Cook v. Orkin Exterminating Co., Inc.
227 Ariz. 331
| Ariz. Ct. App. | 2011Background
- Cooks hired Lang Construction to build their home; backfill around the basement was untreated for termites, leading to infestation after occupancy.
- Lang sought bankruptcy; insurer referred Cooks to AIC, which contacted Orkin and Rollins to execute a Subterranean Termite Agreement in January 1989.
- The Agreement allegedly did not reflect negotiations; Cooks claim Orkin promised effective treatment, lifetime coverage, and repair of new termite damage, which the Agreement allegedly lacked.
- Orkin treated in 1989, with repeated treatments in 1991, 1992, 1993; in 1994–1995 Orkin conducted extensive treatment after Cooks asked for repair of termite damage.
- From 1995 onward, Orkin treated multiple times (1996–2007) with assurances of effectiveness; Cooks demolished parts of their home for treatment and vacated for a year.
- In 2008, Cooks sued for breach of contract, implied covenant, warranty, fiduciary duty, negligence, misrepresentation, and fraud; Orkin moved for judgment on the pleadings and later for summary judgment, asserting ELR and no fiduciary duty; court granted partial summary judgment in Orkin’s favor, leading to appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a fiduciary duty existed | Cook argues Orkin held itself as a special expert creating a fiduciary duty. | Orkin contends no fiduciary relationship existed beyond an arms-length contract. | No fiduciary duty existed |
| Whether the economic loss rule bars tort claims | Cooks contend ELR does not apply to their tort claims. | Orkin argues ELR bars purely economic-loss tort claims. | ELR bars tort claims for purely economic loss |
| Whether ELR applies to misrepresentation/fraud claims | Cooks rely on non-pleaded consumer-fraud theories; ELR exception was argued. | Orkin asserts ELR bars such tort-like claims as to economic losses. | ELR applies to these claims; contractual remedies preferred |
Key Cases Cited
- Salt River Project Agric. Improvement and Power Dist. v. Westinghouse Elec. Corp., 143 Ariz. 368 (Ariz. 1984) (ELR framework balancing tort vs. contract in economic loss cases)
- Flagstaff Affordable Housing Ltd. P'ship v. Design Alliance, Inc., 223 Ariz. 320 (Ariz. 2010) (ELR limited to construction defect cases; later clarified in Flagstaff II)
- Flagstaff Affordable Housing Ltd. P'ship v. Design Alliance, Inc., 223 P.3d 664 (Ariz. 2010) (Flagstaff I distinguished; ELR does not apply to certain professional negligence claims)
- Flagstaff Affordable Housing Ltd. P'ship v. Design Alliance, Inc., 223 P.3d 670 (Ariz. 2010) (Flagstaff II clarifies economics-only losses rule; contracting party limited to contract remedies)
- Standard Chartered PLC v. Price Waterhouse, 190 Ariz. 6 (Ariz. 1996) (fiduciary duties require intimacy, disclosure, entrusting of power; commercial transactions generally do not create fiduciaries)
- Taeger v. Catholic Family and Cmty. Servs., 196 Ariz. 285 (Ariz. Ct. App. 1999) (definition of fiduciary relationship and its hallmarks)
- Urias v. PCS Health Sys., Inc., 211 Ariz. 81 (Ariz. Ct. App. 2005) (limits to fiduciary presumptions in commercial contexts)