SW Legal studies in Business

City Not Liable for Costs Suffered by Business Owner Due to City Mistake

Oregon high court held that a city could not be held liable for negligence when it mistakenly issued a permit to open a business that should not have been issued. There was no common law right of action against the city, as it was merely exercising its proper authority.

Topic Torts
Key Words

Negligence; Government; Land Use; Certification; Economic Loss

C A S E   S U M M A R Y

Loosli wanted to start a used car business in Salem, Oregon, and leased property for that purpose. He applied to the state for a “vehicle dealer certificate” as required to operate that business. To get the state certificate, Loosli needed a certificate from the city stating that the applicant was in compliance with local land use ordinances. A city planner signed the city certificate and Loosli received the state certificate. While in the process of getting ready to open the business, the city decided the approval for the business in the location on the certificate was a mistake and told him he could not run the business there. Loosli eventually opened in another location, but incurred significant expenses. He sued the city for negligence in an effort to recover the economic losses he suffered. The trial court and appeals court held for the city; Loosli appealed.


Affirmed. Liability in negligence for purely economic harm must be based on some duty of the negligent party to the injured party beyond the common law duty to exercise reasonable care to prevent foreseeable harm. Even if it was reasonably foreseeable that Loosli would suffer an economic loss as a result of the city’s actions, that is not sufficient to state a negligence claim against the city. Some source of a duty outside of the common law of negligence is required. The city’s compliance with its land use plan did not impose a duty on it to protect applicants to the city from economic loss because of mistakes made by the city. The city was acting properly under its statutory authority to regulate land use.


Loosli v. City of Salem, 345 Or. 303 (2008 WL 4445704, Sup. Ct., Ore., 2008)

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