Iowa Electric Light & Power Co. v. Allis-Chalmers Mfg. Co.
Decision Date | 14 June 1973 |
Docket Number | Civ. No. 9-2472-C-2. |
Parties | IOWA ELECTRIC LIGHT AND POWER COMPANY, a corporation, Plaintiff, v. ALLIS-CHALMERS MANUFACTURING COMPANY, a corporation, Defendant. |
Court | U.S. District Court — Southern District of Iowa |
John W. Morrison, Chicago, Ill., and John B. Grier, Marshalltown, Iowa, for plaintiff.
Eugene Davis, Des Moines, Iowa, for defendant.
This matter is before the Court upon defendant's Motion for Summary Judgment. This is a products liability case. Plaintiff's complaint is in six counts; Count I is on implied warranty, Count II is on express warranty; Count III is for breach of contract; Count IV pleads strict liability in tort; Count V pleads negligence on the basis of res ipsa loquitur; and Count VI, an amendment, adds the allegation of willfullness to each of the preceding Counts. By agreement of the parties, the allegations of Count VI are not at issue in this motion, and any motion with respect to Count VI will be determined at a later time.
The controversy centers around a transformer which was manufactured by Allis-Chalmers Manufacturing Co., the defendant herein, for Iowa Electric Light and Power Co., the plaintiff herein, in 1958.
The pertinent uncontroverted facts in this lawsuit are as follows:
On June 24, 1958, defendant sent to plaintiff a proposal, Proposal DAV-2615, for sale and delivery of the transformer central to this action. Included within that proposal were the following conditions of sale:
On July 3, 1958, plaintiff accepted the proposal by mailing to defendant plaintiff's Purchase Order No. 25091, ordering the equipment described in the proposal "all in accordance with Proposal DAV-2615 dated June 24, 1958 based on Skeleton Specifications."
On July 7, 1958, defendant sent to plaintiff its Order of Acceptance in which the conditions of sale above described were again set out.
The transformer had a failure on February 22, 1965, after being in service 6 years. Plaintiff requested defendant to repair the transformer at plaintiff's expense. Defendant accepted this request and incorporated in the acceptance the same conditions as have been heretofore set out. Plaintiff paid the defendant the agreed price for the repairs.
The transformer again failed on January 27, 1968. After this occurrence, plaintiff again requested defendant to furnish materials and certain services for repair of the transformer. Defendant complied, and plaintiff paid for the same.
The defendant, in its motion, urges that the contract between the parties be enforced in accordance with the "conditions of sale." The plaintiff contends that the disclaimers in the contracts do not preclude recovery.
With respect to plaintiff's Count IV, sounding in strict liability in tort, the defendant contends (1) that the disclaimers and limitations on damages found in the contracts preclude recovery on this theory, and (2) that the theory of strict liability does not encompass a prayer for commercial loss damages.
The Supreme Court of Iowa has approved recovery, in certain instances, under the tort theory of strict liability for defective products, adopting the principles found in Restatement, Second, Torts, Section 402A. Hawkeye Security Insurance Co. v. Ford Motor Co., 174 N. W.2d 672, 684 (Iowa 1970) hereinafter Hawkeye I. Section 402A allows recovery under strict liability in tort for physical harm to the ultimate user or consumer, or to his property, which is caused by a defective product.
The question of whether plaintiff waived his cause of action sounding in strict liability in tort because of disclaimers in the contracts must be resolved against the defendant. In Hawkeye Insurance Co. v. Ford Motor Co., 199 N.W.2d 373, 381 (Iowa 1972) hereinafter Hawkeye II, the court said: "Further, strict liability in tort is not based on the Uniform Commercial Code and is not subject to disclaimer." Comment (m) to Section 402A of Restatement, Second, Torts, states:
The rule stated in this Section is not governed by the provisions of the Uniform Sales Act, or those of the Uniform Commercial Code, as to warranties; and it is not affected by limitations on the scope and content of warranties, or by limitation to "buyer" and "seller" in those statutes. Nor is the consumer required to give notice to the seller of his injury within a reasonable time after it occurs, as is provided by the Uniform Act. The consumer's cause of action does not depend upon the validity of his contract with the person from whom he acquires the product and it is not affected by any disclaimer or other agreement, whether it be between the seller and his immediate buyer, or attached to and accompanying the product into the consumer's hands. In short, "warranty" must be given a new and different meaning if it is used in connection with this Section. It is much simpler to regard the liability here stated as merely one of strict liability in tort.
Defendant states many policy reasons in support of its position on disclaimer of strict liability in tort. The Court feels, however, that the adoption of such a rule of law would merely again confuse the area of law that Section 402A liability was intended to make simpler.
On the other hand, the Court concludes that defendant's argument with respect to the scope of damages under Section 402A is a good one. Courts and commentators have delineated at least four distinct categories of harm which could be held recoverable under the theory of strict liability in tort for defective products: (1) physical injury to persons; (2) physical damage to tangible things other than the product itself; (3) physical harm to the product itself; and, (4) commercial or economic loss which involves no physical harm but which are occasioned by the unfitness of the product. See Keeton, Products Liability—Some Observations about Allocation of Risks, 64 Mich.L.Rev. 1329, 1343 (1966). Clearly, the law in Iowa, as in most jurisdictions, allows recovery for damages described in categories (1) and (2). Hawkeye I, supra; Hawkeye II, supra; Restatement, Second, Torts, Section 402A (). Plaintiff in this case, however, seeks damages for repair of the transformer, acquisition of a temporary transformer in replacement, and "economic loss." Thus, the Court finds itself having to declare Iowa law in an area in which the Supreme Court of Iowa has not clearly spoken.
The Iowa Supreme Court, in the first Hawkeye opinion, cited a New Jersey case which allowed recovery for damage to the product itself under the theories of implied warranty and strict liability in tort.1 Law review writers have interpreted this to mean that the Iowa Court possibly would approve recovery for economic or commercial losses. The commentators note, however, that no such claim was made in the Iowa case.2
These commentaries were written before Hawkeye II was decided. That case did little to clear the air, however, because of the puzzling language it contains with respect to the instant problem. At page 382 of 199 N.W.2d, the Supreme Court states:
The Court believes that it is necessary to trace the history of the Hawkeye litigation in order to understand the above quoted passage in Hawkeye II. The Hawkeye series of actions began when in 1964 a Ford truck operated by Thomas Kolby and owned by Tri-B Corporation ran into a farm-tractor and...
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