Plаintiff general contractor brought claims of negligence and negligent misrepresentation against Defendant design professionals, over allegedly late and erroneous delivery of professional services as part of the construction of a resort. Each party had a contract with the resort’s owner, but the parties had no contract with each other. The District Court (Murtha, Judge) dismissed the suit under Fed. R.Civ.P. 12(b)(6), holding that thе claims were barred by Vermont’s economic loss doctrine. Plaintiff alleges that the District Court erred in dismissing its claims because (1) its claims fall under the special relationship exception to the economic loss doctrine, and (2) the economic loss doctrine does not apply to claims for negligent misrepresentation. Because these contentions involve open questions of Vermont state lаw, we certify two questions to the Vermont Supreme Court.
I. Background
A Factual Background
Spruce Peak Realty, LLC (“Owner” or “Spruce Peak”) planned to build a resort
Plaintiff alleges that Defendants were negligent in performing their professional services. To wit, Plaintiff claims that Defendants were late in delivering their drawings; that their drawings were incomplete and contained errors and omissions; and that they failed to respond promptly and accurately to requests for information. Based on these allegations, Plaintiff filed a complaint in the District Court for the District of Vermont alleging negligence and negligent misrepresentation on the part of each Defendant, and stating that Plaintiff had “suffered damages in excess of $75,000” as a result. J.A. 10-25.
B. Contractual Background
Plaintiffs contract with Spruce Peak (the “Construction Contract”) incorporated the documents due frоm the Design Team as “Project Construction Documents.” J.A. 2. According to Plaintiff, “[ejontrary to the Construction Contract, the Project Construction Documents were not completed and delivered to Hunt on August 27, 2005.” J.A.3.
The Construction Contract laid out procedures for dealing with cost overruns. Specifically, the contract required Plaintiff to “notify Spruce Peak of any ‘errors, omissions or discrepancies in the Plans, Specifiсations or other Contract Documents’ ” so that Plaintiff could seek a remedy from Spruce Peak. J.A. 34, 89. Plaintiff was then entitled to additional compensation, paid by Spruce Peak, for such cost overruns or delays. Plaintiff apparently took advantage of these procedures to increase the Guaranteed Maximum Price (“GMP”) of the Construction Contract from just below $80 million to just below $97 million.
C. Defendants’ Motion to Dismiss and Plaintiffs Response
Defendants moved to dismiss the complaint, arguing that Plaintiffs claims were barred by the economic loss doctrine. Although they did not dispute that they were licensed professionals and that they provided professional services, they contended that, under Vermont law, the professional services exception does not apply “in the absence of contractual privity between a plaintiff and defendant.” Supp. A. 11.
Plaintiff responded that contractual privity is not a prerequisite of the professional services exception. Rather, it argued, “the professional licensure of the defendant ... and the foreseeability of the plaintiffs injury” are “the only two factors” that the Vermont Supreme Court has “endorsed as determinative.” Supp. A. 27. Both of these factors, Plaintiff argued, were present: Defendants were professionally licensed, and “it was fоreseeable that Hunt would be injured if the Defendants did not perform their contractual duties with the degree of skill and care required of professionals in their respective fields” because “their contractual obli
D. The District Court’s Dismissal of the Complaint
The District Court granted Defendants’ 12(b)(6) motion in its entirety.
2
.
Hunt Constr. Group, Inc. v. Brennan Beer Gorman/Architects, P.C.,
No. l:08-CV-65,
As to Plaintiffs second claim, the District Court held that “[t]he policy considerations underlying Vermont’s economic loss rule apply equally to tort actions for negligent [misrepresentation,” and accordingly found them barred.
Id.
at
II. Discussion
A Standard of Review
The Second Circuit reviews the grant of a motion to dismiss under Rule 12(b)(6)
de novo,
“construing the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiffs favor.”
Chambers v. Time Warner, Inc.,
B. Certification Standard
Vermont law allows for the federal certification of questions of state law directly to the Vermоnt Supreme Court. Vt. R.App. P. 14(a);
see Doe v. Newbury Bible Church,
1. Applicable Law
Vermont has adopted the economic loss rule, which рrohibits recovery under tort for economic losses which are not also accompanied by tangible, physical harm.
See Breslauer v. Fayston Sch. Dist,
Vermont recognizes an exception to the economic loss rule where “the parties have a special relationship, which creates a duty оf care independent of contract obligations.”
EBWS,
Although
EBWS
held that a professional services exception exists (and the parties do not contest the existence of this exception), we know of no case in which the Vermont Supreme Court has actually found the exception to apply. In
EBWS,
the court found that the services provided by the defendant were “the services of a contractor not a professional architect.” Id. at 525,
Other state courts applying the professional services exception have split on its role when parties share a mutual contracting party, but do not themselves contract with one another. Several state high courts have found such actions barred. The Colorado Supreme Court, for example, has found that a “duty of care ... memorialized in ... contracts” does not suffice to escape the economic loss rule; rather, a plaintiff must show a “duty independent of the interrelated contracts.”
BRW, Inc. v. Dufficy & Sons, Inc.,
On the other hand, a number of state high courts have held that a contractor can sue a design professional in negligence for purely economic losses. As the West Virginia Supreme Court put it,
[a] design professional (e.g. an architect or engineer) owes a duty of care to a contractor, who has been employed by the same project owner as the design professional and who has relied upon the design professional’s work product in carrying out his or her obligations to the owner, notwithstanding the absence of privity of contract between the contractor and the design professional, due to the special relationship that exists between the two. Consequently, the contractor may, upon proper proof, recover purely economic damages in an action alleging professional negligence on the part of the design professional.
E. Steel Constructors, Inc. v. City of Salem,
Vermont has not definitively stated whether professionals have a duty to other contractors on a multi-party project, nor-has it really considered an analogous case. Of the Vermont cases in this area,
Hamill
is the closest, but the Supreme Court did not discuss the special relationship exception anywhere in its opinion. There is certainly language in Vermont opinions that supports Defendants’ reading.
See Springfield Hydroelectric,
But although Defendants present strong arguments for their desired rule, Plaintiffs reading is also compatible- with Vermont precedents.
EBWS,
in referring to duties “created beyond the terms of the construction contract,”
id.
at 525,
Given that there is a well-defined and fairly close split among the states on this issue, and that Vermont has not definitively chosen a side, we deem it apрropriate to give the Vermont Supreme Court the opportunity, if it wishes, to settle the issue. The question “presents purely state law issues, controls the outcome of this case, and lacks controlling precedent.”
Preseault,
Does the economic loss doctrine bar a contractor from seeking purely economic damages against design professionals who allegedly provided negligent professional services in violation of the design prоfessionals’ contractual obligations with a mutual counterparty?
D. Negligent Misrepresentation 1. Applicable Law
The Vermont Supreme Court has adopted the definition of negligent misrepresentation given in the Restatement (Second) of Torts § 552(1):
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liаbility for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Limoge v. People’s Trust Co.,
Despite these Vermont state precedents, the federal District Court for the District of Vermont, applying the economic loss doctrine, has barred negligent misrepresentation claims involving only economic loss on three occasions, including the instant case.
See Hunt Constr. Group,
2. Discussion
The District Court’s resolution of the conflict between Vermont’s seemingly broad recognition of the tort , of negligent misrepresentation and its adoption of the economic loss doctrine is based, as the Court wrote in this case, on the notion that “[t]he policy considerations underlying Vermont’s economic loss rule apply equally to tort actions for negligent representation.”
Hunt Constr. Group,
As Plaintiff argues, “[i]f the economic loss rule is as pervasive in Vermont’s jurisprudence as [Defendants] assert[], the Supreme Court of Vermont would not repeatedly award economic damages for negligent misrepresentation, knowing the econоmic loss rule would bar such an award.” Appellant’s Reply Br. 15-16.
Accordingly, we certify the following question:
Does the economic loss doctrine apply to claims of negligent misrepresentation?
III. Conclusion
For the foregoing reasons, we CERTIFY twо questions to the Vermont Supreme Court:
(1) Does the economic loss doctrine bar a contractor from seeking purely economic damages against design professionals who allegedly provided negligent professional services in violation of the design professionals’ contractual obligations with a mutual counterparty?
(2) Does the economic loss doctrine apply to claims of negligent misrepresentation?
We reserve judgment over the case until the Vermont Supreme Court has either declined certification or ruled on these questions.
Notes
. At the time of oral argument, a fourth firm, Wilson Associates ("Wilson”), was among the Defendant-Appellees. After oral argument, however, Hunt and Wilson settled and stipulated to the dismissal of Wilson from this appeal.
. Although the District Court's ruling is styled a "Ruling on Motions for Summary Judgment,” the text of the ruling makes clear that the Court intended to grant Defendants’ 12(b)(6) motion, and none of the parties refers to the ruling below as one for summary judgment.
. Not all of
our
cases
mention
"the importance of the issue to the state” as a factor.
See, e.g., Preseault,
.
See Terracon Consultants W., Inc. v. Mandalay Resort Group,
.
See Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc.,
. Defendants argue that the principle expressed in Webster is dispositive in this case, and that the Limoge line can be ignored entirely. But that principle applies'to the cases on which Defendants rely just as much as it applies to those on which Plaintiffs rely: the application of the economic loss rule to negligent misrepresentation claims is, at most, a question merely lurking in EBWS and Springfield. Hydroelectric, and not one that the Vermont Supreme Court has yet decided explicitly.