Moransais v. Heathman and Its Aftermath
The monumental decision of Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999), decided on July 1, 1999, has come but it is certainly not gone. The fallout continues and its ramifications for expanded liability in the area of construction litigation cannot be overemphasized. The time has arrived to look at the initial cases following Moransais and specifically what lies ahead in the now explosive minefield generally known as design professional malpractice.
For many years those of us practicing in the field of construction litigation viewed the economic loss rule as an unfair impediment to the negligence of design professionals in the preparation of faulty plans and specifications. After all, A.R. Moyer, Inc. v. Graham, 285 So. 2d 397 (Fla. 1973), seemed to take away the nonprivity claimants’ right to sue an architect for erroneous or ambiguous drawings causing economic damages but no property damage or personal injury. The much later decision in The Sandarac Association, Inc. v. W.R. Frizzell Architects, Inc. , 609 So. 2d 1349 (Fla. 2d DCA 1993), did nothing to allay the plaintiff lawyer’s misgivings in holding that the ELR barred a tort action against an architect by a condominium association when the damages alleged were purely economic and there was no privity. Of some hope, however, was the subsequent decision of Southland Construction, Co. v. The Richeson Corp. , 642 So. 2d 5 (Fla. 5th DCA 1994), holding that F.S. §471.023 (1993) created a private right of action for negligence against an individual professional engineer notwithstanding the limitations of the ELR.
On July 1, 1999, the Florida Supreme Court shocked many in the legal community by approving Southland and concluding:
Accordingly, we hold that the economic loss rule does not bar a cause of action against a professional for his or her negligence even though the damages are purely economic in nature and the aggrieved party has entered into a contract with the professional’s employer. We also hold that Florida recognizes a common law cause of action against professionals based on their acts of negligence despite the lack of a direct contract between the professional and the aggrieved party.
The language of the court was unmistakable in its regret at having most of us believing that the ELR was going to forever insulate design professionals from the same kind of scrutiny received by title abstractors in First American Title Insurance Co. v. First Title Service Co., Inc. , 457 So. 2d 467 (Fla. 1984), and accountants in First Florida Bank, N.A. v. Max Mitchell & Co., 558 So. 2d 9 (Fla. 1990). For purposes of future guidance, perhaps, the court’s language evincing its regrets over the expansive course the ELR had taken was of the most value:
We must acknowledge that our pronouncements on the rule have not always been clear and, accordingly, have been the subject of legitimate criticism and commentary.
More recently this Court has recognized the danger in an unprincipled extension of the rule, and we have declined to extend the economic loss rule to actions based on fraudulent inducement and negligent misrepresentation.
Unfortunately, however, our subsequent holdings have appeared to expand the application of the rule beyond its principled origins and have contributed to applications of the rule by trial and appellate courts to situations well beyond our original intent.
[W]e may have been unnecessarily over-expansive in our reliance on the economic loss rule as opposed to fundamental contractual principles.
Today, we again emphasize that by recognizing that the economic loss rule may have some genuine, but limited, value in our damages law, we never intended to bar well-established common law causes of action, such as those for neglect in providing professional services. Rather, the rule was primarily intended to limit actions in the product liability context, and its application should generally be limited to those contexts or situations where the policy considerations are substantially identical to those underlying the product liability-type analysis.
Post Moransais Decisions
The post Moransais courts generally have taken the cue and curtailed the application of the ELR. In Comptech International, Inc. v. Milam Commerce Park Ltd. , 753 So. 2d 1219 (Fla. 1999), the court approved a civil suit against a landlord whose contractor was said to have negligently constructed improvements in violation of the building code. In reversing the Third District Court of Appeal and approving Stallings v. Kennedy Electric, Inc. , 710 So. 2d 195 (Fla. 5th DCA 1998), the court held:
As we stated above, the Legislature has made it abundantly clear in unambiguous language that the statutory remedy for violation of the building code is available “notwithstanding any other civil remedies available.” The judicially created economic loss rule cannot abrogate this statutory cause of action. We therefore approve the Fifth District’s determination that a cause of action pursuant to Section §553.84 is not precluded by the economic loss rule.
The Stallings decision refused to apply the ELR to an action against an electrical contractor for faulty wiring holding that the ELR cannot be applied to render useless F.S. §553.84 providing a statutory cause of action for those suffering damages as a result of a violation of the state minimum building codes. The Stallings decision in itself relied upon the earlier cases of Delgado v. J.W. Courtesy Pontiac GMC-Truck, Inc. , 693 So. 2d 602 (Fla. 2d DCA 1997), and Rubio v. State Farm Fire & Casualty Co. , 662 So. 2d 956 (Fla. 3d DCA 1995). In each of these two cases the ELR gave way to statutorily created causes of action (F.S. §501.213 and §624.155, respectively). In Doan v. John Hancock Mutual Life Insurance Co. , 727 So. 2d 400 (Fla. 3d DCA 1999), the court receded from Rubio but on other grounds.
In Stone’s Throw Condominium Association, Inc. v. Sand Cove Apartments, Inc., Deeb Contractors, Inc., Mouriz Salazar & Associates, Inc., and George Mouriz, 749 So. 2d 520 (Fla. 2d DCA 1999), the condominium association filed an action against the developers, contractor, and architects. The claims against the architects included a cause of action for negligent misrepresentation that the state minimum building codes had been met when they had not. The court referred back to Moransais in reversing the dismissal of the negligent misrepresentation claim against the architects stating:
The Moransais decision has two important holdings that apply to this appeal. The Supreme Court first held “that the economic loss rule does not bar a cause of action against a professional for his or her negligence even though the damages are purely economic in nature and the aggrieved party has entered into a contract with the professional’s employer.” 24 Fla. L. Weekly at S312. That holding requires us to reverse and remand the trial court’s dismissal of the negligent misrepresentation claim pleaded by the appellant insofar as that dismissal was based upon the economic loss rule.
The second relevant holding of Moransais is that “Florida recognizes a common law cause of action against professionals based on their acts of negligence despite the lack of a direct contract between the professional and the aggrieved party.” 24 Fla. L. Weekly at S312.
But the same district refused to allow a teacher to sue the school board for negligently omitting his name from a list of eligible potential employees in Monroe v. Sarasota County School Board, 746 So. 2d 530 (Fla. 2d DCA 1999). Interestingly enough, the Monroe decision, filed on December 10, 1999, preceded the same district’s decision in Stone’s Throw Condominium Association, Inc. , but seemed to reach a contrary holding in its view of Moransais :
Because Moransais involved purely economic injury, the case might now be read to permit a plaintiff to allege a negligent theory any time any economic injury occurs due to the failure of a Defendant to act reasonably. See Moransais, 24 Fla. L. Weekly at S311,
So. 2d at. As explained below, we reject that reading of Moransais and interpret Moransais as applying only to allow professionals to be sued personally on established theories of professional negligence, even though a contractual relationship exists between the plaintiff and the professional’s corporation.
On the other hand, the Third District Court of Appeal embraced Moransais in reversing a summary judgment and holding that the ELR does not bar a fiduciary duty claim nor can it eliminate legislatively created causes of action. Invo Florida, Inc. v. Somerset Venturer, Inc., et al., 751 So. 2d 1263 (Fla. 3d DCA 2000). Also see First Equity Corporation of Florida, Inc., and Al Pareira v. Floyd Watkins, 1999 WL 542639, 24 Fla. L. Weekly D 1758 (Fla. 3d DCA 1999) to the same effect.
The judicial path is littered with casualties of the ELR, but that is changing dramatically. The exposure of the design professional to suits by nonprivity claimants is at hand. Common law claims will again clutter the judicial path, but this time professional malpractice causes of action will not be a casualty to an overused application of the ELR. Sloppy preparation of plans and specifications have always been costly, but now that cost is going to where it belongs: the checkbook of the errant architect or engineer.
Howard J. Hollander practices primarily construction law with the firm of Hollander & Bartlestone, P.A., Miami, and is a frequent contributor to periodicals of interest to the construction industry.
This column is submitted on behalf of the General Practice, Solo and Small Firm Section, Craig Ferrante, chair, and David Donet, editor.