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FROM THE BENCH: ELD Falling in California?


Before the city of Eureka, CA put a new wastewater-pipeline project out to bid, it retained SHN Consulting Engineers & Geologists to prepare a geotechnical-baseline report (GBR) in which the firm reported that "the majority of the subterranean region targeted by the project was composed of stable soils suitable for HDD." Soon after Apex Directional Drilling, LLC began work, however, it encountered mud and flowing sands that comprised conditions far different from those described in the GBR. The constructor reported the situation to the city and SHN, but – according to the United States District Court for the Northern District of California (Apex Directional Drilling, LLC v. SHN Consulting Engineers & Geologists, Inc., 2015 U.S. Dist. LEXIS 105537 (N.D. Cal. Aug. 11, 2015) — SHN "continued to maintain that the project was proceeding in the competent soils described in the GBR, and, on that premise, repeatedly gave Apex illogical instructions." Apex wound up suing the city for breach of contract and SHN for breach of professional duty and negligent misrepresentation. SHN argued that the suit should have been dismissed, because the firm was protected by the economic-loss doctrine (ELD) and so did not owe a duty of care to the constructor. But the court disagreed, at least to the extent that it refused to dismiss, holding that the final decision would have to be made by a jury. It doesn't look good. more

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