Supreme Court of Texas Blog

No. 11-0810
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LAN/STV, A JOINT VENTURE OF LOCKWOOD, ANDREWS & NEWMAN, INC. AND STV INCORPORATED v. MARTIN K. EBY CONSTRUCTION COMPANY, INC.

Oral argument was held on October 8, 2013. The Court issued an opinion resolving the case on June 20, 2014. File Closed

In the news...

Tracking 2 articles about this case.

June 23, 2014

The economic loss rule in Texas is more restrictive than the Restatement

from SCOTXblog

The Court has issued opinions:

June 20, 2014

Eight sets of opinions, one grant [Jun. 20, 2014]

from SCOTXblog

This article also mentions 10 other cases.

Opinion

June 20, 2014

Hecht
Green
Johnson
Willett
Guzman
Lehrmann
Boyd
Devine
Brown

Chief Justice Hecht delivered the opinion of the Court. PDF

 

Court of Appeals

Appellate District:5th Court of Appeals
Outcome Below:Affirmed
COA Docket No.:05-09-00946-CV
Opinion Author:Honorable Douglas S. Lang

Trial Court

Trial Court:192nd District Court
County:Dallas
Trial Judge:Honorable S. Craig Smith
Trial Docket:03-7835-K

Entries on SCOTX Orders Lists

Docket Entries

Date Event Outcome  
2014-08-07 Case Stored  
2014-08-01 Mandate issued  
2014-06-20 Court approved judgment sent to attorneys of record Issued
2014-06-20 Opinion issued   Court of Appeals' judgment reversed & judgment rendered
2014-06-20 Opinion issued Issued
  This case was awaiting the Court's decision after oral argument between March 18, 2014 and June 20, 2014.  
2014-03-18 Amicus Curiae Brief received  
2014-03-04 Amicus Curiae Brief received  
2014-02-11 Post submission brief filed (Amicus Curiae)  
  This case was awaiting the Court's decision after oral argument between November 26, 2013 and February 11, 2014.  
2013-11-26 Post submission brief filed  
2013-10-11 Post submission brief filed (Petitioner)  
2013-10-08 Oral argument  
2013-10-08 Oral argument  
2013-08-28 Oral Argument Submission Form from Attorney received  
2013-08-28 Oral Argument Submission Form from Attorney received  
2013-07-09 Address Change  
  This case was waiting for oral argument between May 3, 2013 and July 9, 2013.  
2013-05-03 Case set for oral argument   Case set for oral argument
2013-05-03 Case set for oral argument   Case set for oral argument
  This case was waiting for oral argument between March 1, 2013 and May 3, 2013.  
2013-03-01 Electronic communication received from Party  
2013-02-15 Petition for Review disposed   Filing granted
2013-02-15 Petition for Review disposed   Filing granted
2013-02-15 Petition for Review granted
2013-02-15 Petition for Review granted
  This case was pending on merits briefs between November 29, 2012 and February 15, 2013.  
2012-11-29 Case Record Filed
2012-11-28 Phone call from Clerk's Office  
2012-11-13 Record Requested in Petition for Review  
2012-11-09 Reply Brief (Petitioner)  
2012-11-05 Motion for Extension of Time disposed.   Filing granted
2012-11-02 Reply Brief  
2012-10-30 Motion for Extension of Time to File Brief filed  
2012-10-19 Motion for Extension of Time disposed.   Filing granted
2012-10-16 Motion for Extension of Time to File Brief filed  
2012-10-04 Brief on the Merits (Respondent)  
2012-10-04 Brief on the Merits (Respondent)  
2012-09-10 Motion for Extension of Time disposed.   Filing granted
2012-08-28 Motion for Extension of Time to File Brief filed  
2012-08-22 Fully hyperlinked brief filed (Petitioner)  
2012-08-15 Brief on the Merits  
2012-08-15 Brief on the Merits  
2012-07-25 Case Record Filed  
2012-07-11 Motion for Extension of Time disposed.   Filing granted
2012-07-10 Motion for Extension of Time to File Brief filed  
2012-06-19 Record Requested in Petition for Review
2012-06-15 Brief on the Merits Requested  
2012-05-25 Reply to Response  
2012-05-18 MET to file reply disposed of   Filing granted
2012-05-09 Motion to Extend Time to File Reply filed  
2012-05-02 Response to Petition (Respondent)  
2012-04-02 Response to Petition (Respondent)  
2012-03-21 Motion for Extension of Time to File Response  
2012-03-21 Motion for Extension of Time to File Response disposed   Filing granted
2012-03-01 Supreme Court of Texas Requested Response  
2012-02-07 Case forwarded to Court
2012-02-07 Case forwarded to Court
2012-01-02 Appendix Filed  
2012-01-02 Petition for Review #2 (Petitioner)  
2011-12-14 Motion for Extension of Time to File Petition for Review disposed   Filing granted
2011-12-07 Response Waiver filed  
2011-12-07 Motion for Extension of Time to File Petition for Review #2 filed  
2011-11-10 Petition for Review (Petitioner)  
2011-11-10 Appendix Filed (Petitioner)  
2011-10-26 Second Motion for Extension of Time to File Petition for Review disposed   Filing granted
2011-10-24 Second Motion for Extension of Time to File Petition for Review filed  
2011-10-13 Motion for Extension of Time to File Petition for Review disposed   Filing granted
2011-10-10 Motion for Extension of Time to File Petition for Review filed  

Parties

Party Counsel Role
LAN/STV
Ms. Wanda McKee Fowler
Mr. Bradley Wayne Snead
Mr. Henry S. Platts Jr.
Mr. Thomas C. Wright
Petitioner
Martin E. Eby Construction Company, Inc.
Mr. Jeffrey S. Levinger
Mr. Daniel J. Davis
Mr. Jeffery A. Ford
Respondent

Amici Curiae

Amicus Curiae Counsel
CCE, Inc.
Mr. Charles R. 'Skip' Watson Jr.
Atkins North America, Inc.
Ms. Elizabeth G. Bloch
General Contractors of Texas, Inc.
Mr. Joseph F. Canterbury Jr.

The economic loss rule in Texas is more restrictive than the Restatement

An architect on a commercial project was sued by a contractor on the project for their negligent work, which allegedly caused significant increased costs that the contractor could not recoup.

The key fact here turns out to be that the architect worked for the project owner, not the contractor. For that reason, the architect argued, Texas law does not permit the contractor to sue it for pure economic losses (those unconnected to some bodily harm or property damage) caused by its allegedly negligent work. The principle involved is the “economic loss rule.”

As the opinion explains, the economic loss rule aims to draw a clearer line to the edges of tort liability than offered by older principles such as “foreseeability.” While foreseeability can turn on idiosyncratic facts, the economic loss rule instead invites a court to announce broad policy determinations about whether tort liability should apply in a particular situation.

The Texas Supreme Court ultimately agreed with the architect and held that the architect had no liability for these economic losses suffered by a contractor relying on its plans. What makes this opinion notable — and ensures it will be frequently cited, despite its narrow holding — is the depth of its examination of the policies and principles behind the economic loss rule, both in terms of Texas law and the larger national academic discussion.

That extensive background sets the stage for the Court to announce a rule at odds with the Restatement. Some commentary in the Restatement addresses just this situation — an architect, whose plans inflict economic loss on others in the project. The Restatement suggests that an architect on a commercial project should expect exactly this degree of reliance from contractors bidding on the project and, thus, that it is appropriate to impose tort liability as the default rule and let the parties choose, if they wish, to modify that by contract.

A unanimous Texas Supreme Court disagreed. It viewed the policies behind the economic loss rule as better served by leaving this kind of liability among people engaged in the same economic transaction exclusively to the realm of contract law: “We think it more probable that a contractor will assume it must look to its agreement with the owner for damages if the project is not as represented or for any other breach. Though there remains the possibility that a contractor may not do so, we think the availability of contractual remedies must preclude tort recovery in the situation generally because … ‘clarity allows parties to do business on a surer footing’.”

To explain its thinking, the Court offered an excerpt from a 1992 law review article by Professor William Powers, an extensive block quote that may soon be a favorite example for those defending the practical value of the legal academy.1

The Court’s precise holding turns out to be narrow: That a general contractor cannot recover pure economic losses from an architect hired by the project’s owner. The implications for future contractors are clear enough: negotiate for contractual or insurance-based protection.


  1. This opinion extensively discusses academic publications by Professor Powers, Professor Fleming James, and Judge Posner, among others. 

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