Standard Bank, PLC v. Runge, Inc.

Summarized by Anthony Bisconti , Bienert Katzman Littrell Williams LLP
14 years 4 months ago

Citation:

Case No. 1:07-CV-01989-RPM (10th Cir. Oct. 6, 2011) (Unpublished/not binding precedent)

Tag(s):

Ruling:

The Court affirmed the district court's ruling that the economic loss rule barred the plaintiff's claims for negligent misrepresentation and professional negligence. In applying Colorado law, which applied to the underlying case, the Court found that the relationships at issue were governed by a set of interrelated contracts between sophisticated commercial entities, all which had the opportunity to allocate risk and loss through negotiation of their separate contracts. The Court also found unpersuasive Standard's argument that it should be allowed recovery in tort because otherwise it would be left without a remedy, stating that the purpose of the economic loss rule is to encourage parties to build the cost considerations into the contract because they will not be able to recover economic damages in tort. "A party who fails to protect itself in a contract may be left without any remedy at all as a result of its oversight.”

Procedural context:

Standard Bank, PLC appealed the district court's grant of summary judgment in favor of Runge, Inc., d.b.a. Pincock, Allen & Holt (PAH). Standard filed tort claims against PAH for preparing allegedly flawed viability report in connection with Standard's financing of a coal mine that went bankrupt. The district court granted summary judgment in favor of PAH ruling that Standard's claims were barred by the economic loss rule.

Facts:

In 2005, Bronco Hazleton, Co. entered into a contract to purchase a coal mine for $25 million. Royal Bank of Scotland (RBS) was going to provide financing and required an evaluation by an independent engineer as part of its due diligence. RBS contacted PAH and instructed it to deal directly with Bronco. Bronco and PAH entered a contract, which limited PAH's liability to the greater amount of fees paid under the contract or $50,000, but offered the possibility of increased exposure to liability in exchange for a higher fee. The contract specifically disclaimed any third party beneficiaries. Standard became involved in the deal after RBS backed out. Standard also required an independent engineer's report, and RBS "released" the contractors it used. PAH submitted a report to Standard nearly identical to the one previously submitted to RBS. The transaction ultimately closed. The mine failed, and Standard was unable to syndicate the loan. Standard alleged that certain serious problems with the mine should have been flagged in PAH's report, but were not. In September 2007, Standard sued PAH for negligent misrepresentation and professional negligence.

Judge(s):

Terrence L. O'Brien, Mary Beck Briscoe, William J. Holloway

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