April 09th, 2020

US Court of Appeals for the Fifth Circuit Opinions
Golden Spread Electric Cooperative v. Emerson Process Management Power & Water Solutions

Docket: 19-10238
Opinion Date: April 8, 2020
Judge: Jacques Loeb Wiener, Jr.
Areas of Law: Business Law, Contracts

The Fifth Circuit affirmed the district court's dismissal of Golden Spread and Westport's tort claims against Emerson. The claims arose after Emerson installed a new control system for Golden Spread and the control system's software had been programmed incorrectly. The court held that the economic loss rule, which prevents recovery in tort for purely economic damage unaccompanied by injury to persons or property, is applicable in this case. The court reasoned that the Texas Supreme Court would conclude that the risk suffered here is better addressed in contract than in tort. In this case, the parties are sophisticated, commercial actors that actually did negotiate over the allocation of risk. Furthermore, the parties themselves were in the best position to understand and allocate the risks of their transaction ahead of time to resolve any ambiguities in the application of that rule to their circumstances.

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