privity between the MOA and PND (at least with respect to MOA's claims that have been raised in this case), PND maintains it is entitled to summary judgment.

In its Opposition, MOA explains that it has divided the damages it is seeking into three categories. It asserts its "Category I Damages" are property damage, not economic loss, and thus are recoverable in a tort action. At the very least, MOA argues that a material factual dispute exists as to whether its Category I damages constitute property damage as opposed to economic loss.

MOA acknowledges that its Category II and III damages are economic loss. But it asserts that while the Alaska Supreme Court has not "squarely addressed the issue, " according to MOA, Alaska law does, or at least should, permit the recovery in tort of economic loss in the absence of contractual privity, and particularly when the loss results from a design professional's negligent acts.[15] MOA also asserts that economic loss is recoverable under Alaska law on a claim for "regular" negligence when the plaintiff is within a foreseeable class that the defendant knew or had reason to know is likely to suffer economic damages as a result of its conduct.[16] Finally, MOA asserts that economic loss is recoverable in an action for negligent misrepresentation because that is an economic tort, for which the appropriate remedy is damages for pecuniary loss.[17]

Integrated Concepts and Research Corporation (ICRC) had asserted that PND's motion should be deemed moot or held in abeyance because of procedural issues that were then pending. It also argues that "Alaska law does not support the sweeping relief sought by PND based on a limited factual record."[18] ICRC adds that PND did indeed have a direct contractual relationship with MOA for several years, which it asserts is a disputed material factual issue.[19] ICRC also summarizes its perspective on Alaska's economic loss doctrine, although it focuses its analysis on several cases in which there was privity of contract between the litigants. Based on that analysis, ICRC asserts that the focus under Alaska law is not on the "nature of damages, " as PND has maintained. Rather, ICRC asserts the case law "shows a clear focus on the nature of the duty allegedly breached by the defendant."[20] ICRC asserts that "at this stage of the proceedings, there appears little room for disputing that PND served as the professional responsible for the OCSP [Open Cell Sheet Pile] design, which, under Alaska law, potentially opens the door to recovering economic losses."[21]

In its Reply, PND responds that there is no reason to delay a ruling on its motion, asserting that the "issues raised in PND's motion - i.e., the proper legal characterization of [MOA]'s claims - directly relate to the issues presented by [MOA's then-pending] motion to amend."[22] PND further maintains that none of the reasons argued by MOA and ICRC for not applying the economic loss doctrine apply here. First, PND maintains that the Category I damages are not property damages because the Backlands property that was allegedly damaged was "created because of the work that PND did on the Project, " and thus it is not "other property." Second, PND asserts that the alleged risk to persons or to the Project property is too speculative to warrant application of that exception to the economic loss doctrine. Third, PND maintains that the Alaska Supreme Court has not, and likely would not, allow professional negligence tort claims for economic loss against professional service providers and particularly when there is no contractual privity. Fourth, PND argues that MOA is incorrect as a matter of law when it asserts that the economic loss doctrine only applies when the parties are in privity of contract. Fifth, PND asserts that MOA's interpretation of Alaska law regarding a foreseeable class of plaintiffs is overbroad and inapplicable. And finally, PND asserts that MOA's negligent misrepresentation claim should be precluded because it is "an impermissible attempt to plead around the economic loss doctrine, " because, in PND's view, that claim is in essence alleging a negligent breach of PND's contractual obligations.[23]

II. CH2M Hill's Motion

CH2M Hill's motion for summary judgment is also based on the economic loss doctrine. And, like PND, CH2M Hill observes that there was no privity of contract between it and MOA. The parties' briefing on this motion contains each party's perspective on the relevant Alaska case law, as well as CH2M Hill's analysis of the policy reasons that support reliance on the economic loss doctrine, and in particular the doctrine's benefit in construction projects with multiple parties. MOA, for its part, devotes considerable briefing to its argument that economic loss is recoverable in an action for professional negligence when the parties are ...


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