Document: 476 U.S. 858 106 S.Ct. 2295 90 L.Ed.2d 865 EAST RIVER STEAMSHIP CORP., et al., Petitionersv.TRANSAMERICA DELAVAL, INC. No. 84-1726. Argued Jan. 21, 1986. Decided June 16, Syllabus A shipbuilder contracted with respondent to design, manufacture, and supervise the installation of turbines that would be main propulsion units for four oil-transporting supertankers constructed by shipbuilder. After each ship was completed, it chartered one petitioners. When ships were put into service, on all malfunctioned due design manufacturing defects. Only products themselves damaged. Petitioners filed a five-count admiralty complaint in Federal District Court against respondent, alleging tortious conduct based products-liability theory seeking damages cost repairing income lost while they out service. The granted summary judgment respondent. Appeals affirmed, holding petitioners' dissatisfaction product quality did not state claim cognizable tort. Held: 1. fourth count should have been dismissed ground petitioner who referred lacked standing bring claim. P. 863. 2. torts alleged other counts clearly fall within jurisdiction. Pp. 863-864. 3. Admiralty law, which already recognizes general liability negligence, also incorporates principles liability, including strict liability. 864-866. 4. But whether stated negligence or no lies when commercial party alleges injury only itself resulting purely economic loss. Such is most naturally understood as warranty 866-876. 752 F.2d 903, affirmed. BLACKMUN, J., delivered opinion unanimous Court. Thomas E. Durkin, Jr., Newark, N.J., Robert Smith, Justice BLACKMUN 1 In this case, we must decide cause action tort defective purchased transaction malfunctions, injuring causing case requires us consider preliminarily Then, charting course between contract determine kind harm protected left entirely law contracts. 2 * 1969, Seatrain Shipbuilding Corp. (Shipbuilding), wholly owned subsidiary Lines, Inc. (Seatrain), announced build issue—the T.T. Stuyvesant, Williamsburgh, Brooklyn, Bay Ridge. Each tanker pursuant separate engaged Shipbuilding. turn now known Transamerica Delaval (Delaval), (costing $1.4 million each, see App. 163) 225,000-ton, $125 million, ibid., supertankers. its title transferred from contracting trust company (as trustee an owner), petitioners, subsidiaries Seatrain. Queensway Tankers, Inc., Stuyvesant; Kingsway Williamsburgh; East River Steamship Brooklyn; Richmond operated under bareboat charter, took full control 20 22 years though it, obligation afterwards return real owner. See G. Gilmore & C. Black, §§ 4-1, 4-22 (2d ed. 1975). charterer assumed responsibility any repairs ships. Tr. Oral Arg. 11, 16-17, 35. 3 Stuyvesant sailed maiden voyage late July 1977. On December 11 year, about enter Port Valdez, Alaska, steam began escape casing high-pressure turbine. That problem temporarily resolved repairs, but before long, encountering severe storm Gulf turbine malfunctioned. ship, lacking normal power, able continue journey Panama then San Francisco. January 1978, examination revealed first-stage reversing ring virtually had disintegrated caused additional damage parts damaged part replaced Ridge, construction. April again repaired, time Brooklyn. Finally, August, permanently satisfactorily repaired newly designed manufactured Delaval. 4 Brooklyn Williamsburgh service 1973 1974, respectively. result Stuyvesant's problems, inspected port. Those inspections similar damage. Temporary made, installed permanent summer. 5 Ridge completed early 1979, contained thus never experienced problems plagued three Nonetheless, appears deterioration Ridge's addition, unique problem. 1980, voyage, engine vibrate frequency increased even after speed reduced. It turned astern guardian valve, located low-pressure turbines, backwards. Because error, entered it. resumed travels. II 6 charterers' second amended complaint, United States New Jersey, invokes contains five seeks aggregate more than $8 first counts, read liberally, allege strictly liable defects fifth Delaval, process, negligently supervised valve initial listed plaintiffs breach well claims. interposed statute limitations defense, charterers alone brought suit nonrenewed claims prejudice moved judgment, contending actions 7 Third Circuit, sitting en banc, S.S. v. Turbine, 903 (1985). held solely actionable if defect creates unreasonable risk persons property itself, materializes. Disappointments over product's quality, hand, are law. Id., at 908, 909-910. dissatisfied quality: involved gradual unnoticed turbines' component parts, created operate lower capacity. 909. Pennsylvania Glass Sand Caterpillar Tractor Co., 652 1165, 1169-1170 (CA3 1981). Therefore, neither nor strict-liability cognizable. 8 Judge Garth concurred "grounds somewhat different," F.2d, 910, Becker, joined Higginbotham, dissented part. 913. Although agreed majority's analysis merits, he found presented because failed danger demonstrable injury. 9 Becker largely approach, permit recovery "near miss," where existed calamity occurred. He felt count, concerning exposure unable power harm. 10 We certiorari resolve conflict among Courts admiralty.1 474 814, 56, 88 45 III A. Initially, conclude lacks relating removed still remained until disintegration. charter May designed, nondefective, Plaintiffs' Answers First Set Interrogatories Defendants, 42. therefore can Warth Seldin, 422 490, 501, 95 2197, 2206, 343 (1975). Richmond, course, has raised reverse allegedly occurred B 12 first, second, third, satisfy traditional "locality" requirement—that wrong high seas navigable waters. See, e.g., Plymouth, Wall. 20, 35-36, 18 L.Ed. 125 (1866). sailing seas. third sea, discovered port, maritime locale. Southern Co. NLRB, 316 31, 41, 62 886, 891, 86 1246 (1942). 13 waters States, imposed requirement "maritime nexus"—that bear "a significant relationship activity." Executive Jet Aviation, Cleveland, 409 249, 268, 93 493, 504, 34 454 (1972); Foremost Ins. Richardson, 457 668, 102 2654, 73 300 (1982). need reach question nexus established occurs Were there such requirement, met here, these commerce, primary concern C 14 With jurisdiction comes application substantive U.S., 255, S.Ct., 498. Absent relevant statute, developed judiciary, applies. Reliable Transfer 421 397, 409, 1708, 1714, 44 251 (1975); Knickerbocker Ice Stewart, 253 149, 160-161, 40 438, 440, 64 834 (1920). Drawn state2 federal sources, amalgam common-law rules, modifications those rules. Kermarec Compagnie Generale Transatlantique, 358 625, 630, 79 406, 550 (1959); Romero International Terminal Operating 354, 373-375, 468, 480-481, 368 (1959). This body principles, see, Kermarec, supra, 632, 410; generally Currie, Federalism Admiralty: "The Devil's Own Mess," 1960 S.Ct.Rev. 158, 164, asked incorporate concepts, long common torts, Igneri Cie. de Transports Oceaniques, 323 257, 260 (CA2 1963), cert. denied, 376 949, 84 965, 969 (1964). 15 overwhelmingly adopted concepts both Sieracki Seas Shipping 149 98, 99-100 1945), aff'd grounds, 328 85, 66 872, 1099 (1946), Pan-Alaska Fisheries, Marine Constr. Design 565 1129, 1135 (CA9 1977) (adopting Restatement (Second) Torts § 402A (1965)). Indeed, Circuit previously "is longer seriously contested." Ocean Barge Transport Hess Oil Virgin Islands Corp., 726 121, 123 (1984) (citing cases). 16 join recognizing Court's precedents injuries workers pointed direction. Sieracki, 94, 877, (1946) (strict unseaworthiness); Italia Societa per Azioni di Navigazione Oregon Stevedoring 315, 322, 748, 752, 732 (1964) implied workmanlike service). rationale cases—that best protect hazardous equipment—is equally applicable Compare 93-94, 876-877, Escola Coca Cola Bottling Fresno, 24 Cal.2d 453, 462, 150 P.2d 436, 441 (1944) (concurring opinion). And extent grounded incorporated 410. Our incorporation however, threshold determination issue case. IV 17 Products grew public policy people protection dangerous afforded warranty. Seely White Motor 63 9, 15, Cal.Rptr. 17, 403 145, (1965). clear, development allowed progress too far, drown sea Gilmore, Death Contract 87-94 (1974). manufacturers protect, independent contractual obligation. paradigmatic "reasonably certain place life limb peril," distributed without reinspection, causes bodily MacPherson Buick 217 N.Y. 382, 389, 111 N.E. 1050, 1051, 1053 (1916). manufacturer negligent "public demands fixed wherever will effectively reduce hazards health inherent market." Cal.2d, P.2d, (opinion concurring judgment). 19 For reasons safety, manufacturer's duty care broadened include Marsh Wood Babcock Wilcox 207 Wis. 209, 226, 240 N.W. 392, 399 (1932); Genesee County Patrons Fire Relief Assn. L. Sonneborn Sons, 263 463, 469-473, 189 551, 553-555 (1934). considered so akin personal two treated alike. 19, Cal.Rptr., 24, 152. "property damage" cases, property. "other" Rather, supertanker's defectively components itself. Since supplied integrated package, 162-163, properly regarded single unit. "Since very simplest machines [a contrary] require finding 'property damage' every eliminate distinction liability." Northern Power Engineering 623 324, 330 (Alaska Before could become operational system, connected piping valves supervision personnel. 78, 181. Delaval's supervisory obligations agreement. manufacture system—by allowing valve—damaged system. Cf. Lewis Timco, 736 163, 165-166 (CA5 1984). Obviously, attributes suffered—the failure function properly—is essence action, through seek recoup benefit bargain. 21 intriguing may spawned variety answers.3 At end spectrum, majority land-based 145 (1965) (defective truck), preserving proper role precludes imposing monetary Jones Laughlin Steel Johns-Manville Sales 626 280, 287, n. 1980) spectrum minority whose progenitor, Santor M Karagheusian, N.J. 52, 66-67, A.2d 305, 312-313 (marred carpeting), make nondefective encompassed harm.4 LaCrosse Schubert, Schroeder Associates, 72 Wis.2d 38, 44-45, N.W.2d 124, 127-128 (1976). courts adopting issue,5 Emerson G.M. Diesel, Alaskan Enterprise, 1468 1984), find safety insurance rationales behind apply losses economic. These reject approach arbitrary recoverable plaintiff suffers damage, injures They difference loss proximately defendant's conduct. Further, believe lead unlimited think predict insure failure. 1474. 23 Between poles number cases circumstances attempt differentiate "the disappointed users . endangered ones," Russell Ford 281 Or. 587, 595, 575 1383, 1387 (1978), latter sue said nature defect, type risk, manner arose. 1173 (relied case). Alaska Supreme allows situation potentially property, proximate circumstances. 329 (1981). intermediate positions unsatisfactory. positions, essentially degree indeterminate enable easily structure their business behavior. Nor do persuasive rests injured. realize qualitative, occurring internal breakage. Or calamitous. Morrow Moon Homes, 548 279 1976), Cloud Kit Mfg. 563 248, 1977). either way, since definition person damaged, Even abrupt, accident-like event, repair costs, decreased value, profits purchaser receive bargain—traditionally core Farnsworth, Contracts 12.8, pp. 839-840 25 decline adopt view espoused Emerson. raise legitimate questions theories restricting countervailing arguments powerful. fails account keep spheres maintain realistic limitation damages. 26 Exercising discretion admiralty, Pope Talbot, Hawn, 346 74 202, 204, 98 143 (1953), hold prevent itself.6 27 drawn physical does rest 'luck' having accident rests, rather, understanding undertake distributing his products." 18, 23, 151. weak leaving remedies strong. 28 reduced injured, "cost overwhelming misfortune," prepared meet. contrast, user stands lose value product, risks displeasure customers meet needs, or, experiences costs performing Losses like insured. 10A Couch, Cyclopedia Insurance Law 42:385-42:401, 42:414-417 1982); Benedict, Admiralty, Form 1.16-7, p. 1-239 (7th 1985); 5A J. Appleman Appleman, Practice 3252 (1970). Society presume customer needs special protection. justified. Carroll Towing 159 169, 173 1947). 29 Damage means simply customer's expectations, words, received "insufficient value." R. Summers, Uniform Commercial Code 406 1980). maintenance precisely purpose express warranties.7 UCC 2-313 (express warranty), 2-314 (implied merchantability), 2-315 (warranty fitness particular purpose). nonworking breach-of-warranty action. Or, prefers, revoke acceptance contract. 2-601, 2-608, 2-612. 30 particular, suited controversies sort parties set terms own agreements.8 restrict limits, disclaiming warranties limiting remedies. 2-316, 2-719. exchange, pays less product. involve large disparities bargaining cf. Henningsen Bloomfield Motors, 32 358, 161 69 (1960), reason intrude parties' allocation risk. 31 While giving recognition bargain, sufficiently protects obtain ch. 10. expectation available give bargain compensating forgone opportunities. Fuller Perdue, Reliance Interest Damages: 1, 46 Yale L.J. 60-63 (1936); Posner, Economic Analysis 4.8 (3d 1986). Recovery profits, them position functioned properly.9 Hawkins McGee, N.H. 114, 146 641 (1929). Thus, indicate natural built-in whereas subject indefinite amount. agreement consequential damages, foreseeable breach. Hadley Baxendale, Ex. 341, 156 Eng.Rep. (1854). economic, derives requirements foreseeability privity, enforced setting. 2-715; 396, 406-410. 33 generally, inadequate brake. Kinsman Transit City Buffalo, 388 821 1968). Perlman, Interference Other Expectancies: Clash Tort Doctrine, 49 U.Chi.L.Rev. 61, 71-72 Permitting vast sums. difficult take expectations downstream encounter example, charterers—already step transaction—were permitted recover losses, companies subchartered might delays, on. spread far." Robins Dry Dock Repair Flint, 275 303, 309, 48 134, 135, 290 (1927). try limit tort, relying far murkier line, negates contention permitting enables avoid line drawing. Ultramares Touche, 255 170, 174 (1931); Louisiana ex rel. Guste M/V Testbank, 1019, 1046-1052 1985) (en banc) (dissenting opinion), pending sub nom. 84-1808. D 35 injured themselves. unavailable charterers. Any limitation, scope, 78-79. record indicates reached settlement Deposition Stephen Russell, 32. informed asserted 36. so, bargains, explicitly allocated repairs. 36 agreements owners, "as is" condition, inspection, them, obtaining forms insurance. 35; 86, 88, 99, 101, 112, 125-126, 127. Seatrain, guarantee payments covenants 142-156. responsibilities laid out. There extricate 37 Similarly, system rather assuming negligent, motion, owed Flintkote Dravo 678 942 (CA11 S.M. Wilson Smith International, 587 1363 1978). claimed 38 dismissed, affirm entry 39 ordered. (this case), Ingram Equipment, Pott Industries, 756 649 (CA8 1985), pending, 85-12; Miller Industries 733 813 1984); 1129 1977); Jig Puritan Underwriters 519 171 1019 banc), ask defer forum State. state-law required here. Jersey "pressing significant" interest Kossick Fruit 365 731, 739, 81 892, 56 (1961). reliance help mandates same conclusion Appeals: Spring Motors Distributors, 555, 579, 489 660, 672 answered 395 (1965), Code, Wade, Is Section Second Preempted Therefore Unconstitutional?, 42 Tenn.L.Rev. Congress, national legislation, wrestling theory. Frumer M. Friedman, Liability 4C (1986). S. 100, 99th Cong., 1st Sess. (1985) (the Product Act) introduced, excluded, 2(6), Suggestions made revising provision. Amendment 131 Cong.Rec. 5461 (1985); id., 11850, 11851. bills addressed issue. 1999, 38772 1951, 132 10304 H.R. 2568, 4425, 2d area laws. Weintraub, Commentary Conflict Laws 6.29 (2nd Interestingly, California taken what direction Seely. A.2d, 672, court rejected context. J'Aire Gregory, Cal.3d 799, 157 407, 598 60 (1979), recognized interference prospective advantage. Most concerned fishing vessels. 1468, 1472 1984) (relying solicitude fishermen protective approach). concedes courts, Carbone Ursich, 209 178, 182 1953), U.S.C.App. 533 (1982 ed., Supp. II), times provided fishermen. involves ever sought (1931). If actions, contracts construction supply materials jurisdiction, Thames Towboat Schooner "Francis McDonald", 254 242, 243, 41 65, 66, 65 245 (1920); 735, 889, 188, 11-36 1985). State govern actions. North Pacific Hall Brothers Railway 249 119, 127, 221, 223, 510 (1919). apply. recognize, static bodies overlap. situations, privity discarded. E.g., 380-384, 69, 81-84 (1960). circumstances, disclaim Keystone Aeronautics R.J. Enstrom 499 146, 1974). currents run different directions warranty, seem appropriate disputes compensate him occupied Sullivan O'Connor, 363 Mass. 584-586, 588, 6, 296 N.E.2d 183, 187-188, 189, (1973); Prosser, Borderland Contract, Selected Topics 380, 424-427 (Thomas Cooley Lectures, Fourth Series 1953). analogous awarded difficulty measuring interest. Security Store American Railways Express 227 Mo.App. 175, 51 S.W.2d 572 (1932).

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