Sea-Land Service, Inc. ("Sea-Land"), Appellant.
On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 95-cv-01378)
Before: GREENBERG, ROTH, and SEITZ, Circuit Judges
Opinion Filed: January 15, 1998
Appellant Sea-Land Service, Inc. (Sea-Land) has appealed the district court's grant of summary judgment in favor of General Electric Company (GE) on Sea-Land's tort claims in admiralty for economic loss. The district court dismissed the case based on the holding of the Supreme Court in East River Steamship Corp. v. Transamerica Delaval, Inc., 106 S.Ct. 2295 (1986), that under maritime law no claim lies for either negligence or strict products liability when a commercial party alleges injury only to a product itself, resulting in purely economic loss. Id. at 2302.
In this appeal, we must decide 1) whether a defective part, a connecting rod, that caused damage to its surrounding engine was separate property from the engine or was merely a component of the engine; 2) whether East River bars a tort claim for post-sale duty to warn under a negligence theory when the damage is purely economic; and 3) whether East River bars a tort claim for negligent repair when the damage is purely economic. The district court held 1) that the rod was not separate property from the engine, within the meaning of East River, and that East River precluded tort recovery for economic loss as a result of a product damaging itself; 2) that even when the injury is only economic, there is a post-sale duty-to-warn claim if a defendant-manufacturer had actual knowledge that the product was defective, but that GE did not have actual knowledge of the defective part prior to Sea-Land's injury; and 3) that East River bars a tort claim for negligent repair when the damage is purely economic.
Sea-Land is a bareboat charterer of many vessels including the Sea-Land Enterprise. The Enterprise was constructed in 1980, and Sea-Land purchased it in 1988 from U.S. Lines. The Enterprise has two ship's service generators, a ship's service turbine generator and a ship's service diesel generator (SSDG). The Enterprise's SSDG is powered by a GE diesel engine. The diesel engine is made up of "life-cycle" parts, which a vessel operator would not expect to replace, and "renewable" parts, which must be replaced periodically. In December, 1990, Sea-Land overhauled the Enterprise's diesel engine, procuring 105 GE parts including eight GE master connecting rods. On February 26, 1991, after only 47 hours of operation by the overhauled diesel engine, it broke down, causing damage to the engine and the engine casing.
The cause of the failure, as admitted by GE, was one of the 8 connecting rods. The rod had failed because the meloniting process, used to harden it, was faulty. GE replaced all the suspect connecting rods and repaired the engine free of charge. Coincidentally, on February 8, 1991, eighteen days before the Enterprise engine failure, a similar defective connecting rod had caused a diesel engine on the United States Navy Ship Albert Meyer to break down. It later occurred that in November 1994 the Enterprise suffered a further breakdown of the SSDG. Sea-Land alleges that the 1994 engine failure was at the same location as GE's 1991 engine block repair and was due to negligent repair by GE.
Sea-Land brought suit against GE to recover for the losses caused by the two engine failures. In Count I, Sea-Land alleges that the GE connecting rod was defective and claims the profits it lost while the ship was inoperable until the 1991 repairs had been completed. In Count II, Sea-Land asserts that GE negligently failed to warn Sea-Land of a potentially defective connecting rod of which it had knowledge by virtue of the Albert Meyer engine failure. In Count IV, Sea-Land contends that GE breached its duty of care to Sea-Land by negligently performing the 1991 repair. As a result, Sea-Land claims the cost of repair of the engine in 1994 and the profits it lost while the ship was once again inoperable.
On April 26, 1996, the district court granted summary judgment to GE on Count I, finding that the defective GE rod was the proximate cause of injury to Sea Land but that East River barred a tort claim for lost profits. On April 17, 1997, the district court granted summary judgment to GE on all other counts, including failure to warn and negligent repair. This consolidated appeal followed.
The district court had jurisdiction over this civil case in admiralty. 28 U.S.C. Section(s) 1333. We have appellate jurisdiction from final decisions of district courts. 28 U.S.C.Section(s) 1291. Our review of a grant of summary judgment is plenary. Public Interest Research of ...