New Jersey federal courts actively utilize the “economic loss doctrine” to weed out tort claims where the legal obligations at issue are established by the parties' direct contractual relationship. See SRC Construction Corp. of Monroe v. Atlantic City Hous. Auth., 935 F. Supp. 2d 796, 800-01 (D.N.J. 2013) (where the court predicted that the New Jersey Supreme Court would not apply the doctrine to a situation in which the parties did not have a direct contractual relationship).

Generally, the doctrine provides that where the scope of liability is defined by the obligations assumed in a contract, remedies in tort are not available, unless an independent duty is also owed. Saltiel v. GSI Consult., 170 N.J. 297, 316 (2002). Unlike their federal counterparts, New Jersey state courts infrequently apply the doctrine. However, the recent application of the doctrine by New Jersey federal courts in financial services cases may breathe new life into the defense.

Origin of the Economic Loss Doctrine

The doctrine is a species of products liability law. See”The Economic Loss Rule in NJ and the 'Integrated Product' Doctrine” (N.J.L.J., Dec. 10, 2014). The case often cited as establishing the doctrine is Seely v. White Motor Co., 45 Cal.2d 9 (1965), in which the court held that a manufacturer may be held liable on a negligence theory for physical injuries resulting from defects in his goods that do not meet a certain standard of care, but it cannot be held liable for the level of performance of its products in a consumer's business unless the manufacturer agrees in advance that the product is designed to meet the consumer's demands. Thus, in a negligence action, a manufacturer's liability would be limited to physical injuries caused by a defective product but would not include economic losses. Id.at 18.