Background
Salt Creek Midstream, LLC hired Comal Energy Services, LP to provide engineering, inspection, and construction-related services for a natural-gas pipeline project in West Texas and southern New Mexico. Salt Creek separately retained affiliated company Asset Risk Management, LLC to provide personnel who performed accounting functions, including reviewing and processing contractor invoices.
After disputes developed over Comal’s invoicing practices, supporting documentation, work-order compliance, and payment, Comal alleged that ARM personnel falsely represented why its invoices were not being approved or paid. Comal claimed those statements induced it to keep working and caused depletion of working capital, layoffs, impaired credit, and a decline in business value. Although Comal later received $4.8 million in a settlement with Salt Creek, its tort claims against ARM proceeded to trial. A jury rejected Comal’s fraud and tortious-interference theories but found ARM liable for negligent misrepresentation and awarded approximately $9.3 million.
The Court’s Holding
The First Court of Appeals held that Texas’s economic loss rule barred Comal’s negligent-misrepresentation claim as a matter of law. The alleged statements concerned invoice formatting, work-order compliance, approval routing, and payment timing—all matters governed by Comal’s contract with Salt Creek. The claim existed only because Comal performed work and sought payment under that contract.
The court concluded that Comal’s claimed losses were not distinct, separate, and independent from losses recoverable through a breach-of-contract claim. Whether characterized as reliance, expectancy, or consequential damages, the losses flowed from delayed or withheld contractual payments and were at least theoretically recoverable in contract. ARM’s lack of contractual privity with Comal did not prevent application of the rule.
Because the economic-loss issue entitled ARM to rendition of judgment, the court did not reach ARM’s remaining appellate arguments. It reversed the trial court’s judgment and rendered judgment for ARM.
Key Takeaways
- Under Texas law, the economic loss rule can bar negligent-misrepresentation claims even when the plaintiff and defendant are not parties to the same contract.
- Labeling losses as reliance damages does not avoid the rule when those losses arise from the failure to receive a contract-governed payment or other contractual benefit.
- A plaintiff asserting negligent misrepresentation in a contractual setting must establish an injury distinct, separate, and independent from losses recoverable in contract.
Why It Matters
The decision reinforces the boundary between tort and contract in projects involving layered contractual relationships. A contractor generally cannot convert a payment dispute into a negligent-misrepresentation claim against an affiliated project participant merely because that participant communicated about invoice processing.
The ruling also underscores that courts will examine the source and nature of the claimed injury, not merely the damages label or the absence of direct contractual privity. Where the alleged harm reflects a contractual expectancy or consequences of nonperformance, the negotiated allocation of risk and remedies controls.