Economic Loss & Settlement Credit Law

Trial Lawyer Austin Texas

Jan 7, 2013 — by Jeff Mundy
Tags: Damages


Although the Texas Supreme Court described the term as "something of a misnomer," one general formulation of the economic loss rule, as applicable to this case, is that a party may not recover in tort for purely economic losses suffered to the subject matter of a contract. Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 415, 418 (Tex. 2011). In determining whether the economic loss rule applies, courts must consider "both the source of the defendant's duty to act (whether it arose solely out of the contract or from some common-law duty) and the nature of the remedy sought by the plaintiff." Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 960 S.W.2d 41, 45 (Tex. 1998) (quoting Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 12 (Tex. 1996)).

 The Supreme Court also explained that the fact that a party seeks economic damages does not necessarily bar a tort cause of action. Id. at 418--19 (noting that economic losses may be recovered in tort for "negligent misrepresentation, legal or accounting malpractice, breach of fiduciary duty, fraud, fraudulent inducement, tortious interference with contract, nuisance, wrongful death claims related to loss of support from the decedent, business disparagement, and some statutory causes of action" (emphasis added) (footnotes omitted)).

We therefore conclude that the trial court erred by applying a settlement credit against exemplary damages assessed against Del Monte. See Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 391 (Tex. 2000) (non-settling defendant may only claim credit based on damages for which all joint tortfeasors jointly liable); Gilcrease v. Garlock, Inc., 211 S.W.3d 448, 457 (Tex. App.-El Paso 2006, no pet.) (exemplary damages assessed against non-settling defendant may not be offset by amount of common damages paid by settling defendants).

Flanagan Shipping Corp. v. Del Monte Fresh Produce N.A., (Tex. App. - Houston [1st Dist.], 2012).

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