Outboard Marine Corp. v. Babcock Industries, Inc., 96-1925

• Decision Date: 03 February 1997
• Docket Number: No. 96-1925,96-1925
• Citation: 106 F.3d 182
• Parties: Prod.Liab.Rep. (CCH) P 14,855 OUTBOARD MARINE CORPORATION, Plaintiff-Appellant, v. BABCOCK INDUSTRIES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 182

106 F.3d 182

Prod.Liab.Rep. (CCH) P 14,855

OUTBOARD MARINE CORPORATION, Plaintiff-Appellant, v. BABCOCK INDUSTRIES, INC., Defendant-Appellee.

No. 96-1925.

United States Court of Appeals Seventh Circuit.

Argued Nov. 5, 1996.

Decided Feb. 3, 1997.

Peter C. John, Hedlund & Hanley, Chicago, IL, Warren E. Platt (argued), Ellen J. Waxman, Jonathan F. Weisbard, Alex B. Marconi, Patrick X. Fowler, Martha E. Gibbs, Snell & Wilmer, Phoenix, AZ, Mary P. Benz, Quinlan & Crisham, Chicago, IL, for plaintiff-appellant.

William E. Spizzirri, Kralovec, Marquard, Doyle & Gibbons, Chicago, IL, Michael J. Gibbons, Wheaton, IL, Charles W. Pieterse, Whitman, Breed, Abbott & Morgan, Greenwich, CT, Richard F. Lawler (argued), Pamela C. Holly, Whitman Breed, Abbott & Morgan, Greenwich, CT, for defendant-appellee.

Before POSNER, Chief Judge, and CUDAHY and ROVNER, Circuit Judges.

POSNER, Chief Judge.

A manufacturer of boat engines, Outboard Marine, brought this suit for breach of warranty (a suit governed by Illinois law) against a supplier of cables for its engines, the ACCO division of FKI Industries, formerly known as Babcock Industries. The jury awarded Outboard Marine $4,403,000. Discontented with this verdict, Outboard Marine asked the judge to enter judgment for $12,384,700, or in the alternative to grant a new trial on damages. The judge refused to do either, and Outboard Marine appeals.

The cables were installed in a new type of Outboard Marine engine, which failed at an alarming rate and had to be replaced at substantial cost to Outboard Marine. The evidence at trial established that ACCO had failed to make the cables in accordance with Outboard Marine's specs and that this failure had contributed to the failure of the new engines. There was also evidence of engine defects unrelated to the defective cables--defects that were the sole responsibility of Outboard Marine and that would have caused many of the engine failures even if the cables had been manufactured properly. Outboard Marine submitted to the jury a damages calculation of $19,132,302 which assumed that all the engine failures and resulting recalls and replacements had been due to ACCO's bad cables. ACCO countered with evidence that even if this assumption were correct, Outboard Marine's damages would be only $12,384,700, because of accounting and other errors that Outboard Marine had made in computing the $19.13 million figure. ACCO went much further, however, arguing to the jury that the plaintiff was actually entitled to only a paltry $303,000 in damages (the cost of the defective cables) because everything above that was due not to the alleged breach of warranty by ACCO but to the defective character of the plaintiff's design of its new engine. Neither party explained to the jury how to calculate the damages if both a breach of warranty and the plaintiff's own design defects had contributed to the costs incurred by the plaintiff as a result of the engine failures. Between $303,000 and $12.38 million, the jury was on its own.

Outboard Marine's case for the entry of judgment of $12,384,700 depends entirely, as its lawyer acknowledged at argument, on the proposition that ACCO had conceded at trial that if there was a breach of warranty the $12.38 million figure was a minimum estimate of the damages for the breach. Such a concession would be tantamount to a stipulation as to damages, leaving only the issue of breach to be decided by the jury. Taylor v. Green, 868 F.2d 162, 165 (5th Cir.1989); see also Davis v. United States, 716 F.2d 418, 430 (7th Cir.1983). Only there was no concession. That $12.38 million figure was premised on the assumption, which ACCO did not accept--which it vigorously challenged--that Outboard Marine's own design defects had not contributed to the engine failures. It was a worst-case analysis: if the jury rejected ACCO's arguments about the design defects, the maximum damages it should award would be the $12.38 million figure, not the $19.13 million urged by Outboard Marine; but ACCO asked the jury not to reject its arguments about the design defects.

Outboard Marine's argument for a new trial on damages is stronger than its argument for a judgment, and indeed at first glance compelling. The only estimates tendered to the jury were $303,000, $12.38 million, and $19.13 million. No one knows how the jury came up with $4.4 million. It looks as if the jury started with the $303,000 of conceded damages and then added one-third of $12.38 million (roughly $4.1 million), but this is just a guess; and if this is what the jury was doing, it was wrong, because it should have subtracted the $303,000 from the $12.38 million (which included the $303,000) before taking one-third. Thus, a rational path is not readily discernible between the evidence and argument of the parties and the jury's verdict. Desperately ACCO argues that the evidence showed that there were three causes of the engine failures and that two of them (two forms of corrosion damage) were the fault of Outboard Marine and only one (the defective cables) was the fault of ACCO, so the jury assigned two-thirds of the liability to Outboard Marine. This wholly speculative reconstruction (replaced at argument by the even more speculative suggestion that the jury actually calculated the damages due to the respective parties' mistakes) set up ACCO for Outboard Marine's riposte that, if ACCO is right, the jury was importing tort notions of comparative fault into a contract case, where such notions do not belong. Outboard Marine goes further. It argues that any attempt to apportion damages between the breach of warranty and its (that is, Outboard Marine's) own mistakes improperly makes comparative negligence a defense in a contract case; and let us begin our analysis of the issue of a new trial on damages with that question.

Tort and contract law have similar aims, and their doctrines tend therefore to be isomorphic, Evra Corp. v. Swiss Bank Corp., 673 F.2d 951, 957-58 (7th Cir.1982); Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280, 1289 (7th Cir.1986), though strict liability plays a bigger role in contract than in tort. Mitigation of damages in contract law, for example, corresponds to avoidable consequences in tort law. Barron v. Ford Motor Co. of Canada Ltd., 965 F.2d 195, 199 (7th Cir.1992); compare Restatement (Second) of Torts § 918 (1979), with Restatement (Second) of Contracts § 350 (1981). Both these doctrines, however, are primarily concerned with efforts by victims of a breach of contract or a tort, exerted after the breach or tort has occurred, to minimize the harm. Failing to fasten your seatbelt--a pre-accident measure to avoid not the accident but injury if the accident occurs--is an exception in terms of sequence, but it is not, strictly speaking, a form of contributory or comparative negligence. Those are defenses (complete in the case of contributory negligence, partial in the case of comparative negligence) based on the accident victim's failure to take steps that would have prevented the accident from occurring. A seatbelt defense is based on a failure to prevent an injury resulting from an accident that may have occurred without the slightest fault on the part of the plaintiff. The difference is not fundamental, and in regard to liability for a defective product that causes personal injury has been pretty much erased--an automobile manufacturer, for example, is equally culpable whether the defect caused the accident or, by making the car less than optimally crashworthy, magnified the consequence of an accident that may have occurred without any fault on the part of the manufacturer. Outboard Marine is correct, however, that there is no contract doctrine of contributory or comparative negligence.

There are good reasons for this absence. The standard tort results from the interaction of two activities (driving and walking, for example), and a change in either one could reduce the probability of the accident giving rise to the tort. The pedestrian can cross the street at the crosswalk, as well as the driver being able to drive more slowly. The typical contract, in contrast, has a performing party and a paying party; these activities proceed on separate tracks; it is rare that a breach comes about as a joint consequence of these qualitatively entirely different activities. Such interdependencies as there are between the duties of the parties to a contract are governed by the doctrine of conditions. Casio, Inc. v. S.M. & R. Co., 755 F.2d 528, 532 (7th Cir.1985); 2 E. Allan Farnsworth, Farnsworth on Contracts § 8.2 (1990). If the payor stops paying, the performing party can stop performing, and vice versa. Given the protection that the doctrine gives...