Opinion ID: 2601614
Heading Depth: 1
Heading Rank: 7

Heading: Is Excel entitled to maintain its claim of misrepresentation?

Text: [¶ 24] As already noted, this Court's decision in Rissler would bar claims against HKM based upon negligent misrepresentation. Excel argues that its claim of misrepresentation is really a claim of intentional misrepresentation or fraud. It contends that even courts which apply the economic loss rule to disputes between contractors and design professionals exclude claims of fraud from the rule because fraud is a remedy for purely economic loss. HKM responds that Excel made a claim of negligent misrepresentation, not intentional misrepresentation or fraud. HKM also responds that in those jurisdictions in which fraud or other intentional torts are treated as exceptions to the economic loss rule, such claims are only allowed if they arise from an independent duty and if they involve claims for damages which are not available for a breach of contract. HKM denies that Excel's claim meets these criteria. [¶ 25] The trial court held that a claim for intentional misrepresentation was barred by Rissler because fraud shares common elements with the tort of negligent misrepresentation. A claim for intentional misrepresentation is not necessarily barred by the economic loss rule. Such a claim could be predicated on an independent duty. Rissler, 929 P.2d at 1234 n. 1; JBC, 843 P.2d at 1197. Of course, a claimant may not use a fraud claim as an artifice to sidestep contractual duties or the economic loss rule. Rissler, 929 P.2d at 1235. [¶ 26] Both parties cited cases in which the courts of other states have taken a case-by-case approach to the question of whether an intentional tort claim is based upon an independent duty, or whether it has been pled simply to avoid contractual limitations. In Giles v. General Motors Acceptance Corp., 494 F.3d 865 (9th Cir.2007), the Ninth Circuit applied Nevada law to a claim that General Motors Acceptance Corporation (GMAC) had misrepresented the terms of a lien and tricked a car dealer into signing backdated assignments of accounts. GMAC asserted the economic loss rule as a defense. The Ninth Circuit noted that the economic loss rule is in part intended to prevent tort law from progressing so far that contract law would drown in a sea of tort, quoting East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 866, 106 S.Ct. 2295, 2300, 90 L.Ed.2d 865 (1986). Giles, 494 F.3d at 874. [¶ 27] The Giles court also pointed out that application of the economic loss rule has historically been difficult because courts have stated that purely economic losses may not be recovered in tort in overly broad terms. Id. These statements are not completely accurate, it noted, because torts such as fraud and conversion exist to remedy purely economic loss, quoting Grynberg v. Questar Pipeline Co., 70 P.3d 1, 11, 13 (Utah 2003). Some courts apply the economic loss rule only in products liability cases and negligence actions, and not to claims for fraud and other intentional torts. Giles, 494 F.3d at 875. [¶ 28] The Giles court further pointed out that some courts, including those of Nevada, analyze fraud claims on a case-by-case basis in an effort to determine whether a particular claim really alleges nothing more than a failure to perform a promise contained in a contract. Giles, 494 F.3d at 876. The Nevada Supreme Court has treated the phrase purely economic loss as a term of art referring to losses which could be recovered in a contract suit. Calloway v. City of Reno, 116 Nev. 250, 993 P.2d 1259, 1263-64 (2000). As a result, it has held that it could not delineate the entire universe of intentional torts which would or would not be subject to the economic loss rule, and concluded that each case had to be examined to determine whether or not the economic loss rule would apply to bar intentional tort claims. Id. at 1266 n. 3. [¶ 29] The Ninth Circuit summarized the Nevada rule as follows: Based on our reading of the Nevada cases, Nevada's economic loss doctrine is generally consistent with the principles discernable in the case law of other jurisdictions. Broadly speaking, Nevada applies the economic loss doctrine to bar recovery in tort for purely monetary harm in product liability and in negligence cases unrelated to product liability. Nevada law may also bar recovery for tort claims where the plaintiff's only complaint is that the defendant failed to perform what was promised in the contract. But it does not bar recovery in tort where the defendant had a duty imposed by law rather than by contract and where the defendant's intentional breach of that duty caused purely monetary harm to the plaintiff. Giles, 494 F.3d at 879. Based on its analysis, the Giles court held that the fraud claims involved in that case were not barred because they related to behavior outside the contract and violated an obligation under Nevada law not to commit fraud. Id. at 880. [¶ 30] HKM cited Hamon Contractors, Inc. v. Carter & Burgess, Inc., ___ P.3d ___, 2009 WL 1152160 (Colo.App.2009) (currently unpublished). [1] In that case, which involved a construction contract, the intermediate appellate court held that a claim that the project engineer concealed the inadequacy of its design and thereby committed fraud was barred by the economic loss rule. The court interpreted a three-factor test set out by the Colorado Supreme Court in BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 74 (Colo. 2004) as (1) whether the duty allegedly breached is independent of the parties' contract; (2) whether there is a recognized common law duty of care; and (3) whether the tort duty differs in any way from the contractual duty. Hamon, . [¶ 31] Both cases are consistent with this Court's decisions in previous cases. A party may not sidestep contractual limitations by simply pleading an intentional tort. Rissler, 929 P.2d at 1235. Recovery on a tort theory requires a showing that a duty independent of contract was violated. Id. at 1235 n. 1; JBC of Wyoming Corp, 843 P.2d at 1197. Determining whether a particular intentional tort claim is simply a repackaged contract claim requires consideration of the conduct alleged, its relationship to the contractual duties of the parties, the source of the tort duty alleged to have been breached, and the nature of the damages claimed. [¶ 32] In this case, the record consisted only of the pleadings and a few pages from the contracts Excel and HKM had with the Town of Lovell. This limited record would make it impossible to determine whether or not Excel's claim arises from an independent duty if Excel has adequately pled a claim for intentional misrepresentation or fraud. To determine whether such a claim has been pled obviously requires an analysis of the pleadings in this case. [¶ 33] The elements of intentional misrepresentation or fraud are as follows: (1) the defendant made a false representation intended to induce action by the plaintiff; (2) the plaintiff reasonably believed the representation to be true; and (3) the plaintiff relied on the false representation and suffered damages. Birt, ¶ 42, 75 P.3d at 656. In order to prove intentional misrepresentation, the plaintiff must show that the misrepresentation was made intentionally, with knowledge of its falsity, or that the maker of the misrepresentation was at least aware that he did not have a basis for making the statement. Id.; Restatement (Second) of Torts § 526 (1977). Fraud must be proven by clear and convincing evidence, as opposed to by a preponderance of the evidence for negligent misrepresentation claims. Birt, ¶ 42, 75 P.3d at 656. Fraud must be pled with particularity. W.R.C.P. 9(b). [¶ 34] Excel alleged as follows in its complaint: 33. HKM represented to Excel that at least some of Excel's claims for impacts from extra work would be addressed at the end of the Project without adhering to the formal contract requirements (Representation). 34. The Representation made by HKM was false. 35. HKM made the Representation to induce Excel into believing that Excel would not have to provide documentation for every impact at the time of the impact because the parties would address those impacts at the end of the Project. 36. Excel relied on the Representation by not submitting documentation for every impact per the contract requirements. 37. Excel reasonably believed HKM's Representation was true. 38. Excel has suffered damages in an amount to be proven at trial as a result of HKM's negligent misrepresentation. [Emphasis added]. [¶ 35] The Wyoming Rules of Civil Procedure permit notice pleading, and pleadings are to be liberally construed to do substantial justice. However, even notice pleading requires fair notice to opposing parties of the nature of a party's claim. Krenning v. Heart Mtn. Irr. Dist., 2009 WY 11, ¶ 30, 200 P.3d 774, 783 (Wyo.2009). Liberal construction of pleadings does not excuse omission of that which is material and necessary in order to entitle one to relief. William F. West Ranch, LLC v. Tyrrell, 2009 WY 62, ¶ 9, 206 P.3d 722, 726 (Wyo.2009). [¶ 36] The claim made by Excel can only be construed as one for negligent misrepresentation. Excel did not allege that HKM intentionally made representations which it knew to be false, even though fraud must be pled with particularity. In addition, Excel specifically described its claim as one for negligent misrepresentation. The record does not suggest that Excel ever sought to amend its claim to add allegations of fraud. Under the circumstances, the Court can only conclude that Excel made a claim for negligent misrepresentation and not for fraud. Under Rissler, a claim for negligent misrepresentation falls within the bar of the economic loss rule, as the parties can allocate the risks related to such misrepresentations by the terms of the contract itself. The trial court therefore correctly granted the motion for summary judgment as to Excel's claim of misrepresentation.