The Economic Loss Doctrine and Other Property

Ralph Anzivino continues his exploration of the economic loss doctrine in a new paper on SSRN.  The economic loss doctrine indicates that economic losses resulting from a defective product are recoverable, if at all, under contract law, instead of tort law.  In applying this doctrine, however, courts have run into difficulty with damage to other property besides the defective product.  For instance, in one case, a ship caught fire and sunk as a result of defective hydraulic equipment, and the court had to decide whether the ship owner could recover the value of other equipment on the ship under a tort theory of strict products liability.  Courts have adopted a variety of conflicting and uncertain tests to determine whether such damages to other property are governed by tort or contract law. 

In his paper, Ralph proposes a new test that emphasizes contract principles first.  Parties should be permitted to allocate the risk of losses between themselves.  Thus, if a contract validly addresses losses to other property, Ralph would enforce the contract; otherwise, tort principles would apply.  He defends this approach as clearer and more consistent with the underlying purposes of the economic loss doctrine than approaches currently in use.

Entitled “The False Dilemma of the Economic Loss Doctrine,” Ralph’s paper is forthcoming in the Marquette Law Review.  His other recent articles on the economic loss doctrine are here, here, and here.

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Anzivino on the Disappointed Expectations Test

Ralph Anzivino has a new paper on SSRN entitled “The Disappointed Expectations Test and the Economic Loss Doctrine.”  This makes a trilogy of recent articles by Ralph on different aspects of the economic loss doctrine.  (The first two are here and here.)  The abstract for this most recent entry is as follows:

The economic loss doctrine is a judicially created rule that determines whether contract or tort law applies when a defective product causes damage. The doctrine’s starting premise is that contract law governs if the defective product causes economic loss and tort law governs when the defective product causes property damage. A common refrain is that the doctrine was created to prevent contract law from drowning in a sea of tort. However, as the rule has developed, courts have continued to expand contract coverage at the expense of tort coverage. First, when the defective product damages only itself, the courts concluded that such property damage should be resolved under contract law, not tort law. Next, when the defective product damages the system of which it was a component part, the courts concluded that such property damage should also be resolved under contract law, not tort law. Recently, another rule has begun to receive judicial acceptance that further expands the coverage of contract law at the expense of tort law. The rule is called the “disappointed expectations” test or the “reasonably foreseeable” rule. It provides that property damage that was reasonably foreseeable at the time of contracting is recoverable only under contract law, not tort law. The purpose of this Article is to examine the disappointed expectations rule and determine whether it is a positive addition to the legal landscape of the economic loss doctrine.

After surveying the development of the disappointed expectations test, which has been adopted by the Wisconsin Supreme Court, Ralph identifies several reasons why the test should be rejected.  He pointedly concludes, “The rule is the most recent progression of tort law drowning in a sea of contract law.”

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O’Hear, Twerski, and the Work of the Professoriate

Aaron TwerskiProfessor Jessica E. Slavin recently posted concerning Professor Michael M. O’Hear’s well-deserved receipt of the Eastern District of Wisconsin Bar Association’s Judge Robert W. Warren Public Service Award. Through the resources available to me as dean, I have been able to secure a copy of Michael’s brief and well-stated acceptance remarks. Professor O’Hear describes his basic belief that law schools can act as “bridge builders” — first, “between, on the one hand, the world of legal practice, judging, and lawmaking, and, on the other hand, the world of rich and diverse learning contained in the modern university” and, second, between “the local and the national” (the latter being, Professor O’Hear notes, “a two-way street”).

These remarks bring to mind — but are not identical to — somewhat more pointed comments delivered by a renowned Marquette lawyer, Aaron D. Twerski (pictured above), who is the Irwin and Jill Cohen Professor at Brooklyn Law School (and former dean at Hofstra). Twerski is an extremely well-regarded law professor (as is O’Hear, although they are at different points in their careers) and received the prestigious Robert C. McKay Law Professor Award from the Tort Trial & Insurance Practice Section of the American Bar Association. Professor Twerski used the occasion of his award to lament the seeming lack of interest of many law professors in saying things of interest to judges and practicing lawyers.

Among his milder comments:

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