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D.C. Court of Appeals adopts the economic loss doctrine

In Aguilar v. RP MRP Washington Harbor, LLC __ A.3d __ (D.C. Sept. 4, 2014), the D.C. Court of Appeals considered the issue whether the District of Columbia will follow the majority of jurisdictions by adopting the "economic loss doctrine" which prohibits claims of negligence where a claimant seeks to recover purely economic loss sustained as a result of an interruption in commerce caused by a third party.  The Court held that it would adopt the economic loss doctrine.

The Plaintiffs had sued for lost wages that resulted from the closure of their workplaces due to a flood at the Washington Harbor retail complex.  That property has unique disappearing flood walls, which can be raised when the Potomac river threatens to flood.  The flood walls were negligently not raised during a river flood in April, 2011.  Plaintiffs claim that the defendant had adequate prior knowledge of the impending flood. 

The defendant moved to dismiss for failure to state a claim because the economic loss doctrine bars recovery of claims alleging solely economic loss stemming from a defendant's negligence.  The Plaintiffs argued that the economic loss doctrine does not apply in the District of Columbia.

The D.C. Court of Appeals held that the plaintiffs are precluded from pursuing a negligence action against appellants for recovery of lost wages, standing alone absent any other injury, by virtue of the economic loss doctrine.  The economic loss doctrine in the District of Columbia bars recovery of purely economic losses in negligence, subject to a limited exception where a "special relationship" exists.  What constitutes a special relationship is illustrated by the Court, which found no special relationship in this case because "there was no obligation on the part of [the defendant] to care for [plaintiffs'] economic well being."

The United States District Court for the District of Columbia had previously stated that the economic loss doctrine is a rule that prevents a party from alleging a tort claim, such as negligence or strict products liability, “‘where the only damage is to the product itself.’” Capital Motor Lines v. Detroit Diesel Corp., 799 F. Supp. 2d 11, 16 (D.D.C. 2011) (quoting Liberty Mut. Ins. Co. v. Equipment Corp. of America, 646 F. Supp. 2d 51, 56 (D.D.C. 2009) (internal citation omitted)). “Under the economic loss doctrine, a plaintiff [suing in tort] may not recover the ‘loss of value or use of the product itself, cost to repair or replace the product, or the lost profits resulting from the loss or use of the product.’” Capital Motor Lines, 799 F. Supp. 2d at 16 (quoting Potomac Plaza Terraces, Inc. v. QSC Products, Inc., 868 F. Supp. 346, 354 (D.D.C. 1994)(internal citations omitted)).  However, in Aguilar, the D.C. Court of Appeals rejected the argument that the application of the economic loss doctrine is limited to cases involving contract or products liability claims.

The economic loss doctrine thus has taken its place as one of the affirmative defenses to be considered in every case in the District of Columbia.

Posted by David B. Stratton on 10/13/2014 at 03:46 PM
DefensesDistrict of ColumbiaPermalink