Maeda Pac. Corp. v. GMP Haw., Inc

In Maeda Pac. Corp. v. GMP Haw., Inc., 2011 Guam 20, a construction company was awarded a contract to build a water supply system, which included a water reservoir tank. Id. 2-3. The construction company hired an engineering firm as the lead designer and quality control provider for the project. Id. 2. In addition, the construction company hired a subcontractor to build the tank and a design firm to design the tank. Id. 3. After the tank was constructed, the tank roof collapsed during a test of the water pumping system. Id. A subsequent investigation suggested design defects in the tank roof. Id. 4. The construction company filed a complaint in the District Court of Guam against the engineering firm and the design firm, alleging breach of contract and negligence. Id. 6. The engineering firm filed a cross claim against the second design firm and a third party complaint against a subcontractor for contribution. Id. 7. The second design firm and the third party defendant filed motions for summary judgment, claiming that the damages sought by the construction company were "economic losses" which are not recoverable in tort. Id. 8. The District Court certified two questions to this court: "(1) Does the economic loss doctrine apply in Guam?"; and "(2) If the economic loss doctrine does apply in Guam, does it preclude negligence-based claims against design professionals, such as engineers and architects, who provide services in the context of commercial property development or improvement, when the plaintiffs seek to recover purely economic losses?" Id. In Maeda, the Court acknowledged our holding was narrowly tailored to the facts of that case. Id. 50. The Court refused to address the parties' arguments over exactly how far and in what specific circumstances the doctrine should apply, finding that these issues go beyond the District Court's certification to this court. Id. 32-33. Specifically, the Court refused to address whether there was an exception to the economic loss doctrine for claims of negligent misrepresentation because it was not pleaded in the District Court. Id. 34. In addition, the Court refused to address whether the economic loss doctrine applied when the damages from the tort extends beyond the work product itself to physical property damage resulting from the defect. Id. 35. The Court adopted the economic loss doctrine, recognizing that "across jurisdictions, the terms and scope of the economic loss rule may be the subject of disagreement, but there is no dispute that recovery in tort actions for purely economic losses is often difficult to obtain." Id. 27, 31 This court stated that "the vigor with which the economic loss doctrine is now applied suggests that the pendulum of American law has swung far in the direction of favoring resolution of disputes via contract law rather than tort law," which the court hinted might be because of the "preference for private ordering over public regulation." Id. 28-29. The Court also found that in the commercial construction litigation context: "where a party in privity of contract with a design professional is seeking to recover economic loss damages, and no personal injury or damage to property other than the subject of the contract is alleged, such a party is limited to contractual remedies, and a negligence action may not be maintained." Id. 43. The Court explained that "this appears to be the majority trend, with most jurisdictions applying the economic loss doctrine to bar commercial construction industry plaintiffs from recovering under a negligence-based theory against design professionals, especially when the parties are in privity." Id. 40 . We further recognized that "if tort and contract remedies were allowed to overlap, certainty and predictability in allocating risk would decrease and impede future business activity. The construction industry in particular would suffer . . . ." Id. 41. Accordingly, the Court held that in the context of commercial construction cases, the economic loss doctrine can apply regardless of whether there is privity between the parties. Id. 49. The Court noted that in the commercial construction context, "there is no principled reason . . . to establish a bright-line rule dependent solely on privity. Such an approach would ignore the traditional practices of the construction industry. Rather, application of the doctrine should depend on the opportunity a party had to reasonably protect itself through contract." Id.