Source: https://www.larsenrico.com/primary-exception-to-the-economic-loss-rule-special-relationships-creating-an-independent-duty/
Timestamp: 2019-04-21 12:11:20+00:00

Document:
There are at least two special relationship exceptions to the economic loss rule. A professional relationship is the first exception to the application of the economic loss rule. Generally speaking, professionals, who owe an independent duty to their client and non-contracting parties, cannot invoke the economic loss rule to bar their client’s tort claims. This type of general statement, however, creates the issue as to whether sophisticated parties have bargained for a limitation of consequential damages recoverable from the professional, in exchange for lower professional fees. Also, when suing a professional for breach of contract, generally the plaintiff is required to prove a breach of the governing professional standard of care, the same proof necessary to prove negligence. Note, however, that not every breach of contract claim is based upon a breach of the professional’s standard of care.
The Court in Steiner Corp. v. Johnson & Higgins of California, 196 F.R.D. 653 (D. Utah 2000), refused to extend the economic loss rule to bar a malpractice claim against an actuarial firm which handled aspects of employer’s retirement plan.
Actions against professionals often involve purely economic loss without any accompanying personal injury or property damage. Extending the economic loss rule to these cases would effectively extinguish such causes of action. Attorneys and other professionals might support a rule which would serve as a complete bar to claims of malpractice and consequently eliminate the necessity of paying malpractice insurance premiums. However, this court does not believe that the Utah Supreme Court intended such a result and refuses to render an “Erie guess” that the Utah high court would so extend the reach of the rule. . . .
Two years later, the “independent duty” exception to the economic loss rule was developed in Utah in Hermansen v. Tasulis, 2002 UT 52, 48 P.3d 235 and later in West v. Inter-Financial, Inc., 2006 UT App 222, 139 P.3d 1059. The Utah Supreme Court set forth the “independent duty” analysis holding that “[w]hen an independent duty exists, the economic loss rule does not bar a tort claim.” Hermansen v. Tasulis, 2002 UT 52, ¶ 17, 48 P.3d 235, 240. This, of course, is a year after the decision in SME Industries, 2001 UT 54, 28 P.3d 669, applying the economic loss rule to bar claims design professionals (e.g., an architect or engineer).
Hermansen, 2002 UT 52 at ¶ 17 (quoting v. Commonwealth Land Title Co., 666 P.2d 302 (Utah 1983)).
Id. at ¶ 29. On the other hand, in contrast to Hermansen, a Real Estate Purchase Contract (“REPC”) does not create a special relationship eliminating the application of the economic loss rule, Gibbons v. National Real Estate Investors, LC, 2011 WL 6069236 *5 (D. Utah, Dec. 6, 2011); Mountain Dudes, LLC v. Split Rock, Inc., Nos. 2:08–cv–940–CW, 2011 WL 1549425 *5 (D. Utah, Apr. 21, 2011), nor do Covenants, Conditions and Restrictions.Mountain Dudes at *5.
Under Utah law, the issue is whether the professional “owe[s] an independent duty to non-contracting buyers, thereby removing them from the rubric of the economic loss rule.” West, 2006 UT App 222 at ¶ 19. The United States Court of Appeals for the Tenth Circuit, applying Colorado law, adopted a more complex analysis. In Standard Bank, PLC v. Runge, Inc., 443 Fed. App’x. 347 (10th Cir. 2011), the Court addressed the factual scenario where a professional engineer firm negotiated limitations of its liability for consequential damages to $50,000, unless the owner was willing to pay a higher fee for an increase in its level of liability. The contract also established the engineering firm’s duty under the contract with the owner as the same duty it would owe under a negligence standard: “in accordance with the standard of care of its profession” meaning “generally accepted professional practices, in the same or similar localities, related to the nature of the work accomplished, at the time the services are performed.” Id. at 348.
“(1) whether the relief sought in negligence is the same as the contractual relief; (2) whether there is a recognized common law duty of care in negligence; and (3) whether the negligence duty differs in any way from the contractual duty.” BRW, Inc., 99 P.3d at 74.
Id. at 352. The Standard Bank court found that the economic loss rule barred the third-party’s claim against the engineering firm: “The relationships here were governed by a set of interrelated contracts between sophisticated commercial entities, all of which had the opportunity to allocate risk and loss through negotiation of their separate contracts.” Id. at 353. The third party did not have a contract with the engineering firm. This ruling, therefore, left the third party with no viable claim against the engineering firm.
Perhaps, depending on the facts, a principal-agent relationship could create a source of independent duty outside of the contract, allowing the application of the economic loss doctrine. Clearone Commc’ns, Inc. v. Jas Forwarding, No. 2:09–CV–450–TS; 2009 WL 3248120 (D. Utah Oct. 7, 2009). Simply alleging that an agent breached his duty to his principal, however, it not sufficient. The Plaintiff must demonstrate that the breached “duties, rights, or obligations [of the agent are] independent of those imposed upon [it] under contract.” Salt Lake City Corp. v. Erm–West, Inc., Case No. 2:11–CV–1174 TS; 2013 WL 5873292 (D. Utah, Oct 30, 2013); see also UBS Bank USA v. Ibby, LLC, 2009 WL 4884383 (D. Utah Dec. 10, 2009) (holding the tort claims of negligence and negligent misrepresentation did not stem directly from the limited fiduciary duty and thus were not barred by the economic loss rule).

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