Hunt Constr. Group Inc v. Gorman/architects

• Decision Date: 24 May 2010
• Docket Number: No. 08-5603-cv.,08-5603-cv.
• Citation: 607 F.3d 10
• Parties: HUNT CONSTRUCTION GROUP, INC., Plaintiff-Appellant,v.BRENNAN BEER GORMAN/ARCHITECTS, P.C.; Wilson Associates; S. Desimone Consulting Engineers, LLC; Cosentini Associates, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

607 F.3d 10

HUNT CONSTRUCTION GROUP, INC., Plaintiff-Appellant,v.BRENNAN BEER GORMAN/ARCHITECTS, P.C.; Wilson Associates; S. Desimone Consulting Engineers, LLC; Cosentini Associates, Inc., Defendants-Appellants.

No. 08-5603-cv.

United States Court of Appeals Second Circuit.

Argued: Dec. 21, 2009.

Question Certified: May 24, 2010.

Steven G.M. Stein (Joel J. Rhiner and Jean M. Gallo, on the brief), Stein, Ray & Harris, LLP, Chicago, IL, for Appellant.

Michael J. Vardaro, Zetlin & De Chiara LLP, New York, N.Y., for Appellees Brennan Beer Gorman/Architects, P.C.; S. DeSimone Consulting Engineers, LLC, and Cosentini Associates, Inc.

James M. Cooley, Heilmann, Ekman & Associates, Inc., Burlington, VT, for Appellee Wilson & Associates, LLC.

28 Before: CALABRESI and POOLER, Circuit Judges, and KAHN, District Judge.^*

PER CURIAM:

Plaintiff 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 the 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 law, 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 hotel and spa (“the Hotel”). It contracted with Plaintiff-Appellant Hunt Construction Group, Inc. (“Plaintiff” or “Hunt”) as its general contractor. It contracted with the various Defendants-Appellees (collectively, “Defendants” or the “Design Team”) for professional services: architectural design from Brennan Beer Gorman/Architects, P.C.; structural engineering from S. DeSimone Consulting Engineers, LLC; and mechanical, electrical, and plumbing engineering from Cosentini Associates, Inc.¹

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

Plaintiff's contract with Spruce Peak (the “Construction Contract”) incorporated the documents due from the Design Team as “Project Construction Documents.” J.A. 2. According to Plaintiff, “[c]ontrary 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, Specifications 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 Plaintiff's Response

Defendants moved to dismiss the complaint, arguing that Plaintiff's 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 plaintiff's 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 foreseeable 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 obligations to the Owner were inextricably intertwined” with Hunt's. Supp. A. 27-28.

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. 1:08-CV-65, 2008 WL 4870993, 2008 U.S. Dist. LEXIS 93754 (D.Vt. Nov. 3, 2008). It first explained the background and rationales of the economic loss doctrine. It then stated that the “ ‘key’ factor” in a professional services analysis “is the relationship between the parties.” Id. at 2008 WL 4870993 at *2, 2008 U.S. Dist. LEXIS 93754 at *6 (citing EBWS, LLC v. Britly Corp., 181 Vt. 513, 524-25, 928 A.2d 497 (2007)). The professional services exception applies, the Court found, only if “there is ‘a duty of care independent of any contractual obligations.’ ” Id. at 2008 WL 4870993 at *2-3, 2008 U.S. Dist. LEXIS 93754 at *7 (quoting Springfield Hydroelectric Co. v. Copp, 172 Vt. 311, 316, 779 A.2d 67 (2001)). Because Defendants' only duties here were created by their contracts with Spruce Peak, the Court concluded, the professional services exception did not apply, notwithstanding Defendants' professional licensure and the alleged foreseeability of Plaintiff's injury. Id. at 2008 WL 4870993 at *2-3, 2008 U.S. Dist. LEXIS 93754 at *7-9.

As to Plaintiff's second claim, the District Court held that “[t]he policy considerations underlying Vermont's economic loss rule apply equally to tort actions for negligent [mis]representation,” and accordingly found them barred. Id. at 2008 WL 4870993 at *5, 2008 U.S. Dist. LEXIS 93754 at *15. The District Court cited two District of Vermont cases for support, but did not cite or discuss any state court precedents. Id.

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 plaintiff's favor.” Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002).

B. Certification Standard

Vermont law allows for the federal certification of questions of state law directly to the Vermont Supreme Court. Vt. R.App. P. 14(a); see Doe v. Newbury Bible Church, 445 F.3d 594, 596 (2d Cir.2006) (per curiam). Our circuit's rules permit us to certify questions of law to the highest court of a state.2d Cir. R. 27.2; see Preseault v. City of Burlington, 412 F.3d 96, 102 (2d Cir.2005). In considering whether to certify a question, we look at “(1) the absence of authoritative state court decisions; (2) the importance of the issue to the state; and (3) the capacity of certification to resolve the litigation.” O'Mara v. Town of Wappinger, 485 F.3d 693, 698 (2d Cir.2007).³

C. The Economic Loss Rule

1. Applicable Law

Vermont has adopted the economic loss rule, which prohibits recovery under tort for economic losses which are not also accompanied by tangible, physical harm. See Breslauer v. Fayston Sch. Dist., 163 Vt. 416, 421, 659 A.2d 1129 (1995) (citing Prosser & Keeton on The Law of Torts § 92, at 656-57 (5th ed.1984)). As the Vermont Supreme Court has put it, “[n]egligence law does not generally recognize a duty to exercise reasonable care to avoid intangible economic loss to another unless one's conduct has inflicted some accompanying physical harm.” Springfield Hydroelectric, 172 Vt. 311 at 314, 779 A.2d 67 (internal quotation marks omitted) (alteration in original). The rule is intended to maintain the distinction between tort law and contract law, as “[c]ontract principles ... are generally more appropriate for determining claims for consequential damage that parties have, or could have, addressed in their agreement.” Id. (internal quotation marks omitted). “[T]he economic-loss rule serves to maintain the boundary between contract law, which is designed to enforce parties' contractual expectations, and tort law, which is designed to protect citizens and their property by imposing a general duty of reasonable care.” Hamill v. Pawtucket Mut. Ins. Co., 179 Vt. 250, 254, 892 A.2d 226 (2005).

Vermont recognizes an exception to the economic loss rule where “the parties have a special relationship, which creates a duty of care independent of contract obligations.” EBWS, 181 Vt. at 524, 928 A.2d 497. In particular, the Vermont Supreme Court has suggested, a special relationship may exist where one party has a “professional duty” to the other. Id. This analysis, the state court has said, does not turn on “whether one is licensed in a particular field ...; rather, the determining factor is the type of relationship created between the parties.” Id. at 524-25, 928 A.2d 497. In an earlier case discussing (but not then adopting) the special relationship exception, Vermont had noted that other courts require a “special relationship ... sufficient to compel the conclusion that the...