Court Opinion

ID: 6762643
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:33:07.326687+00
Date Added: 2024-06-11T16:02:38.409109
License: Public Domain

H. Brown, J.,
dissenting. I must respectfully dissent from the majority’s application of the privity doctrine to bar Floor Craft Floor Covering, Inc.’s action against Braun & Spice, Inc.
The privity doctrine, which at one time made a contractual relationship a prerequisite for tort recovery, was accidentally created in an ancient English opinion, Winterbottom v. Wright (Ex. 1842), 10 M. & W. 109, 152 Eng. Rep. 402. Winterbottom held that a driver injured in a mail coach accident could not sue the contractor hired to maintain the coach for breach of the maintenance contract. Id. at 113-115, 152 Eng. Rep. at 404-405. As a matter of contract law, this was a sound result. Unfortunately, some of the judges’ dicta were misread as a holding that in the absence of privity no suit could be maintained in tort for injuries caused by misperformance of a contractual duty. Prosser & Keeton, The Law of Torts (5 Ed. 1984) 668, Section 93 (“Prosser & Keeton”).
This misinterpretation went uncorrected for years. The privity doctrine insulated manufacturers from liability for the sale of defective products, see, e.g., Huset v. J.I. Case Threshing Machine Co. (C.A.8, 1903), 120 F. 865, and professionals from liability for malpractice, see, e.g., Savings Bank v. Ward (1879), 100 U.S. 195 (attorneys); Ultramares Corp. v. Touche, Niven & Co. (1931), 255 N.Y. 170, 174 N.E. 441 (accountants). Eventually, as courts throughout the nation realized that the privity doctrine was both bad tort law and bad social policy, the doctrine was given its well-deserved burial. See, generally, Prosser, The Assault Upon the Citadel (1960), 69 Yale L.J. 1099; Prosser, The Fall of the Citadel (1966), 50 Minn. L. Rev. 791.
At one time, this court took its place among the rest of the common-law world in laying the privity doctrine to rest (as applied to actions sounding in tort). Rogers v. Toni Home Permanent Co. (1958), 167 Ohio St. 244, 4 O.O. 2d 291, 147 N.E. 2d 612 (products liability); Temple v. Wean United, Inc. (1977), 50 Ohio St. 2d 317, 4 O.O. 3d 466, 364 N.E. 2d 267 (same); Shaweker v. Spinell (1932), 125 Ohio St. 423, 181 N. E. 896 (medical malpractice); Haddon View Investment Co. v. Coopers & Lybrand (1982), 70 Ohio St. 2d 154, 24 O.O. 3d 268, 436 N.E. 2d 212 (accountant malpractice); see, also, Sedar v. Knowlton Constr. Co. (1990), 49 Ohio St. 3d 193, 199, 551 N.E. 2d 938, 945 (noting “the general demise of the privity requirement”); Kocisko v. Charles Shutrump & Sons Co. (1986), 21 Ohio St. 3d 98, 101, 21 OBR 392, 394, 488 N.E. 2d 171, 174 (Wright, J., dissenting) (same). Unfortunately, this is no longer the case.
In Simon v. Zipperstein (1987), 32 *10Ohio St. 3d 74, 512 N.E. 2d 636, a majority of this court exhumed and reanimated the privity doctrine, applying it to safeguard lawyers from malpractice claims. The Simon majority employed the absence of contractual privity to bar the intended beneficiaries of negligently drafted wills from suing the drafting attorney for legal malpractice. This was justified as necessary to shield the attorney-client relationship from conflicts of interest, a rationale which was shaky at best.6
In the instant case, the majority employs an equally unsound rationale to justify its latest application of the privity doctrine. The majority declares that it is a “general rule” that absent privity of contract one may not recover in negligence for economic loss.
This has never been the law of Ohio. Indeed, we have previously held, in a different context, that purely economic losses can be recovered in negligence by one not in privity with the tortfeasor. In Haddon View, supra, we held that accountants may be liable for professional negligence, in .the absence of privity, to persons whose reliance on the accountants’ work product is reasonably foreseeable. The majority acknowledges the existence of Haddon View, but asserts (in a footnote) that it is distinguishable, with no explanation of the distinction.7 It appears that the majority has “distinguished” Haddon View on the ground that Haddon View concerned accountants accused of malpractice which caused economic loss to a foreseeable plaintiff, while the instant case concerns architects accused of malpractice which caused economic loss to a foreseeable plaintiff. This is not a legally — or logically — significant distinction.
In support of its argument, the majority cites Chemtrol Adhesives, Inc. v. American Mfrs. Mut. Ins. Co. (1989), 42 Ohio St. 3d 40, 537 N.E. 2d 624. In *11Chemtrol, a manufacturer of self-adhesive labels brought an action to recover damages caused by a defective piece of industrial equipment. We held that, where there is no claim for personal injuries or property damage caused by defective goods, tort theories may not be used as a substitute for UCC Article 2 warranties. This is because “where the buyer and seller are in privity of contract, and they have negotiated that contract from relatively equal bargaining positions, the parties are able to allocate the risk of all loss” through their contract. (Emphasis added.) Id. at 46, 537 N.E. 2d at 631. Chemtrol has nothing to do with the recovery of damages where the parties involved are not in privity of contract.
The majority further attempts to bolster its position by examining “the analysis given this issue by other jurisdictions.” In at least twenty-one of our sister states, courts have held that the absence of contractual privity does not shield design professionals from liability for malpractice which causes economic loss.8
The majority brushes past this *12wealth of authority and relies primarily on a federal diversity case which misconstrues New York law, Widett v. U.S. Fid. & Guar. Co. (C.A.2, 1987), 815 F. 2d 885, and two Virginia cases, Blake Constr. Co. v. Alley (1987), 233 Va. 31, 353 S.E. 2d 724, and Sensenbrenner v. Rust, Orling & Neale (1988), 236 Va. 419, 374 S.E. 2d 55, to provide a rationale for its resurrection of the privity doctrine. The majority’s reliance is misplaced. 9
In Widett, supra, the federal court held that New York continues to follow the privity doctrine. The Widett court was wrong. In Ossining Union Free School Dist. v. Anderson LaRocca Anderson (1989), 73 N.Y. 2d 417, 541 N.Y. Supp. 2d 335, 539 N.E. 2d 91, New York’s highest court reversed the dismissal of a claim by a school district against a firm of consulting engineers, with which the district was not in privity, for the engineers’ “negligent misrepresentation” of the structural condition of a building. The court stated that, while its earlier cases limited the class of persons who could recover, they had not “erected a citadel of privity for negligent misrepresentation suits.”- Ossining, supra, at 424, 541 N.Y. Supp. 2d at 338, 539 N.E. 2d at 94. The court also made it clear that the abrogation of the privity doctrine in New York does not treat accountants as a special class. *13“We have never drawn that categorical distinction, and see no basis for establishing such an arbitrary limitation now. * * * [W]hile the rule has been developed in the context of cases involving accountants, it reflects our concern for fixing an appropriate ambit of duty, and there is no reason for excepting from it defendants other than accountants * * *.” Id. at 424, 541 N.Y. Supp. 2d at 338-339, 539 N.E. 2d at 94-95. Ossining makes it clear that the law of New York is not what the majority wishes it to be.
While the Virginia cases cited by the majority do, at least, squarely agree with the majority’s position, closer inspection reveals that they are poorly reasoned. The Virginia Legislature long ago abrogated the privity doctrine by statute in cases of personal injury, property damage, and products liability. See Va. Code Sections 8.01-223 and 8.2-318. The Virginia Supreme Court has justified the doctrine’s continued survival in professional malpractice cases, partially by resort to rules of statutory construction not applicable in Ohio,10 but mostly by adopting the so-called “economic loss” rule. Under this rule, losses for personal injury or property damage may be recovered in tort absent privity of contract, but “purely economic” losses cannot. Blake, supra, at 34, 353 S.E. 2d at 726; Sensenbrenner, supra, at 422-423, 374 S.E. 2d at 56-57.
This position has been rejected by a majority of other jurisdictions. See, e.g., Council of Co-Owners Atlantis Condominium, Inc. v. Whiting-Turner Contracting Co. (1986), 308 Md. 18, 33-35, 517 A. 2d 336, 344-345, and cases cited therein. The distinction drawn by the Virginia court between “economic losses” and other injuries is meaningless because, ultimately, the law of torts treats all injuries — whether physical, psychological, or financial — as economic losses remedied by a transfer of money from the tortfeasor to the victim. See, e.g., Posner, Economic Analysis of Law (3 Ed. 1986) 177-185, Sections 6.11-6.12 (discussing damage awards for lost earning capacity and wrongful death). In this sense all injuries to person or property create “economic losses.”
Further, by effectively requiring some plaintiffs to wait until physical injury occurs before bringing suit, the economic loss rule penalizes prudent conduct. “If there is a defect in a stairway and the purchaser repairs the defect and suffers an economic loss, should he fail to recover because he did not wait until he or some member of his family fell down the stairs and broke his neck? Does the law penalize those who are alert and prevent injury? Should it not put those who prevent personal injury on the same level as those who fail to anticipate it?” Barnes v. Mac Brown & Co. (1976), 264 Ind. 227, 230, 342 N.E. 2d 619, 621.
The economic loss rule is at odds with the basic policy of tort law. Tort law “is directed toward the compensation of individuals * * * for losses which they have suffered within the scope of their legally recognized interests * * * where the law considers that compensation is required.” Prosser & Keeton, supra, at 5-6, Section 1. Tort liability is imposed for conduct which is socially unreasonable, id. at 6, regardless of the nature of the injuries caused by that conduct.11 In adopting *14the economic loss rule as its justification for the resurrection of the privitydoctrine in design malpractice cases, the majority has lost sight of this principle.
Finally, the majority advances the fantastic contention that the privity doctrine is necessary to “hold parties to their contracts.” The grant to certain professionals of immunity from liability for misperformance of their contractual duties does not encourage the performance of contractual duties.
The majority expresses the concern that, absent the privity doctrine, plaintiffs might attempt to use tort law as a means of avoiding contractual limitations on their right to recover, such as liability limits, choice-of-forum clauses, and arbitration clauses. We should give effect to such contractual provisions, but we need not disinter the privity doctrine to do this. Design professionals can contract directly with builders and others to limit their potential exposure to malpractice liability; alternatively, provisions in contracts between the owner and builders limiting the liability of design professionals to the builders may be enforced through third-party beneficiary theory. See, e.g., Bates & Rogers Corp. v. North Shore Sanitary Dist. (1984), 128 Ill. App. 3d 962, 471 N.E. 2d 915, affirmed (1985), 109 Ill. 2d 225, 486 N.E. 2d 902.
Thus, the majority has failed to articulate a sound policy to support its application of the privity doctrine to shield design professionals from the consequences of their negligence. Certainly, “lack of privity [itself] does not constitute a policy reason for not imposing liability where negligence is shown to be a substantial factor in occasioning the harm.” A.E. Investment Corp. v. Link Builders, Inc. (1974), 62 Wis. 2d 479, 488, 214 N.W. 2d 764, 769.
In all but Virginia, courts which have considered the question before us have concluded that design professionals should be held responsible for economic losses caused by their negligence,12
I believe that the application of the privity doctrine in this case stems from flawed reasoning. The majority’s decision is certainly at odds with the law as it exists almost everywhere else in the United States. Accordingly I must dissent.
Douglas, J., concurs in the foregoing dissenting opinion.

 All but one of the Ohio cases cited by the Simon majority in support of its position involved suits for “attorney malpractice” or “malicious prosecution” against attorneys who had represented a third party in prior litigation. As one commentator observed:
“* * * Providing some sort of immunity to attorneys from suits by non-clients makes sense in these situations. Not only would permitting claims against the attorney create conflicts of interest, it might well provide an avenue for revenge or harassment by an opposing party.
“While * * * [this] policy makes sense in an adversarial context, it has no application where the attorney is employed to draft a will. In the will-preparation transaction, the interests of the client-testator and the named testamentary beneficiary are essentially congruent with respect to the attorney’s performance. Both desire that the attorney draft an instrument which effectively transmits wealth from the client-testator’s estate to the beneficiary. It is impossible to see how, in competently drafting a will in favor of the named beneficiary, the attorney might be subjected to a conflict of interest due to fear of later liability to the beneficiary. * * *” (Footnotes omitted.) Note, Privity as a Bar to Recovery in Negligent Will-Preparation Cases: a Rule Without a Reason (1989), 57 U. Cin. L. Rev. 1123, 1136-1137; see, also, Note, The Negligent Drafting of Wills and Simon v. Zipperstein: a Step Backward in Ohio Jurisprudence? (1988), 20 U. Tol. L. Rev. 133.

 The majority quotes from Columbus City School Dist. Bd. of Edn. v. Fry, Inc. (1984), 22 Ohio App. 3d 94, 22 OBR 281, 489 N.E. 2d 294, in this part of its discussion. The Fry court found a distinction between Fry and Haddon View because Fry was an indemnity claim, while Haddon View was not. I am not sure that this is a meaningful distinction; even if it were, Fry is inapposite because the case before us does not involve an indemnity claim.

 Berkel & Co. Contractors, Inc. v. Providence Hosp. (Ala. 1984), 454 So. 2d 496 (subcontractor may recover against architect); Donnelly Constr. Co. v. Oberg/Hunt/Gilleland (1984), 139 Ariz. 184, 677 P. 2d 1292 (contractor may recover against architect); Carroll-Boone Water Dist. v. M. & P. Equip. Co. (1983), 280 Ark. 560, 661 S.W. 2d 345 (contractor may recover against engineer); United States, ex rel. Los Angeles Testing Laboratory, v. Rogers & Rogers (S.D. Cal. 1958), 161 F. Supp. 132 (applying California law to pendent claim; contractor may recover against architect); Seiler v. Levitz Furniture Co. (Del. 1976), 367 A. 2d 999 (tenant may recover against architect); A.R. Moyer, Inc. v. Graham (Fla. 1973), 285 So. 2d 397 (contractor may recover against architect or engineer); Essex v. Ryan (Ind. App. 1983), 446 N.E. 2d 368 (subsequent purchaser may recover against surveyor where surveyor has actual knowledge that purchaser would rely on survey); Normoyle-Berg & Assoc., Inc. v. Deer Creek (1976), 39 Ill. App. 3d 744, 350 N.E. 2d 559 (contractor may recover against engineer); Gurtler, Hebert & Co. v. Weyland Machine Shop, Inc. (La. App. 1981), 405 So. 2d 660, certiorari denied (La. 1982), 410 So. 2d 1130 (subcontractor may assert third-party claim against architect); Craig v. Everett M. Brooks Co. (1963), 351 Mass. 497, 222 N.E. 2d 752 (contractor may recover against engineer); Council of Co-Owners Atlantis Condominium, Inc. v. Whiting-Turner Contracting Co. (1986), 308 Md. 18, 517 A. 2d 336 (condominium purchasers may recover against architect for cost of repairing structural defects which have not yet caused personal injury or property damage); Bacco Constr. Co. v. American Colloid Co. (1986), 148 Mich. App. 397, 384 N.W. 2d 427 (contractor may recover against engineer); Owen v. Dodd (N.D. Miss. 1977), 431 F. Supp. 1239 (applying Mississippi law; contractor may recover against architect); Waldor Pump & Equipment Co. v. Orr-Schelen-Mayeron & Assoc. (Minn. App. 1986), 386 N.W. 2d 375 (subcontractor may recover against engineer); Conforti & Eisele, Inc. v. John C. Morris Assoc. (1980), 175 N.J. Super. 341, 418 A. 2d 1290 (contractor may recover against design professional); Ossining Union Free School Dist. v. Anderson LaRocca Anderson (1989), 73 N.Y. 2d 417, 541 N.Y. Supp. 2d 335, 539 N.E. 2d 91 (owner may recover against consulting engineer); Davidson & Jones, Inc. v. New Hanover (1979), 41 N.C. App. 661, 255 S.E. 2d 580, certiorari denied (1979), 298 N.C. 295, 259 S.E. 2d 911 (contractor may recover against architect); Forte Bros., Inc. v. National Amusements, Inc. (R.I. 1987), 525 A. 2d 1301 (contractor may recover against architect); Associated Architects & Engineers, Inc. v. Lubbock Glass & Mirror Co. (Tex. Civ. App. 1967), 422 S.W. 2d 942 (subcontractor may recover against architect); Detwiler Bros., Inc. v. John Graham & Co. (E.D. Wash. 1976), 412 F. Supp. 416 (applying *12Washington law; subcontractor may recover against architect); A.E. Investment Corp. v. Link Builders, Inc. (1974), 62 Wis. 2d 479, 214 N.W. 2d 764 (tenant may recover against architect); see, also, Cosmopolitan Homes, Inc. v. Weller (Colo. 1983), 663 P. 2d 1041 (subsequent purchaser may recover against builder of home for design and construction defects).

 The other authorities cited by the majority are not on point.
In Ramey Constr. Co. v. Apache Tribe of Mescalero Reservation (C.A.10, 1982), 673 F. 2d 315, the federal circuit court of appeals held that the trial court properly determined that the defendant architect was not negligent on the facts of that case. There is no discussion of the privity doctrine anywhere in the opinion.
In Bates & Rogers Corp. v. North Shore Sanitary Dist. (1984), 128 Ill. App. 3d 962, 471 N.E. 2d 915, affirmed (1985), 109 Ill. 2d 225, 486 N.E. 2d 902, the contractor’s action against the architect was barred, not by the privity doctrine, but by a specific promise not to sue contained in the contractor’s agreement with the owner. There is nothing in either opinion which contradicts Normoyle-Berg & Assoc., supra, or otherwise suggests that Illinois has revived the privity doctrine.
The North Carolina case cited by the majority, McKinney Drilling Co. v. Nello L. Teer Co. (1978), 38 N.C. App. 472, 248 S.E. 2d 444, has been all but overruled by later cases in that state. See Davidson & Jones, supra; Shoffner Indus., Inc. v. W.B. Lloyd, Constr. Co. (1979), 42 N.C. App. 259, 257 S.E. 2d 50, certiorari denied (1979), 298 N.C. 296, 259 S.E. 2d 301; Quail Hollow East Condominium Assoc. v. Donald J. Scholz Co. (1980), 47 N.C. App. 518, 268 S.E. 2d 12, certiorari denied (1980), 301 N.C. 527, 273 S.E. 2d 454.
Both State, ex rel. Smith, v. Tyonek Timber Co. (Alaska 1984), 680 P. 2d 1148, and Florida Power & Light Co. v. Westinghouse Elec. Corp. (Fla. 1987), 510 So. 2d 899, involve attempts to apply tort theories in a sale-of-goods transaction. Like Chemtrol Adhesives, supra, they are inapplicable to the instant case.
R.J. Reagan Co. v. Kent (Tex. Civ. App. 1983) , 654 S.W. 2d 532, was decided by the application of Texas civil venue statutes, not by the application of the common-law privity doctrine. In R.H. Macy & Co. v. Williams Tile & Terrazzo Co. (N.D. Ga. 1984) , 585 F. Supp. 175, the outcome was determined by Georgia’s privity statute. Since these statutes are not a part of Ohio law, these cases are inapposite.

 Under Virginia law, statutes in derogation of the common law are to be given a strict construction. Blake, supra, at 34, 353 S.E. 2d at 726. Ohio does not follow this rule. R.C. 1.11.

 For example, acts of fraud usually *14cause only purely economic losses to the victim; yet, fraud is universally regarded as a tort, even in Virginia. See, e.g., Pigott v. Moran (1986), 231 Va. 76, 81, 341 S.E. 2d 179, 182; Jefferson Std. Life Ins. Co. v. Hedrick (1943), 181 Va. 824, 833, 27 S.E. 2d 198, 202.

 See note 8, supra.