case number one five six four one zero state farm mutual auto insurance company at all versus nor code incorporated argument not to exceed fifteen minutes per side mr shafer you may proceed for the dispositive issue in this case is whether the kentucky supreme court would apply the economic loss rule to consumer products in addition to commercial products and of course we say yes it would and that the district court erred in ruling to the contrary in our view the economic loss rule applies to this case for three principle reasons first of all footnote five in the getting thin lewis case gives a very strong intention of how the kentucky supreme court would view this issue if it were to come before the court  commercial transactions so why shouldn't that carry more weight than a reference to the restatement in a footnote that explicitly refuses to consider the effect of the economic loss rule on consumer transactions well the or the origins your honor of the economic law through are in commercial products but the rule has expanded such that now a majority of the jurisdictions apply it to both commercial and consumer products and the fact of the matter is getting thin lewis was a case that dealt with a commercial product there was no reason for the court to decide whether the economic loss rule applies to consumer cases and i i would give the kentucky supreme court credit for very carefully staying and delineating  holding was in getting xin lewis that is that it applied to commercial cases but at the same time they didn't have to drop footnote five in there but they did for a reason and i think the reason is clear that if the kentucky supreme court were weren't to consider the case the issue that you have to look at the restatement and see that there is no distinction between commercial products and consumer products in other words a product is a product under the restatement of the in our view  things and lewis while the footnote is dicta of course that is the best evidence of where the court would go in a case like this for the reasons that i'll get to difference to your argument th kentucky itself was a light to the game so to speak and even adopting the economic no i don't think so your honor we do now have the advantage of a lot of authorities from a lot of different states that we've provided citation to from the what was it called for him or in friedman treatise the court style that this court cited to in the hoover universal case we've now seen that most jurisdictions do apply the rule in both types of cases and we see through repeated decisions of our supreme court in kentucky that it tends to follow the majority of jurisdictions on an issue like this getting xin lewis for example was a straight down the middle follow the majority kind of ruling they they followed the majority rule on applying the rule on determining there was no calamitous event exception defining the product for purposes of the rule and in addition to that we see consistently in recently that the kentucky supreme court does tend to follow the restatement particularly the restatement of torts in terms of product liability cases or the principle sections of which that are applicable here are section four o two a which the falcon call court utilized back in its  decision earlier and also section nineteen a of the restatement third of torts product liability which was specifically referred to in this footnote but but but an important point i do want to get to is that the real estate marketing versus france case has been completely discredited and disavowed in so far as the economic loss rule is concerned why is that important is important because it was the france case that this court utilized back in two thousand and two in the hoover universal opinion fourteen years ago for it what i'll call an eerie gas index that the kentucky supreme court probably would not apply the economic law through all in consumer cases i think with the passage of time and the issuance of the getting xin loise opinion we see that the court and hoover universal simply read too much into france and france has no presidential value here i mean just to be specific  here's what they're getting is in lewis case said about france that is the economic loss rule at the economic loss rule was really never implicated in the friend case it was never the phrase was never used the doctrine was never implicated the partners language in france as the court noted in getting zulu is in fact may well be dicked was not altogether law recognizes the calamitous event exception to the economic loss rule so what we see is that france ought to be just completely wiped away from the equation here if we w franz away from the equation the dig in mount lebanon or hoover universal goes away and we're left with getting to lewis and the dick that we feel is highly suggestive in getting loose put in the number five and we have with all the strength again i'm struggling with the policy arguments because it seems to me that getting some loose makes a fairly strong explanation an really but isn't that a very different sexual context and a consumer transaction where the truth is consumer consumers are generally not as well informed about the products as are the manufacturers of them nor are consumers right or really are they are rarely in the position of being able to negotiate a contract so why wouldn't the policies underlying the rule itself show the distinction here well that's a good question your honor and and as we point out in our brief we believe the policies do apply equally well and many cases from across the country have said of the state farm versus ford motor company case from wisconsin which we cited in our brief goes on in great detail to discuss why those policies are the same when we first of all getting xin lewis emphasize the historical distinction between toward and contract law that is an important distinction and it's part of the public policy of kentucky otherwise contract law just drowns in a sea of tort to paraphrase the united states supreme court and also i think the policies recognizing getting xin lewis recognize that a manufacturer like nor called has a right to provide a warranty per student to the principals under and the limitations allowed by the uniform commercial code and  in that regard the hoover universal case actually speaks to this and it specifically holds that under applying kentucky law as it did that application of the economic loss rule does not require privity it does not require equal bargaining power and it does not require that the plaintiffs ever had an opportunity to obtain a warrant to those though that that's that's a holding from the hoover universal case that's completely consistent with getting xin lewis and these policies and of course i have to point out the third policy that's often articulated is the fact that the purchaser always has the right to allocate risk if not by contract by obtaining insurance which is exactly what happened but isn't that part  distinguishing factual context i know you guys have several examples in your briefing of of the right to contract that was one of the arguments and i'm just not quite did give a warranty in this case as the product manufacturer it was a three year warranty and and our view is that application of the economic loss rule simply should not depend on whether it incident like this occurred during the warranty period or serendipitously after the warranty period if this incident occurred during the warranty period none of us would be here because there would be a contract remedy a warranty remedy unlike the situation we have here where the fact of the matter is a used product was purchased for just after the warranty at expired i think that's the best way to understand it if we start drawing distinctions contract law truly does drown in a sea of tort there has to be a distinction ok there further question now thank you our code as a result of the fire which occurred back in two thousand and thirteen i think i would start like to start by noting that there are what i consider to be at least two very unusual circumstances in this case refrigerator that was in two thousand and seven and that was of course the product liability action that we alleged against or called the second was the circumstance where biden or cold after pressure i suppose from the federal authorities entered into a recall arrangement and in two thousand and eleven arranged for service or repair work to be done on this refrigerator the second aspect which i will jump to very quickly which i think is unusual is that in this particular litigation after the lower court held that the economic loss rule did not apply in total because it was a consumer transaction that the north pole decided to follow was what is referred to as an admission of liability except for the application of the economic loss rule i have not personally seen that i think it's much more than just a judicial admission because a biased biased term has to admit all of the facts as well as the causes of action that give rise to liability in this case based upon the allegations in the complaint and of course the admission of liability from north pole the court subsequently decided that even if the economic loss rule would apply to this transaction in other words to a consumer transaction that it would not apply to the liability created by nor cold's recall activity which occurred four and a half years after they made this refrigerator as a result of all that they farm was awarded the judgment against an oracle i want to point out clearly that the basis for foundation for the validity of that judgment is both factual circumstances they are connected because they involve a refrigerator made by nor called but they are separate types of causes of actions separate theories and as the court ruled the lower court ruled were entitled to judgments farm was on either cause of action the one thing i haven't heard at all so far and where i am going to start on behalf of my clients they farm is that i believe this case can be entirely resolved on the basis of the recall activity the primary reason is that your cold is now acknowledged in this brief that the economic loss rule does not apply to repair or service activity associated with this recall ended up deciding that regardless of the ruling concerning whether this was a consumer transaction and whether it applied there that this was a negligence based repair opposing counsel brief clearly just that argument noting that it was simply your stipulation that it would be liable for all property damaged that i think i think his argument is incorrect it was referred to talked about in our brief that the whole concept of an admission is usually thought of in terms of a judicial admission of course that's an eviden matter and here we have a situation that the admission of liability that was drafted and filed solely by nor cold with no involvement from state farm they have admitted that they would be liable for the property damage except for that one defense that means that they have by that admission of liability has to follow then that all factual matters have been resolved against my thirty years of practice i have never had a situation in a piece of litigation before the by admitting that they would be liable for the property damages except for the one defen that then the has to then name that everything else has standard method we want to start getting into facts which i don't think we should do at this stage  record are your calls on product recall documents where they referred to the activities of the recall as being a service or repair i do not believe that even common sense would dictate that something that is arranged for a half years after the product is made has to be regarded as some kind of repair or service activity just bertelsmann clearly found that that was the case we had no problem at all in determining this was a negligent repair claim as concerns at least the recall activity i would again point out that this is only one of the two factual circumstances that the the judgment we have against the effect of what i believe to be the recall and the repair activity being sufficient to support the judgment i don't believe even requires this court to go to the issue of whether or not kentucky's would apply the economic loss rule and consumer transaction cases and obviously it's there and i will address that but i believe how do you respond to the the admission of liability was what then triggered the trial court to go ahead in our judgment because all elements of the claim had been admitted but as to the actual specifics of the repair activity the recall activity nor cold was responsible for all of those activities except as i phrased it in my brief except for actually taking out the drill drilling a hole putting in the parts and that was that was done by a third party that of course they paid for other than that they dictated exactly the kind of repair activity how it should be done under what terms should be done and ultimately of course they paid for it to be done and as we all know a corporation has to act through someone else we never alleged that the actual repair itself was performed what we did what we did allege was that they were negligent in the type of recall repair that they arranged they did not fix anything they merely put a high temperature sensor and they were frederator with the hope that when it started getting too hot it would stop it from causing a fire and it didn't do that in this case i would i would really skip to the second portion of the matter and that would be whether kentucky would apply the economic loss rule to consumer sales or consumer transactions the it seems to me that the decision entered by judge bertelsmann just less than a year ago and is now which is now been published lays out specifically why kentucky would not do that  and would not apply it to the consumer sales goes through a very good analysis of the three reasons on the policies that dictate that kentucky would not do it we have a series of cases starting even before frons but with ron and well can be picked apart and discussed the end result of frons was that in a consumer situation the consumer was entitled to recover the economic loss the words were not used the economic loss rule words were not used but that was the end result and so what happened was in the lebanon clearly with the advent of restatement of towards three and specifically the sections involving product liability there is a definition of a what is a product that was included there by the author of that decision i think it's fair to state being a traditional doctor if there were a majority of the members of the kentucky supreme court who are in favor of adopting the economic loss rule for all situations it would have it has happened before with the supreme court's entering decisions of that nature and i don't think there would been any problem at all if they would have wanted to do that the bottom line i believe this is the consumer in the state of kentucky none of these policy provisions these policies which are typically cited two in support of the economic loss rule all of which did arise out of commercial cases none of them are really further applied in consumer situations involving the state of kentucky and under the circumstances there is no need to revisit what judge bertelsmann has just written last year and chairman i'm wondering but you know it sort of strikes most this is a strange case because the two parties are both commercial that state farm and a snorkel the consumer here protecting themselves with insurance and state farm collected premiums now and wants to get reimbursed for the common saying the risk you took so it sounds to me like maybe the state fund trying to have its cake and eat it too much i mean why isn't this case more like a commercial transaction is not a commercial transaction only because the liability that the right of state farm to proceed is purely derivative of the insured if you refer back into their earlier portions of the pleadings the insurer is also a party and and i supposed to get him out of the case and make it more maybe so that the question like you just ask would be asked they they when i hadn't paid him his claim state farm again the whole concept we believe of  the economic loss rule has to be that there has to be some kind of arm's length contract negotiation about all the duties and responsibilities between two commercial entities obviously no one had that sta farm's and sure did not have that in this case obviously state farm did not as well out of those policies than mr dunn but i think th well i just had one quick question which in in light of all the moving pieces in this case and in the economical loss doctrine why wouldn't the first case that we should send to the cut kentucky courts and l that nor cold as now place itself in this this is it could have asked that the matter be referred to the kentucky supreme court before any activity was done it did not do so it made a motion for summary judgment the case law is clear which i  placed in my response to that motion starting with pennington versus state farm and also state auto versus hargus not only are we motions to transfer generally not granted but once there has been a decision by the federal court there is a presumption that it should not be transferred i did cite to very recent interim the decision rising out of the eastern district of kentucky where they use  the sort of down home language that someone should not be entitled to two bites from the same apple nor called made its choice as to how it wanted this matter decided there's just jurisdiction between the state and the federal court as we all yes your honor thank you and the time i have available i'll go back to the beginning of mr dunn's argument we admitted liability so that this matter could be decided on summary judgment based upon the agreed statement of facts and the stipulations of record all of which the court has in front of it we never admitted negligence we never admitted a defective design we never admitted that our recall program was negligent conducted and we specifically said in our admission that we had meant nothing more than what we say we just admitted that we lose if the economic loss rule doesn't apply with respect to the recall program the recall related claim itself it's actually quite simple that is a tort claim against a manufacturer that's exactly the kind of claim that the economic loss rule covers and if the economic loss rule applies to commercial consumer cases this entire case is barred everything or cold did in this case or with respect to this product it did as the product manufacturer it issued a recall that's what manufacturers to the claim here is what we call  tort claim and we're not a service provider there's no question that the economic loss rule does not apply to service providers but that misses the point because we're not a service provider we're a manufacturer who manufactured and sold a product and when circumstances dictated we do so we issued a recall the service work was performed by a third party down in florida we are not a service provider the recall related claim as it turns out does not get around the economic loss rule at all either way these are tort claims negligence claims against a man and against the product manufacturer and the economic loss rule applies just as we believe judge bertelsmann erred by characterizing the recall claim as a service claim if we were not a service provider we did not perform the service and for that reason that's really a red herring argument and now we believe that this court always has the authority to certify an appropriate and significant question of law to the kentucky supreme court and if the kentucky supreme court wishes to be the one decide is it should be allowed to consider that fact we we believe that our motion to certify in this court was timely and it should be considered