Delta Marine, Inc. v. Whaley, 91-44-CIV-7-MC.

• Decision Date: 21 January 1993
• Docket Number: No. 91-44-CIV-7-MC.,91-44-CIV-7-MC.
• Citation: 813 F. Supp. 414,1993 AMC 2825
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: DELTA MARINE, INC., Plaintiff, v. Neil Gregg WHALEY, d/b/a Insulation Works, Ellington Insulation Co., and Childers Products Co., Defendants.

813 F. Supp. 414

1993 AMC 2825

DELTA MARINE, INC., Plaintiff, v. Neil Gregg WHALEY, d/b/a Insulation Works, Ellington Insulation Co., and Childers Products Co., Defendants.

No. 91-44-CIV-7-MC.

United States District Court, E.D. North Carolina, Raleigh Division.

January 21, 1993.

Reid G. Hinson, Wilmington, NC, for Delta Marine, Inc.

Henry L. Anderson, Jr. and Thomas J. Cox, Jr., Wilmington, NC, for Whaley, d/b/a Insulation Works.

John D. Martin, Marshall, Williams & Gorham, Wilmington, NC, for Ellington Insulation Co.

David M. Duke, Young, Moore, Henderson & Alvis, Raleigh, NC, for Childers Products Co.

ORDER

McCOTTER, United States Magistrate Judge.

This matter is before the court on Delta's motion to amend its complaint, Childers motions to dismiss and for summary judgment, Ellington's motion for summary judgment, and for a consideration of Whaley's jury demand. The court allowed Delta to withdraw its motion to amend and Childers to withdraw its motions for summary judgment. Childers' motion to dismiss was allowed. The court granted Ellington's motion for summary judgment on all claims except Whaley's claims for breach of implied warranties.

FACTS

Delta Marine, Inc. (Delta) entered into a contract with the United States Coast Guard to repair the USCGC Cowslip, a buoy tender and public vessel of the United States. The Cowslip was docked in Delta's floating dry dock so that the underwater portion of the hull could be cleaned and painted and the main propulsion shaft thrust bearing altered.

Delta's floating dry dock is located upon the navigable waters of the United States, the Northeast Cape Fear River. The dry dock is permanently moored to the shore but is towed between various berths when necessary. The dry dock had been moved to accommodate the Cowslip. The Cowslip's crew was to remain on board throughout the period of the contract, which was originally scheduled for thirty-six days.

A portion of Delta's contract with the Coast Guard required the removal and replacement of insulation in the Cowslip's refrigerated spaces. Delta obtained a marine chemist's certificate prior to commencing the work to ensure that the work area was safe for men and hot work. Delta removed the insulation.

Delta subcontracted with Gregg Whaley (Whaley) to re-insulate the refrigerated space. Whaley agreed to use products that satisfied certain military specifications to insulate the reefer. Because Whaley was unable to obtain an adhesive that met the specification, he purchased CP-85 from Ellington Insulation Company (Ellington) as a substitute. The substitute, CP-85, is manufactured by Childers Products Company (Childers).

On 30 October 1989, a spark from an electric plug ignited vapors from CP-85. The resulting fire allegedly caused personal injuries, damage to the Cowslip, and the termination of Delta's contract with the Coast Guard, along with other ancillary injuries.

Delta brings this action against Whaley, Childers, and Ellington to recover for its damages. Whaley filed cross-claims against Childers and Ellington. Whaley also filed a counter-claim against Delta.

ANALYSIS

I. CHILDERS' MOTION TO DISMISS

Childers contends that Whaley's alleged violations of the Unfair and Deceptive Trade Practices Act, Chapter 75 of the North Carolina General Statutes (Chapter 75), conflicts with the standard for awarding punitive damages established by general maritime law. Childers claims, properly, that admiralty law supersedes conflicting state law.

Where a conflict between a state statute and judicially established admiralty law exists, the state law must yield to admiralty just as if the admiralty law had been codified by an Act of Congress. Wilburn Boat Co. v. Fireman's Ins. Co., 348 U.S. 310, 314, 75 S.Ct. 368, 371, 99 L.Ed. 337 (1954). Substantive state remedies also must conform to federal maritime standards. Offshore Logistics, Inc. v. Tellentire, 477 U.S. 207, 223, 106 S.Ct. 2485, 2494, 91 L.Ed.2d 174 (1986). The court must now decide whether a judicially established admiralty standard governs punitive damages, and, if so, does it conflict with Chapter 75? This court answers both of these issues affirmatively.

Courts have established standards that apply to punitive damages in admiralty cases. Punitive damages are appropriate in maritime tort actions where defendant's actions were intentional, deliberate, or so wanton and reckless as to demonstrate a conscious disregard for the rights of others. Muratore v. M/S Scotia Prince, 845 F.2d 347, 354 (1st Cir.1988). The Fifth Circuit Court of Appeals in Miles v. Melrose, 882 F.2d 976, 989 (5th Cir.1989), agreed and held that an award of punitive damages is recoverable only when the defendant is guilty of "gross negligence, or actual malice or criminal indifference which is the equivalent of reckless or wanton misconduct."

Chapter 75 awards treble damages upon a showing of an unfair and deceptive trade practice, thus the act is punitive in nature. The standard enunciated by the courts in Muratore and Miles conflicts with the elements required to recover for treble damages under Chapter 75. In Marshall v. Miller, 302 N.C. 539, 543, 276 S.E.2d 397, 400 (1981), the Court stated that Chapter 75 was enacted "to establish an effective private cause of action for aggrieved consumers ..." because the common law remedies had been ineffective. Unlike admiralty law, Chapter 75 does not require a showing of gross negligence, actual malice, or reckless or wanton misconduct. Miles, 882 F.2d at 989. A practice is deceptive and treble damages must be awarded under Chapter 75 if the trade practice has the capacity or tendency to deceive. Johnson v. Phoenix Mutual Life Insurance Co., 300 N.C. 247, 266 S.E.2d 610 (1980). Chapter 75, therefore, allows recovery under a much lower standard than required by admiralty law.

A Texas state court's analysis, in Ingram Barge Co. v. Trifinery, Inc., 1991 A.M.C. 1450 (1990), is persuasive. The case was brought in state court but involved civil admiralty claims. The court found the deceptive trade practice statute's requirement in conflict with the higher standards of maritime law. Id. at 1458. In Texas, actual damages are trebled if the deceptive conduct was committed knowingly. Tex.Bus. and Com.Code Ann. § 17.50(b)(1) (Vernon Supp.1990). Knowledge does not rise to the level of gross negligence, actual malice, reckless, or wanton conduct as required by general maritime law. Ingram, 1991 A.M.C. at 1459. The court, therefore, held that the maritime standard for awarding punitive damages supersedes the state standard when dealing with civil admiralty claims.

The standard for awarding treble damages under Chapter 75 conflicts with the requirements for awarding punitive damages under admiralty law. Whaley's claim under North Carolina's Unfair and Deceptive Trade Practice Act, therefore, is dismissed. Wilburn, 348 U.S. at 314, 75 S.Ct. at 370.

II. ELLINGTON'S MOTION FOR SUMMARY JUDGMENT

Ellington moves for summary judgment pursuant to Rule 56(a) of the Federal Rules of Civil Procedure on Whaley's remaining claims. Whaley seeks damages from Ellington based on strict products liability, negligent failure to warn, breach of an express warranty, and breach of implied warranties of merchantability and fitness for a particular purpose. This court grants summary judgment on all claims except the breach of implied warranties of merchantability and fitness for a particular purpose.

Summary judgment must be granted if, after an adequate time for discovery, "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). Rule 56(c) requires an examination of the entire record including pleadings, depositions, answers to interrogatories, admissions on file, and affidavits in the light most favorable to the non-moving party. The court must also consider every inference that can be drawn from this evidence. Ross v. Communications Satellite Corp., 759 F.2d 355, 364 (4th Cir.1985).

The non-moving party, however, cannot "rest on the mere allegations" of the pleadings but must produce "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "The mere existence of a scintilla of evidence in support of the non-moving party's position will be insufficient; there must be evidence on which the jury could reasonably find for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial," and summary judgment is appropriate. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

A. Strict Products Liability

This court has admiralty jurisdiction over this products liability action. Delta v. Whaley, 91-44-CIV-7-MC (E.D.N.C. 23 December 1992). The doctrine of strict products liability applies to admiralty and maritime claims. East River Steamship Corp. v. TransAmerica DeLeval, Inc., 476 U.S. 858, 864-66, 106 S.Ct. 2295, 2298-99, 90 L.Ed.2d 865 (1986). Whaley's strict liability claim is based on a failure to warn of the dangerousness of the product and, therefore, governed by Section 402A of the Restatement (Second) of Torts. Id.

Under Section 402A, a manufacturer is liable if a warning is inadequate without any consideration of negligence. Id. Although Section 402A applies to sellers as well as manufacturers, it neither subjects sellers to strict liability nor requires a determination of negligent conduct. Most courts rely on Comment j of Section 402A for determining when a seller is liable for failure to give an adequate warning. Owens-Illinois, Inc. v. Zenobia, 325 Md. 420, 433, 601 A.2d 633, 639 (1992). Comment j considers...