Washington Water Power Co. v. Graybar Elec. Co.

• Citation: 112 Wn.2d 847,774 P.2d 1199
• Decision Date: 29 June 1989
• Docket Number: No. 55182-1,55182-1
• Parties: , Prod.Liab.Rep. (CCH) P 12,233 . GRAYBAR ELECTRIC COMPANY, a foreign corporation; and A.B. Chance Company, a foreign corporation (a Division of Emerson Electric Company), Defendants. Supreme Court of Washington, En Banc
• Court: United States State Supreme Court of Washington

Page 847

112 Wn.2d 847

774 P.2d 1199, Prod.Liab.Rep. (CCH) P 12,233

Certification From the United States District Court For the Eastern District of Washington in the WASHINGTON WATER POWER COMPANY, a Washington corporation, Plaintiff, v. GRAYBAR ELECTRIC COMPANY, a foreign corporation; and A.B Chance Company, a foreign corporation (a Division of Emerson Electric Company), Defendants.

No. 55182-1.

Supreme Court of Washington En Banc.

June 29, 1989.

Bogle & Gates, Ronald E. McKinstry, Erik R. Lied, Christopher N. Weiss, Seattle, for defendants.

Paine, Hamblen, Coffin, Brooke & Miller, Richard D. McWilliams, Richard W. Kuhling, Diane M. Hermanson, J. Christopher Lynch, Spokane, for plaintiff.

Bryan P. Harnetiaux, Spokane, Winston & Cashatt, Robert H. Whaley, Spokane, amicus curiae for plaintiff on behalf of Washington State Trial Lawyers Ass'n.

Bassett & Morrison, Margaret A. Morgan, Seattle, amicus curiae for defendants on behalf of Washington Defense Trial Lawyers Ass'n.

DURHAM, Justice.

Washington Water Power Company (WWP) commenced this action in federal district court to recover damages incident to the failure of, and expected failure of, approximately 162,000 electric deadend insulators in use in WWP's electrical distribution system. Defendants are A.B. Chance Company (Chance), which manufactured the insulators between 1962 and 1984, and Graybar Electric Company (Graybar), the distributor from whom WWP purchased Chance insulators between 1973 and 1984.

The insulators are in place throughout WWP's service area in eastern Washington and northern Idaho. They sit between live electric lines and the utility poles over which the lines are suspended, isolating the flow of electricity from the utility pole. Their expected useful life is considered to be about 50 years.

Since 1976, approximately 3000 Chance insulators in use in WWP's distribution system have experienced performance failures, creating several types of hazards. In some instances, live lines have fallen to the ground. In others, electricity has leaked from the insulators to the surrounding equipment, causing pole and crossarm fires. Insulator performance failure also has caused radio and television interference in WWP's distribution area.

Between 1977 and 1983, WWP returned damaged insulators to Chance for testing. Chance in each instance advised WWP that the failures were caused by something other than the insulators themselves. In 1985, however, Chance advised that insulators manufactured after 1970 were defective. Following Chance's testings, WWP obtained a recommendation from the British Columbia Hydro & Power Authority that the insulators presented a safety hazard and should be removed from service.

WWP estimates that its damages from incidents of insulator failure through October 1987 include at least $2 million of damage to WWP property, $2,500 of damage to the property of third parties, and $100 in damages for personal injuries. WWP estimates as well that it will cost around $9 million to replace insulators that have not yet failed, including those manufactured before 1970. ¹

WWP's complaint states claims against Graybar for breach of contract and warranty, against Chance for violation of the federal racketeer influenced and corrupt organizations act (RICO), 18 U.S.C. § 1964, and the Washington product liability act (WPLA), RCW 7.72, and against both Graybar and Chance for negligence, strict liability, fraud, negligent misrepresentation, estoppel, and violation of the Washington Consumer Protection Act, RCW 19.86. Defendants moved for partial summary judgment on WWP's tort claims, contending that the costs of WWP's insulator replacement program constitute economic loss recoverable "only under the Uniform Commercial Code because the Washington Product Liability Act excludes economic loss from its remedial scheme and preempts common law tort remedies". As the result of a certification from the federal district court, we must determine what merit there may be to this contention. ²

I

The Washington product liability act (WPLA) is one piece of a broad legislative effort during the past decade directed at reforming various aspects of the law of torts. Like other tort reform statutes, the WPLA is designed to address a liability insurance crisis which could threaten the availability of socially beneficial products and services. See RCW 7.72.010 Preamble; see also Laws of 1986, ch. 305, § 100.

The centerpiece of the WPLA is the "product liability claim". The statute broadly defines this concept to include any product-related claim "previously based on ... any other substantive legal theory except fraud, intentionally caused harm or a claim or action under the consumer protection act, chapter 19.86 RCW." RCW 7.72.010(4). The substantive liabilities of product manufacturers and sellers towards individuals or entities asserting product liability claims are specifically delineated in the statute. Manufacturers are liable for negligence in product design or in the provision of warnings concerning potential product hazards. RCW 7.72.030(1). Manufacturers also are strictly liable for unsafe product conditions resulting from construction defects and breaches of warranties. RCW 7.72.030(2). Product sellers not involved in a product's manufacture have the same liabilities as manufacturers in certain circumstances, and additionally bear liability for negligence, breach of express warranty and misrepresentation. RCW 7.72.040. A product liability claim may be maintained against a manufacturer or other product seller notwithstanding an absence of contractual privity. RCW 7.72.010(5).

In addition to delimiting the substantive liabilities of manufacturers and product sellers, the WPLA describes the damages that persons or entities asserting product liability claims may recover. Such damages include "any damages recognized by the courts of this state", but not "direct or consequential economic loss under Title 62A RCW." RCW 7.72.010(6). Damages for direct or consequential economic loss are not prohibited to product liability claimants, but are simply made unavailable within the scheme of the WPLA. See RCW 7.72.020(2) ("Nothing in this chapter shall prevent the recovery of direct or consequential economic loss under Title 62A RCW.").

Two aspects of the WPLA are at issue in this case. First is the extent to which the WPLA preempts traditional common law remedies for product-related harms. Also at issue is the question of what sorts of damages the WPLA permits product users to recover from manufacturers and other product sellers with whom they have no contractual privity.

II

The reasons why product liability plaintiffs such as WWP would wish to bring their claims under common law theories, rather than under the WPLA, are readily apparent. As discussed more fully below, the WPLA restricts recovery for "economic loss" to the law of sales. Thus under the WPLA, several significant obstacles to recovery may arise. One of these is the rule of privity. See Baughn v. Honda Motor Co., 107 Wash.2d 127, 152, 727 P.2d 655 (1986). WWP is especially concerned to avoid this rule because, having purchased no insulators directly from Chance, it will be unable to recover damages from Chance if the sales law privity rule applies. ³ Under Washington common law, however, lack of privity would not bar WWP's recovery from Chance. See Berg v. General Motors Corp., 87 Wash.2d 584, 555 P.2d 818 (1976) (economic loss held recoverable in tort from manufacturer with whom plaintiff was not in privity).

A second obstacle facing product liability plaintiffs is the set of contract sales rules relating to limitations of damages and disclaimers of warranties. See RCW 62A.2-316, 62A.2-718, 62A.2-719. Such limitations and disclaimers have no effect on a plaintiff's recovery under common law strict liability theory, but may pose a complete bar to recovery in a contract action. Because of the presence of liability limitation and warranty disclaimer clauses in the sales documents executed by WWP and Graybar, therefore, WWP understandably would prefer to avoid the sales law rules.

Also problematic for many product liability claimants is the sales law rule of repose. See RCW 62A.2-725. The 4-year sales law limitation period commences when the contract breach occurs (usually when tender of delivery is made), "regardless of the aggrieved party's lack of knowledge of the breach." RCW 62A.2-725(2). In a common law tort action, by contrast, the limitation period does not commence until the defect is discovered, or by reasonable diligence should have been discovered. Sahlie v. Johns-Manville Sales Corp., 99 Wash.2d 550, 663 P.2d 473 (1983). Thus, with respect to those insulators WWP received 4 years or more before it filed its complaint, the common law might afford a remedy that under the law of sales would be barred as untimely sought.

In light of these considerations, it is understandable why WWP is anxious to preserve the option of bringing product liability claims for economic loss under common law tort theories. We cannot, however, find a legal basis for this position. For the WPLA means nothing if it does not preempt common law product liability remedies.

To be sure, the Legislature might have stated its intent to preempt common law product liability claims more certainly than it has in the WPLA--for example, by means of an express preemption clause. See, e.g., Conn.Gen.Stat.Ann. § 52-572n (West 1960 & Supp.1988); Ohio Rev.Code Ann. § 2307.72(A) (Page 1981 & Supp.1987); Model Uniform Product Liability Act § 103(A), 44 Fed.Reg. 62,713, 62,720 (1979). The absence of such a clause does not defeat the case for preemption, however. Clear statutory language and corroborative legislative history leave no doubt about the WPLA's preemptive purpose.

Included within the definition of "product liability claim" is

any claim or action brought for harm caused by the manufacture, production,...