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    The Lawletter Blog

    CONTRACTS: Florida Limits "Economic Loss Rule" to Products Liability Cases

    Posted by Gale Burns on Tue, Feb 4, 2014 @ 09:02 AM

    The Lawletter Vol 38 No 11

    Paul Ferrer, Senior Attorney, National Legal Research Group

         Florida's two-pronged approach to the so-called "economic loss rule" has engendered much confusion over the years. The Florida Supreme Court attempted to clear up the confusion in Tiara Condominium Ass'n v. Marsh & McLennan Cos., 110 So. 3d 399 (Fla. 2013), but may not yet have succeeded entirely in light of the discussion in the concurring and dissenting opinions concerning the potential reach of the majority decision.

         The economic loss rule was originally a doctrine rooted in products liability law. In that context, the rule "preclud[es] recovery of economic damages in tort where there is no property damage or personal injury." Id. at 404. In such cases, the issue is seen as one involving contract law, specifically, warranty principles, through which the plaintiff can recover the benefit of its bargain for economic losses resulting from the failure of the product itself to perform as promised by the warranty. Id.; see also id. at 408 (Pariente, J., concurring) ("[T]he rule itself acts merely as a specific articulation of the proper approach for those products liability cases in which contract principles, rather than tort principles, are best suited to resolving the claim.").

         The confusion in Florida arose when the supreme court began using the same terminology to refer to the broader concept by which "a tort action is barred where a defendant has not committed a breach of duty apart from a breach of contract." Id. at 402. The problem could have been avoided had the court simply used a different moniker when referring to this long-standing principle, as other jurisdictions have done. See, e.g., Bealer v. Mut. Fire, Marine & Inland Ins. Co., 242 F. App'x 802, 804 (3d Cir. 2007) ("The gist of the action doctrine bars a plaintiff from bringing a tort claim for damages that merely replicates a claim for breach of an underlying contract."), cert. denied, 552 U.S. 1185 (2008). Instead, Florida separated the "economic loss rule" into two branches, one dealing with "contractual privity" and the other with "products liability." See Tiara, 110 So. 3d at 402-03.

         In Tiara, responding to a question certified to the Florida Supreme Court by the Eleventh Circuit, the court rejected the "continued applicability of the economic loss rule in cases involving contractual privity," id. at 400, holding that "the application of the economic loss rule is limited to products liability cases," id. at 400, 407. The problem is that the majority opinion in Tiara did not clearly indicate whether the "contractual privity" branch of the economic loss rule survives under another name (such as the "gist of the action" doctrine referred to by the Bealer court). The dissenting justices apparently felt that the principle did not survive the decision in Tiara, as they both opined that the majority had "greatly expand[ed] the use of tort law at a cost to Florida's contract law." See id. at 410 (Polston, C.J., dissenting), 411 (Canady, J., dissenting) ("I agree with Chief Justice Polston's view that 'Florida's contract law is seriously undermined by this decision.'"). On the other hand, Justice Pariente, in her concurring opinion joined by two other justices, responded that "[t]he majority's conclusion that the economic loss rule is limited to the products liability context does not undermine Florida's contract law or provide for an expansion in viable tort claims." Id. at 408 (Pariente, J., concurring). Instead, the same principle formerly dealt with under the "contractual privity" branch of Florida's economic loss rule will now be applied using "common law principles of contract." Id. at 409.

         It is unfortunate that the majority did not simply deal with this issue explicitly, rather than leaving the matter to be debated between the concurring and dissenting justices, as it appears that the courts are already in disagreement as to whether this salutary principle separating contract and tort law is still the law in Florida. Compare Joyeria Paris, SRL v. Gus & Eric Custom Servs., No. 13-22214-CIV, 2013 WL 6633175, at *3-4 (S.D. Fla. Dec. 17, 2013) (deciding, based on Justice Pariente's concurrence, that the plaintiff had failed to allege a cause of action for fraud independent of its breach-of-contract claim where the fraud claim was based on "the same conduct that makes up the defendants' alleged breach of the parties' oral contract"), with Munoz Hnos, S.A. v. Editorial Televisa Int'l, S.A., 121 So. 3d 100, 103 (Fla. Dist. Ct. App. 2013) (the plaintiff's negligent misrepresentation and fraud claims arising out of a contract with the defendant were not barred, based on the court's holding in Tiara that "application of the economic loss rule is strictly limited to products liability cases"). It will, apparently, now take another decision by the Florida Supreme Court to clean up this issue as well.

    Topics: legal research, Paul Ferrer, economic loss rule, The Lawletter Vol 38 No 11, Florida, Tiara Condo. Ass’n v. Marsh & McLennan Cos., tort law versus contract law, is it limited to products liability context, courts in disagreement

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