443 F. App'x 347
10th Cir.2011Background
- PAH contracted to perform professional evaluation for the Hazleton coal mine; contract limited liability to fees or $50,000, with higher exposure for higher fees.
- Report prepared initially for Bronco and then revised for Standard as part of Standard’s financing process; Standard later syndicated the loan and sought to present PAH as independent engineer to other lenders.
- Bronco/PAH contract and related Senior Credit Agreement shaped the duties and expectations for PAH’s evaluation; Standard became the ultimate user of the PAH report after RBS withdrew.
- Mine later proved problematic; Standard attempted debtor-in-possession financing and sought to recover losses when the mine failed and Bronco declared bankruptcy.
- Standard sued PAH in 2007 for negligent misrepresentation and professional negligence; district court granted summary judgment, holding the claims barred by the economic loss rule.
- On appeal, the Tenth Circuit affirmed, concluding the economic loss rule bars tort claims where duties arise from interrelated commercial contracts and no independent tort duty exists.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the economic loss rule bar Standard's tort claims against PAH? | Standard | PAH | Yes; tort claims barred |
| Are the duties at issue interrelated contract duties precluding tort relief under BRW? | Standard argues BRW allows independent duty | PAH argues interrelated contracts foreclose independent duty | Yes; interrelated contracts bar independent duty |
| Did PAH owe an independent tort duty as an evaluative professional to Standard or others? | Standard contends independent duty arises from evaluative professional responsibility | PAH contends duties are contract-based and limited by liability clause | No independent duty; duties memorialized in contract |
| Should Standard be allowed to amend its complaint after judgment to add contract claims? | Standard seeks to amend if tort claims are barred | PAH supports denial based on Rule 15(a) after judgment | Denied |
Key Cases Cited
- Town of Alma v. AZCO Construction, 10 P.3d 1256 (Colo. 2000) (economic loss rule bars torts when contractual duties govern the claim)
- BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004) (extends rule to commercial settings; independent duty must be shown to avoid rule)
- Dufficy & Sons, Inc. v. BRW, 99 P.3d 66 (Colo. 2004) (see BRW interpretation of interrelated contracts and independent duty)
- A.C. Excavating v. Yacht Club II Homeowners Ass’n, Inc., 114 P.3d 862 (Colo. 2005) (subcontractors owe independent duty to homeowners in residential construction; limits application)
- Level 3 Communications, LLC v. Liebert Corp., 535 F.3d 1104 (10th Cir. 2008) (scope of misrepresentation outside original contract; temporary batteries example)