THE ECONOMIC-LOSS RULE AND SECTION 75-1.1: CURRENT TRENDS.

• Author: Falcone, Jeremy
• Position: 2018 LAW JOURNAL

When a dispute involves economic losses in a contractual setting, the economic-loss rule operates to bar tort claims to recover those economic losses.

Defendants frequently rely on the rule as a defense to any of those extra-contractual claims. While the rule's application in those settings is relatively clear, how does it apply to claims brought under Section 75-1.1 of North Carolina's Unfair and Deceptive Trade Practices Act?

Courts have not agreed. Even on similar facts, courts have reached different conclusions. This article examines some courts' decisions on the issue, with some applying the rule to bar the claims and others refusing to apply the rule. In the absence of guidance from the North Carolina Supreme Court, it appears that the economic-loss rule's application will continue to depend on the circumstances of the case and the particular court's approach to the issue.

Applying the economic-loss rule in Buffa v. Cygnature Construction & Development, Inc.

In Buffa v. Cygnature Construction & Development, Inc., the North Carolina Court of Appeals held that the economic-loss rule barred an UDTPA claim.

In 2006, the plaintiffs built a home in Beech Mountain. Five years after the construction ended, the plaintiffs discovered extensive water damage that had already harmed the structural integrity of the home. Several inspections suggested that the water had entered through windows.

The plaintiffs sued several companies associated with the construction, including the window manufacturer. The plaintiffs' UDTPA claim alleged only that the window manufacturer failed to notify a known design defect. The trial court granted summary judgment in favor of the window manufacturer because the economic-loss rule barred the 75-1.1 claim and several tort claims.

The plaintiffs appealed. On the section 75-1.1 claim, the plaintiffs argued that the economic-loss rule does not apply to UDTPA claims at all. They cited a string of state and federal cases that allowed consumers to recover under section 75-1.1 "for purely economic loss."

The court rejected the plaintiffs' "contention that] the trial court erred by applying the economic-loss rule to a claim of unfair and deceptive trade practices."

While the Buffa decision suggests that the decision is resolved, a different panel of the Court of Appeals held otherwise at nearly the same time.

Declining to apply the economicloss rule in Bradley Woodcraft, Inc. v. Bodden

In Bradley Woodcraft, Inc. v. Bodden, a...