Court Opinion

ID: 196454
Source: CourtListenerOpinion
Date Created: 2011-02-07 03:06:06+00
Date Added: 2024-06-11T12:06:45.452995
License: Public Domain

December 6, 1995      [NOT FOR PUBLICATION]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.
                                                           

                                11