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Coker v. DaimlerChrysler Corp.8/16/2005
e rule to claims for fraud and unfair and deceptive trade practices, but declined to do so. In fact, the only ruling that we can locate which applies the economic loss doctrine to bar a claim for fraud is the decision of the business court below.
Aside from the lack of precedent to justify such a ruling, I conclude that the majority decision is contrary to sound reasoning and to the policy considerations that underlie fraud and the economic loss doctrine, as well as Chapter 75. In claims for negligence, where the doctrine has been applied, the wrong for which plaintiffs seek redress is the breach of a duty of reasonable care in design and traditionally the harm is either personal injury or property damage. In claims for fraud on the other hand, the wrong addressed is the alleged misrepresentation by a defendant, relied upon by the plaintiff and typically resulting in an expenditure of money. Thus, the loss involved in a fraud claim is very often economic.
Under the [economic loss] rule, a plaintiff who can claim only economic damages without being able to show any personal or property damage will not be allowed to bring a tort action for the loss, and must look to contract, warranty, and statutory actions instead. Courts use the rule to separate contract law, 'which is designed to enforce the expectancy interests of the parties,' from tort law" which is designed to keep persons from 'causing physical harm' to others.
National Consumer Law Center, Unfair and Deceptive Trade Practices Manual, S. 4.2.16.2. (6th Edition 2004) (quoting Casa Clara Condo Ass'n v. Charley Toppino & Sons, Inc., 620 So.2d 1244, 1246 (Fla. 1993)). Most courts will not apply the economic loss rule to bar claims that the defendant fraudulently induced the transaction. These courts reason that the purpose of the rule, to limit parties to contract remedies, is not promoted when fraud has undermined the consumer's ability to freely negotiate the terms and remedies of the contract.
Id. I would apply the same reasoning here and hold that the economic loss rule does not bar plaintiffs' claims for fraud.
Further, to the extent that the ruling below implicitly applies the economic loss doctrine to the Chapter 75 claim, I would specifically reject that application as well.
The rule has generally been used to bar only tort claims; most courts have held that the economic loss rule does not apply to UDAP [UDTPA] claims. UDAP claims are exempt from the economic loss rule because the rule is judicial, not legislative, and must give way to specific legislative policy pronouncement allowing damages for economic loss. In other words, by enacting a remedy for economic losses suffered by reason of an act deemed wrongful by the statute, the legislature has effectively preempted the economic loss rule for those cases covered by the act. To apply the economic loss rule to UDAP claims would effectively eviscerate the statute. The legislature could hardly have intended that the rule would bar the very claims the UDAP statute created.
Id. (emphasis added). Since, in North Carolina, unfair and deceptive trade practices claims include, but are not limited to, claims involving fraud, this reasoning applies to the fraud claim as well. See Holley v. Coggin Pontiac, 43 N.C. App. 229, 241, 259 S.E.2d 1, 9, disc. rev. denied, 298 N.C. 806, 261 S.E.2d 919 (1979).
In sum, I would reverse the dismissal on the pleadings of both claims and remand for further proceedings.
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