August 24, 1995
Plaintiff Wellsboro Hotel Company filed this products liability action
to recover for damage to its building allegedly caused by the application of defendant's product. Plaintiff owns and operates the Penn Wells Hotel located in Wellsboro Pennsylvania.
In April, 1990, plaintiff contracted with defendant Leon Prins t a Crest Painting to apply a coating to the exterior, masonry walls of the hotel. The contract specified the use of a product manufactured by defendant Southwestern Petroleum Corporation (SWEPCO) marketed as SWEPCO Masonry Coating and promoted as a "protective coating designed for use on a variety of porous masonry surfaces." (Plaintiff's complaint, P 7)
Work on the project was completed on or around August 1, 1990. Two years later, plaintiff observed cracking, chipping and peeling and crumbling of the paint and the underlying masonry. Plaintiff attributes these problems to the application of defendant's product and brings this action against Prins and SWEPCO for damage to its building.
Plaintiff asserts claims against SWEPCO for: 1) breach of express and implied warranties (Count I); 2) negligence (Count II); 3) breach of contract (Count III); and 4) strict liability (Count IV). Liability is asserted against Prins on theories of: 1) negligence (Count V); 2) breach of express and implied warranties (Count VI); and 3) breach of contract (Count VII).
Defendant SWEPCO moves for partial summary judgment on the strict liability claim asserted in Count IV on two grounds. It asserts that: 1) plaintiff cannot prevail on its claim of strict liability since only property damage is alleged; and 2) the only damages sought constitute economic loss unrecoverable as a matter of law under a theory of strict liability. (Record document no. 18) SWEPCO seeks, in the alternative, a preliminary determination from the court that imposition of liability against it under a theory of strict liability is contrary to social policy. Id.
For the reasons which follow, we will enter an order granting SWEPCO's motion for summary judgment on Count IV.
Summary judgment standard
Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)
...The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be 'no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is 'entitled to judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.
Celotex v. Catrett, 477 U.S. 317, 323-24, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).
The moving party bears the initial responsibility of stating the basis for its motions and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. He or she can discharge that burden by "showing...that there is an absence of evidence to support the nonmoving party's case." Celotex, supra, 477 U.S. at 323 and 325.
Issues of fact are "'genuine' only if a reasonable jury, considering the evidence presented, could find for the non-moving party." Childers v. Joseph, 842 F.2d 689, 693-94 (3rd Cir. 1988), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Material facts are those which will affect the outcome of the trial under governing law. Anderson, supra, 477 U.S. at 248. In determining whether an issue of material fact exists, the court must consider all evidence in the light most favorable to the non-moving party. White v. Westinghouse Electric Company, 862 F.2d 56, 59 (3rd Cir. 1988).
Choice of law
Choice-of-law decisions are governed by the choice-of-law rules of the forum state. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Here, all parties agree that Pennsylvania law governs. Plaintiff is a Pennsylvania corporation, and defendant's product was sold and applied here. The hotel is located in Pennsylvania and the damage allegedly sustained as a result of application of defendant's product occurred here. Application of Pennsylvania law is, therefore, proper under Griffith v. United Air Lines, 416 Pa. 1, 203 A.2d 796 (Pa. 1964) and its progeny.
SWEPCO argues that recovery under section 402A of the Restatement (Second) of Torts (1965) is barred because there are no allegations, nor any proof, that its product posed a threat to the safety of individuals, and because only property damage is claimed to have resulted from the alleged defect. In a related argument, Swepco asserts that no viable strict liability claim exists because only economic damages are sought. Plaintiff seeks to recover the cost of removing the defective SWEPCO product, repairing the damage to the underlying mortar, repainting and repairing the surface. (See: record document no. 22, exhibit "B")
A line of federal and state court decisions dating from 1981 have established the parameters for recovery under a strict liability claim in which only property damage is asserted. In Pennsylvania Glass Sand v. Caterpillar Tractor Co., (PGS) 652 F.2d 1165 (3d Cir. 1981), the Third Circuit identified three factors as relevant in determining whether a cause of action in strict liability lies where only property damage is asserted: 1) the nature of the defect; 2) the manner in which it presents itself; and 3) the type of risk the defect posed. Id. at 1174. In PGS, the plaintiff sought to recover the cost of repairing a front-end loader which caught fire. Plaintiff alleged that the loader was defective because it was not equipped "with a fire suppression system, or with adequate warnings of the steps to be taken if a fire occurred." Id. at 1166. Plaintiff's theory was not that a product defect caused the fire, but rather that allegedly faulty design increased the risk of damage in the event of an accidental fire. After much discussion of products liability law in Pennsylvania and other states, the Third Circuit held that the damages sought were recoverable under a theory of strict liability.
The PGS holding was applied by the United States District Court for the Eastern District of Pennsylvania in Philadelphia National Bank v. Dow Chemical Co., (PNB) 605 F. Supp. 60, 63 (E.D.Pa. 1985). Philadelphia National Bank (the bank or PNB) sued in strict liability to recover for damage to a bank building allegedly caused by the use of a mortar additive manufactured and sold by defendant Dow Chemical Co (Dow). Dow's product, known as Sarabond, was incorporated into the mortar during construction. PNB alleged that the Sarabond caused metals embedded in the mortar and brick panels of its building to corrode and cracked the exterior masonry. Contending that the Sarabond had become "an integral and indivisible part" of the PNB building and that the losses claimed resulted from gradual deterioration, not a sudden and catastrophic loss," Id. at 62, Dow argued that plaintiff could not recover under a claim of strict liability.
After reviewing the Third Circuit holdings in PGS and East River Steamship Corp. v. Delaval Turbine, Inc., 752 F.2d 903 (3d Cir. 1985) (en banc), the district court ruled that PNB had presented a viable claim, because it had
come forward with evidence that 'other property' has in fact been injured--the brick panels and steel infrastructure of the building. [Footnote omitted.] Furthermore, it has presented evidence that a very real risk of injury to persons, by way of crumbling mortar and falling brick, is present. Emergency repairs have been undertaken at the PNB building to prevent masonry from becoming dislodged, and numerous instances of crumbling masonry due to the incorporation of Sarabond into other buildings are cited.
Id. at 63. Concluding "on the basis of the limited Pennsylvania authority" before it, "that Pennsylvania would permit recovery in tort where an allegedly defective construction product causes injury to other components used in construction and creates a real, unspeculative risk of harm to passers-by on the street below," the district court denied Dow's motion to dismiss PNB's strict liability claims.
The Third Circuit applied and refined the tri-part PGS test in East River. Although the claims asserted in that case arose under federal admiralty law, the court relied upon its prior decision in PGS, applying Pennsylvania law. East River Steamship Corp. (East River) sued to recover repair costs and lost profits sustained when alleged defects in the component parts of the turbines installed in four supertankers had to be repaired and replaced. Applying PGS, the Third Circuit considered: "the nature of the alleged defect, the manner in which the injury to the defective product occurred, and the type of risk that is inherent in the defect." Id. at 909. Each of these factors, it found, favored disallowing the claim. The court stated:
The defect involved internal deterioration and breakdown of the turbine's parts, and thus directly implicates the intended performance level of the turbine and the charterers' disappointed expectations in their purchase. Unlike the defect in those cases in which tort recovery is allowed for a damaged product, the defect in this case is not intimately related to the safety of the product, nor is it associated with calamitous events like fire or sudden collision....