Consumers Power v. MISS. VAL. STRUCTURAL STEEL

• Decision Date: 25 June 1986
• Docket Number: Civ. A. No. 82CV-60296-AA.
• Citation: 636 F. Supp. 1100
• Parties: CONSUMERS POWER COMPANY, a Michigan corporation, and Bechtel Power Corporation, a Nevada corporation, Plaintiffs, v. MISSISSIPPI VALLEY STRUCTURAL STEEL COMPANY, a Delaware corporation; which prior to January 1, 1979 was named Debron Corporation, a Delaware corporation; and which since January 1, 1982 has been named Bristol Steel Corporation, a Delaware corporation; Bristol Steel & Iron Works, Inc., a Virginia corporation; J.W. Rex Company, a Pennsylvania corporation; which since March 18, 1979 has been named Rexmet Corporation, a Pennsylvania corporation; and Southern Bolt & Fastener Corporation, a Louisiana corporation, Defendants/Third-Party Plaintiffs, v. BABCOCK AND WILCOX COMPANY, a Delaware corporation, Third-Party Defendant, and SOUTHERN BOLT & FASTENER CORP., a Louisiana corporation, v. SUPERIOR HEAT TREATING COMPANY, a Texas corporation, Third-Party Defendant.
• Court: U.S. District Court — Western District of Michigan

636 F. Supp. 1100

CONSUMERS POWER COMPANY, a Michigan corporation, and Bechtel Power Corporation, a Nevada corporation, Plaintiffs, v. MISSISSIPPI VALLEY STRUCTURAL STEEL COMPANY, a Delaware corporation; which prior to January 1, 1979 was named Debron Corporation, a Delaware corporation; and which since January 1, 1982 has been named Bristol Steel Corporation, a Delaware corporation; Bristol Steel & Iron Works, Inc., a Virginia corporation; J.W. Rex Company, a Pennsylvania corporation; which since March 18, 1979 has been named Rexmet Corporation, a Pennsylvania corporation; and Southern Bolt & Fastener Corporation, a Louisiana corporation, Defendants/Third-Party Plaintiffs, v. BABCOCK AND WILCOX COMPANY, a Delaware corporation, Third-Party Defendant, and SOUTHERN BOLT & FASTENER CORP., a Louisiana corporation, v. SUPERIOR HEAT TREATING COMPANY, a Texas corporation, Third-Party Defendant.

Civ. A. No. 82CV-60296-AA.

United States District Court, E.D. Michigan, S.D.

May 6, 1986.

On Motion for Rehearing June 25, 1986.

COPYRIGHT MATERIAL OMITTED

Michael A. Thoists, Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen, Detroit, Mich., for Consumers and Bechtel.

Richard C. Marsh, Clark, Klein & Beaumont, Detroit, Mich., for Bechtel also.

Daniel L. Garan, Thomas F. Myers, Garan, Lucow, Miller, Seward, Cooper & Becker, P.C., Detroit, Mich., for Mississippi Valley.

Roger F. Wardle, Edward D. Plato, Kohl, Secrest, Wardle, Lynch, Clark & Hampton, Farmington Hills, Mich., for Rex.

MEMORANDUM OPINION AND ORDER

JOINER, District Judge.

Consumers Power Company (Consumers) and Bechtel Power Corporation (Bechtel) (plaintiffs), have brought this action against Mississippi Valley Structural Steel Company/Debron Corporation/Bristol Steel Corporation/Bristol Steel & Iron Works, Inc. (MVSS), J.W. Rex Company/Rexmet Corporation (Rex), and Southern Bolt & Fastener Corporation (Southern Bolt) (defendants), alleging that the defendants supplied them defective reactor vessel anchor bolts for use at the Midland nuclear power plant. The plaintiffs' first amended complaint (complaint) claims that several of the bolts cracked, while some of the others were excessively hard and not in conformance with the procurement documents. Plaintiffs bring suit for these claimed defects under contract and tort theories; the latter claims being for negligence and breach of implied warranty in tort.

Consumers is the owner of the two-unit nuclear power plant located in Midland, Michigan. It contracted with Bechtel to design and construct this plant. In 1974, Bechtel entered into a contract with MVSS for the purchase of the reactor vessel anchor bolts and other materials for both units of the plant. Bechtel issued a purchase order for the goods to be provided. To meet the terms of its contract with Bechtel, MVSS subcontracted with Southern Bolt for the manufacture and heat treating of the reactor vessel anchor bolts. Southern Bolt manufactured the bolts but subcontracted for their heat treatment with Rex (Unit # 1 bolts) and Superior Heat Treating Company (Superior) (Unit # 2 bolts).

The reactor vessel anchor bolts were manufactured and heat treated by the above-named parties. After delivery to Bechtel, the bolts were embedded into concrete as part of the reactor vessel support system. The reactor vessels were placed into position and the bolts placed under tension to hold the vessels in place. In September, 1979, one of the anchor bolts in Unit # 1 was discovered to have separated. An investigation of the other bolts revealed some others had separated, while still more were excessively hardened. The excessive hardness of these bolts made them unacceptable for the purpose of holding the reactor vessel secure.

There are several motions now before the court. MVSS, Southern Bolt, and Rex have moved for summary judgment on the plaintiffs' tort claims of negligence and breach of implied warranty in tort. Rex has also filed a second motion for summary judgment on the tort claims. Finally, MVSS, Southern Bolt, and Rex have filed motions for partial summary judgment alleging that Bechtel is not a real party in interest.

For the reasons stated below, MVSS, Southern Bolt, and Rex's motions for summary judgment on the negligence and breach of implied warranty in tort claims are granted. This renders Rex's second motion for summary judgment moot because it dismisses all claims against them in this action. Finally, MVSS, Southern Bolt, and Rex's motions for partial summary judgment to dismiss Bechtel are denied.

MVSS, SOUTHERN BOLT, AND REX'S MOTIONS FOR SUMMARY JUDGMENT ON TORT CLAIMS

The principal issue in these motions is whether in a commercial transaction, where all of the parties are businesses, the goods are specially manufactured items, and the only damages pleaded are commercial economic losses resulting from defects in goods themselves, does the UCC govern the transaction to the exclusion of all tort remedies? The court answers this question affirmatively, as have all other Michigan courts when faced with this issue.

Commercial law, such as the UCC, has developed so that commercial problems can be solved by businesses with predictable consequences. Noncommercial losses, which are not pleaded in this case, can result in tort liability. If plaintiffs had alleged that the defective anchor bolts caused personal injury or damage to other property, they could have sued for tort damages.

The legal basis for this court's decision may be found in McGhee v. General Motors Corp., 98 Mich.App. 495, 296 N.W.2d 286 (1980). In McGhee, the plaintiff purchased a used truck tractor from the defendant. While the plaintiff was working on the tractor's transmission, the cab fell from the frame to the ground and sustained substantial damage.

Plaintiff brought an action for damages and included a count of negligence. The negligence count was dismissed by the trial court and the dismissal affirmed by the Court of Appeals.

The Court of Appeals outlined the "economic loss" theory in its opinion:

We agree that no cause of action is stated in the complaint, where the foundation of the relationship between the parties is contractual and no personal injury or damage to property other than the subject goods themselves is alleged. While there is some disagreement among courts on this point, we believe that the better view is expressed in S.M. Wilson & Co. v. Smith International, Inc., 587 F.2d 1363, 1376 (CA 9, 1978):

"Where the suit is between a non-performance seller and an aggrieved buyer and the injury consists of damage to the goods themselves and the costs of repair of such damage or a loss of profits that the deal had been expected to yield to the buyer, it would be sensible to limit the buyer's rights to those provided by the Uniform Commercial Code. See Keeton, Torts, Annual Survey of Texas Law, 25 S.W.L.J. 1, 5 (1971) ... To treat such a breach as an accident is to confuse disappointment with disaster. Whether the complaint is cast in terms of strict liability in tort or negligence should make no difference."

The sound reasoning that underlies this position was set forth in Mid-Continent Aircraft Corp. v. Curry County Spraying Service, Inc., 572 S.W.2d 308, 312 (Tex., 1978), in which a used airplane failed and crashed without injury to its pilot:

"The nature of the loss resulting from damage that a defective product has caused to itself has received the attention of several commentators. Dean Page Keeton writes:

"`A distinction should be made between the type of "dangerous condition" that causes damage only to the product itself and the type that is dangerous to other property or persons. A hazardous product that has harmed something or someone can be labeled as part of the accident problem; tort law seeks to protect against this type of harm through allocation of risk. In contrast, a damaging event that harms only the product should be treated as irrelevant to policy considerations directing liability placement in tort. Consequently, if a defect causes damage limited solely to the property, recovery should be available, if at all, on a contract-warranty theory.' "The Uniform Commercial Code was adopted by the Legislature as a comprehensive and integrated act to facilitate the continued expansion of commercial practices. * * * For sales of products the above purpose is carried out by Article 2 of the Code, which supplies a complete framework of rights and remedies for transacting parties. In light of the Code's scope and purpose, its terms should not be nullified by applying strict liability when the parties have contracted otherwise. Such an expansion of strict liability would frustrate the Code's purposes of codifying the law of commercial transactions by displacing its applicability in all cases where the sale of faulty products is involved. Some losses resulting from product transactions are best covered by contract liability under the Code."

Applying McGhee to the facts before it, the court finds Dean Keeton's distinction between types of dangerous conditions equally applicable here. Tort law seeks only to protect against harms to other property and persons; not damage to the goods themselves. The former is part of the accident problem and tort law seeks to allocate these risks. However, as Dean Keeton concludes, "if a defect causes damage limited solely to property, recovery should be available, if at all, on a contract-warranty theory."

While McGhee involved a suit by a consumer plaintiff against a manufacturer, the Michigan Court of Appeals has applied the same theory to suits between commercial parties. A.C. Hoyle v. Sperry Rand Corp., 128 Mich.App. 557, 340 N.W.2d 326 (1983). Hoyle involved a suit by the plaintiff company against a manufacturer contractor who supplied defective hydraulically powered motors. Plaintiff did not allege that the motors themselves were damaged by the defect, nor that the motors caused physical injury to persons or other...