PR Overseas Boating, LTD v. Quick Spa

• Court: Court of Appeals for the Eleventh Circuit
• Decided: August 18, 2023
• Docket: 22-11730
• Status: Unpublished

Opinion

USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 1 of 14

[DO NOT PUBLISH] In the United States Court of Appeals For the Eleventh Circuit

____________________

No. 22-11730 Non-Argument Calendar ____________________

ROGER MARTIN, Plaintiff, PR OVERSEAS BOATING, LTD, Plaintiff-Appellant, versus QUICK SPA, a.k.a. Quick USA, Inc., THE TALARIA COMPANY, LLC, d.b.a. as The Hinckley Company,

Defendants-Appellees, USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 2 of 14

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JOHN MILLER,

Defendant.

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 2:19-cv-14153-JEM ____________________

Before ROSENBAUM, NEWSOM, and BRASHER, Circuit Judges. PER CURIAM: PR Overseas Boating, Ltd. (“PRO”) appeals the district court’s grant of summary judgment on its claims for breach of im- plied warranty of fitness for a particular purpose, negligent instal- lation, and negligent misrepresentation, arising from the purchase and installation of a gyroscopic stabilization system on a 63-foot yacht. After careful review, we affirm the grant of summary judg- ment on PRO’s negligence claims, but we vacate in part and re- mand for further proceedings on its implied-warranty claim. I. PRO owns a 63-foot yacht called the Time Out. In 2017, after the vessel was damaged in Hurricane Irma, PRO’s owner, Roger Martin, brought the Time Out to a boatyard facility in Stuart, Flor- ida, which The Talaria Company, LLC, doing business as The USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 3 of 14

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Hinckley Company (“Hinckley”), operated. Martin hired Seaport Yacht Services, Inc., (“Seaport”) and its owner, Captain Christo- pher Leyden, to be PRO’s agent and oversee the repairs. While the Time Out was under repair, Martin asked Leyden to look into installing gyroscope stabilizers on the vessel with the goal of reducing the roll motions of the Time Out. Leyden went to Randy Ward, Hinckley’s representative, who suggested gyroscope stabilizers made by Quick S.p.A. (“Quick”), an Italian company, which were smaller than a competitor’s product and could be in- stalled in the engine room of the Time Out. Ward also introduced Leyden to Jeff Spath from Quick USA, Inc., a Quick subsidiary. Leyden traveled to Quick’s facility in Italy and met with its representatives. Leyden told Quick representatives he was con- cerned about installing the Quick system in the Time Out’s engine room because the gyroscopes were air-cooled and the drivers could get hot and cause the equipment to overheat. The Quick gyro- scopes were operated through a separate driver box, which is an electronic device that effectively serves as the “brain” of the equip- ment. Quick’s CEO, Michel Marzucco, assured Leyden that Quick had never had a problem with its air-cooled gyroscopes in the en- gine room on previous yachts, and other Quick representatives likewise reassured Leyden that his concerns were unfounded. Ley- den also raised the same issue “many times during installation” with both Spath and Ward. After speaking with Leyden, Martin decided to have a Quick gyroscopic system installed in the Time Out. Quick selected the USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 4 of 14

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specific equipment used in the system based on information Hinck- ley provided. Leyden’s company Seaport contracted with Hinck- ley for the purchase and installation of the stabilization equipment in the engine room of the Time Out. Martin and PRO advanced the necessary funds. Hinckley installed the Quick gyroscopic system with assistance from Quick. The Time Out project was Hinckley’s “first Quick gyro installation,” though it had installed other gyro- scopic stabilizers. At a boat show in November 2018, after the installation was completed, Martin permitted the Time Out to be displayed for an exhibition of the Quick gyroscopic system. When Quick’s presi- dent saw the installation for the first time, he yelled obscenities and indicated the installation was incorrect. Then, during the first sea trial, the system overheated and shut down. Quick paid a contrac- tor to install an air-conditioning unit in the engine room of the ves- sel, but the air-conditioning unit failed to prevent the gyroscopic system from overheating. Hinckley did not conduct any ventila- tion or temperature studies of the Time Out’s engine room until af- ter the failed sea trial. In October 2021, at a later sea trial, the gyro system failed at trolling or slow-speed operation, which is the speed for which the system was marketed. The gyroscopes spat out a dark gray granu- lar foam debris that appeared to be insulation. II. PRO sued, asserting three claims: (1) against Hinckley for breach of implied warranty of fitness for a particular purpose, see USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 5 of 14

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Fla. Stat. § 672.315; (2) against Hinckley for negligent installation of the Quick gyroscopic system; and (3) against Quick for negligent misrepresentation. The defendants moved for summary judgment on all claims. Hinckley argued that the implied-warranty claim failed because the Quick gyroscopic system was purchased and installed for its ordi- nary purpose—roll reduction or stabilization—and not a particular purpose. Hinckley also maintained that the negligent-installation claim was barred by Florida’s economic loss rule as intertwined with PRO’s warranty claim, and that Hinckley otherwise did not breach a duty owed to PRO. For its part, Quick argued that PRO’s negligent-misrepresentation claim was not supported by the evi- dence and was barred by the economic loss rule. PRO responded that Hinckley impliedly warranted that the Quick gyroscopic system would be fit for the particular purpose of providing stabilization in the Time Out’s engine room, and that Hinckley negligently installed the stabilization system by failing to perform a pre-installation ventilation study or to follow the instal- lation manual. PRO further said that Quick made negligent mis- representations about “the particular Gyro System and specific lo- cation where it was installed.” Finally, PRO asserted that the eco- nomic loss rule did not bar its claims because it was an intended third-party beneficiary of the contract for the purchase and instal- lation of the Quick gyroscopic system. PRO did not otherwise ad- dress the economic loss rule. USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 6 of 14

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The district court entered summary judgment for the de- fendants. The court first found that, because PRO intended to use the Quick gyroscopic system for the ordinary purpose of stabiliza- tion, PRO failed to prove a “particular” purpose as a matter of law. And second, the court rejected PRO’s claimed third-party benefi- ciary exception and concluded that Florida’s economic loss rule barred PRO’s negligence claims because the subject matter of those claims was “interwoven with the Warranty.” PRO now appeals. III. We review a district court’s grant of summary judgment de novo. Global Quest, LLC v. Horizon Yachts, Inc., 849 F.3d 1022, 1026 (11th Cir. 2017). “Summary judgment is appropriate when the ev- idence, viewed in the light most favorable to the nonmoving party, presents no genuine issue of material fact and compels judgment as a matter of law.” Id.; see Fed. R. Civ. P. 56(a). IV. PRO seeks to hold Hinckley liable on a theory of implied warranty of fitness for a particular purpose. “[L]iability for breach of an implied warranty is based on the agreement, imposed by law, to be responsible in the event the thing sold is not in fact fit for the use and purposes intended.” Papas v. Upjohn Co., 985 F.2d 516, 520 (11th Cir. 1993) (quotation marks omitted). An implied warranty of fitness arises “where a seller has reason to know a particular pur- pose for which the goods are required and the buyer relies on the seller’s skill or judgment to select or furnish suitable goods.” Royal USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 7 of 14

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Typewriter Co. v. Xerographic Supplies Corp., 719 F.2d 1092, 1100 (11th Cir. 1983); see Fla. Stat. § 672.315. “Florida’s U.C.C. distinguishes a ‘particular purpose’ from a use to which the goods are ordinarily put.” First New England Fin. Corp. v. Woffard, 421 So. 2d 590, 597 n.10 (Fla. Dist. Ct. App. 1982); see McLeod v. W.S. Merrell Co., 174 So. 2d 736, 738 (Fla. 1965). A “particular purpose” means “a specific use by the buyer which is peculiar to the nature of his business.” Royal Typewriter, 719 F.2d at 1100. It does not include “uses which are customarily made of the goods in question,” which are instead covered by the concept of merchantability. Fla. Stat. § 672.315, cmt. n.2. If the contem- plated use of the good is the ordinary purpose for which the good is sold, no warranty of fitness for a particular purpose arises. Royal Typewriter, 719 F.2d at 1100. Nevertheless, whether an implied warranty arises is “a question of fact to be determined by the cir- cumstances of the contracting,” Fla. Stat. § 672.315, “focus[ing] on the relationship between the buyer and the seller,” D-I Davit Int’l- Hische GMBH v. Carpio, 346 So. 3d 197, 202 (Fla. Dist. Ct. App. 2022). The district court ruled that PRO could not prove a “partic- ular” purpose because it intended to use the Quick gyroscopic sys- tem for the ordinary purpose of stabilization. We agree to a degree that PRO intended that ordinary purpose. But our review of Flor- ida caselaw indicates that PRO is not foreclosed from establishing a more “particular” purpose in the circumstances of this case. USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 8 of 14

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In Chrysler Corp. v. Miller, for example, the plaintiff sought to recover for breach of implied warranty of fitness after the engines and outdrives specifically recommended by the defendant for the plaintiff’s houseboat did nothing to fix the houseboat’s power fail- ures. 310 So. 2d 356, 357 (Fla. Dist. Ct. App. 1975). Nothing sug- gested an intended use for the propulsion system other than the ordinary one: propulsion. Nevertheless, the Florida appellate court affirmed the verdict for the plaintiff, explaining that the plaintiff “had the right to expect that this power system properly would pro- pel his Gallen houseboat” when he purchased it based on the de- fendant’s representations and advice. Id. Because the power sys- tem was not adequate to “propel plaintiff’s houseboat properly,” “through no fault of his, plaintiff was entitled to be redressed there- for.” Id. Similarly, in Cedars of Lebanon Hospital Corp. v. European X- Ray Distributors of America, Inc., the plaintiff hospital sued for breach of express warranty and implied warranty of fitness for a particular purpose, alleging that two remote x-ray systems it purchased in re- liance on the defendant’s representations and inducements were unfit for the intended purpose of taking diagnostic x-rays. 444 So. 2d 1068, 1071–72 (Fla. Dist. Ct. App. 1984). Again, it appears the x- ray systems were purchased for their ordinary use: taking x-rays. Yet the Florida appellate court held that the plaintiff stated a claim for breach of an implied warranty of fitness based on various rep- resentations the defendant made, including that “the equipment was capable of handling the high volume hospital use for which it was needed.” Id. at 1072. USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 9 of 14

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To be sure, Miller and Cedars of Lebanon did not directly ad- dress the “particular purpose” issue. But their results are consistent with the principle that whether an implied warranty of fitness arises is “a question of fact to be determined by the circumstances of the contracting.” Fla. Stat. § 672.315. In Miller, the plaintiff relied on the defendant’s advice to purchase certain products to fix the power issues on his houseboat. In Cedars of Lebanon, the plaintiff relied on the defendant’s representations that the x-ray systems were very high quality and capable of handling the hospital’s de- mands. In both cases, the courts “focus[ed] on the relationship be- tween the buyer and the seller,” Carpio, 346 So. 3d at 202, including the sellers’ tailored claims about product usage in a specific context. See also First New England Fin. Corp. v. Woffard, 421 So. 2d 590, 596 (Fla. Dist. Ct. App. 1982) (“Appellee has shown that the seller knew of appellee’s particular purpose and that appellee was relying on the seller’s judgment in choosing the best yacht for that purpose, i.e., crossing oceans as opposed to weekend lake sailing.”). PRO is in a position similar to that of the plaintiff in Miller. In the light most favorable to PRO, the evidence reflects PRO re- lied on Hinckley’s skill and expertise to select a suitable stabiliza- tion system for the unique constraints posed by the Time Out, just as the plaintiff in Miller relied on the defendant’s advice to purchase a propulsion system for his particular houseboat. Hinckley also was well aware of PRO’s unique demands when it sold the Quick system. So PRO “had the right to expect that this [stabilization] system properly would” stabilize the Time Out. See Miller, 310 So. 2d at 357. Accordingly, we cannot say as a matter of law that the USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 10 of 14

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evidence fails to support a “particular” purpose giving rise to an implied warranty of fitness. See Fla. Stat. § 672.315. For these reasons, we vacate the grant of summary judg- ment on PRO’s claim for breach of implied warranty of fitness for a particular purpose under Florida law. We express and imply no opinion about whether the evidence is otherwise sufficient to es- tablish entitlement to relief on such a claim. V. PRO also challenges the district court’s conclusion that the economic loss rule barred its claims for negligent installation and negligent misrepresentation. “[T]he economic loss rule is a judicially created doctrine that sets forth the circumstances under which a tort action is prohibited if the only damages suffered are economic losses,” without any claim of personal injury or property damage. Tiara Condo. Ass’n, Inc. v. March & McLennan Cos., Inc., 110 So. 3d 399, 401–02 (Fla. 2013). The economic loss rule was “designed to prevent the appli- cation of tort remedies to traditional contract law damages.” Global Quest, 849 F.3d at 1030. Nevertheless, Florida courts recognize sev- eral exceptions to this doctrine, including for “torts committed in- dependently of the contract breach,” such as certain fraud or negli- gent-misrepresentation claims. Tiara Condo., 110 So. 3d at 402; see Vesta Constr. & Design, L.L.C. v. Lotspeich & Assocs., Inc., 974 So. 2d 1176, 1181–82 (Fla. Dist. Ct. App. 2008). Before the district court, the defendants sought summary judgment on the negligence claims on the ground that Florida’s USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 11 of 14

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economic loss rule as intertwined with and therefore subsumed by any warranty claim barred them. PRO’s response in opposition to these arguments did not contend that the negligence claims fell within the exception for independent torts. Tiara Condo., 110 So. 3d at 402. Instead, PRO relied solely on a purported exception to the economic loss rule for third-party beneficiaries. On appeal, however, PRO relies on both purported exceptions. We address each in turn. A. Put simply, there is no exception to the economic loss rule for third-party beneficiaries, as the district court correctly ex- plained. See Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532, 543 (Fla. 2004) (listing the recognized exceptions to the eco- nomic loss rule), abrogated on other grounds by Tiara Condo., 110 So. 3d 399. None of the cases PRO cites stand for that proposition. Rather, the cited cases simply outline when a third party can satisfy the privity requirement and enforce the terms of a contract. See, e.g., Merino v. Ethicon Inc., 536 F. Supp. 3d 1271, 1286 (S.D. Fla. 2021); Hawaiian Airlines, Inc. v. AAR Aircraft Servs., Inc., 167 F. Supp. 3d 1311, 1318–19 (S.D. Fla. 2016). No one here disputes that PRO was an intended third-party beneficiary of the contract for the Quick gyroscopic system on the Time Out. But that fact is not material because the application of the products-liability economic loss rule does not depend on privity. See Am. Aviation, 891 So. 2d at 541 (“[T]he products liability eco- nomic loss rule . . . applies even in the absence of privity of USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 12 of 14

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contract.”). “[T]he premise of the rule is simply that a contract ac- tion is more appropriate for recovering economic losses than is a negligence action.” Ocean Ritz of Daytona Condo. v. GGV Assocs., Ltd., 710 So. 2d 702, 705 (Fla. Dist. Ct. App. 1998). PRO fails to offer any supporting reasoning for its view that third-party benefi- ciaries should be excluded from the rule’s reach. See id. (rejecting a third-party beneficiary exception to the economic loss rule). Ac- cordingly, the district court correctly rejected the sole argument PRO raised below regarding the economic loss rule. B. For the first time on appeal, PRO contends that its negligent- misrepresentation claim falls within the exception for “torts com- mitted independently of the contract breach.” Tiara Condo., 110 So. 3d at 402. PRO also asserts that the economic loss rule does not apply to the negligent-installation claim because it “sought dam- ages for ‘consequential’ damages” in the operative pleading. Hinckley responds that these arguments were not properly raised below and should not be considered on appeal. “[I]ssues raised for the first time on appeal are generally for- feited because the district court did not have the opportunity to consider them.” Reider v. Philip Morris USA, Inc., 793 F.3d 1254, 1258 (11th Cir. 2015); see Hurley v. Moore, 233 F.3d 1295, 1297 (11th Cir. 2000) (“Arguments raised for the first time on appeal are not properly before this Court.”). Nonetheless, we may choose to con- sider a forfeited argument on appeal in certain rare circumstances. Access Now. Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1332 (11th Cir. USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 13 of 14

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2004). Those circumstances include when the issue involves a pure question of law and refusal to consider it would result in a miscar- riage of justice, or when the proper resolution is beyond any doubt. Ramirez v. Sec’y, U.S. Dep’t of Transp., 686 F.3d 1239, 1250 (11th Cir. 2012); see also United States v. Campbell, 26 F.4th 860, 873 (11th Cir. 2022) (en banc). In our view, no exceptional circumstances are present here. PRO’s new reliance on the exception for independent torts does not present a “pure question of law,” nor is the proper resolution of the issue beyond doubt. In applying the independent-torts ex- ception, Florida courts have drawn a distinction “between misrep- resentations that are directly related to the breaching party’s per- formance of the contract and those which are independent of the contract (for example, a misrepresentation which induces the party to enter the contract).” Vesta Constr. & Design, 974 So. 2d at 1181; see Hotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So. 2d 74, 78 (Fla. Dist. Ct. App. 1997) (stating that “where the alleged fraudulent mis- representation is inseparable from the essence of the parties’ agree- ment, the economic loss rule applies,” even if the representations were precontractual). Whether the alleged misrepresentations here were “related to” or “independent” of the contract is hardly clear, as both parties can identify some support in the caselaw. And the issue calls for the kind of “fact-specific” inquiry generally inappropriate for reso- lution for the first time on appeal. See Access Now, 385 F.3d at 1332– 33. Plus, PRO’s reply brief wholly fails to respond to the forfeiture USCA11 Case: 22-11730 Document: 52-1 Date Filed: 08/18/2023 Page: 14 of 14

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issue, which Hinckley raised in its response brief, so it offers no rea- son to deviate from the general rule that issues raised for the first time on appeal will not be considered. Accordingly, we decline to resolve whether the negligent misrepresentation claim is suffi- ciently independent of the warranty to be excepted from the eco- nomic loss rule. As for the negligent-installation claim, PRO likewise failed to raise its current argument at summary judgment, so it is for- feited. In any case, the only argument PRO makes on appeal re- garding this claim and the economic loss rule is that it “sought dam- ages for ‘consequential’ damages,” citing its operative pleading. But PRO “may not rest upon mere allegation or denials of [its] pleadings” to establish a “genuine issue for trial.” Anderson v. Lib- erty Lobby, Inc., 477 U.S. 242, 256 (1986). And it does not cite any affirmative evidence supporting its claim for damages other than economic losses. See id. Accordingly, PRO has not shown that the district court erred in granting summary judgment. VI. In sum, we vacate the grant of summary judgment on PRO’s claim for breach of implied warranty of fitness for a particular pur- pose. We affirm the judgment against PRO on its claims for negli- gent installation and negligent misrepresentation. AFFIRMED in part; VACATED and REMANDED in part.