Halcrow, Inc. v. Eighth Judicial Dist. Court of State

Decision Date27 June 2013
Docket NumberNo. 60194.,60194.
PartiesHALCROW, INC., Petitioner, v. The EIGHTH JUDICIAL DISTRICT COURT OF the STATE of Nevada, in and for the COUNTY OF CLARK; and The Honorable Elizabeth Goff Gonzalez, District Judge, Respondents, and Pacific Coast Steel; and Century Steel, Inc., Real Parties in Interest.
CourtNevada Supreme Court

OPINION TEXT STARTS HERE

Backus Carranza & Burden and Leland Eugene Backus and Shea A. Backus, Las Vegas; Lloyd, Gray, Whitehead & Monroe, P.C., and E. Britton Monroe and Burns L. Logan, Birmingham, AL, for Petitioner.

Gordon & Rees, LLP, and Robert E. Schumacher, Las Vegas; Procopio, Cory, Hargreaves & Savitch, LLP, and Scott R. Omohundro, Craig A. Ramseyer, and Timothy E. Salter, San Diego, CA, for Real Party in Interest Pacific Coast Steel.

Hutchison & Steffen, LLC, and Michael K. Wall, James H. Randall, L. Kristopher Rath, and Cynthia G. Milanowski, Las Vegas; Koeller, Nebeker, Carlson & Haluck, LLP, and Megan K. Dorsey and Robert C. Carlson, Las Vegas, for Real Party in Interest Century Steel, Inc.

Watt, Tieder, Hoffar & Fitzgerald, LLP, and David R. Johnson and Jared M. Sechrist, Las Vegas, for Amicus Curiae Tishman Construction Corporation of Nevada.

Before the Court En Banc.1

OPINION

By the Court, SAITTA, J.:

In this opinion, we address whether the economic loss doctrine applies to bar a claim alleging negligent misrepresentation against a structural steel engineer on a commercial construction project. We exercise our discretion to review this petition for extraordinary writ relief, as our intervention will help resolve related future litigation by addressing an important legal issue, which our decision in Terracon Consultants Western, Inc. v. Mandalay Resort Group, 125 Nev. 66, 206 P.3d 81 (2009), left open. Ultimately, we conclude that the economic loss doctrine bars negligent misrepresentation claims against commercial construction design professionals where the recovery sought is solely for economic losses.

PROCEDURAL HISTORY AND FACTS

This original proceeding stems from the construction of, and subsequent litigation regarding, the Harmon Tower (the Harmon) located within CityCenter, a mixed-use urban development in Las Vegas owned and developed in part by MGM Mirage Design Group. MGM retained an architectural firm and a general contractor, Perini Building Company, Inc., to assist in the project's development. The architectural firm retained petitioner Halcrow, Inc., to design the Harmon's structure, prepare drawings, and perform ongoing structural engineering services, including observations and inspections, throughout the construction of multiple structures in CityCenter. Perini hired real party in interest Century Steel, Inc., to provide the steel installation. Following the construction of a portion of the Harmon, Century assigned its assets, including the contract for the Harmon, to real party in interest Pacific Coast Steel (PCS).

All parties agree that Halcrow had no contract with PCS, Century, or Perini. Nonetheless, pursuant to PCS's and Century's contractual obligations to Perini, they were required to follow Halcrow's design and specifications for installing reinforcing steel in the Harmon. Problems arose when defects were discovered relating to the reinforcing steel's installation. Ultimately, the Harmon, which originally was to consist of over 40 floors, could not be built above 26 floors due to flaws in the steel installation.

After construction was stopped on the Harmon, Perini filed a complaint against MGM for allegedly failing to make timely payments. MGM filed a counterclaim against Perini for the alleged reinforcing steel defects and other nonconforming work on the Harmon. Perini then filed a third-party complaint against Century and PCS, among others, asserting claims for contractual indemnity. Century and PCS in turn filed their own third- and fourth-party complaints against several entities, including Halcrow, alleging claims for negligence, equitable indemnity, and contribution and apportionment, and seeking declaratory relief.

Halcrow filed a motion to dismiss Century's and PCS's third-and fourth-party complaints for failure to state a claim on which relief can be granted, based on this court's holding in Terracon Consultants Western, Inc. v. Mandalay Resort Group, 125 Nev. 66, 206 P.3d 81 (2009). Halcrow argued that Terracon bars unintentional tort claims against design professionals in commercial construction projects when the claimant incurs purely economic losses. The district court granted Halcrow's motion and dismissed Century's and PCS's claims for negligence, indemnity, contribution, and declaratory relief.

PCS then sought leave to amend its third-party complaint in order to include a cause of action for negligent misrepresentation. Century followed suit and filed a motion for leave to amend its fourth-party complaint against Halcrow and others, to allege a claim for negligent misrepresentation. Halcrow filed an opposition to Century's and PCS's motions to amend their complaints, arguing that Terracon did not carve out an exception to the economic loss doctrine for negligent misrepresentation claims, and thus, PCS and Century should not be permitted to maintain such claims. Century and PCS on the other hand argued that Halcrow owed them a duty to act with reasonable care, pursuant to the Restatement (Second) of Torts section 552, in communicating information to Century and PCS about the steel installation. Specifically, they alleged that Halcrow failed to conduct timely inspections in accordance with its representations that inspections would take place and erroneously stated that on-site adjustments would alleviate errors in its plans. Century and PCS therefore contended that as a result of their foreseeable reliance on Halcrow's false representations regarding the steel installation inspection and correction process, Halcrow could be held liable for negligent misrepresentation.

Following a hearing, the district court granted the motions to amend but stayed the proceedings pending resolution of the legal issues by this court. This petition for extraordinary writ relief followed.

DISCUSSION

Writ of mandamus

A writ of mandamus is available to compel the performance of an act that the law requires as “a duty resulting from an office, trust or station.” NRS 34.160. Mandamus relief may also be proper “to control an arbitrary or capricious exercise of discretion.” Int'l Game Tech., Inc. v. Second Judicial Dist. Court, 124 Nev. 193, 197, 179 P.3d 556, 558 (2008). Mandamus is an extraordinary remedy, and we have full discretion to determine whether a petition will be considered. Cote H. v. Eighth Judicial Dist. Court, 124 Nev. 36, 39, 175 P.3d 906, 908 (2008). Writ relief will not be available when an adequate and speedy legal remedy exists. NRS 34.170. “Whether a future appeal is sufficiently adequate and speedy necessarily turns on the underlying proceedings' status, the types of issues raised in the writ petition, and whether a future appeal will permit this court to meaningfully review the issues presented.” D.R. Horton, Inc. v. Eighth Judicial Dist. Court, 123 Nev. 468, 474–75, 168 P.3d 731, 736 (2007); see also Smith v. Eighth Judicial Dist. Court, 113 Nev. 1343, 1344–45, 950 P.2d 280, 281 (1997) (indicating that this court will consider a petition challenging an order denying motions to dismiss when an important issue of law needs clarification and considerations of sound judicial economy and administration militate in favor of granting the petition).

We exercise our discretion to consider this petition because the legal issue of whether a negligent misrepresentation tort claim may be maintained against a design professional in a commercial construction setting is one of first impression in Nevada and the issue has resulted in split decisions in Nevada state and federal district courts such that our clarification of this important issue now will promote sound judicial economy and administration.D.R. Horton, Inc., 123 Nev. at 474–75, 168 P.3d at 736.

The district court acted arbitrarily and capriciously in granting leave to amend in order to plead negligent misrepresentation

NRCP 15(a) provides that leave to amend a complaint shall be “freely given when justice so requires.” However, leave to amend should not be granted if the proposed amendment would be futile. See Allum v. Valley Bank of Nev., 109 Nev. 280, 287, 849 P.2d 297, 302 (1993). A proposed amendment may be deemed futile if the plaintiff seeks to amend the complaint in order to plead an impermissible claim. See Soebbing v. Carpet Barn, Inc., 109 Nev. 78, 84, 847 P.2d 731, 736 (1993).

Negligent misrepresentation and the economic loss doctrine

In Terracon, we held that the economic loss doctrine applied to preclude a plaintiff from asserting professional negligence claims against design professionals when the plaintiff sought to recover purely economic losses in a dispute concerning commercial construction. Specifically, we concluded that:

in a commercial property construction defect action in which the plaintiffs seek to recover purely economic losses through negligence-based claims, the economic loss doctrine applies to bar such claims against design professionals who have provided professional services in the commercial property development or improvement process.

125 Nev. at 80, 206 P.3d at 90. In so holding, we explained that the economic loss doctrine is intended to mark ‘the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby [generally] encourages citizens to avoid causing physical harm to others.’ Id. at 72–73, 206 P.3d at 86 (alteration in original) (quoting Calloway v. City of Reno, 116 Nev. 250, 256, 993 P.2d 1259, 1263 (2000), overruled on other grounds by Olson v. Richard, 120 Nev. 240, 241–44, 89 P.3d 31, 31–33 (2004)). We further...

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