Court Opinion

ID: 9535799
Source: CourtListenerOpinion
Date Created: 2023-08-07 06:44:27.809649+00
Date Added: 2024-06-11T13:33:20.566320
License: Public Domain

JUSTICE SIMON, specially concurring: I concur in the judgment, and in the general principle that economic loss should not give rise to product liability in tort. I disagree with certain statements and assumptions in the majority opinion. There is no fundamental reason to define economic loss primarily as the absence or opposite of physical harm. The appellate court opinion in this case demonstrates at length the illogical results of the no-physical-harm approach, especially if combined with the view that once there is any physical harm, all damages are recoverable, including those that would be considered economic loss when not accompanied by the physical harm. Physical harm should not guarantee recovery, and the absence of physical harm should not necessarily defeat recovery. For example, if an oven malfunctions and has to be repaired or replaced, that is clearly economic loss; if the roast inside is burned to a crisp (physical harm), should that make all the losses recoverable? Conversely, I believe there should be recovery for lost profits where a plaintiff restaurant buys and serves the defendant’s unfit packaged food, so that a patron, though uninjured, jumps up and denounces the restaurant, wrecking its reputation (Mazetti v. Armour & Co. (1913), 75 Wash. 622, 135 P. 633), or where flooring material emits a penetrating obnoxious odor, rendering a store’s merchandise unsaleable, though not physically damaged (Walker v. Decora, Inc. (1971), 225 Tenn. 504, 471 S.W.2d 778), or simply driving customers out of the store. The essential difference between economic loss and noneconomic loss is the difference between contract and tort. The proper approach is to draw the line according to the policies that make some damages recoverable in tort and others not. The majority opinion goes a long way toward acknowledging this. In particular, it quotes and adopts Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165, which held that, at least in the case of damage to the defective product itself, as opposed to other objects, the items for which damages are sought do not necessarily determine whether the loss is economic, but one must look to the policies behind the regimes of torts and contracts to see which is more appropriate. This logic should be carried further and applied more generally. The true significance of physical harm is that it usually represents an invasion of a right existing apart from any contract — a tort interest. No one is supposed to set your house on fire, and neither should a product. But there are other such interests. A product should not wreck your employees’ morale or your customers’ good will, either; if it goes berserk and does so, that is likely to fall on the tort side of the line. On the other hand, if a product simply fails to live up to its promise, if it does not accomplish what it was supposed to the way it was supposed to, that is only an invasion of a contract-like interest: the user has lost the benefit of his bargain. If a refrigerator fails, the food inside may spoil, but there is no tort. The product may be inadequate or useless, but it is not dangerous. The only risk is to commercial expectations. The central test is the relation of the malfunction and the consequent loss to what the product was supposed to accomplish. The product’s function is the core of the commercial bargain, and any shortcomings should normally be dealt with by commercial law, unless there is some excellent reason for invoking the less flexible tort system. Hazards peripheral to the product’s function, however, were not in the forefront of the minds of the contracting parties, and it is convenient to have tort rules about them. Fireman’s Fund American Insurance Cos. v. Burns Electronic Security Services, Inc. (1980), 93 Ill. App. 3d 298, appeal denied (1982), 88 Ill. 2d 550. Other considerations, including the physical character of the damage, may be significant in certain cases. For example, personal injury occupies a special place in the law; risks to the person are less subject to allocation by agreement than other risks (cf. Ill. Rev. Stat. 1979, ch. 26, par. 2-719(3) (limitation of damages for personal injury is prima facie unconscionable)), so that a defect that endangers personal safety presents an unusually strong attraction to the tort system. While I do not propose any litmus test for economic loss, I believe that the first step is to break away from a fixation on physical harm. Physical harm has maintained its place only because it is a proxy for the real distinction. That is, defects that cause physical harm to property other than the product itself usually involve an accident rather than a mere failure, because few products are dedicated to the purpose of not damaging things. The purpose of a toaster is to toast, not to avoid burning the house down. Conversely, where there is no physical harm at all, the loss is usually economic, because it is rare for a product to cause large nonphysical losses except by failing to do something someone was expecting; most accidental losses are physical. The difficulty and disagreements the law has had over the intermediate case of damage to the product itself reflect the fact that whether recovery is permitted is unpredictable; there is no quick answer to the question of whether the loss is economic, and the law has therefore been forced to take a more comprehensive and more sensible approach than merely looking for physical distinctions. The fact that physical harm is a proxy for something else rather than of fundamental legal significance is clearly seen in the widespread idea that if the incident involves any physical harm, all losses are recoverable — an idea that the appellate court discussed and attacked at some length. Such a rule would indeed be out of place if the law were really concerned about what kinds of items of damages are recoverable. It makes sense once we realize that the real issue is whether the incident as a whole belongs in the tort world. The presence of any physical harm tends to indicate that more is involved than an inferior product; the defect and the hazard were probably such that tort treatment is appropriate. Once we decide to treat the incident as a tort, the losses are recoverable without regard to whether they are physical. In summary, this case presents no more than an inferior product. The majority correctly explains that the loss is economic loss not suitable for recovery in tort. In dictum, however, the majority perpetuates the conventional wisdom about other, supposedly easier, kinds of cases. I raise another question about the majority opinion and about most discussions of economic loss. They assume that there can be only one kind of strict product liability out of privity. This assumption forces one to choose between saying that economic loss is not recoverable out of privity and saying that there is no difference between economic loss and any other kind. Neither alternative is satisfactory. One should not have to choose wholesale between Santor v. A&M Karagheusian, Inc. (1965), 44 N.J. 52, 207 A.2d 305, and Seely v. White Motor Co. (1965), 63 Cal. 2d 9, 403 P.2d 145, 45 Cal. Rptr. 17; I believe the proper approach is to adopt the valid concerns behind each. There is, as those who opt for Seely insist, a big difference between economic loss and its opposite: the difference between contract and tort. Economic loss should not be recoverable in tort. But that does not mean that it should not be recoverable unless there is privity. In the world of modern commerce, where people rely on nationally advertised brand names to buy goods that the retailer never altered, inspected, or recommended, it is realistic to say, with Santor, that there is a bargain of sorts between buyer and manufacturer, and that the buyer is entitled to the benefit of that bargain. In other words, economic loss should be recoverable out of privity in some circumstances, but not on the same terms as tort losses. The proper approach is to develop a system of warranties out of privity to protect warranty-like, that is contract-like, interests, while using a tort theory to protect tort interests. Both theories have solid support in the precedents. In fact, half of the classic cases that Prosser cited as support for his tort approach allowed recovery for economic losses; they were based on implied warranties. (Edmeades, The Citadel Stands: The Recovery of Economic Loss in American Products Liability, 27 Case W. Res. L. Rev. 647 (1977).) Prosser convinced us that the warranty approach was not needed or suited for tort cases. But a tort approach to enforcing routine commercial expectations is as fictitious as a warranty theory usually is for personal injuries. We need both, and this case should not be construed to foreclose that possibility.