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Schmid Pipeline Construction, Inc. v. Summit Natural Gas of Maine, Inc.

United States District Court, D. Maine

June 23, 2014

SCHMID PIPELINE CONSTRUCTION, INC., Plaintiff and Counterclaim Defendant,
SUMMIT NATURAL GAS OF MAINE, INC. Defendant and Counterclaim Plaintiff.


JOHN C. NIVISON, District Judge.

In this action, Plaintiff/Counterclaim Defendant Schmid Pipeline Construction ("Schmid"), a Wisconsin corporation, and Defendant/Counterclaim Plaintiff Summit Natural Gas of Maine ("Summit"), a Colorado corporation, assert claims arising out of a contract for the construction and installation of the "Kennebec Valley Pipeline Project." The matter is before the Court on Plaintiff's Motion to Dismiss Count IV of Defendant's Counterclaim (Motion to Dismiss, ECF No. 9).[1] Through its motion, Schmid argues that Summit's counterclaim for negligent misrepresentation is barred by the economic loss doctrine. (Motion to Dismiss at 4-9.)

Following a review of the pleadings, and after consideration of the parties' arguments, as explained below, the recommendation is that the Court grant the motion.


In its Complaint, Schmid alleges, inter alia, that "the scope of the Work represented to Plaintiff by Defendant was significantly greater than originally estimated and budgeted for under the Contract." (Complaint ¶ 16.) Schmid, therefore, seeks to recover the increased costs for the additional work that it was required to perform. ( Id. ¶ 27.)

In its Counterclaim, Summit alleges that Schmid misrepresented its capabilities and its ability to meet certain deadlines. (Counterclaim ¶¶ 11, 17.) In addition to its claims for breach of contract, unjust enrichment, and breach of warranties, Summit asserts a claim of negligent misrepresentation (Count IV). As part of its negligent misrepresentation claim, Summit alleges that Schmid "submitted false information to Summit regarding Schmid's expected and actual costs to perform its work on the Project, " that Schmid "failed to exercise reasonable care in submitting accurate information to Summit regarding Schmid's estimated costs for its work on the Project, " and that Summit "justifiably relied upon [the] information... in making decisions about contracting with Schmid and in making payments to Schmid for Schmid's work on the Project." ( Id. ¶¶ 76, 78, 80).


A. Standard of Review

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may seek dismissal of "a claim for relief in any pleading" if that party believes that the pleading fails "to state a claim upon which relief can be granted." In its assessment of the motion, the Court must "assume the truth of all well-plead facts and give the plaintiff[] the benefit of all reasonable inferences therefrom." Blanco v. Bath Iron Works Corp., 802 F.Supp.2d 215, 221 (D. Me. 2011) (quoting Genzyme Corp. v. Fed. Ins. Co., 622 F.3d 62, 68 (1st Cir. 2010)). To overcome the motion, Counterclaim Plaintiff must establish that its allegations raise a plausible basis for a fact finder to conclude that Counterclaim Defendant is legally responsible for its claims. Id.

B. Discussion

Maine law recognizes a claim for negligent misrepresentation under the following circumstances:

One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Chapman v. Rideout, 568 A.2d 829, 830 (Me. 1990) (adopting the formulation of the tort as stated in the Restatement (Second) of Torts § 552(1) (1977)). In the business context, a party that provides information can be liable when it "fails to exercise the care or competence of a reasonable person under like circumstances." Rand v. Bath Iron Works, 2003 ME 122, ¶ 13, 832 A.2d 771, 774-75. In Maine, the liability in question is measured by the economic interest at stake, sometimes described as the "lost bargain." Jourdain v. Dineen, 527 A.2d 1304, 1307 (Me. 1987) (quoting Wildes v. Pens Unlimited Co., 389 A.2d 837, 841 (Me. 1978) (discussing action for "deceit")). Consequently, the measure of damages in tort for misrepresentation is the same as the measure of damages for breach of contract. Williams v. Ubaldo, 670 A.2d 913, 917 (Me. 1996) (breach of contract damages are designed to put the injured party in the position it would have been in absent breach, or the "benefit of the bargain"); Deering Ice Cream Corp. v. Colombo, Inc., 598 A.2d 454, 456 (Me. 1991) (breach of contract damages generally are measured by injured party's expectation interest or the benefit of its bargain).

In this case, Summit alleges that prior to the creation of the contract, Schmid provided Summit with false information regarding its ability to perform the work that was the subject of the parties' pre-contract negotiations. The issue generated by Schmid's motion is whether ...

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