Oregon Supreme Court: City not liable for erroneous statement to business owner

By Lori Irish Bauman
October 6, 2008

The Oregon Supreme Court held last week that a government body cannot be liable for negligently providing incorrect information.  In Loosli v. City of Salem, the court concluded that a used car dealer can't recover damages resulting from the City of Salem's erroneous certification as part of the dealer's application for a vehicle dealer certificate.  The city mistakenly stated that the location for the proposed used car lot complied with land use rules.  When that turned out to be wrong, the dealer incurred costs associated with moving the business to a different location. 

The case turns on the application of the economic loss doctrine, which provides that a negligence claim to recover for purely economic losses must be based on some special duty that defendant owes to plaintiff beyond the ordinary duty to exercise reasonable care to avoid foreseeable harm.  In this case, the dealer contended that the special duty arose from the city's statutory obligation to provide the land-use certification.   But the court concluded that the certification was not intended to benefit the dealer specifically, but rather to protect the public at large.  Because there was no special duty, the dealer could not recover its business losses.

The Supreme Court affirmed a Court of Appeals ruling that the city was entitled to summary judgment on the dealer's negligence claim.  See our coverage of the 2007 Court of Appeals opinion here.

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