City Public Service Bd. v. General Elec. Co.

• Decision Date: 09 July 1991
• Docket Number: No. 90-5615,90-5615
• Citation: 935 F.2d 78
• Parties: CITY PUBLIC SERVICE BOARD, Plaintiff, City of San Antonio, Acting By and Through its City Public Service Board, Appellant, v. GENERAL ELECTRIC COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 78

935 F.2d 78

CITY PUBLIC SERVICE BOARD, Plaintiff,

City of San Antonio, Acting By and Through its City Public

Service Board, Appellant, v. GENERAL ELECTRIC COMPANY, Defendant-Appellee.

No. 90-5615.

United States Court of Appeals, Fifth Circuit.

July 9, 1991.

Cathy J. Sheehan, Jerry A. Gibson, Plunkett, Gibson & Allen, San Antonio, Tex., for appellant.

Ruth E. Greenfield, Thomas H. Crofts, Jr., C. Damon Ball, Groce, Locke & Hebdon, San Antonio, Tex., for defendant-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before GOLDBERG, HIGGINBOTHAM and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The City of San Antonio appeals from a summary judgment granted to the defendant, General Electric Company. Finding the district court's disposition proper under Texas law, which governs this diversity case, we affirm.

I.

In 1970, the City of San Antonio ("City") put into service a turbine generator manufactured and designed by General Electric Company ("GE"). Two years later, GE allegedly became aware that certain "tie-wire pins" were too weak to sustain the turbine's operation. Although GE periodically sent "updating technical information letters" to the City and other turbine owners, it never notified the City of the insufficient strength of the pins.

The City's turbine was overhauled with GE's assistance in 1981. Pursuant to a service contract, GE supervised the overhaul, performed certain inspections, and made some of the repairs. More than a year after the overhaul, the turbine failed causing rotor blade damage and economic loss allegedly totalling $3.6 million.

The City sued GE, claiming that the tie-wire pins caused the breakdown. The City sought damages for breach of warranty, strict products liability, and negligent failure to warn. GE filed a motion for summary judgment, urging that the City's claims were barred by the ten-year statute of repose. See Tex.Civ.Prac. & Rem.Code Ann. Secs. 16.008 and 16.009 (Vernon 1986). While this motion was pending, the City sought to add a claim for breach of the implied warranty to repair goods in a workmanlike manner. The district court denied this request and granted GE's motion for summary judgment. This Court upheld the summary judgment, but remanded for further proceedings on the implied warranty claim.

On remand, the City urged that our disposition of its negligence claim was clearly erroneous and moved to reinstate the claim. The district court denied the motion. Subsequently, GE sought and obtained summary judgment on the implied warranty claim. The City appeals from both orders.

II.

Summary judgments are reviewed de novo on appeal. Phillips Oil Co. v. OKC Corp., 812 F.2d 265, 272 (5th Cir.), cert. denied, 484 U.S. 851, 108 S.Ct. 152, 98 L.Ed.2d 107 (1987). GE first contends that in this diversity case, the Texas district court's interpretation of Texas law should be reviewed under a more deferential standard. Based on a new Supreme Court decision, we disagree.

This Court has often held that a district court's interpretation of the law of the state in which it sits is entitled to "special deference" on appeal and will be reversed only if "obviously wrong." See, e.g., Balliache v. Fru-Con Constr. Corp., 866 F.2d 798, 799 (5th Cir.1989); Armstrong v. Farm Equip. Co., 742 F.2d 883, 886 (5th Cir.1984). The Supreme Court recently rejected this position, however, stating that the obligations of responsible appellate review "require that courts of appeals review the state-law determinations of district courts de novo." Salve Regina College v. Russell, --- U.S. ----, 111 S.Ct. 1217, 1225, 113 L.Ed.2d 190 (1991). Balliache, Armstrong, and its predecessors are thus no longer authoritative. Under Salve Regina College, this court will undertake plenary review of the district court's interpretation of Texas law.

The City's warranty claim is premised on the Texas Supreme Court's decision in Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349 (Tex.1987) (Melody Home II ). The plaintiffs in that case purchased a modular prefabricated home from Melody Home. Two years after moving into the home, the plaintiffs discovered that a sink was not properly connected to a drain in one of the interior walls. Melody Home employees worked on the sink twice, but their repair efforts proved unsuccessful and caused additional damage to the home. Id. at 351. In a narrowly drafted opinion on rehearing, the Texas Supreme Court held that "an implied warranty to repair or modify existing tangible goods or property in a good and workmanlike manner is available to consumers suing under the DTPA [Texas Deceptive Trade Practice Act]." ¹ Id. at 354.

The distinction between Melody Home II and the case sub judice is obvious. In Melody Home II, repairs were undertaken by the defendant and were not performed proficiently. The City makes no such allegation in this case. Indeed, it conceded at oral argument that the repairs actually undertaken by GE were performed in a proficient manner and were not the cause of the turbine's failure. The City nevertheless invokes Melody Home II, claiming that GE's failure to warn of the need to replace the tie-wire pins establishes a breach of the implied warranty.

The argument that a failure to warn constitutes a breach of warranty was rejected, however, in Dallas Power & Light Co. v. Westinghouse, 855 F.2d 203, 208 (5th Cir.1988) ("DP & L "). In that case, Westinghouse sold a turbine to a city utility company and agreed to provide "continued technical expertise in proper preventative maintenance and inspection." Id. at 204. Several years after the turbine was installed, Westinghouse discovered damage to the unit during a routine service inspection. Id. The utility company sued Westinghouse for negligent inspection and failure to warn. Id. at 206. After concluding that these claims were time-barred, this Court rejected the utility company's attempt to invoke Melody Home II, observing that a failure to warn does not "state a claim for breach of implied warranty to repair or modify in a good and workmanlike manner." Id. at 208.

The City seeks to distinguish DP & L on the ground that Westinghouse never undertook any repairs of the utility company's turbine, whereas in this case GE did undertake repairs. This argument is unpersuasive. Although the holding in DP & L was partly predicated on the utility company's failure to allege that any repairs were actually undertaken, the Court also found it significant that the utility company failed to allege that any repair efforts by Westinghouse were faulty. See id. at 208. Thus, contrary to the City's position, our decision in DP & L is based on the recognition that a service provider breaches the Melody Home II warranty only if (1) repairs are undertaken and (2) those repairs are not performed in a workmanlike manner. In this case, because the City has conceded that GE's repairs were not defective, it is irrelevant that some repairs were made. The City has produced no evidence that GE performed or attempted any repair of the tie-wire pins that are asserted to be defective. Nor has the City produced any evidence that such repairs were even promised. GE's service contract with the City specifically excluded liability for the "failure to discover or repair latent defects or defects inherent in the design of the equipment." This case fails for the same basic reason as DP & L's case against Westinghouse: an allegation that the contractor "had the duty to make repairs and failed to do so" is not within the scope of the Melody Home II implied warranty. Id. Similarly, "failure to advise the implementation of the newly designed rotor blades" does not breach the Melody Home II warranty.

The state Supreme Court cited DP & L favorably as a footnote to its recent opinion holding that failure to perform an oral service agreement is not a breach of an express warranty under the DTPA. Southwestern Bell Telephone Co. v. FDP Corp., 34 Tex. S.Ct. J. 398, 401 n. 5 (March 6, 1991). For there to be a warranty breach, the court said, there must first be a contract of which the warranty is a part. The court drew an analogy between that holding and DP & L as having "reached the same result in the context of an implied warranty." As a court Erie-bound to apply state law as state courts would do, our analysis of this case draws considerable strength from Southwestern Bell. ²

III.

The remaining issue here is whether the district court erred in refusing to allow the City to amend its pre-trial order to assert a negligence claim that this Court had previously held was extinguished by the statute of repose. Under settled "law of the case" principles, issues decided by an appellate court cannot be re-examined by the district court on remand. See Schexnider v. McDermott International, Inc., 868 F.2d 717, 718 (5th Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 150, 107 L.Ed.2d 108 (1989). The district court must comply with the appellate court's mandate without variance. Daly v. Sprague, 742 F.2d 896, 900-01 (5th Cir.1984). P...