Economic loss doctrine not to restrict negligence claim against geotechnical engineer: Texas Court of Appeals

Economic loss doctrine not to restrict negligence claim against geotechnical engineer: Texas Court of Appeals

Recently, the Texas Court of Appeals came up with a holding that in the absence of contractual privity between the parties, the economic loss rule did not bar recovery for construction defects in negligence, based on breach of the common-law duty to use reasonable care to avoid injuring anyone's property, See USA Walnut Creek, DST v. Terracon Consultants, Inc., Number 13-13-00194-CV, 2015 Tex. App. LEXIS 1806.

Plaintiff Creekstone Walnut, LP had contracted with its affiliated entity, Creekstone Builders, Inc. who subcontracted Terracon Consultants Inc. for geotechnical engineering and inspection services. Later, plaintiff USA Walnut Creek purchased constructed complex in 2005 which subsequently in 2007-2008 received damage reports attributed to buildings for its structures and base foundations. As a result, plaintiff (Creekstone Walnut, LP) sued builder and property management entities, that is, the Creekstone Builders, Inc. Plaintiff accused Creekstone Builders of the defective construction and maintenance of building. In response to this, Creekstone Builders shifted the allegation to Terracon Inc. as a responsible third-party for the said damage stating that Terracon Inc. was negligent in providing its engineering and testing services during construction of the building. Thus plaintiff, USA Walnut Creek filed an amended complaint adding Terracon Inc. as a defendant, to which Terracon Inc. moved for summary judgment at based on an argument that plaintiff did not have any evidence to support its allegation that Terracon owed a tort duty to USA Walnut Creek. The trial court granted defendant Terracon’s motion and USA Walnut Creek appealed.

Upon examination of the facts and arguments, the Court of Appeals of Texas, Thirteenth District, Corpus Christi – Edinburg reversed the trial court’s decision and concluded that because the claim arose from an engineering subcontractor's alleged negligent design of a defective foundation for an apartment complex and there were no allegations as to the engineering subcontractor’s failure to supervise the builders' construction of the complex or to ensure that the builders followed the design plans, the owner was not required to show that the engineering subcontractor had controlled the construction of the buildings. Terracon was thus held liable for damage.

Further, the owner presented sufficient evidence of breach and causation, including a detailed expert report and affidavits describing the damage, to survive a motion for no-evidence summary judgment.

The court made it clear that the geotechnical engineer could be held liable for such damages to which he owed responsibility to advise and maintain services during the completion of building project.