Tort law is designed to compensate individuals who suffer some form of personal injury. Tort law is separate from contract law. That is to say, a tort injury arises out of some general legal duty that the defendant owed to the plaintiff, while a contract injury is based on the terms of the contract itself.
In Georgia the courts enforce what is known as the “economic loss rule.” This rule basically states that parties to a contract typically cannot file personal injury lawsuits against one another, “except in cases where the party would have a right of action for the injury done independently of the contract.” More broadly, Georgia does not allow a party to recover “purely economic losses” in a personal injury claim, regardless of whether or not a contractual relationship existed between the plaintiff and the defendant.
Murray v. ILG Technologies, LLC
A recent decision from the U.S. 11th Circuit Court of Appeals in Atlanta, Murray v. ILG Technologies, LLC, illustrates the broad application of the economic loss rule. This case does not involve a typical personal injury claim, such as one arising from an auto accident or medical malpractice. Instead, it involves a group of aggrieved law students who were mistakenly told they failed the bar exam due to an apparent glitch in the software used to calculate their grades.
Naturally, the students filed a class action complaint against the company that provided the grading software to the Georgia Office of Bar Admissions (OBA). The lawsuit accused the company and its owner of negligence and defamation, among other things. In response, the defendants subsequently moved to dismiss the case, arguing it was barred by Georgia’s economic loss rule.
A federal judge agreed and dismissed the lawsuit. The plaintiffs appealed to the 11th Circuit. But in a January 8, 2020, opinion, a three-judge panel of the 11th Circuit affirmed the trial court’s dismissal.
The appeals court explained that the defendants “owed no duty to the [plaintiffs] outside any duty imposed by the contract with the OBA.” In other words, the defendants only had a duty to supply software to the OBA. They had no “independent duty that arose by operation of law” towards the defendants.
The 11th Circuit also rejected the plaintiffs’“attempt to circumvent the operation of the economic loss rule by arguing they have sought damages arising out of injury to their persons.” Specifically, the plaintiffs said they suffered “reputational damage” and “emotional distress” after being incorrectly told they failed the bar exam. The problem here, the Court explained, was that “reputational damage” injuries are only recoverable in Georgia for “actions alleging intentional or wanton misconduct,” as opposed to mere negligence.
As for “emotional distress,” Georgia law similarly does not permit recovery of damages for the “physical manifestations of psychic or emotional trauma.” There must be an actual physical injury. The plaintiffs suggested they sustained physical symptoms–such as headaches and nausea–that “amplified” their emotional distress. But the 11th Circuit said Georgia law has never recognized a personal injury claim for “compounded emotional distress,” and it declined to recognize one here.