Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C.
929 N.E.2d 722, 2010 Ind. LEXIS 397, 2010 WL 2594314 (2010)
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Rule of Law:
The economic loss rule bars tort claims for purely economic losses in a large construction project when the parties are connected through a network or chain of contracts that allocates their respective risks, duties, and remedies, regardless of whether direct contractual privity exists between the plaintiff and defendant.
Facts:
- The Indianapolis-Marion County Public Library ('Library') hired Woollen Molzan and Partners, Inc. ('WMP') as the architect for a major renovation and expansion project.
- WMP subcontracted with Thornton Tomasetti Engineers ('TTE') and Charlier Clark and Linard, P.C. ('CCL') to perform engineering and architectural services for the project.
- Joseph G. Burns, a managing principal of TTE, served as the project's 'engineer of record'.
- The Library never entered into a direct contract with TTE, CCL, or Burns.
- During construction, the Library became concerned about the structural integrity of the project's parking garage, which was designed to be the foundation for the library structure.
- An expert hired by the Library confirmed significant design and construction defects in the garage, advising it was at serious risk of structural failure.
- The Library suspended construction to mitigate the effects of the negligent design and incurred substantial costs for repairs, project delays, and other related expenses.
- The Library's alleged damages, totaling approximately $40 to $50 million, were for costs to cure the defects and did not involve personal injury or damage to property other than the library facility itself.
Procedural Posture:
- The Indianapolis-Marion County Public Library ('Library') filed a lawsuit in an Indiana trial court against its architect (WMP), subcontractors (TTE and CCL), an engineer (Burns), and others, alleging negligence and breach of contract.
- The Library settled its claims with WMP and the general contractor, the two parties with whom it had a direct contractual relationship.
- The remaining Defendants (TTE, CCL, and Burns) filed motions for partial summary judgment, arguing the Library's negligence claims were barred by the economic loss rule.
- The trial court granted the Defendants' motions for partial summary judgment.
- The Library appealed the trial court's decision to the Indiana Court of Appeals.
- A majority of the Court of Appeals affirmed the trial court's grant of summary judgment.
- The Library sought, and the Indiana Supreme Court granted, transfer of the case for a final decision.
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Issue:
Does the economic loss rule bar a project owner from bringing a negligence claim against subcontractors and engineers for purely economic damages when the parties are connected through a network of contracts, despite the lack of direct contractual privity?
Opinions:
Majority - Sullivan, J.
Yes. The economic loss rule bars a project owner from bringing a negligence claim against subcontractors and engineers for purely economic losses when the parties are connected by a network of contracts. The court held that the relationships between participants in a major construction project are governed by the network of contracts through which they allocate their respective risks, duties, and remedies, making contract law the appropriate avenue for relief. The Library's damages were purely economic because they were for the cost of repair to the project itself, which was the 'product' the Library purchased, not damage to 'other property.' The court reasoned that allowing a tort claim would disrupt the carefully negotiated contractual allocation of risk common in the construction industry. The absence of direct contractual privity between the Library and the Defendants does not change this outcome because the parties' relationships and expectations were defined by the interlocking web of project contracts.
Analysis:
This decision solidifies the application of the economic loss rule within the complex framework of multi-party construction projects, emphasizing the primacy of contract law over tort law for resolving commercial disputes. The court's 'network of contracts' theory establishes that the absence of direct privity is not determinative when sophisticated parties have allocated risks and remedies through an interconnected chain of agreements. This precedent strengthens the barrier between contract and tort, promoting predictability by requiring project participants to rely on their bargained-for contractual protections rather than seeking extra-contractual remedies in tort for purely economic losses. Future litigants in similar construction disputes will face a high bar to succeeding on a negligence claim for economic damages against a party with whom they did not directly contract.
