A Texas appellate court has reversed a nearly $10 million jury verdict by applying the economic loss doctrine in a dispute over a West Texas natural gas pipeline project.
The case stemmed from the construction of a 32-mile natural gas pipeline in West Texas, where disagreements between the contractor and project owner escalated into litigation.
After disputes arose during the project, the contractor sued the project owner for breach of contract, and that claim was ultimately resolved through settlement.
The contractor separately pursued claims against the owner’s project management firm, alleging that the firm negligently misrepresented that the owner would pay certain invoices that ultimately went unpaid.
That negligent misrepresentation claim proceeded to trial, where a jury sided with the contractor and awarded nearly $10 million in damages against the project management firm.
The project management firm appealed, arguing the contractor’s negligent misrepresentation claim was barred by the economic loss doctrine, a principle recognised in some form by most US states.
The Texas Court of Appeals agreed with that argument, reversing the jury’s verdict and rendering judgment in favour of the project management firm in Asset Risk Management, LLC v. Comal Energy Services, LP.
Under Texas law, the economic loss doctrine generally prevents a party from recovering in tort for losses that are purely economic or contractual in nature, particularly where the alleged harm arises from a failure to perform under a contract.
To succeed under a tort theory, a plaintiff must identify an independent legal duty existing apart from the contract, or demonstrate a non-economic injury such as personal injury or property damage.
The doctrine carries several notable exceptions, including claims for fraudulent inducement, and its precise application continues to vary from state to state through ongoing judicial decisions.
The ruling underscores the significance of correctly identifying the legal basis for construction-related claims, particularly when disputes involve multiple parties across complex infrastructure projects.
Law firm Bradley Arant Boult Cummings highlighted the decision as a significant example of how the economic loss doctrine can shape outcomes in contractor disputes involving third-party project management firms.