Lead Opinion
The essential determination that the court must make in this case is whether tort theories may be invoked by a purchaser of a product in an instance in which the failure of the product causes damage only to the product that failed (economic loss in the parlance of the authorities). An additional issue is raised questioning the propriety of the entry of a summary judgment in favor of the seller when the buyer asserts that a genuine issue of material fact exists concerning the contractual duties owed by the seller to the buyer. The parties also have argued the applicability of the law relating to an insurance company acting as a volunteer in the payment of the claim for insurance proceeds filed by the buyer. The trial court ruled that the complaint of Continental Insurance, Fireman’s Fund Insurance Company, St. Paul Insurance Company, Royal Insurance Company, Centennial Insurance Company, and American Home Insurance Company (Appellants collectively referred to as Continental) failed to state a claim in those counts asserting negligence, strict liability, or failure to warn against Page Engineering (Page) because the only damages asserted were the economic loss to Bridger Coal (Bridger), the buyer of the product. With respect to contractual claims that were asserted, the trial court found that the contract was not ambiguous and that Page’s duties expired long before any cause of action accrued. In addition, the district court ruled that Continental was a volunteer with respect to its payment of Bridger’s insurance claim. We hold that the trial court correctly ruled that Continental’s claims of negligence, strict liability, and failure to warn do not state a claim upon which relief can be granted. We are in accord with the district court’s ruling that Page had no existing duty under the contract that related to Bridger’s loss in this case. Given those determinations, the question of whether Continental acted as a volunteer in paying Bridger’s claims for insurance is moot, and we need not address it. We affirm the trial court’s entry of summary judgment in favor of Page, recognizing that, in substance, the judgment constituted a dismissal with prejudice of the claims for relief under tort theories and was a true summary judgment with respect to claims based upon breach of an express or implied contract.
This case arose out of the failure of a reeving block on a very large dragline that Bridger had purchased from Page. A break in the reeving block caused the 100 yard long boom to separate from the rest of the dragline structure and, when it fell, the boom was destroyed. Continental paid Bridger for its damages, which were caused by the collapse of the dragline, and then sought to recover from Page asserting its rights as a subrogee of Bridger.
In the Appellants’ Brief, Continental sets forth five primary issues to be addressed, each of which encompasses several sub-issues and arguments. Those are stated as:
*643 “A. Whether a district court in treating a Wyoming Rules of Civil Procedure Rule 12(B)(6) motion to dismiss as a summary judgment motion may make factual assumptions as to the type of loss, cause of loss, and insurance coverage for the loss; deny plaintiff the right to conduct further discovery; and then grant summary judgment to defendant on the basis of the assumed type of loss, cause of loss, and insurance coverage?
“B. Whether a manufacturer who sells heavy machinery in Wyoming and later discovers that one component of said machinery has a correctable unreasonably dangerous defect may escape liability for ‘negligent failure to warn’ under the ‘economic loss’ doctrine when the dangerously defective component fails in a foreseeable manner and destroys a non-defective component of the machinery?
“C. Whether the ‘economic loss’ limitation on product liability actions should entirely preclude a product liability action which sounds in negligence or strict liability where an unreasonably dangerous defective component of a product fails in a foreseeable manner and destroys a now-defective component?
“D. Whether the district court may make factual assumptions as to cause of loss and based thereon enter summary judgment that the loss was not covered by insurance and thus that insurers are not entitled to subrogation?
“E. Whether any continuing obligation should be implied under a contract for sale of heavy machinery where, after the sale, the manufacturer continues to conduct technical, training and assistance visits to the jobsite; and, if there is no such continuing obligation, whether discovery should be allowed to ascertain the obligations and requirements understood by the manufacturer or imposed by industry custom and practice as to the subsequent visits to the jobsite?”
Page Engineering, in its Brief of Appel-lee, states the issues presented in this way:
“I. Whether the trial court properly applied the economic loss doctrine, which is cited with approval by the Wyoming Supreme Court and is the controlling law in a clear majority of jurisdictions, to enter summary judgment for appellee on appellants' tort claims (Counts I, II, IV-VI) which seek to recover only for loss to the dragline boom?
“II. Whether any finding of fact was necessary to the district court’s award of summary judgment for appellee as a matter of law?
“III. Whether the courts recognize an exception to the doctrine approved by the United States Supreme Court in the East River decision denying recovery for economic loss (damage to the product itself) when the failure of one component of a product damages another component?
“IV. Whether the economic loss doctrine bars strict liability claims for damage to the product itself?
“V. Whether the economic loss doctrine bars claims for negligent failure to warn?
“VI. Whether the trial court properly awarded summary judgment for appellee on appellants’ claim for breach of contract for failure to maintain insurance (Count III), negligent failure to maintain insurance (Count IV) and express indemnity (Count V) where the clear and unambiguous language of the 1974 agreement, the only contract relied on by appellants in the record, provides that appellee’s duties to Bridger lapsed under the 1974 agreement eight years before the collapse of the dragline?
“VII. Whether the trial court properly denied appellants’ motion for continuance of discovery where appellants only sought discovery of facts to establish their theory of failure to warn and the trial court had already found this theory legally insufficient?
“VIII. Whether the trial court properly awarded summary judgment for appellee because appellants were not entitled to subrogation since appellants admitted that the loss to the dragline was due to a latent defect in the dragline and recovery for loss due to a latent defect was excluded from coverage under appellants’ insurance policy.”
“This Purchase Contract, including these terms and conditions, the specifications attached hereto and any additional terms and conditions incorporated in and attached hereto constitutes the sole and entire agreement between the parties. The Seller’s proposal is incorporated in and made a part of this Purchase Contract only to the extent of specifying the nature and description of the Equipment ordered, and then only to the extent that such terms are consistent with the terms of this Purchase Contract. No other items or conditions shall be binding upon Buyer unless accepted by it in writing.”
In paragraph ten of the purchase agreement, Page’s warranty of the dragline was set forth in this language:
“Seller warrants that the Equipment and all parts thereof shall be free from defects in design, material, workmanship and title, and shall conform in all respects to the terms of this Purchase Contract, and, if no quality is specified, shall be of the best quality consistent with the nature and type of equipment usual and customary for draglines. If within one (1) year from (a) the date that the equipment is available for commercial operation (capable of stripping overburden) or (b) thirty (30) days after the date the dragline first walks, whichever is earlier, the Equipment, or any part thereof, does not conform to these warranties, and Buyer shall have notified the Seller within a reasonable time after its discovery of such nonconformity, Seller shall thereupon promptly correct such nonconformity at its sole expense. The conditions of any subsequent tests shall be mutually agreed upon and Seller shall be notified of and may be represented at all tests that may be made. In the event that the Equipment or any component parts are replaced pursuant to this warranty, such replacement Equipment and parts shall be warranted and guaranteed as provided herein for a period of one (1) year after such replacement and acceptance thereof by Buyer. The Seller shall not be liable hereunder for any damages as defined and excluded in paragraph 6.0 of this contract [relating to consequential or special damages] nor shall Seller be responsible under any breach of this warranty for any injury to any person proximately resulting from the breach of this warranty. THIS WARRANTY IS THE ONLY WARRANTY MADE AND THERE ARE NO OTHER WARRANTIES OR GUARANTEES, EXPRESSED OR IMPLIED, INCLUDING MERCHANTABILITY OR FITNESS FOR PARTICULAR USE.”
The contractual duties which Continental contends were not performed by Page are found in paragraphs eighteen, nineteen, and twenty of the Purchase Contract. According to paragraph eighteen, Page would furnish consultants during the erection, which was defined to terminate when the dragline became operable, and for a period not in excess of sixty days after completion of the erection of the dragline. In paragraph nineteen, Page agreed to “continuously carry” insurance on the dragline in the amount of one million dollars “to protect against and from all loss by reason of injury to persons or damage to property including Seller’s own employees and third persons, and property of Buyer and third parties, based upon or arising out of Seller’s operations hereunder including the operations of his subcontractors or sub-subcontractors.” In paragraph twenty, Page agreed that it would indemnify Bridger for any “damage to or destruction of property” of Bridger’s “resulting from, arising out of, or in any way connected with Seller’s operations hereunder at the job site, excepting only such injury or harm as may be caused solely by the fault or negligence of Buyer, its directors, officers, employees or agents.”
“* * * The dragline has a boom 100 yards long from which is suspended a bucket capable of holding 50 to 75 cubic yards of material. The bucket scoops up material as it is dragged along the ground. The bucket is then lifted by the boom and the entire dragline, including the housing and boom, then turns so that the contents of the bucket may be dropped into a spoil pile. The dragline then turns back to its original position, the bucket is dropped and dragged again, and the procedure is repeated. The dragline is moved to a new position by ‘walking’ on large legs attached to its sides.
“The reeving block is a large steel ‘pulley’ through which steel cables pass from a mast to the dragline housing. Other lines run from the mast to the tip of the boom to support the boom. Engines in the housing are used to raise the boom during erection by tightening the lines which pass through the reeving block. After erection of the boom, static lines are attached to the sides of the reeving block to hold the mast and boom in position.”
This dragline was used by Bridger in its mining operations, without any apparent complaints, from 1978 until March of 1983. Then Bridger notified Page of several problems that it was experiencing with the machine. One of those complaints related to the reeving block. Bridger had noticed some cracking in that part of the dragline. According to Continental’s brief, Bridger had observed the cracking earlier and had welded it. The record supports only a reference in a letter from Page to Bridger referring to a notification by Bridger to Page of cracking in the reeving block in a letter dated March 30, 1983.
Bridger requested Page to send personnel to the mine site to inspect the dragline, and Page did that. After completing the inspection, Page sent Bridger a letter which related Page’s findings and recommendations. The letter includes advice by Page to Bridger that many of the problems were attributable to improper use and maintenance of the dragline. Specifically with respect to the cracking in the reeving block, Page suggested that those cracks be welded properly. There is no claim by Continental that Page was responsible for accomplishing any of these suggested corrections, and there is no evidence or allegation that Page performed any of the suggested repairs for Bridger.
In the same month, March of 1983, Page instructed its company engineers to design a reeving block model that would support a greater stress load. Officers of Page stated that this was sheer coincidence because the modifications were requested in response to a purchase order for a dragline that would be required to tolerate greater stress conditions than those of draglines previously manufactured and sold, including the dragline furnished to Bridger. Several structural changes were made in the design of the reeving block that permitted the boom to apply a straight pull on the load. The new design also employed a thicker gauge of steel, providing greater “impact properties in cold weather.” Continental, in this action, alleged that the redesign developed not only a more durable reeving block, but a safer one as well, and Continental claims that Bridger should have been told of its availability. It is clear that Page did not advise any of its prior purchasers of the redesign of the reeving block, nor did it recommend to Bridger that it should, or could, replace the reeving block on Bridger’s dragline with the redesigned model.
On February 24, 1986, the reeving block on the Bridger dragline broke at one of the previously welded cracks. Continental alleged that the break in the reeving block caused the boom to separate from the housing of the dragline resulting in destruction of the boom with damages in excess of $2,500,000. After learning of the collapse
After the destruction of the boom on its dragline, Bridger filed a claim with Continental for the damages it had suffered. Continental paid Bridger’s claim, and it then filed its complaint in the district court seeking to recover from Page for any cause of action that Bridger could have brought against Page on the ground that Continental was subrogated to Bridger’s claims. Continental’s complaint set forth five claims for recovery that included theories of negligent design of the reeving block, negligent failure to warn Bridger of the redesign of the reeving block, breach of contract for failure to maintain insurance on the dragline, negligent failure to maintain insurance, and express indemnification. Page answered Continental’s complaint, and Page and Continental began to pursue discovery.
Approximately one year later, on July 16, 1987, Page filed a Motion to Dismiss and to Stay Proceedings Pending Disposition of This Motion, pursuant to Rule 12(b)(6), W.R.C.P., asserting that (1) an action in tort to recover only economic loss fails to state a cause of action; (2) any contractual duties which Page might have been responsible for under the 1974 contract had ended at least eight years before the collapse of the Bridger dragline; and (3) Continental was a volunteer in making its payment to Bridger, thereby preventing any claim of Continental to a right of subrogation because the policy which Continental had written for Bridger did not cover the type of damage experienced by the dragline. Continental then filed an Opposition to Defendant’s Motion to Dismiss in which it argued that the economic loss doctrine did not apply to a cause of action which alleged a failure to warn or to any cause of action which alleged negligence because the defect in the product created an unreasonably dangerous condition. In addition, Continental contended that Page’s contractual duties extended beyond the warranty period in the Purchase Contract so that Bridger’s claim was covered by the policy or that, in the alternative, Continental had paid Bridger’s claim in good faith believing that the claim was covered. Continental therefore asserted that it did have a right of subrogation to any claim Bridger could have brought against Page. Continental also filed a Motion for Leave to File Amended and Supplemental Complaint seeking to amend its complaint by supplementing it to include an additional cause of action for strict products liability.
The district court then furnished to the parties a decision letter in which the court stated that it intended to treat the Motion to Dismiss filed by Page as a motion for summary judgment and that it would allow Continental two weeks to either approve of or object to the court’s proposed action. Continental did not file an objection, but it did file a Motion for Continuance of Discovery in which it was asserted that additional time was necessary to develop its argument that Page should be held strictly liable in tort due to the unreasonably dangerous condition created by the defect in the reeving block. After additional briefing, the trial court entered an order denying Continental’s motion for additional discovery time and its motion to amend the complaint to add an additional claim of strict product liability. The court then entered a Summary Judgment for Page with respect to all pending claims.
Initially, Continental asserts that the district court erred in granting summary judgment because of the existence of genuine issues of material fact relating to the cause of Bridger’s damages. Continental quotes language from the decision of the district court that suggests a finding that the damage to the reeving block, which in turn caused the collapse of the boom, was a gradual deterioration caused by a latent defect. It is Continental’s contention that such a finding was prejudicial because several courts have distinguished between
In a prior case, we reversed the decision of the district court granting a summary judgment prematurely and denying reasonable time for the parties to conduct their desired discovery. Pace v. Hadley,
The recognized majority rule is that a claim for pure economic loss (the damage is only to the defective product) does not lie on a theory of negligence or strict liability. East River S.S. Corp. v. Transamerica Delaval, Inc.,
“Contract law, and the law of warranty in particular, is well suited to commercial controversies of the sort involved in this case because the parties may set the terms of their own agreements. The manufacturer can restrict its liability, within limits, by disclaiming warranties or limiting remedies. See U.C.C. §§ 2-316, 2-719. In exchange, the purchaser pays less for the product. Since a commercial situation generally does not involve large disparities in bargaining power, cf. Henningsen v. Bloomfield Motors, Inc.,32 N.J. 358 ,161 A.2d 69 (1960), we see no reason to intrude into the parties’ allocation of the risk.” East River,476 U.S. at 873 ,106 S.Ct. at 2303 .
In addition, we are in accord with those courts that have concluded it is unwise to intrude, without more justification, into the remedies that legislatures have chosen and which have been provided by the adoption of Article 2 of the Uniform Commercial Code — Sales. Sections 34-21-201 through 34-21-299.5, W.S. 1977. See Sacramento Regional Transit District v. Grumman Flxible,
Continental argues vigorously that this court should not espouse the majority rule, but should, instead, adopt the rationale of those courts that permit recovery of eco
“* * * We realize that the damage may be qualitative, occurring through gradual deterioration or internal breakage. Or it may be calamitous. [Citations]. But either way, since by definition no person or other property is damaged, the resulting loss is purely economic. Even when the harm to the product itself occurs through an abrupt, accident-like event, the resulting loss due to repair costs, decreased value, and lost profits is essentially the failure of the purchaser to recover the benefit of its bargain — traditionally the core concern of contract law. See E. Farnsworth, Contracts Section 12.8, pp. 8397840 (1982).” East River,476 U.S. at 870 ,106 S.Ct. at 2301 .
After the Supreme Court articulated its resolution of this issue, the United States Court of Appeals for the Third Circuit reexamined the wisdom of its decision in Pennsylvania, in which that court had held fhat tort principles could be invoked in an action seeking recovery for damage to the defective equipment when the defect resulted in a hazardous condition and the loss flowing from the defect was caused by an accident that was a sudden and catastrophic event. In that case, the court predicted that the rule ultimately adopted in Pennsylvania would be consistent. In Aloe, however, the court determined that, by applying the concepts of East River, “a murky trudge through sophisticated nuances gives way to an unencumbered flight to basics.” Aloe,
“Making liability depend upon whether or not the loss results from an ‘accident’ creates a difficult issue and arguably an irrelevant issue with respect to the validity of contract provisions allocating a risk of loss for harm to the defective product itself to the purchaser. Distinguishing ‘accidental’ damage to the product from mere economic loss is difficult in many cases, such as defect in a component of a television set that burns out the tubes, or an electric connection to the engine of a refrigerator that destroys the engine.” W. Keeton, Prosser and Keeton on the Law of Torts § 101 at 709 (5th ed. 1984).
Furthermore, drawing a distinction between a sudden, calamitous event and gradual deterioration may simply turn on the arbitrary factor of whether the purchaser noticed the gradual deterioration of a component part that, left unattended, could result in a calamitous occurrence. This difficulty was noted in S.J. Groves & Sons Company v. Aerospatiale Helicopter Corporation,
We have no quarrel with Continental’s contention that there may be no incentive for manufacturers to produce safer products unless they are held liable for those defective products placed in the hands of purchasers and consumers. We are satisfied, as other courts have been, that rules which permit recovery in negligence and strict liability for damage to property other
We therefore hold that Wyoming does not permit recovery in strict liability or negligence for damage caused to the product itself. The corollary of this rule in context of summary judgment is that, where no cause of action is permitted, there obviously are no material facts. In the context of discovery, if there are no facts which are material, no purpose can be served by further discovery.
In the alternative, Continental argues that recovery should be permitted when the alleged tort is the failure to warn of a known, or foreseeable, unreasonably dangerous condition. Continental refers us to two cases in which recovery was allowed on the theory of negligent failure to warn when the only damage was to the product itself. Those cases are Miller Industries v. Caterpillar Tractor Company,
“* * * A duty to warn of a product’s defect of which the seller becomes aware goes not to the quality of the product that the buyer expects from the bargain, but to the type of conduct which tort law governs as a matter of social and public policy. See Prosser, Section 92, p. 613; Jig the Third,519 F.2d at 179, 181 (Gee, J., dissenting). To hold otherwise would impermissibly allow a manufacturer who is aware that it has a defective product on the market to hide behind its warranty while the buyer unknowingly uses it.” Miller,733 F.2d at 818 .
In McConnell,
This case is different from those because it involves a single manufacturer that was responsible for a single, integrated product, even though it was made up of several components. Cf. Fordyce Concrete, Inc. v. Mack Trucks, Inc.,
Recognition of a cause of action based upon duty to warn, in these circumstances, well could impose a duty on the manufacturer to advise each customer of every change in the design of its product that, in some way, might lengthen the useful life of that product. There does not appear to be any inherent wisdom in imposing such a duty. We also have considered, and rejected, the adoption of any distinction based upon whether the defect could create an unreasonably dangerous condition. Imposing liability for damages caused to the user or consumer or to other property is ample incentive to encourage manufacturers to warn of a dangerous defect of which they are, or should be, aware. To permit recovery in the instance in which the product damages only itself simply because the plaintiff has alleged failure to warn of the defect will only encourage plaintiffs to present “a products liability argument clothed in ‘failure to warn’ language,” if for nothing more than its settlement potential. Zidell, Inc. v. Cargo, Freight and Subfreight of Barge ZPC 404,
This case is a classic example of the proposition that expectancies with respect to the performance of a product should be a matter of contract between the parties. If a purchaser desires to extend the warranty period, or obtain some form of insurance as to the reliability or worthiness of the product, that may be done through bargaining for an extended warranty at an increased cost or by payment of premiums for insurance. Bridger decided to obtain insurance from Continental to cover certain defects in the dragline beyond the protection furnished in the warranty provision of its contract with Page. As consideration for that coverage, Continental accepted premium payments in accordance with its insurance policy. That decision to obtain, or provide, additional insurance through contractual arrangements represents the business expectancies of each of the parties with respect to the worthiness of the product. The injection of tort principles into the resolution of that bargain, without any compelling justification for doing so, serves only to obfuscate the decision making process by which sophisticated entities conduct their business. We hold that the district court did not err in dismissing, by the entry of summary judgment, Continental’s claims alleging a right to recover economic damages in tort, including the theory of failure to warn.
Continental seeks reversal also upon its right to recover under perceived contractual obligations owed by Page. It contends that there are present in the record genuine issues of material fact which foreclose the entry of summary judgment with respect to contract claims. More specifically, Continental argues that the purchase agreement established a continuing obligation on the part of Page to insure the dragline and to indemnify Bridger against any loss. Alternatively, Continental urges the proposition that, if there was no continuing obligation under the contract, the
The rule is clear that the interpretation of an unambiguous contract presents simply a question of law for the court, and disposition of disputes relating to such a contract properly may be accomplished by a summary judgment. See State v. Pennzoil Company,
“It is readily apparent from the contract, when it is read as a whole, that Page’s ‘operations’ under that contract consisted of erecting the dragline at Bridger, and that once it was erected, Page had no further obligation to maintain insurance for its ‘operations’ under this agreement, as its operations were complete. Also, it was clearly intended by the parties that Bridger would have the benefit of the limited warranty after Page’s operations in erecting the dragline under the agreement were completed, and that there would be no further requirement for Page to maintain insurance. Plaintiffs’ reading of Paragraph 19 to the effect that Page has to maintain insurance on the dragline ‘continuously’ until the end of the world is a nonsensical reading of that provision which totally ignores the rest of the contract and the context in which it is made.”
The assertion of an absurd reading of an unambiguous contract to support a claim does not justify a conclusion of ambiguity in the contract nor require a court to deny summary judgment because a genuine question of material fact exists as to a duty owed under the contract.
Insofar as Continental urges an implied contract between Page and Bridger that extended beyond the period of the express agreement, Continental admits that the terms of such an agreement are unknown to either of the parties. It simply suggests that a jury be allowed to decide what the terms were. It is an axiom of the law of contracts that, in the absence of a meeting of the minds, there is no contract. Thus, in an instance in which the terms of the contract are so uncertain that mutuality of agreement cannot be discerned, the contract is unenforceable because of uncertainty. See Elder v. Jones,
In this regard, Continental’s reliance is upon Page’s response to Bridger’s request to investigate certain problems that it was experiencing with the dragline and to offer suggested solutions. This re
While Continental does present arguments relating to the matter of payment as a volunteer, we see no need to address those contentions. The status of Continental as a volunteer would only serve as a defense to valid claims which might have existed in favor of Bridger assigned by subrogation to Continental. In view of our conclusion that Bridger has no valid claims as a matter of law, Continental’s status as a volunteer is not material.
While greater precision might have produced an order by the district court granting the motion to dismiss with respect to the tort theories asserted by Continental and then granting summary judgment with respect to contract claims, we have no difficulty in perceiving the premise for the ruling of the district court. Since there are no factual issues which have any materiality, and this case is controlled by principles of law, the denial of further discovery proceedings by the district court was correct. The disposition of the case by the entry of summary judgment in favor of Page is an appropriate resolution. The order granting summary judgment to Page is affirmed.
URBIGKIT, J., filed a dissenting opinion.
Dissenting Opinion
dissenting.
Denied completion of discovery and rejected right for leave to amend, appellants lost their product liability damage claims on a granted motion for summary judgment which was never made.
This appeal should be remanded to permit appellants to amend their complaint and complete their discovery to correct the treatment they received at the hands of the trial court which denied them due process. Procedurally, the trial court improperly treated a motion to dismiss as a motion for summary judgment and then used that summary judgment to foreclose the discovery appellants considered necessary to sustain their claims of contractual right, product strict liability and a post-sale duty to warn.
First, I will address the procedural mistreatment inflicted upon the appellants and thereafter substantively address case law and concepts which lead me to reject the majority’s holding that appellants’ claims of negligence, strict liability, and failure to warn did not state a claim upon which
I. PROCEDURAL MISADVENTURES
Page Engineering Company (Page) manufactured and sold a strip mine dragline to Bridger Coal Company (Bridger Coal) for its coal production operation. The two corporations remained in contact during Page’s periodic inspections of and consultations about the machine’s use. During this time, Page came to understand the reeving block equipment was faulty in design and could easily fail, but neglected to warn Bridger Coal. Not surprisingly, the reeving block did fail and brought down the boom.
Suit was filed June 16, 1986 including allegations of the product liability claims of negligence and defective design, and also failure to warn, failure to maintain insurance, and violation of express warranty. Page answered by general denial and affirmative allegations of failure to state a claim, lack of privity, comparative negligence, assumption of risk and unavoidable accident. The lawsuit proceeded normally until July 1, 1987 when the Wyoming attorney for Page suddenly “took sick” during a discovery deposition and document production being pursued by Continental Insurance Company (Continental) in Chicago, Illinois. Page brought the depositions to a halt even though the “ill” counsel was not lead counsel and then refused Continental the opportunity to copy documents already produced.
Back in Sweetwater County, Wyoming, an ex parte motion was then quickly filed by defendant for a protective order. This motion assured the trial court judge that a motion for Mr. Greenhalgh (Page’s Wyoming counsel who became “ill” during discovery) to withdraw as counsel would be made as soon as new counsel could be retained. That assurance proved to be false since the “ill” Wyoming counsel never withdrew from the case. A restraining order against continued discovery was issued without any apparent opportunity for response or objection by Continental who had been attempting to pursue deposition and documentary examination discovery from Page’s personnel and records in Chicago.
With the ex parte protective order deterring discovery in effect, Page filed its motion to dismiss on July 16, 1987, thirteen months after the commencement of the lawsuit. The brief supporting the motion argued that product liability theories would
The trial court gave Continental fourteen days to respond to Page’s motion to dismiss (less mailing time) and gave Page fifteen days thereafter to reply. Continental responded, including the contention that the motion to dismiss was untimely and Page filed a reply brief on August 21,1987. Three days later, Continental filed a motion for leave to file an amended and supplemental complaint. Continental also moved to disqualify the previously “ill” but never withdrawn local counsel on a conflict basis. The brief supporting this motion stated in part that “we were given to believe that discovery was aborted at the Page plant in Illinois because [Wyoming counsel] was-withdrawing not only not from this case, but from litigation altogether.” The attached transcript to the brief related what occurred in Chicago on June 30, 1987:
[WYOMING COUNSEL]: I would like to say for the record that I don’t feel I can participate in any depositions for health reasons. I have a history of heart problems.
4 * * I don’t think I can sit through another deposition today.
* ⅞: sfc sfc ⅜ *
* 4 4 I am not physically prepared to sit through any more depositions today. * * *
MR. HENSON: Since you spent the weekend on the treadmill at the gym, I don’t know that sitting through a deposition would cause any more stress than that.
If you had told us last Friday that you weren’t going to be engaging in depositions here, then we wouldn’t have spent the weekend preparing for depositions and spent the weekend here.
* * * * * *
Mr. Anderson came yesterday at a quarter till 5:00 while we were looking at documents and said that he wanted to get involved in the case and that he was going to have to take some time to become familiar with it and that his client would pay our clients’ expenses for having to come back here for these depositions, which were suddenly aborted here at the last minute.
* * * * He *
Are you saying that you are withdrawing from the defense of Page Engineering at this point?
[WYOMING COUNSEL]: / intend to notify the insurance company that I am withdrawing for health reasons.
(Emphasis added.)
Based on Page’s motion to dismiss and faced with a motion for leave to amend, the trial court granted a non-requested summary judgment on September 1, 1987. The sixteen page decision letter concluded:
Rule 12(c), W.R.C.P. provides that on a motion for judgment on the pleadings, if matters outside the pleadings are presented, the motion shall be treated as one for summary judgment. I don’t think it matters much in this case how it is treated. However, the contract, the insurance policy and the subrogation receipts are all before the Court and have been referred to extensively by all counsel. Inasmuch as the parties have briefed the matter as they have, I am going to answer in kind, and treat the case as though a motion for summary judgment had been filed, pursuant to Rule 56, W.R.C.P., and if anyone chooses to do so, and, as provided by Rule 12(b)(c) “all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56”, assuming there is indeed any more to be said.
[Wyoming counsel] will please prepare an order granting a motion for summary judgment and a summary judgment, submit it to opposing counsel for approval as to form and to me for signature. Opposing counsel have to and including September 15, 1987 to give such approval, or objections thereto, failing in which it will be deemed they have approved.
One last observation. I own a 1978 Oldsmobile on [which] the warranty expired years ago, and I have it insured.*655 Suppose a wheel breaks causing an accident and extensive damage to the car and my insurance company pays me. Is it then “subrogated” to my claim against General Motors for negligent design? It appears here that plaintiffs don’t seem to understand that machines wear out eventually, somewhat like the “one hoss shay.”[5 ]
(Emphasis added.) Procedurally, Continental was denied the opportunity to object when the trial court converted Page’s motion to dismiss into a summary judgment which should have been foreclosed not only by Pace v. Hadley,
The trial judge had decided the case and nothing thereafter would change his decision. In his further decision letter of October 21, 1987, the trial judge explained:
I do not believe the decision in Pace v. Hadley (9/22/87) appropriate here. As a matter of fact I do not even agree with Pace, supra. In that case the Supreme Court had no difficulty at all in finding what the facts were, (3rd paragraph, page 1 of slip opinion) but also held that the “plaintiffs were not allowed a reasonable time for discovery.” If the Court could discern the facts so readily, so could the plaintiffs. In my experience as a lawyer, I never filed a lawsuit until I knew what the facts were as I wanted to be sure I had a cause of action. Today, apparently, the theory is shoot first and ask questions later. The additional discovery requested by plaintiffs is unnecessary and unwarranted.
(Emphasis added.) After railing for two full pages against discovery, the trial judge concluded:
Plaintiffs’ Motion For Continuance of Discovery is denied. [Wyoming counsel] will please prepare an order denying the motion, an order granting Page’s motion for summary judgment and a summary judgment, submit it to opposing counsel for approval as to form, and to me for signature. Opposing counsel have to and including November 2, 1987, within which to give such approval, failing in which it will be deemed they have approved.
Responding to such an untimely and unjustified decision by the trial court to convert a motion to dismiss into summary judgment without notice, Continental filed a declaration of its counsel in support of the motion to reconsider and the motion to allow the continuance of discovery, a motion for continuance of discovery on September 15, 1987, and a memorandum in support of the motion for continuance of discovery with comprehensive attachments.
We are presented with a very troubling record where a litigant was clearly denied due process and somehow out of that morass, this court is able to perceive that a contractual issue was not created as a matter of partially completed discovery with a motion to file an amended complaint never considered. In view of the obvious resolution by the majority which is, in essence, that due process does not matter if a substantive right might not exist, I will not pursue the subject of the contractual issues of litigation. It should, however, be noted the Wyoming counsel who “became ill” in Chicago never withdrew and, in fact, did appear for oral argument before this tribunal. It must also be recognized that summary judgment disposition of contractual claims has occurred without completion of discovery in contravention of this court’s empirical direction to the same trial judge in the earlier case of Pace,
II. SUBSTANTIVE ERROR — DENIAL OP CONSIDERATION OF CLAIM FOR VIOLATION OF DUTY TO WARN POST-SALE (UNWARNED DANGERS KNOW NO MASTER)
Although not always a legal duty, the duty to warn can arise from obligations of people on the street to not stand mute while a young woman is brutally killed or the traveler who ignores the missing bridge in an unwillingness to warn anyone who might follow. Here, in an area of responsibility within product liability cases, we encounter manufacturers or vendors who know their products may cause damage or injury but remain stonefaced and silent. These products can range from the exploding lighter to a motor vehicle which tends to roll over easily. Schwartz, The Post-Sale Duty to Warn: Two Unfortunate Forks in the Road to a Reasonable Doctrine, 58 N.Y.U.L.Rev. 892 (1983); Annotation, Failure to Warn as Basis of Liability Under Doctrine of Strict Liability in Tort, 53 A.L.R.3d 239 (1973).
More egregious is this majority’s misap-preciation of the problem presented in what it does to disregard or destroy the parallel tort of failure to warn. The doctrine of economic loss has no application or validity to the tort of failure to warn and neither litigant nor this court provide precedent to the contrary.
In product defect strict liability cases, the failure to warn tort remedy exists in states that have never adopted the Restatement (Second) of Torts § 402A (1965) remedies of strict liability. When the manufac
Existing separately from the faulty manufactured or faulty designed merchandise disputes, the duty to warn has two separately identified applications. The first, which is not presented here, is the vendor/manufacturer responsibility upon initial sale if the product or its intended use is intrinsically dangerous and that danger may not be equally known to the user. This sale date duty to warn tort responsibility has an extensive and long-standing history.
Where such a duty arises, it stems from the existence of the relationship between the successor and the customers of the predecessor. Polius v. Clark Equipment Co.,802 F.2d 75 , 84 (3rd Cir.1986);*658 accord Mozingo v. Correct Manufacturing Corp.,752 F.2d 168 , 177 and n. 12 (5th Cir.1985) (duty arises from continuation of relationship between successor and predecessor’s customers); Travis v. Harris Corp.,565 F.2d 443 , 448-49 (7th Cir.1977). “The successor corporation’s liability stems not from its status as a successor, but from its establishment of a relationship with the customer that imposes certain duties and responsibilities.” Polius,802 F.2d at 84 ; Mozingo,752 F.2d at 177 ; Travis,565 F.2d at 449 .
The court must look at factors such as the succession to service contracts, coverage of the particular machine by a contract, service of that machine by the successor, and the successor’s knowledge of the defect and of the machine owner’s location. Polius,802 F.2d at 84 ; Mozingo,752 F.2d at 177 ; Travis,565 F.2d at 449 ; see also Downing v. Overhead Door Corp.,707 P.2d 1027 , 1033 (Colo.App.1985) (duty to warn exists where a danger concerning the product becomes known to the manufacturer subsequent to the sale and delivery of the product, even though it was not known at the time of the sale).
Florom v. Elliott Mfg.,
The claim of breach of the duty to warn was not proper for disposition by summary judgment. Leannais [v. Cincinnati, Inc.], 565 F.2d [437] at 442 [ (7th Cir.1977)]. While our conclusion is based on the federal rules of procedure, we note that Colorado’s procedural and substantive law mandates the same result. E.g., Union Supply v. Pust,196 Colo. 162 ,583 P.2d 276 , 279, 283 (1978) (failure to warn is jury question and “trial judge should only invade the fact-finding function of the jury in the clearest cases when the facts are not in dispute.”). Thus the summary judgment on this claim must be reversed.
Florom, 867 F.2d at 577.
The principal case considered as precedent on the function and criteria of the post-sale duty to warn is Cover v. Cohen,
The court went on to discuss:
A manufacturer or retailer may, however, incur liability for failing to warn concerning dangers in the use of a product which come to his attention after manufacture or sale, through advancements in the state of the art, with which he is expected to stay abreast, or through being made aware of later acci*659 dents involving dangers in the product of which warning should be given to users * * *.
Although a product be reasonably safe when manufactured and sold and involves no then known risks of which warning need be given, risks thereafter revealed by user operation and brought to the attention of the manufacturer or vendor may impose upon one or both a duty to warn * * *.
What notice to a manufacturer or vendor of problems revealed by use of the product will trigger his postdelivery duty to warn appears to be a function of the degree of danger which the problem involves and the number of instances reported * * *.
The nature of the warning to be given and to whom it should be given likewise turn upon a number of factors, including the harm that may result from use of the product without notice, the reliability and any possible adverse interest of the person, if other than the user, to whom notice is given, the burden on the manufacturer or vendor involved in locating the persons to whom notice is required to be given, the attention which it can be expected a notice in the form given will receive from the recipient, the kind of product involved and the number manufactured or sold, and the steps taken, other than the giving of notice, to correct the problem * * *.
Id.
Among other cases cited by the New York court involving the post-sale failure to warn cause of action include Comstock v. General Motors Corp.,
“When the fact is once established and demonstrated by experience that a certain commodity apparently harmless contains concealed dangers, and when distributed to the public through the channels of trade and used for the purposes for which it was made and sold is sure to cause suffering to, and injure the health of, some innocent purchaser, even though the percentage of those injured be not large, a duty arises to and a responsibility rests upon the manufacturer and dealer with knowledge to the extent, at least, of warning the ignorant consumer or user of the existence of the hidden danger. Failing to do so, the dealer, as well as the manufacturer, who has the knowledge and does not impart it, is liable to a subsequent, ignorant purchaser, reasonably within contemplation of the parties to the original sale, for injuries sustained through such hidden dangers. This is by reason of the duty the dealer owes to the public generally, which includes all whom it may concern, to give notice of any concealed dangers in the commodity in which he traffics, and to exercise a reasonable precaution for the protection of others commensurate with the peril involved. We think this principle applicable to the case at bar and fairly deducible from the many authorities touching manufacture and sale of dangerous commodities.”
Comstock,
In Braniff Airways, Inc.,
It is clear that after such a product has been sold and dangerous defects in design have come to the manufacturer’s attention, the manufacturer has a duty either to remedy these or, if complete remedy is not feasible, at least to give*660 users adequate warnings and instructions concerning methods for minimizing the danger.
See John Deere Co. v. May,
A fishing vessel engine damage resulted from failure of an unsupported oil line in Jones v. Bender Welding & Mach. Works, Inc.,
Nor can Caterpillar avoid liability by contending that it had no duty to inform its dealers of the bracket. While it is arguably true as Caterpillar contends that the lack of a bracket did not cause a safety hazard to the ship’s passengers, the danger posed to the engine and the ship itself, if not the shipper’s lost profits, is sufficient to create a duty to act in a reasonable fashion. * * * In light of the comparable development at common law of the duty to inform as reasonable conduct by a manufacturer and the clear implication of our recent opinion in Pan Alaska Fisheries, Inc. v. Marine Construction & Design Co., supra [565 F.2d 1129 (9th Cir.1977)], we also reject Caterpillar's argument that the duty to inform dealers is not enforceable by the ultimate consumer.
Id. at 1335.
A product similar in commercial scope of limited unit production as canning or packaging equipment produced the litigation in Kozlowski v. John E. Smith’s Sons Co.,
[A] jury could find it persuasive that prior to the accident, a Smith’s sales representative made only two visits to the Cudahy plant. On each occasion he failed for one reason or another to inform Cudahy of the safety by-pass valve and the hazard it was designed to prevent. The representative’s own testimony is that these sales calls were made after 1971 when the safety by-pass valve had become standard equipment on all new machines.
Id.
The differentiation between incidents of initial sale and subsequent post-sale duty to warn were related in Miller Industries v. Caterpillar Tractor Co.,
[T]he argument for finding that a warranty was not intended to preclude a negligence action is even more compelling here than in Jig the Third. In Jig the Third [Jig the Third Company v. Puritan Marine Insurance Underwriters Corporation,519 F.2d 171 (5th Cir.1975) ], the plaintiff’s claim was premised on the negligent design and manufacturing of the product and thus was closely related to the quality of the product and the plaintiff’s expectations of how the product would perform. Here, however, the gravamen of the plaintiffs’ complaint is that the defendant failed to properly warn of defects that it discovered after the engine was already on the market. Whatever the merits of adopting a rule that views defects in a product as part of the parties’ bargain and thus within the law of sales, it is much less tenable to presume that the buyer has bargained away the manufacturer’s obligation to warn of defects that later come to the manufacturer’s attention. A duty to warn of a product’s defects of which the seller becomes aware goes not to the*661 quality of the product that the buyer expects from the bargain, but to the type of conduct which tort law governs as a matter of social and public policy. * * * To hold otherwise would impermissibly allow a manufacturer who is aware that it has a defective product on the market to hide behind its warranty while the buyer unknowingly uses it.[10 ]
Overspeed of an airplane propeller occasioned consideration of the failure to warn liability in Noel v. United Aircraft Corp.,
There was evidence from which the jury could have found that the machine was negligently designed and its braking capacity misrepresented. When the manufacturer of such a machine learns or should have learned of the risk created by its fault, it has a duty to take reasonable steps to warn at least the purchaser of the risk. * * * One such reasonable step may be to warn at least the purchaser of changes which eliminate or tend to eliminate the risk created by the manufacturer’s initial fault.
In Labelle v. McCauley Indus. Corp.,
The manufacturer’s duty to warn of a defect or dangerous condition extends, however, to the purchaser of its product, * * *, even if defects are discovered after the initial sale. * * *
To be adequate, a warning must reasonably apprise the purchaser of the danger by direct notice or by an indirect notice which gives warning or eliminates the danger. That an indirect warning fails to reach a particular purchaser does not alone render the manufacturer negligent if the method of warning be adequate. Restatement (Second) of Torts, § 388 Comment c (1965).
A question of fact was created by issuance of a revision to the service manual. The airplane was damaged when the propeller blade sheared and created the inquiry of a duty to warn post-sale cause of action for which plaintiff’s favorable jury verdict had been, initially entered. That verdict for the damage to the airplane resulting from the propeller blade provided sufficient evidence to support a finding of negligent failure to warn about a defective condition in the product. Bottazzi,
The analysis that a breach in the duty to warn is different from the duty breached by manufacturing a defective product and is also different from a breach in a post-sale duty to warn of a known danger, is well-stated in Nicor Supply Ships Associates v. General Motors Corp.,
Two courts, the Eleventh Circuit in Miller Industries v. Caterpillar Tractor Co., [733 F.2d 813 (11th Cir.1984) ] acting before East River, and a New Jersey District Court in McConnell v. Caterpillar Tractor Co., [646 F.Supp. 1520 , 1526 (D.N.J.1986) ] acting after East River, have distinguished between a manufacturer’s negligence occurring “as part of the manufacturing process” and a manufacturer’s negligent failure to warn of a known defect. * * * Both courts reasoned that a manufacturer’s negligence after manufacture has been completed “goes not to the quality of the product that the buyer expects from the bargain, but to the type of conduct which tort law governs as a matter of social and public policy.”
*662 In both Miller Industries and McConnell, the failure-to-warn claim was predicated on knowledge gained by the manufacturer after the product had been delivered. * * *
While failing to warn a purchaser of a defect in a product known at the time of manufacture is, of course, different from manufacturing a defective product, both negligent acts occur during the manufacturing process and before delivery of the product to the buyer. We are unable to assign to either act a relatively higher level of consciousness of wrongdoing, and thus do not discern a meaningful legal difference between them.
Examination of the cited cases supports the thesis presented. In McConnell v. Caterpillar Tractor Co.,
Plaintiffs allege that both Caterpillar and Giles & Ransome were negligent in failing to notify them of the defect in the crankshaft. We first note that the East River decision, as we read it, does not bar plaintiffs’ negligence claim. It is true that in East River, plaintiff-charterers, in the fifth count of their complaint, alleged that the defendant negligently supervised the installation of a valve, and that the Supreme Court disallowed recovery on this count as well as on the strict products-liability counts because the losses sustained were purely economic. However, in East River, plaintiffs alleged that the negligence occurred “as part of the manufacturing process.”106 S.Ct. at 2297 . The alleged negligence in the instant case is distinguishable; plaintiffs here assert, not that defendants negligently manufactured the crankshaft, but that they negligently failed to warn plaintiffs of a known defect in the crankshaft.
In Strauch v. Gates Rubber Co.,
It was reasonable for the jury to conclude from this evidence that the hose failed on June 28, 1985 because it had been in service longer than its useful life and that defendant’s failure to warn of its product’s truncated serviceable life was a proximate cause of its failure.
Id. at 1286.
The post-sale duty to warn negligence tort is the result of a circumstance but not a function of the sales transaction. 1A L. Frumer & M. Friedman, Products Liability § 2.22 (1987). The initiating factors arise when first the manufacturer or supplier comes to recognize that a previously sold product produces an unreasonable risk of injury or damage to the user or bystander. Secondly, the possessor of the information makes no reasonable effort to meet its duty of due care to provide the information to the possessor of the product so that potential damage can be avoided by disuse or correction. Finally, the user, unaware of the danger, continues use of the faulty product and, within the reasonably expected circumstances, an event of loss occurs from which damage and injury result.
It is first apparent the duty is to communicate the warning. This provides the user opportunity to avoid the harm. Consequently, the duty itself has nothing to do with statutes of limitation triggered by negligence or warranty from the initial sales transaction. Contractual terms of implied warranty, express warranty and waiver of warranty are likewise not functional factors in the existence of the tort or related to a remedy from a failure to warn. Additionally, with one differentiated ease, Bell Helicopter Co.,
[T]he existence of the contract creates a situation that subjects the parties to duties that are independent of the obligation to perform the contract * * *.
[[Image here]]
Among the most fundamental of personal rights, without which man could not live in a state of society, is the right of personal security, including the “preservation of a man’s health from such practices as may prejudice or annoy it” (1 Black.Com. 129, 134) — a right recognized, needless to say, in almost the first words of our written Constitution (Const, art. 1 par. 1). To assert, therefore, that one living in a state of society, organized, as ours is, according to the principles of the common law, need not be careful that his acts do not endanger the life or impair the health of his neighbor seems to offend against the fundamentals.
In the earlier case of Tomlinson, diseased and unfit food was sold. A more current example of the ignored duty to warn is found in Young,
[Ejvidence tendered by the plaintiff indicates, that for a number of years prior to decedent’s death defendant was aware its control valve was defective and represented a real danger to the public (there had apparently been more than 100 accidents resulting in 32 deaths and 77 injuries), yet it did not recall the controls nor attempt to alert the public to the risk, but embarked instead upon an affirmative course of conduct designed and calculated to conceal the problems with the control. Allegedly this concealment, which continued for several years after decedent’s death, was undertaken with the intention of deceiving the public at large as to the continued fitness for use of this control valve which defendant had placed in commerce and minimizing recoveries in lawsuits generated by the faulty control. Although generally nondisclosure or concealment alone does not equate to actionable fraud * * *, it is a principle of long standing that “one who sells an article knowing it to be dangerous by reason of concealed défects is guilty of a wrong, without regard to the contract, and is liable in damages to any person, including one not in privity of contract with him, who suffers an injury by reason of his willful and fraudulent deceit and concealment” (Kuelling v. Lean Mfg. Co., supra, 183 N.Y. p. 89,75 N.E. 1098 ).
Of similar intelligence is a case which is the factual converse of Buckley,
“It seems to be a well-settled rule of the common law that a person who negligently uses a dangerous instrument or article, or causes or authorizes its use by another in such a manner or under such circumstances that he has reason to know that it is likely to produce injury, is responsible for the natu*664 ral and probable consequences of his act to any person injured who is not himself at fault.”
In the same case Judge Buchanan quotes with approval from Thompson on Negligence, vol. 1, § 821, as follows:
“The doctrine of these cases, stated in a general way, is that, if a person sells goods, chattels, or machinery which posses some concealed defect, or tendency to do harm, such as will, according to the probabilities of ordinary experience, do harm to innocent persons, he must respond in damages if such harm ensue without the intervention of the negligence or fault of others; and upon principle it would be immaterial whether the knowledge of the concealed vice or defect was withheld from the purchaser through the vendor’s unskillfulness, ignorance or fraud.”
American Oil,
Presented here is a post-sale duty when the manufacturer or vendor comes to know that a danger from continued use may exist to the product as well as other property. A post-sale duty to warn concept is an emerging tort concept founded upon a concept that any choice requires the knowledge to chose and the originator of the product retains a responsibility to furnish that information which permits the user to exercise a choice.
The fallacy in this majority is in collapsing this post-sale duty to inform into concepts of product liability recovery limitation where only economic damage results from usage of a faulty product. A contractual thesis with corollary attributes of statute of limitations or limited time of warranty has nothing to do with the societal danger from a faulty product where the knowledge necessary to protect is encased in the hands of the originator. The authority supporting this misapplication of a differing responsibility to protect society from injury as a product liability concept is a current case from an intermediate appellate court which makes the same mistake repeated by this majority. Utah Intern., Inc. v. Caterpillar Tractor Co.,
[W]e believe that the same policy considerations which apply to defects in manufacturing also apply to failure to warn of defects. Post-East River cases other than McConnell appear to apply broadly the rule prohibiting tort recovery for economic loss. * * * Thus, we hold that in*665 commercial settings claims for economic loss from a product injuring itself due to negligent failure to warn are also precluded from recovery.
Id.
This quotation reflects how bad law results from misquotation or improper examination of cases. The federal district judge in Frey Dairy v. A.O. Smith Harvestore Products, Inc.,
The Tenth Circuit Court of Appeals in Smith v. FMC Corp.,
The FMC Corporation crane accident illustrates the theoretical invalidity of this court’s economic damage adaptation when applied to a post-sale duty to warn cause of action claim. In that case, the faulty device on the .crane boom caused the death of two innocent bystanders. In this case, it was only by blind luck that no one was killed when the reeving block failed, destroying the boom and the dirt bucket. The differentiation in thesis that no viable claim of negligent violation of the duty to warn after sale can be stated here and one could be stated in FMC Corporation is simply absurd. Sales contract conditions and warranties have absolutely nothing logically to do with the existence of the same tort in both cases. One only needs to recognize the absolute axiom of accidents that if a gamble is made from which damage and loss result to the product itself, sooner or later, if not most of the time, someone will be injured or killed or, at least, other property damaged. The comparison of happenstance is illustrated in Suich v. H & B Printing Machinery, Inc.,
The text authorities recognize a duty to warn even if the damages are what has been referred to generally as economic damage. The premises for recognizing this tort are spelled out in 1 M. Madden, Products Liability § 10.13 at 453-55 (2d ed. 1988) (footnotes omitted):
*666 A post-sale duty to warn may attach even if the product was, at the time of manufacture and sale, reasonably safe for use (or arguably so), but through use or operation, has betrayed hazards not earlier known to the seller, or to other sellers of like products.
* tfc * * * *
As is equally true of the duty to warn at the point of sale, the doctrinal underpinning of the manufacturer’s post-sale informational obligation is the commitment to remedying the asymmetry of information held by the seller, on the one hand, and by the consumer on the other. The object, in general terms, is to encourage manufacturers to impart to consumers that information the manufacturers receive in the ordinary course of their business, germane to product safety and technological advances and to the performance and accident histories of those products sold and in use.
See likewise, 1A L. Frumer & M. Friedman, supra, at 2-1071. “Even if there is no duty to warn at the time of the sale, facts may thereafter come to the attention of the manufacturer which make it imperative that a warning then be given.” Id. at 2-1071. See also 1 American Law of Products Liability 3d, § 1:67 at 71 (1987) and 3 American Law of Products Liability 3d, § 32:6 at 20 (1987). “Thus, a manufacturer must warn of dangers inherent in its product that it knew or should have known about during the time the plaintiff used the product.” Id. at 21.
The majority,offers no real authority to deny recovery for a breach of post-sale duty to warn. As the authorities reflect, the issue is a responsibility to share information in order to afford the purchaser an opportunity to avoid damage and loss. Page could easily have warned Bridger Coal the reeving block was defective. Bridger Coal could have replaced the defective reeving block for $80,000 — $150,000 or continued using the old reeving block and risked the catastrophic loss that followed. The point is they would have been allowed to make an informed decision and determined whether to buy safety with a replacement product.
The majority is wrong in precedent, wrong in theory, and wrong in rejection of its obligation to contribute to the effectiveness and efficiency of the nation’s economic institutions.
III. PRODUCT LIABILITY — PROPERTY DAMAGE
(WHAT IS ECONOMIC DAMAGE?)
This court is presented with a clearly defined substantive appeal determination whether the economic loss doctrine bars recovery where the reeving block failed and caused damage to the boom and shovel of the drag line equipment. Disregarding all contractual issues by-passed by denied discovery and the substantively significant concerns of implied warranties of merchantability and fitness for the purpose intended, we are presented under economic loss doctrine topics of (a) what is economic damage; (b) proper viability of the economic loss doctrine for application under these circumstances as it should properly be confined and defined within current literature when the occurrence is catastrophic and life threatening; and (c) constituent damage to other parts of the equipment.
Before distilling the three substantive mistakes in analysis and precedent made by this court, it helps to set out what is meant by the terms used by courts.
These economic loss product cases apparently address direct product damage and economic loss, as long as no indirect property damage results and no personal injuries are sustained by users or other persons. Opinion writers and scholars do not make clear what happens if there is also indirect property or injury damages. That confusion is engendered by indecision of whether the inquiry is the existence of an available theory of tort recovery or only a limitation on, recoverable damage without regard for the availability of the recovery theory. Differentiation between strict liability and negligence adds further misconstruction and confusion. See Gaebler, Negligence, Economic Loss, and the U.C.C., 61 Ind.L.J. 593 (1986).
The significance of a proper use of terms and determination of theory can be quickly recognized if economic and non-economic damage is considered. That would have been the case here if other property or an employee had been in the way when the boom folded like a windblown match-stick house. Whether or not there was injury or property damage alongside economic loss raises the inquiry of where recovery is authorized — under the Uniform Commercial Code and contract theory or under the tort claims of negligence and strict liability. Common sense indicates the existence of other damage should not determine whether a tort was committed. Consequently, to understand the structure of the eases, it is helpful to consider recoverability for kinds of damage and not fence with a decision of whether the tort exists. This is the only justification for comparing strict liability and negligent product liability cases to those of the independent violation of a duty to warn where separately located in product sales obligation and liability cases.
A tort is an act that wrongfully invades the rights of other persons — either negligent, willful or founded on strict liability. In order for actionable results to follow from the occurrence of a tort, there is additionally required proximate cause and compensable damage. This case raises the recoverability for damage from a defective product which was put into the stream of commerce whether damage results to itself, to the balance of the machine to which it is attached, or to a person or other property. The conduct of the “wrongful action” does not change by a difference in damage. Consequently, the proper inquiry in product liability cases is not whether there was a tort definable by resulting damage, but when the tort exists, what resulting damages are compensable.
This court is asked to determine the relation of what it calls economic damage with the determination of when recovery for damages can be obtained. The question can be phrased in analysis that either the tort does not exist if a particular character of damage is produced or, alternatively, the tort exists but a particular character of damage is not recoverable. The first construction operates from result to justifica
A theory of tort law is invoked in second approach and a concept of a way to limit recovery by the first. Clearly, the conflict, confusion and illogical reasoning was fertilized by the United States Supreme Court in East River S.S. Corp.,
A careful and comprehensive review of the many cases establishes a persuasive thesis in recognizing the second approach should be used to achieve decision. That is to simply first determine, “is there a tort?” If so, what damages can be recovered. It may be more provident to analyze losses for which tort liability will not be recoverable. Nearly unanimously, damages in defective product liability cases are not recoverable where the loss is a failure of bargain resulting from an unmet expectancy in product performance. This is not tort, it is contract. Conversely, the majority of the cases and the most pervasive reason find the tort and accompanying right to recover for any resulting damages in failure of a product unreasonably dangerous and the loss event is sudden, unexpected, calamitous or accidental rather than developmental.
All of these conflicts develop from the required delineation of what is recoverable damage from any product liability tort. States which apply any of these concepts agree unanimously the right to recover for sustained damage exists if personal physical injury results from the product failure. This is the typical bad tire and rollover bar user injury eases. Nearly as unanimous, recovery is permitted if the failed part causes “other property damage.” The exploding refrigerator in Largoza v. General Elec. Co.,
To the other extreme, if the damage is only to the part or if the problem is essentially a failure in expectancy, few if any cases find recoverable damage. This leaves the unusually dangerous or calamitous event occurrence as unsettled subjects. I find within this analysis that this majority adopts an obviously minority posture, which is a clearly regressive aptitude for Wyoming product liability law. Good reason for rejection of that misapplication can be found in the many thoughtful discussions in the multitude of cases. One of the clearest and best reasoned is the recent Washington case of Washington Water Power Co. v. Graybar Elec. Co.,
IV. APPROACHES TO ECONOMIC DAMAGE RECOVERY IN PRODUCT LIABILITY CASES: THE THREE DIVERGENCES
A. General Standards
There are three possible standards to pick from to decide when recovery can be had where the loss is said to be “economic loss”.
1. Santor Standard: In addition to contractual remedies, obsolescence and wear out recovery may be obtained by product liability theories of tort of strict liability for design or manufacturing defect and duty to warn upon initial sale. (Obsolescence and wear out damage, failure of the bargain.)
2. Catastrophic Loss for Use of Unreasonably Dangerous Product Standard: Recovery is permitted for those tort theories if the event of loss was sudden or catastrophic and by some application the product was unreasonably dangerous within which the unexpected loss resulted. (Accidental loss, unreasonably dangerous nature of the occurrence and defective product.)
There is a further divergence in the application of East River. Some cases follow the East River justification and result to apply the economic damage rule to non-consumer transactions for bargaining equals.
Permitting recovery when the loss is catastrophic and a product is unreasonably dangerous to use is the predominant standard for non-admiralty eases which is contrary to the assertions made by the majority.
The conflict of which standard to apply is between one which allows only those remedies contracted for and one which allows a tort claim of negligence or strict liability when the loss is catastrophic and a product is unreasonably dangerous to use. Under this tort standard, it is not relevant that the damage was to other property or to human life.
The East River standard line of cases may or may not be confined to commercial transactions where there is equal bargaining power between the purchaser and vendor or manufacturer.
The most recent adjudication providing the clearest persuasion is the Washington Supreme Court decision in Washington Water Power Co. v. Graybar Elec. Co.,
In its opinion, the Court assessed the relative merits of several different conceptions of economic loss. For purposes of the law of admiralty, it chose the conception that defendants urge us to adopt under the WPLA. When a product damages only itself, and not persons or other property, the Court held, the proper remedy lies in contract, not in tort, no matter what risk of harm the product defect poses, and no matter how the product injury occurred.
Washington Water Power Co.,
In our opinion, however, this increased certainty comes at too high a price. If manufacturers can contract successfully around liabilities for product injuries, a principal deterrent to unsafe practices— the threat of legal liability — will be lost. See Cloud v. Kit Mfg. Co.,563 P.2d 248 , 250-51 (Alaska 1977); Salt River Project Agricultural Imp. & Power Dist. v. Westinghouse Elec. Corp.,143 Ariz. 368 ,694 P.2d 198 , 211 (1984); Mid Continent Aircraft Corp. v. Curry [Cy.] Spraying Serv., Inc.,572 S.W.2d 308 , 316-18 (Tex.1978) (Pope, J., dissenting).
Washington Water Power Co.,
The Court’s analysis in East River, we believe, unjustifiably dismisses the safety concerns attendant to product injuries caused by hazardous defects. For this reason, we find East River’s approach to economic loss unsuited to what the Legislature intended under the WPLA. Product injuries, the Court says, do not raise safety concerns, but are “essentially” a performance problem.
Id.
Washington Water Power Co. does not stand alone. While the Washington court used risk of harm as the basis of economic damage liability for a defective product, Oregon courts use a strict liability standard which applies if the defect is “unreasonably dangerous to the user.” Brown v. Western Farmers Assoc.,
The issue left open in Brown,
Insofar as the premise of responsibility for the marketing of a dangerously defective product states a norm for the producer and seller, that norm either has or has not been met at the time the product is sold. Whether the seller has met this responsibility cannot depend on the fortuitous extent of the damage done when the danger created by the defect subsequently comes to pass. Moreover, if a plaintiff is able to trace the damage to the seller’s negligence, he may recover for economic losses of a kind that the seller should have been able to foresee.
Id.
That court again distinguished between disappointed user and the endangered one:
The premise of his liability also controls its extent. The loss must be a consequence of the kind of danger and occur under the kind of circumstances, “accidental” or not, that made the condition of the product a basis for strict liability. This distinguishes such a loss from economic losses due only to the poor performance or the reduced resale value of a defeptive, even a dangerously defective, product. It is the distinction between the disappointed users in Price and Brown, and the endangered ones in Brownell v. White Motor Corp. [260 Or. 251 ,490 P.2d 184 (1971) ] and Wulff v. Sprouse-Reitz Co.
Id.
The relation between the terms given to damaged property and the ability to maintain a tort action under Illinois law was well illustrated in Kishwaukee Community Health Services Center v. Hospital Bldg. and Equipment Co.,
This ease becomes complicated because the judge seems to reject recovery which East River would have permitted as damage to other property. Obviously, damage to other property is not economic damage within the linguistic adaptations found on the subject in these cases. Kishwaukee Community Health Services Center is one of the few cases where recovery is denied and which East River would have permitted.
Moorman Mfg. Co.,
The policy considerations against allowing recovery for solely economic loss in strict liability cases apply to negligence actions as well. When the defect is of a qualitative nature and the harm relates to the consumer’s expectation that a product is of a particular quality so that it is fit for ordinary use, contract, rather than tort, law provides the appropriate set of rules for recovery.
That court further observed:
The demarcation between physical harm or property damage on the one hand and economic loss on the other usually depends on the nature of the defect and the manner in which the damage occurred.
Id. at 449. Cited as respectable authority was Cloud v. Kit Mfg. Co.,
One should not have to choose wholesale between Santor v. A & M Karagheusian, Inc. (1965),44 N.J. 52 ,207 A.2d 305 , and Seely v. White Motor Co. (1965),63 Cal.2d 9 ,403 P.2d 145 ,45 Cal.Rptr. 17 ; I believe the proper approach is to adopt the valid concerns behind each.
Moorman Mfg. Co.,
Scott & Fetzer Co. v. Montgomery Ward & Co.,
The admiralty rule of East River compared to state law standards of product responsibility was defined in City of Greenville v. W.R. Grace & Co.,
The product failure similar to Washington Water Power Co., 774 P.2d 1199 was litigated in Salt River Project Agr. Imp. and Power Dist. v. Westinghouse Elec. Corp.,
Differentiated was the nature of the defect as defective in a way that poses an unreasonable danger to those that use or consume it or only found to be not fit for the intended purpose without unreasonable danger of causing injury to person or property. Last then considered was the type of loss or damage. The Arizona court recognized the fire and explosion was “not merely a commercial defect or ‘non-dangerous impairment of quality’ ” and recognized the endangered persons and other property from the accident for which tort law provides a proper rationale. Salt River Project Agr. Imp. and Power Dist.,
Washington Water Power Co. and Salt River Project Agr. Imp. and Power Dist. both cited with approval and followed the name case on this subject from Alaska, Cloud,
West Virginia followed the same principle after review of nationwide precedent by statement in Star Furniture Co. v. Pulaski Furniture Co.,
Physical harm to the defective product belongs with tort principles; reduction in value merely because of the product flaw falls into contract law. See, e.g., Gherna v. Ford Motor Co.,246 Cal.App.2d 639 ,55 Cal.Rptr. 94 (1966); Gibson v. Reliable Chevrolet, Inc.,608 S.W.2d 471 (Mo.App.1981); Russell v. Ford Motor Co.,281 Or. 587 ,575 P.2d 1383 (1978).
Therefore, we reject the line of cases begun by Santor v. A & M Karagheusian, Inc.,44 N.J. 52 ,207 A.2d 305 (1964), which have permitted use of strict liability to recover the difference between the value of the product received and its purchase price in the absence of a sudden calamitous event. See, e.g., Cova v. Harley Davidson Motor Co.,26 Mich.App. 602 ,182 N.W.2d 800 (1971); Air Products & Chemicals, Inc. v. Fairbanks Morse, Inc.,58 Wis.2d 193 ,206 N.W.2d 414 (1973) (applying Pennsylvania law). In West Virginia, property damage to defective products which results from a sudden calamitous event is recoverable under a strict liability cause of action. Damages which result merely because of a “bad bargain” are outside the scope of strict liability.
In a most recent analysis, the West Virginia court effectively and directly considered East River and Star Furniture Co. where a 475B Michigan front-end loader was burned up by an alleged hydraulic fuel leak in its system (comparable to the fuel pump example, infra). Capitol Fuels, Inc.,
What appears obvious from Star Furniture is that under the “bad bargain” concept, the fact that the product may be flawed or defective, such that it does not meet the purchaser’s expectations or is even unusable because of the defect, does not mean that he may recover the value of the product under a strict liability in tort theory. The purchaser’s remedy is through the Uniform Commercial Code. See Kesner v. Lancaster, — W.Va. —,378 S.E.2d 649 (1989). In order to recover under Star Furniture, the damage to the product must result from a sudden calamitous event attributable to the dangerous defect or design of the product itself.
In this case, we reaffirm our decision in Star Furniture. The front-end loader was not merely an ineffective product which failed to meet the customer’s expectations. A defect in the front-end loader caused an abrupt fire which continued to burn until the loader was destroyed. The operator of the loader escaped without injury. The defect in the front[-]end loader created a potentially dangerous situation and the risk associated with the defect was not one ordinarily contemplated by a purchaser. Clearly, this is the type of property damage resulting “from a sudden calamitous event” which is recoverable under Star Furniture, — W.Va. at —,297 S.E.2d at 859 .
Id. at 313.
Alaska's Cloud,
“The economic loss rule prevents recovery in tort when a defective product has resulted in the loss of the value or use of the thing sold, or the cost of repairing it. Under such circumstances, the duty breached is generally a contractual one and the plaintiff is merely suing for the benefit of his bargain. The rule does not prevent a tort action to recover for injury to other property and persons because the duty breached generally arises independent of the contract. Nor does it preclude recovery for damages to the defective product itself, where the injury resulted from an accident.” (Footnote omitted.) (Emphasis supplied.)
See also Watkins v. Barber-Colman Co., Inc.,
The potentially hazardous product was recognized in Pennsylvania in Industrial Uniform Rental Co., Inc. v. International Harvester Co.,
The Nebraska court has employed the unreasonably dangerous test in discussion and case analysis. In recent opinion, it said by quotation in National Crane Corp. v. Ohio Steel Tube Co.,
A majority of courts that have considered the applicability of strict liability to recover damages to the defective product itself have permitted use of the doctrine, at least where the damage occurred as a result of a sudden, violent event and not as a result of an inherent defect that reduced the property’s value without inflicting physical harm to the product. See Star Furniture Co. v. Pulaski Furniture Co.,297 S.E.2d 854 (W.Va.1982). In essence, this court has reached the same result. See Morris v. Chrysler Corp.,208 Neb. 341 ,303 N.W.2d 500 (1981).
In most recent decision, the Ohio Supreme Court forsook a Santor v. A & M Karagheusian, Inc.,
The New Jersey court “readjusted” its posture originally adopted in Santor,
Within the volume of cases considered, an almost exact duplication in kind of equipment damage occurred in John R. Dudley Const., Inc. v. Drott Mfg. Co.,
The convergence of three cases provides for California a posture which is perhaps different on the subject of economic damages resulting from the damage to the product itself than perhaps exists in any other state. These cases are J’Aire Corp. v. Gregory,
In California, economic recovery is permitted in negligence actions where the economic loss is especially foreseeable despite the absence of physical injury or property damage. Ales-Peratis Foods Intern., Inc. v. American Can Co.,
The incongruity of the California law and any logical validity to a commercial setting dichotomy is currently illustrated by GEM Developers v. Hallcraft Homes of San Diego, Inc.,
C. The East River — Minority Adaptations.
The contrary minority posture has been adopted by some states which do not follow the risk of injury status of Washington Water Power Co.,
The second state that appears to have adopted the same posture, although the sporadic, adaptations in the cases leaves this conclusion far from certain, is Minnesota. The lead case was Superwood Corp. v. Siempelkamp Corp.,
The fourth state which may follow the same persuasion, or at least the dissent in the case thinks so, is Texas through Mid Continent Aircraft Corp. v. Curry County Spraying Service, Inc., 572 S.W.2d 308 (Tex.1978). The difficulty in perception is both the majority and the minority cited the same case with approval, Nobility Homes of Texas, Inc. v. Shivers,
(FOR APPLICATION OF ANY EAST RIVER RULE)
A final aspect of this case remains. Realistically, at least for this subject, this court can claim case support not found for the other issues in its decision. We still need to consider the determination of what is other property when a constituent part of the equipment malfunctions and causes general damage. Specifically, this is the present case where the break up of the reeving block destroyed the crane boom. On duty to warn, this court had almost no authority to support its decision. On nonrecognition of the risk of harm differentiation from economic damage recovery limitations, a clearly present minority view was selected. However, here on definition of other property, I would argue for what is probably an academic attainment if the other proper rules were followed, but in absence thereof, a minority posture among the many cases.
Currently illustrative for an East River (admiralty) approach is Nicor Supply Ships Associates,
Digicon, as the time charterer, was granted the right hy appellate decision to pursue loss or damage for what it had put on the ship and loss of profits from inability to use this “other property” unless the entire installation was a total loss. In distinguishing the case from Louis Dreyfus Corp. v. 27,946 Long Tons of Corn,
In a parenthetical description of another case, contained in a footnote, this court recently stated in Employers Ins. of Wausau v. Suwannee River Spa Lines, Inc. [866 F.2d 752 , 763 n. 16 (5th Cir.1989) ] that the “loss of cargo is not damage to ‘other property’ within [the] meaning of East River.” That statement relies upon a similar observation in our earlier opinion in Louis Dreyfus Corp. v. 27,946 Long Tons of Corn. To the degree, if at all, that these statements suggest that the additions to the vessel involved in this case are not “other property,” they are obiter dicta, not precedent. They may help to explain the rationale of the particular opinion in which they were uttered, but they do not bind us as the law of the circuit.
Nicor Supply Ships Associates,
The review justification is limited by the probability of dangerousness and calamitous event circumstance whenever a part
It is highly unlikely that for most integrated machines, the manufacturer actually fabricated most of the composite parts. I would consequently limit the scope of a single part defect — non-tort recovery — to whatever originally failed and not what it did to the other parts of the machine in failing. The courts that have declined this rational approach have espoused the intent to limit tort recovery. To reach a result by redefinition is, to me, unnecessary subterfuge. If the failed part is not unnecessarily dangerous or damage in occurrence reflects deterioration and depreciation as a denied benefit of the bargain, I would leave adjudication between the parties on straight contract or warranty standards no matter how much or how little of the entire machine was damaged.
However, where as here, the decisive factor is the character of the occurrence and the nature of the fault in the product. The standard to be followed should include recovery for all damage however incurred. I find it to be linguistically improper and logically unsound to call the crane damage in this case economic loss after the reeving block came apart and dumped the boom unit. Undoubtedly, there were significant additional economic losses sustained from down time and repair complexities, but these costs were neither claimed nor a part of this two million dollar damage litigation. Consequently, even if the minority rule on tort remedy availability is now adopted as proposed by this majority, I would leave application of the resulting economic damage limitation to the failed part and not deny recovery for other damage done to the balance of the machine, as well as other external property losses or personal injuries, if any are incurred.
VI. CONCLUSION
It is fair to conclude that Washington Water Power Co.,
Finding error by this court in both misunderstanding the duty to warn claim and denial of access to the product liability claim, I respectfully dissent.
Notes
. Denying appellants' motion for leave to amend, which was contemporaneous to the motion to dismiss/summary judgment, cannot be justified under Wyoming precedent. This majority violates the express terms of W.R.C.P. 15 and permits the trial court to flaunt Pace v. Hadley,
. Appropriately to be realized is:
For whatever reason, be it an unacknowledged endorsement of caveat emptor, a quiet deference to the legislative enactment of the U.C.C., or a more fundamental inability to study and understand the issue, the courts have made a mess. The courts fail to consider, for instance, the definition of economic loss and whether the definition fits the facts in any given case. The courts generally disregard the basic policies which support imposition of strict liability in tort and their application to the question of economic loss recovery. The differences between the opposing theories of recovery are either ignored, assumed, or hopelessly confused, as is the question whether it makes any difference which theory is applied.
Comment, Agristor Leasing v. Spindler: Economic Loss, Strict Liability and the U.C.C.— What a Mess, 34 S.D.L. Rev. 101, 103-04 (1989) (footnotes omitted).
. The reeving block costs approximately $80,000 to replace; the improved model was available for approximately $150,000. After the reeving block broke apart and caused the boom to collapse, the damage to the boom and bucket was $2,536,957. Replacement cost of the earth digging equipment was approximated to be $16,-000,000 with its seventy-five cubic yard bucket and lifting capacity rated for 290,000 pounds or 145 tons per load. Reeving blocks are holders of cable pulleys used in the boom operation, lifting and movement processes.
.Continental Insurance Company and other insurance companies (designated collectively as Continental) paid for repair and present this litigation pursuant to a subrogation receipt. The appropriateness of the subrogation rights and process is not considered by the majority in its opinion and will not be pursued in this dissent. See Compass Ins. Co. v. Cravens, Dargan and Co.,
. I do not perceive the majority correctly references the next to the last paragraph of the decision letter for what it actually served to be. That sentence considers the approval as to form subject to Uniform Rules for the District Courts 404, which states:
Written judgments or orders shall be presented to the court within 20 days after its decision is made known. Before submitting the judgment or order the party drafting it shall secure the written approval of the opposing parties not in default.
In lieu of securing the approval of the opposing parties the party proposing the form of judgment or order may forward the original to the court and serve a copy on the other parties with a notice advising objections must be made within 5 days. If no objection is timely made, the court may sign the judgment or order. If objection is made, the court will resolve the matter.
Further right for Continental to make substantive argument was not addressed or provided by the foreclosing decision as then announced.
This court should take heed of advice given by one of the most thoughtful and scholarly appellate tribunals in this nation in an eighteen page extended tort case review:
The importance of today's decision lies not so much in its explication of the principles of tortious interference and defamation as in its signal to trial courts to approach with great caution applications for dismissal under [a motion to dismiss] for failure of a complaint to state a claim on which relief may be granted. We have sought to make clear that such motions, almost always brought at the very earliest stage of the litigation, should be granted in only the rarest of instances. If a complaint must be dismissed after it has been accorded the kind of meticulous and indulgent examination counselled in this opinion, then, barring any other impediment such as a statute of limitations, the dismissal should be without prejudice to a plaintiff’s filing of an amended complaint.
Printing Mart-Morristown v. Sharp Electronics Corp.,
. Since the opinion was written, an intermediate appellate court case has appeared deciding non-recovery for economic damages will similarly apply to failure to warn for strict liability in product liability within commercial transactions. Utah Intern., Inc. v. Caterpillar Tractor Co.,
. Failure to warn liability may arise from spectators watching alligators in a pond when they see wayward small children approach to swim. A bridge ahead is out occurrence likewise provides a cogent example. Inevitably presented is the legalistic and societalistic differences between a moral and legal duty to fellow humans. However, in product liability cases, the duty to warn also achieves two faces with first application to the dangerous product on initial sale and a different obligation for a previously sold product when the manufacturer or merchant comes to know that a failure of replacement or repair creates an unreasonable risk of danger of damage. The moral duty achieves a legal — tort status — liability responsibility.
. Hopkins v. Chip-In-Saw, Inc.,
. The Tenth Circuit Court of Appeals panel on rehearing added as a pertinent subject of review for this case:
The petition for rehearing has not convinced us that we should revise our opinion and require that any duty to warn claim be based solely on negligence principles.
Moreover, under Rule 18, Fed.R.Civ.P., "A defendant cannot compel a plaintiff to choose at his peril the theory upon which he intends to rely and thereby possibly defeat a recovery where two consistent, concurrent or cumulative theories can be urged without prejudice to the defendant’s ability to defend.” Senter v. B.F. Goodrich Company,127 F.Supp. 705 , 707-708 (D.Colo.1954); see also Rule 318(a), Colorado Rules of County Court Civil Procedure (1970) (adopting Federal Rule 18 on joinder of independent or alternate claims): Fumer, Products Liability § 16.02[1] at 16-111, 16-112 (doctrine of election remedies has no place in products liability area as plaintiff should be allowed to submit to the jury all claims on which there is sufficient evidence). There is no evidence of prejudice here. On remand, the plaintiff may pursue duty to warn claims under both negligence and strict liability in tort theories.
Florom,
. An issue of unknown user duty to warn inquiry is not presented in this case because the sales transaction was between Page and Bridger Coal. Tate v. Robbins & Myers, Inc.,
. As William James said, the truth of an idea is not a stagnant property inherent in it. Truth happens to an idea. It becomes true. It is made true by events. Its verity is, in fact, an event, a process. The process namely of verifying itself is verification. Its validity is the process of its validation.
Here, the duty to warn speaks to practical and moral desirability of avoided harm. To know is to have an intelligible choice. To deny knowledge is to withhold both intelligence and choice. The duty to warn as a moralistic responsibility is not limited to continued use of a dangerous product. By legend in the old west, it was called putting caution before foolhardy courage or, if you do it, that may be the last mistake you will ever make.
. Caterpillar Tractor Company is a frequent visitor to these industrial product liability cases.
. Compare the defective milking machines where there was only economic damage in Mulholland,
. See Bland & Wattson, Property Damage Caused by Defective Products: What Losses are Recoverable?, 9 Wm. Mitchell L. Rev. 1, 4-5 (1983) (footnote omitted), which states:
The line between non-recoverable economic loss and recoverable property damage is not easy to draw. The courts have had difficulty defining "economic loss" in a manner which preserves the warranty concepts embodied in the Uniform Commercial Code as well as the tort concepts of negligence and strict liability. To classify a certain type of loss as “economic,” however, is to predetermine its recovera-bility in negligence or strict liability.
It is the central strain of this dissent that adjudicatory deliberation is in many cases first made as to recoverability and then the curse of economic damage is thrown at the opinion to justify the predetermined denial. A large majority of economic loss denial cases involve di
It is interesting to note that those authors state "Texas is the only state to expressly refuse to allow recovery of damages for injury to the product itself, even if the injury results from an unreasonably dangerous defect in the product.” Id. at 14. They then state "[t]he law of Minnesota is unclear as to the recoverability of damages for an injury to the product itself.” Id. at 16.
See, however, the definition in Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L.Rev. 917, 918 (1966) (quoting from Fentress v. Van Etta Motors,
Property damage is usually readily distinguishable from economic loss. For example, operation of a defective radiator causes property damage when it results in a fire which destroys the plaintiffs store and economic harm when it results in conditions so uncomfortable that it causes the loss of customer patronage. At times, however, the distinction may be more difficult to draw. If A manufactures paste which it sells to B who uses it to cement shoes which he sells to C, a failure of the paste to properly adhere causes economic loss if it does not physically damage the shoes but merely renders them unsaleable; on the other hand, a defect in the paste which physically damages the shoes causes property loss. If the damage is to the defective product itself, similar distinctions must he drawn. When the defect causes an accident "involving some violence or collision with external objects,” the resulting loss is treated as property damage. On the other hand, when the damage to the product results from deterioration, internal breakage, or other non-accidental causes, it is treated as economic loss. It is also important to distinguish between "direct" and "consequential” economic loss. Direct economic loss may be said to encompass damage based on insufficient product value; thus, direct economic loss may be "out of pocket”— the difference in value between what is given and received — or "loss of bargain” — the difference between the value of what is received and its value as represented. Direct economic loss also may be measured by costs of replacement and repair. Consequential economic loss includes all indirect loss, such as loss of profits resulting from inability to make use of the defective product.
A somewhat different definitional approach is stated in Note, Products Liability: Expanding the Property Damage Exception in Pure Economic Loss Cases, 54 Chi-Kent L. Rev. 963 (1978).
. "[N]o precise distinction can be made between property damage and economic loss.” Ribstein, Guidelines for Deciding Product Economic Loss Cases, 29 Mercer L. Rev. 493, 511 (1978).
. Conversely defined, the author in Comment, supra,
Purely economic losses may be classified into two basic categories: direct economic losses and indirect or consequential economic losses. A direct economic loss includes a diminution in the value of the product as measured by the difference between the purchase price or value of the product as represented to the purchaser and the value of the product after discovery of the defect. This type of direct economic loss is known as a loss of bargain. A direct economic loss also includes whatever repair costs may be incurred in repairing the defective product and any direct incidental expenditures which may be incurred in replacing a defective product which cannot be repaired. On the other hand, indirect or consequential economic losses include both losses of future business profits and business opportunities. Such losses are commonly referred to as expectation losses. Consequential economic losses also include any indirect loss resulting from the consumer’s inability to secure an effective cover or replacement for the defective product.
*668 It is noted the author concluded "the manufacturer should generally be held liable for the full extent of [what he classified as] direct economic loss.” Id. at 182.
The genius of the common law lies in its ability, when presented with a new problem, to provide a remedy and, thereafter, to find or to develop a legal theory to justify it. When the problems of direct and consequential economic loss were first seriously proposed as compensable injuries, the courts had difficulty finding an acceptable legal basis upon which to justify recovery. As a result, sympathetic courts were forced to justify recovery upon that old standby, public policy, and numerous other legal fictions. This ad hoc approach has developed into a hopeless morass of conflicting legal rationales and theories of recovery.
Id. at 183 (footnote omitted). See likewise Note, supra, 54 Chi-Kent L. Rev. 963 with the broad expansive rule then confined by a consumer expectation.
. This analysis attunes to the direction of some cases in analysis parallel with East River S.S. Corp.,
. The recovery denial cases provide another incongruity which results from using justification in East River to create a rule for application. It is stated "in commercial settings when there is no large disparity in bargaining power, economic losses from a product injuring itself cannot be recovered in actions for strict products liability or negligence in manufacture or failure to warn.” Utah Intern., Inc.,
Consequently, this adaptation adds two additional factors to the rule. First, the principle is limited to commercial transactions, whatever that means, and to equals in bargaining power, however that is to be judged or computed.
How this rule is to be differently applied to the leaking fuel pump that burns up the car, house and maybe the owner as compared to the commercial trucker where the truck, the garage and perhaps the driver are similarly at risk is not logically established. Cf. Nicor Supply Ship Assoc.,
. A well-cited review, Note, Privity Revisited: Tort Recovery by a Commercial Buyer for a Defective Product’s Self-Inflicted Damage, 84 Mich.L.Rev. 517, 521 (1985), finds within the cases "four different approaches to determining whether a tort recovery is available for a product’s self-inflicted damages.” That author states:
1.Deny recovery for a defective product’s self-inflicted damages for the reason that economic loss is coincidental with physical damage. Note, supra, 84 Mich.L.Rev. at 521 (citing Mid Continent Aircraft Corp. v. Curry County Spraying Service, Inc.,
2. ”[T]he fact that a defective product’s self-inflicted damage is coincident with economic loss does not make it any the less physical damage,” and, consequently, recovery is justified in tort. Note, supra, 84 Mich.L.Rev. at 521 (citing Santor v. A & M Karagheusian, Inc.,
3. The third rule stated is: "Not surprisingly, a majority of courts have turned to a third approach, based upon the landmark decision of Seely v. White Motor Co., [
4. The fourth approach turns to contract law and introduces as a key factor the existence of privity. Note, supra, 84 Mich.L.Rev. at 523.
Realistically, few cases are confirmable in result by use of this definitional analysis.
. Confusion still remains as to what constitutes the defined economic damage for which the rules will be applied. The subject of a proper definition of economic damage will be considered in the fifth major segment of this dissent regarding "Other Property."
. There are a line of cases where dangerousness is absent that apply the rule of no recovery for economic loss unless contractual provisions would allow such recovery. These are the con-tr&-Santor cases. See Note, Manufacturers' Liability to Remote Purchasers for “Economic Loss" Damages — Tort or Contract?, 114 U.Pa.L.Rev. 539 (1966). Cf. Wade, Tort Liability for Products Causing Physical Injury and Article 2 of the U.C.C., 48 Mo.L.Rev. 1 (1983) where, without unreasonable dangerousness, the- buyer cannot achieve the benefit of his anticipated bargain by any non-contractual theory. This is the "damned poor product, so what?” application of law to the American industrial product arising from the generation of greed and the era of irresponsibility. See Hart Engineering Co. v. FMC Corp., 593 F.Supp 1471, 1483 (D.R.I.1984), where that court stated::
There is no parallel rationale, however, for extending this special prophylaxsis to provide relief for mere disappointment in product performance. In such circumstances, the same imbalance is not present; and the need for an expansive rendering of legal rights and remedies is considerably less. As the Purvis [Purvis v. Consolidated Energy Products Co.,674 F.2d 217 , 222-23 (4th Cir.1982)] court remarked:
*671 All products carry the risk that they will serve their intended function poorly. In this sense, the risk of ''ordinary" malfunctions is well within the contemplation of the average purchaser.
The author then quotes from Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp.,
[T]he Third Circuit phrased the ratio deciden-di for the rules as follows:
The rationale behind strict liability in personal injury situations is not well-suited to claims alleging only economic loss. Economic loss results from the failure of the product to perform to the level expected by the buyer and the seller. Such loss is most frequently measured by the cost of repairing the infirmity or by the difference in the value of the product as it exists and the value it would have had if it performed as expected. Thus, economic loss is almost always incurred by the owner of the product, not by persons who merely use it or come into contact with it.
Hart Engineering Co.,
In sum, the better rule seems undeniably to be that the law of contracts is the vehicle of choice to redress a purchaser’s unrequited expectations of product efficacy, at least where (as here) the parties are in privity of contract and have had ample opportunity to allocate the risks involved. In those regrettable instances where the product turns sour and proves to be a lemon, dulcification should flow from the terms of the bargain, not from the vagaries of negligence law. To permit recovery of purely economic losses in such circumstances would, unless by happy coincidence such recovery was consistent with the agreement between the contracting parties, undermine the very foundations upon which business transactions have historically been built. Thus, to couple product disappointment with traditional notions of tort recoupment in such a context would be to mix matter and anti-matter; the resultant amalgam would be much too volatile to make sense in a commercial setting.
Id. at 1484. The sewer sludge pump did not perform. Richard O’Brien Companies v. Challenge-Cook Bros., Inc.,
We can set aside, for the purpose of this drag line collapse, those industry failure cases since immediate catastrophic events here did directly threaten greater damage where product failure put other property or life at risk.
. See Note, supra, 9 Tex.Tech.L.Rev. 733 and Note, Products Liability in Commercial Transactions, 60 Minn.L.Rev. 1061 (1976). See also Note, supra, 84 Mich.L.Rev. 517.
. Significant federal case law supports tort remedies for unreasonable danger. Product damage cases are the moderate majority posture. See, as examples, Dixon v. International Harvester Co.,
. During a period in which the law is constantly expanding to protect new interests, the loudest debate is too often between those advocating no change at all and those demanding substantial revision of the legal fabric; too often ignored are the narrow distinctions of degree which make the law rational and coherent. Yet in the area of economic loss no fruitful inquiry is possible without close consideration of underlying factors which do, in fact, dictate the drawing of fine distinctions. Hopefully, in deciding whether to expand manufacturer's liability to encompass economic loss, courts will not reach results by inadvertence, but instead will focus on the policies to be furthered by each decision.
Note, supra, 66 Colum.L.Rev. at 966.
. The commercial enterprise justification or limitation is the most confusing and logically irrational factor of East River. If a product is dangerous, it will be dangerous to people even if purchased by large corporations. How can a rule be properly injected between one of the few remaining American (or more prevalent foreign) manufacturers and a mom and pop small business corporation or the family farmer? The thesis of justified dangerousness in commercial activity as an acceptable risk lacks any conceivable logic. It is here the inquiry of whether there is a tort without damage or lacking remedy is jost visibly presented. The factual and principled justification for East River rests with the character of seller-buyer relationship, but case application tends to suggest that the justification may be disregarded and the concept applied even if either a "consumer" transaction exists or the bargainers are not equal in economic muscle.
. In academic analysis, the economic damage case law, decisions and discussion line up in the following array of concepts. Uniformity of result does not exist and little consistency to decision can be perceived. California law, as discussed infra, probably does not fall within any of these categories as apparently applying a particularized contract approach.
1. Santor — economic damage recoverable in tort including obsolescence and wear out. Generally abandoned concept.
2. No unreasonable danger or catastrophic event failure. Relief confined to contract. This includes obsolescence, wear out and insufficien-cies of performance cases. The predominate rule denies tort recovery by general citation of the California case of Seely,
3. Unreasonable dangerousness and/or catastrophic event failure. This, as the case at hand in majority perspective, permits recovery for economic damages. This is the Cloud v. Kit Mfg. Co.,
4. East River totally applied. No economic damage is recoverable if damage results only to the equipment machine or entire facility of which the faulty part is a constituent part.
5. East River — commercial purchaser — bargain equal adaptation where the East River denial rule is applied but only to commercial transactions as distinguished from consumer transactions and buyer and seller are bargaining equals.
Clearly, the essential issue presented here is whether the reeving block failure brings Continental into a category three standard as the majority rule or whether this court elects to adopt either the fourth or fifth East River applications. It is absolutely impossible to tell from East River and succeeding federal case law whether that finite authority is category four or five. Obviously, most admiralty cases would likely be more commercial than consumer, whatever the difference may be.
. In an even more case of curious text is the most recent case of Mulholland,
. City of Greenville should have particular present pertinence to the City of Casper where a major high school was closed and school sessions put on split shift because of asbestos contamination recently discovered in the building. It may seem sometimes that jurists write for academia beyond the real world. Product liability and asbestos problems contra-indicate and demonstrate that a real world exists for opinion discussion. See, however, Comment, Asbestos in Schools and the Economic Loss Doctrine, 54 U.Chi.L.Rev. 277 (1987).
. A substituted used repair part which caused a converted aircraft engine to explode resulting in severe damage to the engine produced an interesting by-play in expression between the majority and minority in Consumers Power Co. v. Curtiss-Wright Corp.,
It is pure fortuity that the explosion that reduced Consumers Power’s engine to scrap did not damage any person or property nearby. The defective compressor disc did not lead merely to a loss of efficiency or a decline of profits; the disc’s failure caused a sudden, violent and calamitous accident which posed a serious threat to persons and property. The damage caused by the explosion is property damage, not economic loss.
Id. at 1099. The dissent then said:
The fortuity that personal injury or outside property damage might occur in addition to injury to the defective product does not require a different rule with respect to economic loss. To deviate from the basic rule would lead to speculation and inquiry unrelated to the negotiations between the commercial entities.
Id. at 1102. How fortuity is a proper concept defining an exploding motor and consequent risk to persons or property is unexplained.
. In its analysis to draw the line between contract and tort, the Arizona tribunal developed five hypotheticals to illustrate the problems addressed. In all five hypotheticals, a new LMC unit with an unreasonably dangerous and undiscovered defect was installed in the previously purchased' turbines. Subsequently, the unit malfunctioned causing the losses and damages illustrated:
*677 At Plant # 1, the defect caused the LMC to malfunction at a time when the plant engineer was aloft on a catwalk inspecting one of the turbines controlled by the LMC. The force of the resulting explosion (accident) knocked the engineer to the floor, injuring him.
At Plant #2, the same malfunction affected only one turbine, which accidentally caught on fire and was completely destroyed.
At Plant #3, the defect caused the LMC to malfunction and burn. The fire department responded quickly, so none of the turbines or other property located near the LMC was damaged in the accident.
At Plant # 4, the plant engineer discovered the defect in the LMC and was able to shut down the turbines and replace the LMC before any damage occurred. However, the LMC replacement cost to [plaintiff] is $50,000, including shutdown, start-up and testing costs.
At Plant #5, during a peak demand period, the LMC malfunctioned and failed to start all four of the gas turbines. The plant was down for twenty-four hours. As a result, [plaintiff] could not deliver electricity to its numerous commercial and residential users. [Plaintiff] not only lost all the profits anticipated from the sales to those consumers but must replace the LMC and faces lawsuits by some of its large commercial users.
Salt River Project Agr. Imp. and Power Dist.,
From the illustration, the court found unanimous authority that the damages at plant one and plant two were recoverable, a split of authority in plant three determined by the unreasonably dangerousness rule in application or rejection, and a majority rule for denial of economic losses in plants four and five. The turbine in Salt River Project Agr. Imp. and Power Dist. and the reeving block in Continental have identical placements within the hypotheticals as a plant three occurrence dependent on definition of "other property.”
. The court in Aloe Coal Co.,
. In East River S.S. Corp.,
Interestingly, the New Jersey and California Supreme Courts have each taken what appears to be a step in the direction of the other since Santor and Seely. In Spring Motors Distributors, Inc. v. Ford Motor Co.,98 N.J., at 579 ,489 A.2d, at 672 , the New Jersey court-rejected Santor in the commercial context. And in J’Aire Corp. v. Gregory,24 Cal.3d 799 ,157 Cal.Rptr. 407 ,598 P.2d 60 (1979), the California court recognized a cause of action for negligent interference with prospective economic advantage.
. There are a significant number of cases where denied recovery of economic damages were either clearly within the unachieved benefit of the bargain classification or exceptional dangerousness did not exist or was never considered by the litigants or appellate court. Twin Disc, Inc. v. Big Bud Tractor, Inc.,
. A number of cases provide an easy factual answer to the defective product causing damage to other property categorization. Hales v. Green Colonial, Inc.,
. Miller Industries,
. Otherwise, we fail to:
Rather than contribute yet another unexplained and unreasoned decision to the economic loss pile, the court could instead carefully consider the problems of definition and commercial transactions. The court, could base its decision on a carefully articulated argument that the public policy which supports strict liability does or does not extend to economic loss.
Comment, supra, 34 S.D.L.Rev. at 136. I would hope with that author for "something better."