Vermont Plastics, Inc. v. Brine, Inc.

• Citation: 824 F. Supp. 444
• Decision Date: 04 June 1993
• Docket Number: No. 2:91-CV-203.,2:91-CV-203.
• Parties: VERMONT PLASTICS, INC., Plaintiff, v. BRINE, INC., Defendant and Third-Party Plaintiff, v. NEW ENGLAND PLASTIC SERVICES CO. and Plastic Materials Company, Inc., Third-Party Defendants. BRINE, INC., Counter-Claimant, v. VERMONT PLASTICS, INC., Counter-Defendant. VERMONT PLASTICS, INC., Third-Party Plaintiff, v. NEW ENGLAND PLASTIC SERVICES, CO. and Plastic Materials Company, Inc., Third-Party Defendants. NEW ENGLAND PLASTIC SERVICES CO., Cross-Claimant, v. PLASTIC MATERIALS COMPANY, INC., Cross-Defendant.
• Court: U.S. District Court — District of Vermont

824 F. Supp. 444

VERMONT PLASTICS, INC., Plaintiff, v. BRINE, INC., Defendant and Third-Party Plaintiff, v. NEW ENGLAND PLASTIC SERVICES CO. and Plastic Materials Company, Inc., Third-Party Defendants.

BRINE, INC., Counter-Claimant, v. VERMONT PLASTICS, INC., Counter-Defendant.

VERMONT PLASTICS, INC., Third-Party Plaintiff, v. NEW ENGLAND PLASTIC SERVICES, CO. and Plastic Materials Company, Inc., Third-Party Defendants.

NEW ENGLAND PLASTIC SERVICES CO., Cross-Claimant, v. PLASTIC MATERIALS COMPANY, INC., Cross-Defendant.

No. 2:91-CV-203.

United States District Court, D. Vermont.

June 4, 1993.

Gary D. McQuesten, Valsangiacomo, Detora & McQuesten, P.C., Barre, VT, for Vermont Plastics, Inc.

David N. Cole, Hanover, NH, for Brine, Inc.

Paul L. Reiber, and Carolyn Browne Anderson, Abell, Kenlan, Schwiebert & Hall, P.C., S. Stacy Chapman, III, Webber, Costello & Chapman, Ltd., Rutland, VT, and Donald Ball, Ball & Sargent, Worcester, MA, for New England Plastic Services, Co.

Robert S. DiPalma, John T. Sartore, Paul Frank & Collins, P.C., Burlington, VT, for Plastic Materials Company, Inc.

OPINION AND ORDER

PARKER, Chief Judge.

Defendant and third-party plaintiff, Brine, Inc. ("Brine") brings this third-party action against third-party defendants Plastic Materials Company, Inc. ("PMC") and New England Plastic Services ("New England"), alleging negligence, negligent misrepresentation, and breach of express and implied warranties. Both third-party defendants (collectively, "Defendants") move to dismiss the negligence claims, for judgment on the pleadings with respect to the express warranty claim, and for summary judgment on the implied warranty claim. Brine opposes these motions. The complaint against both Defendants and the various motions and supporting memoranda are similar and are treated together. Defendants' motions on the negligence, negligent misrepresentation, and the implied warranty claims are granted. Defendants' motion with respect to the express warranty claim is denied pursuant to Fed. R.Civ.P. 56(f).

BACKGROUND

The undisputed facts for purposes of the pending motions are as follows.¹ Brine, the third-party plaintiff, is a New Hampshire corporation which manufactures sporting goods. The original plaintiff in this action, Vermont Plastics, Inc. ("Vermont Plastics"), a Vermont corporation with its principal place of business in Vermont, is a custom plastic injection molding company. Third-party defendant PMC is a compounder of plastic materials; its principal place of business is in Delaware. The other third-party defendant, New England, has its principal place of business in Massachusetts and is a distributor of plastic materials.

Vermont Plastics supplied plastic lacrosse stick heads to Brine. Brine specified that only Dupont Zytel ST-801 Super-Tough nylon resin was to be used in the manufacture of the lacrosse stick heads, and Vermont Plastics originally used this nylon. In the fall of 1987, Vermont Plastics was having problems obtaining ST-801 in the colors needed for the lacrosse stick heads. Vermont Plastics contacted New England in an attempt to secure a source of nylon. New England contacted PMC and PMC supplied the nylon through New England to Vermont Plastics. In certain instances, PMC shipped the nylon directly to Vermont Plastics. PMC did not use ST-801 nylon. Instead, it used a nylon which the parties refer to as "6608."

PMC and New England had no direct contact with Brine during this period. It is undisputed that neither PMC nor New England entered into a formal contract with Brine. The parties, however, dispute the nature of the contacts between PMC and Vermont Plastics, and Brine claims that discovery is not complete regarding the nature and extent of contacts between Vermont Plastics, New England, and PMC.

PMC represented to New England that 6608 could be used instead of ST-801 with no adverse effects. New England made similar representations to Vermont Plastics. None of the parties informed Brine of the change in the nylon resin, and Brine was unaware that the 6608 nylon was being used instead of the ST-801. Because the nylon used to make the heads was switched, Brine experienced an increased rate of breakage in the lacrosse stick heads.² When Brine realized that the breakage rate of the stick heads was increasing, it contacted Vermont Plastics about the problem, but Vermont Plastics informed Brine that there were no changes in its manufacturing process that could lead to the increased breakage rate.

Due to the increased breakage rate, Brine had to replace over 38,000 lacrosse sticks which had broken in play because of the heads' defective quality, and Brine has a number of heads in its inventory which it will not sell as a result. Brine has also suffered declining sales in its lacrosse stick business as a result of lost consumer confidence due to the increased breakage rate. A lacrosse stick that is more likely to break during play presents an increased risk of injury to the players.

Vermont Plastics originally brought this action in Washington County Superior Court against Brine attempting to recover compensatory and punitive damages, which Vermont Plastics alleges it suffered as a result of one particular financial transaction (not material to the pending motions) with Brine. Brine removed to this Court claiming diversity of citizenship and an amount in controversy exceeding $50,000 exclusive of costs and interest. Brine then counterclaimed under Fed. R.Civ.P. 13(a), alleging various claims against Vermont Plastics. Brine later added New England and PMC as third-party defendants. The claims against both are similar and based on negligence, negligent misrepresentation, and a breach of express and implied warranty. Both New England and PMC filed motions to dismiss the negligence claim, motions to dismiss the implied warranty claim on the pleadings, and a motion for summary judgment on the express warranty claim.

DISCUSSION

I. Standard of Review

Because Brine has submitted an undisputed affidavit in opposition to the Defendants' various motions and that affidavit is some-what relevant to all the motions, it is proper to treat the various motions as motions for summary judgment. See Fed.R.Civ.P. 12(b) ("if on a motion ... to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as a motion for summary judgment"); Fed. R.Civ.P. 12(c) (same but as to motions for judgment on the pleadings).

Summary judgment is proper when "there is no genuine issue as to any material fact, and when the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Payne v. United States, 980 F.2d 148, 150 (2d Cir.1992) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)). "All facts must be viewed in the light most favorable to the nonmoving party, and the nonmoving party must be given the benefit of all reasonable inferences." Salahuddin v. Coughlin, 993 F.2d 306, 308 (2d Cir.1993). A dispute regarding a material fact is genuine if the evidence is such that a reasonable jury could return a verdict in the nonmoving party's favor. See Litton Indus., Inc v. Lehman Bros. Kuhn Loeb, Inc., 967 F.2d 742, 746 (2d Cir.1992) (citing Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510).

II. Brine's Negligence Claims

In Counts II & III, Brine alleges negligence against both New England and PMC. Defendants have moved to dismiss these counts. They claim that Brine's harm is purely economic—that is, there is no personal injury nor other property damage to Brine—and that such damages are not recoverable under a negligence theory. In other words, Defendants argue that Brine cannot recover in negligence because Brine's only damages are to the lacrosse stick heads themselves and consequential business losses arising therefrom, and that such damages are not compensable in tort. Brine does not dispute that it seeks to recover solely for economic harm, but argues that such damages are recoverable in negligence under Vermont law. The parties agree that there is no Vermont Supreme Court opinion deciding this issue. Naturally, each party urges this Court to predict Vermont law³ favorable to their respective desired outcomes.

Perhaps the most persuasive authority in this area is a relatively recent Supreme Court decision deciding admiralty law. East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). In that case, turbines purchased by the plaintiffs were damaged due to manufacturing and design defects in the turbines themselves; there was no harm except to the turbines. The Supreme Court determined that failure of a product to perform as expected is essentially a breach of warranty claim and accordingly held that "no products-liability claim lies in admiralty when the only injury claimed is economic loss." 476 U.S. at 876, 106 S.Ct. at 2304.

The East River Court delineated three major viewpoints adopted by various courts on this issue. The majority view, represented by Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965), would deny recovery in all cases based on strict products liability and negligence where the claim is to recover solely for economic loss. The minority approach, which was first articulated by the New Jersey Supreme Court in Santor v. A & M Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305, 312-13 (1965), holds that in cases grounded in tort the manufacturer's duty to make a non-defective product extends to injury to the product itself.

Situated between these two views fall a number of cases that attempt to define the line between tort and contract, not by considering the type of damages sought, but rather by "analyzing interrelated factors such as the nature of the defect, the type of risk, and the manner in...