Theuerkauf v. United Vaccines

• Decision Date: 13 January 1993
• Docket Number: No. 2:91-CV-275.,2:91-CV-275.
• Citation: 821 F. Supp. 1238
• Parties: Gerald THEUERKAUF, d/b/a Lakeland Mink Ranch, Plaintiff, v. UNITED VACCINES DIVISION OF HARLAN SPRAGUE DAWLEY, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

821 F. Supp. 1238

Gerald THEUERKAUF, d/b/a Lakeland Mink Ranch, Plaintiff, v. UNITED VACCINES DIVISION OF HARLAN SPRAGUE DAWLEY, INC., Defendant.

No. 2:91-CV-275.

United States District Court, W.D. Michigan, N.D.

January 13, 1993.

Joseph C. Sartorelli, Petrucelli & Petrucelli, Iron River, MI, for plaintiff.

Ronald D. Keefe, Kendricks, Bordeau, Adamini, Keefe, Smith & Girard, Marquette, MI, Deborah S. Burke, Thomas A. Withrow, Henderson, Daily, Withrow & DeVoe, Indianapolis, IN, for defendants.

OPINION

QUIST, District Judge.

This is a diversity action between an Indiana corporation and a Michigan resident. This action arises out of plaintiff's loss of 1,970 breed stock mink after the mink were injected with BIOCOM-DP vaccine on July 2 and 3, 1990. The vaccine is intended to prevent distemper, virus enteritis, botulism, and pseudomonas pneumonia in mink. The defendant manufactures, tests, and distributes the vaccine.

Plaintiff states three claims against defendant. Count One is a negligence claim. Plaintiff claims that defendant was negligent in failing to use reasonable care to discover that the vaccine was harmful to the mink and failing to take reasonable precautions to warn the plaintiff that the vaccine was harmful. Count Two is a breach of warranty claim. Plaintiff claims that the vaccine was not reasonably fit for the general purpose for which it was sold; and therefore, defendant breached an express warranty as well as an implied warranty of fitness and merchantability. Count Three is a fraud claim. Plaintiff claims that defendant misrepresented the safety of the vaccine to the plaintiff and omitted to warn the plaintiff of the harmful effects of the vaccine. Plaintiff seeks damages for the loss of the 1,970 mink, the cost of the veterinary treatment and medication, and lost profits. In addition, Count Three seeks compensation for emotional distress and punitive damages.

Defendant filed a Motion to Dismiss Counts One and Three for failure to state a claim. Defendant states that plaintiff's complaint arises out of a commercial contract for the purchase of the vaccine and that the Economic Loss Doctrine prevents the plaintiff from bringing tort claims, such as Count One and Count Three, arising under a commercial contract where the plaintiff suffers only economic loss. Defendant claims it had no duty to the plaintiff outside the contract; and therefore, the plaintiff may not make tort claims against the defendant.

Plaintiff responded to the Motion to Dismiss by stating the damages he seeks are not limited to economic losses and that the damage is to property other than the product sold and not within the contemplation of the parties when they contracted. Plaintiff's response also raised the additional allegation that the defendant's representative falsely represented that the Upper Peninsula Fur Breeders Association and Dr. Boydoon trusted defendant's vaccine and purchased it for their herds. Plaintiff did not allege this in the Complaint.

DISCUSSION

An action may be dismissed if the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The moving party has the burden of proving that no claim exists. All factual allegations in the complaint must be presumed to be true, and reasonable inferences must be made in favor of the non-moving party. Miree v. DeKalb County, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977); 2A James W. Moore, Moore's Federal Practice, ¶ 12.072.5 (2d ed.1991). Dismissal is proper only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Dismissal is also proper if the complaint fails to allege an element necessary for relief or "if an affirmative defense or other bar to relief is apparent from the face of the complaint...." 2A James W. Moore, Moore's Federal Practice, ¶ 12.072.5 (2d ed.1991).

The Economic Loss Doctrine

The Economic Loss Doctrine "bars tort recovery and limits remedies to those available under the Uniform Commercial Code where a claim for damages arises out of the commercial sale of goods and losses incurred are purely economic." Neibarger v. Universal Cooperative, Inc., 439 Mich. 512, 515, 486 N.W.2d 612, 613 (1992). The purpose of the Uniform Commercial Code is to simplify the law governing commercial transactions and to standardize the laws governing commercial transactions in all states. The Doctrine distinguishes between cases involving the sale of goods for commercial purposes where the parties' economic expectations are protected by commercial and contract law and the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by tort law. Id. at 519-23, 486 N.W.2d at 614-16.

Contract and tort law have different purposes. Contract law protects the interests for which the parties bargained or could have bargained. Tort law protects society's interest in protecting people from harm. Specifically, product liability law encourages the production of safer products. Product liability law allocates the risks of unsafe products on the manufacturer rather than the consumer. "Where all parties involved ... are commercial businesses, this rationale disappears." Id. at 526, 486 N.W.2d at 617 (quoting Consumer Power Co. v. Mississippi Valley Structural Steel Co., 636 F.Supp. 1100, 1105 (E.D.Mich.1986)) (emphasis in original).

The Michigan Supreme Court cited Miller v. United States Steel Corp., 902 F.2d 573 (7th Cir.1990) for a discussion of economic loss. In Miller, the Seventh Circuit stated that economic loss was a misnomer and should more appropriately be called commercial loss. Commercial loss is distinguished from injury to the plaintiff personally or injury to property other than the product. The Seventh Circuit noted that personal injuries and property injuries are economic losses in the sense that they can be compensated by money. The Seventh Circuit noted that contract law was better suited to deal with purely commercial loss. On the other hand, product liability law is a special branch of tort law designed to cover cases in which personal injury occurs to a consumer or bystander. Id. at 574.

The Michigan Supreme Court stated that the Economic Loss Doctrine may apply even where property other than the product sold is defective. The court stated that determining when the Economic Loss Doctrine applies "requires consideration of the underlying policies of tort and contract law as well as the nature of the damages." Neibarger, 439 Mich. at 531, 486 N.W.2d at 620. The court noted that, in many instances, the failure of a product to work as expected will cause damage to other property and this damage is not beyond the contemplation of the parties. The court stated:

Damage to property, where it is the result of a commercial transaction otherwise within the ambit of the UCC, should not preclude application of the economic loss doctrine where such property damage necessarily results from the delivery of a product of poor quality.

439 Mich. at 531, 486 N.W.2d at 620.

Judge Bell of this Court refused to allow tort claims of fraud, misrepresentation, and negligence in an action which was in essence a contractual dispute. Merchants Publishing Co. v. Maruka Machinery Corp., 800 F.Supp. 1490 (W.D.Mich.1992). In Merchants Publishing, Judge Bell noted that an action in tort under Michigan law "requires a breach of duty separate and distinct from a breach of contract; that `an action in tort will not arise for a breach of contract unless the action in tort would arise independent of the existence of the contract.'" Id. at 1493 (quoting Brock v. Consolidated Biomedical Labs., 817 F.2d 24, 25 (6th Cir.1987)).

On the other hand, Judge McKeague of this Court found a situation in which the Economic Loss Doctrine did not apply. Citizens Insurance Co. v. Proctor & Schwartz, 802 F.Supp. 133 (W.D.Mich.1992). Citizens Insurance held that fire damage that occurred when a roaster caught fire could be remedied in tort (except for the damage to the roaster itself). Citizens Insurance noted the difference between "disappointment" and "disaster." Disappointment occurs when the economic loss is a "natural, foreseeable result of the product's defect...." Id. at 140.

In the instant case, the Economic Loss Doctrine prohibits plaintiff from maintaining his tort claims because the dispute here is in essence a contractual dispute in which the damage arose out of the commercial sale of goods. The plaintiff and defendant both operate businesses. They entered into an agreement by which plaintiff would purchase the vaccine from the defendant to use on plaintiff's breed stock mink. The mink were used by plaintiff to produce income as is illustrated in his complaint, which alleges lost profits. Moreover, plaintiff had purchased similar vaccines from other vendors. Plaintiff's status in the...