Economic Loss Rule -- When It All Comes Down!

The Florida Supreme Court's recent decision to abrogate the economic loss rule (except in product liability cases) has started to work its way into the case law, including this new 11th Circuit opinion:

The Supreme Court of Florida answered its question in the negative and held that the application of the economic loss rule was limited to products liability cases. Accordingly, based on the opinion the Supreme Court of Florida filed with the Eleventh Circuit Court of Appeals on March 11, 2013, and attached hereto as “Appendix I,” we vacate the district court’s grant of summary judgment in favor of Marsh on Tiara’s claims for negligence and breach of fiduciary duty and remand those claims for the district court to reconsider them in light of the Supreme Court of Florida’s opinion.

Note to Justices Canady and Polston: The sky is falling, the sky is falling!

RIP ELR.

We've written before about the slow painful demise of the once-mighty economic loss rule, the late 80's legal equivalent of flatbread or, to bring this into 2013, "greek yogurt."

(For insight into why -- all of a sudden -- everyone must constantly be asked whether they would like some quinoa and coconut water with every meal, click here.)

So it's no surprise that, like most things from the 80s, the Florida Supreme Court has decided that it's best to just forget that whole thing ever happened:

Having reviewed the origin and original purpose of the economic loss rule, and what has been described as the unprincipled extension of the rule, we now take this final step and hold that the economic loss rule applies only in the products liability context. We thus recede from our prior rulings to the extent that they have applied the economic loss rule to cases other than products liability. The Court will depart from precedent as it does here “when such departure is ‘necessary to vindicate other principles of law or to remedy continued injustice.’ ” Allstate Indem. Co. v. Ruiz, 899 So. 2d 1121, 1131 (Fla. 2005) (quoting Haag v. State, 591 So. 2d 614, 618 (Fla. 1992)). Stare decisis will also yield when an established rule has proven unacceptable or unworkable in practice. See Westgate Miami Beach, Ltd. v. Newport Operating Corp., 55 So. 3d 576, 574 (Fla. 2010). Our experience with the economic loss rule over time, which led to the creation of the exceptions to the rule, now demonstrates that expansion of the rule beyond its origins was unwise and unworkable in practice. Thus, today we return the economic loss rule to its origin in products liability.

Hooray!

(Next I hope the Supremes address the unwise and unworkable expansion of flatbread well beyond its historic origins...)

BTW Justices Canady and Polston in dissent really get it wrong, as Justice Pariente politely points out.

Or am I totally wrong on this?

I think the dissenting Justices are overdramatizing this ruling but hey, if they truly believe the tort floodgates have been completely opened, there is ample language for plaintiffs to cite in opposition to the inevitable motions to dismiss when you try to tack on a tort to every run of the mill contract case.

3d DCA Watch -- Let's Do the Time Warp Again -- Apex Depos, Economic Loss Rule and Venetian Salami!

I have a quick question -- can you convert a simple breach of contract action into a tort claim for damages?

Has anyone researched this?

Oh well, let's suck in a deep whiff  -- and hold it -- from this week's written utterances, freshly baked from the dank, dark, desultory, Desilu Studios'-like concrete wonderland that is our very own JusticeBunker™:

Walker v. Figarola:

It appears we have finally found something truly apodictic:

Similarly, their complaint failed to state a cause of action for civil theft. As this Court explained in Ginsberg, 645 So. 2d at 494, “Where damages sought in tort are the same as those for breach of contract a plaintiff may not circumvent the contractual relationship by bringing an action in tort.” The Walkers seek to recast their simple breach of contract claim into a tort claim to avoid the reality that the statute of limitations has run on their contract claim. But the allegations are for a simple breach of an oral contract—Figarola borrowed $25,000 from the Walkers which he promised to repay within three weeks, and the loan remains unpaid.

Hmm, you don't say -- is there a rule that governs all this?

Rocomonde v. Marshalls:

Judge Emas in the house, reversing an sj for a lady who tripped on a mobile clothing rack at Marshalls:

In the instant case, the trial court found, as a matter of law, that Marshalls was not negligent, because Rocamonde saw the mobile rack in the aisle, had the ability to look at the base of the rack, and failed to do so. However, “it is the dangerous condition of an object which must be open and obvious, not simply the object itself.” Kloster Cruise Ltd. v. Grubbs, 762 So. 2d 552, 555 (Fla. 3d DCA 2000). Although the cart itself was open and obvious, a primary issue here is whether the protruding bottom portion of the rack – the condition which is alleged to have caused her to trip and fall – was open and obvious. Viewing the record in a light most favorable to Rocamonde, there is evidence that she tripped over the protruding base of the rack which was hidden or obscured from her view. It cannot be said as a matter of law that Rocamonde was aware of this condition.

I don't know, but the last time I was at the downtown Marshalls I would have been thrilled to just have a mobile clothing rack blocking my aisle.

If I recall correctly, I had immediately in front of me the following:

1.  scattered children's books;
2.  part of a gourmet macaroni box that someone noshed from and was now on the floor;
3.  an LSU Tigers golf club cover;
4.  a homeless person; and
5.  Herman Russomanno.

See what I mean?

Reynolds v. Gero:

Venetian Salami.

Yes, you heard me.

Deal with it.

General Star v. Atlantic Hospitality:

Apex depos -- what is this, the 90s?

Listen closely, kids:

Discovery is intended to be part of the “just, speedy, and inexpensive" determination of disputes—not a device to get greater attention at an adversary’s headquarters.

Ok then, I suppose I should send out a cancellation notice for that three-day Kim Rothstein depo I just scheduled in Aruba.

SFL Friday -- The Economic Loss Rule Is Officially Dead.

Well, I should say, it's on life support.

Kids, there once was a time when the economic loss rule was everywhere and applied, or sometimes applied, or was argued to apply, to just about everything.

Quick example -- the Rabbi at my wedding actually pontificated on its applicability while we were signing the Ketubah.

Anyway, in this majestically concise opinion today by Judge Marra, you will find a perfect delineation of what remains of the ELR, and it ain't much and you can generally plead around it unless you truly are trying to sue someone in tort for breach of contract (in which case you shouldn't be in federal court).

In other news, what kind of bonehead gets a boner when a woman is crying, the Nazis are Democrats (according to Fox News), and I wish I was in Hawaii.

Have a great weekend!

3d DCA Watch -- The Sad Decline of the Economic Loss Rule.

I've written about this before, but there was a time a few decades ago when all anyone wanted to talk about was the Economic Loss Rule.

Could it apply here? Why doesn't it apply here? Let's have a lunch seminar and discuss it!

It was everywhere, the "metadata" or pesto wrap flatbread legal trend of its time.

But as the bunkerized Robed Ones remind us, ding dong the ELR is dead:

This “prohibition against tort actions to recover solely economic damages for those in contractual privity is designed to prevent parties to a contract from circumventing the allocation of losses set forth in the contract by bringing an action for economic loss in tort.” Indem. Ins. Co., 891 So. 2d at 536. Moreover, when discussing the exemptions to the economic loss rule, the Florida Supreme Court, citing Moransais as an example, stated that “[a]nother situation involves cases such as those alleging neglect in providing professional services, in which this Court has determined that public policy dictates that liability not be limited to the terms of the contract.” Indem. Ins. Co., 891 So. 2d at 537. In Moransais, the Florida Supreme Court tacitly acknowledged that an extra-contractual remedy against a negligent professional is necessary because contractual remedies in such a situation may be inadequate. Moransais, 744 So. 2d at 983 (“While the parties to a contract to provide a product may be able to protect themselves through contractual remedies, we do not believe the same may be necessarily true when professional services are sought and provided.”). By allowing a professional negligence claim against an individual on common law and statutory grounds, and finding that the doctrine designed to prevent “parties to a contract from circumventing the allocation of losses set forth in the contract” does not preclude such a claim, the Florida Supreme Court implicitly acknowledged that claims of professional negligence operate outside of the contract.

Ahh Moransais -- it's been a while, welcome back my dear friend. Come sit next to my pal Venetian Salami.

But I guess my question is why?

What is it about professional services contracts in particular such that public policy compels -- in all circumstances -- that there be extra contractual remedies available in addition to those agreed to by the parties (or in Judge Shepherd's words, the "ancient concepts of freedom of contract")?

In other words, the court is not allowed to pay any attention to the circumstances of the contract formation or its terms, which typically can provide an equitable basis for extra contractual relief -- unequal bargaining power, obscure or buried terms, terms of adhesion, unconscionable terms, whether the parties are sophisticated etc.

Apparently all of the usual equitable tools get thrown out the window where professional services are involved, and it's simply the case that extra contractual remedies are always available?

I've never been a fan of the ECL, but at least I'd like to understand the reasoning for the exceptions.

Perhaps another way of looking at it is why shouldn't this exception extend beyond the professional service setting if there are compelling equitable grounds?