Bryant Elec. Co., Inc. v. City of Fredericksburg

• Decision Date: 23 May 1985
• Docket Number: No. 84-1137,84-1137
• Citation: 762 F.2d 1192
• Parties: BRYANT ELECTRIC COMPANY, INC., Appellant, v. CITY OF FREDERICKSBURG and Malcolm Pirnie, Inc., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1192

762 F.2d 1192

BRYANT ELECTRIC COMPANY, INC., Appellant, v. CITY OF FREDERICKSBURG and Malcolm Pirnie, Inc., Appellees.

No. 84-1137.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 7, 1985.

Decided May 23, 1985.

C. Allen Foster and Richard Conner, Greensboro, N.C. (Foster, Conner & Robson, Greensboro, N.C., on brief), for appellant.

William D. Bayliss, Richmond, Va. (Paul S. Bliley, Jr., Browder, Russell, Morris & Butcher, Richmond, Va., on brief) and Murray H. Wright, Richmond, Va. (Edward E. Nicholas, III, McGuire, Woods & Battle, Richmond, Va., on brief), for appellees.

Before HALL, ERVIN and SNEEDEN, Circuit Judges.

SNEEDEN, Circuit Judge:

Plaintiff, Bryant Electric Company, Inc. ("Bryant"), appeals from an order of the United States District Court for the Eastern District of Virginia granting the motions to dismiss filed by the respective defendants, Malcolm Pirnie, Inc. ("Pirnie") and the City of Fredericksburg ("City"). The district court dismissed Bryant's claim against Pirnie for failure to state a cause of action. Fed.R.Civ.P. 12(b)(6). The district court declined to exercise jurisdiction over Bryant's claim against the City because it enforced a forum selection clause in the contract between the City and Bryant providing for all claims to be litigated in the Circuit Court for the City of Fredericksburg. We agree and accordingly affirm the order of the district court.

Bryant, a North Carolina corporation with its principal place of business in High Point, North Carolina, is a general contractor. Bryant entered into a contract with the City in August 1982, following a competitive bidding process, to construct an aqueduct from the Rappahanock River to the City's water filtering plant and to perform certain restoration work on intake gates at a dam on the river. Pirnie, a New York corporation with its principal place of business outside Virginia, had been hired by the City in 1981 to provide architectural and engineering services for this project. Pirnie, under its contract with the City, was also to serve as the City's authorized representative and agent during the construction period.

Bryant alleges that it has suffered economic loss because of errors by Pirnie in the design and supervision of the project. Bryant maintains that Pirnie's errors caused significant delay and additional expense. The original contract price was $1,549,550.00. Bryant claims that the cost of the extra work which it performed exceeds $550,000.00.

Bryant brought suit against Pirnie and the City seeking to hold the defendants jointly and severally liable for the additional cost. ¹ Bryant sued the City for breach of contract. Bryant sued Pirnie in tort, alleging negligence in the design and supervision of the project. No contract exists between Bryant and Pirnie, and Bryant does not allege that it is a third-party beneficiary of the contract between Pirnie and the City.

Bryant filed its diversity suit in federal court despite the forum selection clause in its contract with the City designating the Circuit Court of the City of Fredericksburg as the appropriate forum for resolution of disputes. Bryant, however, has filed an identical action in the Circuit Court for the City of Fredericksburg.

II.

To resolve Bryant's claim against Pirnie, this Court must decide whether there exists a cause of action in tort under Virginia law for a contractor to recover against an engineer for economic loss in the absence of privity. Because this is a diversity case, we must decide this issue as we believe the Supreme Court of Virginia would decide were it faced with the issue. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 83 L.Ed. 1188 (1938). Unfortunately, the Supreme Court of Virginia has not yet addressed this specific issue. There is, however, a case pending before the Supreme Court of Virginia in which this identical issue is raised. Blake Construction Co. Inc. v. Milton M. Alley, et al., No. 831942 (Circuit Court, City of Richmond, September 8, 1983). It appears unlikely that a decision will be rendered in that case in the near future. In view of this delay, we have determined that we must proceed to decide the case before us despite our preference for guidance from the Supreme Court of Virginia.

The district court concluded that there was no such cause of action under Virginia law and accordingly dismissed Bryant's claim against Pirnie under Fed.R.Civ.P. 12(b)(6). The district court, noting the absence of any Virginia Supreme Court decision directly on point, turned to the "host" of lower Virginia courts of record which have decided the issue. Joint Appendix at 44. These lower courts have consistently held that a contractor may not recover for purely economic losses suffered as a result of an architect's or engineer's negligence absent privity of contract. In J. West Construction Co. v. Beeson, Lusk, Jones, Inc., for example, a subcontractor sought delay damages resulting from an architect's alleged negligence. In sustaining the architect's demurrer with prejudice, the Circuit Court for the City of Richmond stated the following:

[T]here is no duty owed by an architect to a subcontractor, unless a contractual duty exists; and there is no contractual duty alleged in this case. The architect's duty runs to the owner, not to the contractor or subcontractor.

J. West Construction Co. v. Beeson, Lusk, Jones, Inc., LE-1095 (Circuit Court, City of Richmond, April 16, 1982). Addendum to Appellees' Brief at 11. ²

While Bryant correctly argues that such lower court opinions, particularly if unpublished, are not binding on the Virginia Supreme Court or on this Court, these decisions "are entitled to consideration as an indication of what state law is...." Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction Sec. 4507 (1981). In Harris v. Lukhard, 733 F.2d 1075 (4th Cir.1984), this Court was faced with an issue of state law on which the Supreme Court of Virginia had not yet ruled. Following a discussion of relevant Virginia Circuit Court decisions, the Court stated that, while such decisions were not controlling, a federal court should attribute some weight to the state's lower courts' interpretation of the state statute in question. Id. at 1082. This would seem particularly true in the case before us in light of the number of these lower court opinions and the consistency of their holdings. ³

We also believe that Sec. 8.01-223 of the Virginia Code may be read as barring Bryant's claim against Pirnie for lack of privity. Section 8.01-223 reads as follows:

Lack of privity no defense in certain cases.--In cases not provided for in Sec. 8.2-318 where recovery of damages for injury to person, including death, or to property resulting from negligence is sought, lack of privity between the parties shall be no defense.

Code of Virginia Sec. 8.01-223 (1950), as amended. This statute, enacted in 1966, is in derogation of the common law requirement of privity. ⁴ Farish v. Courion Industries, Inc., 754 F.2d 1111 (4th Cir.1985). Such statutes are, therefore, to be strictly construed and are not to be extended beyond their express terms. Id. at 1115. Chesapeake & Ohio Railway v. Kinzer, 206 Va. 175, 142 S.E.2d 514 (1965).

Section 8.01-223, by its own terms, abolishes the privity requirement in cases involving injury to person or injury to property resulting from negligence. It does not, however, appear to abolish the common law requirement of privity for negligence suits in which the plaintiff has suffered only economic loss. The Virginia legislature could have drafted a statute which simply abolished the privity requirement in all negligence suits, or the legislature could have specifically included "economic loss" in the statute. ⁵ Instead, it chose a narrower provision, abrogating the common law requirement of privity only where injury to property or person occurs.

A proper reading of the express terms of Sec. 8.01-223, therefore, would seem to require some physical injury to the plaintiff's property before a suit may be maintained in the absence of privity. This statute has been interpreted to require physical injury by a lower Virginia court in Mechanical Constructors, Inc. v. Stafford County, Virginia Case No. 501-82 (Circuit Court, Stafford County, January 27, 1984). Mechanical Constructors involved a claim by a contractor against an engineering firm for economic damages resulting from the firm's alleged negligence. The Court stated that, "[t]he claim herein is not for injury to person or property. Hence, Code Section 8.01-223 does not apply to exonerate this claim from the traditional requirements of privity."

Bryant argues that such a distinction between economic loss and physical injury to property is an artificial one and should be rejected by this court. ⁶ The distinction, however, is not ours to make. It is one which we believe has been made by the Virginia legislature and is one by which we are bound. ⁷

It should be noted that those courts outside Virginia which have addressed the issue of the liability of design professionals for negligence in the absence of privity are split in their results. Compare Shoffner Industries, Inc. v. W.B. Lloyd Construction Co., 42 N.C.App. 259, 257 S.E.2d 50 (1979), cert. denied, 298 N.C. 296, 259 S.E.2d 301 (1979) (contractor may recover from architect any costs resulting from architect's negligence even though not in privity with architect), Blecick v. School Dist., 2 Ariz.App. 115, 406 P.2d 750 (1965) (architects not liable, absent privity of contract, to contractors in tort for the preparation of defective plans and specifications). Bryant points out that the majority of courts which have addressed the issue have found a cause of action to exist. Brief of the Appellant at 11. Pirnie, however, maintains that the emerging trend is to the contrary. Brief for Appellees at 11. We adhere to our conclusion that there is no such cause of action...