In Donatelli v. D.R. Strong Consulting Engineers, Inc., a 5-4 decision issued on November 14th, the Washington Supreme Court affirmed the denial of an engineer’s summary judgment motion seeking dismissal of claims for professional negligence and negligent misrepresentation under the independent duty doctrine (formerly the economic loss rule).
The Donatellis hired D.R. Strong in 2002 to develop their King County property into two short plats. In their amended complaint, the Donatellis alleged that D.R. Strong represented that the project could be completed in approximately eighteen months. Five years later, however, the project was not complete. As a result, the Donatellis alleged they suffered substantial financial losses and eventually lost the property in foreclosure. The Donatellis sued D.R. Strong for breach of contract, CPA violations, negligence and negligent misrepresentation claiming over $1.5 million in damages.
The Donatellis likely asserted the negligence and negligent misrepresentation claims to avoid application of a contractual limitation of liability clause, which limited damages to the greater of D.R. Strong’s professional fee or $2,500.
In an effort to constrain the Donatellis to their contractual remedies, D.R. Strong moved for partial summary judgment on the CPA, negligence and negligent misrepresentation claims. The trial court granted the motion on the CPA claim, but denied summary judgment as to the negligence and negligent misrepresentation claims. On discretionary review, the Court of Appeals affirmed.
In its majority opinion, the Washington Supreme Court considered whether it could apply the independent duty doctrine, stating, “The Court of Appeals found that the independent duty doctrine did not bar the Donatellis’ claim for negligence. We agree but find that the independent duty doctrine cannot apply to this case because the record does not establish the scope of D.R. Strong and the Donatellis’ contractual duties.”
In reaching this decision, the Court concluded (internal citation and quotation marks omitted):
The independent duty doctrine is an analytical framework that is used to determine whether one party to a contract can bring tort claims against another party to the contract. The independent duty doctrine will allow a plaintiff to pursue tort claims against a defendant when the plaintiff can prove defendant’s breach of a tort duty arising independently of the terms of the contract. To determine whether a duty arises independently of the contract, we must first know what duties have been assumed by the parties within the contract.
Because there are genuine issues of material fact regarding the scope of D.R. Strong’s contractual duties to the Donatellis, we cannot apply the independent duty doctrine to say, one way or the other, whether D.R. Strong had a duty independent of the contract to avoid professional negligence.
In affirming the denial of D.R. Strong’s motion for summary judgment on the negligent misrepresentation claim, the Court concluded that the duty to avoid the alleged misrepresentations that induced the Donatellis to contract with D.R. Strong was independent of any contract the parties might have agreed to.
Chief Justice Madsen, in a spirited dissent joined by Justices Wiggins, James Johnson, and Charles Johnson, asserted that summary judgment should have been granted because (1) the Court’s 1994 Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1 decision was dispositive, (2) the Donatellis’ claims did not involve personal injury or property damage, and (3) the parties’ written contract contained a limitation of liability clause covering both the negligence and negligent misrepresentation claims.
The Court’s decision means that the case will likely be remanded to the trial court to further develop the factual record regarding the scope of the parties’ contractual relationship.