Anchorage, a Municipal Corporation v. Integrated Concepts and Research Corporation et al

Filing 501

ORDER: re PND's and GeoEngineers' Motions for Summary Judgment 311 and 313 (see order for full details). Signed by Judge Sharon L. Gleason on 12/05/2016. (AEM, CHAMBERS STAFF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
MUNICIPALITY OF ANCHORAGE,
Plaintiff,
v.
INTEGRATED CONCEPTS AND
RESEARCH CORPORATION, a corporation;
PND ENGINEERS, INC., a corporation;
CH2M HILL ALASKA, INC., a corporation;
and GEOENGINEERS, INC. a corporation,

Case No. 3:13-cv-00063-SLG

Defendants.
_________________________________
CH2M HILL ALASKA, INC. a corporation,
Third-Party Plaintiff,
v.
TERRACON CONSULTANTS, INC., a
Delaware corporation,
Third Party Defendant.

ORDER RE PND’s AND GEOENGINEERS’ MOTIONS FOR SUMMARY JUDGMENT
Before the Court are Defendants PND Engineers, Inc.’s and GeoEngineers, Inc.’s
motions for summary judgment. 1 The motions have been fully briefed; 2 oral argument
was held on June 29, 2016. 3

1

See Docket 311 (PND’s Mot. for Summ. J.); Docket 313 (GeoEngineers’ Mot. for Summ. J.).

2

See Docket 336 (MOA’s Opp’n to PND’s Mot.); Docket 338 (MOA’s Opp’n to GeoEngineers’
Mot.); Docket 361 (PND’s Reply); Docket 363 (GeoEngineers’ Reply).

3

See Docket 407 (Tr. of Oral Arg.).

This order should be read in conjunction with the Court’s order at Docket 478, in
which the Court addressed Defendant CH2M Hill Alaska’s motion for summary judgment.4
The rulings of the prior order shall apply to these parties. This order focuses on the
distinct arguments and factual issues raised by PND and GeoEngineers in their motions.
BACKGROUND
The facts of this case are known to the parties and set out in the Court’s order at
Docket 188.
Both PND and GeoEngineers argue that the economic loss doctrine precludes
MOA’s tort claims and that no exception to that doctrine applies. They argue that MOA’s
claims for negligence are untenable because Alaska law requires more than foreseeability
to recognize a duty in negligence and the other relevant factors weigh against the
recognition of such a duty. They also argue that MOA’s professional negligence claims
should be precluded under Alaska law. Last, they maintain that MOA’s claims for
negligent misrepresentation are legally untenable and factually unsupported.
In response, MOA argues that Alaska law supports the finding of a duty in
negligence.

And it maintains that Alaska law permits an action for professional

negligence against these Defendants.

Finally, MOA maintains that its negligent

misrepresentation claims are permitted under Alaska law and that it has demonstrated
that there are triable issues of fact as to those claims.

4

The Court’s prior order held that neither the Backlands nor the waters of the Cook Inlet
constitute “other property” and that the Port Expansion Project does not currently present a
significant risk of personal injury or property damage. See Docket 478 at 7-13.

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DISCUSSION
This Court has subject matter jurisdiction for the reasons set out in the Court’s prior
order. The standard for summary judgment is also set out in that order. 5
1. Negligence
As the Court’s prior order explained, pursuant to Geotek Alaska, Inc. v. Jacobs
Eng’g Grp., Inc., 6 it will apply the multi-factor approach the Alaska Supreme Court set
forth in D.S.W. v. Fairbanks N. Star Borough Sch. Dist. to determine whether an
actionable duty in negligence exists as to a particular defendant. The Court’s analysis of
the D.S.W. factors in the prior order with respect to CH2M Hill Alaska is substantially the
same for the two Defendants addressed here, with slight factual differences for the factors
of certainty of injury and closeness of connection. 7
Both PND’s and GeoEngineers’ motions raise new factual arguments that
undermine the certainty of MOA’s injury. PND cites to the Port Director’s testimony “that
the Backlands is permitted as a loading area for things like construction equipment and
windmills.” 8 PND also observes that cargo trucks are permitted to drive across the

5

See Docket 478 at 5–6.

6

Docket 478 at 14–15 (citing 354 P.3d 368, 376 (Alaska 2015)). The D.S.W. factors include: (1)
the foreseeability of harm to the plaintiff; (2) the degree of certainty that the plaintiff suffered
injury; (3) the closeness of the connection between the defendant’s conduct and plaintiff’s injury;
(4) the moral blame attached to the defendant’s conduct; (5) the policy of preventing future
harm; (6) the extent of the burden to the defendant and consequences to the community of
imposing a duty; and (7) the availability, cost, and prevalence of insurance for the risk involved.
See D.S.W., 628 P.2d 554, 555 (Alaska 1981).

7

See Docket 478 at 15–19.

8

Docket 311 at 10 (citing Docket 312-25 (Greydanus Dep.) at 3).

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Backlands and the Port is leasing portions of the Backlands for cement storage. 9
GeoEngineers echoes PND’s argument and maintains that rebuilding the Port Expansion
is unnecessary as the expansion area in its current state generates $10 million in annual
revenue for MOA. 10 These arguments, along with the reasons identified in the prior
order, 11 demonstrate the uncertainty of MOA’s injury. Accordingly, this D.S.W. factor
strongly weighs against finding a negligence duty as to these two Defendants.
The “closeness of connection” factor also differs for these Defendants, as they
each played distinct roles in the Port Expansion Project. MOA argues that the harm
caused by PND and GeoEngineers is closely related to MOA’s injury because they were
collectively responsible for the March 2008 Report, in which they concluded that the
OCSP structure, if constructed as designed, would be stable in both static and seismic
conditions. 12 But both the design and the construction of the Port Expansion were the
collaborative product of several entities. PND was a third-tier subcontractor, whose work
was allegedly verified both internally by members of the design team, and externally by
independent reviewers. 13 GeoEngineers was a fourth-tier subcontractor, whose work
was also internally and externally reviewed. 14 The Court finds that the collaborative

9

Docket 311 at 10 (citing Docket 312–26 (Alaska Basic Industries Agreement)).

10

Docket 313 at 31–32.

11

Docket 478 at 16.

12

Docket 336 at 48–49.

13

See Docket 311 at 4–6, 25–26 (describing the layers of contracts); see also id. at 30
(describing the review process).
14

Docket 313 at 32.

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nature of the project, combined with the extensive system of internal and external review,
diffuses the closeness of the connection between MOA’s asserted injury and each
Defendant’s conduct. Accordingly, the Court finds that this factor does not support the
imposition of a negligence duty as to these two Defendants.
Although the Court has considered the different factual circumstances related to
these Defendants, the Court finds that the D.S.W. factors weigh against the recognition
of a duty in negligence as to either of them. Accordingly, the Court concludes that the
economic loss doctrine precludes MOA’s negligence claims against both PND and
GeoEngineers.
2. Professional Negligence
PND and GeoEngineers each argue that MOA cannot maintain an action for
professional negligence. But as the Court previously held in its prior order, Alaska law
permits a project owner to sue a design professional in tort for economic losses arising
from the professional’s malpractice. 15

Here, both PND and GeoEngineers were

professional design and engineering companies that were hired for their expertise. As
such, each company owed a duty to MOA, the project owner, to “use such skill, prudence,
and diligence as other members of the profession commonly possess and exercise.” 16
A claim for professional negligence requires more than a cognizable duty. A
plaintiff must also establish each of the following elements: (1) “a breach of th[e] duty [of

15

Docket 478 at 21–22 (citing State, Dep’t of Nat. Res. v. Transamerica Premier Ins. Co., 856
P.2d 766, 772 (Alaska 1993) (“[A] project owner may sue a design professional in tort for
economic losses arising from the professional’s malpractice, despite the existence of a
contractual relationship between the parties.”)).

16

Docket 478 at 23 (quoting Breck v. Moore, 910 P.2d 599, 604 (Alaska 1996)).

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professional care];” (2) “a proximate causal connection between the negligent conduct
and the resulting injury”; and (3) “actual loss or damage resulting from the professional’s
negligence.” 17
None of the parties address these other elements. Defendants instead primarily
argue that a professional negligence claim is not maintainable because the parties
“engaged in a bargained-for allocation of risk in its chain of contracts.” 18 PND asserts
that through its contract it understood that “ICRC would be able to sue PND in contract
for no more than $1 million.” 19 But the Court has concluded that Alaska law imposes an
independent duty in tort on design professionals, regardless of the contractual allocation
of liability among the various parties. PND and GeoEngineers may have each bargained
for specific limitations on liability to those to whom they are in privity of contract, but in the
Court’s view, those contractual limitations do not preclude MOA’s claims of professional
negligence against either Defendant under Alaska law. Accordingly, the Court will deny
PND’s and GeoEngineers’ motions for summary judgment on MOA’s claims for
professional negligence.
3. Negligent Misrepresentation
a. The Legal Viability of MOA’s Claims for Negligent Misrepresentation
PND and GeoEngineers both cite to Alaska Pac. Assur. Co. v. Collins and maintain
that MOA’s negligent misrepresentation claims are impermissibly based on Defendants’

17

Docket 478 at 23 (citing Breck, 910 P.2d at 604 (quoting Linck v. Barokas & Martin, 667 P.2d
171, 174 n.4 (Alaska 1983))).

18

Docket 313 at 25; see also Docket 311 at 13–17; Docket 313 at 25–29.

19

Docket 311 at 16.

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contractual duties. 20 Alaska Pacific involved allegations that an insurer had negligently
breached its contractual duties to its insured. Specifically, the insured alleged that the
insurer was liable for the “negligent investigation and denial of his claim and request for
a litigation defense.”21 The Alaska Supreme Court recognized that an insurer “may be
held liable for torts independent from its contractual duties, such as fraud,” but held that
“an action for negligence in breaching a specific contractual duty sounds in contract.”22
The case focused on a negligence claim between contracting parties, not a negligent
misrepresentation claim between non-contracting parties. As such, the Court does not
find its analysis to be applicable to MOA’s negligent misrepresentation claims.
PND also cites State for the Use of Smith v. Tyonek Timber, Inc., in which the
Alaska Supreme Court affirmed its “commitment ‘to draw the line between injuries which
properly find their remedy in tort and those which are more appropriately governed by
contract principles.’”23 The Court is unpersuaded that Tyonek governs this case for two
reasons.

First, that case addressed a claim for negligence, not negligent

misrepresentation. Second, the law in Alaska appears to have evolved since Tyonek’s
determination in 1984, perhaps most notably with the Alaska Supreme Court’s decision
in Geotek. 24

20

Docket 311 at 27 and Docket 313 at 36–37 n.140 (citing 794 P.2d 936 (Alaska 1990)).

21

794 P.2d at 939.

22

Id. at 946.

23

See Docket 311 at 27 (citing 680 P.2d 1148, 1152 (Alaska 1984) (quoting Northern Power &
Eng’g Corp. v. Caterpillar Tractor Co., 623 P.2d 324, 328 (Alaska 1981))).
24

354 P.3d 368 (Alaska 2015).

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For the foregoing reasons and consistent with the Court’s ruling in its prior order,
MOA may maintain an action for negligent misrepresentation against PND and
GeoEngineers.
b. Merits of MOA’s Claims for Negligent Misrepresentation
PND and GeoEngineers each maintain that even if the Court finds MOA’s negligent
misrepresentation claims to be legally viable, summary judgment is nonetheless
warranted because based on the current facts in the record, each Defendant is entitled
to summary judgment as a matter of law.
The tort of negligent misrepresentation is comprised of the following four elements:
First, the tortfeasor must have made a statement in the course of business,
employment, or some other enterprise in which he had a pecuniary interest.
Second, the statement must have been false when the tortfeasor made it.
Third, the victim must have justifiably relied upon the statement to his
detriment. Fourth, the tortfeasor must have failed to exercise reasonable
care when making the statement. 25
MOA’s First Amended Complaint alleges that Defendants “represented to Plaintiff
on multiple occasions, most notably in [their] 2008 Geotechnical Report. . . that the OCSP
system was suitable for use at the Project site.” 26 To defeat this claim on summary
judgment, Defendants must demonstrate the absence of any genuine issue of material
fact. 27 In an attempt to meet its burden, PND asserts that apart from labeling PND as the

25

S. Alaska Carpenters Health & Sec. Trust Fund v. Jones, 177 P.3d 844, 857 (Alaska 2008)
(citing Bubbel v. Wien Air Alaska, Inc., 682 P.2d 374, 380 (Alaska 1984); see also Willard v.
Khotol Servs. Corp., 171 P.3d 108, 118–19 (Alaska 2007) (providing another articulation of the
elements of negligent misrepresentation).

26

Docket 145 (FAC) at ¶ 237; see also id. at ¶ 275.

27

See Fed. R. Civ. P. 56.

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Engineer of Record, MOA’s 30(b)(6) designee George Vakalis “was unable to identify any
concrete facts other than calculations potentially being incorrect . . . to satisfy the
elements of negligent misrepresentation.”28 Both Defendants also specifically argue that
no false statements were made because the “OCSP design for the Project provides a
stable site.”29 They each maintain that the OCSP has a factor of safety greater than 1 for
all non-seismic conditions and it has been proven constructible. 30
But PND and GeoEngineers do not address their representation, contained in the
March 2008 Report, that the OCSP system, if built as designed, would withstand seismic
conditions—a representation that the CH2M Hill, Inc. Suitability Study calls into
question. 31 Also, the March 2008 Report advised that “tall sheet piles [should] be driven
from a dike on the land side of the wall,” which MOA now alleges “caused significant sheet
pile damage as unbalanced soil pressure was exerted on the OCSP wall preventing the

28

Docket 311 at 29.

29

Docket 311 at 30; Docket 313 at 38. GeoEngineers also argues that “engineering calculations
and professional opinions . . . do not rise to the level of the types of false statements” that
sustain claims for negligent misrepresentation. Docket 313 at 38. But none of the cases
GeoEngineers cites compels that conclusion. Moreover, the Alaska Supreme Court has
implicitly found that a professional opinion can be the basis of a misrepresentation claim so long
as the defendant intended for the plaintiff to rely on the opinion. See Selden v. Burnett, 754
P.2d 256, 259 (Alaska 1988) (“[I]f an accountant were to give investment advice to the
representative of a group of investors, explicitly intending the information to be for the benefit
and guidance of each member of the group, the account would owe a duty of care to each
member.”) (emphasis added).

30

Docket 311 at 30; Docket 313 at 38–39.

31

See Docket 306-13 (Suitability Study) at 28 (“[D]amage [caused during installation] affects the
stability of some sections of the OCSP system, and it results in zones of weakness that could
lead to extensive damage during a large seismic event.”). The Court’s finding that the Port
Expansion in its current state does not present a significant risk to persons or property is distinct
from the veracity of the representation that the Port Expansion will be stable during seismic
events.

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contractor from driving the sheet piles straight.” 32 Finally, MOA argues that the March
2008 Report also “prescrib[ed] and permitt[ed] the use of riprap dikes and large fill
materials in the same areas where future driving would occur.” 33

The conclusions

reached in CH2M Hill, Inc.’s Suitability Study demonstrate that there are genuine disputes
of fact as to the accuracy of the representations made by PND and GeoEngineers in the
March 2008 Report.
GeoEngineers also asserts that “there is no evidence whatsoever of any ‘failure to
exercise reasonable care or competence in obtaining or communicating the
information.’”34 But after GeoEngineers filed its summary judgment motion, the Court
granted MOA’s motion to supplement the record with its expert report. 35 The report
alleges several ways in which GeoEngineers was negligent in reaching the conclusions
that were subsequently included in the March 2008 Report. 36
MOA has also presented sufficient evidence of reliance to survive summary
judgment. MOA maintains that the conclusions of the 2008 Report “provided MOA and

32

Docket 338 at 55; see Docket 306-13 (Suitability Study) at 29.

33

Docket 338 at 55–56 (citing CH2M Hill, Inc. Suitability Study).

34

Docket 313 at 39.

35

Docket 466 (Order Re Mot. for Leave to Supplement the Summ. J. Record).

36

See, e.g., Docket 394-1 (MOA Expert Report) at 136 (“PND and GeoEngineers failed to use
hydrodynamic loads in their design of the OCSP structure.”); id. at 144 (“PND and
GeoEngineers failed to specify and design to an adequate factor of safety for the steel sheet
piling interlock capacity for the coated and uncorroded sheet piling.”); id. at 148 (“[I]t was a
deviation from industry standard practice for PND and GeoEngineers to totally disregard the
sensitivity of the soils at the PIEP and fail to consider the possibility of a strength reduction in
the soil.”).

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MarAd the ‘green light’ for the Project to move forward with the construction phase.” 37
And the record contains sufficient evidence that these conclusions may have been
actually relayed to and relied on by the Port. 38
Neither PND’s nor GeoEngineers’ motion for summary judgment addresses the
2002 Solicitation or the alleged verification of Terracon’s findings by these Defendants.
MOA’s opposition alleges that these Defendants supplied false information in both
instances. To the extent that these alleged misrepresentations have been adequately
pled in this action, they are not properly before the Court in these summary judgment
motions.
CONCLUSION
Based on the foregoing, IT IS ORDERED that PND’s Motion for Summary
Judgment at Docket 311 and GeoEngineers’ Motion for Summary Judgment at Docket
313 are GRANTED in part and DENIED in part as follows:
(1) PND’s and GeoEngineers’ motions for summary judgment on MOA’s
negligence claims are granted;
(2) PND’s and GeoEngineers’ motions for summary judgment on MOA’s claims for
professional negligence are denied;
(3) PND’s and GeoEngineers’ motions for summary judgment on MOA’s claims for
negligent misrepresentation are denied; and
(4) PND’s and GeoEngineers’ motions for summary judgment on MOA’s claims

37

Docket 336 at 46.

38

See 281-5 (Cowles Dep.) at 8; see also Docket 328-4 (Vakalis Dep.) at 4.

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that are based on damage to “other property” or the creation of a substantial
risk of personal injury or property damage are granted. 39
DATED this 5th day of December, 2016 at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE

39

See Docket 478 at 7–14.

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