Opinion ID: 3049624
Heading Depth: 2
Heading Rank: 3

Heading: Yerington Ford Case

Text: In the Yerington Ford case, the district court granted summary judgment to GMAC on two grounds. First, the court held that Nevada’s economic loss doctrine prevented Appellants from recovering on their tort claims. Second (and in the alternative with respect to Appellants’ claims for breach of fiduciary duty, constructive fraud, and undue influence), the court held that GMAC owed no fiduciary duty to the Gileses or to Yerington Ford based on a confidential or special relationship. We address these grounds in turn. 9574 GILES v. GMAC
Appellants appeal the dismissal of their tort claims for fraud, conversion, constructive fraud, undue influence, and breach of fiduciary duty. They contend that the district court erred in holding that these claims are barred by Nevada’s economic loss doctrine. For the reasons that follow, we agree with Appellants that their tort claims for fraud and conversion are not barred. Because we agree with GMAC that it owed no fiduciary duty to Appellants, we do not decide whether Appellants’ claim for breach of fiduciary duty is barred by the economic loss doctrine. For the same reason, we also do not decide whether the economic loss doctrine bars Appellants’ claims for constructive fraud and undue influence, because under Nevada law those claims require a breach of an underlying fiduciary duty. [1] Broadly speaking, the economic loss doctrine is designed to maintain a distinction between damage remedies for breach of contract and for tort. The term “economic loss” refers to damages that are solely monetary, as opposed to damages involving physical harm to person or property. The economic loss doctrine provides that certain economic losses are properly remediable only in contract. The doctrine has roots in common law limitations on recovery of damages in negligence actions in the absence of physical harm to person or property. See generally Barber Lines A/S v. M/V Donau Maru, 764 F.2d 50, 54 (1st Cir. 1985) (Breyer, J.) (reaffirming in an admiralty case the “rule limiting recovery for negligently caused pure financial harm” in the absence of physical injury to person or property, even where such harm was foreseeable); Onita Pac. Corp. v. Trustees, 843 P.2d 890, 894-900 (Or. 1992) (discussing and following same common law rule under Oregon law); Ultramares Corp. v. Touche, 174 N.E. 441, 444 (N.Y. 1931) (Cardozo, C.J.) (holding that defendant accountants “owed to their employer a duty imposed by law to make their certificate without fraud, and a duty growing out of contract to make it with the care and caution proper to their GILES v. GMAC 9575 calling” but not a tort duty to make it without negligence); id. (“If liability for negligence exists, a thoughtless slip or blunder . . . may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class. The hazards of a business conducted on these terms are so extreme as to enkindle doubt whether a flaw may not exist in the implication of a duty that exposes [accountants] to these consequences.”); Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 309 (1927). However, the “economic loss doctrine” as a separately named and articulated doctrine dates only from the last half century. It first came to prominence in product liability cases. In such cases, the doctrine is intended to maintain traditional limits on manufacturers’ liability provided by the law of warranty, except in cases of physical injury to persons or property. See generally E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 866-75 (1986); id. at 874 (noting that “[a] warranty action . . . has a built-in limitation on liability . . . . from the agreement of the parties and the requirement that consequential damages, such as lost profits, be a foreseeable result of the breach”). Some jurisdictions have yet to apply the economic loss doctrine outside the product liability context. See, e.g., id. at 871 n.6 (reserving the question whether the doctrine applies in maritime cases outside negligence and strict liability claims for product defects); Minn. Stat. § 604.101 (codifying Minnesota’s doctrine, which applies only in product liability cases); see also Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 885 (1997) (Scalia, J., dissenting) (describing “the so-called ‘economic loss’ rule” narrowly as the rule that “denies the purchaser of a defective product a tort action against the seller or manufacturer for purely economic losses sustained as a result of the product’s failure”). The seminal product liability case is Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965), in which the plaintiff bought a truck that “bounced violently” when used for heavy duty 9576 GILES v. GMAC hauling. Id. at 147. After numerous unsuccessful attempts to cure the problem, the plaintiff sued the truck’s manufacturer in both contract and tort. Chief Justice Traynor wrote that the plaintiff could recover expectation and foreseeable consequential damages, including lost profits, from the manufacturer based on contract, but could not recover proximately caused economic damages, including lost profits, in tort. In tort, the plaintiff was limited to damages for physical injury to persons or property. Chief Justice Traynor explained: The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the “luck” of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. He can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety defined in terms of conditions that create unreasonable risks of harm. He cannot be held for the level of performance of his products in the consumer’s business unless he agrees that the product was designed to meet the consumer’s demands. Id. at 151. In East River, the Supreme Court, sitting in admiralty, adopted Chief Justice Traynor’s rationale for applying the economic loss doctrine to product liability cases. The Court held that if the “public policy judgment that people need more protection from dangerous products than is afforded by the law of warranty” were “allowed to progress too far, contract law would drown in a sea of tort.” 476 U.S. at 866. Accordingly, although tort liability for product defects in admiralty GILES v. GMAC 9577 cases extended to physical injury to persons and property, it did not extend to “purely monetary harm” caused as a consequence of a defective product’s failure, where the only physical damage was to the product itself. Id. at 868, 871. The doctrine is necessary, the Court held, “to keep products liability and contract law in separate spheres and to maintain a realistic limitation on damages.” Id. at 871. The economic loss doctrine in product liability cases can be easily stated. If a plaintiff is in a contractual relationship with the manufacturer of a product, the plaintiff can sue in contract for the normal panoply of contract damages, including foreseeable lost profits and other economic losses. Whether or not the plaintiff is in a contractual relationship with the manufacturer, the plaintiff can sue the manufacturer in tort only for damages resulting from physical injury to persons or to property other than the product itself. However, the economic loss doctrine has not been confined to product liability cases. When applied in cases outside the product liability context, the doctrine has produced difficulty and confusion. In such cases, as lamented by the Florida Supreme Court, “the [economic loss] rule has been stated with ease but applied with great difficulty.” Indem. Ins. Co. v. Am. Aviation, Inc., 891 So. 2d 532, 544 (Fla. 2004) (Cantero, J., concurring) (internal quotation marks and citations omitted). One reason for the difficulty is that many courts have stated in overly broad terms that purely economic losses cannot be recovered in tort. See, e.g., Apollo Group, Inc. v. Avnet, Inc., 58 F.3d 477, 479 (9th Cir. 1995) (“Generally, under the ‘economic loss’ rule, a plaintiff who suffers only pecuniary injury as a result of the conduct of another cannot recover those losses in tort.”); Corporex Dev. & Constr. Mgmt., Inc. v. Shook, Inc., 835 N.E.2d 701, 704 (Ohio 2005) (“The economic-loss rule generally prevents recovery in tort of damages for purely economic loss.”); In re Chi. Flood Litig., 680 N.E.2d 265, 274 (Ill. 1997) (“At common law, solely eco9578 GILES v. GMAC nomic losses are generally not recoverable in tort actions.”); Duffin v. Idaho Crop Improvement Ass’n, 895 P.2d 1195, 1199-1201 (Idaho 1995) (reversing where lower court failed to recognize limits on the general notion that “purely economic loss cannot be recovered in tort”); City of Oakbrook Terrace v. Hinsdale Sanitary Dist., 527 N.E.2d 70, 74 (Ill. App. Ct. 1988) (“Our supreme court has held that damages for solely economic losses cannot be recovered in tort.”). Such broad statements are not accurate. Tort law has traditionally protected individuals from a host of wrongs that cause only monetary damage. As the Utah Supreme Court has noted, “torts such as fraud and conversion exist to remedy purely economic losses.” Grynberg v. Questar Pipeline Co., 70 P.3d 1, 11, 13 (Utah 2003) (emphasis added). Many courts have explicitly refused to extend the economic loss doctrine beyond the product liability context or beyond claims for negligence and strict liability. See, e.g., United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd., 210 F.3d 1207, 1226 (10th Cir. 2000) (refusing to apply doctrine because, under Colorado law, “the economic loss rule applies only to tort claims based on negligence, and only to some negligence claims”); EED Holdings v. Palmer Johnson Acquisition Corp., 387 F. Supp. 2d 265, 278-79 (S.D.N.Y. 2004) (allowing fraud claim to go forward because New York law permits recovery of economic loss on claims of fraud and fraud in the inducement even “in tandem” with contract claims); Indem. Ins. Co., 891 So. 2d at 543 n.3 (noting that “[i]ntentional tort claims such as fraud, conversion, intentional interference, civil theft, abuse of process, and other torts requiring proof of intent generally remain viable” despite economic loss doctrine); In re Chi. Flood Litig., 680 N.E.2d at 274-75 (describing Illinois’ doctrine, which applies only to “tort theories of strict liability, negligence, and innocent misrepresentation” and not to “intentional, false representation, i.e., fraud” or “negligent misrepresentation by a defendant in the business of supplying information for the guidance of others in their business transactions”); Huron Tool & Eng’g Co. v. Precision Consulting GILES v. GMAC 9579 Servs., Inc., 532 N.W.2d 541, 544 (Mich. Ct. App. 1995) (noting that torts outside the doctrine’s scope include defamation, misrepresentation, intentional misrepresentation, tortious interference with prospective economic advantage, intentional interference with contractual relations, and certain fraud in the inducement claims); Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270, 285-87 (Pa. 2005) (declining to apply economic loss doctrine and permitting recovery for negligent misrepresentation where defendant supplies false information for the guidance of others in business transactions, as described in Restatement (Second) of Torts § 552); Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 463 S.E.2d 85, 88 & n.2 (S.C. 1995) (noting that “[p]urely ‘economic loss’ may be recoverable under a variety [of] tort theories” where “[a] breach of a duty aris- [es] independently of any contract duties” and listing as examples libel, defamation, various forms of professional malpractice, and the existence of a “special relationship”); John Martin Co. v. Morse/Diesel, Inc., 819 S.W.2d 428, 435 (Tenn. 1991) (declining to extend the economic loss doctrine beyond product liability and allowing recovery for negligent misrepresentation under Restatement (Second) of Torts § 552); Am. Towers Owners Ass’n, Inc. v. CCI Mech., Inc., 930 P.2d 1182, 1190 n.11 (Utah 1996) (noting that doctrine does not bar recovery of “purely economic losses in cases involving intentional torts, e.g., fraud, business disparagement, intentional interference with contract, etc.”); see also Minn. Stat. § 604.101 (codifying Minnesota’s doctrine, which limits compensatory damages only in product liability cases and permits claims of intentional or reckless misrepresentation regarding the goods). Most courts that have applied the economic loss doctrine beyond product liability cases have done so to bar recovery of economic loss in negligence and strict liability. See, e.g., Corporex Dev., 835 N.E.2d at 704 (“The well-established general rule is that a plaintiff who has suffered only economic loss due to another’s negligence has not been injured in a manner 9580 GILES v. GMAC which is legally cognizable or compensable.” (quoting Neb. Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345 N.W.2d 124, 126 (Iowa 1984)) (internal quotation marks omitted)); Gerald M. Moore & Son, Inc. v. Drewry, 467 S.E.2d 811, 813 (Va. 1996) (holding that the doctrine bars recovery of economic loss in actions for negligence in performance of contract); O’Connell v. Killington, Ltd., 665 A.2d 39, 42-43 (Vt. 1995) (barring recovery of economic loss in negligence in ski accident case because “[n]egligence law does not generally recognize a duty to exercise reasonable care to avoid intangible economic loss to another unless one’s conduct has inflicted some accompanying physical harm”); FMR Corp. v. Boston Edison Co., 613 N.E.2d 902, 903 (Mass. 1993) (barring recovery of economic loss in negligence where power outage caused loss). However, some courts have applied the economic loss doctrine to bar recovery on tort claims beyond negligence and strict liability. Where such tort claims have been barred, they have usually amounted to nothing more than a failure to perform a promise contained in a contract. In such cases, the plaintiff has been held to be entitled only to ordinary contract damages. For example, if the tort alleged is intentional or fraudulent misrepresentation by a seller to a buyer, but the misrepresentation only goes to the quality or quantity of the goods promised in the contract, some courts limit the buyer to contract remedies: Where there are well-developed contractual remedies, such as the remedies that the Uniform Com- mercial Code (in force in all U.S. states) provides for breach of warranty of the quality, fitness, or specifications of goods, there is no need to provide tort remedies for misrepresentation. The tort remedies would duplicate the contract remedies, adding unnecessary complexity to the law. Worse, the provision of these duplicative tort remedies would undermine contract law. That law has been shaped GILES v. GMAC 9581 by a tension between a policy of making the jury the normal body for resolving factual disputes and the desire of parties to contracts to be able to rely on the written word and not be exposed to the unpredictable reactions of lay factfinders to witnesses who testify that the contract means something different from what it says. Many doctrines of contract law, such as the parol evidence and “four corners” rules, are designed to limit the scope of jury trial of contract disputes (a further example is the statute of frauds). Tort law does not have these screens against the vagaries of the jury. All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 865-66 (7th Cir. 1999) (Posner, J.); see also Apollo Group, 58 F.3d at 480-81 (barring common law tortious breach of warranty and negligent misrepresentation claims under Arizona law because plaintiff sought “to recover purely ‘benefit of the bargain’ ” economic losses based on “foreseeable risks [that] could have been — and indeed were — allocated by the parties in their contractual agreement”); Cerabio LLC v. Wright Med. Tech., Inc., 410 F.3d 981, 990 (7th Cir. 2005) (barring fraud claim under Wisconsin law because it “pertain[ed] to the character and quality of the product that [was] the subject matter of the contract”); Werwinski v. Ford Motor Co., 286 F.3d 661, 679-81 (3d Cir. 2002) (barring fraud claim under Pennsylvania law because “appellants are unable to explain why contract remedies are inadequate to provide redress when the alleged misrepresentation relates to the quality or characteristics of the goods sold”); Hoseline, Inc. v. U.S.A. Diversified Prods., Inc., 40 F.3d 1198, 1200 (11th Cir. 1994) (barring fraud and civil theft claims under Florida law where defendant allegedly “misrepresented the amount of coil in its boxes” because “[i]n essence, both . . . claims arose from USA’s breach of its contractual obligation to ship certain quantities”); First Care Med. Clinic, Inc. v. Polymedco, Inc., No. 3:05-CV-82, 2006 WL 3497845, at -5 (W.D.N.C. Dec. 4, 2006) (barring recovery of economic loss for intentional 9582 GILES v. GMAC misrepresentation about product in product liability action); Huron Tool, 532 N.W.2d at 546 (barring fraud claim in software defect case because the alleged misrepresentations were “indistinguishable from the terms of the contract and warranty” and therefore plaintiff “fail[ed] to allege any wrongdoing by defendants independent of defendants’ breach of contract and warranty”); id. at 545 (holding generally that fraud claims are barred only “where the . . . misrepresentation by the dishonest party concerns the quality or character of the goods sold” but not where fraud in the inducement takes other forms “extraneous to the contract”); Kaloti Enters., Inc. v. Kellogg Sales Co., 699 N.W.2d 205, 219-21 (Wis. 2005) (following Huron Tool in recognizing fraud in the inducement exception except where the fraud concerns the quality or characteristics of goods); see also Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1, 881 P.2d 986, 992 (Wash. 1994) (limiting recovery for construction delays to contract remedies to increase “predictability in allocating risk”). The result of the application of the economic loss doctrine in such cases is not that buyers are unable to recover for economic losses. Rather, the result is that they must seek recovery for their economic losses in contract rather than in tort. The leading Nevada case on the economic loss doctrine is Calloway v. City of Reno, 993 P.2d 1259 (Nev. 2000). Calloway is conceptually similar to Seely, the paradigmatic product liability case decided by the California Supreme Court thirty-five years earlier. Owners of recently built townhouses sued subcontractors for allegedly negligent framing work performed during construction. Id. at 1261-62. The Nevada Supreme Court analogized housing construction cases to product liability cases and held that “purely economic losses” arising from improper performance of a construction contract (or subcontract) may be recovered only in a suit for breach of contract. Id. at 1269. The damages that may be recovered in a tort suit for defective construction are limited to physical injury to persons or to property other than the structure itself. Id. at 1267. GILES v. GMAC 9583 The Nevada Supreme Court made clear in Calloway that, as used in relation to the economic loss doctrine, “purely economic loss” is a term of art. Id. at 1263. It does not refer to all economic loss, but only to economic loss that would be recoverable as damages in a normal contract suit. Id. According to Calloway, “[p]urely economic loss is generally defined as ‘the loss of the benefit of the user’s bargain . . . including . . . pecuniary damage for inadequate value, the cost of repair and replacement of the defective product, or consequent loss of profits, without any claim of personal injury or damage to other property.’ ” Id. (quoting American Law of Products Liability § 60:36, at 66) (elipses in original); accord Nat’l Union Fire Ins. Co. v. Pratt & Whitney Canada, Inc., 815 P.2d 601, 603 n.2 (Nev. 1991). The Court described the purpose of the economic loss doctrine in language similar to that used by Chief Justice Traynor in Seely: Contract law is designed to enforce the expectancy interests created by agreement between the parties and seeks to enforce standards of quality . . . . In contrast, tort law is designed to secure the protection of all citizens from the danger of physical harm to their persons or to their property and seeks to enforce standards of conduct. These standards are imposed by society, without regard to any agree- ment. Tort law has not traditionally protected strictly economic interests related to product quality — in other words, courts have generally refused to create a duty in tort to prevent such economic losses. Calloway, 993 P.2d at 1265-66. The Court refused to delineate the entire universe of claims that would, or would not, be subject to the economic loss doctrine. Rather, the Court held, “the more reasoned method” is to examine in each case “the relevant policies in order to ascertain the proper boundary between the distinct civil law duties that exist separately in contract and tort.” Id. at 1266 n.3. 9584 GILES v. GMAC Calloway built on an earlier case, Bernard v. Rockhill Development Co. 734 P.2d 1238 (Nev. 1987), in which the Nevada Supreme Court declined to apply the economic loss doctrine to an intentional tort suit. See Calloway, 993 P.2d at 1263-65. The parties in Bernard had entered into an agreement under which Rockhill Development would sell a particular lot to the Bernards and would then build a residence on the lot for them. 734 P.2d at 1239. The Bernards recorded the contract of sale. Id. Later, while attempting to get construction money, Rockhill asked the Bernards to “ ‘unrecord’ ” the contract of sale, thereby releasing any lien or encumbrance on the title to the lot. Id. at 1239-40. The Bernards unrecorded the contract, but Rockhill never built the residence. Id. at 1239. The Bernards sued both for breach of contract and in tort. In connection with their tort claim, they sought punitive damages, alleging that Rockhill had falsely and maliciously represented to them that it would perform the contractual obligation to build the residence after the Bernards unrecorded the contract. Id. at 1239-40. The district court dismissed the tort claim on the pleadings as an “attempt[ ] to create an additional claim for relief sounding in tort by ‘cloaking’ their breach of contract claim with language which suggested the tort of misrepresentation.” Id. at 1240. The Nevada Supreme Court reversed, reinstating the misrepresentation claim. It wrote: There is no question that a contractual relationship existed between Rockhill and the Bernards as a result of their agreement to build and purchase a residence . . . . However, when Rockhill asked the Ber- nards to “unrecord” the contract of sale and thereby release any lien or encumbrance on the title to Lot 8, the Bernards surrendered a valuable legal right: notice to the public of their contractual rights to Lot 8. In contrast, Rockhill gave up nothing because it was already under a legal duty by virtue of the 1981 contract. Rockhill had a separate duty, independent GILES v. GMAC 9585 of that imposed by the 1981 contract, not to make false promises or fraudulently misrepresent its intention to perform. Id. Consistent with Calloway, the Nevada Supreme Court has barred recovery for economic loss in product liability cases as well as in negligence cases unrelated to product liability. See, e.g., Arco Prods. Co. v. May, 948 P.2d 263, 266 (Nev. 1997) (barring recovery under strict liability for lost profits due to defective cash registers); Nat’l Union Fire Ins. Co., 815 P.2d at 603-04 (following East River in holding that a defective engine’s damage to the airplane constituted a product damaging itself and barring recovery of economic loss in negligence); Cent. Bit Supply v. Waldrop Drilling & Pump, Inc., 717 P.2d 35, 36-37 (Nev. 1986) (barring recovery in negligence and strict liability for purely economic loss due to faulty drill); Local Joint Executive Bd. of Las Vegas, Culinary Workers Union v. Stern, 651 P.2d 637, 638 (Nev. 1982) (barring recovery in negligence for lost wages and benefits after a hotel fire); see also Jordan v. State ex rel. Dep’t of Motor Vehicles & Pub. Safety, 110 P.3d 30, 51 (Nev. 2005) (en banc) (barring negligence claim based on alleged “reasonable duty to inform” without undertaking analysis under Calloway). [2] Based on our reading of the Nevada cases, Nevada’s economic loss doctrine is generally consistent with the principles discernable in the case law of other jurisdictions. Broadly speaking, Nevada applies the economic loss doctrine to bar recovery in tort for purely monetary harm in product liability and in negligence cases unrelated to product liability. Nevada law may also bar recovery for other tort claims where the plaintiff’s only complaint is that the defendant failed to perform what was promised in the contract. But it does not bar recovery in tort where the defendant had a duty imposed by law rather than by contract and where the defendant’s inten9586 GILES v. GMAC tional breach of that duty caused purely monetary harm to the plaintiff. [3] It appears to be a question of first impression in Nevada law whether the economic loss doctrine applies to fraud and conversion claims. Applying the principles set forth by the Nevada Supreme Court in Calloway, we hold that Appellants’ fraud and conversion claims are not barred.
[4] Viewing the evidence in the light most favorable to Appellants, GMAC committed fraud. According to the Gileses’ evidence, GMAC placed a hold on Yerington Ford’s open account funds without legal authority to do so, and then fraudulently tricked the Gileses into signing and back-dating an assignment of those funds in March 2002 by representing to the Gileses that the assignment was merely a standard part of the floorplan agreement that other dealerships had already signed. GMAC argues that Nevada law bars this fraud claim because it is “intertwined with” the contracts between the parties. GMAC argues that the claim “pertains to actions purportedly taken by GMAC after and in response to the ‘out of trust’ sales” and “concerns modifications to the parties’ funding relationship which Appellants maintain were in some manner improper or not otherwise authorized by the terms of the [wholesale security agreement].” [5] Although the events giving rise to Appellants’ fraud claim did occur in the context of a contractual relationship between the parties, the claim is not a mere contract claim cloaked in the language of tort. Appellants claim fraud in the inducement rather than fraud in the execution or promissory fraud. Unlike a fraud claim that duplicates a contract claim by alleging misrepresentation about the characteristics or quality of goods that are the subject of the contract, Appellants’ fraud claim is what the Wisconsin and Michigan courts would call fraud “extraneous” to the contract. Huron Tool, 532 N.W.2d GILES v. GMAC 9587 at 545; Kaloti Enters., 699 N.W.2d at 585. Like the defendant in Bernard, GMAC had an independent “duty imposed by law” not to commit fraud, a duty not “arising by virtue of the alleged express agreement between the parties.” Calloway, 993 P.2d at 1263 (quoting Bernard, 734 P.2d at 1240). [6] If Appellants’ evidence is believed, GMAC’s conduct breached a duty imposed by law, not by contract. Appellants’ tort claim based on GMAC’s fraudulent misrepresentation in inducing them to sign and back-date the assignment does not duplicate a contract suit based on the rights and duties of the parties under the floorplan financing and wholesale security agreements. Rather, the claim is based on behavior outside the contractual obligations and in violation of the duty imposed under Nevada law not to commit fraud. That is, GMAC’s conduct did not represent a mere failure to perform its contractual obligations to Appellants and went beyond what it was authorized to do under its contract in the event of breach by Appellants. We therefore hold that the economic loss doctrine does not bar Appellants’ fraud claim.
Again viewing the evidence in the light most favorable to Appellants, GMAC converted Appellants’ open account funds by taking these funds without a valid assignment. GMAC makes a virtually identical economic loss doctrine argument against Appellants’ conversion claim. GMAC contends that Appellants do not have a claim for conversion because that claim is “intertwined with” the parties’ prior contracts. [7] However, none of the parties’ prior agreements actually provided for the assignment of the open account funds, and the alleged wrongful taking of the open account funds does not duplicate a contract claim. GMAC had an independent duty imposed under tort law not to take Appellants’ property without legal authority to do so. For the reasons given above, the economic loss doctrine does not bar recovery of damages 9588 GILES v. GMAC for breach of that duty. We therefore hold that the economic loss doctrine also does not bar Appellants’ conversion claim. B. Fiduciary Duty Based on a Confidential or Special Relationship The district court granted summary judgment to GMAC on Appellants’ claims for breach of fiduciary duty arising from a confidential or special relationship. Appellants’ claims for constructive fraud and undue influence and the Gileses’ claim for intentional infliction of emotional distress also depend on Appellants’ contentions that GMAC had fiduciary duties to Yerington Ford and the Gileses, and that GMAC breached those duties. Based on the arguments presented to the district court below, we affirm its grant of summary judgment to GMAC with respect to fiduciary duty. [8] Under Nevada law, “[a] fiduciary relationship is deemed to exist when one party is bound to act for the benefit of the other party. Such a relationship imposes a duty of utmost good faith.” Hoopes v. Hammargren, 725 P.2d 238, 242 (Nev. 1986) (holding that doctors have fiduciary relationship to patients). “The essence of a fiduciary or confidential relationship is that the parties do not deal on equal terms, since the person in whom trust and confidence is reposed and who accepts that trust and confidence is in a superior position to exert unique influence over the dependent party.” Id. (internal quotation marks and citation omitted). [9] The Nevada Supreme Court has held that fiduciary duties arise as a matter of law in certain categories of relationships. See, e.g., Powers v. United Servs. Auto. Ass’n, 979 P.2d 1286, 1288 (Nev. 1999) (insurers and insured); Cook v. Cook, 912 P.2d 264, 266 (Nev. 1996) (attorney and client); id. (spouses); Fick v. Fick, 851 P.2d 445, 449-50 (Nev. 1993) (fiancés); Leavitt v. Leisure Sports Inc., 734 P.2d 1221, 1224 (Nev. 1987) (corporate officers or directors and corporation). In relationships falling outside these categories, Nevada law GILES v. GMAC 9589 recognizes a duty owed in “confidential relationships,” where “one party gains the confidence of the other and purports to act or advise with the other’s interests in mind.” Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995) (per curiam) (internal quotation marks and citation omitted). The duty owed is comparable to a fiduciary duty: “When a confidential relationship exists, the person in whom the special trust is placed owes a duty to the other party similar to the duty of a fiduciary, requiring the person to act in good faith and with due regard to the interests of the other party.” Id. A confidential relationship “may exist although there is no fiduciary relationship; it is particularly likely to exist when there is a family relationship or one of friendship.” Id. (internal quotation marks and citation omitted). Demonstrating a confidential relationship fulfills the fiduciary duty element of actions for constructive fraud and undue influence. See id. at 337; Peardon v. Peardon, 201 P.2d 309, 333 (Nev. 1948). In Perry, the Nevada Supreme Court found a confidential relationship between two “close friends and neighbors,” where an experienced and well-educated business woman sold a business to her friend, who had only an eighth-grade education and who entrusted her friend, the experienced business woman, with managing the business. 900 P.2d at 336-38. Nevada also recognizes “special relationships” giving rise to a duty to disclose, such that “[n]ondisclosure . . . become[s] the equivalent of fraudulent concealment.” Mackintosh v. Jack Matthews & Co., 855 P.2d 549, 553 (Nev. 1993). In order to prove the existence of a special relationship, a party must show that (1) “the conditions would cause a reasonable person to impart special confidence” and (2) the trusted party reasonably should have known of that confidence. Mackintosh v. Cal. Fed. Sav. & Loan Ass’n, 935 P.2d 1154, 1160 (Nev. 1997) (per curiam). “[T]he existence of the special relationship is a factual question . . . .” Id. In the Mackintosh cases, the Nevada Supreme Court recognized a special relationship imposing a duty to disclose where a lender sold a house it knew was vulnerable to severe flooding to a buyer on an “as9590 GILES v. GMAC is” basis, on condition that the buyer obtain its mortgage from the lender. Id. at 1159-60. The court found that the buyer reasonably believed that the seller would inform the buyer of latent defects in the house because the seller was providing long-term financing on the house and had voluntarily performed other repairs before and after escrow closed. Id. at 1160. It further found that “a reasonable lender would have known of the special confidence”: “[A] third party lender would likely not have lent money on the home unless and until the flooding problem was corrected and . . . it was a reasonable inference that Cal Fed required the Mackintoshes to seek a loan through it for that reason.” Id. Appellants contend that confidential and special relationships arose between GMAC and Yerington Ford and between GMAC and the Gileses during the course of the parties’ dealings.1 Appellants do not challenge the district court’s holding that the Nevada Supreme Court would not recognize a fiduciary relationship as a matter of law between a lender and borrower (GMAC and Yerington Ford), or between a lender and 1 Appellants also contend on appeal that GMAC’s actions after October 10, 2001, constituted acts of domination or excessive control over Yerington Ford that created a fiduciary duty in GMAC. Cf. Pension Trust Fund for Operating Eng’rs v. Fed. Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002) (recognizing under California law that “a lender . . . owes a fiduciary duty to a borrower when it excessively controls or dominates the borrower”); In re Monohan Ford Corp. of Flushing, 340 B.R. 1, 41 (Bankr. E.D.N.Y. 2006) (recognizing same under New York law). This contention was not made in, or considered by, the district court. Yerington Ford, 359 F. Supp. 2d at 1085-94. As a general rule, we do not consider issues raised for the first time on appeal, see Citibank (S.D.) v. Eashai (In re Eashai), 87 F.3d 1082, 1085 n.2 (9th Cir. 1996), and we decline to do so here. Cf. Cold Mountain v. Garber, 375 F.3d 884, 891 (9th Cir. 2004) (noting our discretion to consider an issue for the first time on appeal where necessary to prevent a miscarriage of justice; where the issue arose because of a change in the law; or where the question is purely legal and the factual record is sufficiently developed). We leave it to the district court on remand to determine whether to allow Appellants to present a fiduciary duty argument based on domination and control. GILES v. GMAC 9591 guarantor (GMAC and the Gileses). See Yerington Ford, F. Supp. 2d at 1088-90, 1092. Thus, if a fiduciary relationship exists in this case, it exists because of the specific actions and particular situations of the parties. According to their evidence, the Gileses were encouraged to place confidence in GMAC by a GMAC representative’s comment upon the signing of their first financing agreement between Giles Chevrolet and GMAC in 1992. The GMAC representative commented to the Gileses that the financing relationship was “like a marriage, what works for one works for the other, and one takes care of the other.” William Giles stated that his view of their relationship was that “we look out for each other’s interest, because they make money from doing business with me.” The Gileses contend that they were further encouraged to place trust in GMAC by their personal friendship with Doug Snyder, the GMAC representative with whom the Gileses did business beginning sometime in 1996. William Giles and Snyder had personal conversations over the phone and occasionally had dinner together. In 1998, William Giles chose to finance Yerington Ford through GMAC not only because he viewed it as the more financially favorable option, but also because of his friendship with Snyder. He stated that part of his motivation for switching Yerington Ford to GMAC was that “it would be a real feather in [Snyder’s] cap pulling a Ford store over to GMAC.” [10] The Gileses offer as evidence of their trust and confidence in GMAC the fact that they signed documents without reading them, relying on GMAC’s representations about the contents of those documents. Those documents include the $4.3 million lien on the Fernly property signed in October 2001 and the back-dated assignments signed in May 2002. Responding to a question at his deposition about whether “a prudent businessman might want to read the crucial documents for the operation of his business,” William Giles 9592 GILES v. GMAC responded, “Not when you have a relationship with a company for many, many years.” GMAC notes that the Gileses signed three agreements on behalf of the dealerships disavowing the existence of a fiduciary relationship between GMAC and the dealerships. Giles Chevrolet entered into a lease plan with GMAC in 1992 that included among its provisions: “Neither party owes the other any fiduciary obligation.” This “GMAC Lease Plan” provided for GMAC’s purchases of consumers’ leases and the associated leased vehicles from the dealership. Yerington Ford entered into a lease agreement containing the same provision in 1997, as well as a “GMAC Retail Plan” providing for GMAC’s purchases of consumers’ retail installment contracts from the dealership and also containing the provision. William Giles also did not read these documents before signing them. There are no such provisions in the wholesale security agreements governing the dealerships’ floorplan financing from GMAC. The Gileses describe themselves as “unsophisticated in the matters of wholesale floorplan financing.” However, even according to their own evidence, before founding Giles Chevrolet, William Giles worked at another Chevrolet dealership from 1974 to 1991, serving as that dealership’s general sales manager from 1985 until 1991. Although he did not attend meetings regarding the dealership’s own financing from GMAC and was not involved in that aspect of the business, he attended meetings between that dealership’s owner and GMAC concerning retail and lease contracts. We agree with the district court that, based on this evidence, Appellants have failed to raise a genuine issue of material fact that would support a finding of a confidential or special relationship either between GMAC and Yerington Ford or between GMAC and the Gileses. Even resolving every factual dispute in their favor, no reasonable finder of fact could find, based on the arguments presented to the disGILES v. GMAC 9593 trict court, that either relationship existed. Cf. Anderson, 477 U.S. at 248. [11] Appellants have not produced evidence sufficient to support a finding that a confidential or special relationship arose because Appellants placed “a special trust,” Perry, 900 P.2d at 338, or “special confidence,” Mackintosh, 935 P.2d at 1160, in GMAC.2 Appellants do not contend that signing a contract without reading it is, by itself, an act of special trust or confidence sufficient to transform an arms-length relationship into a quasi-fiduciary relationship. The “marriage” comment made by a GMAC representative at the signing of Giles Chevrolet’s 1992 agreement is insufficient to raise a genuine issue of material fact given that there is no evidence that Appellants’ relationships with GMAC actually were any more “marriage-like” than a standard friendly but arms-length business relationship. As the district court noted, the law of contract would dissolve if an ordinary personal friendship between business associates like the one between Snyder and the Gileses were sufficient to transform an otherwise armslength business transaction into a transaction based on a confidential or special relationship. Yerington Ford, 359 F. Supp. 2d at 1091. [12] We therefore affirm the district court’s holding that Appellants failed to raise a genuine issue of material fact as to whether GMAC owed a fiduciary duty to Yerington Ford or the Gileses.