The Economic Loss Doctrine Is Alive and Well in Michigan
Recently U.S. District Judge John Feikens affirmed the report and recommendation of U.S. Magistrate Judge R. Steven Whalen, holding that Michigan's economic loss doctrine barred common law fraud claims in consumer fraud litigation. See Murphy v. The Proctor & Gamble Co., 2010 WL 889796 (E.D. Mich. Mar. 9, 2010).
The case clearly presented one of the most pressing consumer fraud issues of the day. (Not.) The defendant makes Fusion and Fusion Power handles for disposable razor heads. Fusion Power -- as you might guess -- houses a little battery and vibrates. Plain ole Fusion does not. The defendants also make Fusion and Fusion Power disposable razor heads that plaintiffs say are identical, except that Fusion Power razor heads cost a dollar more than plain ole Fusion razor heads.
(Can't you just picture a federal judge getting up in the morning and saying to himself "It's cases like this Murphy case that are why I went to law school. They're simply fascinating!")
The defendants moved to dismiss the common law "fraud" and "silent fraud" counts. Judge Feikens held that Magistrate Judge Whalen correctly analyzed Michigan law, concluding that the economic loss doctrine bars torts claims for purely economic losses arising out of the quality of the goods because such claims arise out of contract -- not tort -- and are governed by the Uniform Commercial Code, not common law fraud. Although Michigan recognizes an exception for fraud in the inducement, that exception does not apply if the alleged misrepresentation concerns the quality of the goods sold. Accordingly, plaintiffs' claims were nothing more than contract claims repackaged as fraud claims, and thus were barred by the economic loss doctrine.
Although it was a close shave, the defendant got out of the common law fraud counts without so much as a nick.
