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Architect is Not Responsible for Contractor’s Delay Damages—LAN/STV v. Eby

The Texas Supreme Court has held that a contractor under contract to the project owner only, may not sue an engineer for delay damages based upon design errors.[1]

LAN/STV, a joint venture, contracted with the Dallas Area Rapid Transit Authority (DART) to provide design plans and specifications for a light rail line in Dallas. Separately, DART contracted with Martin K. Eby Construction Company (Eby) to construct the rail line. There were no contracts between Eby and LAN/STV. Very shortly after construction commenced, Eby “discovered” that the plans had numerous errors and asserted that 80% of the construction drawings required revisions and modifications. Eby contended that it lost $14,000,000.00 on the project.

Eby originally sued DART for breach of contract which was dismissed for failure to exhaust administrative remedies. After a complicated legal process, Eby and DART settled for a fraction of what Eby claimed and Eby filed suit against LAN/STV for negligence and negligent misrepresentation. The jury found fault on the part of LAN/STV (45%), DART (40%) and Eby (15%). Both parties appealed.

Eby had claimed that LAN/STV prepared the plans and knew that Eby was going to rely upon those plans in connection with the performance of its work on the project. Negligent misrepresentation is a tort (non-contract) cause of action. The noted that, in  general, ‘there is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.’ Texas had previously recognized an exception for the recovery of purely economic losses in connection with the negligent performance of services in professional malpractice cases involving lawyers. The Court reiterated its previous recognition of the negligent misrepresentation cause of action set out in Section 552 of the Restatement (Second) of Torts and its application to legal malpractice cases. McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787 (Tex. 1999). Eby wanted to extend that holding to a construction context.

The Court noted that negligent performance of services and negligent misrepresentation are “both torts . . . based on the same logic” with similar “general theor[ies] of liability.” In agreeing that an architect’s plans are “intended to serve as a basis for reliance by the contractor, the Court stated that ‘the contractor’s principal reliance must be on the presentation of the plans by the owner, with whom the contractor is to reach an agreement, not the architect, a contractual stranger. The architect is liable to the owner for deficient plans. Therefore, the Court concluded that the general contractor had no direct cause of action against the architect retained separately by the owner for economic losses caused by allegedly defective plans.

[1] LAN/STV, a Joint Venture of Lockwood, Andrews, Newman, Inc. and STV Incorporated v. Martin K. Eby Constr. Co., Inc., 435 S.W.3d 234 (Tex. 2014).

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