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2-J CORP. v. TICE

May 7, 1996

2-J CORPORATION, t/a DR. FEELGOODE'S
v.
WILLIAM E. TICE, III, t/a TICE CONSTRUCTION COMPANY and JEWELL BUILDING SYSTEMS, INC.



The opinion of the court was delivered by: JOYNER

 JOYNER, J.

 MAY 7, 1996

 Today we address JBS's Motion for Summary Judgment on the counts against it, Counts IV, V and VI. In considering a motion for summary judgment, a court must consider whether the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show there is no genuine issue of material fact, and whether the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The court must determine whether the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 In making this determination, all of the facts must be viewed in the light most favorable to the non-moving party and all reasonable inferences must be drawn in favor of the non-moving party. Id. at 256. Once the moving party has met the initial burden of demonstrating the absence of a genuine issue of material fact, the non-moving party must establish the existence of each element of its case. J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990), cert. denied, 499 U.S. 921, 113 L. Ed. 2d 246, 111 S. Ct. 1313 (1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)).

 COUNTS IV AND VI FOR NEGLIGENCE AND PRODUCTS LIABILITY

 JBS seeks to dismiss these tort claims on the basis that 2-J has only alleged economic loss. A principle known as the Economic Loss Doctrine provides that "a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself." East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871, 90 L. Ed. 2d 865, 106 S. Ct. 2295 (1986). Although the East River case was founded in admiralty law, the doctrine has been widely adopted into various states' common law due to its thorough analysis and persuasive reasoning. Aloe Coal Co. v. Clark Equip. Co., 816 F.2d 110 (3d Cir.), cert. denied, 484 U.S. 853, 98 L. Ed. 2d 111, 108 S. Ct. 156 (1987).

 Pennsylvania's Supreme Court has not had the opportunity to decide whether it would accept this doctrine, but both the Third Circuit and the Pennsylvania Superior Court have predicted that East River 's Economic Loss Doctrine will be adopted by the Pennsylvania Supreme Court. Aloe Coal, 816 F.2d at 119; N.Y. State Elec. & Gas v. Westinghouse, 387 Pa. Super. 537, 564 A.2d 919 (1989); REM Coal Co. v. Clark Equip. Co., 386 Pa. Super. 401, 563 A.2d 128, 132 (1989). We too predict such a result, and accordingly, we ask here whether 2-J has alleged damage to more than the defective product itself, i.e., to a person or other property. If 2-J has, then its tort claims may proceed.

 2-J alleges that it used the building as a warehouse and when the building collapsed, the goods that were stored there were damaged. Accordingly, 2-J declares, it is obvious that other property was damaged. This argument has great force on an initial reading. JBS, however, maintains that the Economic Loss Doctrine still precludes these tort claims because the goods that were damaged are not the type of "other property" contemplated by the Supreme Court when it ruled on East River.

 JBS's argument is based in part on the holdings of opinions issued by courts sitting in Pennsylvania. The most closely analogous case is Hartford Fire Ins. Co. v. Huls America, Inc., 893 F. Supp. 465 (E.D. Pa. 1995). That case involved a similar situation where a roof collapsed and the property under the roof suffered water damage. This Court ruled that "when faced with the question, the Pennsylvania Supreme Court will conclude that, at least within the commercial context, the phrase 'other property' does not include the type of property that one would reasonably expect to be injured as a direct consequence of the failure of the product at issue." Id. at 469.

 To arrive at this conclusion, the Court examined the principals behind the Economic Loss Doctrine itself. In New York State Elec. & Gas, 564 A.2d at 925-26, the Superior Court held that when a defective product damages only itself, the proper remedy is found in contract law. This is because the damages "relate specifically to product quality and value as to which the parties have had the opportunity to negotiate and contract in advance." Similarly, the Supreme Court, in East River, stated that when a product injures other property or people, "the cost of an injury and the loss of time or health may be an overwhelming misfortune." In contrast, however, "when a product injures itself, the commercial user stands to lose the value of the product, risks the displeasure of its customers who find that the product does not meet their needs, or, as in this case, experiences increased costs in performing a service. Losses like these can be insured. Society need not presume that a customer needs special protection." 476 U.S. at 871-74.

 The Hartford Court also relied on cases ruling that a plaintiff does not allege damage to other property if the defective product damaged property that was an integral part of the defective product. See King v. Hilton-Davis, 855 F.2d 1047 (3d Cir. 1988), cert. denied, 488 U.S. 1030, 102 L. Ed. 2d 971, 109 S. Ct. 839 (1989); Bailey Farms, Inc. v. NOR-AM Chem. Co., 27 F.3d 188, 191 (6th Cir. 1994); Ringer v. Agway, Inc., 1990 U.S. Dist. LEXIS 10122, No. 89-2806, 1990 Westlaw 112091 (E.D. Pa. Aug. 2, 1990). Given this guidance, the Hartford Court held that the plaintiff "expected the roof to protect its building from water damage and to allow it to continue its business without interruption. The roof failed to do so. [Plaintiff's] remedy is in contract, and not in tort." 893 F. Supp. at 470.

 2-J insists that Hartford 's interpretation of East River was an overly broad interpretation and that no other cases support its conclusion. However, other District Courts sitting in Pennsylvania have made similar rulings. In Wellsboro Hotel Co. v. Prins, 894 F. Supp. 170 (M.D. Pa. 1995), a protective coating applied to the exterior masonry walls of a hotel began to degrade. The plaintiff alleged that other property was damaged because it was discovered that the coating had also damaged the walls themselves. The Court held that "the gravamen of [plaintiff's] claim is that, as with the failed roof in Hartford, the [defendant's] masonry coating did not perform as warranted -that not only did it fail to protect the hotel facade, it damaged the facade by causing the underlying masonry and stucco to chip, crack and crumble. This," the Court ruled, "is more akin to the traditional concerns of contract law than it is to the traditional concerns of tort law" and dismissed the tort claims. Id. at 175. See also Ringer, 1990 U.S. Dist. LEXIS 10122, 1990 Westlaw 112091 (seed potatoes were infected with bacteria that ...


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