Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP
155 A.3d 445
| Md. | 2017Background
- The City of Baltimore hired Rummel Klepper & Kahl, LLP (Engineer) to design interrelated public projects (SC 852R and SC 845R) and produce bid-ready plans, specifications, timelines, and bidder responses.
- Balfour Beatty Infrastructure, Inc. (Contractor) won the SC 852R contract through competitive bidding, constructed denitrification filter (DNF) cells and pipe support systems per Engineer’s designs, and later experienced leaks, delays, and added remediation costs.
- Contractor sued Engineer for professional negligence, negligent misrepresentation, and under Restatement (Second) of Torts § 552, alleging Engineer knew bidders would rely on the designs and timelines and that design defects and delayed companion-project designs caused Contractor’s purely economic losses.
- Engineer moved to dismiss, arguing the economic loss doctrine bars tort recovery for purely economic harm absent privity or physical injury/risk and that the “intimate nexus”/privity-equivalent tests should not extend to design professionals on public projects.
- The Circuit Court and Court of Special Appeals dismissed and affirmed for lack of privity; the Maryland Court of Appeals granted certiorari and affirmed, holding design professionals on large government construction projects owe no tort duty for purely economic losses to non‑privity contractors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the economic loss doctrine bars a general contractor’s professional negligence claim against a design professional on a government project under the privity‑equivalent intimate nexus analysis | Contractor: intimate nexus/privity‑equivalent exists because Engineer knew bidders would rely on designs and timelines | Engineer: economic loss doctrine bars tort recovery absent privity or physical harm; intimate nexus should not apply in public construction | Held: Yes—economic loss doctrine applies; privity‑equivalent intimate nexus analysis not extended to design professionals on public projects |
| Whether negligent misrepresentation claims are barred when alleged reliance and foreseeability are present | Contractor: Engineer intended and knew bidders would rely; misrepresentation claim should proceed | Engineer: same economic loss rule bars such tort claims in this context | Held: Barred—negligent misrepresentation claim fails without privity or physical risk |
| Whether a § 552 Restatement negligent‑information claim can proceed against the Engineer | Contractor: Engineer supplied defective plans and knew contractors would rely | Engineer: § 552 does not override economic loss doctrine in this public‑contract context | Held: Barred—§ 552 claim fails for lack of a tort duty in this setting |
| Whether the privity‑equivalent (Credit Alliance/Walpert) test should be applied to designers on large public projects | Contractor: test should apply to professionals beyond accountants; relationship here meets the test | Engineer: public projects have a complex contractual network and public‑purse concerns that counsel against extending tort duties | Held: The Court declined to apply the privity‑equivalent test to design professionals on government construction projects; contractual allocation of risk governs |
Key Cases Cited
- Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965) (origin of modern economic loss doctrine in products context)
- E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (U.S. 1986) (economic loss doctrine used to limit tort damages and preserve contractual allocation of risk)
- Jacques v. First Nat'l Bank of Md., 307 Md. 527 (Md. 1986) (adoption of the intimate nexus/privity‑equivalent inquiry)
- Council of Co‑Owners Atlantis Condo., Inc. v. Whiting‑Turner Contracting Co., 308 Md. 18 (Md. 1986) (construction context: tort duty where negligent work creates risk of physical injury)
- Lloyd v. Gen. Motors Corp., 397 Md. 108 (Md. 2007) (economic loss doctrine bars recovery absent privity or physical injury/risk)
- Walpert, Smullian & Blumenthal, P.A. v. Katz, 361 Md. 645 (Md. 2000) (adoption of Credit Alliance three‑part test for privity‑equivalent intimate nexus)
- Chicago Title Insurance Co. v. Allfirst Bank, 394 Md. 270 (Md. 2006) (privity‑equivalent intimate nexus found based on linking conduct)
- Credit Alliance Corp. v. Arthur Andersen & Co., 483 N.E.2d 110 (N.Y. 1985) (three‑part test used to show accountant‑to‑third‑party duty; framework applied by Maryland in Walpert)