SW Legal studies in Business

Producer of Misinformation Had No Duty to Third Parties Injured by Bad Information
Description Appeals court affirmed the dismissal of suit brought by landowners whose property fell in value when a consulting firm incorrectly announced that property next door would become a landfill. The consultant may have provided bad information about the property, but its duty was to the party who hired him, not the affected third parties.
Topic Torts
Key Words Negligence; Misinformation; Duty
C A S E   S U M M A R Y
Facts Foth was hired by Bluestem Solid Waste Management Agency to search for a new landfill site in Linn, County Iowa. Foth announced that a piece of land that happened to border property owned by the Vogels was the prime site. The announcement caused the Vogels land, which was being readied for residential development, to fall in value. The Vogels sued Foth for negligently supplying information for the guidance of others that caused an economic loss to occur. The Vogels contend that since the site picked by Foth is prime farm land, under Iowa law it cannot be converted into a landfill. The district court dismissed the suit; the Vogels appealed.

Affirmed. Under Iowa law, the tort of negligence has developed into a broad and open-ended cause of action, which can be applied to negligence in the supplying of information for the guidance of others in the course of business. However, the duty is narrowly limited to the person for whose benefit and guidance the information is produced. Foth produced the information for Bluestem. The fact that Foth could reasonably foresee that an announcement about a landfill, correct or not, might affect property values, does not create an obligation on Foth's part to all such affected parties. If Foth has been negligent, and causes a loss to Bluestem, then Bluestem may have a cause of action against Foth for supplying misinformation. But Foth had no duty to the Vogels or other property owners who might have been affected by its information.

Citation Vogel v. Foth and Van Dyke Associates, Inc., 266 F.3d 838 (8th Cir., 2001)

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