In Rattagan v. Uber Technologies, Inc. the Supreme Court resolved a question certified by the Ninth Circuit involving the application of California’s economic loss rule.
The economic loss rule generally prohibits plaintiffs from recovering tort damages in cases involving breaches of contract that cause only economic losses. The Ninth Circuit asked the Supreme Court to decide the following question: “Under California law, are claims for fraudulent concealment exempted from the economic loss rule?”
The Supreme Court’s unanimous opinion discusses the evolution of California law on this issue and concludes that the question the Ninth Circuit should have asked is “Can a plaintiff assert an independent claim of fraudulent concealment in the performance of a contract?” The court then concluded that the the answer to the reframed question is a conditional yes. A plaintiff may assert a cause of action for fraudulent concealment based on conduct occurring in the course of a contractual relationship, but only if two conditions are met: (1) the elements of the claim can be established independently of the parties’ contractual rights and obligations and (2) the tortious conduct exposes the plaintiff to a risk of harm beyond the reasonable contemplation of the parties when they entered into the contract.