Oklahoma Gas & Electric Co. v. McGraw-Edison Co.

1992 OK 108, 834 P.2d 980, 18 U.C.C. Rep. Serv. 2d (West) 77, 63 O.B.A.J. 2300, 1992 Okla. LEXIS 173, 1992 WL 167301

• Court: Supreme Court of Oklahoma
• Decided: July 14, 1992
• Docket: 74381
• Status: Published

Opinions

HODGES, Vice Chief Justice.

Pursuant to the Oklahoma Uniform Certification of Questions of Law Act, Okla. Stat. tit. 20, §§ 1601-1611 (1991), the United States Court of Appeals for the Tenth Circuit certified the following question to this Court: “Can a plaintiff in a manufacturer’s products liability action recover damages for injury to the allegedly defective product itself and consequential economic harm flowing from that injury?” We answer in the negative.

Plaintiff, Oklahoma Gas & Electric Company (OG & E), entered into contracts with H.B. Zachary Company and Bexar Equipment Company for the purchase of a three-phase power transformer. Bexar Equipment Company entered into a contract with Defendant, McGraw-Edison Company (McGraw-Edison), for the manufacture of the transformer pursuant to the requirements of OG & E. The transformer was placed into service in August, 1977. It exploded on March 23, 1981.

OG & E filed this action in Oklahoma state court on March 22, 1983, seeking recovery of actual damages for injury to the allegedly defective transformer and ancillary equipment and consequential damages for clean-up, repair and reinstallation of the transformer, rental and handling of a temporary transformer and lost profits. These damages were pursued on theories of negligence in the design and manufacture of the transformer, breach of express and implied warranties and manufacturers’ products liability.

After removal to the federal court, OG & E dismissed its claims of negligence and breach of warranties. The federal district court granted partial summary judgment in favor of McGraw-Edison on OG & E’s claim for damages to the transformer itself and resultant economic harm flowing therefrom. Leave to appeal the partial summary judgment was granted but subsequently dismissed as improvidently granted. On remand, OG & E dismissed its claim for damages to ancillary equipment. The federal district court entered final summary judgment in favor of MeGraw-Edison on OG & E’s claim of manufacturers’ products liability for damages to the transformer itself and consequential economic losses. OG & E appealed, prompting the Tenth Circuit to certify the question of law to this Court. The certification of this question, however, predated this Court’s pronouncement in Waggoner v. Town & Country Mobile Homes, Inc., 808 P.2d 649 (Okla.1990).

In Waggoner, the purchasers of a defectively designed mobile home sued the manufacturer and the dealer to recover actual damages to the product and punitive damages for the disappointment associated with the manufacturer’s unsuccessful attempts to remedy the defect. No claim for personal injury or damage to other property was asserted. Id. at 653. Paced with a claim for purely economic loss to the product itself, this Court held that any such attempt to recover should have been brought under the warranty provisions, express or implied, of the sales contract. Id.

The Waggoner court noted that a buyer’s economic expectations are adequately protected by the warranty provisions of the Uniform Commercial Code. Therefore, damage to the product itself, alleged to be caused by a defect, presents a contract action based on the sales contract. In contrast, personal injuries and damage to other property are the harms that manufacturers’ products liability was designed to remedy. “No action lies in manufacturers’ products liability for injury only to the product itself resulting in purely economic loss.” Id.

Waggoner also noted that the United States Supreme Court reached the same result in a unanimous decision in East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). The Supreme Court noted that most states do not allow recovery in products liability for purely economic losses. It concluded that the law of warranties adequately protected a buyer’s expectations as to product value. Id. at 872, 106 S.Ct. at 2302. See Waggoner, 808 P.2d at 653. This Court adopted that reasoning in Waggoner and reached the same result.

The Waggoner holding controls here. No claim for personal injury or damage to other property is presented by this action. OG & E’s action for damages to the product and consequential economic losses sounds in contract, not in manufacturers’ products liability. In answer to the certified question, the plaintiff in this action may not recover damages for injury to the allegedly defective product itself and consequential economic harm flowing from that injury upon the theory of manufacturers’ products liability.

CERTIFIED QUESTION ANSWERED.

LAVENDER, SIMMS, HARGRAVE, SUMMERS and WATT, JJ., concur. OPALA, C.J., and ALMA WILSON and KAUGER, JJ., dissent.