Loureiro Contractors, Inc. v. City of Danbury et al. (2010)

MEMORANDUM OF DECISION RE A.I. ENGINEERS, INC. MOTION TO STRIKE, # 117

The defendant, A.I. Engineers, Inc., has filed a motion to strike the sixth count-negligence, and the seventh count-negligent misrepresentation, of the plaintiff's complaint based upon the application of the economic loss doctrine;  as to the seventh count, in the alternative, because it does not allege justifiable or reasonable reliance, and/or because there are no allegations that A.I. Engineers, Inc., knew that its alleged representations were false at the time they were made;  as to paragraph three and four of the prayer for relief seeking punitive damages and attorneys fees, because they are not predicated on any wilful and wanton conduct necessary for such relief.

FACTS

On December 4, 2009, the plaintiff, Loureiro Contractors, Inc. (hereinafter “Loureiro”), filed an eight-count complaint against the defendants, city of Danbury (hereinafter “the City”), and A.I. Engineers, Inc. (hereinafter “AIE”), alleging the following facts.   In August 2007, AIE created plans and specifications as part of a competitive bidding process for a construction project known as Reconstruction of Rose Hill Avenue Bridge Over Still River.   The City subsequently entered into a contract with Loureiro to construct the subject bridge according to AIE's plans and specifications.   Over the course of the project, the City and AIE requested a number of changes and modifications to the original plans and specifications, resulting in Loureiro incurring additional expenses to its detriment.   Counts one through five of the complaint, brought against the City, allege breach of contract, negligent misrepresentation, breach of the covenant of good faith and fair dealing, unjust enrichment and violations of the Connecticut Unfair Trade Practices Act (“CUTPA”), General Statutes § 42-110a.¹  Counts six, seven and eight of the complaint allege negligence, negligent misrepresentation and breach of the implied warranty of fitness, respectively, against AIE.

On April 21, 2010, AIE moved to strike the sixth, seventh and eighth counts of Loureiro's complaint, along with the third and fourth paragraphs of the prayer for relief seeking punitive damages and attorneys fees, on the ground that such claims fail to state cognizable causes of action.   Loureiro filed an objection to AIE's motion to strike on August 17, 2010, and AIE replied thereto on September 16, 2010.   The motion to strike, objection and reply were all accompanied by memoranda of law.   Loureiro subsequently withdrew count eight ² of its complaint on September 20, 2010, and argument on the balance of the motion to strike was heard at the short calendar on that same day.

DISCUSSION

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint.”   (Internal quotation marks omitted.)  Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).   The court must “construe the complaint in the manner most favorable to sustaining its legal sufficiency.”   (Internal quotation marks omitted.)  Broadnax v. New Haven, 270 Conn. 133, 173, 851 A.2d 1113 (2004).  “It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.”  (Emphasis added;  internal quotation marks omitted.)   Asylum Hill Problem Solving Revitalization Ass'n. v. King, 277 Conn. 238, 246, 890 A.2d 522 (2006).

Specifically, AIE moves to strike counts six and seven of the complaint and paragraphs three and four of the prayer for relief on the grounds that:  (I) counts six and seven are barred by application of the economic loss doctrine, (II) count seven is insufficient as it contains no allegations that AIE knew that its alleged representations were false at the time they were made or that Loureiro justifiably relied on such representations and (III) paragraphs three and four of the prayer for relief are insufficient because they are not predicated on any wilful or wanton conduct.   AIE's arguments will be addressed in turn.

I

AIE argues that the economic loss doctrine bars the sixth and seventh counts of the complaint.   In particular, AIE argues that application of the economic loss doctrine to the present facts is consistent with our Supreme Court's holding in Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 153, 709 A.2d 1075 (1998).   Moreover, AIE argues that application of the economic loss doctrine to the present facts is appropriate as Loureiro, a commercial entity, had an adequate opportunity to allocate the risk of following AIE's plans and specifications when it entered into its post-bid contract with the city.   Finally, AIE argues that application of the economic loss doctrine to the present facts will not unfairly prejudice Loureiro as it may still seek recovery pursuant to its contractual rights with the City or from its payment bond.

Loureiro counters that the economic loss doctrine does not bar its claims under counts six and seven.   In particular, Loureiro argues that Flagg does not preclude recovery in tort by a construction contractor against a design professional where there is no privity of contract between those parties.   Loureiro argues that Flagg 's application of the economic loss doctrine does not extend beyond defective performance under a contract for the sale of goods pursuant to the Uniform Commercial Code (“UCC”).   Moreover, Loureiro contends that its injuries were foreseeable and that any cause of action or means of recovery it may seek against the City or through its payment bond is irrelevant with regard to the economic loss doctrine's application to the present matter.

“[T]he economic loss doctrine ․ is a judicially created principle which prohibits recovery in tort where the basis for that tort claim arises from violation of a contract and damages are limited to purely economic losses as opposed to personal injury or property damage ․” Hoydic v. B & E Juices, Inc., Superior Court, complex litigation docket at Stamford-Norwalk, Docket No. X08 CV034010104 (February 27, 2008).   There have been no appellate decisions subsequent to Flagg addressing the economic loss doctrine in Connecticut and considerable debate has arisen in the Superior Court regarding the doctrine's reach.  “Some superior courts have found that the holding in Flagg warrants an extension of the economic loss doctrine well beyond cases involving the sale of goods [under the UCC] ․ Others have found either that the economic loss doctrine has not been recognized in Connecticut or that the application of the ruling in Flagg is limited to claims arising from the sale of goods ․” (Citations omitted.)   Dart Chart Systems v. Kettle Brook Care Center, LLC, Superior Court, judicial district of Hartford, Docket No. CV095025871 (June 5, 2009).

Nonetheless, in the present matter, focusing on the debate over Flagg 's import is misleading.   The present facts are similar to those in United Steel, Inc. v. Spiegel, Zamecnik & Shah, Inc., Superior Court, complex litigation docket at Hartford, Docket No. X09 CV065001846 (March 27, 2007) (42 Conn. L. Rptr. 476), where the court's focus was on the contractual relationship of the parties.³  In particular, the United Steel court adopted an interpretation of the economic loss doctrine “which bars recovery in tort where the relationship between the parties is contractual ․” (Citations omitted;  emphasis added;  internal quotation marks omitted.)  Id. 479.   In United Steel, the plaintiff was a subcontractor hired to fabricate structural steel for a building project on a college campus.   The plaintiff brought an action alleging negligence and negligent misrepresentation, among other tort claims, against the project's architect and structural engineer, for expenses and losses incurred as a result of allegedly deficient plans and specifications.   Noting the absence of contractual privity between the parties, the United Steel court declined to extend the economic loss doctrine and strike certain counts of the complaint.   This court agrees with the reasoning of the court in United Steel, whereby in the absence of privity of contract, a contractor may bring a tort claim against a design professional for purely economic losses “as long as the latter [has] failed to perform its duties with care and diligence and the damages claimed by the general contractor were a reasonably foreseeable consequence of its failure.”  Id.

The present matter does not involve parties to a contract within the confines of the UCC and Loureiro has sufficiently pleaded that AIE failed to perform its duties in developing plans and specifications for the subject construction project with care and diligence.⁴  Furthermore, Loureiro has alleged that it relied on AIE's plans and specifications to its detriment.   As the contractor selected pursuant to a competitive bidding process wherein AIE's plans and specifications provided a basis for the project bids, the damages incurred by Loureiro as a result of the allegedly defective plans and specifications were a reasonably foreseeable consequence of AIE's alleged failure to exercise due care.   Therefore, the motion to strike the sixth and seventh counts of the complaint pursuant to application of the economic loss doctrine is denied.⁵

II

AIE argues that count seven must be stricken because it fails to allege certain elements of a negligent misrepresentation claim.   In particular, AIE argues that Loureiro has failed to allege that it reasonably or justifiably relied on any perceived misrepresentations.   Moreover, AIE argues that Loureiro has failed to allege that AIE knew that any alleged representations were false at the time they were made.

Loureiro contends that it has adequately alleged the requisite elements to support a claim for negligent misrepresentation.   Specifically, Loureiro argues that the facts of the complaint necessarily imply that it justifiably relied on AIE's representations as communicated in the project plans and specifications.   Additionally, Loureiro argues that the complaint sets forth adequate allegations by which to imply that AIE knew, should have known or had a duty of knowing that its alleged misrepresentations were false at the time they were made.

“[A]n innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth ․ The governing principles are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977):  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.”  (Citations omitted;  internal quotation marks omitted.)  Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 575, 657 A.2d 212 (1995).

In the present matter, Loureiro has alleged that AIE “failed to exercise reasonable care and acted with wanton and willful disregard to Loureiro's rights in providing Loureiro with untruthful and inaccurate representations.”   Complaint, count seven, ¶ 15.   Moreover, Loureiro alleges that it “relied upon the express and implied representations of [AIE] in executing the [c]ontract, commencing work on the [p]roject and in continuing to perform work on the [p]roject.”  Id., ¶ 18.

“In reading the complaint we follow the modern trend, which is to construe pleadings broadly and realistically, rather than narrowly and technically ․ As long as the pleadings provide sufficient notice of the facts claimed and the issues to be tried and do not surprise or prejudice the opposing party, we will not conclude that the complaint is insufficient.”  (Internal quotation marks omitted.)  Edwards v. Tardif, 240 Conn. 610, 620, 692 A.2d 1266 (1997).

The allegations of the present complaint, viewed in a light most favorable to sustaining its sufficiency, state a cause of action for negligent misrepresentation.   In particular, Loureiro's allegations that AIE acted with wilful and wanton disregard in providing inaccurate representations implies that AIE knew or should have known that the representations they made were false.   Moreover, as noted above, Loureiro's position as a contractor chosen pursuant to a competitive bidding process wherein AIE's plans and specifications provided a basis for the project bids necessarily implies that Loureiro reasonably relied on such plans and specifications in formulating its bid proposal and in subsequently commencing work on the subject construction project.   Thus, the motion to strike the seventh court of Loureiro's complaint is also denied.

III

Finally, AIE urges the court to strike the fourth and fifth paragraphs of the prayer for relief, seeking punitive damages and attorneys fees, on the ground that Loureiro's complaint fails to adequately allege wilful and wanton conduct on which to premise such claims for relief.   Contrary to AIE's contention, the complaint specifically alleges wilful and wanton conduct on the part of AIE.⁶ Although generally a request for punitive damages and attendant attorneys fees is inappropriate in an action sounding in negligence, the present complaint alleges conduct sufficient, as a matter of pleading, to support such claims.  United Steel, Inc. v. Spiegel, Zamecnik & Shah, Inc., supra, 43 Conn. L. Rptr. 480-81.   Therefore, the motion to strike the third and fourth paragraph of the prayer for relief is denied.

CONCLUSION

Accordingly, and for the foregoing reasons, AIE's motion to strike is denied in its entirety.

Swienton, J.

FOOTNOTES

FN1. On April 28, 2010, this court, Swienton, J., granted the City's motion to strike the CUTPA claim and paragraph four of the prayer for relief [49 Conn. L. Rptr. 772].   It should be noted that the grant of the motion to strike paragraph four was limited to attorneys fees claimed under CUTPA's statutory mandate.   Thus, paragraph four of the prayer for relief remains viable as to an award of attorneys fees as a component of exemplary damages..  FN1. On April 28, 2010, this court, Swienton, J., granted the City's motion to strike the CUTPA claim and paragraph four of the prayer for relief [49 Conn. L. Rptr. 772].   It should be noted that the grant of the motion to strike paragraph four was limited to attorneys fees claimed under CUTPA's statutory mandate.   Thus, paragraph four of the prayer for relief remains viable as to an award of attorneys fees as a component of exemplary damages.

FN2. The withdrawal of count eight thus renders moot that portion of AIE's motion to strike contesting the sufficiency of such count..  FN2. The withdrawal of count eight thus renders moot that portion of AIE's motion to strike contesting the sufficiency of such count.

FN3. As pointed out in United Steel, Inc. v. Spiegel, Zamecnik & Shah, Inc., the only Connecticut appellate case in which the economic loss rule has been invoked, Flagg Development Corp. v. General Motors Corp., supra, involved parties to a contract.   Id., n. 8..  FN3. As pointed out in United Steel, Inc. v. Spiegel, Zamecnik & Shah, Inc., the only Connecticut appellate case in which the economic loss rule has been invoked, Flagg Development Corp. v. General Motors Corp., supra, involved parties to a contract.   Id., n. 8.

FN4. Loureiro specifically alleges that AIE breached its duties by:  (a) preparing and designing plans and specifications containing material misrepresentations of relevant and material facts;  (b) failing to adequately review and correct the plans and specifications and other documents prior to bid when AIE knew that contractors like Loureiro would be relying on those documents;  (c) failing and/or refusing to provide Loureiro with adequate and accurate plans and specifications and other information;  (d) failing to take sufficient and timely remedial steps to properly deal with and respond to designers' errors and inaccuracies in the plans and specifications;  (e) continuously failing to warn Loureiro of and continuously failing to correct, the material inaccuracies of the plans and specifications;  (f) failing and/or refusing to approve submittals in a timely fashion;  (g) responding to Loureiro's requests for information with misleading and inaccurate information;  (h) requiring Loureiro to furnish additional labor, materials and equipment that were not contemplated and failing and/or refusing to authorize compensation for the same;  (i) refusing Loureiro to perform additional work over longer periods of time than was required and failing and/or refusing to authorize compensation to Loureiro for the same;  (j) causing unnecessary delays of the performance of Loureiro's duties and obligations and failing to recommend to the City that it grant additional time and compensation to Loureiro;  (k) failing to conduct its activities on the project in accordance with applicable professional and industry standards;  (l) failing to perform its duties and obligations in accordance with the standard customs and usage of the industry;  (m) requiring Loureiro to perform additional and uncompensated work which was not required under the contract and failing and/or refusing to authorize compensation to Loureiro for such work;  (n) failing and/or refusing to respond to Loureiro's requests for additional compensation and for time extension in a timely and adequate fashion;  and (o) failing and/or refusing to comply and acknowledge the terms and conditions of the contract.  (Complaint, Count VI, ¶ 17)..  FN4. Loureiro specifically alleges that AIE breached its duties by:  (a) preparing and designing plans and specifications containing material misrepresentations of relevant and material facts;  (b) failing to adequately review and correct the plans and specifications and other documents prior to bid when AIE knew that contractors like Loureiro would be relying on those documents;  (c) failing and/or refusing to provide Loureiro with adequate and accurate plans and specifications and other information;  (d) failing to take sufficient and timely remedial steps to properly deal with and respond to designers' errors and inaccuracies in the plans and specifications;  (e) continuously failing to warn Loureiro of and continuously failing to correct, the material inaccuracies of the plans and specifications;  (f) failing and/or refusing to approve submittals in a timely fashion;  (g) responding to Loureiro's requests for information with misleading and inaccurate information;  (h) requiring Loureiro to furnish additional labor, materials and equipment that were not contemplated and failing and/or refusing to authorize compensation for the same;  (i) refusing Loureiro to perform additional work over longer periods of time than was required and failing and/or refusing to authorize compensation to Loureiro for the same;  (j) causing unnecessary delays of the performance of Loureiro's duties and obligations and failing to recommend to the City that it grant additional time and compensation to Loureiro;  (k) failing to conduct its activities on the project in accordance with applicable professional and industry standards;  (l) failing to perform its duties and obligations in accordance with the standard customs and usage of the industry;  (m) requiring Loureiro to perform additional and uncompensated work which was not required under the contract and failing and/or refusing to authorize compensation to Loureiro for such work;  (n) failing and/or refusing to respond to Loureiro's requests for additional compensation and for time extension in a timely and adequate fashion;  and (o) failing and/or refusing to comply and acknowledge the terms and conditions of the contract.  (Complaint, Count VI, ¶ 17).

FN5. This court would adhere to the narrower view that the economic loss doctrine as enunciated in Flagg is limited to transactions involving the sale of good governed by the UCC. The reasoning set forth in Santoro, Inc. v. A.H. Harris & Sons, Inc., Superior Court, judicial district of Hartford, Docket No. CV 03-0828039 (September 23, 2004) is persuasive:  “Upon close examination, [the decision in Flagg ] cannot reasonably be read to create a general rule barring all tort claims based in whole or in part upon alleged breaches of contract or alleged breaches of implied warranties of fitness and/or merchantability.   Instead, it can only be read to bar such claims in the particular circumstances there at issue, to wit:  where both the plaintiff and the defendant are sophisticated commercial parties, and their dispute arises from the defendant's allegedly defective performance under a contract for the sale of goods.   The reasons for this limitation, quite simply is (sic) that its origin lies not in the broad common law of torts or contracts, but in the narrower, express provisions of Article 2 of the Uniform Commercial Code, which establishes special rules governing the remedies available for breaches of commercial contracts for the sale of goods.”.  FN5. This court would adhere to the narrower view that the economic loss doctrine as enunciated in Flagg is limited to transactions involving the sale of good governed by the UCC. The reasoning set forth in Santoro, Inc. v. A.H. Harris & Sons, Inc., Superior Court, judicial district of Hartford, Docket No. CV 03-0828039 (September 23, 2004) is persuasive:  “Upon close examination, [the decision in Flagg ] cannot reasonably be read to create a general rule barring all tort claims based in whole or in part upon alleged breaches of contract or alleged breaches of implied warranties of fitness and/or merchantability.   Instead, it can only be read to bar such claims in the particular circumstances there at issue, to wit:  where both the plaintiff and the defendant are sophisticated commercial parties, and their dispute arises from the defendant's allegedly defective performance under a contract for the sale of goods.   The reasons for this limitation, quite simply is (sic) that its origin lies not in the broad common law of torts or contracts, but in the narrower, express provisions of Article 2 of the Uniform Commercial Code, which establishes special rules governing the remedies available for breaches of commercial contracts for the sale of goods.”

FN6. Paragraph 15 of Count VII-Negligent Misrepresentation (as to A.I. Engineers) states:  “A.I. Engineers failed to exercise reasonable care and acted with wanton and willful disregard to Loureiro's rights in providing Loureiro with untruthful and inaccurate representations” as to the plans and specifications, extra labor and materials, design deficiencies, etc..  FN6. Paragraph 15 of Count VII-Negligent Misrepresentation (as to A.I. Engineers) states:  “A.I. Engineers failed to exercise reasonable care and acted with wanton and willful disregard to Loureiro's rights in providing Loureiro with untruthful and inaccurate representations” as to the plans and specifications, extra labor and materials, design deficiencies, etc.

Swienton, Cynthia K., J.