Schmidt, Sethi & Akmajian Blog

Torts: Design Professionals’ Duty To Persons Not in Privity

Posted by Ted A. Schmidt | May 23, 2022 | 0 Comments

Cal-Am Properties Inc. v. Edais Engineering Inc., No CV-21-0129-PR (May 23, 2022) (J. Lopez)

Cal-Am Properties, Inc.[Cal-Am]  leased an RV park. Cal-Am hired VB Nickle [Nickle] to design and construct a banquet/concert hall on the property. Nickle hired Edais Engineering, Inc. [Edais] to survey and stake the project.  Cal-Am had no contractual relationship with Edais. Edais admitted its placement of the stakes was defective resulting in the hall being constructed ten feet north of where it should have been eliminating eight RV parking spaces. Cal-Am sued Edais alleging several theories including negligence. The trial court granted summary judgment to Edias finding Cal-Am could not recover its purely economic damages. The Arizona Court of Appeals affirmed the trial court based upon the absence of a duty by Edais to Cal-Am. The Arizona Supreme Court affirmed the trial court and court of appeals and in so doing overruled Donnelly Constr. Co. v. Oberg/Hunt/Gilleland, 139 Ariz. 184, 187 (1984).
Plaintiff's suit relied upon Donnelly's holding that a design professional owed a duty of care for “foreseeable injuries to foreseeable victims.”  Subsequent to Donnelly the Arizona Supreme Court published Gipson v. Kasey, 214 Ariz. 141, 143  (2007) which held the question of duty is one for the court, and the question of foreseeability is not a factor in making that determination. To establish a duty there must be a special relationship between the parties or public policy supporting the creation of duty. 
In ruling that no duty exists here, the supreme court expressly stated that a duty may exist between a design professional and those not in privity, but the facts of this case do not support such a finding as no preexisting recognized relationship existed between Cal-Am and Edias.
Here, no contractual or familial relationship exists between
Cal-Am and Edais. And although liability for a joint undertaking may exist
despite a lack of privity between two parties, this concept necessarily
involves conduct a defendant undertook directly with or for a plaintiff, see,
e.g., Stanley v. McCarver, 208 Ariz. 219, 223 ¶ 13 (2004) (finding a duty where
doctor agreed, for consideration, to interpret patient's medical record and
report results), and no liability exists where, as here, parts of an overall
enterprise were organized by another entity and the defendant's relevant
undertaking was with and for that entity. Thus, no “special relationship”
gives rise to a duty in this case.
Statutes and regulations can create a duty as a matter of public policy.  However, here, the statutes and regulations cited by plaintiff are not designed to protect plaintiff but rather to protect the safety, health and welfare of people who enter a structure. Similarly the Restatement (Second) of Torts Section 324A does not create a duty because the defective staking did not physically harm the land. Restatement (Third) of Torts Section 6 would require reliance on Edais' staking by Cal-Am. Here it was Nikle and not Cal-Am who relied upon Edias' staking.
Here Cal-Am's remedy is to sue the contractor Nickle for breach of contract and Edias for breach of contract as a third-party beneficiary to the contract. “Consequently, Donnelly's demise does not insulate design professionals from legal consequence for their negligence.”

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".


There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Our team works together - for you!

Our award-winning lawyers are backed by a talented, caring team of legal professionals, paralegals, bilingual assistants, notaries, and others - all dedicated to you, your case, and the compensation you deserve.

No fees and no costs until we win.

As such we always have your case and your best interest in mind. When you win, we win too by providing the best legal care possible.

Thorough investigation and preparation.

We tirelessly and thoughtfully prepare every case we represent as though it was going to trial. This lets insurance companies know that we are a force to be reckoned with. As such, we settle successfully 98% of the time.