Elcon Construction, Inc. v. Eastern Washington University
273 P.3d 965
Wash.2012Background
- Elcon and Eastern entered a drilling contract to replace two on-campus wells; contract claims went to arbitration; tort claims were dismissed under an economic loss/independent duty framework.
- Eastern sought DOE-approved consolidation, allowing refurbishment and potentially new wells; bid package required bidders to investigate site conditions and weather the risk of subsurface conditions.
- Elcon bid low, awarded contract, and delegated site investigation to its subcontractor; it did not independently verify subsurface conditions beyond what Eastern provided.
- Drilling replaced well 1 stalled due to sand, Elcon sought increased costs, Eastern terminated for convenience, and later paid for work performed; Eastern later issued a termination for cause after undisclosed damage was found.
- Elcon filed suit alleging contract breach and various torts; arbitration resolved contract claims; tort claims dismissed at trial or on summary judgment, later affirmed by appellate court.
- The trial court and Court of Appeals applied the independent duty/economic loss rule to bar tort claims; the Supreme Court held the independent duty rule has no application here, and the tort claims fail on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fraud in the inducement is viable. | Elcon alleges Eastern misrepresented depth and subsurface data by not sharing the Golder Report. | Golder Report was not project-specific; bidding instructions required Elcon to investigate, so nondisclosure could not be material. | Fraud claim fails; nondisclosure not material given contract bidding duties. |
| Whether intentional interference with a contractual relationship exists. | Sending a copy of the termination letter to Elcon's surety harmed bonding and thus breached contract. | No improper motive shown; mere sending of notice does not prove improper interference. | Claim fails; no improper purpose shown. |
| Whether Elcon is entitled to statutory interest on the arbitration award. | RCW 39.76.011 requires interest on public works payments; postaward motion sought interest. | Statutory interest not recoverable on an arbitrator’s award; not within postaward jurisdiction. | No statutory interest recoverable on the arbitration award. |
Key Cases Cited
- Alejandre v. Bull, 159 Wash.2d 674 (Wash. 2007) (fraud outside independent duty rule; contract-tort boundary established)
- Atherton Condo. Apartment-Owners Ass'n Bd. of Dir. v. Blume Dev. Co., 115 Wash.2d 506 (Wash. 1990) (fraud and related torts treated independently of real property limits)
- Eastwood v. Horse Harbor Found., Inc., 170 Wash.2d 380 (Wash. 2010) (independent duty doctrine; limits on its application)
- Westmark Properties, Inc. v. McGuire, 53 Wash.App. 400 (Wash. App. 1989) (prejudgment interest/arbitration related)
- Fluor Daniel, Inc., 160 Wash.2d 786 (Wash. 2007) (arbitration award modification; prejudgment interest context)
- Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1, 124 Wash.2d 816 (Wash. 1994) (economic loss rule description and application)