305 P.3d 622
Kan.2013Background
- Kenneth and Beverly Rinehart contracted with Morton Buildings for a preengineered building used as their residence and the business location of Midwest Slitting, LLC; Midwest Slitting was not a party to the written contract.
- Construction disputes led to litigation: the Rineharts prevailed on breach of contract/warranty and KCPA (Kansas Consumer Protection Act) deceptive practice claims; the jury awarded the Rineharts and Midwest Slitting separate economic damages.
- Midwest Slitting sued Morton for negligent misrepresentation and recovered $149,824.65; the verdict did not apportion the award by item.
- Morton appealed, arguing (inter alia) the economic loss doctrine barred Midwest Slitting’s negligent misrepresentation claim; the Court of Appeals rejected that argument and affirmed.
- The Rineharts sought appellate attorney fees under K.S.A. 50-634(e) and Kan. Sup. Ct. Rule 7.07(b); the Court of Appeals awarded the full requested fees in a brief order. Morton challenged that award on appeal to the Kansas Supreme Court.
- The Kansas Supreme Court: (1) held the economic loss doctrine does not bar negligent misrepresentation claims of the type asserted by Midwest Slitting; (2) vacated/remanded the appellate-fee award for the Court of Appeals to reassess whether billed appellate work was limited to KCPA-related or properly intertwined work under the statute and rule.
Issues
| Issue | Plaintiff's Argument (Rinehart/Midwest Slitting) | Defendant's Argument (Morton) | Held |
|---|---|---|---|
| Whether the economic loss doctrine bars Midwest Slitting’s negligent misrepresentation claim | Doctrine should not bar — negligent misrep. is a recognized tort with duty limits and allows recovery | Doctrine should bar recovery because only economic loss was alleged and policy reasons favor limiting tort where contract risks exist | Court held: economic loss doctrine does not bar negligent misrepresentation here; duty arises by law and doctrine’s purposes not furthered |
| Whether privity is required for the economic loss doctrine to apply | No privity here; statute/ tort allows recovery without contract | Economic loss should apply even without contractual privity to limit tort expansion | Court: privity alone not dispositive; refused broad extension to bar negligent misrep. where tort elements limit liability |
| Whether Court of Appeals properly awarded full appellate attorney fees under Rule 7.07(b) and K.S.A. 50-634(e) | Fees for appellate work on KCPA (and work intertwined) are recoverable; sought full amount | Award improperly included time on non-KCPA issues (e.g., economic loss issue); statute limits recoverable fees to KCPA-related work | Court remanded: panel’s terse order insufficient to show award limited to KCPA-related or properly intertwined work; Rule 7.07(b) does not exceed statutory limits |
| Whether Kansas Supreme Court should award additional fees for work before it | Rineharts requested fees for this court work | Morton argued affidavit insufficient to segregate KCPA-related work; some requested time clearly nonrecoverable | Court denied present motion but allowed resubmission narrowly tied to KCPA-appellate work and remanded for further proceedings |
Key Cases Cited
- David v. Hett, 293 Kan. 679 (Kan. 2011) (held economic loss doctrine does not bar negligent residential construction claims; analyzed East River rationales)
- East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858 (U.S. 1986) (formulated economic loss doctrine in product liability context to preserve contract/tort boundary)
- Mahler v. Keenan Real Estate, Inc., 255 Kan. 593 (Kan. 1994) (adopted negligent misrepresentation under Restatement §552; no privity requirement for that tort)
- Northwest Arkansas Masonry, Inc. v. Summit Specialty Products, Inc., 29 Kan. App. 2d 735 (Kan. App. 2001) (Court of Appeals applied economic loss doctrine in product-defect strict liability case even without contractual privity)
- Koss Construction Co. v. Caterpillar, Inc., 25 Kan. App. 2d 200 (Kan. App. 1998) (early Kansas Court of Appeals adoption of economic loss doctrine in commercial product liability)