Where retaining walls for the foundation of a food distribution center began to evidence stress and potential failure, the building owner filed a suit against various design firms, contractors and subcontractors that had been involved in the design, inspection, testing and construction of the retaining walls – based on allegations of negligence. The U.S. District, applying Pennsylvania law, held that the owner’s negligence claims were barred by the economic loss doctrine because the claims related to the cost of repairing and replacing the walls and did not allege any physical injury to any person or damage to property other than the retaining walls.
In the decision in American Stores Properties v. Spotts, Stevens & McCoy, 2009 WL 2513437 (U.S.D.C., E.D.Pa 2009), the plaintiff offered three different arguments against application of the economic loss doctrine – each of which was rejected by the Court. Plaintiff argued that (1) the doctrine can only be applied where there is privity of contract between the parties; (2) the doctrine is not to be applied when dealing with professionals whose information is to be relied upon by others in the industry (citing Bilt-Rite Contractors v. Architectural Studio (Pa. 2005); and (3) property damage had been suffered. The District Court dealt concisely with each of these arguments finding the following:
1) Privity of contract is not required for application of the economic loss doctrine to negligence claims. “Even where the parties are not in privity of contract, Pennsylvania law does not recognize a cause of action based on negligent acts that result in only economic loss.” The court cited several Pennsylvania state court decisions holding that negligence claims against contractors were barred despite the absence of a contractual relationship. As stated in one of the cited decisions, “Purely economic loss, when not accompanied with or occasioned by injury, is considered beyond the scope of recovery even if a direct result of the negligent act.”
2) The Bilt-Rite case cited by the plaintiff was not relevant because it concerned negligent misrepresentation claims against a design firm and the holding of that case was that the economic loss doctrine would not apply to negligent misrepresentation claims under Section 522 of the Restatement (Second) of Torts (1977). The Court explained that the Bilt-Rite holding only applies in the situation where a plaintiff relies on “expert supplier of information” with whom it has not contract, and that courts have further restricted the holding of Bilt-Rite to negligent misrepresentation claims under Section 522.
3) Plaintiff suffered no damage to “other property.” The plaintiff tried to argue that soils reports and other services were the defective “product” and that his in turn caused damage to the retaining wall which were “other property.” In rejecting that argument, the court found the retaining walls were the “product” for which the plaintiff bargained and damages to the wall were therefore subject to the economic loss doctrine. The court pointed out that if the plaintiff had alleged damage to goods or inventory that was stored in the food distribution center, recovery for that damage would not be barred by the economic loss doctrine since it would indeed be damage to “other property.” “However, in this case, the retaining wall is the relevant product that was bargained for by Plaintiff. There is simply no ‘other property’ at issue.” Since the plaintiff did not allege damages other than those related to the cost of repairing or replacing the walls, the court concluded that recovery was barred under the economic loss doctrine.