An October 2026 decision from the Texas Business Court offers important guidance for construction companies, owners, and subcontractors navigating project disputes, but also any party seeking to impart tort liability on a commercial partner. In ESI Incorporated of Tennessee v. Orion Engineered Carbons, LLC, the court dismissed a general contractor's tort claims against a subcontractor it had never contracted with directly and reinforced the high bar for establishing informal fiduciary relationships in commercial settings.

What Happened

ESI, a construction company, sued Orion (the project owner) and Redecam (Orion's subcontractor) after a project to install emissions-reduction systems at Orion's facilities fell behind schedule. ESI claimed that Redecam's disorganization and faulty design information disrupted its work and drove over $10 million in added costs. Because ESI had no direct contract with Redecam, it pursued tort theories: negligent misrepresentation and constructive fraud.

The court dismissed both claims against Redecam on summary judgment.

The Economic-Loss Rule Forecloses Tort Claims Between Contractual Strangers

The court's most significant holding concerns the economic-loss rule. Texas law bars recovery of purely economic damages in tort when contractual remedies were available. Relying on the Texas Supreme Court's controlling decision in LAN/STV v. Martin K. Eby Construction Co., the Texas Business Court held that ESI's lack of a direct contract with Redecam did not help ESI — it hurt it. The economic-loss rule applies precisely in situations where construction participants could have, but did not, secure contractual protections from the owner. A contractor that wants protection against a subcontractor's errors must negotiate for it through the owner. Failing to do so does not open a tort claim as a fallback.

The court also rejected ESI's argument that Redecam's direct communications with ESI (as opposed to an unknown class of bidders, like the LAN/STV case) distinguished this case. Under LAN/STV, the key consideration is the availability of contractual remedies, not whether the contractor actually obtained them.

No Informal Fiduciary Duty From Commercial Collaboration Alone

ESI's constructive-fraud claim required proof of a special or fiduciary relationship with Redecam. The court found none. Although ESI and Redecam worked closely for nine months before the formal project agreement was signed, with Redecam selecting vendors, tracking fabrication, and supplying schedule information that ESI relied upon — the court held that commercial collaboration and subjective trust do not create an informal fiduciary relationship. Texas law sets a demanding standard, and arm's-length coordination toward a shared commercial goal falls well short of it.

Key Takeaways

• Contractors cannot use tort claims as a backup when contract protections were available. The economic-loss rule may apply to disputes between parties who had no direct contract, regardless of how closely they worked together or what representations were exchanged. Contractors should negotiate express protections from owners covering subcontractor performance at the outset.
• Collaboration does not create fiduciary duties. Working closely with another party, relying on their information, and extending trust in a commercial setting does not establish the special relationship needed to support equitable claims. Equitable theories require something substantially more personal and enduring than coordinated project work.

What to Watch

The court's ESI decision reinforces that Texas law channels construction-project disputes through contract, not tort. Businesses entering large construction projects should evaluate their contractual risk allocation carefully before work begins. Litigants already in disputes should assess whether their claims or defenses depend on tort theories that the economic-loss rule may bar.