Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_11-cv-08013/USCOURTS-azd-3_11-cv-08013-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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 Neither party has requested a hearing on the defendant’s motion and

the Court concludes that oral argument would not aid the decisional process.

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Del Mar Land Partners, LLC,

 Plaintiff,

vs.

Stanley Consultants, Inc.,

 Defendant.

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No. CV-11-8013-PCT-PGR

 

 ORDER

 

Pending before the Court is defendant Stanley Consultants, Inc.’s Motion

for Partial Judgment on the Pleadings Pursuant to F.R.C.P. 12(c) and Arizona’s

Economic Loss Rule (Doc. 35). Having considered the parties’ memoranda, the

Court finds that the motion should be granted.1

Plaintiff Del Mar Land Partners, LLC’s Amended Complaint (Doc. 8)

contains claims for breach of contract, negligent misrepresentation, fraud, and

unjust enrichment, all of which arise from two contracts between the parties, a

master agreement entered into in October 2006 and an addendum agreement

entered into in January 2007, which concerned civil engineering consulting

Case 3:11-cv-08013-PGR Document 44 Filed 03/26/12 Page 1 of 6
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2

 In an early order (Doc.20), 2011 WL 2692959 (D.Ariz. July 12, 2011),

the Court granted the defendant’s motion to dismiss the plaintiff’s negligent

misrepresentation claim, the Second Cause of Action in the Amended Complaint,

because the tort damages sought by the plaintiff for the defendant’s alleged

misrepresentations were barred by the economic loss doctrine as adopted by the

Arizona courts. The Court stated in relevant part in that order:

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services the defendant was to provide to enable the plaintiff to obtain permits

from various Arizona state agencies required for the development of a residential

real estate project located in Mohave County, Arizona. The fraud claim at issue

here, the Third Cause of Action of the Amended Complaint, alleges that the

defendant made various false statements to the plaintiff prior to the execution of

one or both of the parties’ contracts, including that the defendant was

experienced and competent in providing civil engineering services in Arizona

necessary for the plaintiff to obtain building permits and approval for its

construction project, that the defendant would submit the required applications to

the Arizona Department of Water Resources and the Arizona Department of

Environmental Quality, and that additional work outside of the scope of the

original contract was required to be performed by the defendant because Arizona

had subsequently changed its permitting process. The claim further alleges that

as a result of the defendant’s misrepresentations, the plaintiff’s efforts to obtain

the permits and approval to build on its property were unduly delayed and that it

was falsely induced to enter into the addendum contract.

The defendant argues that the fraud claim should be dismissed pursuant to

Fed.R.Civ.P. 12(c) because, like the negligent misrepresentation claim the Court

has already dismissed, it is barred as a matter of law by the economic loss

doctrine.2

 The doctrine refers “to a common law rule limiting a contracting party

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While the full scope of Arizona’s economic loss doctrine has yet to

be resolved, the Court is persuaded that the economic loss doctrine

is applicable here to limit the plaintiff to its contract remedies

because the pertinent allegations of the Amended Complaint are

directed at alleged breaches by the defendant that in effect deprived

the plaintiff of the benefit of its bargain and there are no allegations

of physical harm either in the form of personal injury or property

damage. The harm allegedly suffered by the plaintiff is not one that

is separate and distinct from any harm that would foreseeably result

from the defendant’s failure to perform as the parties’ contracts

required as it is clear from the Amended Complaint that the plaintiff’s

damages arise from its contention that its housing project was

unnecessarily delayed, which resulted in buyers cancelling the

purchase of lots within the plaintiff’s property, making harder for the

plaintiff to sell additional lots, and reducing the sale price for lots it

did sell, because the defendant’s filings on the plaintiff’s behalf were

repeatedly rejected by the various Arizona agencies due to the

defendant’s unfamiliarity with Arizona law and permitting process.

2011 WL 2692959, at *4.

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to contractual remedies for the recovery of economic losses unaccompanied by

physical injury to persons or other property.” Flagstaff Affordable Housing Limited

P’ship v. Design Alliance, Inc., 223 P.3d 664, 667 (Ariz.2010) (Court concluded

that the economic loss doctrine barred a housing project’s owner from recovering

negligence-based damages arising from its architect’s failure to design the

project’s buildings in accordance with the parties’ contracts and federal

accessibility rules because the damages sought were only for economic losses.) 

The gist of the defendant’s position is that since the plaintiff is alleging that it did

not get the benefit of its bargain in its contracts with the defendant and has not

alleged that it incurred any damages for personal injury or property damage, its

loss is purely an economic one as its damages are its lost expectancy interest

from the defendant’s alleged failure to perform according to the its contracts. As

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the Court did in its order dismissing the negligent misrepresentation claim, the

defendant mainly relies on the Arizona Court of Appeals decision in Cook .v Orkin

Exterminating Company, Inc., 258 P.3d 149 (Ariz.App.2011) (In a case in which

the plaintiffs claimed in part that they were induced to enter a contract with the

defendant based on its negligent misrepresentations regarding its ability to rid

their home of termites, the court concluded that the economic loss doctrine

barred the plaintiff’s fraud and misrepresentation claims because the plaintiffs

were seeking remedies for purely economic loss from the defendant’s failure to

adequately perform its promises under the contract.)

In its cursory response in opposition to the defendant’s motion, the plaintiff,

rather than discussing the applicability of the Cook decision to its fraud claim,

merely asserts that the Arizona Supreme Court has not spoken on the issue of

the application of the economic loss doctrine to a fraud claim and that this Court

should determine that the Arizona Supreme Court would not extend the rule to

fraud claims because the result of such a rule would be unconscionable and

against public policy as it “would perversely award an intentional deceit to obtain

the other party’s signature on a contract, and then hold the innocent to the terms

of the contract (such as limitations of liability) obtained through fraud.” 

While the Court agrees that the Arizona Supreme Court has yet to

specifically decide the applicability of the economic loss doctrine to the type of

fraud claim presented here, no prediction as to how that court would decide the

issue need now be made because the Court is “obligated to follow the decisions

of the state intermediate courts” when there is an “absence of convincing

evidence that the highest court of the state would decide [the issue] differently.” In

re Kirkland, 915 F.2d 1236, 1239 (9th Cir.1990). The plaintiff has not only failed to

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present any evidence, much less convincing evidence, that the Arizona Supreme

Court would reject the reasoning of the Cook decision, it does not even attempt to

support its contention with any cogent legal analysis. See Pelfresne v. Village of

Williams Bay, 917 F.2d 1017, 1023 (7th Cir.1990) (“A litigant who fails to press a

point by supporting it with pertinent authority, or by showing why it is sound

despite a lack of supporting authority or in the face of contrary authority, forfeits

the point. We will not do his research for him.”) (internal citations omitted). While

recognizing that the scope of the economic loss doctrine remains unclear and

unsettled, the Court concludes that Cook controls the viability of the plaintiff’s

fraud claim given the allegations in the Amended Complaint and the plaintiff’s

failure to persuade the Court of Cook’s non-applicability. Consequently, the

Court will dismiss the fraud claim as being barred by the economic loss doctrine. 

The plaintiff relatedly argues that if the Court dismisses the fraud claim

under the economic loss doctrine, the Court should expressly recognize the

plaintiff’s right to introduce evidence at trial of the defendant’s bad faith and/or

fraud in order to demonstrate that the contractual damages limitation provision in

the parties’ contracts is unenforceable under Arizona law as an improper attempt

on the defendant’s part to avoid liability for an intentional tort. In support of its

contention, the plaintiff cites to Airfreight Express Ltd. v. Evergreen Air Center,

Inc., 158 P.3d 232, 240 (Ariz.App.2007) (Court determined that, as a matter of

public policy, limitation of liability clauses can be held unenforceable if one party

acted in bad faith). The Court agrees with the defendant that the plaintiff’s

request is premature. The Court will resolve this issue, if it becomes necessary,

at a more appropriate time in this litigation. Therefore,

IT IS ORDERED that the defendant’s Motion for Partial Judgment on the

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Pleadings Pursuant to F.R.C.P. 12(c) and Arizona’s Economic Loss Rule (Doc.

35) is granted and that the plaintiff’s Fraud claim, the Third Cause of Action in the

Amended Complaint, is dismissed.

DATED this 26th day of March, 2012.

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