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.
