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Wartsila NSD North America, Inc. v. Hill International Inc.

342 F.Supp.2d 267 (D. N.J. 2004)

CONTRACTS; FRAUD — A temporary employee supplier has a duty to its customers to verify the credentials on the resumes of the individuals sent for employment.

A construction company retained a consulting firm for a project. The construction company hired one of the consulting firm’s employees as an independent contractor. The employees had been assigned to the project. Both the construction company and the consulting firm later discovered that the employee lacked the credentials claimed on his resume. The construction company then sued the consulting firm, alleging that the late discovery of these defects ultimately caused the construction company to lose millions of dollars in related litigation. The consulting firm moved for summary judgment, contending that the construction company could not prove that it sustained damages during the time when the firm owed the company a duty of care, asserting that its duty of care to the company ceased when the company hired the employee away from the firm. The consulting firm also asserted that the company had not demonstrated that it knew of the employee’s misrepresentations the day that the parties entered into the original consulting agreement. The company argued that its negligence claim should survive summary judgment because there was evidence that the consulting firm breached its duty of care by failing to verify the employee’s resume and it was this breach that led to its damages. The construction company claimed that the employee’s alleged competent performance prior to the actions leading up to this suit was of no consequence since the employee’s value was tainted by the misrepresentations listed on his resume.

The Court held that the consulting firm owed a duty to the construction company that transcended the life of the contractual relationship between the parties. It pointed out that although the construction company had placed the employee on its staff, the employee remained employed by the consulting firm for at least one other project. Thus, the consulting firm had retained some control over the employee. Furthermore, the negligence claim against the construction company came out of the project that the consulting firm had originally been hired for. When the employee was hired away, he simply continued to work on the same project. Therefore, the employee’s independent contractor status did not change the firm’s responsibility to ensure the truth of his credentials. In addition, as a consulting firm, it owed a duty to all of its clients to ensure that its employees possessed the qualifications stated on their resumes. The consulting firm itself recognized that its customers would rely on its investigations into the credentials of its consultants, and that it would have been easy in this case to verify the employee’s credentials. Furthermore, the Court noted that the consulting firm had a policy in place requiring that its human resources department verify the credentials of its employees, and that in this case, the human resources department failed to adhere to the policy. Therefore, a jury could possibly conclude that the consulting firm knew or should have known of the falsity of the employee’s resume. For these reasons, the Court rejected the consulting firm’s motion for summary judgment.

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