Opinion
CV-001131-11/JA
06-27-2013
Fabbis Enterprises, Inc., Plaintiff, v. The Sherwin-williams Company, Defendant.
Appearances:Goodell & Rankin Kimberly M. Thrun, of counsel Jamestown, New York For the Plaintiff Goldberg Segalla LLP Clayton Waterman, of counsel Buffalo, New York For the Defendant
Appearances:Goodell & Rankin Kimberly M. Thrun, of counsel Jamestown, New York For the Plaintiff
Goldberg Segalla LLP Clayton Waterman, of counsel Buffalo, New York For the Defendant
George Panebianco, J.
Plaintiff Fabbis Enterprises, Inc. commenced this action alleging, among other things, Fabbis Enterprises, Inc. was damaged by Sherwin-Williams' negligent misrepresentation. In now moving to dismiss that cause of action, Sherwin-Williams argues that the claim is barred by the "economic loss" doctrine.
The motion to dismiss does not address the other causes of action stated, only the first cause of action for negligent misrepresentation. This decision shall only address the defendant's current motion.
Recitation in accordance with CPLR § 2219 (a) of the papers considered on defendant's motion: letters of Goldberg Segalla LLP dated July 13, 2012, September 6, 2012, September 27, 2012 and November 13, 2012; and letters of Goodell & Rankin dated August 7, 2012, September 24, 2012, October 2, 2012 and November 15, 2012.
Background
In October 2010, an employee of plaintiff Fabbis Enterprises, Inc. (Fabbis) visited a store operated by defendant The Sherwin-Williams Company (Sherwin-Williams), and explained that he was repainting the exterior of a 32-foot cabin cruiser and wanted durable, high gloss exterior paint. Based on the store manager's recommendation, the Fabbis employee purchased a water based epoxy, marked "protective & marine coatings" and applied the product in accordance with the instructions on the label. Upon discovering that the paint had a dull finish, plaintiff again contacted Sherwin-Williams. This time, Sherwin-Williams recommended and sold to Fabbis a clear coat polycrylic to apply as a top coat over the "marine" coating. According to Fabbis' complaint, the second coat paint finish was not glossy and turns yellow when exposed to gasoline, soft drinks and other materials common on recreational boats.
Fabbis alleges that Sherwin-Williams had a duty to impart correct information and breached that duty by negligently recommending that it purchase the wrong paint. Fabbis maintains that it would not be made whole by a mere refund of the purchase price (approximately $750) - - damages which plaintiff could potentially recover pursuant to the breach of express and implied warranty causes of action - - and is seeking reimbursement for the out-of-pocket cost (approximately $14,000) of the wrong paint, the initial painting, and the removal of the paint from the boat so that it can be repainted with the right type of paint.
Through a series of letter briefs, supplemented by oral argument, Sherwin-Williams has moved for an order (presumably, pursuant to CPLR 3211[a][7]) dismissing Fabbis' claim of negligent misrepresentation. It asserts that Fabbis "seeks to subvert contract law by alleging a negligence cause of action rather than a claim for breach of an implied warranty of fitness for a particular purpose (found at UCC § 2-315)" [letter of 11/13/12, p. 2]. It argues that the claim of negligent misrepresentation is barred by the New York economic loss rule, and that the facts of this case fall outside of any recognized exceptions to that rule, including those for "violation of a legal duty independent of that created by the contract" (see Naftilos Painting, Inc. v. Cianbro Corp., 275 AD2d 975 [4th Dept 2000]) and for damage to "plaintiff's property other than the defective product itself" (Restatement [Third] of Torts: Product Liability § 21]; see also Bocre Leasing Corp. v General Motors Corp. (Allison Gas Turbine Div.), 84 NY2d 685 [1995]).
Fabbis posits that this case falls within the "other property" exception to the economic loss rule and/or is outside the rule because it was simply sold the wrong type of paint.
Discussion
The economic loss rule "stands for the proposition that an end-purchaser of a product is limited to contract remedies and may not seek damages in tort for economic loss against a manufacturer" (532 Madison Avenue Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 NY2d 280, 288 n 1 [2001]). "Thus, economic losses, such as damage to the product itself and consequential damages, may not be recovered in an action predicated on strict products liability or negligence, unless personal injury or injury to property other than the product is alleged" (1A NY PJI3d 2:120 at 706 [2012], citing, inter alia, Bocre Leasing Corp. v General Motors Corp. (Allison Gas Turbine Div.), 84 NY2d 685 [1995]; Bellevue South Associates v HRH Const. Corp., 78 NY2d 282 [1991]; Schiavone Const. Co. v Elgood Mayo Corp., 56 NY2d 667 [1982], revg on dissent at 81 AD2d 221 [1981]).
"The economic loss doctrine reflects the principle that defects related to the quality of the product are relevant to the parties' expectancies, such as loss of bargain, and are not recoverable in tort, relegating such claims to the law of contracts and warranty which governs the economic relations between suppliers and consumers of goods' " (Praxair, Inc. v. General Insulation Co., 611 F Supp2d 318, 326 [WDNY 2009], citing Hemming v. Certainteed Corporation, 97 AD2d 976, 976 [4th Dept 1983] [plaintiffs' tort claims, alleging that siding systems did not perform properly causing consequential damages to their homes, were properly characterized as being for "economic loss"]).The rule bars recovery by both remote downstream purchasers, "and those who purchased the product directly from the manufacturer or supplier" (1A NY PJI3d 2:120 at 708, citing, inter alia, Travelers Ins. Companies v Howard E. Conrad, Inc., 233 AD2d 890; Ofsowitz v Georgie Boy Mfg., Inc., 231 AD2d 858).
To determine whether the rule applies to a given case, a court should consider factors such as "the nature of the defect, the injury, the manner in which the injury occurred, and the damages sought" (Hodgson, Russ, Andrews, Woods & Goodyear v. Isolatek Intl. Corp., 300 AD2d 1051, 1052 [4th Dept 2002]). "Critical to a determination of whether a tort claim is barred by the economic loss doctrine is whether damages are sought for the failure of the product to perform its intended purpose, in which case recovery is barred by the economic loss doctrine, or for direct and consequential damages caused by a defective and unsafe product" (Praxair, Inc. at 326, citing Hodgson, Russ, 300 AD2d at 1052-1053).
Several cases illustrate the Hodgson, Russ approach for determining whether the rule applies. In Hodgson, Russ, the Appellate Division concluded that the rule was inapplicable where "the damages sought were not the result of the failure of the product to perform its intended purpose of fireproofing" (300 AD2d at 1052-1053), but were instead caused by mold and fungus on the product, which, after remedial measures proved unsuccessful, resulted in plaintiff's decision to demolish two entire floors.
In Praxair, Inc., the plaintiff brought negligence and strict liability claims against the manufacturer of an insulation coating product used as a joint sealant for its cryogenic testing facility in Tonawanda, New York. The central claim was that the damages (extensive corrosion to the piping system employed throughout the facility) were caused by the inclusion of chlorides as an ingredient of the product. Applying the Fourth Department's Hodgson, Russ approach, the federal court noted the absence of any allegations in the pleadings that the claimed damages resulted from the product's "failure to perform its intended purpose as an insulation joint sealant" (Praxair, Inc. at 327). Accordingly, the court denied the manufacturer's motion to dismiss the tort claims as barred by the economic loss doctrine.
The court also rejected, as premature, the determination sought by the manufacturer that the product and piping were part of a "single integrated system," as opposed to "other property."
Reaching the opposite conclusion - - that the plaintiff's negligence cause of action is barred, and therefore must be dismissed - - is the more recent case of Bristol Village, Inc. v. Louisiana-Pacific Corporation, __ F Supp2d __, 2013 WL 55698 (WDNY, Jan. 3, 2013]). In that case, an assisted living facility located in Clarence Center, New York, brought suit against a product manufacturer alleging that, as a result of defective trim board, plaintiff's structure sustained significant water damage. Applying Hodgson, Russ, the court granted the motion to dismiss, concluding "that the damage claimed relates to the expectations of the parties regarding the performance of [the product], thus relegating these plaintiffs to contractual remedies such as warranty" (at *6).
Not relying upon Hodgson, Russ, but illustrating a similar, economic loss rule analysis is Weiss v. Polymer Plastics Corp., 21 AD3d 1095 (2d Dept 2005). In that case, homeowners brought suit alleging that the synthetic stucco' manufactured by the defendant allowed water to infiltrate the stucco causing direct loss to the stucco itself as well as consequential damages to the plywood substrate. Reasoning that the stucco "did not perform properly to protect their home" (id. at 1096), the Second Department affirmed the order of Supreme Court, Nassau County which dismissed all tort-based claims as barred by the economic loss rule. As the Praxair court noted, "[n]ot only did the [the Second Department in Weiss] not discuss whether the damage to the plywood substrate constituted other property' sufficient to avoid the economic loss doctrine, but the initial determination that the damages . . . were attributed to the failure of the defective stucco to properly perform rendered it unnecessary for the court to consider whether the other property' exception to the economic loss doctrine applied" (611 F Supp2d at 327).
Also consistent with the Hodgson, Russ approach is Hemming v. Certainteed Corp., 97 AD2d 976, supra. There, "[t]he essence of plaintiffs' claims [was] that the [siding systems] did not perform properly to protect their homes and, as a consequence, they . . . suffered direct loss to the siding itself and consequential damages to their homes" (id. at 976). Accordingly, the Fourth Department held that the tort claims were barred by the doctrine.
Accepting as true the facts alleged in the complaint and affording Fabbis the benefit of every favorable inference (see Roni LLC v. Arfa, 18 NY3d 846 [2011]), the Court concludes that the first cause of action set forth in the complaint (negligent misrepresentation) is foreclosed by the economic loss doctrine. Here, the product was intended to serve as a durable, high gloss marine finish. Plaintiff alleges that the product is neither durable nor high gloss nor suitable for marine use. In other words, the essence of the claim is that the product failed to perform its intended purpose.Furthermore, unlike the water damage to the underlying structure in Weiss, Hemming and Bristol Village, or the corrosive damage to the piping system in Praxair, in the instant case, there is no alleged damage to the boat itself, except for the consequential damages inherent in having to remove the paint, which are properly characterized as "economic loss." That the siding in Hemming, the trim board in Bristol Village or the stucco in Weiss had to be removed in order to ultimately repair each structure was not sufficient to avoid application of the economic loss rule in each of those cases. Similarly, the removal of the alleged inadequate paint does not preclude the application of the economic loss doctrine.
Fabbis seeks to distinguish the economic loss rule cases, arguing that, here, a customer was simply sold the wrong' type of paint. But, that is a bootstrapping argument. It was the wrong' type of paint because it allegedly failed to properly perform its intended purpose. The language on the paint cans themselves describe the product as "durable" and "glossy or semi-glossy". It is clear that the Plaintiff's actual complaint is with the performance of the product. Therefore the economic loss doctrine does apply.
Although this Court is sensitive to the ad hominem argument that a strict application of the economic loss doctrine may relegate plaintiff to arguably insufficient, contract law damages, this Court is bound to apply the law as it presently stands. While some states recognize an exception to the economic loss doctrine for negligent misrepresentation claims (see R. Joseph Barton, Drowning in a Sea of Contract: Application of the Economic Loss Rule to Fraud and Negligent Misrepresentation Claims, 41 Wm. & Mary L. Rev. 1789, 1812-1823 [2000]), this Court can find no cases to support such an exception under New York law (see, e.g., General Elec. Co. v. Towne Corp., 144 AD2d 1003 [4th Dept 1988]; Nebraskaland, Inc. v. Sunoco, Inc., 2011 WL 6131313 [EDNY 2011]).
Conclusion
Based upon the foregoing, defendant's motion to dismiss the first cause of action for negligent misrepresentation is, in all respects, granted.
The foregoing constitutes the decision and order of the court.
Dated this 27th day of June 2013 at Jamestown, New York.
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Hon. George Panebianco
City Court Judge