Eaton Corp. v. Trane Carolina Plains

• Court: U.S. District Court — District of South Carolina
• Writing for the Court: Duffy
• Citation: Eaton Corp. v. Trane Carolina Plains, 350 F.Supp.2d 699 (D. S.C. 2004)
• Decision Date: 04 November 2004
• Docket Number: No. 2:03-3451-23.
• Parties: EATON CORPORATION, Plaintiff, v. TRANE CAROLINA PLAINS, Defendant.

350 F.Supp.2d 699

EATON CORPORATION, Plaintiff, v. TRANE CAROLINA PLAINS, Defendant.

No. 2:03-3451-23.

United States District Court, D. South Carolina, Charleston Division.

November 4, 2004.

James William Logan, Jr., Logan Jolly and Smith, Anderson, SC, for Plaintiff.

John E. Schmidt, III, Nelson Mullins Riley and Scarborough, Columbia, SC, for Defendant.

ORDER

DUFFY, District Judge.

This matter is before the court upon Defendant Trane Carolina Plains' ("Trane") Motion for Partial Summary Judgment. For the reasons set forth herein, Defendant's motion is granted in part and denied in part.

I. BACKGROUND

Plaintiff Eaton Corporation ("Eaton") purchased four air conditioning units from Trane¹ in 1998. Pursuant to a service agreement re-negotiated yearly between Eaton and Trane, Trane has been responsible for servicing these units since that time. The service agreement simply provided that "The Trane Company... agrees to furnish services in accordance with the `General Terms and Conditions' and attached `Schedules.'" (Def.Mem., Ex. A).

Between March 21 and March 31, 2003, Trane's employees serviced the units. On March 31, Trane's employees "inspected [the] units," "changed [the] filters/belts," and "made [a] material list for repairs." (Pl.Mem., Ex. 1). On April 3, 2003, a fire occurred at Eaton's facility, and caused extensive damage to the units and the facility. Eaton alleges that the fire originated in the electric motor of one of the units, and that Trane's faulty servicing of the units caused the fire. Eaton asserts claims for breach of contract ("Count One"), negligence ("Count Two"), breach of an express warranty ("Count Three"), and breach of the implied warranty of workmanship ("Count Four").

II. STANDARD OF REVIEW

To grant a motion for summary judgment, the court must find that "there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). The judge is not to weigh the evidence but rather to determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All evidence should be viewed in the light most favorable to the non-moving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 123-24 (4th Cir.1990). "[W]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, disposition by summary judgment is appropriate." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 119 (4th Cir.1991). "[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The "obligation of the nonmoving party is `particularly strong when the nonmoving party bears the burden of proof.'" Hughes v. Bedsole, 48 F.3d 1376, 1381 (4th Cir.1995) (quoting Pachaly v. City of Lynchburg, 897 F.2d 723, 725 (4th Cir.1990)). Summary judgment is not "a disfavored procedural shortcut," but an important mechanism for weeding out "claims and defenses [that] have no factual bases." Celotex, 477 U.S. at 327, 106 S.Ct. 2548.

III. DISCUSSION

Trane seeks partial summary judgment on three bases. First, Trane argues that Eaton's claim for negligence is barred because the parties' relationship was strictly contractual in nature. (Def. Mem. at 3). Second, Trane seeks summary judgment on each of Plaintiff's claims to the extent that they seek recovery for incidental or consequential damages, as the contract, in Trane's opinion, prohibits these forms of relief. Finally, Trane argues that Eaton's claim for breach of the implied warranty of workmanship is flawed because the contract disclaims such warranties. Eaton concedes that its implied warranty claim is subject to dismissal, but argues that it is not barred from pursuing a negligence claim or incidental and consequential damages. The court addresses these two grounds for summary judgment in turn.

A. Eaton's Negligence Claim and The Economic Loss Doctrine

Trane first argues that Eaton cannot pursue its negligence claim because the parties' relationship is purely contractual in nature, and consequently, Eaton is precluded from seeking recovery based in tort. Eaton counters that this so-called "economic loss doctrine" does not apply to bar its negligence claim because (1) the doctrine does not apply where the damage complained of is to property other than the product; (2) the doctrine does not apply where a defendant owes a duty independent of the contract; and (3) the doctrine does not apply to contracts for services. (Pl. Mem. at 6). The court begins its analysis with Eaton's final two arguments.

The economic loss rule bars a negligence action "where duties are created solely by contract." Kennedy v. Columbia Lumber and Mfg. Co., Inc., 299 S.C. 335, 384 S.E.2d 730, 737 (1989). The Kennedy court explained the economic loss rule as follows

This rule exists to assist in determining whether contract or tort theories are applicable to a given case. Where a purchaser's expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only "economic losses." Conversely, where a purchaser buys a product which is defective and physically harms him, his remedy is in either tort or contract. This is so, ... because his losses are more than merely "economic."

Kennedy, 384 S.E.2d at 736. As Eaton points out, however, "[w]here there is a special relationship between the parties that is independent of the contract, ... there exists a duty of care whose breach will support a tort action." See Palmetto Linen Service, Inc. v. U.N.X., Inc., 205 F.3d 126, 129 (4th Cir.2000); see also Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 320 S.C. 49, 463 S.E.2d 85, 88 (1995). For example, South Carolina courts have permitted negligence actions to proceed against builders, engineers, and lawyers based on their professional duties to plaintiffs. See Tommy L. Griffin, 463 S.E.2d at 89; Lloyd v. Walters, 276 S.C. 223, 277 S.E.2d 888 (1981). The reason for allowing these actions is that in certain circumstances, an individual may have breached an independent legal duty owed to the plaintiff which does not arise from the contract. See, e.g., Tommy L. Griffin, 463 S.E.2d at 89 ("We see no logical reason to insulate design professionals from liability when the relationship between the design professional and the plaintiff is such that the design professional owes a professional duty to the plaintiff arising separate and distinct from any contractual duties between the parties...."); Kennedy, 384 S.E.2d at 737 ("If a builder performs construction in such a way that he violates a contractual duty only, then his liability is only contractual. If he acts in a way as to violate a legal duty, however, his liability is both in contract and in tort.").

Often, the distinction between claims which sound in tort and those which sound in contract is unclear. This is especially true in situations such as the matter sub judice, where the parties' relationship initially is formed by contract, but where one party later raises a claim that the contract was performed negligently. As the South Carolina Supreme Court stated in Tommy L. Griffin, whether a duty separate and distinct from the contract exists "will depend on the facts and circumstances of each case." 463 S.E.2d at 89. Thus, the inquiry must focus on "whether the duties [Eaton] alleges in [its] ... negligence cause of action arise from the parties' contract or independently therefrom." Koontz v. Thomas, 333 S.C. 702, 511 S.E.2d 407, 412 (App.1999).

Here, Eaton alleges two bases which could establish the existence of a special relationship outside of the contract. First, Eaton argues that Trane owed a duty to use due care in performing service and maintenance to the air conditioning units in question. (Compl.¶ 12). While the contract between the parties bound Trane to perform routine service on Eaton's air conditioning units, the duties alleged by the negligence cause of action in Eaton's complaint arise from the independent principle of tort law that one must exercise due care in the provision of maintenance and service. See, e.g., William Wrigley Jr. Co. v. Waters, 890 F.2d 594, 602 (2d Cir.1989) ("defendants held themselves out as experts[,] ... they were required to act with due care[,] and thus their liability arises out of a duty imposed by law."). Thus, the negligence claims here do not arise from specific provisions of the contract. Cf. Koontz, 511 S.E.2d at 412 (holding that the purported negligence claims were "veiled" contract claims when the claims merely alleged breaches of specific provisions of the parties' agreement).

Second, Eaton alleges that Trane breached "at least one prevailing industry standard" in performing its contractual duties. (Pl. Mem. at 8). The breach of an industry standard may establish that a special duty outside of the contract exists, and thus prevent application of the economic loss rule. See Kennedy, 384 S.E.2d at 737 (holding that violation of a building code breaches a legal duty for which a builder can be held liable in tort for proximately caused losses); see also Palmetto Linen, 205 F.3d at 129; Bennett v. Ford Motor Co., 236 F.Supp.2d 558, 562 (D.S.C.2002) (noting that the economic loss doctrine might not be applicable because an automobile manufacturer has a special duty to produce vehicles free of defects, and because of a potential breach of industry standards). While Trane counters that Eaton has not yet identified an industry standard to support an alleged independent special relationship, the court notes that summary judgment...