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Economic Loss Doctrine

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Case: Milan Supply Chain Solutions, Inc. f/k/a Milan Express, Inc. v. Navistar, Inc., et al.

Facts: Plaintiff sued Defendant in a commercial dispute pertaining to the quality of trucks purchased by the Plaintiff pursuant to a contract. The lawsuit alleged breach of contract, fraud, and violation of the Consumer Protection Act. A jury held for the plaintiff and awarded damages.

Appellate decision: The intermediate court reversed, holding that the Economic Loss Doctrine barred Plaintiff’s fraud claims. The economic loss doctrine is a judicially created principle that “prevents a party who suffers only economic loss from recovering damages under a tort theory. . . . A party who enters into a contract which contains terms that limit recovery in the event of a breach [is] typically unable to circumvent such provisions by alleging a tort occurred as well.” While some jurisdictions have recognized an exception in cases of fraud, the court held “that where the alleged fraud, as in this case, relates to the quality of goods sold, the economic loss doctrine is a bar and any remedies must be pursued in contract/warranty law.

Review granted: January 16, 2020.

Prediction: Ben thinks the Supreme Court will affirm the reversal and recognize the applicability of the Economic Loss Doctrine in this situation.