Court Opinion

ID: 8927773
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:49:48.296055+00
Date Added: 2024-06-11T17:09:26.699478
License: Public Domain

BECKER, Circuit Judge,
concurring and dissenting:
I share the majority’s view that the Pennsylvania Glass Sand v. Caterpillar Tractor Co., 652 F.2d 1165 (3d Cir.1982) (“PGS”), standard should be adopted in strict products liability actions in admiralty where an injured party has made a claim for economic loss. This standard provides that products liability principles apply when a hazardous product exposes a plaintiff to “an unreasonable risk of injury to [plaintiff’s] person or [plaintiff’s] property.” Id. at 1169. Accordingly, I join in Parts I and III of the majority opinion and in the consequent affirmance of the grant of summary judgment for Delaval on counts II, III, and V of the Charterer’s second amended complaint because these counts do not implicate an unreasonable risk of harm to person or property. In my view, however, the exposure of the disabled STUYVESANT to a storm of “mountainous seas” created an unreasonable risk of harm and otherwise met the PGS standard. Therefore, I cannot join in Part IV of the majority opinion in which the majority applies PGS to count I of the complaint so as to affirm the grant of summary judgment. I would vacate the grant of summary judgment for Delaval on count I and remand for further proceedings.
I also join in Part II of Judge Garth’s concurring opinion. Even though shipbuilding is a traditional maritime activity, maritime jurisdiction does not exist without some nexus to a maritime locality. I believe, with Judge Garth, that the majority is simply wrong in concluding that a maritime locality exists when economic loss due to a product defect is claimed for a vessel that has never been commissioned, because the vessel has been “cannibalized” and one of its parts has been put to sea on another ship and then returned to the aggrieved vessel. Judge Garth has explained in a forceful manner why we have no maritime jurisdiction over count IV, and I will not address the point further.1 I will therefore *914limit the remainder of this separate opinion to a discussion of the STUYVESANT claim (count I).
I fully agree with the majority’s conclusion that, in the maritime context, tort principles may apply when a defect causes only damage to the defective product itself, with no attendant injury to persons or other property.2 The majority has done so by embracing a test, cogently articulated by Judge Adams in PGS, that is intended to identify when a defect that has injured only the defective product itself has caused “an unreasonable risk of harm” and has thereby implicated products liability principles.3 In view of the foregoing, I would have joined in the majority opinion except that I disagree with its application of the PGS test.
In PGS the court focused upon three factors in an effort to identify “whether the safety-insurance policy of tort law or the expectation-bargain policy of warranty law is most applicable to [the] particular claim.” PGS, 652 F.2d at 1173. These “interrelated” factors, specifically adopted by the majority, are the nature of the defect, the type of risk, and the manner in which the injury arose. Id. The majority applies these factors to the allegations in this case and concludes that the policy of tort law is not implicated because the defect was qualitative in nature and because the defect manifested itself in a gradual manner.
In considering the nature of the defect, the majority’s underlying analysis is intended to identify whether the defect at issue in the case can be seen as having a nexus to product safety sufficient to implicate strict liability principles.4 Although this focus is consistent with both Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965), and PGS,5 the *915majority’s conclusion that the defect in the turbine was not “safety-related” is, in my view, unwarranted. The majority’s error in this regard is evident if one compares the nature of the defect in this case with the nature of the defect in PGS. The application of tort principles was appropriate in PGS because the lack of sprinklers and fire-safety instructions for a front-loader poses a serious risk to persons, property, and the product itself in the event of a fire. Similarly, based on the allegations in this case, the application of tort principles is appropriate because the defect in the STUYVESANT’s turbine that rendered it useless in powering the ship posed a serious risk to persons, property, and the product itself in the event the power failure occurred when there was some unrelated danger at sea that required a vessel with full power. In both cases, therefore, the defects substantially increased the risk of serious physical injury or property damage and thereby implicated the concerns of public safety that underly tort law.6
My analysis should not be read as suggesting that all defects are safety-related once they become manifest. For example, it is useful to contrast the defects at issue in this case and PGS with a defect in a turbine used to power an automated assembly plant. If the consequence of this hypothetical defect were that the assembly-line machinery simply stopped performing, product liability principles would not be implicated. Cf. Posttape Associates v. Eastman Kodak Co., 537 F.2d 751, 755 (3d Cir.1976) (“The flaw in the film in no way made it a threat to person or tangible property. The product did not perform as expected, but by no stretch of the imagination could it be considered ‘unreasonably dangerous.’ ”). I believe that it is a hypothetical defect of this type that the first PGS factor (the nature of the defect) indicates does not implicate tort principles. We are not, however, considering defective assembly-line machinery or flawed film. In this case, considerations of public safety are clearly implicated because a design defect has allegedly caused the breakdown of a product that powers a ship and has thereby caused imminent peril and near catastrophe. In sum, the majority fails to consider the “nature of the defect” in a manner consistent with the PGS framework.
The majority’s second reason for deciding that there is no unreasonable risk of harm in this case is “the gradual manner in which the defect manifested itself.” Once again, I am in agreement with the focus of the majority’s analysis: A court must ex*916amine the context in which a claim arises to ensure that the policy concerns of tort law are, in fact, implicated, that is unless tort recovery is to be permitted any time a claim is made for damages to a product that result from a safety-related defect. The necessity of this limitation on tort recovery may be illustrated by reference to the facts in PGS, a case in which the majority concludes the defect was “intimately related to the safety of the product.” Maj. op. at 910. Notwithstanding this close nexus to product safety, if the defect had been detected during a fire safety inspection so that repairs could have been made prior to any calamitous injury by fire, an inquiry into the “manner in which the defect manifested itself” would indicate that recovery under tort principles was not appropriate. Recovery in PGS was warranted not only because the design defect became manifest in circumstances that were sudden, but also, and more importantly, because the circumstances posed a significant threat of injury to person and property. See PGS, 652 F.2d at 1174 (“Here, the damage to the front-end loader was the result of a fire — a sudden and highly dangerous occurrence.”). The latter fact is the critical fact — the “suddenness” would seem secondary. Although in PGS the defect was the absence of a sprinkler system, in the typical case of a mechanical breakdown caused by a defect, there will be deterioration over time culminating in the manifestation of the defect.
I believe that circumstances highly analogous to those existing in PGS are at least alleged in this case. Although I would agree that the defect in the turbine might be characterized as one that caused “internal deterioration” as it powered the STUYVESANT, the defect nevertheless caused a complete breakdown that allegedly enhanced a preexisting, unrelated danger, namely a violent storm at sea. Thus, the turbine’s defect became manifest in a “sudden and highly dangerous” context, thereby suggesting that tort principles ought to apply. Whether the deterioration in the turbine could have been detected earlier by close inspection is an issue as irrelevant to a correct decision in this case as the consideration of whether fire safety inspectors could previously have assessed the front-loader’s defect would have been to the decision in PGS.
Stated briefly, I believe that the test outlined in PGS and adopted by the majority has to be clearly focused on two issues if it is to be effective in identifying cases that implicate the policies of tort law. First, a court must consider whether the defective product could result in an unreasonable risk of harm to person or property. Second, the court must decide whether the circumstances in which the defect became manifest were such that the defect actually resulted in the unreasonable risk. This second inquiry ensures that tort recovery is not available every time a defect that can generally be described as safety-related becomes manifest. Under my approach, a line is drawn between cases in which the damage to the defective product occurs in circumstances that do not create risk and cases in which the damage occurs in circumstances that do create risk. The importance of these two considerations is, in fact, suggested by the court’s statement in PGS that “the nature of the defect and the type of risk it poses are the guiding factors” in the analysis. 652 F.2d at 1174.
Notwithstanding the foregoing analysis, I readily concede that this is a very close case and that the proposition that East River should be permitted to pursue tort recovery as to count I is not free from doubt. Although the majority would deny tort recovery based on the PGS test, I believe that a stronger argument against recovery is that PGS was simply not intended to apply to cases in which the damage to the defective product itself was not causally related to the violent collision or calamitous event during which the defect in the product became manifest. PGS did not have to reach this issue because additional damage to the front-loader was caused by the fire as a result of the absence of a *917sprinkler system.7 In this case, however, no additional damage to the turbine resulted from the storm at sea as a result of the defect: the damage to the turbine apparently would have occurred to precisely the same extent regardless of the storm at sea. A requirement that the external hazard result in actual damage to the defective product would no doubt be a principled limit on the availability of tort recovery when there is damage only to the defective product. I would reject such a limitation, however, because to read PGS as establishing a bar against recovery in such “near miss” cases would disserve the principles of tort law that motivated the decision.8
In sum, the majority’s decision about the general applicability of tort law principles in admiralty is correct. The majority errs, however, in its application of the PGS factors to the allegations in this case. In my view, the charterers’ evidence concerning the STUYVESANT incident raises a genuine issue of material fact concerning the risk to the STUYVESANT as a result of the defective turbine. I believe that the affidavits at least present a triable issue as to whether the increased risk to the STUYVESANT which resulted from the defective turbine was significant enough to be characterized as “unreasonable,” and whether harm was imminent. I would therefore remand for a judicial determination as to whether the loss of speed attributable to the turbine’s breakdown significantly increased the risk created by the stormy seas of the Gulf of Alaska. If it did not, the plaintiffs as a matter of law cannot recover their economic loss in tort.9 If, however, the plaintiffs can succeed in proving that the turbine’s breakdown did cause an unreasonable risk, they are, under my view of the case, entitled to damages for economic loss, given the fact that the PGS test is otherwise met.
Circuit Judge A. LEON HIGGIN-BOTHAM, Jr., joins in this opinion.

. Because under my view of the case count I would survive summary judgment, there would be a valid federal claim to which count IV could be appended. Assuming, however, that count I does not survive summary judgment, Judge Garth appears to be correct when he states that Tully v. Mott Supermarkets, Inc., 540 F.2d 187 (3d Cir.1976) would require dismissal of count IV for want of federal subject matter jurisdiction. Tully would seem to require dismissal of count IV, a pendent claim arising from a common nucleus of operative fact, see Gibbs v. United Mine Workers, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), even though the now-dis*914missed federal claim to which count IV was originally appended is within the exclusive jurisdiction of the federal courts and, hence, could not have been brought in state court. The federal claim in Tully arose under § 10(b) of Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), another area in which the federal courts exercise exclusive jurisdiction. See Securities Exchange Act of 1934, § 27 (codified at 15 U.S.C. § 78aa). Were I of the view that count I does not survive summary judgment, and a majority of the court were in agreement, I would think it appropriate for the in banc court to address specifically the correctness of the Tally result, at least in the admiralty context. See In re Oil Spill By Amoco Cadiz Off Coast of France, 699 F.2d 909, 913-14 (7th Cir.1983) (dictum) (suggesting that the “strong admiralty policy in favor of providing efficient procedures for resolving maritime disputes” counsels in favor of a liberal approach to joinder, notwithstanding decisions rejecting pendent jurisdiction in the diversity context); Leather’s Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 811 (2d Cir.1971).

. This conclusion, although implicit through much of the majority’s opinion, is finally made explicit in the following statement of the holding: "we ... find that because no persons or property were injured or damaged, no tort recovery is appropriate in this case given the qualitative nature of the defect and the gradual manner in which the defect manifested itself.” Maj. op. at 910 (emphasis added).

. The majority has, appropriately, rejected the contrary rule which allows only contract remedies when the defective product alone is damaged by a defect. See, e.g., Mid-Continent Aircraft v. Curry County Spraying Service, 572 S.W.2d 308 (Tex.1978).

. The terms, “qualitative” and "safety-related,” used by the majority to describe the focus of this analysis are, I believe, misleading. I recognize that the majority’s shorthand use of the terms is fully consistent with PGS. See, e.g., 652 F.2d at 1172. Nevertheless, it is apparent that all defects that cause damage are qualitative and defects that cause injury or imminent peril are also safety-related. Both the lack of precision in these terms and their at least partial overlap may account for the majority’s uncritical decision to label as "qualitative" the defect in the ship’s turbine.

. The conclusion in Seely and PGS that product liability law applies only if the defect is hazardous is in marked contrast to the analysis and rule established in Santor v. A & M Karagheusian, 44 N.J. 52, 207 A.2d 305 (1965). In Santor, the court did not focus its analysis on the proper interrelationship between contract and tort in the context of economic loss, but on the use of tort and warranty-based products liability theories in breaking down the "citadel of privity" in defective products cases. The court felt that these latter principles applied regardless of whether the defect was hazardous or qualitative. Santor’s analysis is based on the paradigm of a manufacturer whose goods are sold to individual consumers whose only information about the quality of a product is the reputation of the *915manufacturer. The opinion focused on two characteristics of this market place: the seller’s greater knowledge and greater bargaining power. Under such circumstances, Santor concluded, simple justice requires that the manufacturer guarantee the quality of the product. I believe that this expansive approach to products liability in tort unnecessarily infringes freedom of contract. It is worth noting in this regard that two other courts of appeals have allowed recovery for economic loss when a defect has resulted in damage only to the defective product despite the fact that the three PGS factors would indicate that recovery in tort was not appropriate. See Miller Industries v. Caterpillar Tractor Co., 733 F.2d 813 (11th Cir.1984) (allowing recovery of economic loss due to delays and expense caused by a faulty engine to ship owners and others with an interest in the lost fishing catch, but limiting its holding to the facts of the case); Emerson G.M. Diesel, Inc. v. Alaskan Enterprise, 732 F.2d 1468, 1472-74 (9th Cir.1984) (declining to follow Seely and holding that a fishing vessel could recover repair costs and lost profits caused by a defective hose).
This brief reference to Santor is also of relevance, because, under my theory, count IV states a pendent state law claim.' The charterers argue that the claim should be governed by the law of New Jersey and that under New Jersey law, as embodied in Santor and its progeny, they are entitled to recover for their purely economic losses.

. The majority, in fact, suggests in its opinion that a defect in a ship's engine or turbine would in some cases implicate tort principles. See maj. op. at 909 ("In [cases of defective ship and car engines], the law seeks to leave parties to their bargain, while at the same time protecting consumers of both ships and cars from hazardous defects in the engines.”). The majority does not articulate in any detail why the manifestation of the defect alleged in this case was not "hazardous," given the fact that it left a ship without power during a severe storm at sea. The majority also does not provide any specific examples of engine defects that it would consider sufficiently hazardous to implicate strict liability principles.

. The cases that PGS relied on also evidenced this causal relationship between the damage to the defective product and the calamitous event. In Seely, supra, the damage to the truck was caused by the accident that resulted from the brake failure. In Cloud v. Kit Mfg. Co., 563 P.2d 248 (Alaska 1977), additional damage to the mobile home was caused by the fire because the carpet was made of flammable material.

. As the discussion in the text indicates, I believe that PGS should apply to a case involving a "near miss” or "imminent risk of harm.” I believe that even if this result represents an extension of the Seely/PGS doctrine, it is a principled and proper extension as well as a minimal one. See PGS, 652 F.2d at 1169 ("The gist of a products liability tort case is not that the plaintiff failed to receive the quality of product he expected, but that the plaintiff has been exposed, through a hazardous product, to an unreasonable risk of injury to his person or his property.” (emphasis added)).
I also recognize that this is not a sympathetic case for allowing recovery because the parties are large corporations who were fully able to protect their respective interests at the time of the purchase of the turbine. I note in this regard that the status of the parties is simply not relevant to the PGS analysis adopted by the majority. Perhaps, however, the solution in this regard is that commercial purchasers should be able to waive tort liability for damage to property. Cf. U.C.C. § 2-719(3) ("Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable"). Judge Higginbotham believes that tort liability for economic loss can be waived by a commercial purchaser in an admiralty case.

. The plaintiff bears the burden of showing that a defect creates an unreasonable risk of harm. In this regard the plaintiff must show that the risk of harm involved was a result of product defect — the standard causation question — and that it was unreasonable. This will require a plaintiff to carry the substantial burden of showing that there was an unreasonable risk in spite of the fact that no actual harm ensued. Although meeting this burden may be particularly difficult where, as here, the danger was created by an extrinsic source and the product defect allegedly enhanced the existing danger, the plaintiff, in my view, should have an opportunity to present the evidence to a fact-finder.