Under Texas’s economic loss rule, a plaintiff who is a party to a contract cannot sue under tort unless (1) the defendant owed plaintiff a common law-not contractual-duty and (2) the plaintiff suffered an injury independent of the contract. Regarding the economic loss rule, the court stated: Among other things, the defendants filed a motion to dismiss because “Texas’s economic loss rule bars Plaintiffs’ claims for negligent misrepresentation, negligence, negligent supervision, and breach of fiduciary duty.” The court granted the motion as to the negligent misrepresentation, negligence, and negligent supervision claims, but denied it as to the breach of fiduciary duty claims. To formalize the relationship, each plaintiff signed multiple agreements. Optionsellers, plaintiffs sued defendants for “reckless mismanagement of Plaintiffs’ investment accounts.” No. While certainly some of the allegations relate to the alleged oral agreement between RPS and Mann, and some are tied to the written agreements between the companies, the allegations of a duty independent of the contracts and damages to RPS’s reputation and goodwill resulting from Mann’s alleged breach of his fiduciary duties to his long-time friend and business associate are sufficient at the motion to dismiss stage to state a plausible claim for relief that is not barred by the economic loss rule. RPS states that these breaches resulted in excessive costs to RPS, lost business opportunities, and damage to RPS’s reputation and goodwill in the industry. RPS describes the breach of fiduciary duty as invoicing RPS two and three times for the same work, entering into and supervising the Five Star MSA and placing his own interests above RPS’s, concealing information from RPS, failing to require his companies to follow the contractual requirements, diverting funds for individual purposes, commingling funds, and self-dealing. Here, as the Land Defendants acknowledge, RPS alleges a source of duty separate from any alleged written or oral agreement-the longstanding relationship between Small and Mann. The court then held that there were sufficient pleadings to support an independent fiduciary duty based on a confidential relationship: “Under Texas common law, an ‘informal fiduciary duty may arise from a moral, social, domestic or purely personal relationship of trust and confidence, generally called a confidential relationship.’” Id. The court then noted that the economic loss rule does not apply to breaches of fiduciary duty that arose independent of a contract. Under Texas law, the “economic loss rule generally precludes recovery in tort for economic losses resulting from a party’s failure to perform a contract when the harm consists only of the economic loss of a contractual expectancy.” In determining if the economic loss rule applies, Texas courts look to both the “source of the alleged duty and the nature of the claimed injury.” “ party may elect a recovery in tort if the duty breached stands independent from the contractual undertaking, and the alleged damages are not solely the result of a bargained-for contractual benefit.” This is because “‘ort obligations are in general obligations that are imposed by law-apart from and independent of promises made and therefore apart from the manifested intention of the parties-to avoid injury to others.'” The court first discussed the economic loss rule: The federal district court denied the motion to dismiss. The defendant filed a motion to dismiss based on the economic loss rule, arguing that the plaintiff’s claims all arose from oral and written contracts. The plaintiff alleged that the defendant took advantage of his relationship, lied about his qualifications and experience, and overbilled and had self-dealing transactions. Land Dep’t, Inc., the plaintiff sued the defendant for breaching fiduciary duties due to a confidential relationship regarding oil and gas development. Public Services, Infrastructure, Transportation.
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