The Failed Promise of a General Theory of Pure Economic Loss: An Accident of History?

Abstract

This article was prepared for the 2012 Clifford Symposium, which was held in of the career of Robert Rabin. The article reviews Rabin’s efforts to analyze and rationalize American tort doctrine concerning negligently caused economic loss, which is sometimes dubbed “pure” negligent economic loss so as to distinguish it from economic loss resulting from injury to the plaintiff’s person or property. The article praises and criticizes Rabin’s efforts. It notes that in his early writings on negligently caused economic loss Rabin celebrated decisions such as J’Aire Corp. v. Gregory because it was based on a theory of duty that drawn from a general theory of negligence that applied with equal force to other parts of negligence law, ranging from personal injury to emotional distress. The article then observes that in his later writings, Rabin seemed to back off from his optimistic claim that negligently caused economic loss can be subsumed under a general theory of duty and argued instead that courts must resort to ad hoc duty rules, thus leaving plaintiffs facing a patchwork of holdings driven by various policy considerations.

The article concludes by asking whether Rabin’s retreat is a reflection of an unavoidable reality, which is that negligently caused economic loss is, for whatever reason, destined to operate under principles that limit liability on the basis of principles and/or interests that are unmoored from tort law itself, or whether, as courts outside the United States have suggested (especially in Australia), there is a set of principles available which could subsume negligently caused economic loss cases within a broader theory of duty that includes personal injury, property damage, and emotional distress.

Keywords: Torts, negligence, pure economic loss, litigation