In Fletch’s Sandblasting & Painting, Inc. v. Fay, Spofford, and Thorndike LLC, 2019 WL 847731 (D.Me. Feb. 21, 2019), the Federal District Court held that a subcontractor that was not in contractual privity with an engineer could not seek to recover its economic losses caused by the engineer’s alleged negligent design due to the economic loss doctrine.

Fay, Spofford, and Thorndike LLC (“Fay”) was retained by the United States Navy (the “Navy”) to design, engineer and supervise a project involving improvements to removable submarine covers at the Portsmouth Naval Shipyard (the “Project”).  The Navy also retained Fletch’s Sandblasting & Painting, Inc. (“Fletch”) to install fireproofing product in accordance with the designs provided by Fay.

Fletch sued Fay for negligence and negligent misrepresentation, contending Fay’s negligent designs and negligent engineering caused defects in the fireproofing product and, as a result, it incurred expenses in rendering additional services to determine the cause of the defects. Fay moved to dismiss, relying on Maine’s adoption of the economic loss doctrine.

The Court found there was no privity of contract between Fletch and Fay, but Fletch did have the opportunity to negotiate the terms of its subcontract and thereby establish its risks and liabilities on the Project. The Court noted there was no personal injury and no damage to other property, only the incurred costs associated with the alleged design error. Applying Maine law, the Court held the economic loss doctrine precluded Fletch from asserting tort claims against Fay.

Design and construction entities not in direct contractual privity should begin their evaluation of any damage claim by analyzing the potential impact of the jurisdiction’s version of the economic loss doctrine. This case reflects a common contractual relationship, where contractors and designers contract with the owner, but not each other. Despite this, a contractor’s reliance on the design is inherent in its work. The Court’s ruling in this case supports the position, however, that in the absence of contractual privity a contractor has no direct claim against the engineer for defective designs when its damages are purely economic in nature.