PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PALMETTO LINEN SERVICE,

INCORPORATED,

Plaintiff-Appellant,

v. No. 99-1209

U.N.X., INCORPORATED; NOVA

CONTROLS, INCORPORATED,

Defendants-Appellees.

Appeal from the United States District Court

for the District of South Carolina, at Florence.

Cameron McGowan Currie, District Judge.

(CA-97-1533-4-22)

Argued: November 30, 1999

Decided: March 2, 2000

Before WILKINSON, Chief Judge, KING, Circuit Judge, and

Cynthia Holcomb HALL, Senior Circuit Judge of the United States

Court of Appeals for the Ninth Circuit, sitting by designation.

_________________________________________________________________

Affirmed by published opinion. Chief Judge Wilkinson wrote the

opinion, in which Judge King and Senior Judge Hall joined.

_________________________________________________________________

COUNSEL

ARGUED: Olin Leo Purvis, III, OLIN L. PURVIS, III, P.C., Myrtle

Beach, South Carolina, for Appellant. David Wesley Whittington,

Charleston, South Carolina, for Appellees. ON BRIEF: Robert E.
Lee, MCINTOSH & LEE, Florence, South Carolina, for Appellee

Nova Controls.

_________________________________________________________________

OPINION

WILKINSON, Chief Judge:

Palmetto Linen Service filed a tort action for damages resulting

from the alleged malfunction of a chemical dispensing system used

in its commercial washers. The district court dismissed Palmetto's

claims because South Carolina's economic loss rule limits Palmetto's

remedies to contract and thus bars any tort recovery. We now affirm

the judgment.

I.

Palmetto operates a commercial laundry business that supplies linens to hotels, restaurants, and hospitals. Defendant U.N.X., Inc., sold

chemicals to Palmetto for use in the cleaning process. U.N.X. also

installed a computerized pump system in Palmetto's washers to regulate the injection of the chemicals. Defendant Nova Controls, Inc.,

manufactured and distributed certain components used by U.N.X. in

the chemical dispensing system.

Palmetto alleges that this system malfunctioned, injecting excessive amounts of chemicals into the washers and thereby destroying

over $200,000 worth of Palmetto's linens. Palmetto filed suit against

U.N.X., seeking damages for the destruction of its linens and other

losses caused by U.N.X.'s negligence in the design, installation, and

maintenance of the system.

After some discovery, Palmetto added Nova as a defendant, asserting both negligence claims and a claim for breach of express warranty. Nova had guaranteed the parts it sold to U.N.X. under a oneyear limited warranty. The warranty provided only for the repair and

replacement of defective equipment and expressly precluded liability

for consequential damages. Nova conceded that the warranty also

extended to Palmetto as a foreseeable user under the Uniform Com-

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mercial Code (U.C.C.). See S.C. Code Ann.§ 36-2-318 (Law. Co-op.

1976).

In November 1998, the district court granted Nova's unopposed

motion for summary judgment on the express warranty claim, leaving

only Palmetto's tort claims. In January 1999, the district court granted

summary judgment to both defendants on the negligence claims on

the ground that South Carolina's economic loss rule barred any tort

recovery by Palmetto. Palmetto now appeals the dismissal of its negligence claims.

II.

South Carolina's economic loss rule provides that where a buyer's

expectations in a sale are frustrated because the product does not

work properly, the buyer's remedies are limited to those prescribed

by the law of contract. See Kennedy v. Columbia Lumber & Mfg. Co.,

384 S.E.2d 730, 736 (S.C. 1989). This doctrine demarcates the boundary between contract and tort in product liability cases by helping to

determine which theories are applicable in a given action. See Bishop

Logging Co. v. John Deere Indus. Equip. Co., 455 S.E.2d 183, 188

(S.C. Ct. App. 1995). Its contours and rationale have been carefully

explained by Judge Traxler in Myrtle Beach Pipeline Corp. v. Emerson Elec. Co., 843 F. Supp. 1027 (D.S.C. 1993), aff'd, 46 F.3d 1125

(4th Cir. 1995) (unpublished table decision). Most fundamentally, the

economic loss rule distinguishes between transactions involving the

sale of goods, where contract law protects economic expectations, and

transactions involving the sale of defective products to individual

consumers, whose injuries are traditionally remedied by the law of

torts. See id. at 1049.

A.

Palmetto first argues that the economic loss rule does not bar its

tort claims because it merely seeks to hold defendants liable for negligence in the provision of services. Although Palmetto failed to raise

this argument below, see e.g., Wilder Corp. v. Wilke, 497 S.E.2d 731,

733 (S.C. 1998), we would nonetheless reject it.

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A contract involving the delivery of both goods and services is

classified as a sale of goods governed by the U.C.C. where its "predominant thrust" is "a transaction of sale, with labor incidentally

involved." United States v. Southern Contracting of Charleston, Inc.,

862 F. Supp. 107, 109 (D.S.C. 1994). Courts have thus often limited

a party to contractual remedies where the contract calls for a combination of goods and services. See, e.g., id. at 109-10 (contract to manufacture and deliver incinerator was a sale of goods); Plantation

Shutter Co. v. Ezell, 492 S.E.2d 404, 406-07 (S.C. Ct. App. 1997)

(contract for purchase, installation, and adjustment of interior window

shutters was a sale of goods); United States v. City of Twin Falls, 806

F.2d 862, 871 (9th Cir. 1986) (contract for purchase and installation

of wastewater treatment equipment was a sale of goods); Southern

States Coop. v. Townsend Grain & Feed Co. (In re L.B. Trucking,

Inc.), 163 B.R. 709, 719 (Bankr. D. Del. 1994) (farmer's contract to

purchase herbicide was primarily a sale of goods where trained herbicide applicator was required to spray fields).

Palmetto contracted for the chemicals supplied by U.N.X. and the

installation of the chemical dispensing system. The predominant

thrust of this transaction was to provide the chemicals and equipment.

Any services involved in the transaction, such as the design and maintenance of the equipment, were merely incidental to the sale of goods.

The economic loss rule therefore bars any negligence claim.

B.

Palmetto next argues that defendants are liable because they

breached a legal duty of care separate and apart from their contractual

obligations. We disagree. The economic loss rule bars a negligence

action "where duties are created solely by contract." Kennedy, 384

S.E.2d at 737. Where there is a special relationship between the parties that is independent of the contract, however, there exists a duty

of care whose breach will support a tort action. See Tommy L. Griffin

Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 463

S.E.2d 85, 88 (S.C. 1995). For example, South Carolina courts have

permitted negligence actions to proceed against engineers and lawyers

based on their professional duties to plaintiffs. See, e.g., Griffin, 463

S.E.2d 85; Lloyd v. Walters, 277 S.E.2d 888 (S.C. 1981). But no special relationship exists between Palmetto and either defendant. Pal-

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metto points to no professional duty on the part of defendants. Nor

does Palmetto claim that defendants violated any code provision or

contravened any industry standard. See Kennedy , 384 S.E.2d at 737.

Rather, as the district court observed, the relationship between U.N.X.

and Palmetto is merely one of vendor-vendee. And a mere buyer may

resort only to contractual remedies.

C.

Palmetto finally argues that the "other property" exception to the

economic loss rule permits it to proceed in tort. We reject this argument as well. Although the economic loss rule generally "does not

apply where other property damage is proven," Kershaw County Bd.

of Educ. v. United States Gypsum Co., 396 S.E.2d 369, 371 (S.C.

1990), "courts have tended to focus on the circumstances and context

giving rise to the injury" in determining whether alleged losses qualify as "other property" damage, Myrtle Beach Pipeline Corp., 843 F.

Supp. at 1057. Specifically, in the context of a commercial transaction

between sophisticated parties, injury to other property is not actionable in tort if the injury was or should have been reasonably contemplated by the parties to the contract. See id. at 1058. In such cases the

"failure of the product to perform as expected will necessarily cause

damage to other property," rendering the other property damage

inseparable from the defect in the product itself. Neibarger v. Universal Coops., Inc., 486 N.W.2d 612, 620 (Mich. 1992).

The district court correctly analogized the facts of the instant case

to those of other cases foreclosing recovery for other property damage

where such damage was foreseeable and inseparable from the alleged

product defect. See, e.g., Redman v. John D. Brush & Co., 111 F.3d

1174, 1181-83 (4th Cir. 1997) (tort claim for theft of coin collection

caused by defect in safe was barred because essence of plaintiff's

complaint was that safe did not meet economic expectations); Purvis

v. Consolidated Energy Prods. Co., 674 F.2d 217, 223 (4th Cir. 1982)

(tort claim for loss of tobacco caused by defect in tobacco barns was

barred because loss resulted from "ordinary commercial risk of product ineffectiveness"); Theuerkauf v. United Vaccines Div. of Harlan

Sprague Dawley, Inc., 821 F. Supp. 1238 (W.D. Mich. 1993) (tort

claim for death of rancher's minks caused by defective vaccine was

barred because loss was the natural, foreseeable result of the product

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defect); Neibarger, 486 N.W.2d 612 (tort claim for damage to cattle

caused by defective milking machine was barred because loss was

within contemplation of parties). The destruction of Palmetto's linens

was the natural and foreseeable result of a malfunction in the chemical injection system. The other alleged losses were similarly foreseeable. The parties to the contract either contemplated or should have

contemplated these dangers in allocating the risk of loss. While we do

not downplay the extent of Palmetto's alleged losses, business entities

must protect their commercial interests up front through the medium

of contract. The economic loss rule dictates that Palmetto cannot now

obtain in tort a remedy for which it did not bargain.

III.

The judgment of the district court is

AFFIRMED.

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