Redman v. John D Brush & Co ( 1997 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MICHAEL REDMAN,
Plaintiff-Appellee,
v.
JOHN D. BRUSH AND COMPANY, d/b/a
Sentry Group, Incorporated, No. 95-3215
Defendant-Appellant,
and
VALUE-TIQUE, INCORPORATED,
Defendant.
Appeal from the United States District Court
for the Western District of Virginia, at Big Stone Gap.
Glen M. Williams, Senior District Judge.
(CA-91-207-B)
Argued: December 5, 1996
Decided: April 28, 1997
Before WILKINS and LUTTIG, Circuit Judges, and BUTZNER,
Senior Circuit Judge.
_________________________________________________________________
Reversed by published opinion. Senior Judge Butzner wrote the opin-
ion, in which Judge Wilkins and Judge Luttig joined.
_________________________________________________________________
COUNSEL
ARGUED: Laura Ellyn Wilson, PENN, STUART, ESKRIDGE &
JONES, Abingdon, Virginia, for Appellant. Terry Gene Kilgore, KIL-
GORE & BAKER, Gate City, Virginia, for Appellee. ON BRIEF: D.
Gregory Baker, KILGORE & BAKER, Gate City, Virginia, for
Appellee.
_________________________________________________________________
OPINION
BUTZNER, Senior Circuit Judge:
In this products liability suit, John D. Brush and Company (Sen-
try), the manufacturer of Sentry safes, seeks review of a jury award
entered in favor of Michael Redman. Redman brought the suit after
his coin collection, which was locked inside his Sentry safe, was
stolen. At the conclusion of trial, the jury awarded Redman the value
of the coin collection based on its finding that the loss resulted from
the safe's negligent design. Because the evidence was legally insuffi-
cient to establish Sentry's liability for the loss, we reverse.
This is a diversity case and Redman's loss occurred in Virginia.
Accordingly, Virginia law controls the substantive legal issues.
Alevromagiros v. Hechinger Co., 993 F.2d 417, 420 (4th Cir. 1993).
I
Redman purchased a Sentry Supreme Safe, Model #5570, from a
retailer, which traded under the name of Value-Tique, after noticing
the safe in magazine advertisements. The retailer arranged for Sentry
to ship Redman's safe, which was delivered in February 1987. Red-
man stored his coin collection in the safe. In December 1989, while
Redman and his family were away for three days, a burglar broke into
Redman's home and stole his coin collection. Upon his return, Red-
man found that the safe, which had a combination lock, had been
forced open. On the floor near the safe were a 12" pry bar, a screw
driver, a hammer, and the safe's dial and handle.
In December 1991, Redman filed this action against Sentry and
Value-Tique to recover the value of the coin collection. The com-
plaint asserted claims for breach of warranty, negligent failure to
warn of a dangerous condition, and negligent design or manufacture.
2
Early on, Value-Tique was dismissed from the suit for lack of per-
sonal jurisdiction.
Subsequently, Sentry filed a motion for summary judgment. Ruling
on the motion, the district court dismissed the warranty claim because
the statute of limitations had elapsed and, alternatively, because Sen-
try had effectively disclaimed all liability for consequential damages.
The court also dismissed the negligent design claim because Redman
had not presented any evidence to show that the safe was defective.
The court did not, however, dismiss the failure to warn claim.
After several months of pretrial preparation, Sentry filed a second
motion for summary judgment. In response, Redman asked the court
to reconsider its earlier dismissal of the negligent design claim. Act-
ing on these motions, the court changed two of its previous rulings.
First, the court reinstated the design claim because Redman had
retained an expert who, Redman said, would testify that the safe was
negligently designed. Second, the court dismissed the failure to warn
claim, finding that Redman could not sustain the claim under Virginia
law because the safe was not a dangerous product. The court also held
that Redman's claim was not barred by Virginia's economic loss rule.
As a result of these rulings, the district court then held that the case
would be tried on the sole issue whether Sentry negligently designed
and manufactured the safe. Redman has not appealed any of the
orders that adversely affected him.
After the jury returned a verdict in Redman's favor, Sentry
renewed its motion for judgment as a matter of law because, in its
view, Redman had failed to prove the elements of his claim. The dis-
trict court denied the motion and entered judgment based on the jury's
verdict. See Redman v. Sentry Group, Inc., 907 F. Supp. 180
(W.D.Va. 1995). Sentry appealed.
II
Sentry asserts on appeal that the district court erred in several evi-
dentiary rulings and by denying its motion for judgment as a matter
of law. Under Federal Rule of Civil Procedure 50, the moving party
is entitled to prevail on a motion for judgment as a matter of law if,
after a full hearing, the evidence is legally insufficient to allow a rea-
3
sonable jury to find in favor of the other party. With that standard in
mind, we review the district court's denial of such a motion de novo.
Brown v. CSX Transp., Inc., 18 F.3d 245, 248 (4th Cir. 1994). We
review evidentiary rulings for abuse of discretion.
In order to sustain a products liability claim for negligent design
under Virginia law, "the plaintiff must prove that the product con-
tained a defect which rendered it unreasonably dangerous for ordinary
or foreseeable use." Alevromagiros, 993 F.2d at 420. Although Vir-
ginia law requires manufacturers to make reasonably safe products, it
does not require them to adopt the safest conceivable design. Austin
v. Clark Equipment Co., 48 F.3d 833, 837 (4th Cir. 1995). Instead,
manufacturers are required to design products that meet prevailing
safety standards at the time the product is made. Sexton v. Bell Hel-
mets, Inc., 926 F.2d 331, 336-37 (4th Cir. 1991). When deciding
whether a product's design meets those standards, a court should con-
sider whether the product fails to satisfy applicable industry stan-
dards, applicable government standards, or reasonable consumer
expectations. Alevromagiros, 993 F.2d at 420.
III
We turn first to the contested evidentiary rulings. At the outset of
the trial, Sentry moved to exclude two of Redman's exhibits. Over
Sentry's objection, the district court permitted Redman to introduce
a Value-Tique advertisement that appeared in a magazine called Coin
World three years after Redman bought his safe. The advertisement
described the pictured Sentry safe as "burglar deterrent" and "fire
resistant." As justification for introducing the advertisement, Redman
claimed that he relied on similar advertisements when he bought his
safe. The district court allowed Redman to introduce the advertise-
ment because the safe had been advertised "for burglary purposes."
The advertisement should not have been allowed in evidence. The
most obvious problem with the advertisement is that it depicts a dif-
ferent model safe from the one Redman purchased. An even more
important difficulty with the admission of the advertisement is that
the evidence does not link Sentry to the representation of burglar
deterrence that appears in the advertisement. The evidence shows
only that Redman ordered the safe from Value-Tique and Sentry
4
shipped the safe direct from the factory. According to the best recol-
lection of its witness, Sentry did not place any advertisements in Coin
World in 1986 or 1987. In addition, Redman produced no evidence
to show that Sentry authorized Value-Tique to describe a Sentry safe
as "burglar deterrent." Later during the trial, Redman testified that no
one from Sentry told him the safe was "burglar deterrent," and he
admitted that he had not produced any advertisements that Sentry had
placed in a coin magazine.
The second exhibit that Sentry's counsel challenged was a copy of
the warranty that accompanied the safe. Partially overruling the objec-
tion of Sentry's counsel, the district court allowed Redman to intro-
duce a sentence from the warranty for impeachment purposes. The
sentence reads: "Your safe is built to protect against fire and petty
theft, but if properly installed and used will provide a degree of pro-
tection against burglary." The district court admitted the warranty
statement for impeachment because, in the words of the district court,
Sentry's expert "has said they do not make burglary proof safes."
The trouble with the district court's ruling is simply that the war-
ranty was not contrary to the testimony of Sentry's witness. After
explaining the standards of Underwriters Laboratories (UL) for bur-
glar resistance, Sentry's expert testified that Sentry does not make
burglar resistant safes and that the safe in question was not designed
to meet a UL burglary resistance standard; instead, it met a UL fire
resistance standard, and it could not be redesigned to meet a burglar
resistance standard. He also testified that the safe offered a degree of
burglary protection because it has a lock and bolt work that would
require some degree of force to enter for anyone who did not know
the combination. His testimony was consistent with the warranty,
which described the safe as providing "a degree of protection against
burglary." Consequently, the warranty did not impeach Sentry's
expert. It simply served to confuse the jury by reminding them that
Sentry had given a warranty when, in fact, the district court had dis-
missed Redman's cause of action on the warranty. Although the dis-
trict court explained to the jury that the warranty itself was not an
issue, the jury's prejudicial confusion was made evident by a question
they asked about the meaning of "petty theft," a term mentioned in the
warranty. The court responded to the jury's question by explaining
that the term was not relevant. Nevertheless, the question and answer
5
suggest that the jury was using the statement in the warranty for more
than impeachment purposes, especially since it did not impeach Sen-
try's expert. The warranty should not have been admitted into evi-
dence, and under the circumstances the district court erred by
allowing the introduction of the statement for impeachment purposes.
In addition to the Value-Tique advertisement and the warranty
statement, Sentry challenges the admissibility of the expert testimony
offered by Redman. Redman called as his expert a metallurgic engi-
neer, who undoubtedly qualified to testify about the properties and
characteristics of metal. In preparation for trial, he conducted what he
called a failure analysis on the safe. Through this analysis, he learned
what materials the safe was made of and how those materials were
assembled. He also reached the conclusion that the burglar broke into
the safe by prying open the door using the pry bar later found next
to the safe. Based on his findings, he opined that, although the safe
was fire resistant, it was not burglar deterrent.
The problem with the admissibility of that conclusion is that Red-
man's expert was not qualified to testify about industry standards. He
had never before analyzed a safe, engaged in the manufacture or
design of safes, or received any training regarding safes. Even more
importantly, he was not personally familiar with the standards and rat-
ing systems for fire protection capacity and burglary protection capac-
ity used in the safe industry. He acknowledged that his only
knowledge of safes was acquired in preparation for this trial through
discussions he had initiated with people who sold, distributed, or
repaired safes. In fact, he admitted he used the term "burglar deter-
rent" only because it appeared in the advertisements placed by Value-
Tique.
In order to reach the conclusion that Redman's safe was not "bur-
glar deterrent," the expert relied on the hearsay of store personnel to
ascertain the meaning of "burglar deterrent," that is, to ascertain the
meaning of what he believed to be an applicable industry standard.
Redman did not call those employees as witnesses, nor did he attempt
to qualify them as experts.
Federal Rule of Evidence 703 permits the admission of expert
opinion testimony even though the expert has relied on evidence that
6
is inadmissible. But the rule has a proviso as important as the rule's
statement regarding admissibility. The opinion is admissible only if
the expert has relied on information of a kind reasonably relied on by
experts in the field. In this case, an expert in the relevant field would
be familiar with the design and manufacture of safes and the industry
standards regarding safes. There is no proof and no reason to believe
that such an expert would rely on conversations with store personnel
to identify a standard of burglar protection capacity. Thus, Redman's
expert should not have been permitted to rely on the inadmissible
hearsay of the store personnel for the purpose of establishing a pur-
ported industry standard. See United States v. Trong Cuong, 18 F.3d
1132, 1143-44 (4th Cir. 1994); Thomas J. Kline, Inc. v. Lorillard,
Inc., 878 F.2d 791, 799 (4th Cir. 1989).
Other than the inadmissible hearsay, Redman's expert presented no
evidence of an industry standard for "burglar deterrent" safes. In the
absence of an industry standard for burglar deterrence, it would be
speculative and misleading for the expert to opine that the safe did not
meet that undefined standard. Cf. Alevromagiros , 993 F.2d at 421
(rejecting expert testimony that amounts to mere"subjective opinion"
because "[l]ike the Fifth Circuit, we are unprepared to agree that `it
is so if an expert says it is so.'" [citation omitted]). Under these cir-
cumstances, it was error to permit Redman's expert to testify that the
safe was not "burglar deterrent." It was proper, however, to admit the
expert's testimony about matters relating to his metallurgic expertise,
such as his discussion of how the safe was constructed, the salient
properties of the safe's component materials, and how he thinks the
burglar forced open the door.
IV
Next we examine whether the remaining evidence was sufficient to
show a deviation from applicable industry safety standards. We con-
clude that it was insufficient.
Redman's expert testified that, in his opinion, the safe fell below
the industry standard for "burglar deterrent" safes. As we have dis-
cussed, however, he was not qualified to testify about industry stan-
dards because his only knowledge of the subject derived from an
inappropriate source. Since he was not qualified to testify about
7
industry standards, he also was not qualified to offer an opinion about
whether the safe met those standards. For that reason, the competent
portions of his testimony do not demonstrate that the safe failed to
meet an industry standard.
Sentry offered the testimony of its design engineering manager
who is a mechanical engineer with 13 years of design experience in
the safe industry. Without objection he was offered as an expert on
the design and manufacture of safes. He testified that there are two
classifications of safes in the industry--fire resistant and burglar
resistant. He further testified that the safe in question is designed pri-
marily for fire protection and that it meets UL standards for two-hour
fire resistance. He added that, because the safe is equipped with a
locking mechanism, it provides some measure of burglar protection,
although it does not meet any specific burglar resistance standard. He
also testified that safe construction involves a tradeoff between fire
resistance and burglar resistance because the materials that enhance
burglar resistance reduce fire resistance. He testified that when he
examined the safe, he was not furnished the handle to the locking
mechanism. Without the handle, he was unable to say how it was
removed, but he believed the handle was removed before the thief
broke into the safe by using a pry bar on the door.
The district court concluded that, because Sentry's expert acknowl-
edged that Redman's safe did not qualify for a burglar resistance rat-
ing, it fell below industry standards. To reach this conclusion, the
court created its own standard. Throughout its opinion, it refers to
"burglar deterrent/burglar resistant" safes. See Redman, 907 F. Supp.
at 183-84. However, neither expert testified that such a standard
exists, and no evidence of such a standard was introduced. The phrase
"burglar deterrent" originated in Value-Tique's advertisement, which,
as shown in Part III, was inadmissible.
The problem with the court's reasoning is that nothing in the record
establishes that industry standards require a so-called "burglary deter-
rent" safe to qualify for a burglar resistance rating. Although the dis-
trict court did not recognize a difference between"burglar resistant"
safes and "burglar deterrent" safes, Sentry's expert--the only witness
qualified to testify about industry standards--was careful to draw that
distinction. According to Sentry's expert, the burglar resistance rating
8
system is used by the industry to measure burglar protection capacity.
He did not testify about the existence of an industry standard for bur-
glar deterrence. Viewed properly, the testimony of Sentry's expert
does not establish that Redman's safe failed to meet an applicable
industry standard.
Furthermore, Redman did not offer any evidence to establish that
an industry standard required the safe at issue, which was designed
to resist fires, to provide a defined level of burglary protection. In
fact, he did not even present evidence to show that industry standards
require a safe designed to be burglar resistant to qualify for a mini-
mum burglar resistance rating. Neither expert suggested that safes
designed for fire resistance are required to carry an industry rating for
burglar resistance, nor did they say whether other fire resistant safes
on the market provide more burglar protection than the safe in ques-
tion. In short, the evidence did not establish that the safe fell below
any applicable industry standard. Neither party referred to any gov-
ernment standards.
We also note that neither Value-Tique, through its advertising
description, nor Redman's expert could create a standard, such as
"burglar deterrent," against which Sentry's alleged negligence is to be
measured. Applying Virginia law, we have held that a company can-
not create a particularized standard to measure negligence in the prod-
ucts liability context. See Hottle v. Beech Aircraft Corp., 47 F.3d 106,
108-10 (4th Cir. 1995).
V
Redman may satisfy his burden of establishing that the safe
included an unreasonably dangerous defect if he can show that it
deviated from reasonable consumer expectations. This avenue is open
to him even though he has failed to prove that the safe did not meet
industry or government standards. Alevromagiros , 993 F.2d at 420.
Consumer expectations are used to gauge whether a product design
is defective because those expectations reveal how society "balances
known risks and dangers [inherent in a product design] against the
feasibility and practicability of applying any given technology" to
enhance product safety. Sexton, 926 F.2d at 337. Requiring manufac-
turers to meet reasonable consumer expectations ensures that their
9
products are required to meet minimum standards deemed appropriate
by society, even when those societal standards demand safer products
than government or industry standards. Id. at 336-37. In Virginia, a
plaintiff can establish reasonable consumer expectations through "`ev-
idence of actual industry practices, . . . published literature, and from
direct evidence of what reasonable purchasers considered defective.'"
Alevromagiros, 993 F.2d at 420-21 (quoting Sexton). These types of
evidence are probative when they establish what society demands or
expects from a product. Sexton, 926 F.2d at 337.
Redman presented no evidence to show that reasonable consumers
expect all safes to provide a minimum amount of burglary protection.
Instead, he contends that a reasonable consumer would have expected
the particular safe he purchased to provide more burglary protection
than it did. The reason he offers is that this particular safe was mar-
keted as "burglar-deterrent" and Sentry indicated that it would provide
"a degree of protection against burglary."
Redman's argument misses the mark. There is no doubt that the
safe did, in fact, provide some degree of burglary protection. The safe
was heavy, included a locking mechanism, and appeared secure.
These features, by themselves, would deter some burglars. In addi-
tion, the fact that the burglars needed to break into the safe by remov-
ing the handle and dial, and by using a pry bar, indicates that it
provided some measure of burglary protection. Redman was unable
to say how long the burglar worked to break into the safe. But the job
obviously was not done easily or quickly. In addition to removing the
handle and the dial, the evidence showed that the burglar used the pry
bar at various places on the safe before hitting upon the five spots that
forced the door. The pertinent question then is whether reasonable
consumers would consider a "burglar-deterrent" safe defective
because it did not provide more burglar protection than Redman's
safe.
Redman's evidence did not establish how much burglary protection
reasonable consumers would expect from a burglar-deterrent safe.
The only evidence he offered on this point was his own testimony. He
testified that, based on the advertisement, the warranty statement, and
the safe's appearance, he expected more protection than the safe pro-
vided. Redman's subjective expectations are insufficient to establish
10
what degree of protection or deterrence society expects from a safe.
See Alevromagiros, 993 F.2d at 421.
Furthermore, the evidence disclosed that the industry practice is to
manufacture safes that qualify for either a fire resistance or a burglar
resistance rating, but not both. The reason, according to the unrebut-
ted testimony of Sentry's expert, is that it is not feasible, practically
or economically, to enhance the burglar resistance of safes like Red-
man's without diminishing their capacity to protect against fire. The
safe Redman purchased carried a UL rating for fire resistance. In light
of the industry practice, it would be unreasonable for a safe like Red-
man's, which expressly carried a fire resistance rating, to be consid-
ered defective because it did not carry a burglar resistance rating as
well. Finally, Redman introduced no published literature revealing
consumer expectations.
VI
There is also a problem with Redman's claim for damages. He
measures his damages by the value of the stolen coin collection. But
this damage is an economic loss that Redman cannot recover in a neg-
ligence action.
The evidence disclosed that there is no privity of contract between
Redman and Sentry. Moreover, Redman's claim on Sentry's warranty
was barred by the statute of limitations and by Sentry's lawful exclu-
sion of recovery for consequential damages. The question then arises
whether Redman can recover the loss of his coins by bringing an
action in tort to bypass Sentry's exclusion of consequential damages.
The answer is that Virginia would not permit circumvention of its
warranty law in a case like this one.
In Virginia, the economic loss rule applies in negligence suits.
Sensenbrenner v. Rust, Orling, & Neale, Architects, Inc., 236 Va.
419, 423, 374 S.E.2d 55, 57 (1988). According to the rule, a plaintiff
who is not in privity of contract with the defendant cannot maintain
an action for negligence, such as a product liability suit, based on
purely economic losses. See Sensenbrenner, 236 Va. at 422-23, 374
S.E.2d at 56-57. This rule remains in force notwithstanding the statu-
tory abolition of the privity requirement in negligence actions for
11
injury to persons and damage to property. See Va. Code Ann. § 8.01-
223. This statute is in derogation of the common law and has no
application to claims of economic loss. Sensenbrenner, 236 Va. at
423, 374 S.E.2d at 56-57.
The applicability of the economic loss rule depends on the type of
loss suffered by the plaintiff. The Virginia Supreme Court has noted
with approval that "most jurisdictions equate economic losses . . .
with disappointed economic expectations." Sensenbrenner, 236 Va. at
423, 374 S.E.2d at 57. According to the court, "[t]his is clearly the
prevailing rule where damage is claimed because goods purchased
fail to meet some standard of quality." 236 Va. at 423, 374 S.E.2d at
57. In other words, an economic loss is a loss that flows from the fail-
ure of the product to perform as expected.
Virginia law permits a manufacturer to tailor both the warranty
protection offered with a product and the remedies available for
breach of warranty. See Va. Code §§ 8.2-316, 8.2-719. As a result, the
extent of liability and the remedies available in a warranty action are
often quite different from the remedies available in tort. By preclud-
ing recovery of economic losses in actions for tort, the economic loss
rule preserves the balance of rights and remedies established by war-
ranty law. See Sensenbrenner, 236 Va. at 423, 374 S.E.2d at 57.
Redman argues that the economic loss rule does not preclude tort
recovery in this case. In his view, whenever a plaintiff seeks to
recover a loss involving physical harm to property other than the
product itself, the economic loss rule is inapplicable. Applying this
reasoning, he argues that the loss of his coin collection constitutes
damage to other property that can be recovered in tort. The essence
of Redman's claim is that the safe did not meet his expectations of
burglar deterrence and burglary protection.
If the safe did not meet Redman's expectations, his remedy is
defined by Sentry's warranty, which the court determined was inap-
plicable because of the statute of limitations and the exclusion of con-
sequential damages. This analysis is consistent with Virginia Supreme
Court precedent. In Sensenbrenner, the court made it clear that the
distinction between economic losses and injuries to property is linked
12
to the difference between products liability tort actions and contract
or warranty actions:
The controlling policy consideration underlying tort law is
the safety of persons and property--the protection of per-
sons and property from losses resulting from injury. The
controlling policy consideration underlying the law of con-
tracts is the protection of expectations bargained for. If that
distinction is kept in mind, the damages claimed in a partic-
ular case may more readily be classified between claims for
injuries to persons or property on one hand and economic
losses on the other.
Sensenbrenner, 236 Va. at 425, 374 S.E.2d at 58.
Other courts have reached the same conclusion. For example, when
roofing material fails to serve its intended function, damage to the
underlying roof and the contents of the building may constitute mere
economic loss. Jones & Laughlin Steel Corp. v. Johns-Manville Sales
Corp., 626 F.2d 280 (3d Cir. 1980). In addition, the consequential
loss of safeguarded property caused by the failure of an alarm system
to function has been held to be purely economic loss. Fireman's Fund
American Ins. Co. v. Burns Electronic Security Services, 417 N.E.2d
131 (Ill. 1981) (burglar alarm); Arell's Fine Jewelers, Inc. v. Honey-
well, Inc., 566 N.Y.S.2d 505 (N.Y. App. Div. 1991) (burglar alarm);
see also Nelson v. Todd, 426 N.W.2d 120 (Iowa 1988) (holding that
meat spoilage caused by failure of meat preservative to prevent harm
constituted economic loss). In each of these cases, warranty law, not
tort law, controlled the plaintiff's rights.
In light of the previous discussion, it is clear that Redman's loss is
properly classified as economic. The essence of Redman's claim is
that he suffered a loss because the safe did not function at the level
he expected. Although his claim is based on harm to property other
than the safe itself, his loss arose because the safe did not protect the
coin collection from burglars in accordance with his expectations.
Under these circumstances, the extent of Sentry's liability for Red-
man's loss is controlled by Sentry's warranty. Redman is not permit-
ted to circumvent Sentry's warranty simply by alleging a negligence
claim.
13
VII
Redman has failed to present evidence demonstrating that the safe
violated industry standards, government standards, or reasonable con-
sumer expectations. His claim for damages is legally insufficient
because it is an economic loss that cannot be recovered in a tort action
based on negligent design.
REVERSED
14