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Florida Construction Law News

04AUG 2017

Survival of the Independent Tort Doctrine after the Florida Supreme Court’s Limitation of the Economic Loss Rule

by Haldon L. Greenberg, Esq.

The independent tort doctrine is a prohibition against tort actions that are calculated to recover solely economic damages for one in contractual privity with another. In other words, the doctrine is intended to prevent parties to a contract from circumventing the allocation of losses set forth in a contract by bringing an action for economic loss in tort.[1]

In 2013, the Florida Supreme Court issued its landmark decision in Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc.,[2] reducing the applicability of the economic loss doctrine[3] and holding that it is only applicable in the context of products liability cases, rather than all consumer lawsuits. After issuance of the Tiara majority opinion, many debated whether the opinion would have far-reaching consequences with respect to other types of actions, potentially opening the floodgates to multi-count tort/contract actions,[4] by perhaps having eliminated the independent tort doctrine.[5]

In Peebles v. Puig,[6] Florida’s Third District Court of Appeal has reaffirmed the independent tort doctrine and used it to reverse a judgment awarding damages in tort in a case where the damages resulted from a breach of contract, with no evidence of a tort or tort damages independent and distinct from the contract.

In Peebles, the plaintiff alleged, and the jury found, that the defendant made fraudulent misrepresentations that, to a certain extent, led the plaintiff to continue to perform her contractual employment duties by re-selling Bath Club units.[7]  The defendant’s company declined to pay the plaintiff’s commissions for those resales, and instead, retained these funds.[8]  There was no dispute that the plaintiff’s contract predated the defendant’s alleged misrepresentation s(therefore, fraud in the inducement to a contract was not at issue).[9]  There was also no dispute that the damages sought by the plaintiff and eventually awarded by the jury were the identical damages that the plaintiff sustained as a result of the defendant’s failure to pay her commissions for the resales.[10]

In re-affirming the independent tort doctrine, the Peebles court stated, “[i]t is well settled in Florida that, where alleged misrepresentations relate to matters already covered in a written contract, such representations are not actionable in fraud.”[11] The Court continued, “[i]t is similarly well settled that, for an alleged misrepresentation regarding a contract to be actionable, the damages stemming from that misrepresentation must be independent, separate and distinct from the damages sustained from the contract’s breach.”[12] According to the Court, “[b]oth of these legal principles are rooted in the notion that, when a contract is breached, the parameters of a plaintiff’s claim are defined by contract law, rather than by tort law.”  In a footnote, the court then makes clear that it did not evaluate this case under the economic loss rule and Tiara,[13] thereby reaffirming the independent legal authority of the independent tort doctrine.

To further solidify its point, the Third District stated clearly, that when, as in Peebles, “a contract has been breached, a tort action lies only for acts independent of those acts establishing the contract’s breach.”[14]

The result of this ruling is that there now appears to be further clarity regarding the continued viability of the independent tort doctrine in Florida. As such, Peebles will continue to provide Florida state courts with the basis for, and foundation to, dismiss a tort action that is merely a recitation of damages suffered as a result of the breach of a contract.  Conversely, the wise plaintiff can carefully craft a complaint which positions its alleged damages as the result of an independent tort in order to survive the dismissal of its tort claim (at least at the motion to dismiss stage). Therefore, although the economic loss rule is no longer applied to actions between parties in privity of contract, the independent tort doctrine remains applicable and in the hands of a skilled defense attorney, can still be used to thwart a plaintiff’s attempts to recover tort damages if and as it becomes apparent that the damages sought in tort are identical to the damages for breach of contract.

If you have any questions about the economic loss doctrine, independent tort doctrine, or the Third District Court of Appeal’s decision in Peebles, please do not hesitate to contact Haldon Greenburg at haldon.greenburg@csklegal.com or a member of CSK’s Construction Group.

[1] Indemnity Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532 (Fla. 2004), overruled in part by Tiara Condo. Ass’n v. Marsh & McLennan Cos., 110 So. 3d 399 (Fla. 2013); see, e.g., Ginsberg v. Lennar Fla. Holdings, Inc., 645 So. 2d 490, 494 (Fla. 3d DCA 1994) (“Where damages sought in tort are the same as those for breach of contract a plaintiff may not circumvent the contractual relationship by bringing an action in tort.”).

[2] 110 So. 3d 399 (Fla. 2013).

[3] The economic loss doctrine is a judicially created rule which prohibits the recovery of monetary damages based on a tort theory, unless there was also physical property damage or personal injury.

[4] Among those who believed the Tiara majority opinion would have such effects was Justice Canady, who, in his dissenting opinion, opined that “[w]ith today’s decision, we face the prospect of every breach of contract claim being accompanied by a tort claim.” Id at 411. (Canady, J., dissenting).

[5] Further muddying the waters was a position left out of the majority opinion in Tiara, but included in Justice Pariente’s concurring opinion, which explicitly stated that the majority’s conclusion did not undermine Florida’s contract law, and that in order to bring a valid tort claim, a party still must demonstrate that all of the required elements for the cause of action are satisfied, including that the tort is independent of any breach of contract claim. Id. at 407-10 (Pariente, J., concurring).

[6] 42 Fla. L. Weekly D1080 (Fla. 3d DCA May 10, 2017).

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id. (citing La Pesca Grande Charters, Inc. v. Moran, 704 So. 2d 710, 712-13 (Fla. 5th DCA 1998) (explaining the difference between fraud in the inducement and fraud in the performance, the latter not constituting a separate cause of action from that of a concurrent breach of contract action)).

[12] Id. (citing Rolls v. Bliss & Nyitray, Inc., 408 So. 2d 229, 237 (Fla. 3d DCA 1981)).

[13] Id. at n.4.

[14] Id. (citing Ginsberg, 645 So. 2d at 494).

Posted By Haldon L. Greenberg, Esq.

Haldon L. Greenburg is an Associate in CSK’s Construction Group and practices in the Fort Lauderdale office. Mr. Greenberg has experience representing contractors and developers in construction defect claims and design professionals and consulting engineers in professional liability claims. Prior to joining CSK, Mr. Greenburg gained valuable litigation and trial experience in the areas of both criminal and civil law. He has represented thousands of clients and has been lead counsel on numerous jury and bench trials.