Myrtle Beach Pipeline Corp. v. Emerson Elec. Co., No. 3:86-1796-21.
| Citation | 843 F. Supp. 1027 |
| Decision Date | 08 December 1993 |
| Docket Number | No. 3:86-1796-21. |
| Parties | MYRTLE BEACH PIPELINE CORPORATION and Davidson Pipeline Corporation d/b/a Myrtle Beach Pipeline Company, Standard Southern Corporation, and Reliance Insurance Company, and Allianz, Plaintiffs, v. EMERSON ELECTRIC COMPANY, Defendant. |
| Court | U.S. District Court — District of South Carolina |
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Harry L. Goldberg, Gerald Michael Finkel, Howard S. Sheftman, Columbia, SC, William Jefferson Leath, Jr., Charleston, SC, Roger E. Marken, Los Angeles, CA, for plaintiffs.
Charles Edward Hill, Columbia, SC, Francis H. Brown, III, George A. Frilot, III, New Orleans, LA, for defendant.
This action is before the court on the parties' cross-motions for partial summary judgment pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. In their second amended complaint, Plaintiffs, a conglomeration of corporations and their insurers, (collectively, "Myrtle Beach"), assert claims of common law negligence and breach of implied warranty of merchantability pursuant to the Uniform Commercial Code as adopted in South Carolina, see S.C.Code Ann. §§ 36-1-101 to XX-XX-XXX (Law.Co-op.1976 & Supp. 1992), against Defendant Emerson Electric Company ("Emerson"), contending that Emerson is liable to Myrtle Beach for damages resulting from injury to property owned by the United States. Conversely, Emerson asserts that Myrtle Beach cannot proceed on its common law negligence claim because this action is grounded solely in contract and therefore Myrtle Beach is relegated to the limited remedies embodied in the contract between the parties. Concluding that under South Carolina law Myrtle Beach's negligence claim cannot be maintained and that the limited remedy of repair and replacement is the sole remedy to which Myrtle Beach is entitled under the breach of implied warranty, this court grants Emerson's motion for partial summary judgment and denies Myrtle Beach's motion for partial summary judgment.
Myrtle Beach, a corporation with its headquarters in Houston, Texas, but transacting business in South Carolina, supplied and stored fuel for the United States Air Force at Myrtle Beach Air Force Base ("Base"), property owned by the United States. In 1979, Myrtle Beach and one of its principals, Standard Southern Corporation ("Standard"), also a Texas corporation, contracted with the United States to install a fuel metering system to link storage tanks of Myrtle Beach and the Government. Pursuant to this agreement, Myrtle Beach and Standard hired Gonzalo Ancira ("Ancira") to design the metering system. Concluding that the metering system should incorporate an air eliminator, Ancira solicited several bids for the production of such a mechanism and recommended that the air eliminator manufactured by Brooks Instrument Division of Emerson Electric Company ("Brooks") be incorporated into the metering system. Like Myrtle Beach and Standard, Brooks and Emerson are also Texas corporations.
Brooks's bid quoted a price of $1,145.00 for the cost of the air eliminator. Additionally, the quotation contained the following disclaimer:
WARRANTY: All Brooks products (other than resale, custom and electro-mechanical equipment not manufactured by Brooks), when operated under the conditions stipulated by Brooks in the operating manual for the product are warranted against defect in workmanship and materials for one year from date of shipment and to conform to the written specifications. This constitutes Brooks' only warranty in connection with this sale and is in lieu of all other warranties, expressed or implied, written or oral. THERE ARE NO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE THAT APPLY TO THIS SALE. No employee, agent, dealer or other person is authorized to give any warranties on behalf of Brooks, nor to assume for Brooks any other liability in connection with any of its products without prior written approval by an officer of Brooks. Limitation of Remedy: Brooks will repair or replace at Brooks' option, F.O.B. factory, any Brooks parts defective in workmanship or materials if such part is returned, freight prepaid, within one year from date of shipment to the nearest factory authorized service station or to the factory. It is agreed that such replacement or repair is the exclusive remedy available from Brooks should any of Brooks products prove defective. Brooks is not liable for damages of any sort, including incidental and consequential damages.
The quotation supplied by Brooks therefore explicitly disclaimed any implied warranties, limited Myrtle Beach to a remedy of repair or replacement, and excluded incidental and consequential damages. These warranty provisions appeared on the reverse side of page one on the two-page quotation. Ancira forwarded this quotation to Standard, writing "please place purchase order with Brooks Instrument Division as quoted." In turn, Standard wrote to Brooks, attached a copy of Brooks's quotation, which included the provisions previously recited, and requested that Brooks "please ship the air eliminator ... as per your quotation." Brooks complied and shipped the air eliminator to South Carolina, where it was installed by Myrtle Beach in 1980. These transactions were negotiated in Texas.
On January 15, 1981, approximately ten months after installation, the air eliminator ruptured and roughly 123,000 gallons of fuel spilled on Base premises. The United States, concluding that Myrtle Beach was responsible for the spill, requested that it be reimbursed for the loss of the fuel. Myrtle Beach initially denied liability and refused reimbursement, but the dispute was subsequently settled on Myrtle Beach's payment of $80,000 to the Government for the fuel. Myrtle Beach incurred $23,000.00 in attorneys' fees and expenses in this litigation. Greater than the costs of the spilled fuel, however, and the principal damages sought by Myrtle Beach, are the costs incurred by Myrtle Beach in cleaning up the spill at the Government's order.
Faced with high clean up costs, Myrtle Beach filed a complaint in the District of South Carolina in June of 1986.1 In its original complaint, Myrtle Beach, contending that South Carolina law applies to this action, alleged four claims: (1) strict liability in tort; (2) violation of the South Carolina Unfair Trade Practices Act, see S.C.Code Ann. §§ 39-5-10 to 39-5-160 (Law.Co-op.1976); (3) breach of implied warranty; and (4) negligence. Emerson, asserting that Texas law governed disposition of this action, moved for partial summary judgment with respect to all of Myrtle Beach's claims. Another district judge to whom this case was originally assigned granted Emerson's motion with respect to the strict liability and unfair trade practices claims in 1988. The prior district judge, however, without comment, denied Emerson's motion regarding the breach of implied warranty of merchantability and negligence claims. In its second amended complaint before this court, the only claims are for breach of implied warranty of merchantability and negligence. Despite the prior ruling, all parties have resubmitted the issues to this court. Because of developments in the law, this court finds reviewing these issues appropriate. Accordingly, at the behest of the parties, this court considers the claims against Emerson for breach of implied warranty and negligence. The court commences its disposition by determining what law governs this action.
The threshold issue facing the court is determining the applicable law. Myrtle Beach contends that South Carolina law applies with respect to the alleged negligence claim because the alleged injury occurred in this forum; likewise, Myrtle Beach contends that South Carolina law applies to the breach of implied warranty claim under South Carolina's choice of law provision pursuant to the South Carolina Uniform Commercial Code. Conversely, Emerson asserts that Texas law governs the disposition of the breach of implied warranty claim pursuant to the Texas Uniform Commercial Code and that the statute of limitations has expired on this claim thereby barring it.2 Pursuant to Erie Railroad v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 822-23, 82 L.Ed. 1188 (1938), a federal court exercising diversity jurisdiction, as here, must apply the substantive law of the forum state in which it sits. Extrapolating from Erie, the Supreme Court held in Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941), that choice of law is a substantive matter, and therefore federal courts sitting in diversity must apply the choice of law rule of the forum state, here, South Carolina. With these propositions in mind, the court addresses the choice of law rule with respect to each claim.
South Carolina law provides that the substantive law governing a tort action is determined by the state in which the injury occurred, commonly referred to as the lex loci delicti rule. See Algie v. Algie, 261 S.C. 103, 198 S.E.2d 529, 530 (1973); Oshiek v. Oshiek, 244 S.C. 249, 136 S.E.2d 303, 305 (1964). Under the lex loci delicti rule, this court must apply the substantive law of South Carolina because the alleged injury occurred here. Accordingly, because South Carolina is the situs of the injury, the law of South Carolina applies to Myrtle Beach's alleged negligence claim.
Myrtle Beach's breach of implied warranty claim is asserted pursuant to S.C.Code Ann. § 36-2-314 of the South Carolina Uniform Commercial Code, S.C.Code Ann. §§ 36-1-101 to XX-XX-XXX (Law.Co-op. 1976) ("Uniform Commercial Code"). The Uniform Commercial Code provides for choice of law:
Except as provided hereafter in this section, when a transaction bears a reasonable relation to this State...
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