Beard Plumbing and Heating, Inc. v. Thompson Plastics, Inc.

• Decision Date: 10 August 1998
• Docket Number: No. 95-3198,95-3198
• Citation: 152 F.3d 313
• Parties: 36 UCC Rep.Serv.2d 286, Prod.Liab.Rep. (CCH) P 15,325 BEARD PLUMBING AND HEATING, INCORPORATED, Plaintiff-Appellant, v. THOMPSON PLASTICS, INCORPORATED; NIBCO, Incorporated, Defendants-Appellees, and Thomas Somerville Company, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 313

152 F.3d 313

36 UCC Rep.Serv.2d 286, Prod.Liab.Rep. (CCH) P 15,325

BEARD PLUMBING AND HEATING, INCORPORATED, Plaintiff-Appellant, v. THOMPSON PLASTICS, INCORPORATED; NIBCO, Incorporated,

Defendants-Appellees,

and

Thomas Somerville Company, Defendant.

No. 95-3198.

United States Court of Appeals,

Fourth Circuit.

Argued Oct. 29, 1996.

Decided Aug. 10, 1998.

ARGUED: Steven Mark Garver, Law Offices of Steven M. Garver, P.C., Reston, Virginia, for Appellant. Alexander Francuzenko, Saunders & Schmieler, Silver Spring, Maryland, for Appellee Thompson Plastics; Alan Douglas Titus, Carr, Goodson, Lee & Warner, P.C., Washington, DC, for Appellee NIBCO. ON BRIEF: Cheryl G. Rice, Law Offices of Steven M. Garver, P.C., Reston, Virginia, for Appellant. Jeffrey R. Schmieler, Saunders & Schmieler, Silver Spring, Maryland, for Appellee Thompson Plastics; Samuel J. Smith, Jr., Brian H. Rhatigan Before RUSSELL ^* and ERVIN, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

Carr, Goodson, Lee & WARNER, P.C., Washington, DC, for Appellee NIBCO.

Affirmed by published opinion. Judge ERVIN wrote the opinion, in which Senior Judge PHILLIPS joined.

OPINION

ERVIN, Circuit Judge:

In this diversity action, Beard Plumbing and Heating, Inc., (Beard), appeals from a grant of summary judgment to Thompson Plastics, Incorporated (Thompson), and NIBCO, Incorporated (NIBCO) on Beard's claims of negligence and breach of warranty. For the reasons which follow, we affirm the decision of the district court.

I.

The district court's order granting summary judgment to Thompson and NIBCO is reviewed de novo. E.J. Sebastian Assocs. v. Resolution Trust Corp., 43 F.3d 106, 108 (4th Cir.1994). This court applies the same standards as the district court, i.e. summary judgment is appropriate where there is no genuine dispute as to a material fact. Miller v. FDIC, 906 F.2d 972, 973-74 (4th Cir.1990); Fed.R.Civ.P. 56(c). Any permissible inferences to be drawn from the underlying facts must be viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, the moving party is entitled to summary judgment if the non-moving party has failed to make a sufficient showing on an essential element of the case with respect to which the non moving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

II.

Beard is a Virginia corporation engaged in providing materials and labor related to plumbing and heating. Thompson, an Alabama corporation, and NIBCO, an Indiana corporation, manufacture postchlorinated polyvinyl chloride (CPVC) plumbing components.

In 1992, Beard, engaged as the plumbing subcontractor in a condominium development in Woodbridge, Virginia, installed CPVC plumbing fittings manufactured by Thompson or NIBCO. Beard purchased these fittings from two third-party suppliers, Thomas Somerville Co., which was originally named as a defendant in the case but later non-suited after Thompson and NIBCO were granted summary judgment, and National Plumbing Store, which was never named as a party. There were no contracts between Beard and either manufacturer. When the fittings cracked and subsequently leaked after hot water was used in the system, the general contractor required Beard to replace the fittings and repair the damage sustained by the homes and then dismissed Beard from the job. The general contractor proceeded to sue Beard, which settled for $165,878.93. In addition to that loss, Beard claims it was denied compensation for performing change orders on the site, was denied compensation for the cost of repairs to the damaged buildings, was denied the remainder of its contract price, incurred legal fees, and lost revenue due to damage to its business reputation. See Brief of Appellant at 5-6.

To recover these losses, Beard filed the instant diversity action on June 8, 1995, alleging both breach of warranty and negligence. J.A. at 1. Beard contends that the CPVC fittings manufactured by Thompson and NIBCO were defective and that certain adapters failed when they attempted to shrink around thermally-expanded metal fittings during cool-down. See J.A. at 46. On November 1, 1995, NIBCO filed for summary judgment, and Thompson followed on November 7, on the ground that Beard could not recover economic losses in these circumstances. The district court heard oral arguments on November 17, at which time he granted both motions for summary judgment on Beard's contract and tort claims. See J.A. at 161, 173.

In support of his ruling, the trial judge stated:

Well, I find in this case that there is really no dispute in the basic facts of what occurred here. And I find that the Sensenbrenner case [236 Va. 419, 374 S.E.2d 55 (1988) ] is controlling. That there is privity required when there is a pure economic loss. And I find that there is no dispute in the facts that this is a pure economic loss.

As to the breach of warranty, you just don't meet the basic requirements, the elements to go forward. There is no showing that you relied on the seller's skill or judgment or that he had reason to know you were doing it or that you in fact did it. It is undisputed that you didn't, neither of these defendants bought directly from the plaintiff [sic] and no representations were made.

And for those reasons, both the motions of Thompson Plastics and NIBCO for summary judgment will be granted.

J.A. at 170. This appeal followed.

III.

Beard seeks to assert three causes of action: a negligence claim sounding in tort, and two warranty claims sounding in contract, one for breach of the warranty of fitness for a particular purpose under Va.Code § 8.2-315 and the other for breach of the implied warranty of merchantability under Va.Code § 8.2-314. The first two claims are barred by Virginia law in these circumstances and will be dealt with first. The final claim of breach of the implied warranty of merchantability is a more difficult question and will be treated last.

A.

Virginia law is clear that, absent privity of contract, economic losses cannot be recovered in a negligence action. See Gerald M. Moore and Son, Inc. v. Drewry, 251 Va. 277, 467 S.E.2d 811, 813 (1996); Sensenbrenner v. Rust, Orling & Neale, Architects, Inc., 236 Va. 419, 374 S.E.2d 55, 57-58 (1988); Blake Constr. Co. v. Alley, 233 Va. 31, 353 S.E.2d 724, 726-27 (1987). Sensenbrenner, in restating the privity requirement for economic losses, stands for the dual propositions that (1) tort law is designed to protect the safety of persons and property from injury whereas the law of contracts seeks to protect bargained-for expectations and (2) the type of loss at issue here is not the type of property damage contemplated by tort law but is rather economic loss subject to recovery, if at all, under contract law. Sensenbrenner, 374 S.E.2d at 58. In that case, plaintiffs sought to recover from the architects and pool contractor, with whom there was no contractual privity, not just for damages to the leaking pool itself but also for the cost of repairing damage done to their home's foundation and the cost of ensuring that the pool would cause no further damage to the house. In answering a question certified by this court, the Virginia Supreme Court rejected plaintiffs' contention that this was property damage, holding that the "effect of the failure of the substandard parts to meet the bargained-for level of quality was to cause a diminution in the value of the whole, measured by the cost of repair. This is purely economic loss, for which the law of contracts provides the sole remedy." Id.; see also Rotonda Condominium Unit Owners Ass'n v. Rotonda Assocs., 238 Va. 85, 380 S.E.2d 876, 879 (1989) (citing Sensenbrenner in its conclusion that the costs of repairs to structural defects in the common elements of a condominium development were economic losses).

In the instant case, there is no question that Beard is not in privity with either Thompson or NIBCO, as is evident from the amended complaint itself. See, e.g., J.A. at 9-10. Beard's argument that privity has been abrogated by statute, either by Va.Code § 8.2-318 or by Va.Code § 8.01-223, is unavailing. ¹ In Blake Construction, the Virginia Supreme Court specifically held that " § 8.01-223 does not eliminate the privity requirement in a negligence action for economic loss alone" because that section was in derogation of the common law and the court would not enlarge it beyond its express terms. Blake Constr. Co. v. Alley, 233 Va. 31, 353 S.E.2d 724, 726 (1987). Reading Blake and Sensenbrenner together, it seems clear that the Virginia Supreme Court would read § 8.2-318 the same way to the extent it applies to economic loss in negligence actions. In other words, § 8.2-318 does not abrogate the privity requirement in such circumstances. The court below has already so construed Virginia law. See Richmond, F. & P. R.R. v. Davis Indus., 787 F.Supp. 572, 576 (E.D.Va.1992). In any event, this court has already found that § 8.2-318 and § 8.01-223 are companion statutes, Bryant Elec. Co. v. City of Fredericksburg, 762 F.2d 1192, 1194 n. 4 (4th Cir.1985), and that § 8.2-318 is in derogation of the common law and not to be expanded, Farish v. Courion Indus., 722 F.2d 74, 76-77 (4th Cir.1983), aff'd on rehearing en banc, 754 F.2d 1111 (4th Cir.1985). That precedent, in conjunction with Virginia case law, strongly supports the conclusion that § 8.2-318 has not abrogated the privity requirement in negligence actions seeking recovery for economic loss.

To escape that privity requirement, Beard claims the damages it seeks go beyond economic loss. Yet all of them--the costs of settlement and legal fees incurred in the action brought by the general contractor, the loss of income due to early termination of its contract with the general contractor, the costs of repairing the leaks and other...