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Sixth Circuit limits, rejects "contract immunity" defense

Joy Davis sued Venture One Construction after an unhinged door fell on her while she was retrieving a dustpan on her employer's premises.  The door had been temporarily stored outside the construction area by a subcontractor performing remodeling on a Subway restaurant, and Venture One was the general contractor having a duty to maintain safety at the site.  Venture had persuaded the trial court to dismiss Davis' claim by arguing that it owed no duty to Davis, relying upon the Michigan Supreme Court's activist interpretation of "contractual immunity."  The Sixth Circuit overturned the lower court's decision, rejected Venture's claim that it owed plaintiff no duty, and returned the case to the District Court for trial.

In other entries on this site, the reader can review the history of so-called contract immunity.  In short, the Engler Majority, while it controlled the Michigan Supreme Court, adopted the curious principle that when two parties enter into a contract, their duty to act reasonably with respect to third-parties is eliminated.  Prior to this glaring bit of judicial activism, the common law had maintained for several hundred years that every person owes every other person a duty to act reasonably (or with "due care").  In the 2004 Fultz v. Union-Commerce Assoc., case, however, the Taylor court, intoxicated with its own power to re-shape the law, had concluded that a contractor owes only those duties spelled out in a contract, and that no injury action may be based on contractual obligations.  It suggested that creation of a "new hazard" would create responsibility in the contractor, but this off-hand exception has been virtually ignored by courts applying Fultz

Dicta (or "excess verbage") in the Fultz opinion has been relied upon to maintain that any duty to third-parties to act reasonably is eliminated by the parties' contract:  thus, signing a contract to perform work "immunizes" the contractor from any duty to third-parties.  The Fultz decision and this broad interpretation of it has been widely mocked and criticized, even by lawyers who traditionally represent insurance defendants.

The Sixth Circuit refused to apply Fultz to Davis' case.  The lower court had held that Venture owed a duty within the contract to maintain precautions for safety, and that this contractual duty wiped out any other duty the general contractor might owe to Davis or third-parties.  The Sixth Circuit issued a very thoughtful opinion which traced the history of common law duty and examined the Fultz decision and its underlying facts more carefully, so as to distinguish the holding from the dicta within it.  It concluded:  "This is a complicated way to arrive at a simple idea that is embedded deep within the American common law of torts and that has been part of Michigan law at least since 1956 with Hart:  if one 'having assumed to act, does so negligently,' then liability exists to a third party for 'failure of the defendant to exercise care and skill in the performance itself'...A contract between two parties does not determine those parties' obligations with respect to the rest of the world."

The Sixth Circuit continued, "Contractual duties do not limit separately existing common law tort duties.  The Court in Fultz did not wipe away fifty years (at a minimum) of precedent on this point."  Applying this analysis to the instant case, the Sixth Circuit concluded that when the door was removed from its hinges and stored in a precarious position, it created a "new hazard" that violated Venture's common law duty to act reasonably in fulfilling its contractual obligations. 

It was refreshing to read an opinion that was scholarly and thoughtful, rather than simple demagoguery.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
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