Municipality of Anchorage v. Integrated Concepts and Research Corp.

          ORDER RE PND's AND GEOENGINEERS' MOTIONS FOR SUMMARY JUDGMENT

          SHARON L. GLEASON, UNITED STATES DISTRICT JUDGE.

         Before the Court are Defendants PND Engineers, Inc.'s and GeoEngineers, Inc.'s motions for summary judgment.^[1] The motions have been fully briefed;^[2] oral argument was held on June 29, 2016.^[3]

         This order should be read in conjunction with the Court's order at Docket 478, in which the Court addressed Defendant CH2M Hill Alaska's motion for summary judgment.^[4]The rulings of the prior order shall apply to these parties. This order focuses on the distinct arguments and factual issues raised by PND and GeoEngineers in their motions.

         BACKGROUND

         The facts of this case are known to the parties and set out in the Court's order at Docket 188.

         Both PND and GeoEngineers argue that the economic loss doctrine precludes MOA's tort claims and that no exception to that doctrine applies. They argue that MOA's claims for negligence are untenable because Alaska law requires more than foreseeability to recognize a duty in negligence and the other relevant factors weigh against the recognition of such a duty. They also argue that MOA's professional negligence claims should be precluded under Alaska law. Last, they maintain that MOA's claims for negligent misrepresentation are legally untenable and factually unsupported.

         In response, MOA argues that Alaska law supports the finding of a duty in negligence. And it maintains that Alaska law permits an action for professional negligence against these Defendants. Finally, MOA maintains that its negligent misrepresentation claims are permitted under Alaska law and that it has demonstrated that there are triable issues of fact as to those claims.

         DISCUSSION

         This Court has subject matter jurisdiction for the reasons set out in the Court's prior order. The standard for summary judgment is also set out in that order.^[5]

         1. Negligence

         As the Court's prior order explained, pursuant to Geotek Alaska, Inc. v. Jacobs Eng'g Grp., Inc., ^[6] it will apply the multi-factor approach the Alaska Supreme Court set forth in D.S.W. v. Fairbanks N. Star Borough Sch. Dist. to determine whether an actionable duty in negligence exists as to a particular defendant. The Court's analysis of the D.S.W. factors in the prior order with respect to CH2M Hill Alaska is substantially the same for the two Defendants addressed here, with slight factual differences for the factors of certainty of injury and closeness of connection.^[7]

         Both PND's and GeoEngineers' motions raise new factual arguments that undermine the certainty of MOA's injury. PND cites to the Port Director's testimony “that the Backlands is permitted as a loading area for things like construction equipment and windmills.”^[8] PND also observes that cargo trucks are permitted to drive across the Backlands and the Port is leasing portions of the Backlands for cement storage.^[9]GeoEngineers echoes PND's argument and maintains that rebuilding the Port Expansion is unnecessary as the expansion area in its current state generates $10 million in annual revenue for MOA.^[10] These arguments, along with the reasons identified in the prior order, ^[11] demonstrate the uncertainty of MOA's injury. Accordingly, this D.S.W. factor strongly weighs against finding a negligence duty as to these two Defendants.

         The “closeness of connection” factor also differs for these Defendants, as they each played distinct roles in the Port Expansion Project. MOA argues that the harm caused by PND and GeoEngineers is closely related to MOA's injury because they were collectively responsible for the March 2008 Report, in which they concluded that the OCSP structure, if constructed as designed, would be stable in both static and seismic conditions.^[12] But both the design and the construction of the Port Expansion were the collaborative product of several entities. PND was a third-tier subcontractor, whose work was allegedly verified both internally by members of the design team, and externally by independent reviewers.^[13] GeoEngineers was a fourth-tier subcontractor, whose work was also internally and externally reviewed.^[14] The Court finds that the collaborative nature of the project, combined with the extensive system of internal and external review, diffuses the closeness of the connection between MOA's asserted injury and each Defendant's conduct. Accordingly, the Court finds that this factor does not support the imposition of a negligence duty as to these two Defendants.

         Although the Court has considered the different factual circumstances related to these Defendants, the Court finds that the D.S.W. factors weigh against the recognition of a duty in negligence as to either of them. Accordingly, the Court concludes that the economic loss doctrine precludes MOA's negligence claims against both PND and GeoEngineers.

         2. Professional Negligence

         PND and GeoEngineers each argue that MOA cannot maintain an action for professional negligence. But as the Court previously held in its prior order, Alaska law permits a project owner to sue a design professional in tort for economic losses arising from the professional's malpractice.^[15] Here, both PND and GeoEngineers were professional design and engineering companies that were hired for their expertise. As such, each company owed a duty to MOA, the project owner, to “use such skill, prudence, and diligence as other members of the profession commonly possess and exercise.”^[16]

         A claim for professional negligence requires more than a cognizable duty. A plaintiff must also establish each of the following elements: (1) “a breach of th[e] duty [of professional care];” (2) “a proximate causal connection between the negligent conduct and the resulting injury”; and (3) “actual loss or damage resulting from the professional's negligence.”^[17]

         None of the parties address these other elements. Defendants instead primarily argue that a professional negligence claim is not maintainable because the parties “engaged in a bargained-for allocation of risk in its chain of contracts.”^[18] PND asserts that through its contract it understood that “ICRC would be able to sue PND in contract for no more than $1 million.”^[19] But the Court has concluded that Alaska law imposes an independent duty in tort on design professionals, regardless of the contractual allocation of liability among the various parties. PND and GeoEngineers may have each bargained for specific limitations on liability to those to whom they are in privity of contract, but in the Court's view, those contractual limitations do not preclude MOA's claims of professional negligence against either Defendant under Alaska law. Accordingly, the Court will deny PND's and GeoEngineers' motions for summary judgment on MOA's claims for professional negligence.

         3. Negligent Misrepresentation

         a. The Legal Viability of MOA's Claims for Negligent Misrepresentation

         PND and GeoEngineers both cite to Alaska Pac. Assur. Co. v. Collins and maintain that MOA's negligent misrepresentation claims are impermissibly based on Defendants' contractual duties.^[20] Alaska Pacific involved allegations that an insurer had negligently breached its contractual duties to its insured. Specifically, the insured alleged that the insurer was liable for the “negligent investigation and denial of his claim and request for a litigation defense.”^[21] The Alaska Supreme Court recognized that an insurer “may be held liable for torts independent from its contractual duties, such as fraud, ” but held that “an action for negligence in breaching a specific contractual duty sounds in contract.”^[22]The case focused on a negligence claim between contracting parties, not a negligent misrepresentation claim between non-contracting parties. As such, the Court does not find its analysis to be applicable to MOA's negligent misrepresentation claims.

         PND also cites State for the Use of Smith v. Tyonek Timber, Inc., in which the Alaska Supreme Court affirmed its “commitment ‘to draw the line between injuries which properly find their remedy in tort and those which are more appropriately governed by contract principles.'”^[23] The Court is unpersuaded that Tyonek governs this case for two reasons. First, that case addressed a claim for negligence, not negligent misrepresentation. Second, the law in Alaska appears to have evolved since Tyonek's determination in 1984, perhaps most notably with the Alaska Supreme Court's decision in Geotek.^[24]

         For the foregoing reasons and consistent with the Court's ruling in its prior order, MOA may maintain an action for negligent ...