There are Limits to the Economic Loss Doctrine

Dec 28, 2017

Liability does not extend to vendors supplying product information.

A recent post on the Babst/Calland Construction Law Blog discusses an unreported decision by the U.S. District Court for the Eastern District of Pennsylvania in which the Court ruled that the economic loss doctrine does not apply to manufacturers and suppliers providing product information to design professionals, in Elliot-Lewis Corp. v. Skanska USA Bldg., Inc. 2015 WL 4545362 (E. D. Pa. July 28, 2015).

The Franklin Institute hired an architectural firm, Sayler Gregg, and an engineering firm, Marvin Waxman, “to design renovations to the Franklin Institute in Philadelphia.” Skanska, the general contractor, subcontracted with ElCo to install the HVAC system, which included a cooling tower. The tower overflowed and damaged the building.

“In troubleshooting the issues with the HVAC system, Marvin Waxman utilized information provided by the supplier of the HVAC’s pump system, Patterson Pump Company… and Patterson’s representative, Clapp Associations…After several weeks of unsuccessful repair efforts, Patterson eventually admitted that there were problems ‘intrinsic to the pumps supplied’”.

ELCo, who was required to perform extra work and material to remedy the flaws in the cooling system, filed suit against Skanska when the general contractor refused to pay them. Skanska filed a third party suit against the design professionals who, in turn, filed a fourth party suit against Patterson and Clapp.

“Patterson and Clapp claimed that the Design Defendant’s suit was barred by Pennsylvania’s economic loss doctrine, which prohibits a plaintiff from recovering in tort if the loss is purely economic and not accompanied by an injury to either person or property. However, the Design Defendants argued that their claims were valid under the Bilt-Rite exception to the economic loss doctrine, which permits recovery for purely economic injuries where information is negligently supplied by one in the business of supplying information (such as an architect or design professional) and where it is foreseeable that the information will be used and relied upon by third parties…”

The Court rejected this argument explaining that there is a difference between design professionals, and manufacturers and sales representatives that supply product information.

Source—

EASTERN DISTRICT OF PA DECLINES TO BROADEN BILT-RITE EXCEPTION TO ECONOMIC LOSS DOCTRINE, Babst/Calland, Attorneys at Law, Construction Law Blog, Feb. 2, 2017.