At today’s 95th Annual Meeting, members of The American Law Institute voted to approve Tentative Draft No. 3 of Restatement of the Law Third, Torts: Liability for Economic Harm. Today’s vote marks the completion of this project.

This Restatement covers the topics of unintentional infliction of economic loss, including professional negligence, negligent misrepresentation, negligent performance of services, and public nuisance. It also addresses fraud, breach of fiduciary duty, interference with contract, unjustifiable litigation, and civil conspiracy.

“Recovery in tort for economic loss has been a growth area in American law over the last few decades,” said ALI Project Reporter Ward Farnsworth, Dean of the University of Texas School of Law. “There has been a lot of judicial commentary and a lot of scholarly commentary on when it ought to be possible to recover in tort for a pure economic loss. Our goal in this Restatement has been to capture the best insights of the commentary while staying true to where the case law has been going.”

Several torts in this project were covered in the Second Restatement of Torts but required revision because of developments in the law. In addition to updating the economic torts covered in the Second Restatement, this Restatement addresses some topics not covered in prior Restatements. These include the economic-loss rule outside the area of products liability, exceptions to the economic-loss rule, bad-faith breach of contract as a tort, and the application of principles of comparative responsibility to economic torts.

“It is an underrated branch of tort law,” continued Dean Farnsworth. “Your typical first-year law school course on the law of torts is all about accidents, personal injury, and property damage. This branch of the Restatement of Torts comprises torts involving negligence or intentional wrongdoing that produce pure economic loss. Economic torts are no less significant than any other kind, as the victims of Bernie Madoff or any other Ponzi schemer can attest.”

With the approval of the draft, Dean Farnsworth will now prepare the Institute’s official text for publication. Until the official text is published, this and previous Tentative Drafts approved by ALI’s membership are the official position of ALI, and may be cited as such.

“I want to express my enormous gratitude to Dean Farnsworth as well as to his dedicated group of Advisers and to the Members Consultative Group. They have done admirable work,” said ALI Director Richard L. Revesz. “In 2012, Ward became the Dean at the University of Texas School of Law. Despite his challenging new responsibilities, he continued working on the Restatement at an impressive clip, delivering excellent drafts that were approved by members at previous Annual Meetings. This economic-harm portion of the Restatement Third of Torts series will be of great value to judges who must contend with this complex area of tort law.”

Liability for Economic Harm is the fourth installment of the Restatement Third of Torts to be completed. It follows on the footsteps of Products Liability, Apportionment, and Liability for Physical and Emotional Harm. Two additional projects are currently being drafted: Intentional Torts and Property Torts, which is also being undertaken as part of the Restatement Fourth of Property.




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