In a case decided in late November in the Merrimack Superior Court, Justice McNamara denied a motion to dismiss by Penta Corporation of claims brought by the Town of Newport related to a wastewater treatment plant upgrade project. The case, which the Construction Law Group at Bernstein Shur will continue to follow, provides the current state of the economic loss doctrine in New Hampshire.
In Penta Corporation v. Town of Newport, the project concerned a waste water treatment plan that discharges treated water into the Sugar River. In response to an administrative order by the Environmental Protection Agency regarding effluent limitations in its permit to the town, the town hired AECOM as its engineer to evaluate upgrades needed to respond to the administrative order. AECOM performed the design phase, ultimately resulting in a final design, drawings, and specifications that were provided to bidders. Part of the bid required contractors to design certain elements of the project so that certain filters could operate continuously at various flow rates, and Penta was ultimately awarded the project in 2012. After several tries, however, Penta and its subcontractors were unable to provide equipment that met the performance conditions required by the specifications. The town shut down the filter system in April of 2015, rendering the project a “total loss.” Penta then sued the town after the town refused to pay Penta sums under the contract for the project, the town sued Penta and AECOM, and AECOM and Penta asserted claims against each other.
Part of the town’s counterclaim against Penta asserted a claim for professional negligence, which Penta claimed in a motion to dismiss was barred by the economic loss doctrine in New Hampshire. The Superior Court noted that the economic loss doctrine is a judicially created doctrine that precludes contracting parties from pursing tort remedies for purely economic losses stemming from their contractual relationship. In New Hampshire, one exception to the doctrine is when there is an “independent duty of care outside the terms of the contract.” Here, the court noted that the town was pleading that Penta took on part of the professional responsibility for the design, namely, to meet the performance specifications supplied by AECOM.
Although the opinion discusses other issues, including indemnity between the parties, the economic loss doctrine discussion is important to provide the construction community with the current contours of the doctrine in New Hampshire. The decision is on a motion to dismiss, where the court has to assume that the facts as pleaded are true. Surely, discovery will continue and the merits will be hotly contested by all parties in what the court very clearly described as a totally failed project.