Opinion
No. 055001029
May 24, 2006
MEMORANDUM OF DECISION RE MOTION TO STRIKE (No. 103) DEFENDANT NEWARK CORPORATION'S MOTION TO STRIKE (No. 108)
I. INTRODUCTION.
The motions to strike now before the court present important issues at the intersection of commercial and product liability law.
The plaintiff, Sylvan R. Shemitz Designs, Inc. (Shemitz) alleges that one of its divisions, Elliptipar, Inc. (Elliptipar) manufactures light fixtures. In doing so, it uses an insulation product called a capacitor boot (boot). The boots are manufactured by the defendants Regal Beloit Corporation and General Electric Company (collectively referred to as "Manufacturers"). They are sold to Elliptipar by the defendant Newark Corporation (Newark). Shemitz commenced this action against the defendants in 2005, claiming that the boots were defective, causing certain losses.
Shemitz's complaint consists of five counts. Count One is directed against Newark. It claims a breach of the implied warranty of merchantability under Conn. Gen. Stat. § 42a-2-314. It alleges that, after the light fixtures were sold to its customers, the defective boots "ignited, thereby rendering both the Capacitor Boots and the Light Fixtures of which they were a part, defective." It further alleges that "Elliptipar has suffered damages related to replacing the Capacitor Boots in the Light Fixtures which had been sold to customers, repairing the damage caused by the Capacitor Boots to the Light Fixtures themselves and/or replacing the damaged Light Fixtures, and the time of Elliptipar's employees in investigating and rectifying the problems caused by the defective Capacitor Boots." Count One does not alleges notice pursuant to Conn. Gen. Stat. § 42a-2-607(3)(a).
Count Two is directed against the Manufacturers. It alleges a breach of the implied warranty of merchantability.
Count Three is directed against Newark. It asserts a product liability claim pursuant to Conn. Gen. Stat. § 52-572m, et seq.
Count Four is directed against Newark. It claims that, "Newark was reckless and its conduct in selling the Capacitor Boots to Elliptipar for a purpose for which it later alleged such Capacitor Boots were inappropriate showed reckless indifference to the rights of others, or an unintentional and wanton violation of those rights."
Count Five is directed against the Manufacturers. It asserts a product liability claim pursuant to Conn. Gen. Stat. § 52-572m, et seq.
Shemitz's second prayer for relief seeks "[p]rejudgment interest."
The Manufacturers' motion to strike was filed on December 19, 2005. It asserts that Count Two is barred by the exclusivity provision of Conn. Gen. Stat. § 52-572n(a) and is additionally insufficient because of the lack of privity of contract between Shemitz and the Manufacturers. It asserts that Count Five is insufficient because it claims "commercial loss" and is thus barred by Conn. Gen. Stat. § 52-572n(c). It finally claims that the second prayer for relief should be stricken because Shemitz fails to allege the "wrongful detention of money or liquidated damages.
Newark's motion to strike was filed on January 4, 2006. It seeks to strike Count One because of the failure to allege notice. It seeks to strike Count Three because it claims "commercial loss." It seeks to strike Count Four, claiming that Shemitz "has failed to state a claim for recklessness."
The motions were argued in a consolidated hearing on May 22, 2006.
The Counts will now be reviewed in order.
II. DISCUSSION. A. Count One.
Shemitz agreed at the hearing that the motion to strike Count One must be granted because of its failure to allege notice.B. Count Two.
The absence of privity of contract is fatal to a claim under Article 2 of the Uniform Commercial Code (UCC). Shemitz does not allege either a contractual or a buyer-seller relationship with the Manufacturers. As I have previously explained, Article 2, which contains the warranty provisions of the UCC "applies to transactions in goods." When the parties in question do not have a buyer-seller relationship, Article 2 does not apply. Hartt v. Schwartz, 21 Conn. L. Rptr. 52, 55 (1997). The motion to strike count two must be granted.
C. Count Three.
Count Three asserts a product liability claim against Newark. The specific product liability claim asserted is not identified in the complaint but appears to be one of strict liability in tort. Conn. Gen. Stat. § 52-572m(b). Newark seeks to strike this count on the ground that it seeks to recover commercial loss. Although both sides have made forceful arguments, I find myself, upon reflection, in respectful agreement with Newark on this point.
Our Supreme Court has explained that "the legislature was mindful of a distinction between property damage and commercial losses" in drafting our product liability statutes. Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 583, 657 A.2d 212 (1995). This distinction is codified in Conn. Gen. Stat. 52-572n(a), which provides that product liability claims may be asserted "for harm caused by a product" and § 52-572m(d), which provides that,
"Harm" includes damage to property, including the product itself, and personal injuries including wrongful death. As between commercial parties, "harm" does not include commercial loss.
The problem presented by Count Three arises out of this distinction. The problem presented is this. The damages claimed by Shemitz include both damage to other property (i.e. the light fixtures) and damage to the product itself (i.e. the boots). Although Shemitz's claim additionally includes such items as the time of Elliptipar's employees, the status of such additional items can be left to a properly instructed jury. The assertion of damage to property ordinarily would allow the pleader to survive a motion to strike. Newark, however, makes a perceptive, and ultimately decisive, point. While the alleged damage to the light fixtures and boots was undoubtedly "damage to property" with respect to the owners of the property at the time the property damage occurred, Shemitz was not such an owner. Shemitz admits in its complaint that the property in question had been sold to other customers. Shemitz's damages came about because it had to repair, replace, or otherwise pay for the property damage suffered by its customers. This was monetary damage. The damage to Shemitz, unlike the damage to its customers, was thus "commercial loss." (Shemitz concedes that the parties in question are "commercial parties.")
The product liability statutes do not address the issue whether an item of damages may be "damage to property" as to one downstream purchaser and "commercial loss" with respect to another. The Connecticut appellate courts have not directly addressed this problem. The problem itself is, however, an old one and has been repeatedly addressed by the common law. It is helpful to remember that, in drafting our product liability statutes, "the legislature was merely recasting an existing cause of action and was not creating a wholly new right for claimants harmed by a product." Lynn v. Haybuster Manufacturing, Inc., 226 Conn. 282, 292, 627 A.2d 1288 (1993). See Gerrity v. R.J. Reynolds Tobacco Co., 263 Conn. 120, 127, 818 A.2d 769 (2003).
"Under the prevailing rule in America a plaintiff may not recover in negligence for economic loss resulting from bodily harm to another or from physical damage to property in which plaintiff has no proprietary interest." 4 FOWLER V. HARPER, FLEMING JAMES, JR. OSCAR S. GRAY, THE LAW OF TORTS § 25.18A at 619 (2d ed. 1986). Holmes, J. explained, in a much-cited opinion, that, "a tort to the person or property of one man does not make the tortfeasor liable to another merely because the injured person was under a contract with that other, unknown to the doer of the wrong . . . The law does not spread its protection so far." Robins Dry Dock Repair Co. v. Flint, 275 U.S. 303, 309 (1927).
Our Supreme Court recognized this principle 150 years ago in Connecticut Mutual Life Insurance Co. v. New York New Haven Railroad Co., 25 Conn. 265 (1856). Connecticut Mutual had issued a life insurance policy to one Samuel Beach. Beach was killed in a train wreck, allegedly through the negligence of the defendant railroad company, causing Connecticut Mutual the loss of the insurance proceeds it was required to pay to Beach's estate. On review, the Court held that the action by the insurer could not be squared with "the principle that an injury thus suffered is indirectly brought home to the party seeking compensation for it." Id. at 275. The Court explained its decision in pragmatic terms:
Such are the complications of human affairs, so endless and far-reaching the mutual promises of man to man, in business and in matters of money and property, that rarely is a death produced by a human agency, which does not affect the pecuniary interest of those to whom the deceased was bound by contract. To open the door of legal redress to wrongs received through the mere voluntary and factitious relation of a contractor with the immediate subject of the injury, would be to encourage collusion and extravagant contracts between men, by which the death of either through the involuntary default of others, might be made a source of splendid profits to the other, and would also invite a system of litigation more portentious than our jurisprudence has yet known.
Id. at 274-75.
These pragmatic concerns have been echoed by jurists throughout the last one and a half centuries. Cardozo, J. famously opined that liability for such consequences would be "liability in an indeterminate amount for an indeterminate time to an indeterminate class." Ultramares Corp. v. Touche, 174 N.E. 441, 444 (N.Y. 1931). Our Supreme Court has recently observed that, "Every injury has ramifying consequences, like the ripplings of the waters, without end. The problem for the law is to limit the legal consequence of wrongs to a controllable degree." Ganim v. Smith Wesson Corp., 258 Conn. 313, 349, 780 A.2d 98 (2001). (Interior quotation marks and citations omitted.) Ganim is particularly helpful with respect to the issue presented in the case now before the court, since that case involved an attempt by the City of Bridgeport to seek monetary relief from the manufacturers of handguns causing physical injury to gunshot victims. The City's claim that the physical injury in question caused increased costs for various municipal services was deemed "remote, derivative and indirect." Id. at 351. The Court was persuaded by the analysis of the United States Court of Appeals for the Second Circuit in an analogous case, Laborers Local 17 Health Benefit Fund v. Philip Morris, Inc., 191 F.3d 229 (2d. Cir. 1999), cert. denied, 528 U.S. 1080 (2000). Laborers Local held that a labor union health fund could not sue a cigarette manufacturer for injuries causing the fund to pay out millions of dollars. The injuries suffered by the fund were deemed too remote to establish proximate causation. Id. at 241. This analysis was deemed sufficient to dispose of the product liability claim asserted in Ganim. The injuries complained of were deemed too remote and derivative. 258 Conn. at 374.
The case law just reviewed presents a clear pattern. The railroad passenger in Connecticut Mutual suffered death, but that death was simply economic loss in the hands of his insurer. The gunshot victims in Ganim suffered physical injury and death, but that injury and death were simply economic loss in the hands of the City. The smokers in Laborers Local also suffered physical injury and death, but that injury and death were, once again, simply economic loss in the hands of the fund. Under these circumstances, well-established case law makes it clear that "damage to property" in the hands of one person may be "commercial loss" in the hands of another. Ganim makes it clear that these considerations apply to the product liability statutes.
This analysis does not preclude an action by Shemitz against Newark based on specific contractual terms. It does, however, preclude the product liability claim asserted in Count Three.
D. Count Four.
Count Four claims recklessness. Newark claims that Count Four "does not allege any facts that would constitute recklessness." Our Supreme Court, however, has recently explained that the pleading requirements as to recklessness turn on notice. "[A] complaint is not deficient so long as it utilizes language explicit enough to inform the court and opposing counsel that both negligence and reckless misconduct are being asserted." Craig v. Driscoll, 262 Conn. 312, 343, 813 A.2d 1003 (2003). Craig's requirement of notice is amply satisfied here. The factual basis for Count Four can be tested appropriately by a motion for summary judgment or an appropriately instructed jury considering the evidence presented at trial.
E. Count Five.
Count Five, directed against the manufacturers, presents a remoteness issue similar to the issue discussed with respect to Count Three. For the reasons discussed in that portion of the opinion, the damages claimed by Shemitz constitute "commercial loss" in its hands. The claim made by Shemitz in Count Five is, if anything, more remote than that asserted in Count Three, since no contractual relationship exists between Shemitz and the Manufacturers.
F. The Second Prayer for Relief.
Shemitz's second prayer for relief seeks "[p]rejudgment interest." Prejudgment interest is statutorily allowed "as damages for the detention of money after it becomes payable." Conn. Gen. Stat. § 37-3a. Interest of this description is allowable only for "liquidated sums due for services or services and materials or for reimbursement of specific sums." Foley v. Huntington Co., 42 Conn.App. 712, 739, 682 A.2d 1026, cert. denied, 239 Conn. 931, 683 A.2d 397 (1996). Prejudgment interest is not allowable in a case, such as the present one, seeking consequential damages since, "[b]efore the commencement of trial, the plaintiff cannot be sure of damages from either the jury or the court." Gionfriddo v. Avis Rent A Car System, Inc., 192 Conn. 301, 307, 472 A.2d 316 (1984). The second prayer for relief must, consequently, be stricken.
III. CONCLUSION.
For the reasons stated above, the Manufacturers' motion to strike (No. 103), seeking to strike Counts Two and Five and the second prayer for relief is granted in its entirety.
Newark's motion to strike (No. 108), seeking to strike Counts One, Three, and Four, is granted as to Counts One and Three and denied as to Count Four.