North Carolina Federal District Court Dismisses Tort Claims Based on Same Duty and Breach Alleged in Plaintiff’s Contract Claims

Precision Hydraulic Cylinders, Inc. v. Manufacturing. Technology, Inc., No. 7:18-CV-203-FL, 2019 BL 344743, 2019 U.S. Dist. LEXIS 156670 (E.D.N.C. Sept. 13, 2019)

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Jane Fox Lehman

Precision Hydraulic Cylinders, Inc. (“Precision”) issued a series of purchase orders to Manufacturing Technology, Inc. (“MTI”) to weld steel components together to create hydraulic cylinders. MTI agreed to develop welds for Precision’s small and large cylinders under two separate purchase orders.

The district court dismissed Precision’s negligence and negligent misrepresentation claims pursuant to the economic loss doctrine because they were not “independent, identifiable, and distinct” from Precision’s breach of contract claims. The conduct on which they were based, MTI’s provision of failed welds, was the same. And the duty Precision alleged was owed, to exercise reasonable care in developing the welds, was the same.

Precision’s fraudulent concealment claim survived.  Precision acknowledged that MTI’s failure to develop the large cylinder welds in and of itself did not constitute fraud.  Precision alleged instead that MTI’s concealing the fact that it did not develop the large cylinder welds induced it to enter into subsequent production orders with MTI, which resulted in failed welds reaching Precision’s customers and causing it substantial losses. Precision did not allege that the purchase order obligated MTI to tell Precision that it developed the large cylinder welds, or that MTI’s failure to do so constituted a breach of contract.

Precision’s statutory unfair trade practices claim also survived because in North Carolina, “[p]roof of fraud would necessarily constitute a violation of the prohibition against unfair and deceptive acts.”

To view the full text of the court’s decision, courtesy of Bloomberg Law, click here.