General Electric Co. v. Lowe's Home Centers, Inc.
279 Ga. 77, 608 S.E.2d 636, 2005 Fulton County D. Rep. 349 (2005)
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Rule of Law:
Under Georgia's economic loss rule, a plaintiff may not recover in tort for purely economic losses, such as lost profits, that arise from damage to property the plaintiff does not own. Recovery is limited to economic losses resulting directly from damage to the plaintiff's own person or property.
Facts:
- Lowe’s Home Centers, Inc. (Lowe's) operated a retail store in Rome, Georgia and sought to build a larger 'superstore'.
- The superstore plan required acquiring an adjacent eight-acre parcel of land.
- Lowe's entered into an agreement with a developer, Horne Properties, for Horne to purchase the adjacent parcel and lease it to Lowe's.
- A nearby General Electric Company (GE) plant had used polychlorinated biphenyls (PCBs).
- PCBs originating from GE's plant were discovered on both Lowe's existing property and the adjacent parcel that Horne intended to purchase.
- Following the discovery of contamination, and as permitted by their contracts, Lowe's and Horne canceled their agreements for the adjacent parcel, halting the superstore project.
Procedural Posture:
- Lowe's sued GE in the United States District Court for the Northern District of Georgia, alleging various torts.
- A jury found in favor of Lowe's, awarding it $18 million in lost profits associated with the planned superstore.
- GE, as appellant, appealed the verdict to the U.S. Court of Appeals for the Eleventh Circuit.
- The Eleventh Circuit certified a question to the Supreme Court of Georgia to clarify whether Georgia's economic loss rule barred Lowe's claim for lost profits.
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Issue:
Does Georgia's economic loss rule permit a plaintiff to recover in tort for lost profits that would have been realized from a business enterprise requiring the use of both the plaintiff's damaged property and other damaged property that the plaintiff did not own?
Opinions:
Majority - Fletcher, Chief Justice
No. Georgia's economic loss rule does not allow a plaintiff to recover lost profits that would have only been realized by using its damaged property in conjunction with other damaged property that it did not own. The court held that a plaintiff can only recover in tort for economic losses that result from damage to their own property. The court reasoned that existing precedent, such as Byrd v. English, established that a tort to the property of one person does not make the tortfeasor liable to another person who merely had a contract with the injured party, as this would lead to limitless liability. Lowe's had no legal or equitable interest in the adjacent property; it only had a lease agreement with Horne, who in turn had an option to purchase. Policy considerations also support this bright-line rule, as it prevents double or triple recovery for the same damage and provides certainty and predictability in the law.
Analysis:
This decision reinforces a strict application of the economic loss rule in Georgia, firmly tying recovery for purely economic losses to a plaintiff's proprietary interest in the damaged property. By rejecting Lowe's 'single enterprise' theory, the court prevented the expansion of tort liability to cover contractual expectancies related to third-party property. The ruling establishes a clear, bright-line precedent that prioritizes predictability and prevents potentially limitless and duplicative liability, thereby strengthening the doctrinal wall between tort and contract law.
