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Economic Loss Rule Applies Where There...

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Economic Loss Rule Applies Where There is an Absence of Independent Duty Coupled with Lack of Privity

Grynberg v. Questar Pipeline Co., 2003 UT 8, 70 P.3d 1 (applying Wyoming law), noted that whether the terms of the contract address the dispute is a threshold question.  Id. at ¶ 53Hafen v. Strebeck, 338 F.Supp.2d 1257 (D. Utah 2004), addressed the application of the economic loss rule to the situation where the parties are negotiating a contract, but never execute it.  First the Court determined that commercial entities negotiating a contract have no duty to each other with respect to negligent misrepresentations, but only have a duty to avoid intentional misrepresentations.  Then the Court concluded that “[b]ecause Strebeck had no independent duty to Plaintiffs, Plaintiffs negligent misrepresentation claim is also barred by the economic loss rule because it prevents the imposition of economic expectations on non-contracting parties.”  Id. at 1267.

In Aclys International, LLC v. Equifax, Inc., No. 2:08–cv–00954, 2010 WL 1816248 (D. Utah 2010), the Plaintiff claimed it lent over $5 million to certain business partners based upon Equifax’s omissions from its credit report, including a $236,000 default judgment and a $157,000 judgment.  The Plaintiff claimed these omissions resulted from negligence or constituted negligent misrepresentations.  Plaintiff obtained the Equifax credit report from First Credit Corp., who it hired to investigate the potential business partners. 

Under these facts, the Plaintiff did not have a contract with Equifax and did not assert a breach of contract claim.  “Because Aclys seeks damages for purely economic losses sustained as a consequence of relying on the Equifax credit report, its loss falls squarely within the economic loss rule.”  Id. at *3.  Because Plaintiff could not establish an independent common law or statutory duty, the Court concluded that the economic loss rule barred Plaintiff’s claims.

Using the economic loss doctrine to bar tort claims of non-contracting parties is not new to Utah law.  Am. Towers Owners Ass’n v. CCI Mech., Inc., 930 P.2d 1182 (Utah 1996) (barring condominium homeowners from collecting economic damages from contractors for faulty construction in the plumbing and mechanical systems of the building where homeowners were not parties to any of the construction contracts and had no enforceable rights as third-party beneficiaries); Fennell, 2003 UT App 291, 77 P.3d 339 (barring a homeowner’s claim against a developer for negligent misrepresentation and finding that “the economic loss rule applies to prevent the imposition of ‘economic expectations’ on non-contracting parties”).

 

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