Harrisburg, PA
Legal Intelligencer
(by Casey Alan Coyle and Emily Davis)
Sometimes life imitates art. The Disney animated film “Encanto” centers around a family, the Madrigals. They live in a magical house that bestows upon each child in the family a unique gift, except the protagonist, Mirabel. Mirabel soon discovers that the magic surrounding the house is in danger and seeks out the assistance of her ostracized uncle, Bruno. The Madrigal family avoided mention of Bruno for ten years. Mirabel knew the basics: he could predict the future. But the contours of his powers, the details of his disappearance, the mere mention of his name—all forbidden topics of discussion. The family even wrote a Grammy-nominated song about it, “We Don’t Talk About Bruno.”
Likewise, for nearly a decade, the Pennsylvania Supreme Court has declined to further discuss its holding in Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014), despite numerous calls for clarification. As a result, uncertainty remains regarding the “gist of the action” doctrine in Pennsylvania. Therefore, just like the Madrigal family, there is one question permeating the legal community: is it finally time to talk about Bruno?
Contract v. Tort Distinction
The contract-tort distinction is fundamental to civil litigation. While actions for breach of contract compensate the plaintiff for damages foreseeable at the time of a contract, tort claims remedy injuries resulting from the defendant’s conduct. Nonetheless, the contract-tort distinction is often unclear. Charles Miller, Contortions over Contorts: A Distinct Damages Requirement?, 28 Tex. Tech. L. Rev. 1257, 1257-58 (1997). This blurred boundary is complicated by plaintiffs’ ability to recover additional forms of damages for actions sounding in tort that are not available for actions sounding in contract, like punitive damages. Danielle Sawaya, Not Just For Products Liability: Applying The Economic Loss Rule Beyond Its Origins, 83 Fordham L. Rev. 1073, 1083 (2014). These additional remedies provide a strong incentive for plaintiffs to disguise breach of contract claims as tort claims to recover a greater damages award. Lisa T. Munyon, et al., Tort and Contract Actions: Strange Bedfellows No More In The Wake Of Tiara Condominium, 87 Fla. B.J. (2013).
The Bruno Decision
Courts have attempted to devise rules to maintain the conceptual distinction between tort and contract claims, and one of those is the “gist of the action” doctrine. The doctrine bars a plaintiff from suing in tort when the “gist” or gravamen of the plaintiff’s claim is contractual in nature. eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 15 (Pa. Super. 2002). The purpose of the doctrine is to preclude a plaintiff from “re-casting ordinary breach of contract claims into tort claims.” Hart v. Arnold, 884 A.2d 316, 339 (Pa. Super. 2005). As recently explained by one federal court: “Pennsylvania courts have employed this doctrine to deal with Trojan Horse torts—that is, instances when plaintiffs have clothed a breach of contract claim in negligence terms so they can recover noneconomic damages (like pain and suffering) that they could not recover under contract law.” Humphries v. Pa. State. Univ., No. 4:20-CV-00064, 2021 WL 435532, at *7 (M.D. Pa. Sept. 24, 2021).
While the gist of the action doctrine has been a longstanding fixture of Pennsylvania law, the Pennsylvania Supreme Court did not formally adopt it until Bruno. In doing so, the Court articulated the test to determine when a claim is barred by the doctrine. The Court held that, “[i]f the facts of a particular claim establish that the duty breached is one created by the parties by the terms of their contract—i.e., a specific promise to do something that a party would not ordinarily have been obligated to do but for the existence of the contract—then the claim is to be viewed as one for breach of contract.” Bruno, 106 A.3d at 68. In contrast, “[i]f. . . the facts establish that the claim involves the defendant’s violation of a broader social duty owed to all individuals, which is imposed by the law of torts and, hence, exists regardless of the contract, then it must be regarded as a tort.” Id. The Supreme Court added that the “nature of the duty alleged to have been breached” is the “critical determinative factor in determining whether the claim is truly one in tort, or for breach of contract.” Id.
Justice Eakin authored a concurring opinion, in which he cautioned against what he deemed “troublesome language” in the majority opinion. Bruno, 106 A.3d at 124. He opined: “To the extent the majority is perceived to ‘paint with a broad brush,’ suggesting any negligence claim based on a contracting party’s manner of performance does not arise from the underlying contract, I must disagree. In some cases, such as here, that may be the case. However, synthesizing case law to stand for such a broad pronouncement does not comport with the ‘gist of the action’ doctrine—an inherently circumstantial analysis.” Id.
The Fallout
Although intended to end the uncertainty surrounding the gist of the action doctrine, Bruno left several questions unanswered. Chief among them is how to determine whether a claim concerns a “broader social duty” or a duty imposed by contract. Malone v. Weiss, No. 17-1694, 2018 WL 827433, at *4 (E.D. Pa. Feb. 12, 2018). As one federal court put it, “the Bruno court did not explain how to separate claims that implicate ‘broader social dut[ies]’ (and do not trigger the gist of the action doctrine) from contract duties (that do trigger gist of the action).” Ohama v. Markowitz, 434 F.Supp.3d 303, 319 (E.D. Pa. 2020). This lack of guidance has proven “particularly problematic in the context of a claim for fraudulent inducement because such claims inherently involve both a ‘social duty’ to refrain from fraud as well as duties imposed by contract.” Sheridan v. Roberts Law Firm, No. 2:19-CV-00467, 2019 WL 6726469, at *4 (E.D. Pa. Dec. 11, 2019) (citation and quotation marks omitted).
Pennsylvania state and federal courts have reached “different conclusions” about whether the gist of the action doctrine applies to fraudulent inducement claims. Downs v. Andrews, 639 Fed. Appx. 816, 820 (3d Cir. 2016). In Malone, for instance, the federal district court found that “[p]ermitting a fraudulent inducement claim . . . would essentially negate the entire doctrine of gist of the action because a Plaintiff would have only to allege that Defendants never intended to abide by a provision in their contract to escape dismissal.” Malone, 2018 WL 827433, at *4. On the other hand, in KMB Shamrock, Inc. v. LNR Transportation, Inc., 50 Pa. D. & C. 5th 259 (Lackawanna Cnty. Ct. Com. Pl.), the state court determined that fraudulent inducement claims should “remain unaffected by the gist of the action doctrine following . . . Bruno.”
The lack of clarity surrounding the doctrine is not confined to the tort of fraudulent inducement. Consider, for example, the tort of breach of fiduciary duty, which is often raised alongside a breach of contract claim where an employee solicits customers for a competitor during his/her employment in violation of a non-solicitation agreement. In that scenario, the act underlying the tort is identical to the act constituting the breach of the contract. Therefore, allowing both claims to proceed effectively allows the plaintiff to obtain double recovery for the same harm. Yet, under Bruno, is not clear whether the gist of the action doctrine precludes such a result.
In sum, and as noted by one commentator, “[w]hile the court’s decision to invoke a duty-based standard was an attempt to establish a uniform interpretation of the doctrine under Pennsylvania law, its broad holding allows for continued ambiguity surrounding the application of the doctrine and may increase the number of tort claims brought by plaintiffs who can rely on the opinion’s broad language.” Lauren Anthony, Home Is Where The Confusion Is: Pennsylvania Formally Adopts The “Gist Of The Action” Doctrine And Builds A House For Ambiguity In Bruno V. Erie Insurance Co., 61 Vill. L. Rev. 235, 246 (2016).
Conclusion
Almost ten years after Bruno, the uncertainty surrounding the gist of the action doctrine persists. Therefore, if given the opportunity through the proper vehicle, the Pennsylvania Supreme Court likely will further expound on its decision in Bruno. After all, there’s a lot to say about Bruno.
Casey Alan Coyle is a shareholder at Babst Calland. and focuses his practice on appellate law and complex commercial litigation. He is also a former law clerk to Chief Justice Emeritus Thomas Saylor of the Pennsylvania Supreme Court. Contact him at 267-939-5832 or ccoyle@babstcalland.com.
Emily A. Davis is an associate at Babst Calland and focuses her practice on appellate law and complex commercial litigation. She is also a former law clerk to Chief Justice Baer of the Pennsylvania Supreme Court. Contact her at 724-672-7445 or edavis@babstcalland.com.
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Reprinted with permission from the February 2, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.