R&O Construction Company v. New Creation Masonry, Inc. et al

Filing 116

ORDER Granting 73 Defendant WD Partners, Inc.'s Motion for Summary Judgment. Signed by Judge Larry R. Hicks on 11/9/11. (Copies have been distributed pursuant to the NEF - EDS)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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R&O CONSTRUCTION COMPANY,
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Plaintiff,
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v.
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ROX PRO INTERNATIONAL GROUP,
LTD.; et al.,

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Defendants.

2:09-cv-01749-LRH-LRL
ORDER

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Before the court is defendant WD Partners, Inc.’s (“WD Partners”) motion for summary

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judgment on plaintiff R&O Construction Company’s (“R&O”) second amended complaint

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(Doc. #431). Doc. #73. R&O filed an opposition to the motion (Doc. #84) to which WD Partners

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replied (Doc. #91).

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I.

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Facts and Background
This is a construction defect action. In September 2007, R&O entered into a contract with

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non-party Home Depot to act as the general contractor for a Home Depot store in Las Vegas,

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Nevada. R&O subcontracted the application of the required stone veneer, manufactured by

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defendant Rox Pro International Groups, Ltd. (“Rox Pro”), to non-party New Creation Masonry

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Refers to the court’s docket number.

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Inc. (“New Creation”). New Creation purchased the stone veneer from defendant Arizona Stone

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and Architectural Products NV, LLC (“Arizona Stone”). Allegedly, the stone veneer failed and

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R&O was forced to make substantial structural repairs to the Home Depot store.

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Prior to this incident, in September 2003, the Home Depot entered into a contract with WD

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Partners to provide architectural services for all new Home Depot store locations.2 Pursuant to this

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agreement WD Partners designed and prepared all plans and specifications, including those related

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to the use and application of the required stone veneer, for the Las Vegas Home Depot location.

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On September 3, 2009, R&O filed its initial complaint against defendants Rox Pro;

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Real Stone Source, LLC (“Real Stone”), the distributor for Rox Pro; Arizona Stone; and WD

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Partners. Doc. #1. R&O filed a first amended complaint on February 5, 2010 (Doc. #22) and a

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second amended complaint on June 29, 2010 (Doc. #48). The second amended complaint alleges

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ten causes of action: (1) implied warranty of merchantability - Arizona Stone; (2) implied warranty

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of fitness for a particular purpose - Arizona Stone; (3) implied warranty of merchantability -

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Real Stone; (4) implied warranty of fitness for a particular purpose - Real Stone; (5) implied

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warranty of merchantability - Rox Pro; (6) implied warranty of fitness for a particular purpose -

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Rox Pro; (7) express warranty - Real Stone and Rox Pro; (8) express warranty - Arizona Stone,

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Real Stone, and Rox Pro; (9) negligent misrepresentation - WD Partners and Real Stone; and (10)

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breach of contract - WD Partners. Doc. #48.

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Thereafter, WD Partners filed the present motion for summary judgment as to R&O’s

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claims for negligent misrepresentation and breach of contract. Doc. #73.

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II.

Legal Standard

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Summary judgment is appropriate only when the pleadings, depositions, answers to

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interrogatories, affidavits or declarations, stipulations, admissions, answers to interrogatories, and

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A true and correct copy of the national contract is attached as Exhibit 15 to the deposition of Jose
Raymond Medina. Doc. #84, Exhibit A.

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other materials in the record show that “there is no genuine issue as to any material fact and the

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movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In assessing a motion for

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summary judgment, the evidence, together with all inferences that can reasonably be drawn

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therefrom, must be read in the light most favorable to the party opposing the motion. Matsushita

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Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); County of Tuolumne v. Sonora

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Cmty. Hosp., 236 F.3d 1148, 1154 (9th Cir. 2001).
The moving party bears the initial burden of informing the court of the basis for its motion,

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along with evidence showing the absence of any genuine issue of material fact. Celotex Corp. v.

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Catrett, 477 U.S. 317, 323 (1986). On those issues for which it bears the burden of proof, the

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moving party must make a showing that is “sufficient for the court to hold that no reasonable trier

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of fact could find other than for the moving party.” Calderone v. United States, 799 F.2d 254, 259

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(6th Cir. 1986); see also Idema v. Dreamworks, Inc., 162 F. Supp. 2d 1129, 1141 (C.D. Cal. 2001).

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To successfully rebut a motion for summary judgment, the non-moving party must point to

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facts supported by the record which demonstrate a genuine issue of material fact. Reese v.

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Jefferson Sch. Dist. No. 14J, 208 F.3d 736 (9th Cir. 2000). A “material fact” is a fact “that might

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affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S.

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242, 248 (1986). Where reasonable minds could differ on the material facts at issue, summary

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judgment is not appropriate. See v. Durang, 711 F.2d 141, 143 (9th Cir. 1983). A dispute

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regarding a material fact is considered genuine “if the evidence is such that a reasonable jury could

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return a verdict for the nonmoving party.” Liberty Lobby, 477 U.S. at 248. The mere existence of a

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scintilla of evidence in support of the party’s position is insufficient to establish a genuine dispute;

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there must be evidence on which a jury could reasonably find for the party. See id. at 252.

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III.

Discussion

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A. Negligent Misrepresentation

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In its motion for summary judgment, WD Partners argues that R&O’s claim for negligent

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misrepresentation is actually a claim for professional negligence and is therefore precluded by the

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economic loss doctrine. See Doc. #73. The court agrees.

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The economic loss doctrine prohibits unintentional tort actions in which the plaintiff seeks

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to recover purely economic losses. Terracon Consultants W., Inc. v. Mandalay Resort Group, 206

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P.3d 81, 86 (Nev. 2009) (en banc). The Nevada Supreme Court has applied the economic loss

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doctrine in product liability cases as well as negligence actions. See Giles v. Gen. Motors

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Acceptance Corp., 494 F.3d 865, 879 (9th Cir. 2007). The primary purpose of the economic loss

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doctrine is “to shield the defendant from unlimited liability for all of the economic consequences of

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a negligent act, particularly in a commercial or professional setting, and thus keep the risk of

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liability reasonably calculable.” Terracon, 206 P.3d at 86-87 (quotation ommitted).

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The determination of whether the economic loss doctrine precludes a plaintiff’s claim is a

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two step process. The first step is to ascertain whether the damages are purely economic in nature.

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Terracon, 206 P.3d at 86. A purely economic loss is “the loss of the benefit of the user’s bargain

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including pecuniary damage for inadequate value, the cost of repair and replacement of the

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defective product, or consequent loss of profits, without any claim of personal injury or damage to

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other property.” Calloway v. City of Reno, 993 P.2d 1259, 1263 (Nev. 2000) (overruled on other

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grounds by Olson v. Richard, 89 P.3d 31 (Nev. 2004) (en banc)).

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Here, it is undisputed that R&O is seeking purely economic damages. In its complaint,

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R&O only seeks to recover repair and replacement costs associated with the failing stone veneer.

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There are no claims of additional property damage or personal injury. Therefore, the economic loss

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doctrine is applicable to R&O’s requested damages.

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The second step is to determine whether the economic loss doctrine applies to R&O’s

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claim. Generally, a claim for negligent misrepresentation is excluded from the economic loss

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doctrine. Terracon, 206 P.3d at 87. However, the Nevada Supreme Court has held that, “in a

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commercial property construction defect action in which the plaintiffs seek to recover purely

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economic losses through negligence-based claims, the economic loss doctrine applies to bar such

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claims against design professionals who have provided professional services in the commercial

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property development or improvement process.” Id. at 90.

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Here, the court finds that R&O’s claim for negligent misrepresentation is comparable to the

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professional negligence claim precluded in Terracon. In its complaint, R&O contends that the

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information provided by WD Partners, the architect for the project, was inadequate and improper

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concerning the installation of the required stone veneer. The essence of this claim then, is that WD

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Partners, as architect, failed in its professional capacity to provide proper plans and design services

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related to commercial property. Because “the economic loss doctrine applies to bar such claims

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against design professionals . . . in the commercial property development or improvement process,”

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the court shall grant defendants’ motion for summary judgment as to R&O’s negligent

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misrepresentation claim. Terracon, 206 P.3d at 90.

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B. Breach of Contract

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In its complaint, R&O alleges that it is an intended third party beneficiary to the Design

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Contract between WD Partners and the Home Depot, and that it can recover any damages related to

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WD Partner’s breach of that contract. See Doc. #48.

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In Nevada, there must be a clear intent in the contract for a benefit to be conferred upon a

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third-party before a court may recognize a third-party beneficiary of a contract. See Lipshie v. Tracy

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Inv. Co., 566 P.2d 819, 824-825 (Nev. 1997) (“Third-party beneficiary status is granted if there is

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an intent clearly manifested by the promisor to secure the benefit claimed to the third party.”).

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Here, it is undisputed that R&O was not a signatory to the Design Contract between WD

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Partners and the Home Depot. Further, R&O did not participate in any way in drafting or

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negotiating the contract and was not even the general contractor for the Las Vegas store at the time

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the Design Contract was formed.

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Despite this, however, R&O claims that it is an intended beneficiary because Section 2 of
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the Design Contract obligates WD Partners to be responsible for any and all damages related to

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WD Partners’ failure to comply with applicable building codes and rules. Section 2 states in

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pertinent part that: “Work shall comply with applicable codes and requirements of governmental

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bodies having jurisdiction, and [WD Partners] shall be responsible for any and all damages

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resulting from its failure to comply with such codes, laws, rules, and regulations.” Doc. #84,

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Exhibit A, Medina Dep., Exhibit 15.

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The court has reviewed the documents and pleadings on file in this matter and finds that

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there is not a clear indication within the Design Contract to make R&O an intended third-party

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beneficiary. There is no specific language that makes a clear indication that R&O was to have third

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party beneficiary status years before R&O ever entered the picture as a general contractor. Further,

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neither R&O, nor any other general contractor, is ever mentioned in Section 2 of the Design

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Contract. Section 2 simply provides that WD Partners is responsible to the Home Depot for any

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damages resulting from WD Partners’ failure to comply with building codes in designing the Home

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Depot location. As such, the court finds that there is no clear intent in the Design Contract to confer

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a benefit upon R&O. See Lipshie v. Tracy Inv. Co., 566 P.2d 819, 824-825 (Nev. 1997). Therefore,

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R&O is not an intended third-party beneficiary of the Design Contract and the court shall grant WD

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Partners’ motion for summary judgment as to the claim for breach of contract accordingly.

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IT IS THEREFORE ORDERED that defendant’s motion for summary judgment (Doc. #73)
is GRANTED.

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IT IS SO ORDERED.

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DATED this 9th day of November, 2011.

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__________________________________
LARRY R. HICKS
UNITED STATES DISTRICT JUDGE

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