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Another Data Point on the Application of the Economic-Loss Rule to Section 75-1.1 Claims

We have previously explored the application of the economic-loss rule to claims for violation of N.C. Gen. Stat. § 75-1.1. As we have observed, different courts have taken different approaches when assessing the rule’s application, depending on the circumstances of the case.

In one of our posts, we discussed two decisions on the economic-loss rule that the North Carolina Court of Appeals issued just days apart in 2016. In Buffa v. Cygnature Construction & Development, the Court of Appeals held that the economic-loss rule barred a section 75-1.1 claim. In Bradley Woodcraft, Inc. v. Bodden, by contrast. the Court of Appeals suggested that the economic-loss rule never applies to fraud claims. The Court then declined to apply the rule to a misrepresentation-based 75-1.1 claim.

A recent decision from the United States District Court for the District of Massachusetts provides another data point in the analysis. In Duncan v. Nissan North America, Judge Denise Casper applied the economic-loss rule to dismiss a 75-1.1 claim brought in a putative class action. Judge Casper’s opinion falls more in line with the Buffa approach.

This post examines Judge Casper’s decision.

An allegedly defective timing chain tensioning system

The putative class in Duncan included eight plaintiffs from across the country who had purchased several different models of Nissan vehicles. Their claims focused on the vehicles’ timing chain tensioning systems, or TCTS. According to the plaintiffs, the TCTS was defective, caused damage to the vehicles’ engines, and posed attendant safety risks.

One of the named plaintiffs was a North Carolina citizen. She purchased her 2007 Nissan Pathfinder in North Carolina, and she learned in 2015 that the car’s TCTS needed to be replaced.

In addition to contract and unjust-enrichment claims, the named plaintiffs alleged violations of the unfair and deceptive trade practices statutes of several states, including a 75-1.1 claim on behalf of the North Carolina plaintiff.

Judge Casper allowed the contract and unjust-enrichment claims to proceed, but analyzed each of the unfair and deceptive trade practices claims separately.

Applying the economic-loss rule to dismiss the North Carolina claim

Judge Casper allowed a Massachusetts unfair and deceptive trade practices claim to proceed, but dismissed the remainder of the unfair and deceptive trade practices claims under different theories. She concluded that the Oregon claim was barred by the statute of limitations, and she dismissed the Colorado and Texas claims for failure to plead with the requisite specificity. 

The court’s analysis of the North Carolina claim, however, turned on its reading of the economic-loss rule and its views of how the rule applies to 75-1.1 claims. The court did not analyze the economic-loss rule for any of the other statutory claims.

Judge Casper reviewed the history of the economic-loss rule in North Carolina. The court relied on Moore v. Coachmen Industries, a 1998 decision of the North Carolina Court of Appeals. Judge Casper characterized the holding in Moore as the plaintiff having “failed to state a claim under UDTPA.”   

The plaintiff in Moore, however, asserted a negligence claim, not a 75-1.1 claim. When she characterized the holding in Moore, Judge Casper was likely relying on other courts’ extension of Moore to section 75-1.1 claims. For example, in a 2006 decision called Bussian v. DaimlerChrysler, United States District Judge William Osteen, Sr. relied on Moore in applying the economic-loss rule to prevent a 75-1.1 claim.

At the same time, not all jurists agree on whether Moore applies to 75-1.1 claims.  North Carolina Supreme Court Justice Robin Hudson, then on the Court of Appeals, argued in a dissenting opinion in Coker v. DaimlerChrysler (a 2005 decision) that, while “Moore applied the [economic loss doctrine] to the negligence claims brought against a manufacturer,” North Carolina should not “extend the doctrine” to fraud or 75-1.1 claims.

In Duncan, the plaintiffs tried to maneuver around the economic-loss rule by pointing to the allegations that Nissan made specific misrepresentations regarding the TCTS system. The plaintiffs appeared to be couching their claim as a misrepresentation-based 75-1.1 claim that could fall within the exception for fraud-based claims that some courts, like Bradley Woodcraft, have allowed to proceed.

But Judge Casper was having none of it. She separately distinguished on the facts each of the cases on which the plaintiffs relied, and she held that “Moore makes clear that where the parties have done so [through an agreement], the UDTPA does not provide an additional remedy that would upset the balance struck by the parties.”

At a loss on the economic-loss rule until the Supreme Court weighs in

Judge Casper’s decision is another in a line of cases that have applied the economic-loss rule in varying ways to 75-1.1 claims. At some point, the North Carolina Supreme Court will likely provide clarity on the rule’s application to section 75-1.1. Until then, litigants will need to be aware of the different holdings by different courts on this issue.

Author: Jeremy Falcone

May 8, 2018 Jeremy Falcone
Posted in  Economic-Loss Rule