MEMORANDUM OPINION AND ORDER
The defendant, Union Carbide Corporation, has filed a Motion to Dismiss the Amended Complaint filed against it by the plaintiff, Northwestern Public Service. For the reasons stated below, the Motion to Dismiss is granted in part and denied in part.
BACKGROUND
This case involves polyethylene pipe which the parties refer to as “Century Pipe.” 1 The Century Pipe was made from a chemical compound known as DHDA-2077 Tan, which was developed, manufactured, distributed and sold by defendant. According to the Amended -Complaint, plaintiff purchased the Century Pipe from several entities other than defendant from 1970 through 1974, and installed the pipe as part of its natural gas distribution systems in South Dakota and Nebraska from 1971 through 1974. Plaintiff alleges that it discovered defects in the DHDA-2077 Tan in 1997 and that these defects caused the Century pipe to be subject to premature failure, unreasonably dangerous, and a threat to public safety. Plaintiff claims that, as a result of these defects, it has had to replace all of the Century Pipe in its gas distribution systems.
In this lawsuit, plaintiff seeks to recover the cost of replacing the pipe as well as punitive damages. Plaintiffs Amended Complaint contains ten counts: (1) Negligence; (2) Strict Products Liability; (3) Intentional Misrepresentation; (4) Concealment; (5) Breach of Express Warranty; (6) Breach of Implied Warranty of Merchantability; (7) Breach of Implied Warranty of Fitness for a Particular Purpose; (8) Unjust Enrichment; (9) Deceit; and (10) Deceptive Trade Practices. 2 In its Motion to Dismiss, defendant seeks the dismissal of each of these counts.
DISCUSSION
No count ,in the Amended Complaint may be dismissed .under Rule 12(b)(6) for failure to state a claim unless it appears beyond doubt that plaintiff can prove no
The parties agree that this case is governed by the substantive law of South Dakota.
See Erie R.R. Co. v. Tompkins,
A. Products Liability Claims
Defendant argues that the first two counts of the Amended Complaint—both of which are products liability claims—are barred by the economic loss doctrine. Under this doctrine, economic losses are generally limited to the commercial theories found in the Uniform Commercial Code and are consequently not recoverable under tort theories of products liability.
City of Lennox v. Mitek Industries, Inc.,
Plaintiffs claims of negligence and strict products liability do not fit within a “public safety” exception to the economic loss doctrine. The courts which have recognized such an exception have done so in order to provide a tort remedy for defective products whose risks were not foreseeable at the time of contracting.
See, e.g., Tioga Public School Dist. v. United States Gypsum Co.,
a claim arising from the failure of a product to meet expectations of suitability, quality and performance resulting in damages which a party to a sales contract could reasonably expect would flow from a defect in the product is a benefit of the bargain claim better addressed under contract and the Uniform Commercial Code.
Carey-Canada,
B. Fraud Claims
1. Economic Loss Doctrine
A more difficult question is whether plaintiffs claims of intentional misrepresentation, fraudulent concealment, deceit and deceptive trade practices are barred under the economic loss doctrine. In support of these fraud claims, plaintiff alleges that defendant made intentional misrepresentations that “DHDA-2077 Tan complied with industry and regulatory requirements to be rated as a PE 2306 polyethylene pipe compound suitable for use in natural gas distribution systems.” Plaintiff also alleges that defendant fraudulently concealed facts indicating that DHDA-2077 Tan did not meet these standards. Finally, plaintiff claims that,the alleged misrepresentations and concealment about the quality of the Century Pipe induced plaintiff to purchase the pipe.
The parties take different positions on whether the economic loss doctrine permits recovery for claims such as these. Defendant argues that the doctrine only allows claims of fraudulent inducement involving misrepresentations “that do not in themselves constitute contract or warranty terms subsequently breached by the seller.”
See Huron Tool v. Precision Consulting Services, Inc.,
Applying the economic loss doctrine to fraud claims is a cumbersome job. The economic loss doctrine was developed and designed to protect contract law from being engulfed by the law of products liability.
See East River Steamship Corp. v. Transamerica Delaval, Inc.,
Courts scrutinizing such claims are guided less by the economic doctrine as annun-ciated in
East River
and
Seely
than by traditional principles of tort and contract law. Courts have, in fact, been sorting out genuine fraud claims from re-labeled breach of contract claims since before the advent
of the
economic loss doctrine. See,
e.g., Arnold v. National Aniline & Chem. Co.,
The most important of these principles involves whether misrepresentations about performance under a contract should be viewed as a breach of the contract or as an independent tort. In
Huron,
the Michigan Court of Appeals explained that misrepresentations which relate to a breaching party’s performance under a contract are “interwoven with the breach of contract” and “do not give rise to an independent cause of action in tort.”
Huron,
If the seller makes an oral representation that is important to the buyer, the latter has only to insist that the seller embody that representation in a written warranty. The warranty will protect the buyer, who will have an adequate remedy under the Uniform Commercial Code if the seller reneges.
Id.; see also Huron,
prospective parties to contracts will be able to obtain legal protection against fraud only by insisting that the other party to the contract reduce all representations to writing, and so there will be additional contractual negotiations, contracts will be longer, and, in short, transaction costs will be higher. And the additional costs will be incurred in the' making of every commercial contract, not just the tiny fraction that end up in litigation.
Id.,
While the South Dakota Supreme Court has recognized the need to distinguish fraud claims from breach of contract claims, it has also indicated that fraud may occur in connection with a breach of contract.
See Hoffman v. Louis Dreyfus Corp.,
The state supreme court’s application of relevant policy considerations does not point toward the adoption of the
Huron
rule. As defendant notes, the supreme court adopted the economic loss doctrine out of respect for “negotiated agreements concerning all aspects of a commercial transaction including warranties, warranty disclaimers, and liability limitations.”
City of Lennox,
On balance, the South Dakota Supreme Court seems more likely to hold that the economic loss doctrine does not bar fraud claims which concern the quality or characteristics of goods sold under a contract. As noted above, the Eighth Circuit has predicted that the Minnesota Supreme Court would reach a contrary result.
See Marvin Windows,
2. Pleading Requirements Under Rule 9(b)
Defendant also suggests, without any supporting authority or explanation, that plaintiffs allegations of fraud have not
In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge and other condition of mind of a person may be averred generally.
A plaintiff “need not plead fraud with complete insight before discovery is complete.”
Gunderson v. ADM Investor Services, Inc.,
C. Breach of Warranty Claims
Defendant claims that plaintiffs breach of warranty claims are barred by the applicable statute of limitations. Breach of warranty claims under the Uniform Commercial Code “must be commenced within four years after the cause of action has accrued.” SDCL 57A-2-725(1). Under § 2-725(2) of the Uniform Commercial Code, “[a] cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.” SDCL 57A-2-725(2). Under the circumstances of this case, the alleged breach of warranty occurred when tender of delivery was made. See id. The Amended Complaint alleges that the last delivery of pipe was made in 1974, which means that the four-year statute of limitations on plaintiffs breach of warranty claims expired sometime in 1978. Thus, based solely on these allegations in the Amended Complaint, plaintiffs warranty claims appear to be untimely.
Where the dates in the complaint show that a plaintiffs warranty claims are untimely, those claims are subject to dismissal.
See Wilburn v. Pepsi-Cola Bottling Co. of St. Louis,
The statute of limitations may be tolled under a theory which is pleaded in the Amended Complaint. Under South Dakota law, a defendant may be equitably estopped from raising the statute of limitations as a defense to a warranty claim.
See L.R. Foy Constr. v. S.D. State Cement Plant,
D. Unjust Enrichment and Restitution
Because restitution is an equitable remedy, it is generally unavailable when there exists an adequate remedy at law.
“It is not generally a ground for dismissal of a complaint asserting equitable claims that the plaintiff has an adequate remedy at law.”
Cunningham,
CONCLUSION
For the reasons stated above, plaintiffs products liability claims must be dismissed under the economic loss doctrine. Plaintiffs claims of intentional misrepresentation, fraudulent concealment, deceit, and deceptive trade practices, however, will not be dismissed, either under the economic loss doctrine or Rule 9(b). For the time being, plaintiffs breach of warranty claims and its unjust enrichment claim will not be dismissed, either. Accordingly,
IT IS ORDERED:
(1) that the Motion to Dismiss (Docket No. 6) is granted in part and denied in part;
(2) that the Motion to Dismiss is granted as to Counts I and II of the Amended Complaint; and
(3) that the Motion to Dismiss is denied as to the remaining Counts of the Amended Complaint.
Notes
. The name "Century Pipe” combs from the fact that plaintiff purchased the pipe in question from Century Pipe Company and Century Utility Products, Inc., as well as from Amdev-co Products, Inc.
. The Motion to Dismiss was originally filed with respect to the original Complaint. Just before oral argument on the Motion to Dismiss, however, plaintiff filed an Amended Complaint, adding several new allegations to its existing causes of action, as well as two additional causes of action. Following oral argument on the Motion to Dismiss, the Court allowed each party to file a brief on how the amendments to the Complaint affected the issues raised in the Motion to Dismiss. This Memorandum Opinion and Order addresses the Amended Complaint.
. An example provided in one of the cases cited by plaintiff illustrates the distinction between an "economic loss,” which is foreseeable, and an unforeseeable "non-economic loss”:
[I]f a fire alarm fails to work and a building burns down, that is considered an 'economic loss’ even though the building was physically harmed. It was a foreseeable consequence from the failure of the product to work properly. But if the fire was caused by a short circuit in the fire alarm itself, it is not an economic loss.'
American Fire & Cas. Co. v. Ford Motor Co.,
. Plaintiff argues that this issue cannot be determined without a factual record, because Plaintiff expects to show that it was not foreseeable at the time of contracting that the Century Pipe might eventually fail catastrophically. The issue, however, is not whether the alleged failure was foreseeable at the time of contracting; rather, it is whether, at the time of contracting, it was foreseeable that the failure of the product to perform its intended function would cause' the danger alleged. In this case, the danger allegedly posed by the premature failure of the Century Pipe was a foreseeable result of such a failure.
. In 1998, during a special session of the Minnesota Legislature, the Minnesota statute governing the economic loss doctrine was amended to clarify that the section "shall not be interpreted to bar causes of action based upon fraud or fraudulent or intentional misrepresentation or limit remedies for those actions." Minn.Stat. § 604.10(e) (2000). This year, the Minnesota Legislature again amended its statute to allow common-law misrepresentation claims between merchants so long as "the misrepresentation was made intentionally or recklessly.” 2000 Minn. Laws ch. 358 (to be codified at Minn.Stat. § 604.10).
See Marvin Lumber & Cedar Co. v. PPG Industries, Inc.,
. Other federal district judges in the Eastern District of Wisconsin have determined that
