In an otherwise run-of-the-mill contract case between an IT provider and a bank, Justice Kornreich illustrates a couple of interesting principles.  The first is that IT providers do not rise to the level of professional engineers for the purpose of allowing tort litigation against them.  The second is the “economic loss doctrine.”

 Cervalis LLC v RBS Holdings, USA, Inc.  2017 NY Slip Op 31973(U)  September 18, 2017
Supreme Court, New York County  Docket Number: 650405/2017  Judge: Shirley Werner Kornreich is a case about computers and a data center.  There were failures.

“Plaintiff provides computer information technology services, including colocation (rental, housing, and/or maintenance of computer servers), power and cooling, security, compliance, and network services. Answer at I ~ 2. Defendant is a Connecticut-based financial services provider who contracted for plaintiffs services, which were to be used by the global financial markets division of The Royal Bank of Scotland.”

“In its Counterclaims (Answer at 6-16), defendant alleges that on November 28, 2015, at approximately 12:50 P.M., plaintiff caused a power outage in the Data Center by failing to properly return the fire alarm control panel and related systems to normal operation following a test of the fire alarm system.~~ 10-18. Defendant contends that the power outage disrupted its computer systems, which were housed in the Data Center(~ 19); that plaintiff prolonged the outage by performing unnecessary troubleshooting (~ 20); that the outage lasted for more than eight hours (~ 23 ); and that plaintiff failed to promptly notify defendant of the power outage as it was required to do pursuant to contract.~ 25; Dkt. 20 at 8 (Addendum). Moreover, defendant claims that when defendant became aware of the outage, plaintiff refused certain access to defendant personnel, again in violation of contract.~ 27; Dkt. 20 at 7 (Addendum). Finally, defendant surmises that to avoid the contractual consequences of a power outage lasting longer than two hours (a “Catastrophic Failure,” discussed below), plaintiff attempted to restore power at the Data Center in an abrupt fashion, causing unnecessary damage to defendant’s equipment, data, and operations. At about 9: 15 P.M., normal operations at the Data Center were finally restored.”

Here are the interesting bits:

  1.  “[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.” Clark-Fitzpatrick, Inc. v Long Island R. Co., 70 NY2d 382, 389 (1987). Additionally, under the so-called economic loss doctrine, “a contracting party seeking only a benefit of the bargain recovery, viz., economic loss under the contract, may not sue in tort …. ” 17 Vista Fee Assocs. v Teachers Ins. & Annuity Ass ·n of Am., 259 AD2d 75, 83 (I st Dept 1999); see also Sommer v Fed. Signal Corp., 79 NY2d 540, 552 ( 1992) (“[W]here plaintiff is essentially seeking enforcement of the bargain, the acfion should proceed under a contract theory.”). 5 However, where a party to a contract breaches a “legal duty independent of contractual .obligations … imposed by law as an incident to the parties’ relationship,” that party “may be subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties.” Sommer, 79 NY2d at 551. “
  2. “While courts have recognized a professional duty for some engineers, see, e.g., Hydro Inv ‘rs, Inc. v Trafalgar Power, Inc., 227 F.3d 8 (2d Cir. 2000), operating a computing data center does not implicate the same policy concerns as traditional engineering professions. See Sommer, 79 NY2d at 551-52 (“In [some] instances, it is policy, not the parties’ contract, that gives rise to a duty of due care.”); see also Richard A. Rosenblatt & Co. v Davidge Data Sys. Corp., 295 AD2d 168, 169 (1st Dept 2002) (“[T]he courts of this State do not recognize a cause of action for professional malpractice by computer consultants.”).”