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Waste Management v. Ishikawajima-Harima Heavy Industries

United States District Court, E.D. California
Aug 28, 2006
NO. CIV. S-04-2028 WBS DAD (E.D. Cal. Aug. 28, 2006)

Summary

discussing whether economic loss doctrine bars claims of products liability or negligence under California law

Summary of this case from In re Enron Corp.

Opinion

NO. CIV. S-04-2028 WBS DAD.

August 28, 2006


MEMORANDUM AND ORDER RE: MOTION FOR SUMMARY JUDGMENT


Plaintiff Waste Management, Inc. filed this lawsuit in the Superior Court of California in and for the County of Shasta to recover damages for defendant Ishikawajima-Harima Heavy Industries, Co., Ltd.'s alleged failure to properly repair an IM5000 power turbine purchased from defendant by plaintiff's predecessor. Defendant removed the case to this court and now seeks summary judgment pursuant to Federal Rule of Civil Procedure 56(c). Jurisdiction is predicated on 28 U.S.C. § 1332. For the following reasons, defendant's motion will be granted.

I. Factual and Procedural Background

Pursuant to a contract entered into in 1981, plaintiff's predecessor-in-interest, Simpson Paper Company, purchased an IM5000 gas power turbine from defendant for use at its co-generation power plant in Anderson, California (the "Wheelabrator Lassen facility"). (Yasunaga Shimura Decl. ¶ 2; Compl. ¶ 1.) The contract included a warranty that limited defendant's liability for "defects in material and workmanship for a period of twelve (12) months from the date of ACCEPTANCE of the EQUIPMENT . . . or twenty-three (23) months from delivery of the EQUIPMENT . . ., whichever occurs first." (Shimura Decl. Ex. A at 25 (Article 12.1).) It also excluded liability for consequential damages arising from the owner's inability to operate the turbine due to defects in material or workmanship. (Id. at 29 (Article 12.6).) This "Warranty of Quality" was, in no uncertain terms, defendant's "sole and exclusive" warranty. (Id. (Article 12.5).) It "replace[d] any other warranty or guarantee imposed or implied by law, customarily or otherwise." (Id.)

Whether future maintenance of the turbine was part of the 1981 agreement is somewhat less clear. On one hand, Appendix G in the Technical Specifications discusses a "Maintenance Plan" and suggests that the parties intended for defendant to perform future inspections and maintenance on the turbine. (Id. at 178-79 (Tech. Specs. App. G, Section 5); see also id. at 27 (Article 12.3(7) (excluding from warranty coverage replacements made without defendant's approval or supervision — thus implying that replacements made otherwise were covered).) On the other hand, Article 12 in the purchase agreement details maintenance and repair services that defendant agreed to supply only "during the period of the Warranty described in Section 12.1. . . ." (Id. at 25 (Article 12.2).) Additionally, the "technical services" that defendant contracted to supply did not include maintenance services for the life of the turbine. (Id. at 50 (Tech. Specs 1.1.4).) In contrast to Appendix G, these sections suggest that maintenance and repair services were not a part of the 1981 agreement beyond the warranty period.

Although these provisions describe "preventative maintenance" inspections and "corrective maintenance" procedures without specifying who will conduct such activities, the agreement does specify that "off-site maintenance", required when repairs are extensive, will be conducted at "manufacturers' facilities." (Shimura Decl. Ex. A at 178-79 (Tech. Specs. App. G, Section 5).)

Exactly what goods and services defendant contracted to provide — and when — is at the heart of this dispute, which arose on August 7, 2000 when three "blade retainers of the rotor disk failed" and "extensively damaged" the turbine. (Compl. ¶¶ 8-9.) Leading up to this event, defendant had recently performed various repairs on the turbine, which had surpassed its designed-for operational capacity of 100,000 hours. In particular, on December 16, 1999, defendant billed plaintiff for $345,000.00 of "Power Turbine Repair" work. (Akio Suzuki Decl. Ex. F at 224.) It also advised plaintiff in January, 2000, that further inspection and planning would be necessary to prolong the use of plaintiff's turbine. (Ishizuka Decl. Ex. D at 197.) Subsequently, in May, 2000, defendant's representative, Tsuyoshi Ishizuka, prepared a "Report of IM5000 Power Turbine Repair" in which he noted that the rotor disks were "under high stress" and recommended that they be replaced "with the new ones if Wheelabrator plans to use the IM5000 . . . more longer." (Id. Ex. E at 201-02.)

Even the turbine's rotor (and its component blade retainers), which had been replaced in 1988 after suffering damage caused by "gas generator HPT disk pieces", had surpassed the design life expectation of 100,000 hours by August, 2000. (Tsuyoshi Ishizuka Decl. Ex. E at 201.) "At the time of the alleged failure, [the IM5000] had operated for approximately 137,000 useful life hours" and "the replacement rotor had operated for approximately 100,800 hours." (Id. ¶ 6.)

In mid-July, less than a month before the aging turbine package gave out, plaintiff was still contemplating whether to replace or refurbish its IM5000. (Furman Decl. Ex. 3 (E-mail from George Woodward to defendant's representatives reminding them that plaintiff was still waiting on a quote for replacement costs and proposing an alternative plan to extend the life of the existing IM5000).) Meanwhile, it continued to operate the unit, despite the fact that several of its components had operated for significantly longer than their life expectancy. (Id. Ex. 2 (June 5, 2000 letter from Reiji Ishimoto to William Carlson (reminding plaintiff that its IM5000 had "run more than 133,000 hours to date")).) Plaintiff does not dispute that it was aware of a service notice issued by defendant in 1995, in which defendant warned customers that "continuous operation over 100,000 hours without special inspection and necessary refurbishment may cause unexpected damage on Power Turbine and other associated equipment." (Ishizuka Decl. Ex. C at 190-91.) However, it also contends that despite having performed several recent inspections and repairs of related components, defendant never advised plaintiff that the blade retainers urgently needed replacement and that failure to do so as soon as possible might cause serious damage. (Pl.'s Opp'n to Def.'s Mot. for Summ. J. 7-8.)

The invoices sent to plaintiff suggest that it did make some of the replacements recommended in the 1995 service notice. (Suzuki Decl. Ex. F at 211-12, 224 (charging for a Power Turbine Rotor Repair — which, from earlier investigatory notes prepared by defendant, appears to have included rotor shaft and blade replacements — and Turbine Casing Spare Parts).)

As noted above, plaintiff alleges that serious damage did occur on August 7, 2000 when "three serrations [a.k.a. blade retaining slots or blade retainers] of the IM5000 power turbine's first stage rotor disk failed during operation, releasing each of their three rotor blades which then passed downstream through the turbine." (Compl. ¶ 8.) Subsequently, plaintiff filed suit in state court, seeking damages for (1) design defect; (2) failure to warn (of a design defect); (3) negligence; (4) breach of implied warranty of fitness for a particular purpose; and (5) breach of contract. (Id. ¶¶ 10-44.) Defendant removed the case to this court and now seeks summary judgment pursuant to Federal Rule of Civil Procedure 56(c).

II. Discussion

Discovery is still ongoing in this case and dispositive motions are not due until January 19, 2007. (Jan. 17, 2006 Am. Scheduling Order 2.) However, to avoid the expense of having to conduct depositions of defendant's current and former employees in Japan in September, defendant seeks summary judgment now, arguing that plaintiff cannot bring tort claims (claim one through three), which require evidence of actual damage, given that plaintiff suffered only economic loss. Defendant also contends that plaintiff's contract claims are barred by the warranty limitations to which its predecessor agreed and those implied by law.

A. Legal Standard

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A material fact is one that could affect the outcome of the suit, and a genuine issue is one that could permit a reasonable jury to enter a verdict in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party moving for summary judgment bears the initial burden of establishing the absence of a genuine issue of material fact and can satisfy this burden by presenting evidence that negates an essential element of the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Alternatively, the movant can demonstrate that the non-moving party cannot provide evidence to support an essential element upon which it will bear the burden of proof at trial. Id.

Once the moving party meets its initial burden, the non-moving party must "go beyond the pleadings and by her own affidavits, or by `the depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324 (quoting Fed.R.Civ.P. 56(e)). The non-movant "may not rest upon the mere allegations or denials of the adverse party's pleading." Fed.R.Civ.P. 56(e); Valandingham v. Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989). However, any inferences drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

B. Products Liability (Claims One and Two)

Plaintiff's first and second causes of action, for design defect and failure to warn of a design defect, are essentially products liability tort claims. In California, "plaintiffs may [only] recover in tort for physical injury to person or property [and] not for purely economic losses that may be recovered in a contract action." S.F. Unified Sch. Dist. v. W.R. Grace Co., 37 Cal. App. 4th 1318, 1327 (1995) (citing Seely v. White Motor Co., 63 Cal. 2d 9, 18-19 (1965)); Aas v. Superior Court, 24 Cal. 4th 627, 646 (2000) ("[A]ppreciable, nonspeculative present injury is an essential element of a tort cause of action."), superceded on other grounds by Cal. Civ. Code §§ 895-945.5. The California Supreme Court has further clarified that physical injury to property must consist of "damage to `other property,' that is, property other than the product itself." Jimenez v. Superior Court, 29 Cal. 4th 473, 483 (2002). "The law of contractual warranty governs damage to the product itself." Id.

This rule is otherwise known as the "Economic Loss Doctrine" and it is based on an accepted understanding that a merchant cannot be held liable when a product does not meet the consumer's commercial expectations, absent "an agreement, defined by practice or otherwise" to deliver a certain level of quality.Seely, 63 Cal. 2d 16-17; id. at 18 ("[A manufacturer] cannot be held [liable] for the level of performance of his products in the consumer's business unless he agrees that the product was designed to meet the consumer's demands.").

Given this standard, the court's inquiry is seemingly straightforward, as the only damage plaintiff suffered was damage to the allegedly defective turbine caused by its component parts. However, the overwrought blade retainers are not necessarily part of "the product itself" (i.e., the turbine). "In a case involving component-to-component damage [the trier of fact must] determin[e] whether the defective part is a sufficiently discrete element of the larger product that it is not reasonable to expect its failure invariably to damage other portions of the finished product." KB Home v. Superior Court, 112 Cal. App. 4th 1076, 1087 (2003). More specifically, the character of the responsible part is defined by the answers to the following questions:

(1) Does the defective component . . . perform an integral function in the operation of the larger product . . .?
(2) Does the component have any independent use to the consumer, that is some use other than as incorporated into the larger product?
(3) How related is the property damage to the inherent nature of the defect in the component?
(4) Was the component itself or the larger product placed into the stream of commerce (or, viewed from the buyer's perspective, was the larger integrated product or the component itself the item purchased by the plaintiff)?
Id. at 1086; Cal. BAJI 9.02 (further noting that at trial, plaintiff has the burden of establishing that the damaged property is separate from the defective property).

Generally, whether a component part damaged part of a larger product (the product itself) or other property is a question for the jury to resolve. KB Home, 112 Cal. App. 4th at 1087. Nevertheless, if the facts required to address these inquiries are uncontested, the court can draw the line between the defective product and other property. Id. at 1080 n. 2 ("Summary judgment, of course, may be proper if `the uncontradicted facts established through discovery are susceptible of only one legitimate inference. . . .'" (quotingJolly v. Eli Lilly Co., 44 Cal. 3d 1103, 1112 (1988) (alteration in original)).

Although the parties largely ignore the KB Home factors in their submitted arguments, it appears undisputable that the "IM5000 is an integrated machine, manufactured and sold in its entirety by [defendant]. . . ." (Def.'s Reply 5; see also (Shimura Decl. Ex. A (purchase agreement and specifications).) Defendant also argues, albeit without explanation, that the IM5000 is "nonfunctional" without the blade retainers. Additionally, it is clear from the photographs submitted that the blade retainers (and the rotor disks of which they are a seamless part) are specifically designed to accommodate the rotor blades manufactured by defendant and consequently, the court cannot imagine any independent use for this component outside of its use within the turbine. (See Furman Decl. Ex. 1.7.) Therefore, based on defendant's arguments and other evidence, the first, second, and fourth factors favor treatment of the turbine and its component parts as a single product. Significantly, plaintiff produced no evidence that might cast doubt on these conclusions and provided only bald assertions that the blade retainers are a discrete product.

The court in McDowell Valley Vineyards, Inc. v. Sabate USA Inc., No. C-04-708, 2004 WL 1771574, at *4 (N.D. Cal. Aug. 6, 2004), extracted four additional factors from KB Home that address: (1) "whether the component was purchased from another manufacturer;" (2) "whether the larger product was sold in other markets without the component;" (3) "whether the component can be readily removed from the larger product; and" (4) "whether the component has been used in other applications." Here, the component was not purchased from another manufacturer (additional factor 1). Additionally, plaintiff did not challenge defendant's assertion that the machine can not function without the rotor components and from this the court can infer (1) that the IM5000 is not sold in other markets without blade retainers and (2) that these components cannot be removed from the larger product (additional factors 2 and 3). Finally, although the parties have not presented direct evidence of the fourth factor, use in other applications, the fact that plaintiff and other IM5000 owners must share a limited pool of spare parts amongst themselves (see, e.g., July 28, 2006 Suzuki Decl. Ex. H at 2) suggests that some of the internal parts of the turbine, including perhaps the retaining blades, are not used in other applications. Taken together then, the additional McDowell Valley factors also do not support plaintiff's position.

Regarding the third factor, neither party has fully described the "extensive damage" that allegedly occurred. (Compl. ¶ 9.) Nevertheless, given that plaintiff has characterized the defective part as "blade retainers" and failure to retain the rotor blades allowed them to break free and cause damage, the only reasonable conclusion a jury could draw in this case is that the damage resulted from the inherent nature of the defect in the component. The third factor therefore further supports defendant's argument that the rotor components were part of the product itself, which was the only property that suffered damage.Cf. East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 871 (1986) (concluding that defective turbines that damaged themselves were a single unit based simply on the fact that, as here, "each turbine was supplied by [the turbine designer, manufacturer, and installer] as an integrated package. . . ."). Defendant is thus entitled to summary judgment because all four factors suggest that the blade retainers were intrinsic, not discrete, elements of the turbine and, as noted above, a purchaser cannot bring a products liability claim absent damage to "property other than the product itself."Jimenez, 29 Cal. 4th at 483.

Contrary to plaintiff's arguments, the blade retainers in the IM5000 are not comparable to windows in a house. Cf. Jimenez, 29 Cal. 4th at 484 ("[T]he manufacturer of a defective window installed in a mass-produced home may be held strictly liable in tort for damage that the window's defect causes to other parts of the home in which it is installed."). The retainers are not fungible fixtures made by a third party who is not responsible for, or even involved in, completion of the final product. Rather, they are integral and necessary components of a machine that is designed, constructed, and supplied by a single entity.

C. Negligence (Claim Three)

To the extent that plaintiff's negligence claim is based on defendant's "duty to exercise reasonable care in their design, manufacture, supply, [and] sale" of the IM5000, (Compl. ¶ 26), the analysis is the same as for its products liability claims.Seely, 63 Cal. 2d at 18 ("Even in actions for negligen[t] [construction], a manufacturer's liability is limited to damages for physical injuries and there is no recovery for economic loss alone."); Aas, 24 Cal. 4th at 636. Consequently, this portion of the claim is likewise subject to summary judgment.

However, plaintiff's negligence claim also alleges negligent "inspection, service, repair, maintenance and/or recertification of the stage one rotor and its component parts." (Compl. ¶ 26.) In other words, it alleges that defendant negligently performed services, separate and apart from supplying defective products. At least one California court has observed that "[t]he question of whether a plaintiff may recover damages for economic loss, absent physical injury to person or property, has been answered differently in cases involving the quality and condition of goods from when plaintiff's loss arises from a negligent performance of services." N. Am. Chem. Co. v. Superior Court, 59 Cal. App. 4th 764, 777 (1997). Articulating the specifics of this difference, the North American Chemical court noted that "[a] contract to perform services gives rise to a duty of care which requires that such services be performed in a competent and reasonable manner" and "negligent failure to do so may be both a breach of contract and a tort." Id. at 774; see also Moreno v. Sanchez, 106 Cal. App. 4th 1415, 1435 (2003) ("[T]he negligent failure to exercise reasonable care and skill in undertaking to perform a service contract . . . is a tort, as well as a breach of contract.").

The California Supreme Court has refused to adopt the North American Chemical reasoning, noting that "[a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations", but at the same time it has continued to apply the J'Aire test on which North American Chemical is based. Aas 24 Cal. 4th at 643; J'Aire Corp. v. Gregory, 24 Cal. 3d 799 (1979). J'Aire establishes a six factor balancing test that determines when a contractual duty rises to a duty of care capable of supporting a negligence claim. The factors include:

(1) the extent to which the transaction was intended to affect the plaintiff,
(2) the foreseeability of harm to the plaintiff,
(3) the degree of certainty that the plaintiff suffered injury,
(4) the closeness of the connection between the defendant's conduct and the injury suffered,
(5) the moral blame attached to the defendant's conduct and
(6) the policy of preventing future harm.
J'Aire Corp., 24 Cal. 3d at 804. Neither party addressed this test and its application in this case.

Regardless, even assuming that the J'Aire requirements are satisfied here and that defendant owed plaintiff a duty of care beyond its contractual obligations, the undisputed facts conclusively show that defendant fulfilled the duty that plaintiff alleges. Specifically, plaintiff claims that defendant had a duty to inspect the blade retainers and warn plaintiff that they needed to be repaired or replaced. (Compl. ¶¶ 28-29.) Yet defendant did warn plaintiff in May, 2000 that the "disks for state 1 to 3 [were] under high stress" and recommended that they be replaced "with the new ones if Wheelabrator plans to use the IM5000 . . . more longer." (Ishizuka Decl. Ex. E at 201-02.) Significantly, the blade retainers at issue here are an inseparable part of the turbine's first stage rotor (i.e., the disk for stage 1), which plaintiff continued to use despite defendant's advice to replace it. Plaintiff appears to take issue with defendant's failure to really impress upon plaintiff that it needed to take immediate action. However, this does not change the fact that defendant advised plaintiff to replace the rotor disks and thereby discharged any duty it may have had to warn plaintiff that these parts needed repair. Defendant is thus entitled to summary judgment on the entirety of plaintiff's negligence claim.

At oral argument, in an attempt to show that defendant expressly misrepresented that the blade retainers were in working condition, plaintiff selectively quoted a report prepared by defendants regarding repairs conducted in May, 2000. However, in the report, under the subheading "Operation", defendant simply wrote that "the power turbine is in a good condition except disk space tempe-rature." (Ishizuka Decl. Ex. E at 200 (emphasis added).) Furthermore, in the subsequent subsection covering its "Recommendations", defendant explicitly advised plaintiff to replace rotor disks 1 through 3. (Id. at 201-02.) Plaintiff thus has no basis for its assertion that defendant represented that the rotor in general and the blade retainers in particular were capable of continued use without repair.

D. Breach of Implied Warranty (Claim Four)

Plaintiff further alleges that defendant breached an implied warranty of fitness for a particular purpose when, despite "know[ing] that Plaintiff intended to use its first stage one blade retainers for a particular purpose", defendant failed to replace or repair them. (Compl. ¶¶ 33-36.) To the extent that plaintiff alleges that defendant was negligent while performing repairs, in other words provided inadequate services, plaintiff has failed to state a claim for breach of implied warranty. (See compl. ¶ 35 (attributing its failure to replace the retainers to its reliance on defendant's "skill and judgment").) The implied warranty of fitness for a particular purpose applies only to sales contracts. Allied Props. v. John A. Blume Assocs., 25 Cal. App. 3d 848, 855 (1972) ("[T]he well settled rule in California is that where the primary objective of a transaction is to obtain services, the doctrines of implied warranty and strict liability do not apply."); Gottsdanker v. Cutter Labs., 182 Cal. App. 2d 602, 608 (1960) ("[I]mplied warranties of fitness and of merchantability are enforceable only against a seller.").

Additionally, to the extent that plaintiff is asserting that the blade retainers supplied by defendant in 1988 (as part of the rotor replacement) were not fit for their intended purpose, this claim is not supported by the evidence in this case. Even assuming that defendant's 1981 warranty disclaimer does not apply to this component, the implied warranty of fitness for a particular purpose that plaintiff seeks to invoke arose "at the time of contracting", meaning when the sale or supply of the rotor occurred in 1988. The component then proceeded to function as expected for 100,800 hours over the course of twelve years and exceeded its design life — a limitation that defendant repeatedly reminded plaintiff of over the years. Assuming that the "particular purpose" on which plaintiff's implied warranty was based pertains to its intent to operate the IM5000 beyond its design life, plaintiff has failed to produce any evidence that it communicated such expectations to defendant "at the time of contracting." Moreover, as discussed in more detail in the next section, plaintiff has no evidence that defendant ever agreed that the IM5000 could operate beyond 100,000 hours. See Cal. Com. Code § 2316 ("An implied warranty can . . . be . . . modified by course of dealing or course of performance. . . ."). Therefore, plaintiff has no grounds for asserting an implied warranty of fitness and summary judgment on its fourth cause of action is warranted.

Defendant erroneously cites California Civil Code § 1791.1(3) for the proposition that even if an implied warranty existed, it expired in 1989 — one year after defendant supplied a new rotor (in 1988). Id. ("[I]n no event shall such implied warranty have a duration of . . . more than one year following the sale of new consumer goods to a retail buyer."). By its terms, § 1791.1 applies only to individual consumers and not sophisticated corporate customers like plaintiff. Cal. Civ. Code § 1791(a)-(b) (defining the protected "retail buyer" as "anyindividual who buys" "new product[s] . . . that [are] used, bought, or leased for use primarily for personal, family, or household purposes" (emphasis added)). The applicable source for plaintiff's implied warranty claim in this case is California Commercial Code § 2315.

Defendant argues that the 1981 warranty, which covered defects in material for less than two years and otherwise "replace[d] any other warranty or guarantee imposed or implied by law, customarily or otherwise", should primarily bar plaintiff's fourth cause of action. (Id. (Article 12.5).); see Cal. Com. Code § 2316 ("Language to exclude all implied warranties of fitness is sufficient if it states, for example, that `There are no warranties which extend beyond the description on the face hereof.'"). It further argues that modification of that written warranty cannot be implied from defendant's repair activities.See Eisenberg v. Alameda Newspapers, Inc., 74 Cal. App. 4th 1359, 1387 (1999) ("There cannot be a valid express contract and an implied contract, each embracing the same subject, but compelling different results."). Finally, defendant contends that allowing repair and replacement activities to put this case outside the scope of a carefully negotiated limitation on its liability would violate the intent of the 1981 agreement. (Def.'s Reply 3.) Nevertheless, as observed above in note 1 and the accompanying text, the warranty is vague regarding its application to repair and replacement parts and it is thus not as "carefully" constructed, or as clearly applicable, as defendant insists. Because the court can grant defendant's motion as to the fourth cause of action on other grounds, however, it need not interpret the intent and scope of the 1981 purchase agreement.

Significantly, in the face of defendant's summary judgment motion, plaintiff has not even defined the "particular purpose" that it allegedly communicated to defendant.

E. Breach of Contract (Claim Five)

Plaintiff also alleges breach of contract based on the service/repair contracts that it argues were separate and distinct from the 1981 purchase agreement (which expressly limited any and all warranties to those provided in the agreement). From the pleadings and the papers related to this motion, it appears that plaintiff's claim is based on a belief that the scope of the maintenance work performed by defendant included an agreement to evaluate the residual life of the turbine package. Additionally, plaintiff seems to suggest that defendant's "re-certification" of the turbine following its inspections and repairs included some unsaid guarantee that the turbine would operate indefinitely.

However, as previously noted, based on the facts before the court, plaintiff had no reasonable basis for expecting that defendant's product would continue to operate for an additional indefinite, or even fixed, amount of time beyond the 100,000 hour mark. Defendant reminded plaintiff on several occasions that its product was designed to last for 100,000 hours and described operation after that point as "a new challenge to a new millennium." (Shimura Decl. Ex. G at 197.) Significantly, plaintiff admits that defendant made no guarantees that the turbine could endure continued operations. (Pl.'s Opp'n to Def.'s Mot. for Summ. J. 10 (conceding that "[defendant] did not communicate its expectations to Plaintiff regarding the further useful life of the retainer slots").) Moreover, any such guarantee would have been totally inconsistent with defendant's well documented position that its product's capacity for operating beyond 100,000 hours was unknown.

Additionally, even if, as plaintiff contends, defendant had contracted to determine the residual life of the turbine, this does not translate into a guarantee that the turbine would survive long enough for defendant to complete this investigation. Assuming that such a contract even existed, plaintiff has not suggested a deadline for this work. Consequently, defendant could not have actually breached any agreement. At most, the damage, assuming it is irreparable, relieved defendant of any obligation to complete its residual life evaluation. See Levy v. Caledonian Ins. Co., 156 Cal. 527, 530 (1909) (reciting the "well established rule" that performance is excused "where a contract is made in contemplation of the continued existence of a subject-matter which is, after the making of the contract, destroyed without the fault of either party.").

The available evidence casts considerable doubt on plaintiff's contention that an agreement to evaluate the residual life of plaintiff's IM5000 existed. Notably, when asked whether it was interested in an "IM5000 PT residual Part Life Study program", plaintiff responded on May 10, 2000 that it was "not familiar with this program." (July 28, 2006 Suzuki Decl. Ex. K (Questionnaire on IHI IM5000 Power Turbine).) If plaintiff had, as alleged, already contracted for such a study, one would expect that it would have responded accordingly in the survey.

Based on these circumstances, summary judgment on plaintiff's fifth cause of action is proper. Additionally, the court declines to exercise its discretion pursuant to Rule 56(f) to continue this motion to permit further discovery. Plaintiff has no evidence, not even a declaration from one of its employees, that defendant made any representations regarding the turbine's useful life after 100,000 hours. Similarly, plaintiff has no evidence, and has not even alleged, that an agreement to complete the residual life evaluation before August 7, 2000 existed. Perhaps most troubling, plaintiff has not presented, in response to defendant's motion for summary judgment, the facts on which it based its decision to file a claim for breach of contract. The contracts and whatever other documents there might be to support plaintiff's claim are something that should already be in plaintiff's possession. The court cannot continue a motion for summary judgment based solely on plaintiff's hope that some document obtained through future discovery might sustain a claim for which it seemingly has no basis. Compare 321 Studios v. Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1091 (N.D. Cal. 2004) (noting that to secure a continuance of a motion for summary judgment, a party should "identif[y] relevant information to be discovered, and [the] basis for believing that such information actually exists." (citing VISA Int'l Serv. Ass'n v. Bankcard Holders, 784 F.2d 1472, 1475 (9th Cir. 1986)), with (Fruman Decl. ¶ 4 (stating very generally his reasons for needing further time for discovery: "I intend to ask the deponents, inter alia, about the material facts described by the parties hereto as both `disputed' and `undisputed'")).

Plaintiff concedes that it does not have all of the terms of the contracts for services performed in December, 1999 and May, 2000 and that it has not even "alleged the nature or terms of any contract pertaining to these services." (Pl.'s Opp'n to Def.'s Mot. for Summ. J. 14.) The little evidence that plaintiff has produced demonstrates only that an ongoing contract to evaluate the residual life of the turbine may have existed. (Id. at 15.) Plaintiff offers no support, or even an explanation of the basis, for its theories that (1) the contract for a residual life investigation was past due and thus breached at the time of the accident; (2) defendant agreed to repair "the turbine engine as a whole prior to the failure"; or (3) the terms of the alleged contract guaranteed future functionality of the turbine.

III. Conclusion

Although plaintiff's property was damaged when allegedly defective rotor blade retainers failed to perform as expected, the defective parts were not a sufficiently discrete element of the turbine such that their failure would not be expected to cause damage to other portions of the IM5000. Accordingly, the economic loss doctrine bars plaintiff's claims for products liability and negligent product design. Summary judgment on the portion of plaintiff's negligence claim alleging the negligent provision of services is likewise proper because the facts show that, assuming defendant had a duty above and beyond its contractual obligations, it performed the duties that plaintiff attempts to charge it with.

Summary judgment is also warranted on plaintiff's breach of warranty and contract claims because plaintiff has failed to identify any evidence of terms that defendant may have breached (or even explain what terms it suspects might exist). Plaintiff is not entitled to further discovery on claims that appear to be based on nothing more than theories and conjecture.

IT IS THEREFORE ORDERED that defendant's motion for summary judgment be, and the same hereby is, GRANTED.


Summaries of

Waste Management v. Ishikawajima-Harima Heavy Industries

United States District Court, E.D. California
Aug 28, 2006
NO. CIV. S-04-2028 WBS DAD (E.D. Cal. Aug. 28, 2006)

discussing whether economic loss doctrine bars claims of products liability or negligence under California law

Summary of this case from In re Enron Corp.
Case details for

Waste Management v. Ishikawajima-Harima Heavy Industries

Case Details

Full title:WASTE MANAGEMENT, INC., Plaintiff, v. ISHIKAWAJIMA-HARIMA HEAVY…

Court:United States District Court, E.D. California

Date published: Aug 28, 2006

Citations

NO. CIV. S-04-2028 WBS DAD (E.D. Cal. Aug. 28, 2006)

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