Planning ahead: some tips for the complaint drafter dealing with the economic loss rule.

• Author: Wear, Nancy C.
• Position: Florida

The hearing on summary judgment, the day of calendar call, or, worse, the day of the charge conference is not the day to find out that the economic loss rule has eviscerated the plaintiff's case. Similarly, the defendant's counsel ought not to suppose that victory is automatic on this issue, because the current state of the law is by no means clear, and there is no assurance that, if the defense is inadequately argued, a reversal on appeal necessarily will follow. Thus, both parties should develop an early understanding of the economic loss rule. This article is intended to provide some guidance to the practitioner-drafter in anticipating that defense, and, in that context, to present the current status of this court-made rule in order to assist counsel for plaintiff and defendant in making the most effective presentation for their respective clients. In developing the following strategies, the author had in mind practitioners representing entities, regardless of formality of organization (corporation, partnership, sole proprietorship), operating in a commercial setting.

Many cases that are lost because of the economic loss rule might have been saved by careful drafting of the complaint. What usually happens is that, with the client's contract in hand and the client's cry of "I was robbed!" ringing in counsel's ears, the complaint comes steaming from the printer, replete with a combination of contract and tort language. More than 10 years after the economic loss rule was adopted by the Supreme Court of Florida,[1] that still happens. The practitioner is urged to step back, to review the facts, and to assess the relative positions of the potential plaintiff and the potential defendant. Here are some questions which counsel should consider before writing a complaint.

What Does the Contract Say?

While it is true, as was said in Casa Clara Condominium Assn. v. Charley Toppino & Sons, Inc., 620 So. 2d 1244, 1245 (Fla. 1993), that "Plaintiffs find a tort remedy attractive because it often permits the recovery of greater damages than an action on a contract and may avoid the conditions of a contract," the contract also may contain language which makes early settlement or resolution by summary judgment likely to be a shorter and more certain route to victory for the client.[2] Another advantage of suing on the contract is that many, if not most, contracts contain useful provisions for an award of attorneys' fees which may not be available using other theories. In short, the surest way to avoid economic loss rule problems is to proceed on contract theories alone. The difficulty arises where the parties to the contract either did not or (as discussed below) could not negotiate terms sufficient to protect against the behavior that actually caused the injury.

What Else Does the Contract Say?

Put another way, can we sue in tort after we negotiated our own way out of a contract action? It is a truism that many clients hire an attorney too late. That is, they negotiate their contract without benefit of counsel, or accept the form proffered by the other party, and, contractually speaking, hold their noses and jump off the roof, hoping for a soft landing. As a practical matter, after the injury has been suffered, counsel may be hard-pressed to find remedies for the commercial nondrafter. A significant example of that problem, resolved against the plaintiff on the ground that the economic loss rule barred recovery, arose in Comptech International, Inc. v. Milam Commerce Park Ltd., 711 So. 2d 1255 (Fla. 3d DCA 1998) (on rehearing). Comptech had an existing lease with Milam, and the parties entered into a second lease under which Milam agreed to build out a portion of the space for Comptech's computer hardware business. During the build-out, Comptech complained that the construction was not being done in a timely or workmanlike manner, and that its office space and computers were being damaged in the process.[3] The subsequent lawsuit alleged negligence by Milam in selecting the contractor to do the work, negligence against the contractor (a "dissolved corporation"), damages from violation of the South Florida Building Code, punitive damages, and return of rent illegally collected.[4]

Comptech's lawyers did not allege any breach of contract claims, and the court obligingly tells the reader why: "The lease contained an indemnity provision whereby Comptech agreed to indemnify Milam from all claims for damages arising under the use and occupancy of the premises, including any improvements."[5] Thus, presumably because counsel saw that a realistic contract claim could not be asserted, the plaintiff was forced to allege only tort claims. Throughout the opinion on rehearing the court comes back to that contract provision, barely concealing its contempt for Comptech, a commercial entity supposedly negotiating at arm's length, which completely contracted away all of its remedies: "In fact, the parties did negotiate the allocation of risks and...