Will the economic loss doctrine bar a claim for negligence if by doing so, the plaintiff will be left without a remedy? That issue was addressed in Spectraserv, Inc. v. The Middlesex County Utilities Authority et als., Superior Court of New Jersey, Law Division, Docket No. L-2577-07 (July 25, 2013).
In that case, the parties were disputing whether there should be damages with respect to the construction of a sludge pasteurization facility in Sayerville, New Jersey. The Defendant argued that the negligence claim relating to that construction was barred by the economic loss doctrine.
In its opinion, the Court began by discussing the nature of the doctrine itself. It explained that a tort (e.g., fraud or negligence) claim and a contract claim usually cannot be brought under New Jersey law for the same facts. The plaintiff usually must choose one or the other.
“Economic loss can take the form of either direct or consequential damages.” Spring Motors Distribs. v. Ford Motor Co., 98 N.J. 555, 566 (1985). “A direct economic loss includes the loss of the benefit of the bargain, i.e., the difference between the value of the product as represented and its value in its defective condition.” Ibid. (emphasis omitted). “Consequential economic loss includes such indirect losses as lost profits.” Ibid.
As the Third Circuit has aptly noted, “[u]nder New Jersey [*19] law, the economic loss doctrine defines the boundary between the overlapping theories of tort law and contract law by barring the recovery of purely economic loss in tort.” Travelers Indem. Co. v. Dammann & Co., 594 F.3d 238, 244 (3d Cir. 2010)(internal quotation and formatting marks omitted). “The purpose of the rule is to strike an equitable balance between countervailing public policies that exist in tort and contracts law.” Ibid. (internal quotation and formatting marks omitted). Our Supreme Court has observed that “the purpose of a tort duty of care is to protect society’s interest in freedom from harm, i.e., the duty arises from policy considerations formed without reference to any agreement between the parties[]” whereas “[a] contractual duty, by comparison, arises from society’s interest in the performance of promises.” Spring Motors, supra, 98N.J. at 579.
Id. at 15.
However, in Spectraserv, the Court was confronted with an interesting twist (a “case of first impression”). The issue was whether the doctrine would still be applied if the result would be to bar any claim. In other words, if the doctrine barred a negligence claim and there were no other claim available to the plaintiff, would it still apply?
The answer was that the Court found it did not have to reach that issue. It found that there was another claim that could be brought: a breach of contract claim. Therefore, while the Court acknowledged that there suggesting that the application of the doctrine would be prevented if there were no other remedy, here there was another remedy. Therefore, in this case, the doctrine would be applied.