Texas Business Court Decision – October 20, 2026

No. 26-BC11A-0075  ESI Incorporated of Tennessee v. Orion Engineered Carbons, LLC,  and Redecam USA, LLC (Eleventh Division, Judge Sharp) 2026 Tex. Bus. 74

Misrepresentation and Fraud/Responsible Third Party.

Background. ESI, a construction company, built emissions-reduction systems for Orion’s carbon-black plants under a 2021 Construction Agreement. After project delays, ESI sued Orion and Orion’s subcontractor Redecam, alleging Orion delivered owner-provided equipment late and that Redecam made disorganized, untimely shipments and gave incorrect design details. ESI alleged these problems added more than $10 million in costs. ESIA also alleged that Orion and Redecam made misrepresentations about equipment timing and condition that induced it to commit to the project’s milestones and pricing. Orion countered that ESI missed milestones and failed to pay its subcontractors. The parties jointly removed the case from the Harris County District Court as a pre-existing suit under Tex. Gov’t Code Sec. 25A.021. Redecam moved for combined traditional and no-evidence summary judgment on ESI’s negligent-misrepresentation and constructive-fraud claims. Orion moved to designate Brown & Root, ESI’s subcontractor, as a responsible third party, and Redecam joined that motion.

Issues:

1. Does the economic-loss rule bar ESI’s negligent-misrepresentation claim against Redecam, a contractual stranger?
2. Is there evidence of an informal fiduciary relationship between ESI and Redecam to support a claim for constructive fraud?
3. Must the court reach Redecam’s remaining grounds (falsity and justifiable reliance), and should Redecam’s hearsay objection be sustained?
4. Did Orion’s motion adequately plead the substantive requirements of Tex. Civ. Prac. & Rem. Code Sec. 33.004 for designating Brown & Root as a responsible third party?
5. Did Orion satisfy Sec. 33.004’s procedural requirements, including timely disclosure under Sec. 33.004(d)?
6. Must the court grant leave to replead before denying the motion for designation?

Discussion.

1. Economic-loss rule. The rule bars ESI’s claim for negligent misrepresentation. The court relies on LAN/STV v. Martin K. Eby Construction Co., 435 S.W.3d 234 (Tex. 2014), where a general contractor’s negligent-misrepresentation claim against the owner’s architect, a contractual stranger, was held to be barred. The court reasoned that one construction participant cannot recover from another for economic loss caused by negligence.  The rule applies because ESI’s alleged economic losses arose from performing its contract with Orion, the parties allocated risks by the Construction Agreement, and ESI did not allege injury to its person or property, nor did it assert that its claims would exist apart from the ESI-Orion Agreement.
2. Constructive fraud. This claim is dismissed for lack of evidence of a special or fiduciary relationship.  First, there was no evidence of an informal fiduciary relationship. Second, ESI’s nine months of collaboration with, and subjective trust in, Redecam on the same project for the same principal were arm’s-length commercial dealings. Under Pitts v. Rivas, 708 S.W.3d 517 (Tex. 2025), subjective trust is not evidence of a fiduciary relationship.
3. Remaining grounds. Having concluded that ESI’s fraud theories fail, the court need not reach Redecam’s arguments that the claim also fails because there was no evidence of falsity at the time the alleged misrepresentation was made and because the evidence disproves justifiable reliance.
4. Orion’s Motion for Responsible-Third-Party Designation. Orion adequately alleged that Brown & Root contributed to ESI’s delay-related harm. But it failed to plead a violated “applicable legal standard” under Tex. Civ. Prac. & Rem. Code Sec. 33.011(6). The standard may be contractual, but Orion made only a passing reference to the breach, which fails the fair-notice standard of In re YRC Inc. 646 S.W.3d 809 (Tex. 2022). Redecam’s hearsay objection to inclusion of the ESI’s Professional Services Agreement with Orion is overruled as it was offered to show ESI was retained and not to prove the truth of an out-of-court factual assertion; in any event ESI authenticated the document as a business record.
5. Procedural Requirements. ESI conceded that the motion for responsible third party designation met the suit’s docket-control deadlines and the statutory 60-day deadlines. However, ESI does argue that the relevant four-year statute of limitations bars the designation – see Sec. 33.004(d). On this record, the court cannot determine whether Orion satisfied its obligation to timely disclose Brown & Root under Rules 193 and 194, nor whether it moved for the designation before the four-year limitations period ran on that claim.
6. The court lacks discretion to deny the motion without first granting Orion leave to replead. Tex. Civ. Prac. & Rem. Code Sec. 33.004(g)(2); see In re Smith, 366 S.W.3d 282 (Tex. App. – Dallas 2012, no pet.). The court dismisses the motion without prejudice and grants Orion leave to amend its motion to so as to provide fair notice of the applicable standard and violation of that standard by Brown & Root; when Orion files its amended motion, it must attach its proposed amended pleading containing the third-party designation of Brown & Root.