Nada Pacific Corp. v. Power Eng'g & Mfg., Ltd.
73 F. Supp. 3d 1206
N.D. Cal.2014Background
- Nada Pacific was a microtunneling subcontractor on an SFPUC project; it leased an MTBM and installed its own cutter head; the MTBM contained a gearbox with a planetary carrier manufactured by Besser.
- In Sept. 2010 the MTBM became immobilized underground; Nada recovered the machine via a rescue shaft, repaired it, and completed the project.
- Expert testing (UNI, Structural Integrity Associates) examined the failed gearbox components before a Dispute Review Board (DRB) proceeding between Nada, general contractor Rados, and SFPUC.
- Nada submitted a Request for Change Order to Rados seeking compensation for rescue/repair costs; after the DRB issued a nonbinding recommendation, SFPUC paid Rados $850,000 and Rados paid Nada $481,755.49 (net), with Nada receiving $847,383.74 on final billing.
- Nada sued Besser in federal court asserting products-liability and tort claims (strict liability, negligence, negligent misrepresentation, fraud, equitable indemnity) for damages tied to the MTBM failure; Besser moved for summary judgment on three grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Judicial estoppel based on Nada’s DRB position | Nada argued site conditions caused failure before the DRB; it now attributes failure to Besser — but DRB was quasi-adversarial so estoppel should not apply | Besser: Nada persuaded the DRB (and benefited) with a site-conditions theory; judicial estoppel bars contradicting position here | Court: No estoppel — DRB’s recommendation was nonbinding and it did not adjudicate the dispute, so judicial estoppel inapplicable |
| Offset / collateral source rule (duplicate recovery) | Nada: recovery from SFPUC/Rados is independent and therefore collateral source rule prevents offset | Besser: change-order proceeds are not a collateral source; plaintiff’s recovery must be offset to avoid double recovery; adopt parties’ calculations limiting recovery | Court: Collateral source rule does not apply; Nada’s recovery here is limited/offset by amounts received from SFPUC/Rados (court adopts parties’ offset calculations) |
| Economic loss rule as bar to tort claims | Nada: its claimed ‘‘other property’’ losses (cutter head, installed pipe, lease rights, license to use property) are physical or loss-of-use and thus permit tort recovery | Besser: damages are purely economic or loss-of-use of the product and thus must be pursued in contract; tort claims barred; fraud claim also fails | Court: Economic loss rule bars Nada’s tort claims — alleged ‘‘other property’’ losses are economic/loss-of-use, not physical damage; Robinson’s narrow fraud exception inapplicable (no independent affirmative misrepresentation by Besser) |
Key Cases Cited
- Helfend v. S. Cal. Rapid Transit Dist., 2 Cal.3d 1 (Cal. 1970) (collateral source rule preserves plaintiff’s recovery when benefits come from independent sources like insurance)
- Robinson Helicopter Co. v. Dana Corp., 34 Cal.4th 979 (Cal. 2004) (economic loss rule bars purely economic/product-related tort claims; narrow exception for independent fraud/affirmative misrepresentations)
- New Hampshire v. Maine, 532 U.S. 742 (U.S. 2001) (judicial estoppel factors: clear inconsistency, success in persuading a tribunal, and unfair advantage)
- Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597 (9th Cir. 1996) (judicial estoppel can apply to administrative/quasi-judicial proceedings that adjudicate rights)
- Tavaglione v. Billings, 4 Cal.4th 1150 (Cal. 1993) (single-recovery rule: plaintiff entitled to no more than one recovery for each item of compensable damage)