Opinion ID: 1235030
Heading Depth: 1
Heading Rank: 3

Heading: PSECU's Negligence Claims Against BJ's and Fifth Third.

Text: In asserting negligence claims against BJ's and Fifth Third, PSECU argues that BJ's had a duty to comply with the Visa Operating Regulations, and that Fifth Third had a duty to ensure compliance. PSECU alleged that both parties negligently breached their duties. The district court dismissed both negligence claims based upon the economic loss doctrine that we have already discussed in No. 06-3392. PSECU makes two arguments in contesting the district court's application of the economic loss doctrine. First, PSECU maintains that BJ's and Fifth Third's negligence resulted in physical damage to PSECU's property  the Visa cards  and the doctrine was therefore not applicable. PSECU's theory proceeds as follows: BJ's and Fifth Third's negligence allowed unauthorized third parties to access the magnetic stripe data from these Visa cards and convert that data to their own purposes. Once this credit card information was in the hands of third parties, the associated Visa cards were rendered useless, necessitating their replacement. [BJ's and Fifth Third's] negligence, therefore, resulted in a physical act (third party access) which damaged physical property (the Visa cards) that belonged to PSECU. PSECU therefore suffered property damage as a result of [BJ's and Fifth Third's] negligence and its claims should not be barred by the economic loss doctrine. PSECU's Br. at 39-40. We cannot agree. Even if we assume arguendo that destruction of the Visa cards constitutes the kind of property damage that can be compensated in a negligence action, PSECU's argument still fails because it ignores the fact that the Visa cards were not damaged; they were cancelled. Therefore, if the magnetic-stripe data constitutes physical property, PSECU's negligence claim is still not advanced. The data was copied, not destroyed. Furthermore, the cards themselves remained intact and useable until cancelled by PSECU. The fraudulent transactions had no physical effect on either the cards, the data encoded on the cards, or the magnetic-stripe which contained that data. The fraudulent activity simply did not render the cards useless. The cardholders could continue to use them to make purchases after the information was compromised. Indeed, as BJ's notes, PSECU deemed the cards useless not because they were damaged, but because PSECU was exposed to liability for unauthorized charges. PSECU decided to limit that exposure by canceling cards and reissuing new ones, but, that does not establish that PSECU's property was damaged. Second, PSECU contends that the economic loss doctrine does not apply because the parties are not in privity of contract and the justifications for application of the doctrine are not advanced by its application here. PSECU relies on Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454, 866 A.2d 270 (2005). PSECU also argues that that case constituted a sweeping departure from previous incantations of the economic loss doctrine. PSECU's Br. at 43. According to PSECU, in Bilt-Rite the Pennsylvania Supreme Court held that the economic loss doctrine may not apply where the plaintiff has no available contract remedy. PSECU's Br. at 41 It bases that argument on the following excerpt from Bilt-Rite: Pennsylvania has long recognized that purely economic losses are recoverable in a variety of tort actions.... We agree with that court that a plaintiff is not barred from recovering economic losses simply because the action sounds in tort rather than contract law. Here, Bilt-Rite had no contractual relationship with TAS; thus, recovery under a contract is not available to Bilt-Rite. Having found that Bilt-Rite states a viable claim for negligent representation ... and that privity is not a prerequisite for maintaining such an action, logic dictates that Bilt-Rite not be barred from recovering the damages it incurred. 866 A.2d at 288 (emphasis is PSECU's). However, we have already explained that Bilt-Rite did not hold that the economic loss doctrine may not apply where the plaintiff has no available contract remedy. As explained in Sovereign's appeal, the Bilt-Rite Court simply carved-out an exception to allow a commercial plaintiff to seek recourse from an expert supplier of information with whom the plaintiff has no contractual relationship, in very narrow circumstances not relevant here. 866 A.2d at 268. The Pennsylvania Supreme Court emphasized that its holding was limited to those businesses which provide services and/or information that they know will be relied upon by third parties in their business endeavors.... Id. Accordingly, the district court did not err in dismissing PSECU's negligence claims against BJ's and Fifth Third.