## Facts

- Dallas Area Rapid Transit (DART) hired LAN/STV (a design professional) to prepare plans, drawings, and specifications for a Dallas light-rail project segment.
- DART separately contracted with Martin K. Eby Construction Co., Inc. (Eby) as general contractor; LAN/STV and Eby had no contract.
- DART included LAN/STV’s design documents in the construction bid package, and Eby relied on them in bidding and performing the work.
- After construction began, Eby discovered extensive design errors requiring substantial revisions and causing delays and additional costs.
- Eby claimed nearly $14 million in added costs, settled contract claims with DART for $4.7 million, and then sued LAN/STV in tort seeking remaining losses.
- Eby alleged negligence and negligent misrepresentation, asserting that LAN/STV supplied erroneous information in plans and specifications for Eby’s guidance.
- Eby sought only economic damages (delay and cost overruns), not personal injury or property damage.

## Issues

1. Whether the economic loss rule bars a general contractor’s negligent-misrepresentation claim against a project architect/engineer, absent contractual privity, when the contractor seeks only economic losses from increased costs of performing the owner–contractor construction contract.
2. Whether Texas law recognizes a negligent-misrepresentation or professional-duty exception permitting recovery of such purely economic losses in this construction-project setting.

## Decision

- The Supreme Court of Texas reversed the court of appeals and rendered judgment that Eby take nothing from LAN/STV.
- The court held the economic loss rule precludes Eby’s tort recovery against LAN/STV for purely economic losses tied to Eby’s performance of its construction contract.
- The court rejected extending negligent-misrepresentation liability to allow the contractor to bypass the owner–contractor contractual risk allocation and recover from the architect for increased performance costs.

## Legal Principles

- In unintentional tort cases, Texas law generally limits recovery of purely economic loss unaccompanied by injury to the plaintiff or its property (economic loss rule).
- The rule reflects a preference that commercial parties allocate economic risks by contract rather than through tort duties driven by foreseeability.
- On complex construction projects, economic risks are commonly assigned through interrelated contracts; allowing tort claims that reassign those risks can defeat the parties’ contractual allocation.
- Lack of privity does not prevent application of the economic loss rule when the claimed losses are economic risks that are better handled through contract remedies in the project’s contractual structure.
- A contractor’s claim for increased costs of performing its construction contract, without personal injury or property damage, sounds in contract rather than tort.
- Negligent-misrepresentation theories do not create a general path for contractors to recover purely economic cost overruns from design professionals where doing so would expose design professionals to open-ended third-party liability and alter negotiated project risk allocation.

## Conclusion

The Supreme Court of Texas held that a contractor cannot recover purely economic delay and cost-overrun damages from a project architect/engineer in tort for negligent misrepresentation when the contractor lacks privity and the claimed losses arise from performing the owner–contractor construction contract; the economic loss rule bars such recovery and the contractor’s remedies lie in the contractual framework.


LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234 (Tex. 2014)