March 22, 2019

Colorado Supreme Court: Economic Loss Rule Does Not Bar Tort Claims Arising Before Execution of Contract

The Colorado Supreme Court issued its opinion in Van Rees v. Unleaded Software, Inc. on Monday, June 27, 2016.

Economic Loss Doctrine—Conversion and Civil Theft—Public Impact or Interest—Private or Internal Transactions.

After Unleaded Software, Inc. failed to deliver contracted-for websites and services, Van Rees brought suit, alleging various tort theories, civil theft, three breach of contract claims, and a violation of the Colorado Consumer Protection Act (CCPA). The trial court dismissed all but the contract claims, and the court of appeals affirmed, holding that the economic loss rule barred the tort and civil theft claims and that Van Rees failed to allege a significant public impact under the CCPA.

The supreme court affirmed in part and reversed in part. The economic loss rule applies only if there is no independent tort duty. Here, where Van Rees alleged Unleaded induced him into entering a contractual relationship when it knew it would not be able to perform the promised services, there is an independent tort duty, and the court therefore reversed as to Van Rees’s tort claims. The court did not reach the question of the economic loss rule as it relates to civil theft and instead affirmed the dismissal of that claim because Van Rees failed to adequately allege the knowing deprivation of a thing of value. Finally, the court affirmed the dismissal of the CCPA claim for failure to allege a significant public impact.

Summary provided courtesy of The Colorado Lawyer.

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