Federal Court Applies Economic Loss Doctrine to Dismiss Class Action
How far should the duty to avoid negligent harm to another run? Courts have struggled with this question for as long as there has been tort law.
Recently, a federal court faced this question in TS & C Investments, LLC v. Beusa Energy, Inc., 2009 WL 259675 (W.D. La. Feb. 2, 2009). There, plaintiffs alleged the defendants were responsible for an oil well blowout near an Interstate highway. Plaintiffs were businesses who sought to represent a class of businesses that lost money when the Interstate was shut down to address the blowout. Plaintiffs argued that the defendants should have foreseen, when they placed the oil well near the Interstate, that businesses would be harmed if they negligently caused a blowout.
The defendants moved to dismiss, arguing that the plaintiffs' claims were barred by the economic loss doctrine. The doctrine, articulated in Robins Dry Dock v. Flint, 275 U.S. 303 (1927), is a prudential limit on tort liability and holds that a negligent tortfeasor's liability does not extend to economic loss not associated with physical injury or property damage. The rule prevents limitless liability for tortfeasors and prevents litigation of speculative harm.
The Louisiana Supreme Court had adopted the economic loss doctrine in a maritime context, but had not incorporated it into the state's common law for tort. Thus, the court was forced to make an Erie guess as to whether the economic loss doctrine would be the law of Louisiana. An intermediate appeals court had recognized and applied the doctrine, as had another federal court sitting in diversity.
Thus, "there has been a trend among both Louisiana state and federal courts not to permit the recovery of indirect economic losses caused by a negligent injury to property, both in the maritime and non-maritime contexts, and in contractual and non-contractual settings. Certain of these cases couch the policy determination within the rhetoric of a duty-risk analysis; others do not." Id. at *7.
The court predicted that Louisiana would apply the economic loss doctrine, and thus granted the motion to dismiss on policy grounds:
This Court does not find today that the plaintiffs in this matter were not impacted. Indeed, this Court is cognizant of the impact on the businesses in question resulting from the closure of I-10. However, this Court must give force and effect to the policy considerations set forth by the courts in Louisiana that have considered the issue. Indeed, were this Court to permit claims for purely economic damages to go forward under these circumstances, could not an argument be made that anytime the interstate is closed due to an accident of any nature, those businesses along that span of the interstate, and all of their impacted suppliers, could seek economic damages occasioned by the interstate's closure on grounds that those drivers owed a duty to those businesses located several miles away but along the interstate?
Id. at 9.
