Gongloff Contracting, L.L.C. v. L. Robert Kimball & Assocs., Architects and Eng’rs, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015)

Pennsylvania law generally bars negligence claims when the injured party has suffered only economic losses.  This principle is commonly referred to as the economic loss doctrine.  An exception to this doctrine is found in Section 552(1) of the Restatement (Second) of Torts, which provides that, “one who, in the course of his business, profession or employment … supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” In Bilt-Rite Contractors, Inc. v. Architectural Studio, 581 Pa. 545 (2005), the Pennsylvania Supreme Court adopted this exception and found it to be applicable in cases where information is negligently supplied by an architect or design professional under circumstances where it is foreseeable that others will rely upon that information.  In Gongloff, the Superior Court of Pennsylvania, interpreting Bilt-Rite, held that the Bilt-Rite exception can be triggered when an architect or design professional negligently includes faulty information in its design documents.  The Gongloff court rejected the argument that, under Bilt-Rite, an injured party is required to identify an “express” misrepresentation in a particular communication or document in order to support a claim of negligent misrepresentation.

The Gongloff case arose out of a dispute between an architect-engineer and a sub-subcontractor on a project involving the design and construction of a convocation center at the California University of Pennsylvania.  The sub-subcontractor, Gongloff, entered into a contract with a subcontractor on the project, pursuant to which Gongloff was to provide all labor, materials, and equipment to erect the structural steel for the project.  The architect-engineer, Kimball, provided the design for the project, including a “never-before-utilized” design of the roof system.  Gongloff asserted that Kimball’s roof design was faulty and defective, and that attempts to redesign the roof led to project shutdowns and extra work to be performed by Gongloff, all of which substantially increased Gongloff’s costs on the project.  When the subcontractor with whom Gongloff contracted ceased making payments for these additional costs, Gongloff initiated an action against Kimball for negligent misrepresentation.

After the close of pleadings, Kimball filed a motion for judgment on the pleadings asserting, among other things, that Gongloff’s claim was barred by the economic loss doctrine.  Gongloff disputed that the economic loss doctrine was applicable and asserted that its claim was governed by the Bilt-Rite exception.  The trial court granted Kimball’s motion, finding that Gongloff’s claim was barred by the economic loss doctrine  because Gongloff could not “point to negligent misrepresentation that led to the loss.”  The trial court rejected Gongloff’s argument that Kimball had “impliedly represented that normal construction measures could be employed to erect the structural steel”, stating that “there is no express representation [by Kimball] concerning the means and methods of construction.”  Gongloff appealed.  On appeal, the Pennsylvania Superior Court considered, among other things, whether the exception carved out by Section 552 of the Restatement requires a design professional to make an explicit negligent misrepresentation of a specific fact in order for a third party to recover damages.  The Superior Court determined that it did not.

In arriving at its conclusion, the Gongloff court first observed that negligent misrepresentation differs from intentional misrepresentation in that “the speaker need not know his or her words are untrue, but must have failed to make a reasonable investigation of the truth of these words.”  As noted by the court, the Section 552, or Bilt-Rite, exception does not supplant this common law, but rather clarifies its contours as it applies to “those in the business of providing information to others.”  Next, the Gongloff court reviewed the holding of Excavation Technologies, Inc. v. Columbia Gas Company of Pennsylvania, 2007 936 A.2d 111 (Pa. Super. Ct. 2007).  There, the Superior Court noted that architects and design professionals, which regularly provide information to be used by contractors, subcontractors, and others, have a common law duty to exercise the ability, skill, and care customarily used by others in their industry when providing such information.  Typically, architects and design professionals provide this information through the preparation of plans and specifications.  These documents are provided to bidders, who rely on them in formulating bids for the project, and architects and design professionals are paid a fee to use their skill and training to provide reliable information.  If the plans and specifications prove to be erroneous, contractors, and others relying on the plans and specifications are at risk of suffering economic harm, and the architect or design professional may be liable for economic damages resulting from its breach of the common law duty of care.

The Gongloff court concluded that Bilt-Rite and Excavation Technologies “could be reasonably understood to subject architects to liability for Section 552 negligent misrepresentation claims when it is alleged that those professionals negligently included faulty information in their design documents.”  The court further concluded that “the design itself can be construed as a representation by the architect that the plans and specifications, if followed, will result in a successful project.”  The court rejected Kimball’s argument that courts applying Bilt-Rite have held that an “express representation made by the architect” is required or that Gongloff was required to identify with precision the misrepresentation in the design documents.  As the Gongloff court observed, “Bilt-Rite requires only that information, a rather general term, be negligently supplied by the design professional.”  Accordingly, the court concluded that the trial court’s decision granting judgment on the pleadings was legally erroneous.

To view the full text of the court’s decision, courtesy of Lexis ®, click here.