In Cal-Am Properties Inc. v. Edais Eng’g Inc., 509 P.3d 386, 388 (Ariz. 2022), the Arizona Supreme Court held design professionals are not liable for economic damages incurred by a Plaintiff with whom they are not in privity of contract. Cal-Am Properties, Inc. (“Cal-Am”) was a developer and operator of RV and mobile-home parks. Cal-Am leased the Sundance RV Resort, with the intention of constructing a new banquet and concert hall on the property.

Cal-Am hired a contractor, VB Nickle, to design and construct the hall. VB Nickle contracted with Edais Engineering, Inc. (“Edais”) to survey and stake the property for the permitted location of the hall. Edais placed the stakes in the wrong location and the hall was constructed 10-feet north of the planned location. This miscalculation forced Cal-Am to eliminate eight RV parking spaces planned near the hall.

Cal-Am sued Edais for negligence. The trial court granted summary judgment in favor of Edais and the Arizona Supreme Court affirmed.

In reaching its holding, the Arizona Supreme Court clarified that the concept of foreseeability is not a factor in determining whether a duty exists in Arizona. Rather, the determination of whether a defendant owes a plaintiff a duty of care depends on whether the parties had a special relationship, or whether public policy favors recognizing a duty. For a duty to be based on a special relationship, a preexisting, recognized relationship between the parties must be in place. Similarly, a duty based on public policy in Arizona is created by state statutes and to a lesser extent on the state’s common law. For an Arizona statute to create a duty based on public policy, the plaintiff must be “within the class of persons to be protected by the statute,” and the harm must be of the type “the statute sought to protect against.” Cal-Am Properties, Inc., 509 P.3d at 390 (quoting Quiroz v. ALCOA, Inc., 416 P.3d 824, 829 (Ariz. 2018)).            

With these guide posts, the Arizona Supreme Court ruled Edais did not have a special relationship with Cal-Am. Edais did not act with or for Cal-Am; instead, Edais acted with and for VB Nickle. As result, no special relationship existed between the two parties.

Likewise, the Court ruled that state statutes and administrative regulations governing qualification and minimum standards for design professionals did not support recognizing a special relationship. The rationale for this determination was that the purpose of statutes and regulations governing design professionals are not to protect project owners from economic harm, but rather, to protect the safety, health, and welfare of individuals who enter the buildings and structures, by preventing injuries resulting from poor workmanship. The Arizona Supreme Court concluded by firmly establishing a duty framework for design professionals based on privity of contract and jettisoning foreseeability.

This is a great decision for design professionals in Arizona.  It will be interesting to see how plaintiff’s counsel attempt to chip away at this seemingly wide ranging decision.