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Riina and Neff Prevail in Construction Defect Case with Novel Defense

December 12, 2013

William J. Riina (Partner-New Jersey) and Robert C. Neff, Jr. (Of Counsel-New Jersey) prevailed in a case involving a general contractor who was fired by the owner for failing to meet certain milestones in the construction of a $34 million sludge processing facility in New Jersey. The general contractor sued the owner, who in turn counterclaimed against the general contractor, seeking liquidated damages. The general contractor then filed both a direct negligence claim and third-party claims for indemnification and contribution against various professionals, including Wilson Elser’s client, a professional engineer hired by the owner to design and install operating software for the plant. The contractor alleged that the engineer's negligence had caused the contractor to miss deadlines.

Among other things, Wilson Elser asserted a defense based on the economic loss doctrine, which precludes tort-based claims when economic loss is being asserted. The doctrine is often applied in the product liability context, but there was little published authority in the construction design and defect arena. The court’s two lengthy written decisions granting Wilson Elser’s motions to dismiss the third-party claims and the direct negligence claim adopted that doctrine in the context of this case, where a comprehensive contractual scheme was in place. In short, the court applied the economic loss doctrine to dismiss tort-based claims when the damages sought were solely economic.

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