Court Opinion

ID: 2963743
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:14:36.09345+00
Date Added: 2024-06-11T11:42:45.278308
License: Public Domain

USCA1 Opinion

	

          December 6, 1995      [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                                     
                                 ____________________
        No. 95-1265

                           CMB CONSTRUCTION COMPANY, INC.,

                                 Plaintiff, Appellee,

                                          v.

                                  WEIL-McLAIN, ETC.,

                                Defendant, Appellant.

                                                     
                                 ____________________

        No. 95-1343

                           CMB CONSTRUCTION COMPANY, INC.,

                                 Plaintiff, Appellee,

                                          v.

                             EMERSON ELECTRIC CO., ETC.,

                                Defendant, Appellant.

                                                     
                                 ____________________

                    APPEALS FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

                   [Hon. Steven J. McAuliffe, U.S. District Judge]
                                              ___________________

                                                     
                                 ____________________

                            Selya and Cyr, Circuit Judges,
                                           ______________

                            and Casellas,* District Judge.
                                           ______________

                                                     
                                 ____________________
                            
        ____________________

             *Of the District of Puerto Rico, sitting by designation.

             James D. Crawford, with whom Jennifer DuFault James and Schnader,
             _________________            ______________________     _________
        Harrison, Segal & Lewis were on brief for appellants.
        _______________________
             Wilbur A. Glahn III, with whom Kelly A. Ayotte, McLane, Graf,
             ___________________            _______________  _____________
        Raulerson & Middleton Professional Association, Normandin, Cheney &
        ______________________________________________  ___________________
        O'Neil and Duncan J. Farmer were on brief for appellee.
        ______     ________________

                                                     
                                 ____________________

                                   December 8, 1995
                                                     
                                 ____________________

                    Per Curiam.   In  1988, CMB Construction  Company, Inc.
                    Per Curiam.
                    __________

          ("CMB") completed  a condominium project in  New Hampshire's Loon

          Mountain ski area, and placed all twenty-six units on the market.

          The months of  December through  April are the  prime season  for

          condominium  sales in the area.  The heating systems installed in

          the condominiums  failed during  December 1988 and  January 1989,

          which caused water  pipes to  freeze and burst,  and resulted  in

          extensive  water and  structural damage  to thirteen  condominium

          units.  The needed repairs on the damaged units were not complet-

          ed until May  1989.  Although CMB  sold the damaged  units during

          the  following  winter  (1989-1990),  less   advantageous  market

          conditions brought  prices well  below those which  had prevailed

          during the 1988-89 season.

                    CMB promptly  initiated a  product liability action  in

          New  Hampshire  federal  district court,  against  appellant  The

          Marley  Company,  Weil-McLain  Division   ("Weil-McLain"),  which

          manufactured the heating  systems, and against appellant  Emerson

          Electric  Company ("Emerson"),  which  manufactured the  "surface

          ignitors"  incorporated  in  the  heating systems.    CMB  sought

          compensatory  damages for  its repair  and replacement  costs, as

          well as consequential damages consisting of the reduced condomin-

          ium sale  revenues resulting  from the one-year  delay associated

          with repairing the thirteen  damaged units.  Relying on  a strict

          liability  theory,  CMB ultimately  obtained  a  $503,597.22 jury

          award  for  its repair  and replacement  costs, and  a $1,400,400

          consequential damages award.  Appellants unsuccessfully moved for

                                          3

          judgment as a matter of law and for a new trial.  On appeal, they

          challenge only the consequential damages award.1 

                    Although  the  district court  ruling denying  the Rule

          50(b)  motion for  judgment  as a  matter  of law  is  subject to

          plenary review, the jury verdict will  not be set aside unless no

          rational factfinder  could have reached  the same verdict  on the

          evidence adduced at trial.   See Bezanson v. Fleet  Bank-N.H., 29
                                       ___ ________    ________________

          F.3d 16, 20 (1st Cir.  1994).  A district court ruling  denying a

          motion for new trial will be upheld absent an abuse of discretion

          which results in a "miscarriage of justice."  See Lama v. Borras,
                                                        ___ ____    ______

          16 F.3d  473, 477 (1st  Cir. 1994).   We review  both rulings  by

          considering the evidence and all rational inferences therefrom in

          the light most favorable  to the nonmoving party, viz.,  CMB, but

          making allowance  for evidentiary weight and credibility determi-

          nations  on the latter motion only.  See Levesque v. Anchor Motor
                                               ___ ________    ____________

          Freight, Inc., 832 F.2d 702, 703 (1st Cir. 1987).
          _____________

                    The first contention pressed  by appellants is that New

          Hampshire  strict liability  law does  not permit  a claimant  in

          CMB's position to recover consequential damages based exclusively

          on "commercial losses."  Like  the majority of jurisdictions, New

          Hampshire has  endorsed the  so-called "economic loss"  doctrine,

          see,  e.g., Public Serv. Co. of N.H. v. Westinghouse Elec. Corp.,
          ___   ____  ________________________    ________________________

          685  F. Supp. 1281 (D.N.H. 1988), which holds that damages relat-

          ing to product liability    whether based in negligence or strict
                            
        ____________________

               1St. Paul's Insurance Company,  CMB's subrogee, received the
          $503,597.22 in compensatory damages.  Appellants settled with St.
          Paul's during this appeal.

                                          4

          liability     normally  are not  recoverable as  compensation for
                                      ___

          injury exclusively caused to the defective "product" itself; that
                                    __ ___ _________  _______  ______

          is, where the defect  in the failed product causes  no collateral

          "physical" damage, either to the person of the consumer or anyone

          else, nor  to  any property  other than  the defective  "product"
                                       _____ ____  ___ _________   _______

          itself.  See East  River S.S. Corp. v. Transamerica  DeLaval, 476
          ______   ___ ______________________    _____________________

          U.S.  858,  866, 868,  870 (1986)  (surveying various  rules, and

          adopting  the majority  rule for  use in  admiralty cases).   For

          example, if a defective  widget simply malfunctions, recovery for

          this sort of insurable loss    the diminution in the value of the
                       _________

          widget    normally must be based in contract or warranty law, not
                                              ________    ________

          tort  liability.   Id.  at 870-71  (noting that  such "insurable"
                             ___

          losses  "essentially [involve]  the failure  of the  purchaser to

          receive  the benefit of  its bargain    the  core concern of con-

          tract law").   This traditional  tort-law bar to  "economic loss"
                                           ________ ___ __   ________ ____

          recoveries presumably  would extend  also to  preclude recoveries
          __________

          for  consequential damages attributable  to the defective-product

          malfunction, including  loss of  business opportunities.   Id. at
                                                                     ___

          874 (noting that warranty law is better suited to redressing such

          losses,  since  it limits  consequential  damages,  such as  lost

          profits,  to  those  which  are  a  "foreseeable  result  of  the

          breach"). 

                    The only  pre-verdict  exegesis offered  by  appellants

          below on this issue appears in their pretrial memorandum support-

          ing a motion to dismiss the claims  of CMB and its insurer.   See
                                                                        ___

                                          5

          supra  note  1.2   Appellants  repeatedly stressed  that  the New
          _____

          Hampshire law relating to "economic  loss" was already "clear"   

          and  that the New Hampshire  state courts had  "long held" strict

          liability unavailing     where a claimant alleges only "damage to
                                                                  ______ __

          the product itself and economic losses caused  thereby" and there
          ___ _______ ______

          is no allegation of "bodily injury or serious threat or probabil-

          ity of bodily injury."  Memorandum, at 2-3.  See Fed. R.  Civ. P.
                                                       ___

          50(a) ("motion shall specify . . . the law and the facts on which

          the  moving party  is entitled  to judgment").   Thus,  given the

          evidence of extensive structural damage to the condominium units,
                                __________ ______ __ ___ ___________ _____

          appellants'  argument  before  the  district   court  necessarily
                                                                ___________

          implied  that appellants  were  relying on  the premise  that the
          _______

          "product"  at issue  was the  condominium units,  not  merely the
                                        ___________ _____

          heating systems.
          _______ _______

                    Their argument on appeal has been transformed, however.

          Following a  passing reference  to the highly  dubious contention

          that  the condominium  units  must be  considered the  integrated

          "product" which  implicated settled New Hampshire  law, see Brief
                                      _______                     ___

                            
        ____________________

               2When they argued their  motion for judgment as a  matter of
          law at  the close of  the evidence,  see Fed. R.  Civ. P.  50(a),
                                               ___
          appellants  simply referred to their pretrial motion:  "We do not
          waive  our  right to  our position  expressed  in our  motion for
          summary judgment (sic) that in a case of pure economic loss there
          is no such thing as  a products liability claim."   Their attempt
          to avoid  waiver by relying  on their post-verdict  motions under
                                                ____
          Rule 50(b)  is unavailing as  well.   See Perdoni Bros.,  Inc. v.
                                                ___ ____________________
          Concrete Systs., Inc., 35 F.3d 1, 3 (1st Cir. 1994)  ("The law is
          _____________________
          crystal clear that  `a party may not base its  motion for a judg-
          ment  n.o.v. on a ground that was not argued in its [pre-verdict]
          motion for directed verdict.'"). 

                                          6

          for  Appellant at  13 n.3,3 appellants  contend, in  the alterna-

          tive,  that this  case presents  a question  of first  impression
                                                          _____  __________

          under New Hampshire law.  Id. at 15.  Thus, even if the "product"
                                    ___

          consisted of the heating  systems only, and even if  the heating-

          system malfunctions  caused collateral damage  to the condominium
                                      __________

          units (i.e., to property  other than the product itself),  appel-

          lants  now  argue  that the  New  Hampshire  courts surely  would

          "extend" the East River rationale to these claims.  Consequently,
                       __________

          whether or not  it was proper  to award damages to  CMB's insurer

          for the repair/replacement costs under a strict liability theory,

          see supra note 1  and accompanying text, appellants now  say that
          ___ _____

          CMB cannot use strict liability to recover consequential "commer-

          cial"  losses  flowing from  the  malfunctioning  of the  heating

          systems.  Their revisionist argument on appeal     never broached

          below    urges nothing  less than that New Hampshire's  "economic

          loss"  doctrine should be extended beyond the context of cases in
                                             ______

          which the  defective product  causes damage only  to the  product

          itself.   We  think it too  ambitious an initiative  to be enter-

                            
        ____________________

               3Appellants waived any claim that the condominium units were
          the "product," both on appeal, see FDIC v. Bay St. Dev. Corp., 32
                                         ___ ____    __________________
          F.3d  636, 639 n.3 (1st Cir. 1994) (appellate arguments presented
          in perfunctory fashion without developed argumentation are deemed
          waived), and before the district court, see Lee v.  Life Ins. Co.
                                                  ___ ___     _____________
          of N.A., 23 F.3d 14, 20 n.11 (1st Cir.), cert. denied, 115 S. Ct.
          _______                                  _____ ______
          427 (1994); see also Perdoni, 35 F.3d at 3 ("Sweeping invocations
                      ___ ____ _______
          of conclusory  theories or abstract principles  will not suffice"
          for  pre-verdict Rule 50 motion).  Moreover, it seems most likely
          that  their double  waiver traces  to the  complete lack  of case
          authority supporting their contention.  See East River,  476 U.S.
                                                  ___ __________
          at 867 (normally,  "product" is the "integrated package"  sold to
          the consumer). 

                                          7

          tained for the  first time on  appeal.4  See,  e.g., Lee v.  Life
                                                   ___   ____  ___     ____

          Ins. Co. of N.A., 23  F.3d 14, 20 n.11 (1st Cir.),  cert. denied,
          ________________                                    _____ ______

          115 S. Ct. 427 (1994).  

                    Second,  appellants  contend that  the  superseding and

          efficient cause of the  damages sustained by CMB was  the unfore-

          seeable real estate market downturn in 1989.  See,  e.g., Reid v.
                                                        ___   ____  ____

          Spadone Mach. Co., 404 A.2d 1094, 1099 (N.H. 1979) (noting that a
          _________________

          "superseding   cause"   may  sever   proximate-causation  chain).

          Therefore, they  say, CMB  failed to produce  sufficient evidence

          that  its  lost sales  revenues  were proximately  caused  by the

          defective heating  systems.  Once  again we conclude  that appel-

          lants  failed to  preserve  these arguments  before the  district

          court.5
                            
        ____________________

               4Our waiver ruling analysis is corroborated by the rationale
          upon which the district court relied in denying appellants' post-
          verdict motion  for judgment as a matter of law: "[t]his is not a
          case in which Plaintiff CMB or its subrogee, St Paul's, sought to
          recover for damage  to or  loss of the  defective products  them-
                                                  _________ ________  _____
          selves, but rather sought recovery for damage to CMB's condomini-
          ______
          um project and  business occasioned by the defective condition of
          the hot surface ignitors."   CMB Constr. Co. v.  Weil-McLain, No.
                                       ______________      ___________
          90-181-M,  slip  op. at  3 (D.N.H.  Dec.  30, 1994)  (emphasis in
          original).

               5Appellants cite  to  their  pleadings,  which  suggest  the
          embryonic defense that the  damages sustained by CMB  were caused
          by undesignated "third parties" over whom appellants exercised no
          control.   Appellants  likewise point  to  a pretrial  motion  in
                                                                         __
          limine, wherein they argued that experts would "detail the manner
          ______
          in which  the financial losses  and failure of the  units to sell
          are related to the burst pipes as opposed to the economic  rever-
          sals suffered by the  economy in general."  Although  this state-
          ment  might suggest a defensive stance that some of CMB's damages
                                                      ____
          might  eventually prove  not  to have  been  attributable to  the
          "product" defect, in no  sense does it suggest that  the evidence
          adduced  at  trial would  establish  that  the economic  downturn
          constituted a superseding cause  which entirely severed the chain
                                                 ________ _______
          of causation set in motion by the malfunctioning product. 

                                          8

                    Finally, appellants argue that the district court erred

          in finding that  CMB had  adduced sufficient evidence  as to  the

          amount of consequential damages sustained.  They assert  that the
          ______

          court misapplied New Hampshire  law, which has sometimes required

          plaintiffs in so-called "lost profits" cases to  prove the amount

          of actual damages to  "a reasonable certainty," rather than  by a

          mere  preponderance  of the  evidence.   See,  e.g.,  Great Lakes
                                                   ___   ____   ___________

          Aircraft  Co. v.  City of  Claremont, 608  A.2d 840  (N.H. 1992).
          _____________     __________________

          Appellants argue that the  $1,400,400 consequential damages award

          was based on pure speculation.  They point out that  only four of

          the  twenty-six units had been  sold, or were  under contracts of

          sale, at the time the defective heating systems failed; that only

          one among the four  condominium sales in process failed  to close

          thereafter;  and,  further, that  CMB's  evidence     that  other

          condominium  units in  the  Loon Mountain  area  sold during  the

          winter of 1988-1989     did  not prove that  any specific  buyers
                                                           ________

          existed at that  time who  would have been  prepared to  purchase

          these particular units but for the structural damage.6
                __________

                    We  have  held that  the  heightened  burdens of  proof

          called  for in such New  Hampshire "lost profits"  cases as Great
                                                                      _____
                            
        ____________________

               6Considerable confusion  attended  the parties'  use of  the
          terms  "lost profits" and "lost sales [revenues]," as well as the
          question whether these terms have distinctive connotations  which
          might  affect the burden of proof under the Great Lakes decision.
                                                      ___________
          Appellants point out, however,  that we have noted that  the term
          "lost profits" is "too  mutable" to serve as a  reliable indicium
          of the applicability of Great Lakes.  See Bezanson, 29 F.3d at 21
                                  ___________   ___ ________
          n.6.   Since  appellants did  ask the  district court  to require
          proof of  consequential damages to a  "reasonable certainty," and
          explicitly  cited Great Lakes, we will assume that this claim was
                            ___________
          duly preserved for appeal.

                                          9

          Lakes pertain exclusively to  damages calculations that involve a
          _____

          "complex conjectural judgment" that "depend[s] upon how a variety

          of variables  affecting a stream  of revenues and  expenses would

          have  played out over time if the [defendant's wrongdoing had not

          occurred.]"  Bezanson, 29 F.3d at 21.  Whatever label the parties
                       ________

          might assign  to CMB's consequential damages, state law offers no

          bright-line  or  "hard-edged"  test  for  determining  whether  a

          claimant  must prove damages by more than a mere preponderance of

          the evidence.  Id. at 21 n.6.  Each case essentially turns on its
                         ___

          particular circumstances.  We think the damages sustained by  CMB

          are not in the Great Lakes mold.  
                         ___________

                    First, its  condominium units     fully completed prod-

          ucts    were already on the open market in 1988.   Second, before

          appellants'  defective  products  ever failed,  CMB  had received

          serious "package offers" for all twenty-six units, but decided to

          attempt to generate greater sales revenues by marketing the units

          individually during the auspicious 1988-89 skiing season.  Third,

          roughly comparable  condominium units  in the Loon  Mountain area

          did  sell  briskly during  the  1988-1989 season,  while  CMB was

          repairing its damaged units.  Fourth, notwithstanding the ensuing

          economic downturn,  CMB's condominiums  did sell during  the very

          next "peak" selling season, but at reduced prices.  The relative-
          ____

          ly  short interval     between  the lost  selling season  and the

          actual selling  season    contrasts sharply  with the attenuation

          evidenced  in the "lost profit"  cases cited by  appellants.  Cf.
                                                                        ___

          Great  Lakes, 608 A.2d  at 857 ("At  trial, [plaintiff's] damages
          ____________

                                          10

          expert  []  based his  lost  profit estimates  on  a hypothetical
                                                             _ ____________

          business entity  producing Great Lakes and  Champion aircraft and
          ________ ______

          on forecasted  profits from 1986  through 1995.").   Since  these
                                 ____ ____  _______ ____

          factors  bring this case more  in line with  the "specific [frus-

          trated] transaction"  in Bezanson, which would  have gone forward
                                   ________

          on  fairly predictable  terms but  for defendant's  wrongful act,

          Bezanson, 29 F.3d at 21, we think it quite clear that the jury in
          ________

          this case was  not presented with an especially  "complex conjec-

          tural judgment."  

                    The district court judgment is affirmed.   
                    The district court judgment is affirmed.
                    ___ ________ _____ ________ __ ________

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