In Earl v. NVR, Inc., No. 20-2109, 2021 U.S. App. LEXIS 6451, the U.S. Court of Appeals for the Third Circuit (Third Circuit) considered whether, under Pennsylvania law, the plaintiff’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims against the builder of her home were barred by the economic loss doctrine. The UTPCPL is a Pennsylvania statute that prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” 73 Pa. Stat. Ann. § 201-3. The Third Circuit previously addressed the impact of the economic loss doctrine on UTPCPL claims in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002). In Werwinski, the court held that the plaintiff’s UTPCPL claim was barred by the economic loss doctrine. The Court of Appeals overturned its decision in Werwinski and held that the economic loss doctrine does not bar UTPCPL claims since such claims are statutory, and not based in tort. Continue reading
In Hinrichs v. Dow Chem. Co., 2020 WI 2, 2020 Wisc. LEXIS 2 (2020), the Supreme Court of Wisconsin considered whether two recognized exceptions to the economic loss doctrine—the “fraud in the inducement” and “other property” exceptions—applied to allow the plaintiffs’ tort claims to go forward. The court held that the fraud in the inducement exception only applies to alleged fraud that is unrelated to either the quality or characteristics of the product for which the parties contracted or performance of the contract. In addition, the court held that the fraud in the inducement exception did not apply to the plaintiffs’ tort claims because the alleged fraud was related to the quality and characteristics of the product, and thus was not extraneous to the contract. The court also held that the “other property” exception to the economic loss doctrine did not apply because the product at issue was integrated into a more complete product, and when that happened, the completed product ceased to be “other property” for purposes of the economic loss doctrine. This case narrows the application of two exceptions to the economic loss doctrine, which is a common defense in product defect cases. Continue reading
Often times, both contract and tort claims co-exist in a subrogation matter and the line between the two can be blurred. This is especially true in the context of damages resulting from new home construction defect claims. However, states are increasingly attempting to define the scope of when the “gist of the action” is based in contract only. In Tingler v. Graystone, 834 S.E.2d 244 (Va. 2019), the Supreme Court of Virginia defined that scope in terms of new home construction. The court defined the “source of duty rule” by holding that claims of nonfeasance sounding only in contract do not give rise to an independent tort claim. The court also reiterated its application of the economic loss doctrine, stating that, when negligent actions result in damage to property other than the product itself, there can be a viable tort claim. Continue reading
In Hexagon Holdings Inc. v. Carlisle Syntec, Inc. No. 2017-175-Appeal, 2019 R.I. Lexis 14 (January 17, 2019), the Supreme Court of Rhode Island, discussing claims associated with allegedly defective construction, addressed issues involving intended beneficiaries to contracts and the application of the economic loss doctrine. The court held that, based on the evidence presented, the building owner, Hexagon Holdings, Inc. (Hexagon) was not an intended third-party beneficiary of the subcontract between the general contractor (A/Z Corporation) and the subcontractor, defendant McKenna Roofing and Construction, Inc. (McKenna). In addition, the court held that, in the context of this commercial construction contract, the economic loss doctrine applied and barred Hexagon’s negligence claims against McKenna. Continue reading
In Kmart Corp. v. Herzog Roofing, Inc., 2018 Wisc. App. Lexis 842, the Court of Appeals of Wisconsin considered whether the economic loss doctrine barred the plaintiff’s negligence claims against the defendant roofer for damages resulting from the collapse of a roof. The Court of Appeals held that, while some of the plaintiff’s property damages were unrelated to the scope of the contract, the economic loss doctrine still applied to those damages because they were a foreseeable result of the defendant’s breach of the contract. This case establishes that in Wisconsin, the economic loss doctrine bars tort claims for damage to property unrelated to the contract if those damages were a reasonably foreseeable risk of disappointed expectations of the contract. Continue reading
In Beaufort Builders, Inc. v. White Plains Church Ministries, Inc., 783 S.E.2d 35 (N.C. Ct. App. 2016), the Court of Appeals of North Carolina addressed whether the economic loss rule barred the negligence claim of White Plains Church Ministries, Inc. (White Plains) against Charles F. Cherry (Cherry), the owner of Beaufort Builders, Inc. (Beaufort Builders). The court held that, because the economic loss rule would bar White Plains’ negligence claims against Beaufort Builders, White Plains could not pursue a third-party negligence claim against Cherry, individually.
In Rogers v. Wright, 366 P.3d 1264 (Wyo. 2016), the Supreme Court of Wyoming held that home builders have a tort duty of reasonable care and this duty, independent of any contractual obligations, makes the economic loss rule inapplicable.
In Severn Peanut Company, Inc. v. Industrial Fumigant Company, 807 F.3d 88 (4th Cir. (N.C.) 2015), the United States Court of Appeals for the Fourth Circuit (Fourth Circuit), applying North Carolina law, considered whether a consequential damages clause in a contract between the Severn Peanut Company, Inc. (Severn) and Industrial Fumigant Company (IFC) barred Severn and its subrogating insurer, Travelers Property Casualty Company of America (Travelers), from recovering over $19 million in damages that Severn suffered as the result of a fire and explosion at its Severn, North Carolina plant. The Fourth Circuit, rejecting Severn’s unconscionability and public policy arguments related to the consequential damages clause and finding that the economic loss doctrine barred Severn from pursuing negligence claims, affirmed the trial court’s judgment granting summary judgment in IFC’s favor.
By: Edward Jaeger and Michael Wolfer
In Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Architects and Engineers, 119 A.3d 1070 (Pa. Super. 2015), the Pennsylvania Superior Court recently held that a negligent misrepresentation claim against an architect does not require a plaintiff to make allegations of an express misrepresentation by the architect in order to survive a motion for judgment on the pleadings based on the economic loss doctrine. The court held that, pursuant to Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454 (2005), a plaintiff may sufficiently plead a negligent misrepresentation claim by asserting that the architect’s design documents contained false information.
In Nami Resources Company, LLC v. Asher Land and Mineral, Ltd., — S.W.3d –, 2015 WL 4776376 (Ky. App. Aug. 14, 2015), the Court of Appeals of Kentucky recently declined to expand the scope of the economic loss doctrine, holding that the doctrine precludes misrepresentation claims only in commercial product liability cases.
In Nami Resources, Nami Resources Company, LLC (“NRC”) extracted gas from property owned by Asher Land and Mineral, Ltd. (“ALM”) pursuant to a contract. Under the contract, NRC agreed to pay ALM 1/8th of the gas’ market price. A dispute developed over the amount of royalties that NRC paid to ALM under the contract. ALM sued NRC, asserting, among other things, a claim for breach of contract and a tort claim for fraudulent misrepresentation. NRC argued that ALM’s misrepresentation claim was barred by the economic loss doctrine, contending that ALM’s claims were founded on contractual duties and that, absent a basis independent of the alleged breach of contract, ALM could not maintain its tort claims.