The economic loss rule is alive and well in California. In State Ready Mix, Inc. v. Moffatt & Nichol (2015) 232 Cal.App.4th 1227, the Court of Appeal ruled that a concrete supplier (State Ready Mix, Inc., or “Supplier”) could not seek equitable indemnity or contribution from an engineer for the cost to remove and replace Supplier’s concrete that was non-compliant with Supplier’s own contract. Although the Court minced no words when it described the factual basis for its ruling (“If [Supplier] wants to see who is at fault, it should look in the mirror.”), the most notable aspect of the opinion was its analysis and rejection of the legal theories of potential liability. Continue reading “Tort-Based Indemnity/Contribution Remedies Not Available to Shift Contract Damages”
Failing to pay prevailing wages on a public works project can have consequences beyond labor code penalties and claims for unpaid wages. Contractors who “unlawfully deflate their labor costs” by intentionally violating prevailing wage laws in order to win contracts are also subject to tort claims by the second lowest bidder for interference with prospective economic advantage. Traditionally, the disappointed second bidder’s only recourse has been to challenge the bid process or the bid itself for irregularities via a bid protest. But under the tort theory of interference, the runner-up can seek tort damages from the winning bidder if it can establish that the winning bid was the result of the contractor’s manipulation of the bidding process.
The recent case of Roy Allan Slurry Seal, et al. v American Asphalt South, Inc. (2/20/2015) 2015 Cal App Lexis 164, illustrates this point. In Roy Allan, two slurry seal contractors brought five separate actions against a third contractor after finishing second on 23 public works road sealing projects involving almost $15 million in contract work in five counties in Southern California. Plaintiffs filed complaints in each county, alleging that they would have been awarded the contract as the lowest bidder in each instance had the defendant’s bids included labor costs based on paying the prevailing wage. They asserted a tort cause of action for intentional interference with prospective economic advantage, as well as claims for defendant’s alleged violations of California’s Unfair Practices Act (“”UPA”) and Unfair Competition Law (“UCL”).