Duffy v. Piazza Construction, Inc.
1991 Wash. App. LEXIS 256, 62 Wash. App. 19, 815 P.2d 267 (1991)
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Rule of Law:
A joint venturer cannot maintain a negligence action against another joint venturer for acts committed within the scope of the venture that result in purely economic loss, absent a showing of bad faith, breach of trust, or physical injury to person or property.
Facts:
- Richard and James Duffy entered into a joint venture agreement with Piazza Construction, Inc. (Piazza) to submit a proposal for an office building for the U.S. Forest Service.
- Under the agreement, the Duffys would provide the land for the project, and Piazza would supply the drawings, building specifications, and cost items for the proposal.
- The Forest Service's bid specifications required proposals to include at least 15,500 square feet of net usable office space.
- Piazza prepared and submitted a final proposal on behalf of the joint venture that included only 15,000 square feet of net usable office space.
- The Forest Service rejected the joint venture's bid as nonresponsive because it failed to meet the minimum square footage requirement.
- As a result of the rejection, the joint venture lost the opportunity to be awarded the contract.
Procedural Posture:
- The Duffys filed a complaint against Piazza in the trial court, alleging negligence in the preparation of a bid and seeking damages for lost profits.
- Piazza filed a motion for summary judgment, arguing a joint venturer cannot sue another for negligence committed within the scope of the venture.
- The trial court granted summary judgment in favor of Piazza and dismissed the Duffys' complaint.
- The Duffys, as appellants, appealed the trial court's order to the Court of Appeals of Washington.
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Issue:
Does a joint venturer have a cause of action for negligence against another joint venturer for actions taken within the scope of the joint venture that result in economic loss but do not involve bad faith or physical injury?
Opinions:
Majority - Coleman, J.
No. A joint venturer may not sue another joint venturer for simple negligence in the management of the venture's affairs that results in only economic loss. The relationship between joint venturers is analogous to that of partners, and the rights and liabilities are subject to the same rules. Citing Ferguson v. Williams, the court establishes that negligence in the management of a joint venture does not create a right of action by one member against another. Such an action may lie only when there is a breach of trust (such as converting venture assets for personal use), bad faith, or when the negligence results in physical injury to the person or property of the other venturer. Since the Duffys only alleged lost profits due to Piazza's mistake in managing the bid preparation—a core function of the venture—and did not allege bad faith or physical injury, they have no cognizable claim for negligence.
Analysis:
This decision reinforces the legal principle that partners and joint venturers are generally insulated from liability to each other for ordinary negligence or poor business judgment exercised in good faith. It solidifies the distinction between actionable wrongs (like fraud or conversion) and non-actionable business errors. By limiting negligence claims between partners to cases involving physical harm or breach of fiduciary duty, the ruling protects the collaborative and risk-taking nature of partnerships, preventing them from being undermined by litigation over every mistake. The appropriate remedy for mismanagement is typically an action for an accounting or dissolution of the partnership, not a tort claim for damages.
