Judicial Doctrine Trumps Plain Language of the Product Liability Act

On January 4 of this year, the New Jersey Supreme Court heard oral arguments in Dean v. Burnett Homes, Inc., 200 N.J. 207 (2009), addressing whether a homeowner has a tort remedy against manufacturers of defective building components that cause physical damage to other parts of the home in which they are integrated. Dean centers upon the interaction between, on the one hand a judicial construct known as the “economic loss doctrine” which bars the tort recovery of “purely economic loss” and, on the other, the New Jersey Product Liability Act, which prescribes a statutory remedy for “harm caused by the product.” Recently, the Third Circuit Court of Appeals had occasion to address that interaction in Travelers Indem. Co. v. Dammann & Co., Inc., WL 395915 (3d. Cir. 2010). Although, factually, Travelers arose in a context that is distinguishable from Dean ( the former involved a commercial sale of defective goods, the latter a consumer protection in residential realty), the Third Circuit’s decision on Feb. 5, predicting how the New Jersey Supreme Court will approach the interplay of judicial policy and legislative enactment, has profound implications for legislative protection of both consumers and commercial interests alike. In that respect, the decision is deeply troubling.

It is well-settled that the drafting of statutory language to carry out prevailing policy preferences is a legislative, not a judicial, function. Yet, in Travelers, the Third Circuit effectively substituted the judicial policy pronouncements embodied in the “economic loss doctrine” for the plain language used by the New Jersey Legislature. At issue was whether a commercial purchaser of a defective product could sue under the NJPLA for “physical damage to property, other than to the product itself,” N.J.S.A. 2A:58C-1(b)(2), when the “other property” damage was a reasonably foreseeable result of a contractual breach at the time of the original contracting. While acknowledging that “the NJPLA clearly permits a plaintiff to pursue a tort remedy in the event of harm to ‘other property,’” the Third Circuit nevertheless predicted that the New Jersey Supreme Court would apply the common-law construct of the economic loss doctrine to preclude such a recovery.