Post-Tiara: Contracts Are Still King.

• Author: Palermo, Anthony J.

The independent tort doctrine prohibits tort actions between parties to a contract where the plaintiff cannot assert a tort claim independent of a claim for breach of contract. In other words, one cannot assert a tort action premised upon the same issues addressed in a contract. The doctrine serves to bar a tort claim where the allegedly offending party has committed no breach of duty independent of a breach of its contractual obligations.2 This provides stability for businesses and consumers by ensuring the contracts that they enter into will not be circumvented or cast aside. The independent tort doctrine also provides benefits to litigants and courts by ensuring cases are streamlined and cost-effective.

Although the doctrine advances fundamental societal goals and can be simply stated as a proposition, it has proved vexing for both litigants and courts in application. Confusion surrounding the doctrine and its enforcement persists and has continued following Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., 110 So. 3d 399 (Fla. 2013), where the Florida Supreme Court held the economic loss rule--a related but distinct doctrine to curb tort liability--applies only in the products liability context.(3)

The majority's opinion in Tiara prompted a debate among the justices, with Justice Pariente writing a concurrence, and then-Chief Justice Polston and Justice Canady each writing dissents. Justice Pariente maintained that the majority's decision would not affect common law principles of contract requiring that a tort claim be independent of any breach of contract claim. Justices Polston and Canady, however, expressed concern that, in limiting the application of the economic loss rule to products liability cases, the majority's decision greatly expanded tort law at the expense of contract law and could result in every breach of contract claim being accompanied by a tort claim. Fortunately, courts have heeded Justices Canady's and Polston's well-founded concerns. Through nuanced application of Tiara and the independent tort doctrine, "fundamental contractual principles" have accomplished the same salutary purposes served by--and thereby supplanted--the contractual privity economic loss rule.(4)

Post-Tiara, courts and litigants have debated the contours--and even the survival--of the independent tort doctrine.(5) Much of this debate stems from different interpretations of Tiara's majority opinion and Justice Pariente's concurrence, as well as confusion surrounding the differences between the independent tort doctrine and economic loss rule.6 Regardless of the cause, courts should expressly recognize Justice Pariente's concurrence in Tiara and confirm the independent tort doctrine's application in Florida to avoid the otherwise inevitable diminution of contract law and expansion of tort law that rightly concerned Justices Polston and Canady. Indeed, the independent tort doctrine is vital to Florida contract law. To encourage the just, speedy, and efficient resolution of cases on the merits, courts should analyze the independent tort doctrine at the motion to dismiss stage to ensure the doctrine is properly applied.

The Independent Tort Doctrine and the Economic Loss Rule

*The Independent Tort Doctrine--Under the independent tort doctrine, "to set forth a claim in tort between parties in contractual privity, a party must allege action beyond and independent of breach of contract that amounts to an independent tort."(7) Simply stated, a tort claim must be independent from any breach of contract claim.(8)Derived from fundamental contract principles, the doctrine ensures that parties in contractual privity cannot recast causes of action that are otherwise breach of contract claims as tort claims.(9)

Despite its apparent simplicity, the standard for applying the independent tort doctrine remains unsettled.(10) For example, it is sometimes unclear what distinguishes an "independent" tort from a "dependent" tort.(11) Generally, a tort is independent if "it requires proof of facts separate and distinct from the breach of contract."(12) To make this determination, courts look at whether there is "any meaningful"(13) or "substantive"(14) distinction between the tort claim and breach of contract claim.

A claim for fraudulent misrepresentation, for example, is not an independent tort where the claim is "inextricably intertwined" with the performance of a contract.(15) There is also no independent tort for negligence where a party to a contract claims the other party breached a duty owed to it by failing to perform under the parties' contract.(16) Likewise, fraudulent breaches or performances of contracts are not independent torts.(17) This means there is no independent tort where "a party to the contract claims to have performed but has actually just tricked the other party into believing that they have."(18) Fraudulent inducement claims often require close analysis because "almost any contract claim can be framed as a fraud in the inducement action."(19) A fraudulent inducement claim is independent of a breach of contract claim where the alleged fraudulent representation concerned present conduct or circumstances--meaning the representation was "verifiably true or false at the time the representation was made."(20) Conversely, there is no independent tort where the alleged fraudulent representation concerned future conduct and circumstances.(21) This means a fraudulent representation concerning the performance of a contract--which is a future act that has yet to occur--cannot support an independent tort, nor can a fraud in the performance claim mis-labeled as a fraud in the inducement claim survive.(22) Similarly, depending upon the nature of the action, courts have both recognized and rejected claims of negligent misrepresentation, fraud,(23) breach of fiduciary duty,(24) fraudulent inducement,(25) fraudulent concealment,(26) conversion, civil theft,(27) tortious interference with business relationships,(28) negligent disbursement of funds,(29) racketeering,(30) negligent infliction of emotional distress,(31) and malpractice(32) as independent torts that can survive when a contract exists between the parties.

* Distinguishing the Economic Loss Rule--The economic loss rule prevents parties in contractual privity with each other from bringing tort claims where the damages claimed are purely economic.(33) Prior to Tiara, the economic loss rule applied in two situations: 1) when the parties negotiated remedies in their contract; and 2) when a defective product damages itself but does not cause personal injury or damage to other property.

Although the independent tort doctrine and the economic loss rule are related principles, they are not the same. Confusion surrounding these principles remains due to courts' and litigants' struggle to differentiate them. Some courts have explained the independent tort doctrine and economic loss rule are different principles,(34) while others have indicated the independent tort doctrine is merely the economic loss rule but with a different name.(35) Others describe the independent tort doctrine as "an off-shoot of"(36) or "corollary to"(37) the economic loss rule.

The independent tort doctrine, however, predates the economic loss rule. The Florida Supreme Court explained the independent tort doctrine 30 years prior in Griffith v. Shamrock Village, Inc., 94 So. 2d 854 (Fla. 1957); whereas, the economic loss rule was not adopted by the Florida Supreme Court until Florida Power & Light Co. v. Westinghouse Electric Corp., 510 So. 2d 899 (Fla. 1987).(38) As observed by Justice Pariente in Tiara, "[t]he economic loss rule is not a long-standing common law rule that has always existed in our jurisprudence."(39) Regardless of their origins, the independent tort doctrine and the economic loss rule are distinct principles. Under the economic loss rule, a tort action is barred if the only damages suffered are economic losses. Under the independent tort doctrine, a tort action is barred if the defendant has not committed a breach of duty apart from any breach of contract or where a tort claim is premised upon issues encompassed within the parties' agreement. The independent tort doctrine can be understood as another way of saying a contractual relationship does not create a duty in tort law.(40) In sum, the economic loss rule concerns damages, and the independent tort doctrine concerns duty.(41)

Tiara and its Aftermath

In Tiara, the Florida Supreme Court addressed a question of Florida law that was determinative of a cause pending before the 11th Circuit Court of Appeals with no apparent controlling precedent. The question related to whether an insurance broker provided professional services such that the broker could not assert the economic loss rule as a bar to tort claims seeking economic damages that arise from a contractual relationship between the broker and the insured.(42) The Florida Supreme Court recognized that the certified question, however, depended upon the continued vitality of the economic loss rule in cases involving contractual privity.(43) The Florida Supreme Court, therefore, restated the certified question as an inquiry regarding whether the economic loss rule barred an insured's suit against a broker where the parties are in contractual privity and the damages sought consisted solely of economic losses.(44) The court answered the question in the negative and limited the economic loss rule's application strictly to products liability cases.(45) In so doing, the court receded from its prior rulings to the extent that they applied the economic loss rule beyond the products liability context.(46) In departing from its prior expansion of the economic loss rule, the court justified abrogating and confining the rule to its origin in the products liability realm--and departing from its fidelity to stare decisis--based upon its adherence to a higher maxim...