Detroit Edison Co. v. NABCO, Inc.

872 F. Supp. 371, 26 U.C.C. Rep. Serv. 2d (West) 346, 1992 U.S. Dist. LEXIS 22223, 1992 WL 694412
CourtDistrict Court, E.D. Michigan
DecidedNovember 6, 1992
DocketNo. 89-CV-70280-DT
StatusPublished

This text of 872 F. Supp. 371 (Detroit Edison Co. v. NABCO, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Detroit Edison Co. v. NABCO, Inc., 872 F. Supp. 371, 26 U.C.C. Rep. Serv. 2d (West) 346, 1992 U.S. Dist. LEXIS 22223, 1992 WL 694412 (E.D. Mich. 1992).

Opinion

ORDER GRANTING SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS DRAVO AND VECTURA

HACKETT, District Judge.

This is an action for recovery of damages resulting from a failure in a longitudinal weld in a hot reheat pipe at Detroit Edison’s Monroe, Michigan plant. The theory upon which this case rests has been the subject of several dispositive motions and findings by this court. Defendants Dravo Corp. (Dravo) and Vectura Group, Inc. (Vectura)1 were permitted to file supplementary motions for summary judgment in light of the recent Michigan Supreme Court decision in Neibarger v. Universal Cooperatives Inc., 439 Mich. 512, 486 N.W.2d 612 (1992).

The Court in Neibarger clarified the application of the economic loss doctrine in Michigan and ruled on the use of the “other property” exception to the doctrine. Because this court has based its prior denial of summary judgment on that exception, the court must reconcile its'determination of the applicability of the exception as guided by the Michigan Supreme Court.

Both parties have filed extensive supplemental briefs arguing the impact of the Nei-barger decision on defendants’ motion for summary judgment. Oral arguments have been heard.

PRIOR FINDINGS

In an April 2, 1991, order denying summary judgment for defendants, this court stated and concluded:

In the instant matter, Edison and Dravo are both commercial entities that bargained for the pipe contract from positions of relatively equal strength. The pleadings indicate that Edison specially ordered the pipe and gave Dravo unique specifications for it. Accordingly, if plaintiffs seek only economic damages from the malfunctioning of the pipe, then the economic loss doctrine will apply to this suit and plaintiffs will have only contract remedies available for recovery.
In each count of the complaint, plaintiffs state that as a result of defendants’ acts, “Edison sustained damage to its property and business for which it has not been compensated and Protection Mutual is sub-rogated to the extent of its payment to Detroit Edison.” Plaintiffs have substantiated the damage to their property beyond [373]*373the pipe itself and the Unit 1 turbine. The explosion caused damage to the floors, windows, walls and paneling of the energy plant. Asbestos was disbursed throughout the facility and a substantial cleanup operation was required. The court determines that these losses constitute damage to property beyond the pipe and turbine. Plaintiffs, therefore, may seek recovery under tort theories of law.

Order Denying Defendants’ Motion for Summary Judgment, April 2, 1991, at pp. 4-5.

There are no changes in the court’s prior factual findings. However, at the time summary judgment was denied to defendants, the Michigan Supreme Court “had not explicitly addressed the economic loss doctrine.” Neibarger, 439 Mich. at 523, 486 N.W.2d at 616. The Neibarger opinion provides guidance regarding the doctrine which was previously unavailable. Thus, this court must apply the Court’s interpretation of that doctrine to the facts in this ease. See Monette v. Am-7-7 Baking Co. Ltd., 929 F.2d 276, 280 (6th Cir.1991).

THE ECONOMIC LOSS DOCTRINE

The economic loss doctrine is “a judicially created doctrine which bars recovery in tort where the relationship between the parties is contractual and the only losses alleged are economic.” Frey Dairy v. A.O. Smith Harvestore Products, 886 F.2d 128, 129 (6th Cir.1989). The doctrine is applicable to suits in which “all the parties to a transaction are commercial enterprises of relatively equal strength, have bargained for the production and treatment of specially manufactured goods, and the only damages are commercial economic losses resulting from defects in the goods themselves....” Consumers Power Co. v. Mississippi Valley Structural Steel Co., 636 F.Supp. 1100, 1109 (E.D.Mich.1986). Business plaintiffs in such circumstances must look to the UCC for recovery rather than to tort remedies such as negligence or products liability.

In construing the economic loss doctrine, the Court in Neibarger held:

Where a plaintiff seeks to recover for economic loss caused by a defective product purchased for commercial purposes, the exclusive remedy is provided by the Uniform Commercial Code, including the four-year statute of limitations.

439 Mich. at 527, 528, 486 N.W.2d at 618.

The court emphasized important policy considerations:

[The economic loss doctrine] hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner traditionally remedied by the law of torts.

Id. at 521, 486 N.W.2d at 615.

... [I]n a commercial transaction, the parties to a sale of goods have the opportunity to negotiate the terms and specifications, including warranties, disclaimers, and limitation of remedies. Where a product proves to be faulty after the parties have contracted for sale and the only losses are economic, the policy considerations supporting products liability in tort fail to serve the purpose of encouraging the design and production of safer products.

Id., at 523, 486 N.W.2d at 616.

The Neibarger plaintiffs, dairy farmers, alleged that an entire vacuum system of their milking equipment had been improperly designed and installed. They claimed breach of express warranty, breach of implied warranty, and negligence. Specifically, plaintiffs’ claims were for losses incurred when their cattle became ill, suffered a loss of milk production, and had severe instances of mastitis. 439 Mich. at 516, 517, 486 N.W.2d at 613. The Court found that the plaintiffs’ losses were solely economic, resulting from the defective product which was purchased for commercial purposes. The Michigan Supreme Court upheld summary disposition for defendants, finding that plaintiffs’ complaint was governed by the UCC and its four-year period of limitations. Id. at 537, 486 N.W.2d at 622.

Like the plaintiffs in the instant ease, the plaintiffs in Neibarger argued that the eco[374]*374nomic loss doctrine did not bar their claims because they were asserting damage to property other than the goods themselves. The Court recognized the exception carved out to allow tort claims for damages to property other than the defective product itself. Id. at 530, 486 N.W.2d at 619.

As to the property damages, the Court focused on the characterization of the injuries as economic losses, requiring consideration of the underlying policies of tort and contract law: “Although there is support for the view that the UCC does not bar a tort claim where the plaintiffs are seeking to recover for property other than the product itself, we find in these cases that, notwithstanding injury to the plaintiffs dairy herds, the damages claimed are economic losses.” Id.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Anderson v. Liberty Lobby, Inc.
477 U.S. 242 (Supreme Court, 1986)
Agristor Leasing v. Spindler
656 F. Supp. 653 (D. South Dakota, 1987)
Sullivan Industries, Inc. v. Double Seal Glass Co.
480 N.W.2d 623 (Michigan Court of Appeals, 1991)
80 South Eighth Street Ltd. Partnership v. Carey-Canada, Inc.
486 N.W.2d 393 (Supreme Court of Minnesota, 1992)
Neibarger v. Universal Coopertives, Inc.
486 N.W.2d 612 (Michigan Supreme Court, 1992)
Neibarger v. Universal Cooperatives, Inc
450 N.W.2d 88 (Michigan Court of Appeals, 1989)
Hapka v. Paquin Farms
458 N.W.2d 683 (Supreme Court of Minnesota, 1990)

Cite This Page — Counsel Stack

Bluebook (online)
872 F. Supp. 371, 26 U.C.C. Rep. Serv. 2d (West) 346, 1992 U.S. Dist. LEXIS 22223, 1992 WL 694412, Counsel Stack Legal Research, https://law.counselstack.com/opinion/detroit-edison-co-v-nabco-inc-mied-1992.