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Barring fraudulent concealment claims under the so-called economic loss doctrine would create "perverse incentives" for people to draw others into contracts and "have their way with them," the California Supreme Court was told Tuesday by counsel for an Argentinian attorney suing Uber on allegations it hid crucial information from him.

Cindy Tobisman of Greines Martin Stein & Richland LLP appeared before the state's highest court as it seeks to answer a certified question from the Ninth Circuit that is central to her client Michael Rattagan's claims against Uber Technologies Inc.

Rattagan alleges Uber fraudulently concealed information from him when he represented their subsidiaries during a problem-filled launch in Buenos Aires, leading to him being arrested and vilified in the media.

Not allowing fraudulent concealment claims like his to go forward because of the economic loss doctrine — which prevents a party in a contract from recovering for economic losses in tort unless the party can show there was harm beyond a broken contractual promise — would give cover for parties to trick others into a contract or to misbehave during the execution of the contract, Tobisman said.

"There's nothing about [the doctrine] that we would want to shield people who commit fraud just because there's a contract in the mix," Tobisman said. "And in fact it would create some kind of perverse incentives for people to draw somebody into a contractual relationship because then they could have their way with them."

Tobisman said Uber agrees that if fraudulent concealment induces a contract, a claim would not fall outside the economic loss doctrine. But she also argued that concealment could still occur during the execution of a contract.

A key ruling on the economic loss doctrine, the high court's 2004 opinion in Robinson Helicopter v. Dana, held that fraudulent inducement is not barred under the economic loss doctrine but didn't "expressly state that this exception applies to both concealment and to misrepresentation," Rattagan said in a brief to the court, which also said the Ninth Circuit question didn't specify concealment before or during a contract, so the high court should answer both.

Tobisman later in the hearing argued that in her client's case, the fraudulent concealment occurred during the contract, but that Uber's wrong behavior toward her client is "frankly totally separate from the contract. I think the obligation not to set somebody up as your fall guy and your lighting rod, which is what happened to Mr. Rattagan, is an obligation that exists so far outside the realm of —"

Justice Martin L. Jenkins cut Tobisman off and said, "But it arises in the context of a contract."

"It arises during the performance of a contract in that these two people are in a contractual relationship, but it's independently wrongful in the sense that there's an intentionality," Tobisman said. "I mean, the whole idea of fraud is that it's conduct that you have set out to draw somebody into a situation where if you gave them that material piece of information they could have protected themselves."

Rattagan first sued in 2019 and twice amended his complaint, seeking to hold Uber liable for fraudulent concealment, negligence, breach of the implied covenant of good faith and fair dealing, and aiding and abetting fraudulent concealment over what he called the company's "recklessly orchestrated" entry into the Argentine capital.

Rattagan, one of the founding partners of Rattagan Macchiavello Arocena who previously served as co-head of the firm's mergers and acquisitions group and its natural resources and energy group, says that he began working for two of Uber's Dutch subsidiaries in 2013 to lay the groundwork for a Buenos Aires launch, which included getting the process started for registering Uber's Argentina subsidiary, having Rattagan listed as the legal representative and using his law firm as Uber's legal domicile ahead of an eventual launch in the city.

But over the next couple of years, Uber kept much of its actual launch plans secret from him, including that it had hired alternate counsel in the country, that it planned to launch despite an incomplete corporate registration and that it planned to refuse to comply with local authorities, Rattagan alleges.

After Uber launched in Buenos Aires, local officials and taxicab unions became incensed and staged protests outside Rattagan's law firm, the media vilified him and his firm, and Argentine authorities raided his office and charged him with crimes including tax evasion, he says.

U.S. District Judge Edward Chen dismissed Rattagan's suit in August 2020. Rattagan appealed to the Ninth Circuit, challenging Judge Chen's determination that Rattagan's fraudulent concealment claims were barred by the economic loss rule since they stemmed from Rattagan's stance that he was in an attorney-client relationship with Uber.

The district court also tossed the negligence and breach of the implied covenant claims as time-barred since they were filed after the two-year statute of limitations had run out. Rattagan did not appeal those rulings.

In 2021, the Ninth Circuit asked the California Supreme Court to answer its question on fraudulent concealment, and the court agreed to tackle the issue in February 2022.

Uber maintained throughout the litigation that its operations in Buenos Aires have always been legal and that all of Rattagan's claimed injuries stemmed from Argentine governmental authorities, the media and local trade unions.

Jeffrey M. Davidson of Covington & Burling LLP, who represents Uber, argued in Tuesday's hearing that Rattagan is simply looking to extend the economic loss rule exemptions because his other claims were time-barred.

"The economic loss rule is built to prevent exactly those types of efforts to stamp a tort label on conduct that's properly addressed by contract law," he said.

Rattagan is represented by Cindy Tobisman of Greines Martin Stein & Richland LLP.

Uber is represented by Jeffrey M. Davidson of Covington & Burling LLP.

The case is Michael R. Rattagan v. Uber Technologies Inc., case number S272113, in the Supreme Court of the State of California.

The Ninth Circuit case is Michael Rattagan v. Uber Technologies Inc., case number 20-16796, in the U.S. Court of Appeals for the Ninth Circuit.