Court Opinion

ID: 3049624
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:28:01.911049+00
Date Added: 2024-06-11T11:41:14.652505
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

LINDA GILES; WILLIAM GILES;           
YERINGTON FORD, INC.,
             Plaintiffs-Appellants,         No. 05-15189
               v.                            D.C. No.
GENERAL MOTORS ACCEPTANCE                 CV-03-00147-LRH
CORPORATION,
              Defendant-Appellee.
                                      

BILL GILES MOTOR COMPANY, INC.;       
LINDA GILES; WILLIAM GILES,                No. 05-17251
             Plaintiffs-Appellants,          D.C. No.
               v.                         CV-04-00567-
GENERAL MOTORS ACCEPTANCE                   LRH/VPC
CORPORATION,                                OPINION
              Defendant-Appellee.
                                      
       Appeals from the United States District Court
                 for the District of Nevada
         Larry R. Hicks, District Judge, Presiding

                  Argued and Submitted
        January 9, 2007—San Francisco, California

                   Filed August 10, 2007

   Before: Alfred T. Goodwin, A. Wallace Tashima, and
           William A. Fletcher, Circuit Judges.

          Opinion by Judge William A. Fletcher

                           9563
9566                 GILES v. GMAC

                      COUNSEL

Joseph M. Terry, Williams & Connolly, Washington, D.C.,
for the appellants.

Rick R. Hsu, Reno, Nevada, Michael E. Malloy and Christo-
pher Damian Jaime, Maupin Cox & LeGoy, Reno, Nevada,
for the appellee.
                       GILES v. GMAC                    9567
                           OPINION

W. FLETCHER, Circuit Judge:

   These are consolidated appeals in two diversity actions
brought under Nevada law. In No. 05-15189, the “Yerington
Ford case,” Appellants Yerington Ford, Linda Giles, and Wil-
liam Giles sued General Motors Acceptance Corporation
(“GMAC”). In No. 05-17251, the “Giles Chevrolet case,”
Appellants Bill Giles Motor Company (“Giles Chevrolet”),
Linda Giles, and William Giles sued GMAC. In the discus-
sion that follows, we sometimes use the term “Appellants” to
refer to the appellants in one or the other of the cases and
sometimes to refer to the appellants in both cases. Where the
meaning is not clear from the context, we specify the appel-
lants to whom we refer.

  In the Yerington Ford case, the district court granted sum-
mary judgment to GMAC on the merits in a published opin-
ion. Yerington Ford, Inc. v. Gen. Motors Acceptance Corp.,
359 F. Supp. 2d 1075 (D. Nev. 2004). In the Giles Chevrolet
case, the district court granted summary judgment to GMAC,
based on preclusion stemming from its decision in the Yering-
ton Ford case, in an unpublished order.

   We reverse both decisions and remand for further proceed-
ings. In the Yerington Ford case, we hold that the district
court misapplied Nevada’s economic loss doctrine. In the
Giles Chevrolet case, we hold that the district court misap-
plied Nevada’s preclusion law.

                      I.   Background

   William and Linda Giles (“the Gileses”) own and operate
two car dealerships, Yerington Ford and Giles Chevrolet,
located in Yerington, Nevada. Each dealership had a “floor-
plan financing” agreement with GMAC.
9568                    GILES v. GMAC
   Under a floorplan financing agreement, GMAC finances a
dealership’s wholesale purchase of vehicles; the dealership
displays the vehicles and makes monthly interest payments to
GMAC; and the dealership repays GMAC the portion of the
loan attributable to an individual vehicle when that vehicle is
sold or leased. As part of a floorplan financing agreement,
GMAC enters into a “wholesale security agreement” under
which GMAC’s loan is secured by the dealership’s entire
inventory of vehicles. GMAC has the right under the agree-
ment to inspect the vehicles and the dealership’s books and
records at any time. If the dealership fails to pay off the por-
tion of the loan attributable to an individual vehicle “faithfully
and promptly” after the vehicle is sold or leased, GMAC has
the right to take possession of all vehicles remaining in inven-
tory “without demand or further notice and without legal pro-
cess.”

   In 1992, shortly after its founding, Giles Chevrolet entered
into a floorplan financing agreement with GMAC. In 1997,
the Gileses purchased the dealership that became Yerington
Ford. A year later, in 1998, Yerington Ford entered into a
floorplan financing agreement with GMAC for the purchase
of Ford vehicles. Under its prior owner, Yerington Ford had
obtained its financing from the Ford Motor Credit Corpora-
tion. Yerington Ford switched to GMAC because William
Giles had become friends with GMAC’s representative, Doug
Snyder, and because Giles thought that the terms of GMAC’s
financing arrangement were more favorable.

   When Yerington Ford and GMAC entered into their floor-
plan financing and wholesale security agreements in 1998, all
Appellants entered into a “continuing cross-guarantee” with
GMAC for both dealerships. Under this guarantee, the Gileses
personally guaranteed each dealership’s obligations to
GMAC, and each dealership guaranteed the other’s obliga-
tions to GMAC. The guarantors agreed to be responsible for
all money owed to GMAC under the floorplan financing
agreements. The guarantors further agreed to indemnify
                       GILES v. GMAC                      9569
GMAC for losses incurred in litigation arising out of the
financing agreements, unless the losses resulted from
GMAC’s gross negligence or willful misconduct.

   In October 2001, GMAC performed its routine monthly
audit of the Gileses’ dealerships. GMAC performed the audit
early in the month, at the Gileses’ request, in order to accom-
modate their planned vacation. On October 11, 2001, GMAC
informed the Gileses that the audit had revealed that Yering-
ton Ford had sold or leased a number of vehicles without
repaying GMAC the portion of the loan attributable to those
vehicles. In the language used in the industry, these vehicles
were “out of trust.” Yerington Ford owed GMAC approxi-
mately $291,000 on out-of-trust vehicles. The discovery that
the vehicles were out of trust precipitated the further discov-
ery that the office manager employed by Yerington Ford had
embezzled hundreds of thousands of dollars from the dealer-
ship.

   It is undisputed that, within approximately two weeks of
the audit, Yerington Ford paid GMAC the full amount owed
on the vehicles out of trust. In the meantime, however, the
Gileses had signed documents (collectively, “the October doc-
uments”) that included assignments to GMAC of all of Yer-
ington Ford’s and Giles Chevrolet’s proceeds from the sale or
lease of vehicles by the two dealerships; a deed of trust plac-
ing a $4.3 million lien on property owned by the Gileses (the
“Fernly property”); and a forbearance agreement. The for-
bearance agreement provided that in exchange for 10 days’
forbearance on Yerington Ford’s debt, a GMAC representa-
tive was authorized to be present on the premises of Yering-
ton Ford during all hours of operation; the representative was
authorized to take possession of vehicles’ titles and keys; and
GMAC had the right to be reimbursed for its expenses in
monitoring the dealership.

   The Gileses presented evidence in the Yerington Ford case
in the form of affidavits and deposition testimony that GMAC
9570                   GILES v. GMAC
employee Jeffrey Sanders threatened to padlock the door of
Yerington Ford and to close down the business unless they
signed the October documents. According to the Gileses’ evi-
dence, Sanders misrepresented the terms of the lien on the
Fernly property by telling them that the lien was only for the
amount due on the vehicles out of trust rather than for $4.3
million. According to their evidence, Sanders further repre-
sented that the lien would be released upon repayment of the
debt on the vehicles out of trust.

   Upon discovering the out-of-trust vehicles at Yerington
Ford, GMAC placed a “hold” on both dealerships’ “open
account funds.” Open account funds include amounts rou-
tinely paid to a dealership by car manufacturers, such as fac-
tory credits, reimbursement for warranty repairs,
reimbursement for preparing vehicles for sale, and advances
on retail customers’ payment for vehicle purchases. Accord-
ing to the Gileses’ evidence, Sanders promised that GMAC
would release the holds on the dealerships’ open account
funds as soon as Yerington Ford paid the amount owing on
the vehicles out of trust. However, according to the Gileses,
GMAC did not do so. In the Yerington Ford case, according
to the Gileses’ evidence, GMAC received the dealership’s
open account funds from the Ford Motor Company until Yer-
ington Ford went out of business in May 2003. In the Giles
Chevrolet case, according to the Gileses’ complaint, GMAC
continued its hold on the dealership’s open account funds
from the General Motors Corporation until the complaint was
filed in October 2004.

   According to the Gileses’ evidence in the Yerington Ford
case, GMAC did not obtain assignments from Appellants
authorizing GMAC to place holds on the dealerships’ open
account funds until several months after they placed such
holds. According to the Gileses, GMAC tricked them into
signing back-dated assignments of both dealerships’ open
account funds to make it appear that such assignments had
been made about six months before the audit of Yerington
                        GILES v. GMAC                       9571
Ford. William Giles testified in his deposition that at a meet-
ing on March 12, 2002, GMAC representative Doug Snyder
told the Gileses that the documents were a standard part of the
wholesale floorplan agreement, that they were “just for our
files,” and that other dealerships had signed such an assign-
ment the previous year. According to the Gileses’ evidence,
Linda Giles signed and back-dated the assignments on March
12 at Snyder’s request without reading them or knowing their
import. Her signature on Yerington Ford’s assignment is
dated April 25, 2001; her signature on Giles Chevrolet’s
assignment is dated May 15, 2001. Appellants also offered
evidence to explain the holds’ operation before the alleged
back-dating of the assignments. According to the deposition
testimony of a Ford Motor Company employee who processes
assignments of open account funds, it is customary for Ford
employees to read and rely on a cover letter describing a pur-
ported assignment without actually looking to see whether
there is a properly executed assignment in the underlying doc-
uments.

   Appellants filed suit in the Yerington Ford case on March
19, 2003, claiming that these and other actions by GMAC
constituted fraudulent and negligent misrepresentation, con-
version, breach of fiduciary and confidential relationship
duty, constructive fraud, undue influence, intentional inflic-
tion of emotional distress, and breach of contract. They
alleged that GMAC’s tortious actions and breach of contract
harmed Yerington Ford’s cash flow and ability to do business,
causing financial losses and the eventual closure of Yerington
Ford, as well as causing emotional distress to the Gileses.

   Due to the cross-guarantee, the Gileses potentially would
have had to indemnify GMAC for its losses in the Yerington
Ford case if Yerington Ford had prevailed on its contract
claims. After GMAC filed a cross-claim seeking such indem-
nification in the Yerington Ford case, the district court found
that counsel representing both the Gileses and Yerington Ford
had a conflict of interest with regard to the contract claims. It
9572                     GILES v. GMAC
concluded that Appellants were required either to drop their
contract claims or to obtain separate counsel. Appellants stip-
ulated to a dismissal of their breach of contract claims on June
15, 2004. On December 16, 2004, the district court granted
summary judgment to GMAC on the merits of the remaining
tort claims.

   Meanwhile, on October 8, 2004, Appellants filed suit in the
Giles Chevrolet case. The complaint in the Giles Chevrolet
case contains tort and contract claims almost identical to those
in the Yerington Ford case, based on the same factual allega-
tions. The complaint differs only in that it alleges tortious
harm done to Giles Chevrolet and breach of GMAC’s contract
with Giles Chevrolet. Discovery in the Giles Chevrolet case
was stayed pending resolution of the Yerington Ford case.
After granting summary judgment to GMAC in the Yerington
Ford case, the district court granted summary judgment to
GMAC in the Giles Chevrolet case on the ground that all of
the claims were barred by claim preclusion.

                   II.   Standard of Review

  We review a district court’s grant of summary judgment de
novo. See Buono v. Norton, 371 F.3d 543, 545 (9th Cir.
2004). We must determine, viewing the evidence in the light
most favorable to the nonmoving party, whether there is any
genuine issue of material fact and whether the district court
correctly applied the substantive law. See Olsen v. Idaho State
Bd. of Med., 363 F.3d 916, 922 (9th Cir. 2004).

   A grant of summary judgment is appropriate only where
the moving party has demonstrated that there is no genuine
issue of material fact. Lindsey v. Tacoma-Pierce County
Health Dep’t, 195 F.3d 1065, 1068 (9th Cir. 1999). Once the
moving party demonstrates the absence of a genuine issue of
material fact, the nonmoving party must come forward with
evidence creating a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). Although a
                         GILES v. GMAC                     9573
mere scintilla of evidence is insufficient, “the issue of mate-
rial fact . . . is not required to be resolved conclusively in
favor of the party asserting its existence; rather, all that is
required is that sufficient evidence supporting the claimed
factual dispute be shown to require a jury or judge to resolve
the parties’ differing versions of the truth at trial.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986) (quoting
First Nat’l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89
(1968)). Because “[c]redibility determinations, the weighing
of the evidence, and the drawing of legitimate inferences from
the facts are jury functions, not those of a judge,” “[t]he evi-
dence of the non-movant is to be believed, and all justifiable
inferences are to be drawn in his favor.” Id. at 255.

   We review a district court’s application of state substantive
law in diversity actions de novo. Prieto v. Paul Revere Life
Ins. Co., 354 F.3d 1005, 1010 (9th Cir. 2004). “Where the
state’s highest court has not decided an issue, the task of the
federal courts is to predict how the state high court would
resolve it.” Dimidowich v. Bell & Howell, 803 F.2d 1473,
1482 (9th Cir. 1986) (as amended). “In answering that ques-
tion, this court looks for ‘guidance’ to decisions by intermedi-
ate appellate courts of the state and by courts in other
jurisdictions.” Id.

                  III.   Yerington Ford Case

   In the Yerington Ford case, the district court granted sum-
mary judgment to GMAC on two grounds. First, the court
held that Nevada’s economic loss doctrine prevented Appel-
lants 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 rela-
tionship. We address these grounds in turn.
9574                    GILES v. GMAC
                A.   Economic Loss Doctrine

   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 eco-
nomic 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 under-
lying 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.) (reaffirm-
ing in an admiralty case the “rule limiting recovery for negli-
gently caused pure financial harm” in the absence of physical
injury to person or property, even where such harm was fore-
seeable); 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 blun-
der . . . may expose accountants to a liability in an indetermi-
nate 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 war-
ranty, except in cases of physical injury to persons or prop-
erty. 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 liabil-
ity . . . . from the agreement of the parties and the requirement
that consequential damages, such as lost profits, be a foresee-
able 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 negli-
gence 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 ‘eco-
nomic loss’ rule” narrowly as the rule that “denies the pur-
chaser 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 conse-
quential damages, including lost profits, from the manufac-
turer 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 dis-
    tributing 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 unreason-
    able 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. Accord-
ingly, 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 conse-
quence of a defective product’s failure, where the only physi-
cal damage was to the product itself. Id. at 868, 871. The
doctrine is necessary, the Court held, “to keep products liabil-
ity and contract law in separate spheres and to maintain a real-
istic 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 fore-
seeable lost profits and other economic losses. Whether or not
the plaintiff is in a contractual relationship with the manufac-
turer, the plaintiff can sue the manufacturer in tort only for
damages resulting from physical injury to persons or to prop-
erty 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 ‘eco-
nomic 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 dam-
ages for purely economic loss.”); In re Chi. Flood Litig., 680
N.E.2d 265, 274 (Ill. 1997) (“At common law, solely eco-
9578                    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 eco-
nomic 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 tradi-
tionally 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 neg-
ligence 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 pro-
cess, 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, negli-
gence, and innocent misrepresentation” and not to “inten-
tional, 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 trans-
actions”); Huron Tool & Eng’g Co. v. Precision Consulting
                        GILES v. GMAC                       9579
Servs., Inc., 532 N.W.2d 541, 544 (Mich. Ct. App. 1995) (not-
ing 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 Archi-
tectural 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 transac-
tions, 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) (not-
ing 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 disparage-
ment, 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 misrepresenta-
tion 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., Cor-
porex 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 eco-
nomic loss in actions for negligence in performance of con-
tract); 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 intangi-
ble 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) (bar-
ring recovery of economic loss in negligence where power
outage caused loss).

   However, some courts have applied the economic loss doc-
trine 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 per-
form 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 reme-
    dies, 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 specifi-
    cations 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 pro-
    vision 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 bar-
gain’ ” economic losses based on “foreseeable risks [that]
could have been — and indeed were — allocated by the par-
ties 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 charac-
teristics of the goods sold”); Hoseline, Inc. v. U.S.A. Diversi-
fied Prods., Inc., 40 F.3d 1198, 1200 (11th Cir. 1994) (barring
fraud and civil theft claims under Florida law where defen-
dant 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 *3-5 (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 soft-
ware defect case because the alleged misrepresentations were
“indistinguishable from the terms of the contract and warran-
ty” 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 dis-
honest 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). Cal-
loway is conceptually similar to Seely, the paradigmatic prod-
uct liability case decided by the California Supreme Court
thirty-five years earlier. Owners of recently built townhouses
sued subcontractors for allegedly negligent framing work per-
formed 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 eco-
nomic 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. Accord-
ing 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 Lia-
bility § 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 delin-
eate 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 agree-
ment under which Rockhill Development would sell a particu-
lar 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 con-
tract 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 dam-
ages, alleging that Rockhill had falsely and maliciously repre-
sented to them that it would perform the contractual
obligation to build the residence after the Bernards unre-
corded the contract. Id. at 1239-40. The district court dis-
missed the tort claim on the pleadings as an “attempt[ ] to
create an additional claim for relief sounding in tort by ‘cloak-
ing’ their breach of contract claim with language which sug-
gested the tort of misrepresentation.” Id. at 1240.

  The Nevada Supreme Court reversed, reinstating the mis-
representation 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 res-
    idence . . . . 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 inten-
      tion 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 damag-
ing itself and barring recovery of economic loss in negli-
gence); Cent. Bit Supply v. Waldrop Drilling & Pump, Inc.,
717 P.2d 35, 36-37 (Nev. 1986) (barring recovery in negli-
gence 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) (bar-
ring 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 Cal-
loway).

   [2] Based on our reading of the Nevada cases, Nevada’s
economic loss doctrine is generally consistent with the princi-
ples 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 per-
form 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 inten-
9586                    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.

                          1.   Fraud

   [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 par-
ties. GMAC argues that the claim “pertains to actions purport-
edly 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 con-
duct did not represent a mere failure to perform its contractual
obligations to Appellants and went beyond what it was autho-
rized to do under its contract in the event of breach by Appel-
lants. We therefore hold that the economic loss doctrine does
not bar Appellants’ fraud claim.

                       2.   Conversion

   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 relation-
ship 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. (inter-
nal 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 relation-
ships. 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. Jor-
dan, 900 P.2d 335, 338 (Nev. 1995) (per curiam) (internal
quotation marks and citation omitted). The duty owed is com-
parable 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 relation-
ship “may exist although there is no fiduciary relationship; it
is particularly likely to exist when there is a family relation-
ship 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. Pear-
don, 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 relation-
ship 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 “as-
9590                        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 rea-
sonably 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 per-
formed 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 rea-
sonable inference that Cal Fed required the Mackintoshes to
seek a loan through it for that reason.” Id.

   Appellants contend that confidential and special relation-
ships arose between GMAC and Yerington Ford and between
GMAC and the Gileses during the course of the parties’ deal-
ings.1 Appellants do not challenge the district court’s holding
that the Nevada Supreme Court would not recognize a fidu-
ciary relationship as a matter of law between a lender and bor-
rower (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 Yering-
ton 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 discre-
tion 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 argu-
ment 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 occa-
sionally 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 confi-
dence 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 docu-
ments for the operation of his business,” William Giles
9592                   GILES v. GMAC
responded, “Not when you have a relationship with a com-
pany for many, many years.”

   GMAC notes that the Gileses signed three agreements on
behalf of the dealerships disavowing the existence of a fidu-
ciary 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 associ-
ated 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. Wil-
liam 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 Chev-
rolet, 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 evi-
dence, Appellants have failed to raise a genuine issue of mate-
rial 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 dis-
                           GILES 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 relation-
ship into a quasi-fiduciary relationship. The “marriage” com-
ment 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 busi-
ness relationship. As the district court noted, the law of con-
tract would dissolve if an ordinary personal friendship
between business associates like the one between Snyder and
the Gileses were sufficient to transform an otherwise arms-
length business transaction into a transaction based on a con-
fidential 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.

                    IV.    Giles Chevrolet Case

  In the Giles Chevrolet case, the district court granted sum-
mary judgment to GMAC based on claim preclusion. Apply-
  2
   For the reasons stated in footnote 1, supra, we express no opinion on
whether GMAC’s actions following the discovery that the vehicles were
out of trust gave rise to fiduciary or confidential relationship duties in
GMAC.
9594                    GILES v. GMAC
ing Nevada law, the district court held that the claims in the
Yerington Ford case and the Giles Chevrolet case were identi-
cal; that there was a final judgment in the Yerington Ford
case; and that there was either identity or privity of parties in
the two cases. Appellants in the Giles Chevrolet case appeal
the grant of summary judgment based on claim preclusion
with respect to their contract claims. Although Appellants do
not appeal the district court’s preclusion decision with respect
to their tort claims, they note that, if we reverse the district
court’s decision in the Yerington Ford case on any of the tort
claims, the district court’s decision on those claims cannot
have preclusive effect in the Giles Chevrolet case. They thus
ask that if we reverse the decision in the Yerington Ford case
with respect to any of the tort claims in that case, we also
reverse the decision in the Giles Chevrolet case with respect
to the parallel tort claims.

   For the reasons that follow, we reverse the district court’s
grant of summary judgment against Appellants on their con-
tract claims in the Giles Chevrolet case based on claim preclu-
sion. We also reverse the district court’s decision on
Appellants’ tort claims that are based on fraud and conver-
sion.

   We agree with the district court that in this diversity case
where only substantive state law is at issue we apply the pre-
clusion law that the Nevada courts would apply. Semtek Int’l
Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508-09 (2001).
On at least one occasion, the Nevada Supreme Court has
applied federal law to determine the preclusive effect of a
prior federal court judgment. See Clark v. Columbia/HCA
Info. Servs., 25 P.3d 215, 224 (Nev. 2001) (en banc). But in
that case the federal court decision had been based on federal
rather than state law. When a prior federal court decision has
been based on state law, Nevada courts have applied Nevada
preclusion law. See LaForge v. State, 997 P.2d 130, 133-34
(Nev. 2000); Alitalia-Linee Aeree Italiane-S.p.A. v. Second
Jud. Dist. Ct., 556 P.2d 544, 545 (Nev. 1976) (per curiam).
                        GILES v. GMAC                           9595
We therefore apply Nevada preclusion law to determine the
effect, if any, to be given the judgment of the federal district
court in the Yerington Ford case.

   [13] Under Nevada law, “[g]enerally, the doctrine of res
judicata precludes parties or those in privity with them from
relitigating a cause of action or an issue which has been
finally determined by a court of competent jurisdiction.”
Univ. of Nev. v. Tarkanian, 879 P.2d 1180, 1191 (Nev. 1994)
(per curiam). “The modern view is that claim preclusion
embraces all grounds of recovery that were asserted in a suit,
as well as those that could have been asserted . . . .” Id. at
1192. In order for claim preclusion to apply under Nevada
law, the two claims must be based on the same “cause of
action.” Executive Mgmt., Ltd. v. Ticor Title Ins. Co., 963
P.2d 465, 473 (Nev. 1998) (per curiam) (internal quotation
marks and citation omitted); accord Round Hill Gen.
Improvement Dist. v. B-Neva, Inc., 606 P.2d 176, 178 (Nev.
1980); In re Estate of Firsching, 578 P.2d 321, 322 (Nev.
1978) (per curiam); see also Holcombe v. Hosmer, 477 F.3d
1094, 1097-98 (9th Cir. 2007). We address only the question
whether the contract claims dismissed in the Yerington Ford
case were the same “cause of action” as the contract claims
in the Giles Chevrolet case. We do not reach the question
whether there was a final judgment on the contract claims in
the Yerington Ford case that was entitled to preclusive effect;
nor do we reach the question whether there was privity among
all the parties in the two cases.

  The Nevada Supreme Court has explained the “same cause
of action” test:

    “The true test of identity of ‘causes of action,’ as that
    term is used in connection with the plea of former
    adjudication, is the identity of the facts essential to
    their maintenance . . . . The authorities agree that
    when the same evidence supports both the present
    and the former cause of action, the two causes of
9596                    GILES v. GMAC
    action are identical . . . .” Thus, if appellant’s claim
    is based upon evidence of new and independent
    delinquencies, there can be no such identity.

Round Hill, 606 P.2d at 178 (quoting Silverman v. Silverman,
283 P. 593, 598 (Nev. 1930) (Coleman, J., concurring)). Iden-
tity of claims under Nevada law has also been described as
“one right” and “one wrong”: “The test of a cause of action
for res judicata purposes is the identity of facts essential to
maintain the two suits; if the facts show only one right of the
plaintiff and one wrong by the defendant involving that right
there is only one cause of action.” Firsching, 578 P.2d at 322
(quoting Bissell v. Coll. Dev. Co., 517 P.2d 185, 187 (Nev.
1973)).

   [14] Giles Chevrolet’s contract claims are not barred by
claim preclusion under Nevada’s “cause of action” test. Giles
Chevrolet’s and Yerington Ford’s contracts do not involve the
same “rights.” Giles Chevrolet’s contract claims depend on
Giles Chevrolet’s rights under its 1992 contract with GMAC,
not Yerington Ford’s rights under its own separate, and later,
contract with GMAC. These contracts are nearly identical, but
they establish different rights — rights belonging to Giles
Chevrolet in one case, and rights belonging to Yerington Ford
in the other. Similarly, the claimed violations of the contracts
do not involve the same “wrongs.” The alleged breaches of
one contract harmed Giles Chevrolet in violation of Giles
Chevrolet’s contract; the alleged breaches of the other con-
tract harmed Yerington Ford in violation of its contract. Cf.
Zalk-Josephs Co. v. Wells Cargo, Inc., 400 P.2d 621, 622-23
(Nev. 1965) (applying claim preclusion where claims arose
from “the same guaranty provision” of “the same and identi-
cal state contract” between Wells Cargo and the state).

   [15] Because the “cause of action” prong of Nevada preclu-
sion law is not satisfied, the summary judgment on the con-
tract claims in the Yerington Ford case cannot have preclusive
effect on the contract claims in the Giles Chevrolet case. We
                       GILES v. GMAC                      9597
therefore reverse the district court’s grant of summary judg-
ment on the contract claims in the Giles Chevrolet case. We
also reverse the grant of summary judgment to GMAC on
Appellants’ fraud and conversion claims. Because we have
reversed the district court’s judgment on the fraud and con-
version claims in the Yerington Ford case, that judgment can-
not serve as the basis for preclusion-based dismissal of the
parallel claims in the Giles Chevrolet case. See Fitzharris v.
Phillips, 333 P.2d 721, 724 (Nev. 1958); Cal. Dep’t of Soc.
Servs. v. Thompson, 321 F.3d 835, 847 (9th Cir. 2003).

                         Conclusion

   In the Yerington Ford case, we reverse the district court’s
holding that the economic loss doctrine barred Appellants’
tort claims for fraud and conversion. We affirm the court’s
holding that Appellants failed to raise a genuine issue of
material fact with regard to a fiduciary duty owed by GMAC.

  In the Giles Chevrolet case, we reverse the district court’s
grant of summary judgment to GMAC on the contract claims
and on the tort claims for fraud and conversion.

   We remand both cases for further proceedings not inconsis-
tent with this opinion. In the Yerington Ford case, each side
shall bear its own costs. In the Giles Chevrolet case, we award
costs against GMAC.

 REVERSED IN PART, AFFIRMED IN PART, AND
REMANDED.