Opinion
CIVIL ACTION NO. 03-1005
November 26, 2003
ORDER AND REASONS
Before the Court is Plaintiffs', Skansi Marine, L.L.C., and David Skansi, Motion for Partial Summary Judgment made pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Rec. Doc. 9). Also, before the Court is Defendant's, Ameron International Corporation, Motion for Partial Summary Judgment Concerning Choice of Law made pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Rec. Doc. 11).
After a thorough review of the law, the Motions, the memoranda filed in support and opposition of each Motion, and the record, the Plaintiffs' Motion for Summary Judgment is DENTED.
Additionally, the Defendant's Motion for Summary Judgment Concerning Choice of Law is GRANTED IN PART and DENIED IN PART.
This case purports to be a products liability and/or a breach of warranty case. The question before the Court is whether the substantive law of Alabama or Louisiana governs the case. Plaintiffs contend that Louisiana law should govern while Defendant maintains that Alabama law governs. Due to the inadequate development of material facts, the Court cannot make a determination on which state's law governs the claims of Plaintiffs for damages caused by the allegedly defective products, Amercoat 351 and PSX 1001, to the M/V Nick L. Skansi (hereinafter referred to as "the Nick") and to the M/V Meg L. Skansi (hereinafter referred to as "the Meg"), if any such damages actually occurred. The Court finds that Alabama law governs all claims of Plaintiffs for damages flowing from the product itself being defective, including the economic losses associated with its removal, replacement and "downtime".
II. STANDARD OF REVIEW
A district court can grant a motion for summary judgment only when the "`pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R. CIV. P. 56(c)). When considering a motion for summary judgment, the district court "will review the facts drawing all inferences most favorable to the party opposing the motion." Reid v. State Farm Mut. Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir. 1986). The court must find "[a] factual dispute. . . . [to be] `genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. . . . [and a] fact. . . . [to be] `material' if it might affect the outcome of the suit under the governing substantive law." Beck v. Somerset Techs., Inc., 882 F.2d 993, 996 (5th Cir. 1989) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
"lf the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial." Engstrom v. First Nat'l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995) (citing Celotex, 477 U.S. at 322-24, and Fed.R. CIV. P. 56(e)). The mere argued existence of a factual dispute will not defeat an otherwise properly supported motion. See Anderson, 477 U.S. at 248. "If the evidence is merely colorable, or is not significantly probative," summary judgment is appropriate. Id. at 249-50 (citations omitted).
III. FACTUAL BACKGROUND
Plaintiff, Skansi Marine, L.L.C., is a Louisiana Limited Liability Company with its principal place of business in Louisiana. Plaintiff, David SKANSI, President and owner of Skansi Marine, L.L.C., is a natural person domiciled in Louisiana. Defendant is a corporation organized under the laws of Delaware with its principal place of business in California.
On August 18, 2000, Plaintiffs and Boconco Shipbuilding (hereinafter referred to as "Boconco"), an Alabama corporation with its principal place of business in Alabama, entered into a vessel construction contract for what was later christened the Meg. (Rec. Doc. 11, exhibits B, C, and D). On December 29, 2000, Plaintiffs and Boconco entered into a second vessel construction contract for what was later christened the Nick. (Rec. Doc. 11, exhibits B, C, and E). Article 9 of both contracts provides that "[t]his contract shall be construed according to the laws of Alabama." (Rec. Doc. 11, exhibits D and E). The vessels were thereafter constructed in Alabama. (Rec. Doc. 11, exhibit B).
THE NICK
Plaintiffs chose to use Defendant's Amercoat 351, a tank lining product, to protect the Nick's hull which was specially designed to carry methanol. Amercoat 351 was chosen by Plaintiffs and Boconco to be included in the Nick after they met with Randy Stroeker (hereinafter referred to as "Stroeker"), an agent of Defendant. Boconco purchased the Amercoat 351 from Marshall Marine Supply, an Alabama corporation with its only place of business in Alabama; and Marshall Marine had previously purchased the product from Stroeker in Alabama. (Rec. Doc. 11, exhibit B and F).
The Amercoat 351 product was initially applied to the Nick by Boconco and its painting subcontractor, Larry Peyton, an Alabama domiciliary. (Rec. Doc. 11, exhibit B and G). Apparently, the Amercoat 351 began to chip while the Nick was still under construction. (Rec. Doc. 11, exhibit G). According to Stroeker, Boconco contracted with JDK, another Alabama painting subcontractor, to sand and reapply the Amercoat 351 to fix these deficiencies.
On September 7, 2002, Plaintiffs accepted the Nick from Boconco. (Rec. Doc. 11, exhibit I).
According to Plaintiffs, on September 18, 2002, Skansi Marine, L.L.C., through its broker, C G Boats (hereinafter referred to as "C G"), contracted with ASCO USA, L.L.C. (hereinafter referred to as "ASCO") for the Nick to carry methanol on behalf of ASCO. Plaintiffs allege the Amercoat 351 product chipped and mixed with the methanol causing the Nick's methanol tanks' suction drains to become clogged, making the Nick's tanks unable to carry the 850 tons of methanol per trip required by the ASCO contract. Plaintiffs allege the Nick could only carry 690 tons. The plaintiffs contend that the paint chipping also deteriorated the methanol tanks themselves. (Rec. Doc. 14, exhibit A). Plaintiffs continued to carry methanol for ASCO until ASCO could procure another carrier. Subsequently, Plaintiffs were forced to remove the Amercoat 351 by sandblasting the hull. Plaintiffs contend this sandblasting caused damage to the Nick. (Rec. Doc. 21, exhibit B). Plaintiffs also contend that they suffered substantial economic loss as a result of the allegedly defective Amercoat 351.
THE MEG
On November 15, 2001, Plaintiffs accepted the Meg from Boconco. (Rec. Doc. 11, exhibit H). The Meg's hull was painted using Amercoat 450 HS. (Rec. Doc. 1). Around the time of acceptance, Plaintiffs noticed that the Hull of the Meg required a touch up paint job. (Rec. Doc. 16, exhibit C). After conferring with Stroeker, Plaintiffs purchased four gallons of PSX 1001 to accomplish the touch up from Marshall Marine. (Rec. Doc. 16, exhibit C). While the touch up paint was initially a good match to the original paint, as time went by, the spots that had been touched up were a different color than the spots that retained the original paint. (Rec. Doc. `16, exhibit C). Plaintiffs allege that, after unsuccessfully requesting Defendant to remedy the color mismatch, it incurred substantial economic loss in fixing the mismatch.
H1 IV. LAW AND ANALYSIS
The question currently before the Court is whether Louisiana or Alabama law applies to Plaintiffs' claims.
When a federal court has jurisdiction to hear a case based on the diversity of citizenship of the parties, the court must apply substantive state law. Erie v. Tompkins, 304 U.S. 64 (1938). In cases where federal jurisdiction is founded on diversity and where there is a question as to which state's substantive law governs an issue in the case, the Court is to look to the conflict of law rules in the state where the district sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941); Roberts v. Energy Develop. Corp., 104 F.3d 782, 786 (5th Cir. 1997); R-Square Invs. Inc. v. Teledyne Indus., Inc., 1997 WL 436245 (E.D. La. 1997); Denmark v. Tzimas, 871 F. Supp. 261,271 n. 12 (E.D. La. 1994).
Rather than allow the courts to fashion the conflicts of law rules as many other states have chosen to do, Louisiana has enacted clearly defined and statutorily prescribed conflicts of law principles. R-Square Invs., Inc., 1997 WL 436245, at *3. These principles are set out in articles 3515 through 3549 of the Louisiana Civil Code. LA. CIV. CODE ANN. arts. 3515— 49 (West 1994 Supp. 2003). Generally, an issue in a case having contacts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue. LA. CIV. CODE ANN. art. 3515 (West 1994). That state is determined by evaluating the strength and pertinence of relevant policies of all involved states in the light of: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of the parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state. Id.
Despite this legislative adoption of a general comparative impairment test, Louisiana has fashioned specific rules to govern most situations, which typically avoid the comparative impairment analysis. LA. CIV. CODE ANN. art. 3515 cmts.(a)-(b) (West 1994); Symeon C. Symeonides, Louisiana's New Law of Choice of Law for Tort Conflicts: An Exegesis, 66 TUL. L.REV. 677 (1992). The general comparative impairment test is simply a default should the specific rules not provide an answer to the question of which state's laws should apply to an issue in a case. LA. CIV. CODE ANN. art. 3515 cmts.(a)-(b).
Plaintiff has alleged what purport to be products liability and breach of warranty (redhibition) theories of recovery. For these theories, the Louisiana Civil Code provides specific articles governing the resolution of conflicts of law problems. LA. CIV. CODE ANN. arts. 3542— 3545 specifically govern tort and products liability conflicts of law issues that arise, while LA. CIV. CODE ANN. art. 3537 is tailored to afford resolution to conflicts of law issues arising in contractual, or conventional obligations, cases. LA. CIV. CODE ANN. art. 3545 (West 1994); LA. CIV. CODE ANN. art. 3537 (West 1994).
While this proposition is easily stated, courts have had difficulty distinguishing between which claims are products liability claims subject to the dictates of LA, CIV. CODE ANN. arts. 3542- 3545 and which claims resound more in contract and, thus, are controlled by LA. CIV. CODE ANN. art. 3537. In R-Square Invs., Inc., another court sitting in the Eastern District of Louisiana addressed this problem. 1997 WL 436245, at *3. Relying on East River S.S. Corp. and LA. CIV. CODE ANN. art. 3545 cmt. (a), the court determined that claims for damage to the product itself and for economic loss associated therewith are governed by LA. CIV. CODE ANN. art. 3537, while claims for damages physically caused by the product to other property or to persons are governed by LA. CIV. CODE ANN. art. 3542— 3545. Id. Because the Court agrees with the R-Square Invs., Inc., court's well-reasoned opinion, the Court holds that the appropriate state's law governing the Plaintiffs' claims for damage to Amercoat 351 and PSX 1001 and the economic loss associated therewith, including but not limited to all damages Plaintiffs enumerate in paragraphs 25 and 26 of their petition, must be selected by application of LA. CIV. CODE ANN. art. 3537. However, the Court holds that the appropriate state's law governing the Plaintiffs' claims for damage physically caused by Amercoat 351 and PSX 1001, if any such damages are cognizable, must be selected by application of LA. CIV. CODE ANN. art. 3542— 3545.
H1 A) Plaintiffs' Product Liability Claims
In the area of torts, the Louisiana Civil Code provides a general residual rule, LA. CIV. CODE ANN. art. 3542 (West 1994), as well as rules relating specifically to issues of conduct and safety, LA. CIV. CODE ANN. art. 3543 (West 1994); issues of loss distribution and financial protection, LA. CIV. CODE ANN. art. 3544 (West 1994); products liability, LA. CIV. CODE ANN. art. 3545 (West 1994); and punitive damages, LA. CIV. CODE ANN. art. 3546 (West 1994).
In the context of Plaintiffs' claims, article 3545, article 3543, and article 3542 are relevant.
LA. CIV. CODE ANN. art. 3545 provides:
Delictual and quasi-delictual liability for injury caused by a product, as well as damages, whether compensatory, special, or punitive, are governed by the law of this state: (1) when the injury was sustained in this state by a person domiciled or residing in this state; or (2) when the product was manufactured, produced, or acquired in this state and caused the injury either in this state or in another state to a person domiciled in this state.
The preceding paragraph does not apply if neither the product that caused the injury nor any of the defendant's products of the same type were made available in this state through ordinary commercial channels.
All cases not disposed of by the preceding paragraphs are governed by the other Articles of this Title.
LA. CIV. CODE ANN. art. 3545 (West 1994). This article mandates the application of Louisiana law in the specific instances set forth in the first paragraph of the article. However, even when the circumstances of the first paragraph are met, this article does not apply when neither the product that caused the injury nor any of the defendant's products of the same type were made available in this state through ordinary commercial channels. In such a case, the other articles previously mentioned must be applied depending on whether the issue to which the parties seek a determination of which state's law applies is one which relates to conduct and safety, in which case LA. CIV. CODE ANN. art. 3543 applies; or one which relates to loss distribution and financial protection, in which case LA. CIV. CODE ANN. art. 3544 applies; or one which relates to punitive damages, in which case LA. CIV. CODE ANN. art. 3546 applies. If the resolution of the issue is not provided for by any of these articles, then LA. CIV. CODE ANN. art. 3542 governs the resolution of the issue.
While the Plaintiffs argue that article 3545 is dispositive in this case, the Plaintiffs have offered virtually no evidence to suggest exactly where the injury was sustained or whether Amercoat 351 or PSX 1001 or any of the defendant's products of the same type were made available in this state through ordinary commercial channels. From the evidence Defendant has offered, it seems that the clogging of the tanks probably occurred outside of both Alabama and Louisiana. Moreover, while Defendant has admitted that it has an office within Louisiana, no party has suggested that Defendant sells products in Louisiana or, if so, whether those products are, in fact, Amercoat 351 or PSX 1001 or products of the same type. (Rec. Doc. 11).
It would have been helpful to examine the contract between ASCO and Plaintiffs. Although Plaintiffs contend that they attached a copy of that contract to their petition for damages, a perusal of the record reveals no such document.
As such, there exist genuine issues of material fact as to what state's law should govern Plaintiffs' products liability claims.
H1 B) Plaintiffs' Claims Based Upon the Product Damaging Itself
Again, in the area of conventional obligations, the Louisiana Civil Code provides a general residual rule governing conventional obligations, LA. CIV. CODE ANN. art. 3537, as well as rules specifically relating to form, LA. CIV. CODE ANN. art. 3538 (West 1994); capacity, LA. CIV. CODE ANN. art. 3539 (West 1994); party autonomy, LA. CIV. CODE ANN. art. 3540 (West 1994); and other juridical acts and quasi — contractual obligations, LA. CIV. CODE ANN. art. 3541 (West 1994).
Unlike the products liability issue discussed before, the only rule relevant in this case is LA. CIV. CODE ANN. art. 3537. LA. CIV. CODE ANN. art. 3537 provides:
Except as otherwise provided in this Title, an issue of conventional obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant policies of the involved states in light of: (1) the pertinent contacts of each state to the parties and the transaction, including the place of negotiation, formation, and performance of the contract, the location of the object of the contract, and the place of domicile, habitual residence, or business of the parties; (2) the nature, type, and purpose of the contract; and (3) the policies referred to in Article 3515, as well as the policies of facilitating the orderly planning of transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other.
LA. CIV. CODE ANN. art. 3537. The third consideration listed above refers to the policies of the Louisiana Civil Code's general residual conflict of law article, LA. CIV. CODE ANN. art. 3515. Those policies include (1) the relationship of each state to the parties and the dispute, and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state. LA. CIV. CODE ANN. art. 3515.
In R-Square Invs., Inc., another court sitting in the eastern district of Louisiana faced with similar facts and issues presented to this court determined that Minnesota law, and not Louisiana law, should apply. R-Square Invs., Inc., 1997 WL 436245. In that case, the plaintiff, a Louisiana corporation, purchased an engine from Beryl D'Shannon Aviation Specialties, Inc. (hereinafter referred to as "D'Shannon"), a Minnesota corporation completely independent of the defendant, to be used in a previously purchased aircraft. Id. at *1. D'Shannon had purchased the engine earlier from the defendant, an Alabama corporation. Id. The engine was installed by D'Shannon in Minnesota. Id. The engine came with a warranty limiting the defendant's liability to only the cost of repair and replacement of the engine. Id. Two years later, the engine seized while the aircraft was flying to Mississippi; and the aircraft crashed injuring the aircraft, the engine, and the plaintiffs employee, James Reno. R-Square Invs., Inc., 1997 WL 436245, at *1. The plaintiff sued the defendant in federal court. Id. The defendant moved for summary judgment arguing that the warranty precluded the plaintiff from recovering against it. Id. Under Alabama or Minnesota law, the warranty would have been valid to preclude the plaintiffs claims regarding the damage caused to the engine itself and subsequent economic loss while under Louisiana's law of redhibition the plaintiff claim's would have remained viable notwithstanding the warranty. Id. at *2. The Court concluded that Minnesota law should apply to those claims regarding the damage caused to the engine itself and the subsequent economic loss and granted summary judgment as to those claims. Id. at *7-8.
In making the determination that Minnesota law applied, the court noted that the objects of both of the pertinent contracts, the delivery of the engine to D'Shannon and the installation of the engine into the plaintiffs airplane, occurred in Minnesota. R-Square Invs., Inc., 1997 WL 436245, at *5.
The case currently before the court involves, at least insofar as the Nick is concerned, three contracts. One between Defendant and Marshall Marine whose object was the delivery of the paint in Alabama, another between Marshall Marine and Boconco whose object was the delivery of the paint in Alabama, and a third between Boconco whose object was the delivery and installation of the paint in Alabama. As regards the Meg, two contracts were involved: one between Defendant and Marshall Marine whose object was the delivery of the paint in Alabama and a second between Marshall Marine and Plaintiff whose object was the delivery of the paint in Alabama.
The Court finds that R-Square Invs., Inc. is directly on point and but for one factual distinction would be dispositive. The only pertinent factual distinction between the two set of circumstances is that, in R-Square Invs., Inc., the defendant did not know that his product would end up in Louisiana while in the present case there is a genuine issue of material fact as to whether Stroeker knew that the vessels coated with Amercoat 351 and PSX 1001 would be used in Louisiana. The court in R-Square Invs., Inc. noted that Louisiana law might be applicable where a seller sold the product with knowledge that it would be used in Louisiana. However, the case the court cited to, Gulf State Utili. v. NEI Peebles Elec. Prods., 819 F. Supp. 538, 552 (M.D. La. 1993), to support that proposition involved a contract whose express object was the supplying of equipment for installation and use in Louisiana. The objects of all the contracts at issue here were the sale and delivery of Amercoat 351 and PSX 1001 in Alabama. Nevertheless, due to this discrepancy, the Court finds it necessary to complete an interest analysis exclusively rather than rely upon R-Square Invs., Inc.
The policy behind Louisiana's redhibition law is one of consumer protection. R-Square Invs., Inc., 1997 WL 436245, at *5 (citing Stumpf v. Metairie Motor Sales, Inc., 212 So.2d 705, 710 (La.App. 4th Cir. 1968)). Because Plaintiffs are Louisiana consumers, Louisiana has some interest in applying its laws to resolve this controversy. Aside from Louisiana serving as the domicile of Plaintiffs, Louisiana has little other factual connection to this case.
In contrast to Louisiana, Alabama, "by adopting Article 2 of the Uniform Commercial Code, has demonstrated a strong interest in facilitating the flow of interstate commerce in and out of its borders — an interest that [Alabama] considered important enough to justify the sacrifice of its sales laws in favor of uniformity." R-Square Invs., Inc., 1997 WL 436245, at *5. Alabama has an interest that the transactions that occur within its borders, of which this case involves no less than five separate transactions all occurring in Alabama, be governed by Alabama law to promote Alabama's policy of facilitating interstate commerce within its borders.
Alabama's interest in this case outweighs Louisiana because these transactions actually took place in Alabama. Also, the contracts were actually formed in Alabama. Moreover, for the most part, these transactions involved Alabama domiciliaries and sophisticated commercial entities domiciled in states foreign to Alabama. In fact, the contracts for the construction of the Meg and the Nick were expressly governed by Alabama law and contained an assignment of any warranties received by Boconco to Plaintiffs. Also, had this action been brought originally in Alabama, Alabama law would apply. Chazon v. Parton, 739 So.2d 1104, 1107 (Ala. 1999) ("Alabama follows the principle of lex loci contractus, which, as a general rule, provides that a contract is governed by the laws of the state where it is made, except where the parties have legally contracted with reference to the laws of another state.") citing Cherry, Bekaert Holland v. Brown, 582 So.2d 502 (Ala. 1991).
Defendant lists a litany of other contacts this transaction has with Alabama. While Plaintiffs contest the truth of these other contacts or, at least, suggest these contacts are irrelevant, they offer no evidence of their own to rebut Defendant's contentions. As such, the Court cannot find that there are genuine issues of material fact regarding Defendant's view of the relevant contacts. While these other contacts are not dispositive, they did make it easier for the Court to come to its decision.
H1 V. CONCLUSION
Accordingly, the Plaintiffs' Motion for Summary Judgment is DENIED.
The Defendant's Motion for Summary Judgment Concerning Choice of Law is GRANTED IN PART and DENIED IN PART.