Economic Loss Doctrine & Sufficiency of Pleadings
In July, the Superior Court of Pennsylvania in Donaldson v. Davidson Brothers v. LJF, Inc. issued a decision clarifying Pennsylvania’s Economic Loss Doctrine, the application of public policy considerations, and dismissing LJF’s Loss of Contract claim based upon Pennsylvania’s fact pleading rules.
The case arises out of a tragic three-way motor vehicle accident on June 16, 2008 in Centre County, Penn., which resulted in a fatality. The Estate of Sarah Donaldson sued Davidson Brothers’ claiming that its west bound tractor-trailer rear-ended Ms. Donaldson’s vehicle, which thrust her car into opposing eastbound traffic causing a head-on collision with a tractor-trailer owned by LJF. Davidson Brothers joined LJF into the litigation, but settled LJF’s property damage for $15,181. LJF and Davidson entered into a settlement agreement resolving all claims, except any claims of loss of contract, which was preserved. Later, LJF, in its Answer and Counterclaim to the joinder complaint, asserted liability claims against the Donaldson and Davidson including, inter alia, a claim for “loss of contract.” Donaldson filed preliminary objections claiming that the Economic Loss Doctrine barred LJF’s counter claim; the trial court agreed and dismissed LJF’s counterclaim with prejudice. Davidson later filed a motion for judgment on the pleadings on the same grounds, which the trial court granted, on July 24, 2015. LJF appealed to the Superior Court arguing that Pennsylvania’s Economic Loss Doctrine did not bar recovery. The Superior Court agreed with LJF, but nonetheless dismissed LJF’s counter claim for failing to plead the claim with legal sufficiency.
The Economic Loss Doctrine provides that no cause of action exists for negligence that results solely in economic damages unaccompanied by physical injury or property damage. In Margolis v. Jackson, the court denied recovery against third party negligent tortfeasor for loss of expected profits as indirect result of negligent incapacitation of claimants’ business partner. In Aikens v. Balt. and Ohio R.R. Co., the court denied manufacturing plant employees claims for lost wages who did not suffer personal injury or property damage from train derailment, which damaged the plant. In Robins Dry Dock & Repair Co. v. Flint, the United States Supreme Court decided that a charterer of a steamship could not recover damages for loss of use of the ship caused by the negligence of the company repairing the ship. The US Supreme Court reasoned that claims for economic losses such as loss of contract, are not a foreseeable result of negligence.
In this case, the trial court found that the allowance of damages to LJF for its loss of contract claims would be counter to public policy because claims for economic losses “such as loss of contract are not a foreseeable result of negligence.” Further, the trial court determined that because LJF settled its property loss claim, the claim became “undeterminable,” and therefore did not exist. Without a property damage claim, the trial court held that the Economic Loss Doctrine barred LJF’s claims for loss of contract.
The Superior Court disagreed, stating that it was beyond serious dispute that “some” property damage occurred. The court highlighted that there was no Pennsylvania case law that addressed or considered the effect of a release on the predicate condition of no claim for personal injury or physical damage. Therefore, the Superior Court determined that the Economic Loss Doctrine did not bar LJF’s claim. Furthermore, the Superior Court found the trial court’s reliance on the Aikens case to support its public policy analysis was misplaced. In support of its holding, the Superior Court cited to the Pennsylvania Supreme Court’s decision in Mamlin v. Genoe., which provides, “It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in so declaring .”
While the Superior Court failed to find that the Economic Loss Doctrine and public policy considerations warranted dismissal of LJF’s loss of contract claim, it dismissed the claim under Pennsylvania Rule of Civil Procedure 1019(a). Pennsylvania is a fact-pleading state. As a minimum, a pleader must set forth concisely the facts upon which his cause of action is based. The complaint must not only apprise the defendant of the claim being asserted, but it must also summarize the essential facts to support the claim. Landau v. Western Pennsylvania National Bank. The purpose of Rule 1019 is to require the pleader to disclose the ‘material facts’ sufficient to enable the adverse party to prepare his case. In this case, the Superior Court concluded that LJF failed to present a well pleaded allegation of loss of contract. “A generic, barebones claim of “loss of contract,” - never clarified or explained in eight years of legal dispute - is legally insufficient and would not warrant submission to a jury.”
