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Bouriez v. Carnegie Mellon University

April 6, 2010

CHRISTIAN BOURIEZ, MONTANELLE BEHEER B.V., PLAINTIFFS,
v.
CARNEGIE MELLON UNIVERSITY. DEFENDANT.



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

Electronically Filed

MEMORANDUM OPINION GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT (DOC. NO. 259); DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT (DOC. NO. 263); AND DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT (DOC. NO. 265)

I. Introduction

Before the Court are plaintiffs' motion for partial summary judgment on their negligent misrepresentation claim (Doc. No. 259); defendant's motion for partial summary judgment on plaintiffs' negligent misrepresentation claim, based upon the applicability of Pennsylvania's economic loss doctrine (Doc. No. 263); and defendant's motion for partial summary judgment on plaintiffs' claim for prejudgment interest/delay damages (Doc. No. 265). After careful consideration of the several motions, the responses thereto, the memoranda and documentary materials in support and in opposition, and the entire record in the case, the Court will grant plaintiffs' motion for partial summary judgment on negligent misrepresentation, deny defendant's motion with regard to the economic loss doctrine defense to negligent misrepresentation, and deny defendant's motion for summary judgment as to prejudgment interest and delay damages, for the reasons set forth below.

II. Negligent Misrepresentation and the Economic Loss Doctrine

This Court has previously held that the Arbitration Award against defendant Carnegie Mellon University ("CMU") has preclusive effect in this litigation,*fn1 including as to the issues of CMU's material misrepresentations to both the Governors entities (who were parties to the arbitration) and to plaintiffs (who were not), and their detrimental reliance on the exact same misrepresentations made to both.*fn2 As is implicit in the Court's ruling on the preclusive effect of the Arbitration Award, plaintiffs are correct that said Award establishes its claim of negligent misrepresentation against CMU herein. Plaintiffs' motion for partial summary judgment on the liability aspect of its negligent misrepresentation claim must therefore be granted. Moreover, Pennsylvania's economic loss doctrine does not bar plaintiffs' claim of negligent misrepresentation against CMU, and its motion for partial summary judgment based on this defense must therefore be denied, for several reasons.

A. Background

Except as necessary for the discussion herein, the Court will not repeat the factual background or the protracted procedural history of this case, which has been recounted in several United States Magistrate Judge Reports, Memorandum Opinions of this Court and Opinions of the United States Court of Appeals for the Third Circuit. See (Docs. Nos. 22, 28, 103, 110, 111, 234, 246-1, 257 ). Suffice it to say that CMU's pending Motion for Partial Summary Judgment On Plaintiffs' Negligent Misrepresentation Claim Based Upon The Applicability Of The Economic Loss Doctrine (Doc. No. 263) is not the first time CMU has asserted the economic loss doctrine as a defense to plaintiffs' Christian Bouriez and Montanelle Beheer B.V.'s negligent misrepresentation claim.

In August 2006, the Arbitration Award of almost $10 million was entered against CMU in its arbitration with Governor's Refining Technologies Corporation, LLC, and Governor's Technologies Corporations.*fn3 The Award held that the economic loss doctrine did not apply to the Governors entities' counterclaims against CMU because: "Where there is a duty, and the plaintiff's claim arises from a breach of that duty independent of any rights arising from a breach of contract, the plaintiff is entitled to assert a tort, as well as a contract, claim. Bilt-Rite Contractors, Inc. v. The Architectural Studio, [866 A.2d 270, 277 (Pa. 2005)]. I have found such an independent duty [of CMU] to disclose here." Arbitration Award, at 39 n.58.

CMU argues now, as it previously did before the Arbitrator, this Court and the Court of Appeals, all unsuccessfully, that pursuant to Pennsylvania's economic loss doctrine, "'[p]urely economical loss, when not accompanied with or occasioned by injury, is considered beyond the scope of recovery even if a direct result of the negligent act.' Margolis v. Jackson, 543 A.2d 1238, 1240 (Pa. Super. Ct. 1988)." CMU's Motion for Partial Summary Judgment (Doc. No. 263), ¶ 3.

B. Legal Discussion

Initially, the Court holds, as it has before, that on the merits, the economic loss doctrine does not bar plaintiffs' negligent misrepresentation claim, notwithstanding defendant's assertion that a recent decision of the Pennsylvania Supreme Court, Excavation Tech., Inc. v. Columbia Gas Co. of Pennsylvania, 985 A.2d 840 (Pa. 2009), "clarified" the economic loss doctrine and "makes it clear" that the Arbitration Award's economic loss doctrine holding is contrary to Pennsylvania law. Although Excavation Technologies may have "clarified" the economic loss doctrine law in some respects, it did not alter the economic loss doctrine in a way that inures to CMU's benefit.

The economic loss doctrine precludes recovery for economic losses in a negligence action where the plaintiff has suffered no physical or property damage. Spivack v. Berks Ridge Corp., 402 Pa.Super. 73, 78, 586 A.2d 402, 405 (1991) ("economic losses may not be recovered in tort (negligence) absent physical injury or property damage"); Aikens v. Baltimore & Ohio R.R. Co., 348 Pa.Super. 17, 22, 501 A.2d 277, 279 (1985) ("no cause of action exists for negligence that causes only economic loss"). This generally includes actions for negligent misrepresentation. Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 620 (3d Cir. 1995). See also North Am. Roofing & Sheet Metal Co. v. Building & Constr. Trades Council, No. Civ. A. 99-2050, 2000 WL 230214, at *7-8 (E.D.Pa. 2000) (relying on the economic loss doctrine to dismiss a claim for negligent misrepresentation).

The economic loss doctrine "prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from contract." Duquesne Light Co., 66 F.3d at 618. The doctrine is premised on the notion that parties to a contract may protect themselves from negligence or defective products by negotiating the liability terms of the contract. East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 872-73 (1986).*fn4 Like the gist of the action doctrine, the purpose of the economic loss doctrine, as adopted in Pennsylvania, is "maintaining the separate spheres of the law of contract and tort." New York State Elec. & Gas Corp. v. Westinghouse Elec. Corp., 387 Pa.Super. 537, 550, 564 A.2d 919, 925 (1989).*fn5 See also Bilt-Rite Contractors, Inc. v. Architectural Studio, 581 Pa. 454, 866 A.2d 270 (2005) (adopting Restatement (Second) of Torts Section 552, Pennsylvania Supreme Court holds that architect hired by developer could be liable to third-party contractor for negligent misrepresentation, in spite of contractor's lack of contractual privity with architect, and that the traditional bar against recovery in tort for economic losses between contracting parties did not apply); Werwinski v. Ford Motor Co., 286 F.3d 661, 675-76 (3d Cir. 2002) (predicting that the Pennsylvania ...


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