Opinion
00-CV-11392-MEL.
February 12, 2001.
MEMORANDUM AND ORDER
Plaintiff, the Shipway Place Condominium Association ("Shipway"), through its trustees, sues Osmose, Inc. ("Osmose") and Hoover Treated Wood Products, Inc. ("Hoover") on account of damages caused by the deterioration of the roofs on Shipway's condominium buildings. Shipway asserts causes of action for the negligent design, manufacture, labeling, sale, and distribution of the fire retardant treated ("FRT") plywood sheets that were used in the construction of Shipway's buildings, as well as for breach of warranty.
Osmose moves to dismiss the complaint for failure to state a claim. The motion is granted.
Hoover was dismissed as a defendant by stipulation of the parties on October 18, 2000.
I.
Shipway's condominium complex is located in Charlestown, Massachusetts, and is made up of nine buildings that house 48 residential units and nine non-residential units. The Shipway condominium complex was built over two years from 1983-1985. FRT plywood was used to build the roofs of the nine buildings.
On April 5, 1997, the owners of Shipway Unit 33 returned from a vacation to find that their living room ceiling had sagged. During the repair of the ceiling of Unit 33, investigation into the cause of the damage revealed that the roof trusses and the roof itself were seriously decayed and deteriorated and that these conditions were present in the roofs of all nine Shipway buildings.
An investigation completed in July, 1998, by an engineering firm retained by Shipway concluded that chemicals excreted by the FRT plywood had reacted with the metal roof trusses and other metal components of the roofs and led to their decay and deterioration. The cost of repairs totaled $2,600,000.
II. Count I (Negligence)
Osmose moves to dismiss Count I of the complaint (which alleges that Osmose negligently designed, manufactured, sold, and/or distributed the FRT plywood) on the ground that the economic loss rule bars the cause of action. The economic loss rule provides that "purely economic losses are unrecoverable in tort and strict liability actions in the absence of personal injury or property damage." FMR Corp. v. Boston Edison Co., 415 Mass. 393, 395, 613 N.E.2d 902, 903 (1993). The rule seeks to maintain the distinction between tort and contract law; that is, to prevent contract law from "drown[ing] in a sea of tort." East River S.S. Corp. v. Transamerica Delaval. Inc., 476 U.S. 858 (1985). It encourages parties to allocate economic risks through contract negotiation rather than litigation. The economic loss rule has long been the law in Massachusetts and is widely followed in other states. See FMR Corp., 415 Mass. at 395, 613 N.E.2d at 903-04.
Osmose contends that Shipway seeks damages for economic losses exclusively and is barred by the rule from bringing a tort-based negligence action. It argues that the rule clearly applies here because Shipway has not alleged any personal injury or damage to other property. Damage to the roofs' trusses or other parts of the roofs does not constitute a type of damage recoverable in tort because it "stands on the same footing as other economic loss." Marcil v. John Deere Indus. Equip. Co., 9 Mass. App. Ct. 625, 630, 403 N.E.2d 430, 434 (1980) (defining economic loss as "damages for inadequate value, costs of repair and replacement of defective product or consequent loss of profits . . .")
Osmose relies particularly on the ruling of the Court of Appeals for the Eleventh Circuit in Pulte Home Corp. v. Osmose Wood Preserving, Inc., 60 F.3d 734 (11th Cir. 1995), a case in which it was the defendant and is therefore factually analogous to this case, although it was decided under Florida law. In Pulte, the Eleventh Circuit held that the expense of repairing and replacing allegedly defective FRT plywood could not be recovered in tort because of the economic loss rule. Pulte Home Corp., 60 F.3d at 741-42. The Eleventh Circuit concluded: "Having failed to avail itself of the opportunity to mitigate the risks of potential disappointment at the time of contract negotiation, Pulte cannot now resort to the courts to save it from a bargain improvidently made." Pulte Home Corp., 60 F.3d at 742.
Shipway distinguishes this case from Pulte on the grounds that the present case involves an imminent collapse (of the roof), a proposition which it contends should except it from the economic loss rule. Shipway relies on New York law for precedent supporting such an exception. InTrustees of Columbia Univ. v. Mitchell/Giurgola Assocs., 492 N.Y.S.2d 371, 376, 109 A.D.2d 449, 455 (N.Y.App.Div., 1st Dept. 1985), the First Department of New York State's Appellate Division decreed an exception to the economic loss rule for "unduly dangerous product[s] for which damages under a strict liability theory may be maintained." In that case, a building wall in a crowded university campus was alleged to have been structurally unsound and in danger of collapse due to the builder's negligence, and the Court sustained the validity of the claim against the builder. In the case at hand, Shipway contends that the FRT plywood was an "unduly dangerous product" that led to the "collapse" of the Shipway buildings' roofs, and that the New York rule should apply.
Shipway acknowledges that no collapse exception to the economic loss rule has been recognized by the courts of Massachusetts. It argues nevertheless that "the Massachusetts Courts would adopt the same exception to the `economic loss rule,' as set forth in [Trustees of Columbia Univ.], especially for the type of catastrophic damages which occurred in this matter." Pl.'s Opp'n to Mot. to Dismiss 5. For support, Shipway points to Commonwealth v. TLT Constr. Corp., 1999 WL 429860 (Mass.Super.), which held that the application of a waterproofing agent on the exterior of the Suffolk County Courthouse had damaged the physical property of the Commonwealth and that therefore the economic loss rule did not bar a negligence cause of action. Shipway characterizes the present situation as involving an "unduly dangerous" condition, indicating that the law in Massachusetts will conform to the law in New York.
A United States District Court, sitting in diversity, applies the extent law of the forum state, here Massachusetts. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). No Massachusetts court has suggested or held that in Massachusetts there is an exception to the economic loss rule for collapse cases. TLT Constr. Corp., supra, contrary to Shipway's assertion, does not support the existence in Massachusetts of the New York exception stated in Trustees of Columbia Univ., supra. Critically,TLT Constr. Corp. does not address the Trustees of Columbia Univ. Court's reasoning regarding an "unduly dangerous product," nor does it contemplate the differences between New York and Massachusetts strict liability law. Instead, TLT Constr. Corp. applies the economic loss rule's oft-stated exception for situations in which "other property" is damaged by the defective product. TLT Constr. Corp., 1999 WL 429860 at *3.
Without an exception, Shipway acknowledges that the economic loss rule bars it from asserting a tort-based claim for damages incurred in repairing and replacing its roofs. Accordingly, Count I is dismissed.
III. Count II (Breach of Warranty) A. Uniform Commercial Code Coverage
In Count II, Shipway alleges breach of warranty based in contract law rather than tort law. Shipway alleges that Osmose breached implied warranties of merchantability and fitness for a particular purpose as described by the Massachusetts Uniform Commercial Code ("UCC"). See M.G.L. ch. 106 §§ 2-314 and 2-315.
Osmose moves to dismiss on the grounds that the UCC does not apply to the sale of real property, M.G.L. ch. 106 §§ 2-102, 2-106, and 2-107, and therefore, since Shipway purchased condominiums, not the FRT plywood, it cannot recover under the UCC. Shipway does not respond to this argument in its brief.
Common law breach of warranty claims require privity of contract.Sebago, Inc. v. Beazer East, Inc., 18 F. Supp.2d 70, 97 n. 12 (D.Mass. 1998). No evidence has been presented to show that either Shipway or its individual trustees are in privity of contract with the defendants.
Osmose correctly construes the Massachusetts UCC to exclude coverage of the sale of reality. M.G.L. ch. 106 §§ 2-102, 2-106, and 2-107. Since a sale of reality is at issue here, Count II is dismissed.
B. Statute of Limitations
Osmose argues further that even if the UCC applies, the statute of limitations has run on any such warranty action. The statute of limitations for contract actions under the UCC is four years. M.G.L. ch. 106 § 2-725(1). The construction of the condominiums was completed in 1985. Since the cause of action for a breach of warranty arises when "tender of delivery is made," M.G.L. ch. 106 § 2-725(2), Osmose concludes the statute has run and the warranty claim should be barred. Shipway does not respond to this argument in its brief.
Even if the UCC were to apply, which I have held it does not, Shipway's breach of warranty claim would be time barred because more than four years have elapsed since tender of the FRT plywood was made. M.G.L. ch. 106 § 2-725. Accordingly, Count II is dismissed.
IV.
For the reasons discussed above, Osmose's motion is granted and the complaint is dismissed.
It is so ordered.