McConnell v. Caterpillar Tractor Co.

• Decision Date: 07 November 1986
• Docket Number: Civ. A. No. 85-2479.
• Citation: 646 F. Supp. 1520
• Court: U.S. District Court — District of New Jersey
• Parties: William B. McCONNELL, Leroy E. Truex and Talbot Bird & Co., Inc., Plaintiffs, v. CATERPILLAR TRACTOR CO. and Giles & Ransome, Defendants/Third-Party Plaintiffs, v. CHARLES ECKEL & SONS, INC. and William Eckel, Third-Party Defendants.

646 F. Supp. 1520

William B. McCONNELL, Leroy E. Truex and Talbot Bird & Co., Inc., Plaintiffs, v. CATERPILLAR TRACTOR CO. and Giles & Ransome, Defendants/Third-Party Plaintiffs, v. CHARLES ECKEL & SONS, INC. and William Eckel, Third-Party Defendants.

Civ. A. No. 85-2479.

United States District Court, D. New Jersey.

November 7, 1986.

Miller and Barken by Lee A. Barkan, Hackensack, N.J., for plaintiffs.

Carpenter, Bennett & Morrissey by William A. Carpenter, Jr., Newark, N.J. and Martin, Crawshaw & Mayfield by Linton W. Turner, Jr., Westmont, N.J., for defendants/third-party plaintiffs.

Ferrara & Waldman by Michael J. Waldman, Cherry Hill, N.J., for third-party defendants.

COHEN, Senior District Judge:

In this admiralty case, plaintiffs William B. McConnell and Leroy E. Truex, commercial fishermen, and Talbot Bird & Co., Inc., their insurer, seek to recover damages sustained due to the breakdown of a defective crankshaft manufactured by defendant Caterpillar Tractor Co. ("Caterpillar"), and distributed by defendant Giles & Ransome. Defendants have filed claims for contribution against third-party defendants Charles Eckel & Sons, Inc., and William Eckel ("the Eckels"), the installers of the defective crankshaft. Defendants Caterpillar and Giles & Ransome, joined by third-party defendants the Eckels, move here for summary judgment on the issue of liability. Plaintiffs in turn have filed a cross-motion for summary judgment on the same issue. For the reasons that follow, we grant defendants' motion for summary judgment on plaintiffs' strict products-liability claim, and deny all other motions for summary judgment.

FACTS

In February, 1982, plaintiffs McConnell and Truex bought the F/V Howard Reed, a 1979 quality marine trawler that had been sunk and salvaged. Plaintiffs planned to use the vessel for the commercial gathering of scallops.

The Caterpillar engine of the Howard Reed needed an overhaul, and plaintiffs hired third-party defendants, the Eckels, to do the work. In May, 1982, plaintiffs decided to replace the original crankshaft in the engine, and the Eckels accordingly ordered a new crankshaft from Inlet Diesel, an authorized Caterpillar dealer. Inlet Diesel placed the order with defendant Giles & Ransome, an authorized Caterpillar distributor. It is unclear whether the new crankshaft was delivered from Inlet Diesel to the Eckels, or was picked up by plaintiff McConnell from Giles & Ransome. In any event, the new crankshaft made its way into the hands of the Eckels in early June, 1982.

The crankshaft was covered by the standard Caterpillar warranty, which provided that Caterpillar would repair or replace defective parts during the first six months after purchase but would not cover labor. The warranty also provided:

This warranty is expressly in lieu of any other warranties, express or implied, including any warranty of merchantability or fitness for a particular purpose. Remedies under this warranty are expressly limited to the provision of parts as specified above and any claims for loss arising out of the failure of the parts or exchange components to perform for any period of time, or other economic or moral loss, or direct, immediate, special, indirect or consequential damage are expressly excluded.

Plaintiffs allege that neither they nor the Eckels ever received the warranty, and defendants do not appear to contest this. Defendants allege, however, that both plaintiffs and the Eckels were aware that the crankshaft was subject to the terms and conditions of the warranty, as they had bought Caterpillar parts in the past and had periodically filed warranty claims.

When the crankshaft arrived at the Eckels in June, 1982, their mechanic noticed that it had different oil seals and timing markings than the old crankshaft. He twice contacted someone at Giles & Ransome, and was told both times that the new crankshaft was fine. The mechanic then installed the new crankshaft.

It appears that a Corrective Action Notification dated September 22, 1982, was sent by Caterpillar to Giles & Ransome. The notification reported "major engine failure due to crank timing marks being punched two teeth off," and stated, "all questionable cranks were to have been returned to Mossville for rework. Mossville did rework approximately 80 crankshafts." It is unclear whether this notification covered the crankshaft involved in this case. The notification was received by Giles & Ransome on October 6, 1982. There is apparently no dispute that neither plaintiffs nor the Eckels were notified by Caterpillar or Giles & Ransome of any problem.

After the engine overhaul on the F/V Howard Reed was completed, a dock trial was conducted and revealed no engine trouble. On December 1, 1982, plaintiffs operated the Howard Reed from their dock in Atlantic City, New Jersey, towards the Dorchester Shipyard in Millville, New Jersey, for drydock repairs. When the Howard Reed was about 45 minutes from Atlantic City, the engine "failed" according to defendants, "exploded" according to plaintiffs. Defendants concede that the cause of the engine trouble was a defect in the new Caterpillar crankshaft, and that considerable damage was done to the engine.

After experiencing the engine trouble, the Howard Reed drifted at sea with no power. The F/V Emily-Marguerite, another vessel owned by plaintiffs, was radioed for help, and towed the Howard Reed back to the inlet with help from a third vessel owned by plaintiffs, the F/V Ocean Bird. A tugboat towed the Howard Reed from the inlet to a dock in Atlantic City, and repair work was completed in February, 1983.

As mentioned above, defendants concede that the crankshaft was defective. Caterpillar paid plaintiffs $13,155.83, plus $947.83 in freight charges, to repair or replace damaged parts. Caterpillar alleges that this payment was to honor its express warranty; plaintiffs concede that the Eckels made a warranty claim on their behalf, but it is unclear exactly what warranty they are referring to.¹

Plaintiffs in this action seek to recover labor costs incurred in repairing the damaged engine, towing costs, the salary they paid the captain of the Howard Reed to keep him available while plaintiffs repaired the vessel, and lost profits. They allege, first, that defendants are strictly liable for damages resulting from the breakdown of the defective crankshaft. They further allege that Caterpillar's and Giles & Ransome's failure to notify them of the defect in the crankshaft constituted negligence. Finally, they allege that they are entitled to consequential damages for defendants' breach of implied warranties of merchantability and fitness for a particular purpose.

Defendants, in turn, assert that under admiralty law, plaintiffs are barred from recovering under their tort theories. They also assert that the standard Caterpillar warranty, with its limitation on remedies, precludes plaintiffs from recovering under a breach of warranty claim. Alternatively, defendants argue that even if plaintiffs are not bound by the warranty, defendants are not liable for plaintiffs' consequential damages because they had no reason to know that such damages would be incurred.

DISCUSSION

Federal Rule of Civil Procedure 56(c) provides that summary judgment is to be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." If there is a factual dispute, the appropriate judicial inquiry under Rule 56 is whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., ___ U.S. ___, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986); see also Bushman v. Halm, 798 F.2d 651, 657 (3d Cir.1986). If no facts are in dispute, the court should, of course, grant summary judgment to the party entitled to judgment as a matter of law.

I. Products-Liability Claim

This case is before us under the court's admiralty jurisdiction pursuant to 28 U.S.C. § 1333 (1966). Defendants assert that the recent Supreme Court decision, East River Steamship Corp. v. Transamerica Delaval Inc., ___ U.S. ___, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), mandates that plaintiffs' products-liability claims in admiralty be dismissed.

In East River, a group of ship charterers sued defendant, who had designed, manufactured, and supervised the installation of turbines in the chartered ships, alleging that defendant was strictly liable for design defects in the turbines and was negligent in the installation of a valve. The only damage was to the turbines themselves, and the charterers sought recovery for the cost of repairing or replacing the allegedly defective parts, and for income lost while the ships were out of service.

The Court first held that it joined the Courts of Appeals in recognizing products-liability as part of the general maritime law. Id. at 2299. The Court then confronted the conflict among the Courts of Appeals sitting in admiralty on the proper approach to products-liability claims when the defective product causes injury only to itself, and the resultant loss is purely economic.²

The Court noted that the majority of Courts of Appeals that had considered the issue had held that a manufacturer is liable for economic losses when a defective product injures only itself, whether or not the defect created an unreasonable risk of harm. 106 S.Ct. at 2301 (citing Emerson G.M. Diesel, Inc. v. Alaskan Enterprise, 732 F.2d 1468 (9th Cir.1984)). The Court continued that a second view imposed liability on the manufacturer only when the users of the product were "endangered," the determination turning on "the nature of the defect, the type of risk, and the manner in which the injury arose." 106 S.Ct. at 2301. The Court...