lan/stv, a Joint Venture of Lockwood, Andrews & Newman, Inc. and Stv Incorporated v. Martin K. Eby Construction Company, Inc., 435 S.W.3d 234

Background

DART hired LAN/STV (architect/engineer) to produce plans/specifications for a light-rail project; LAN/STV contracted with DART and was contractually liable to DART for negligent plans. Eby was the low-bid general contractor hired by DART; Eby had no contract with LAN/STV.
After starting work, Eby discovered pervasive errors in LAN/STV’s plans that increased labor/material costs and delayed performance; Eby claims nearly $14 million in losses.
Eby sued DART for breach of contract (initially dismissed for failure to exhaust administrative remedies), pursued administrative remedies, and ultimately settled with DART for $4.7 million.
Eby then sued LAN/STV in tort for negligent misrepresentation (relying on Restatement §552 theory). A jury awarded Eby $5 million, apportioned fault (45% LAN/STV, 40% DART, 15% Eby); trial court entered judgment for Eby for LAN/STV’s share.
On review, Texas Supreme Court considered whether the economic loss rule bars a general contractor’s tort recovery from the project architect for purely economic losses caused by defective plans.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the economic loss rule bars Eby’s negligent-misrepresentation claim against LAN/STV for increased construction costs	Eby: negligent misrepresentation recognized in Texas (Sloane, McCamish, Grant Thornton); economic-loss rule shouldn’t block recovery here	LAN/STV: allowing tort recovery would undermine contractual risk allocation on construction projects and create indeterminate liability	Held: Economic loss rule applies; Eby may not recover tort damages from LAN/STV (judgment reversed; Eby takes nothing)
Whether negligent misrepresentation differs from negligent performance for economic-loss purposes	Eby: negligent misrepresentation cases allowed recovery in limited circumstances	LAN/STV: same policy concerns apply; no special carve-out for misrepresentation here	Held: No special treatment — both torts analyzed by same principles; rule applies equally
Whether the architect is sufficiently directed to bidders to “invite reliance” independent of owner	Eby: plans are meant to be relied on by bidders/contractors	LAN/STV: principal invitation to rely comes via the owner (DART), not the architect directly	Held: Contractor’s primary reliance is on owner’s presentation; architect is a contractual stranger — supports barring tort recovery
Whether contractual remedies and risk allocation make tort recovery unnecessary	Eby: argued prior negligent-misrepresentation precedent permitted recovery	LAN/STV: parties can and should allocate economic risk by contract; contractors can insist on protections from owners	Held: Availability of contractual remedies and predictable allocation favors applying economic loss rule to preclude tort recovery

Key Cases Cited

Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (recognition of limits on recovery of third-party economic losses in negligence)
East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (economic loss to product itself should be governed by contract law)
Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77 (Tex. 1977) (economic-loss principle in products context)
Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (Tex. 1986) (when only economic loss to subject of contract exists, action sounds in contract)
Federal Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439 (Tex. 1991) (recognized negligent misrepresentation cause in limited circumstances)
Equistar Chems., L.P. v. Dresser-Rand Co., 240 S.W.3d 864 (Tex. 2007) (economic loss rule applies where loss arises from product failure and is limited to product itself)
Grant Thornton LLP v. Prospect High Income Fund, Ltd., 314 S.W.3d 913 (Tex. 2010) (accountant liability for negligent misrepresentation is narrowly cabined to known, limited classes of recipients and purposes)