A civil engineering firm who reviewed and approved a concrete mix design was held to be not liable for the resulting bad concrete which, in turn, prompted the destruction and replacement of a travel lift pier. The Second Appellate District's opinion in State Ready Mix, Inc. v. Moffatt & Nichol, California Court of Appeal, Appeal No. B253421 (January 8, 2015), appears to be the first reported case in California in which an appellate court applies the economic loss rule to shield the design professional from liability.
In 2012, Bellingham Marine, Inc. (Bellingham) contracted with Major Engineering Marine, Inc. (Major) to construct a travel lift pier at the Channel Islands Harbor. Bellingham also retained Moffatt & Nichol (Moffat), a civil engineering firm, to design the pier. The design specified that the concrete used for the construction of the pier have an air entrainment of two to four percent and that the cured concrete have a compressive strength of 5,000 PSI in 28 days. The Bellingham – Major contract contained a provision that should the concrete not meet the 5,000 PSI compression strength standard then the pier would be removed and replaced at Major's expense.
Major contracted with State Ready Mix, Inc. (State) to supply the concrete and the concrete mix design. Major requested that Moffatt review and approve the State mix design, despite the fact that Moffatt was not contractually obligated to perform such a review.
State delivered concrete to the project for construction. A testing lab report showed that a sample had a compressive strength of 3,650 PSI at 28 days. Major requested that State determine what the problem was. State reported back that during the pour State encountered a mechanical failure in the chemical dispensing equipment and had to manually add the air entrainment chemicals into the mix. State determined that the chemical was overdosed which resulted in the lower compressive strength.
Major demolished and rebuilt the affected portion of the pier. Major then sued State on contract and warranty theories to recover the monies spent on the demolition and reconstruction. State filed a cross-complaint against Moffatt for implied indemnity and contribution, alleging that Moffat failed to use reasonable care in reviewing the mix design. After three pleading attempts, the trial court sustained Moffatt's demurrer without leave to amend, finding that Moffat was not in privity of contract with Major or State and because the cross-complaint was barred by the economic loss rule.
The Second Appellate District affirmed the trial court ruling. The appellate court noted that State could not sue Moffatt for equitable indemnity or contribution because the complaint did not allege that Moffatt owed State a duty of care under tort law. The court noted that Moffatt's negligent performance of its contract with Bellingham would only become actionable under tort law if the conduct amounting to breach of contract also violated a tort duty independent of the contract. Relying upon the ruling in Aas v. Superior Court, the Second Appellate District noted that a person ordinarily cannot recover in tort for breaches of duty that merely restate contract obligations. The court noted that the damages in this matter did not concern property damage or personal injury, and thus, the economic loss rule should bar State's cross-complaint.
The appellate court further found that State's other theories for relief – implied contract, promissory estoppel, special relationship under Biakanja v. Irving, and good samaritan/negligent undertaking – all were barred based upon a failure in the pleadings to plead any facts which would establish either privity of contract between State and Moffatt or some other obligation owing from Moffatt to State.
Rather, the court noted that State followed its own concrete design and the problems resulted from State's failure to follow that design due to the equipment malfunction. "Common sense compels the conclusion that State alone is responsible for the bad concrete."
Given the recent ruling in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP and the potential for liability created for design professionals in that decision, the ruling in this case must be viewed as a swinging of the pendulum back toward the protection of design professionals in construction defect litigation when they are sued by parties who are not in privity of contract with them. One wonders, however, that if the defective concrete mix had damaged any portion of the project other than that built with the defective concrete mix if the court would have reached the same result.