The Philadelphia Court of Common Pleas recently sustained preliminary objections (which is the Pennsylvania equivalent of a motion to dismiss in lieu of an action) as to a plaintiff’s negligence and negligent misrepresentation claims relying on the “gist of the action” doctrine in the case captioned Kay, Tabas & Niknam Ophthalmology Associates, P.C. v. Gibraltar Technologies, Inc. and Thomas Hogue.
By way of background, the plaintiff Kay, Tabas & Niknam Ophthalmology Associates, P.C. (“Kay Tabas”), a healthcare provider, entered into a service agreement with the defendants Gibraltar Technologies, Inc. and Thomas Hogue (collectively “Gibraltar”) in 2012 wherein Gibraltar agreed to provide data backup services to Kay Tabas. Specifically, Gibraltar was hired to convert Kay Tabas’ patient records, billing records, and other business records into a paperless system. Thereafter, Gibraltar subcontracted with a third-party to store Kay Tabas’ back-up data. On or about November 28, 2013, Kay Tabas’ on-site servers malfunctioned. As a result, Kay Tabas transmitted corrupt data to the third-party. Consequently, Kay Tabas’ back-up data was corrupted and ultimately lost.
On or about May 6, 2015, Kay Tabas filed a complaint against Gibraltar in Philadelphia County, Pennsylvania alleging, inter alia, negligence and negligent misrepresentation. Gibraltar filed preliminary objections in response to Kay Tabas’ complaint. With respect to Kay Tabas’ negligence based claims, Gibraltar argued that Kay Tabas failed to state a legally sufficient cause of action under the gist of the action doctrine as recently established in Bruno v. Erie Insurance Company.
The “gist of the action” doctrine addresses how and when negligence claims apply in the contract context. Specifically, the doctrine holds that “if the facts of a particular claim establish that the duty breached is one created by the parties by the terms of their contract, then the claim is to be viewed as a breach of contract.” Alternatively, “if the fast establish that the claim involves a broader social duty, then it must be regarded as a tort.” The “gist of the action” doctrine also requires courts to distinguish between business actions that are within the scope of the actual promises made in a contract and those that go beyond the scope of the contract.
With this background, the Philadelphia Court of Common Pleas first looked at the service agreement between Kay Tabas and Gibraltar, as the service agreement formed the basis for Kay Tabas’ lawsuit. In doing so, the court determined that Kay Tabas and Gibraltar contracted directly for a backup plan. Further, the court stated that the data backup services Gibraltar failed to deliver were the precise services Kay Tabas expected pursuant to the service agreement. Ultimately, the court ruled that Kay Tabas’ loss of data neither implicated a general societal duty nor did Gibraltar’s business actions go beyond the scope of the promises made in the service agreement. Rather, the court held that Kay Tabas’ claimed damages arose from the specific promises made in the service agreement; thus, the claim should be viewed as a breach of contract, not tort. Accordingly, the court dismissed Kay Tabas’ negligence and negligent misrepresentation claims pursuant to the gist of the action doctrine.
Special thanks to Erin Connolly for her contributions to this post. For more information, please e-mail Bob Cosgrove .