Opinion
Civil Action No. 03-3065 Section "N" (2).
April 7, 2005
ORDER AND REASONS
Before the Court is the Motion for Summary Judgment, filed by Defendant K S Diesel Service, Inc. (Rec. Doc. No. 9). For the reasons that follow, Defendant's motion is GRANTED IN PART and DENIED IN PART.
I. FACTUAL BACKGROUND
In January of 2002, Dawn Services, Inc. ("Dawn") entered into a verbal contract with K S Diesel Service, Inc. ("K S Diesel"), for the purchase and installation of a replacement port main engine into the M/V GULF DAWN, a vessel owned by Dawn. See Complaint, ¶¶ 4 and 5. (Rec. Doc. No. 1). On or about August 12, 2002, Dawn requested that K S Diesel inspect all engines of the M/V GULF DAWN, including the port main engine. See Def. Mem. in Support of Mot. for Sum. J., p. 8, and Unsworn Declaration of Kenneth Hoorman, ¶¶ 12 and 13. (Exhibit A to Def. Mot.). On or about October 30, 2002, while the M/V GULF DAWN was operating on or near the Mississippi River, the port main engine purchased from K S Diesel broke down and failed, allegedly rendering the engine useless. See Complaint at ¶ 4. Subsequently, Boston Old Colony Insurance Company ("Boston"), the indemnity marine insurer of Dawn, paid $78,889.58 on account of the damages allegedly resulting from the engine failure, and thereby became subrogated to the rights of its insured Dawn. See id. at ¶¶ 3, 9 and 10.
On October 30, 2003, Boston filed this action against K S Diesel, seeking to recover the $78,889.58 it earlier paid on account of the loss occasioned by Dawn, as well as attorney's fees, interest and all costs. See generally Complaint. Boston has alleged several theories of recovery, including that available under (i) the general maritime law, (ii) La. Civ. Code arts. 2520 through 2548 relating to rehibitory defects and vices, (iii) the Louisiana Products Liability Act, La.Rev.Stat. 9:2800.51, et seq., (iv) La. Civ. Code arts. 1756 through 1759 relating to breach of contract, and/or (v) general Louisiana tort law, La. Civ. Code art. 2315, et seq. See id. Jurisdiction is premised on both the admiralty jurisdiction of this Court, Fed.R.Civ.P. 9(h), and the diversity of the parties and amount in controversy, 28 U.S.C. § 1332. Id. at § 13.
On October 12, 2004, Defendant K S Diesel filed the instant Motion for Summary Judgment. Through its motion, Defendant submits that it is entitled to summary judgment as a matter of law, dismissing all of Plaintiff's claims against it because (1) this matter concerns a maritime contract and all recovery in tort is barred by application of the East River doctrine; and (2) Plaintiff's recovery is limited to a six-month warranty issued by K S Diesel, which warranty expired prior to the subject engine failure.
East River S.S. Corporation v. Tarnsamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986).
II. LAW AND ANALYSIS
A. Summary Judgment StandardRule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if 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 judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Martinez v. Schlumberger, Ltd., 338 F.3d 407, 411 (5th Cir. 2003); Terrebonne Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 877 (5th Cir. 2002).
Where a defendant moves for summary judgment on the basis of an affirmative defense and, thus, bears the ultimate burden of persuasion, "it must adduce evidence to support each element of its defenses and demonstrate the lack of any genuine issue of material fact with regard thereto." Rushing v. Kansas City S. Ry. Co., 185 F.3d 496, 505 (5th Cir. 1999), cert. denied, 528 U.S. 1160, 120 S.Ct. 1171, 145 L.Ed.2d 1080 (2000) (citation omitted). To warrant judgment in its favor, the movant "must establish beyond peradventure all of the essential elements of the defense." Martin v. Alamo Cmty. Coll. Dist., 353 F.3d 409, 412 (5th Cir. 2003) (emphasis in original) (quotations and citations omitted). "A fact is 'material' if it 'might affect the outcome of the suit under governing law.'" Bazan v. Hidlago Cty., 246 F.3d 481, 489 (5th Cir. 2001) (emphasis in original) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). "An issue is 'genuine' if it is real and substantial, as opposed to merely formal, pretended, or a sham." Bazan, 246 F.3d at 489 (emphasis in original). Thus, a genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The moving party, however, need not negate the elements of the nonmovant's case. See Wallace v. Texas Tech Univ., 80 F.3d 1042, 1047 (5th Cir. 1996) (citing Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
Once a proper motion has been made, the nonmoving party may not rest upon mere allegations or denials in the pleadings but must present affirmative evidence, setting forth specific facts, to show the existence of a genuine issue for trial. See Celotex Corp., 477 U.S. at 322-32, 106 S.Ct. 2548; Wallace, 80 F.3d at 1047. "[T]he court must review the record taken as a whole." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (quotations and citation omitted). All the evidence must be construed "in the light most favorable to the non-moving party without weighing the evidence, assessing its probative value, or resolving any factual disputes." Williams v. Time Warner Operation, Inc., 98 F.3d 179, 181 (5th Cir. 1996). The evidence of the nonmovant is to be believed, with all justifiable inferences drawn and all reasonable doubts resolved in its favor. See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49 n. 5, 111 S.Ct. 401, 112 L.Ed.2d 349 (1990) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). Summary judgment is mandated if the nonmovant fails to make a showing sufficient to establish the existence of an element essential to its case on which it bears the burden of proof at trial. See Nebraska v. Wyoming, 507 U.S. 584, 590, 113 S.Ct. 1689, 123 L.Ed.2d 317 (1993); Celotex Corp., 477 U.S. at 322, 106 S.Ct. 2548. "In such a situation, there can be 'no genuine issue as to any material fact' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. 2548.
B. General maritime law applies to Boston's claims against K S Diesel
The contract which forms the basis of Boston's claims in subrogation against K S Diesel is the verbal contract for the purchase and installation of the port main engine in the GULF DAWN to replace its existing engine. Because the contract can be considered one to both furnish accessories to the vessel and to make repairs to equipment aboard the vessel, the contract between Dawn and K S Diesel is maritime in nature. See, e.g., Houston-New Orleans, Inc. v. Page Eng'g Co., 353 F.Supp. 890, 897-99 (E.D.La. 1972) (identifying contracts with the supplier of a vessel's control panel and with the installer of the control panel as maritime in nature). Consequently, the instant controversy is governed by the general maritime law.
Plaintiff argues in its opposition memoranda that it also has a claim against K S Diesel arising out of K S Diesel's allegedly negligent inspection of the M/V GULF DAWN'S engines on August 12, 2002. K S Diesel correctly points out that the complaint contains no allegations regarding the August inspection, and, having reviewed the complaint, the Court finds that there are no allegations which would put the Defendant on notice that Plaintiff has made any claims arising out of the inspection. Plaintiff has not responded to Defendant's attack on the absence of any such allegations.
Plaintiff does not dispute the maritime nature of that contract.
C. The East River Doctrine applies herein to bar recovery in tort as to any claims arising from the initial purchase and installation
In East River S.S. Corporation v. Transamerica Delaval, Inc., 476 U.S. 858, 859, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), the United States Supreme Court held that a plaintiff may not maintain a tort cause of action under admiralty law "when a defective product, purchased in a commercial transaction malfunctions, injuring only the product itself and causing purely economic loss." The East River Court reasoned that the loss of the value of a defective product that physically harms itself is equivalent to the loss incurred when a product fails to work properly or to work at all. 476 U.S. at 867-68 ("Obviously, damage to a product itself has certain attributes of a products-liability claim. But the injury suffered — the failure of the product to function properly — is the essence of a warranty action."). Accordingly, the Court held that a "manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself." Id. at 871. Thus, if a product malfunctions causing damage to itself, its purchaser must rely on contract law to maintain a claim for recovery. The East River restriction on tort claims, however, does not apply where there has been damage to "other property." Id. at 867. Shipco 2295, Inc. v. Avondale Shipyards, inc., 825 F.2d 925, 928 (5th Cir. 1987).
In Employers Insurance of Wausau v. Suwanne River SPA Lines, Inc., 866 F.2d 752, 765-66 (5th Cir.), cert. denied, 493 U.S. 820, 110 S.Ct. 77, 107 L.Ed.2d 43 (1989), the Fifth Circuit extended East River to a contract for professional services when the services were rendered as a part of the manufacture or construction of a product. The Fifth Circuit later declined to adopt a distinction between services provided pursuant to the manufacture of a new vessel and services related to the repair of an existing vessel. See Nathaniel Shipping, Inc. v. Gen. Elec. Co., Inc., 932 F.2d 366, 368 n. 3 (5th Cir. 1991) ( per curiam) (holding that East River precluded vessel owner's claims against subcontractor arising out of allegedly negligent installation of vessel thrust block).
Defendant contends that the rule of East River bars recovery in tort in this case, as the alleged defective product — the port main engine — was purchased in a commercial transaction, malfunctioned, injured only the product itself, and caused purely economic loss. Plaintiff responds that the East River doctrine "may" be inapplicable to the matter at hand. See Pl.'s Mem. in Opp'n, p. 4. Specifically, Plaintiff argues that, during the August 12, 2002 inspection, K S Diesel personnel may have committed some negligent act or omission which contributed to or caused the engine failure in October 2002. According to Plaintiff, the rule of East River would therefore not apply to any claim based on the inspection, as the inspection does not qualify as "services performed in the manufacture or construction of the product," the engine.
Insofar as Plaintiff has asserted claims against the Defendant arising out of the January 2002 contract for the purchase and installation of the subject engine, the Court agrees with K S Diesel that the East River doctrine applies, and Plaintiff's recovery, if any, is limited to its contractual remedies and any limitations thereof. There is little question here that the alleged defective product is the main port engine which was purchased in a commercial transaction between Dawn and K S Diesel, and which later malfunctioned. Additionally, Plaintiff has not offered any rebuttal evidence indicating that there was damage beyond that sustained by the main port engine, or that the damage exceeded pure economic loss. Moreover, as demonstrated by the parties' submissions, it is clear that Plaintiff does not contest the Defendant's contention that any claim arising out of the January 2002 contract of purchase and installation is subject to the East River doctrine.
Indeed, as set forth above, Plaintiff's only argument against application of the East River doctrine relates to any claims it may have arising out of the allegedly negligent inspection of the subject engine. While the Court is reluctant to go beyond the allegations contained in Plaintiff's complaint, the Defendant did raise the fact of the August 12, 2002 inspection in its motion. At the present time, however, the Court is not well-apprised of the circumstances of that inspection, i.e., whether the inspection was performed pursuant to any express or implied warranty arising out of the January 2002 contract and the implications that such an inspection would have on any such warranties, or whether the inspection was performed pursuant to a wholly separate contract or other obligation. Accordingly, construing all the evidence in the light most favorable to the non-movant, the Court finds that any determination regarding the August 2002 inspection and its implications on Plaintiff's contractual and/or tort remedies would be premature at this time.
If it is later determined that the August 2002 inspection was in fact performed by K S Diesel based on some obligation arising out of the January 2002 purchase and installation contract, this Court would likely conclude that the East River doctrine applies to bar any recovery in tort for claims arising out of the August inspection. See Assoc. Metals and Minerals Corp. v. ALEXANDER'S UNITY M/V, 41 F.3D 1007, 1013 (5th Cir. 1995) (explaining that the East River and Employers Insurance decisions applied to claims where the damage was to a product whose manufacture or design was the basis of a contractual relationship). Further, at the present time, it appears that Plaintiff's asserted claims arising out of the inspection are based on pure speculation. On the other hand, Defendant has presented the Court with strong affirmative evidence that, at the time of the August inspection, no physical contact was made with the port main engine; that no work was performed; and that the engines were properly functioning. See Unsworn Declaration of Luong Vo (Ex. A to Def.'s Supplemental Mem.); Unsworn Declaration of Ronald Joseph Dantin (Ex. B to Def.'s Supplemental Mem.). Based on the reasons set forth above, however, the Court finds that genuine issues remain as to what repairs, if any, should have been performed or recommended, and as to the source of any obligation or duty to perform or recommend such repairs.
D. Genuine issues remain as to Boston's contractual remedies against K S Diesel
In further support of its Motion for Summary Judgment, Defendant K S Diesel contends that Plaintiff's remedy against it is limited to a standard six-month express warranty on the port main engine which K S Diesel agreed to provide Dawn pursuant to the January 2002 contract for the purchase and installation of the engine, and which had been incorporated into every prior contract between K S Diesel and Dawn regarding the purchase and installation of several engines over the entities' nine-year business relationship. The terms of that warranty are as follows:
"KS Diesel Service, inc., offers a six months warranty on engine overhauls — 100% parts and labor. The warranty shall begin on the date the engine is installed in vessel. This warranty covers only malfunctions resulting from defects in material or workmanship. This warranty does not cover malfunctions resulting from misuse, negligence, alterations, accident or lack of performance of normal maintenance services. This warranty shall apply to the fuel system; only if no contamination is found, such as, water in fuel or plugged injector filters. The 100% parts and labor covers all warranty work performed within a 100 mile radius from Harvey, LA. Beyond the 100 mile radius, we shall provide 100% parts and labor to a maximum of twelve hours per day. The customer shall be responsible for any additional overtime beyond twelve hours per day plus expenses; such as mileage @ 60 [cents] per mile, meals and lodging."See Unsworn Declaration of Kenneth Hoorman, ¶ 6. According to Defendant, pursuant to the aforementioned terms and conditions, the warranty commenced on January 19, 2002, the date on which the port main engine was installed in the GULF DAWN. K S Diesel submits that any contractual claims against it should therefore be dismissed because the six-month warranty on the port main engine expired in July of 2002, months before the engine allegedly broke down and failed. In support of the above factual assertions, K S Diesel submits the original and supplemental Unsworn Declarations of its Vice-President, Kenneth Hoorman.
Plaintiff Boston responds that K S Diesel is not entitled to summary judgment based on the asserted six-month warranty. First, Plaintiff maintains that the warranty is not binding on Dawn and/or Boston because (i) there has been no showing of mutual consent to the terms and conditions of the warranty, and (ii) language appearing in a document issued at an indefinite time after the formation of the contract cannot be enforced against Plaintiff. In support of this argument, Plaintiff has submitted in its Sur-Reply the Affidavit of Don Theriot, the port captain for Dawn. See Exhibit A to Sur-reply Mem. in Opp'n. In his Affidavit, Theriot avers that, in January 2002, on Dawn's behalf, he ordered the replacement port main engine from K S Diesel, at which time K S Diesel personnel did not say anything about a warranty and that K S Diesel did not provide him with a warranty document. See id. at ¶¶ 4, 6 and 7. Theriot further states that, to the best of his knowledge, K S Diesel did not give anyone else any warranty document regarding the purchase of the engine, and that the first time the subject of the warranty came up was after the engine failed in October of 2002. Id. at ¶¶ 7 and 8.
Plaintiff first submitted an unexecuted affidavit of Don Theriot on December 30, 2004, at which time Plaintiff sought until January 7, 2005, to obtain and submit a signed and sworn affidavit. On January 13, 2005, Plaintiff filed a motion for leave to substitute an executed affidavit in place of the unsigned copy. Defendant opposed that substitution, stating that Plaintiff was making a late attempt to create a factual dispute as to whether the six-month warranty was offered during the original reconditioning of the subject engine. The Court will allow the substitution as the Court finds that, at the time Defendant filed its motion and supporting memorandum, Defendant failed to meet its burden of persuasion as to the validity and enforceability of the warranty. It was only after Plaintiff in its opposition directed the Court's attention to Defendant's failure to present any factual support as to the offer and acceptance of the warranty and the transmittal of same that Defendant supplemented the unsworn declaration of Kenneth Hoorman. In that supplemental declaration, Mr. Hoorman states that the standard six-month warranty was offered and accepted by Dawn at the time of the verbal contract, January 15, 2002, and that a document memorializing same was subsequently transmitted. Thus, because the Defendant did not raise this specific factual issue until it filed its supplemental memorandum, the Court finds that, while untimely by six days, Plaintiff's substitution of the executed Affidavit of Don Theriot should be allowed. The Courts finds that said substitution is warranted as Mr. Theriot's Affidavit responds to the asserted facts raised in the Defendant's supplemental memorandum, and further, because Plaintiff indicated on December 30, 2004, that the then-unexecuted Affidavit had been verified by telephone, and the executed Affidavit was forthcoming.
Plaintiff additionally argues that Defendant is not entitled to summary judgment as Plaintiff is entitled to pursue a claim against K S Diesel for breach of the implied warranty of workmanlike performance. In support, Boston asserts that the express warranty upon which K S Diesel relies does not disclaim any form of warranty implied by the general maritime law.
In the present case, Defendant, as the moving party, bears the burden of proof that no issue of material fact remains as to (i) the validity and binding effect of the six-month warranty, and (ii) the six-month warranty's exclusivity to any other express or implied warranty. Under admiralty law, contractual provisions limiting liability are generally valid. See Employers Ins., 866 F.2d at 776; Todd Shipyards Corp. v. Turbine Serv., Inc., 674 F.2d 402, 411 (5th Cir. 1982). For a limitation on liability or available remedies to be enforced, the law is well-established that the contractual provision must be clear, unequivocal, and reflect the intent of the parties. See Nathaniel Shipping, Inc., 920 F.2d at 1266. Further, generally accepted principles of contract law require any ambiguity to be construed against the party who drafted the language.
In the matter presently before the Court, as with all contracts, an essential element to the validity of the express warranty relied upon by K S Diesel is the mutual intent or consent of the parties, as evidenced through offer and acceptance. Restatement of Contracts, §§ 19-24 (1932). Having reviewed the record, the Court finds that genuine issues of material fact exist, such that summary judgment is precluded, as to whether K S Diesel offered the six-month express warranty to Dawn during the consummation of the verbal contract for the purchase and installation of the subject engine; whether that warranty was accepted by Dawn; whether a document memorializing the warranty terms was transmitted to Dawn; and if so, on what date. Further, as stated earlier, the Court finds that there exist genuine issues of material fact with respect to the August 12, 1002 inspection, the circumstances surrounding such, and any implications that the inspection may have had on the warranty upon which K S Diesel relies. For example, the Court cannot determine from the record whether the August inspection was initially requested timely and authorized as part of or performed pursuant to the six-month warranty; or whether K S Diesel was hired to perform the inspection separate and apart from the six-month warranty, and if so, whether any money was paid by Dawn for the inspection, as such payment would be indicative of Dawn's knowledge of the six-month warranty and the expiration thereof.
While the Court finds that Defendant has produced strong evidence indicating that the standard express six-month warranty is valid and had expired at the time of the alleged engine failure, the Court finds the Defendant's failure to produce any documentary evidence ( e.g., invoices for the January 2002 transaction and/or for earlier transactions) in support of its motion, along with the Court's inability to make a credibility determination as to the conflicting statements of Kenneth Hoorman and Don Theriot, to be fatal to Defendant's motion.
For example, Plaintiff has not offered any affirmative evidence to refute the fact that Dawn contracted with K S Diesel for several overhauled engines over a nine-year period and that each was covered by the standard six-month express warranty. Based on that uncontested fact, it is highly plausible that Dawn was indeed aware that the port main engine which forms the basis of this action would be subject to the standard six-month warranty through its course of dealings as a customer of K S Diesel. See Campbell v. Sonat Offshore Drilling, 979 F.2d 1115, 1120 (5th Cir. 1992) (superceded by statute on other grounds) (recognizing that "[w]here a party shares a history of business dealings and standardized provisions have become part of those dealings, such familiar provisions . . . issued after performance are binding if they are accepted without objection."). However, for the reasons previously stated, the Court finds that Defendant has not submitted sufficient evidence to support its contention that the warranty was part and parcel of the previous contracts and of the contract at issue.
Finally, because the Court has concluded that Defendant is not entitled to summary judgment based on the asserted standard six-month express warranty, the Court sees no reason at this time to express any view as to the effect of that warranty, if valid and enforceable, on the implied warranty of workmanlike performance. Should the Court later determine that the six-month month warranty relied upon by K S Diesel is not binding on the parties, the implied warranty would most certainly be an available remedy for the Plaintiff.
Admiralty law recognizes an implied warranty of workmanlike performance. See Employers Ins., 866 F.2d at 763 n. 17. The warranty means that the obligor in a service contract has a duty to perform his services with reasonable care, skill, and diligence. Carribean Bulk Carriers, Ltd. v. Motor-Servs. Hugo Stamp, Inc., 1996 WL 210716, at *3 (E.D.La. Apr. 26, 1996) (quoting T. Schoenbaum, 1 Admiralty and the General Maritime Law § 5-8 at 190 (2d ed. 1994)). While this implied warranty has its roots in the tort concept of negligence, it nevertheless is one that by its nature arises in contract. 1996 WL 210716, at *3.
III. CONCLUSION
For all the foregoing reasons, IT IS ORDERED that:
1. The Motion for Summary Judgment filed by Defendant K S Diesel Service, Inc., is GRANTED IN PART, insofar as Defendant seeks dismissal of Plaintiff's claims arising out of the January 2002 contract for the purchase and installation of the port main engine, i.e., those claims based on La. Civ. Code arts. 2520 through 2548 relating to rehibitory defects and vices; the Louisiana Products Liability Act, La.Rev.Stat. 9:2800.51, et seq.; and general Louisiana tort law, La. Civ. Code art. 2315, et seq.; and
2. The Motion for Summary Judgment is DENIED in all other respects.