BALFOUR BEATTY INFRASTRUCTURE, INC.
RUMMEL KLEPPER & KAHL, LLP
[Copyrighted Material Omitted]
from the Circuit Court for Baltimore City, Alfred Nancy,
BY: Gregory S. Martin (Jennifer G. Craddock, Gregory S.
Martin & Assoc. PA on the brief) of Maitland, Florida. (Roger
Jones, Lucas Webster, Joseph L. Katz, Huddles, Jones,
Sorteberg & Dachille PC on the brief) of Columbia, MD, FOR
BY: John A. King (Ronan A. Geronimo, Brett A. Pisciotta, King
& Attridge on the brief) all of Rockville, MD, FOR APPELLEE.
Reed, Eyler, James. R., (Retired, Specially Assigned) JJ.
Md.App. 426] Leahy, J.
appeal we consider whether the economic loss doctrine applies
to shield an engineering firm from tort claims brought by a
contractor seeking damages for economic losses suffered in
consequence of relying on the firm's allegedly defective
designs and projections. Our holding is framed by the fact
that, while the engineering firm and the contractor each had
separate contracts with the government to perform work on the
same design-bid-build construction project, there was no
contract between the parties.
City of Baltimore entered into a contract with Rummel Klepper
& Kahl, LLP (" RK& K" or " Appellee" ), a
design engineering firm, to produce construction designs and
associated documents for use by the successful bidder(s) on
succeeding proposals for construction of the Patapsco
Wastewater Treatment Plant. Fru-Con Construction Corporation,
predecessor to Balfour Beatty Infrastructure, Inc. ("
BBII" or " Appellant" ), was the successful
bidder on the plant upgrade projects, and entered into
Sanitary Contract 852R with the City in November 2009.
over four years later, BBII filed a complaint in the Circuit
Court for Baltimore City against RK& K, claiming that, during
construction, BBII ran into costly delays and complications
in reliance on RK& K's allegedly defective designs and
negligent misrepresentations concerning project timeline
projections. The complaint sounded in tort, supported by the
theory that RK& K had a duty to BBII based on the "
intimate nexus" between them, and asserted three causes
of action: 1) professional negligence, 2) information
negligently supplied for the guidance of others under
Restatement (Second) of Torts § 552, and, 3) negligent
filed a motion to dismiss the complaint for failure to state
a claim. RK& K's central argument was that the [226
Md.App. 427] complaint sought recovery for purely economic
losses, and, because there was no contractual privity or its
equivalent between BBII and RK& K, the economic loss doctrine
barred BBII's tort claims. The circuit
court granted the motion to dismiss in an order entered on
April 10, 2014.
affirm. We hold that BBII failed to state a claim because, as
a matter of law, in the absence of privity, death, personal
injury, property damage, or the risk of death or serious
personal injury, no duty of care in tort runs from an
engineer or architect to a contractor for purely economic
losses on a public construction project. In reaching this
holding, we determine that Maryland does not expand the
" intimate nexus" test to include extra-contractual
concepts of duty for the recovery of solely economic losses
in public construction cases.
the " design-bid-build" project delivery method
utilized by the City in this case, the owner first enters
into a contract with an architect and/or engineer ("
A/E" or " design professional" ) to design the
project. Typically, the engineering and design is completed
before the owner releases a request for proposals for a
general contractor to perform the work. 1 Bruner &
O'Connor Construction Law § 2:11 (2015). Under this
(1) the design is fully developed and completed before the
pricing of the work, thus, presumably resulting in lowest
cost, and (2) selection among responsible and responsive
bidders can be made on the basis of price alone. . . the
contractor is excluded from contributing to the design
process. . .
[226 Md.App. 428] Id. The A/E and the contractor
each have a contract with the owner, but they have no
contractual relationship with each other.
contrast, integrated delivery methods, such as "
design-build," create a single point of responsibility
because the A/E and the contractor are bound under a single
contract with the owner. Id. at § 2:12.
Typically the contractor who is part of a design-build team
is involved in aspects of the design of a project from the
beginning, and the A/E remains involved--normally in an
oversight and advisory role--during the construction phase.
Id. ; 5 Bruner & O'Connor Construction Law
§ 17:52 (2015) (explaining the modern trend to minimize
the A/E's previous " substantial involvement in the
construction process" to a lesser obligation to "
observe the work and determine in general if the work is
being performed in accordance with the contract
traditional design-bid-build model often engenders tensions
between the A/E and the construction contractor, as explained
in one treatise on the subject:
A fundamental difficulty in allocating liability under the
design-bid-build model is the inherent tension between the
[226 Md.App. 429] interests of the architect and contractor.
Some contractors believe they can increase profits through
change orders that are based on ambiguities, errors, or
omissions in the architect's design. Architects have an
interest in protecting their designs, and frequently serve as
the owner's representative during construction. In these
situations, it benefits the architect to resist any
suggestion that the design is flawed and deny change order
requests based on defective plans and specifications.
Because of these competing interests, it can be difficult for
the owner to determine whether the architect or contractor is
responsible for a delay. . . . To complicate matters further,
it may not be possible to join the architect and contractor
in a single action[.]
Robert F. Cushman et al., Proving & Pricing
Construction Claims § 9.03[A] (3d ed. 2015). As
discussed further infra, under traditional
design-bid-build contracts, especially in the public sector,
the contractor normally has a contractual entitlement to
recover against the owner for construction delays and other
benefit-of-the-bargain damages caused by the A/E's
defective specifications and designs.
K's Professional Engineering Services Contract
to the complaint, sometime prior to October
2009, the City entered into a contract with
RK& K for the design of two interrelated projects to upgrade
the plant, termed the " Enhanced Nutrient Removal
Facilities." According to BBII, the City's contract
with RK& K specified that RK& K was to produce accurate,
complete, and correct [226 Md.App. 430] construction designs
and drawings for use by the successful bidder(s) who would
construct the plant upgrades. RK& K's duties and
responsibilities allegedly included, but were not limited to:
▪ Development of the design for the two interrelated
▪ Development and preparation of drawings and
specifications for use by prospective contractors for
preparing and submitting bids and ultimately for use by the
successful contractor for the construction of the projects;
▪ Development of timelines for construction of the
▪ Development and preparation of responses to questions
regarding the design raised by prospective contractors during
the bid phase;
▪ Review, evaluation, and comment on the proposals
submitted by bidders/prospective contractors;
▪ Review, evaluation, and approval of various
submittals from the successful
contractor during construction related to the Work and RK&
▪ Review, evaluation, and inspection of the successful
contractor's Work during construction to assure
conformance with RK& K's design intent and design; and
▪ Review, evaluation, and acceptance of the successful
contractor's Work and certification to the City regarding
in addition to its pre-construction/design phase
responsibilities, RK& K was allegedly assigned several
construction-phase responsibilities, including: 1) evaluating
and approving " various submittals" from the
contractor related to the work and RK& K's design; 2)
inspecting the contractor's work during construction to
assure conformance with RK& K's design intent and design;
and, 3) review, evaluation, and, if acceptable, certification
of the contractor's work to the City.
Md.App. 431] Sanitary Contract 852R
work for the projects under Sanitary Contract 852R (" SC
852" ) and Sanitary Contract 845R (" SC 845"
) was to be completed at the same time,
although SC 852 was let out for bid prior to SC 845. After it
was pre-qualified by the City as capable of performing the
work, Fru-Con Construction Corporation (predecessor in
interest to BBII) bid on the SC 852 project, directly relying
upon RK& K's documents and designs.
November 20, 2009, Fru-Con Construction Corporation and the
City entered into a contract for the SC 852 project ("
Contract" ). Several years later, on January 1, 2014,
the City agreed to an assignment of the Contract from Fru-Con
Construction, LLC, to BBII. Under the Contract, BBII
was to, " among other things," construct
thirty-four " [d]enitrification filter cells ('DNF
cells') adjacent to the existing wastewater
facility." DNF cells are " enormous, concrete tubs
that hold massive amounts of wastewater to be treated."
The Contract also required BBII to construct pipes and pipe
support systems for the SC 852 project.
Md.App. 432] BBII's Complaint
complaint filed on January 6, 2014, BBII related that RK& K
designed the DNF cells to expand or contract at keyed joints
located in their concrete walls to accommodate fluctuating
water pressure. BBII constructed the DNF cells in accordance
with RK& K's designs, but, when the water retention
integrity of the DNF cells was tested, BBII learned that the
cells were leaking due to cracks in the expansion and
contraction joints. BBII
alleged that these cracks and the associated leaks were a
direct result of deficiencies in RK& K's design and that
it cost BBII substantial additional time and expense to
remediate the problems. BBII also claimed that, once
construction was underway, it discovered RK& K's design
for the pipe support system was defective, and again,
suffered substantial additional time and cost remedying RK&
K's allegedly defective pipe system design.
BBII contended that RK& K delayed completion of its design of
the companion project, SC 845, and that RK& K knew that any
delays in the design of SC 845 would delay BBII's ability
to complete work on SC 852 and expose BBII to substantial
costs and expenses. BBII alleged RK& K failed to properly
establish a reasonable contract duration or project timeline
for SC 852, and, instead, supplied false information to
prospective contractors who were developing their estimates
and competitive bids for the projects.
on these factual allegations, BBII asserted a claim for
Professional Negligence (Count I), Restatement (Second) of
Torts § 552 (Court II), and Negligent Misrepresentation
(Count III). In Count I, BBII claimed that it was a
forseeable party that would directly rely upon RK& K's
professional services and designs, and, that " based
upon the intimate nexus between [RK& K's] design and
[BBII's] work as well as the contractual privity
equivalent that exists between [RK& K] and [BBII], [RK& K]
owed [BBII] a duty to act with a reasonable degree of care,
knowledge, diligence and skill ordinarily possessed and
exercised by similarly situated design professionals."
BBII demanded an estimated $10 million [226 Md.App. 433] in
damages for " increased and additional labor, materials,
equipment and subcontractor costs, investigative costs,
consultant fees, remediation costs, and delay costs." In
Count II (Restatement § 552 for " Information
Negligently Supplied for the Guidance of Others" ), BBII
contended that it suffered damages " [a]s a direct and
proximate result of [RK& K's] failure to exercise
reasonable care in preparing, supplying and communicating the
design, including plans and specifications, for the
in its third count for negligent misrepresentation, BBII
posited that, as a result of the overlapping responsibilities
of RK& K in both the design and construction phases of the
project, and, because RK& K knew that BBII would rely on RK&
K's design and project duration schedule, " an
intimate nexus and contractual privity equivalent exists
between [RK& K] and [BBII]." According to BBII, RK& K
knew that the design of SC 845 was not sufficiently complete
so as to allow SC 582 to be constructed within the contract
schedule, and RK& K failed to warn BBII that the prices and
ultimate costs of completing SC 852 would far exceed
Before the Circuit Court
it was served with a copy of the complaint, on January 29,
2014, RK& K filed a motion to dismiss for failure to state a
claim in the circuit court. In its memorandum of points and
authorities, RK& K argued that BBII failed to plead any facts
that would support finding the existence of a legally
cognizable duty in tort running from RK& K to BBII.
the " economic loss rule," RK& K argued that, in
the construction industry, in the absence of privity or
death, injury or a genuine risk of death or serious personal
injury or property damage, no duty is owed by an architect or
engineer to a contractor where the loss or damage alleged is
economic in nature. RK& K asserted that there was no contract
between the parties, and argued that the " intimate
nexus" and Restatement (Second) of Torts § 522
concepts of extra-contractual duty have never been applied in
Maryland to design [226 Md.App. 434] professionals in the
construction field. Nonetheless, RK& K contended that BBII
failed to allege facts that would allow a court to find the
parties shared an " intimate nexus" or "
professional/client relationship." RK& K asserted that,
for example, there were no allegations in the complaint
regarding any specific communications between RK& K and BBII
before or ...