Split Eighth Circuit Finds Economic Loss Doctrine Precludes Tort Recovery For “Other Property” Damage
The Eighth Circuit weighed in yesterday on whether redress was available in tort where there was injury not only to a defective product but also to other property in a state that applied the economic loss doctrine. The underlying incident involved a fire in a North Dakota arena caused by an allegedly defective amplifier, which caused considerable property damage to the arena and to personal property. The arena’s owners filed suit against the manufacturer of the amplifier alleging tort claims of negligence, strict liability, and failure to warn, but the U.S. District Court for the District of North Dakota entered summary judgment for the manufacturer after finding that the economic loss doctrine precluded recovery of tort damages. The Eighth Circuit, in a 2-1 decision in which the court’s Chief Judge dissented, affirmed the lower court’s decision.
North Dakota’s highest state court had not yet definitely ruled on whether the economic loss doctrine would bar tort recovery for damage to other property (beyond the defective product itself). In 1996, the Eighth Circuit had predicted how North Dakota would analyze this question and held that it would likely conclude that the doctrine extended to preclude tort recovery for physical damage to other nearby property of commercial purchasers who could foresee such risks at the time of purchase. In the present case, the court determined that its predicted foreseeability analysis from the 1996 case should still be followed and concluded that it was foreseeable to the contracting parties that a defect in an amplifier could lead to a fire and resulting damage to property beyond the amplifier itself.
The dissent, however, explained that the Eighth Circuit’s 1996 prediction was out-dated given that the North Dakota Supreme Court has since approved tort recovery for damage to “other property,” albeit in dicta. Since the 1996 case, the U.S. Supreme Court also held that in an admiralty case, a tort plaintiff could recover for physical damage to other property caused by a product. Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 877 (1997). Likewise, the Restatement (Third) of Torts recognizes that the economic loss rule still permits recovery for damage to property other than the product itself. The dissent also opined that even if the court applied the foreseeability analysis predicted in the 1996 decision, there were enough facts in dispute to make that a jury question not suitable for summary judgment.
