Capital Motor Lines v. Detroit Diesel Corporation ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
CAPITAL MOTOR LINES, )
)
Plaintiff, )
)
v. ) Civil Action No. 1:08-0964 (ESH)
)
DETROIT DIESEL CORP., )
)
Defendant. )
)
MEMORANDUM OPINION
Plaintiff Capital Motor Lines (“Capital Motor”) brings this action against Detroit Diesel
Corporation (“Detroit Diesel”) after a June 8, 2005 fire in the engine compartment of a motor
coach owned by Capital Motor. Capital Motor alleges breach of implied warranty and two
counts of negligence, and seeks damages from Detroit Diesel, the manufacturer of the motor
coach engine, for property damage to the motor coach and its loss of use as a result of this fire.
Before the Court is Detroit Diesel’s motion for summary judgment. For the reasons set
forth herein, this motion will be granted.
BACKGROUND
Capital Motor is an Alabama corporation with its principal place of business in
Montgomery, Alabama. (Compl. ¶ 3.) Detroit Diesel is incorporated in Delaware with its
principal place of business in Detroit, Michigan. (Id. ¶ 4.)
On September 24, 2001, Capital Motor purchased a 2002 model year motor coach for
$340,000.00.1 (Id. ¶ 6.) Greyhound Lines, Inc. took delivery of this coach and operated it
pursuant to an agreement with Capital Motor. (Def.’s Statement of Undisputed Facts [“Def.’s
Facts”] ¶ 7.) The motor coach was equipped with a Detroit Diesel Series 60 engine. (Id. ¶ 6.)
On June 8, 2005, while Greyhound was operating the coach in Washington, D.C., the driver of
the motor coach noticed smoke coming from the rear of the motor coach. (Compl. ¶ 10.) After
stopping, the driver saw flames from the rear of the coach which later spread throughout the
vehicle. (Id. ¶ 11.) No personal injuries or deaths resulted from the fire, but the motor coach
was rendered a complete and total loss.2 (Id. ¶ 12.) A subsequent inspection of the motor coach
by Capital Motor in August 2005 determined the cause of the fire to be engine malfunction.3 (Id.
¶ 13.) In March 2006, Detroit Diesel issued a report stating that Series 60 engines were prone to
turbocharger compressor failures which could result in fires, and that it would conduct a safety
recall campaign to remedy the problem. (Id. ¶ 14.)
On June 5, 2008, Capital Motor commenced this suit against Detroit Diesel and MCI.
Capital Motor alleged three counts against Detroit Diesel: (1) breach of implied warranty; (2)
negligence in designing, marketing, testing, selling and distributing the engine which caused the
1
Capital Motor purchased the motor coach from Motor Coach Industries, Inc. and Motor Coach
Industries International, Inc. (collectively “MCI”). The complaint originally included negligence
and breach of warranty claims against MCI, but these were voluntarily dismissed by Capital
Motor. (Notice of Voluntary Dismissal [Dkt. No. 15].)
2
Capital Motor’s insurance paid $268,013.33 in damages for the claim. (Def.’s Facts ¶ 13.)
3
Detroit Diesel notes that it “denies many of the alleged facts and legal conclusions set forth in
Plaintiff’s complaint, including Plaintiff’s allegation that the engine was defective and that
Detroit Diesel is responsible for Plaintiff’s damages.” (Def.’s Mot. for Summ. J. [“Def’s. Mot.”]
at 3.) However, Detroit Diesel acknowledges that “those issues are not before the Court on this
motion . . . [t]he only facts relevant to this summary judgment motion are set forth in the
Statement of Undisputed Fact.” (Id.)
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fire; and (3) negligence in failing to warn Capital Motor of the defective engine. Capital Motor
further alleged that it suffered significant property damage as a result of the engine fire,
including total loss of the motor coach and related damages for loss of use. On June 13, 2011,
Detroit Diesel filed the instant motion for summary judgment.
ANALYSIS
Detroit Diesel contends that it is entitled to summary judgment because (1) the statute of
limitations bars the breach of implied warranty claim and (2) the economic loss rule bars the
negligence claims. Capital Motor argues that Detroit Diesel waived the statute of limitations as
an affirmative defense in an interrogatory answer and that any attempt to re-assert this defense
would result in substantial prejudice. Capital Motor further argues that it is not seeking damages
to recover loss of the engine, but rather it is seeking damages to “other property” caused by the
fire, specifically the motor coach, and as a result, its negligence claims are not barred by the
economic loss rule. With respect to each of these issues, there are no disputed issues of fact
(Pl.’s Opp’n to Summ. J. [“Pl.’s Opp’n”] at 2), and the parties agree as to the applicability of
D.C. law. (Def.’s Mot. for Summ. J. [“Def.’s Mot.”] at 4-6; Pl.’s Opp’n at 2 n.1.)
I. BREACH OF IMPLIED WARRANTY: STATUTE OF LIMITATIONS
Capital Motor’s claim for breach of implied warranty is governed by a four-year statute
of limitations, pursuant to the Uniform Commercial Code § 2-275, which has been adopted in the
District of Columbia. D.C. Code § 28:2-725; see also Hull v. Eaton Corp., 825 F.2d 448, 456
(D.C. Cir. 1987); Long v. Sears Roebuck & Co., 877 F. Supp. 8, 13-14 (D.D.C. 1995). The D.C.
Code states that this statute of limitation begins to run upon tender of delivery:
(1) An action for breach of any contract for sale must be commenced within four
years after the cause of action has accrued. By the original agreement the
parties may reduce the period of limitation to not less than one year but may
not extend it.
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(2) A cause of action accrues when the breach occurs, regardless of the aggrieved
party’s lack of knowledge of the breach. A breach of warranty occurs when
tender of delivery is made, except that where a warranty explicitly extends to
future performance of the goods and discovery of the breach must await the
time of such performance the cause of action accrues when the breach is or
should have been discovered.
D.C. Code § 28:2-725 (1)(2) (emphasis added). Here, Detroit Diesel contends that Capital
Motor’s breach of warranty claim accrued when it purchased the coach on September 24, 2001.
(Def.’s Mot. at 7.) Because Capital Motor did not file suit until June 5, 2008, Detroit Diesel
argues that the claim is barred by the four-year statute of limitations. (Id.) In response, Detroit
Diesel does not dispute the applicability of a four-year statute of limitations, but argues that
Capital Motor waived this affirmative defense by withdrawing it in an interrogatory response.4
Detroit Diesel acknowledges the withdrawal, but contends it was submitted in error and any error
was essentially harmless. The Court agrees.
It is Detroit Diesel’s position that it “never intended to waive” the statute of limitations
defense, but “simply made an error in an interrogatory answer” by inadvertently copying and
pasting an earlier response. (Def.’s Reply in Support of Mot. for Summ. J. [“Def.’s Reply”] at
6.) In support of this, Detroit Diesel notes that it first served its answer to Capital Motor’s
complaint on August 21, 2008, which included the affirmative defense that plaintiff’s claims
might be barred by the applicable statute of limitations. (Id. at 7 (quoting Answer of Detroit
Diesel [Dkt. No. 3] at 6).) On September 8, 2010, the parties jointly filed their Rule 16.3 Report,
4
In answering the interrogatory to “identify all facts, documents and witnesses that support your
contention that Plaintiff’s claims may be barred by the applicable statutes of limitation and/or
repose as alleged in your Seventh Defense,” Detroit Diesel stated:
[Detroit Diesel] has not identified any evidence in discovery on this issue, and,
accordingly, withdraws this affirmative defense.
(Pl.’s Opp’n, Ex. A, ¶ 11.)
4
see LCvR 16.3, in which Detroit Diesel unequivocally asserted that “Plaintiff’s implied warranty
claim (Count IV) is barred by the statute of limitations.” (Id. (quoting LCvR 16.3 Report at [Dkt.
No. 14] at 2).) The parties jointly requested nine months of discovery with a cut-off date of May
31, 2011. (Id.) For the following seven months, however, Capital Motor did not take any
discovery from Detroit Diesel. (Id.) With just over a month remaining before the close of
discovery, Capital Motor served interrogatories on Detroit Diesel on April 22, 2011, including
the interrogatory in question. (Id.) Detroit Diesel’s response to this interrogatory on May 26,
2011, withdrew the statute of limitations defense. (See supra note 4.) Upon learning of its
mistake when Capital Motor filed its opposition to the summary judgment motion on July 5,
2011, Detroit Diesel submitted an amended response on July 7, 2011. (Def.’s Reply at 8.)
Detroit Diesel therefore contends that this inadvertent error should not invalidate the defense,
especially since it had previously and clearly asserted its intent to rely on this defense in its
answer to the complaint (id. at 9), noting that a limitations defense “is sufficiently raised . . . by
its bare assertion.” Daingerfield Island Protective Soc’y v. Babbitt, 40 F.3d 442, 445 (D.C. Cir.
1994); see also Barnes v. District of Columbia, 270 F.R.D. 21, 23 (D.D.C. 2010).
In response, Capital Motor argues that Detroit Diesel plainly waived the statute of
limitations defense in their interrogatory response and that reviving it now will prejudice Capital
Motor because discovery has closed. (Pl.’s Opp’n at 5.) In particular, Capital Motor asserts that
“waiver is the intentional relinquishment or abandonment of a known right,” U.S. v. Olano, 507
U.S. 725, 733 (1993) (internal citations omitted), and, “if a party ‘waives,’ i.e., intentionally
relinquishes or abandons an affirmative defense, no cure is available under [Federal Rules of
Civil Procedure] Rule 15.” Harris v. Secretary, U.S, Dep’t of Veterans Affairs, 126 F.3d 339,
366 n.2 (D.C. Cir. 1997). Capital Motor misreads Harris for two reasons. First, Harris
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involved a defendant who had totally failed to raise the affirmative defense in either its original
or amended answer. Unlike Harris, however, Detroit Diesel raised the statute of limitations
defense in its original answer, as well as a subsequent filing. (Def.’s Reply at 9.) Moreover, this
Court recently held that a defendant may wait even “until the summary judgment stage or
possibly the pretrial stage to assert all of its defenses.” Barnes, 270 F.R.D. at 23. As such, if a
defendant is allowed to assert an affirmative defense for the first time at the summary judgment
stage, it seems only fair to allow defendant to amend an interrogatory response to correct a
clerical error, thus conforming the interrogatory response to its prior pleadings. See Barnes, 270
F.R.D. at 23 (“[A] defendant can raise its affirmative defenses at a later stage in litigation . . . .”)
Second, Capital Motor incorrectly invokes Harris’s discussion of Rule 15. Specifically,
Capital Motor argues that Detroit Diesel is barred from seeking the curative provisions of Rule
15 because it “waived” its affirmative defense. (Pl.’s Opp’n at 5.) It further asserts that even if
Detroit Diesel’s waiver was subject to Rule 15 consideration, the waiver should be barred
because it would “result in substantial prejudice” since Capital Motor was “deprived” of the
“opportunity to explore factual inquiries that may refute the basis for the defense.” (Id. at 5-6.)
The Court is not persuaded.
To begin with, Detroit Diesel notes that it “is not seeking to amend its answer under Rule
15,” but rather, it seeks to amend an interrogatory response, “pursuant to Rule 26(e).” (Def.’s
Reply at 10.) Under Rule 26(e), a party “who has responded to an interrogatory . . . must
supplement or correct its disclosure or response” in a timely manner if the party learns that “the
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disclosure or response is incomplete or incorrect.” Fed. R. Civ. P. 26(e). Detroit Diesel
complied with this rule by filing its amended response once it recognized the error.5 (Id.)
More importantly, Capital Motor fails to demonstrate it has suffered any prejudice as a
result of Detroit Diesel’s erroneous response since the response was submitted only four days
before the close of discovery. It strains credulity for Capital Motor to now assert that these
intervening four days “deprived” it of the opportunity to pursue discovery. Capital Motor sat on
its rights to take discovery relevant to this defense for the eight months preceding the issuance of
its interrogatories, despite having notice of this affirmative defense as early as August 21, 2008,
when Detroit Diesel first filed its answer in response to the original complaint. Moreover, even
if discovery had not been about to close, Capital Motor fails to point to any relevant discovery
that it could have actually taken had there been no erroneous response. Capital Motor suggests
that it would have wanted to “explore” the issue whether the “coach was equipped with the
original engine at the time of the incident in June 2005.” (Pl’s Opp’n at 6.) Since Capital Motor
owned the motor coach during the entire period prior to the accident, if a different engine had
been installed, Capital Motor would necessarily have known about it. (See also LCvR 16.3
Report [Dkt. No. 6] ¶ 15 (Capital Motor admits that the motor coach was in fact “equipped with
a Detroit Diesel engine” at the “time of manufacture”).) Capital Motor also suggests that under
D.C. Code § 28:2-725, discovery would have been useful in determining if the warranty had
been extended to future performance. (Pl.’s Opp’n at 6.) Again, this makes no sense in an
implied warranty case, since such a warranty as to future performance can only exist where there
5
Even if Rule 15 were applicable, the Court in Harris noted that no cure was available under
Rule 15 if “[the] party ‘waives,’ i.e. intentionally relinquishes or abandons an affirmative
defense.” Harris, 126 F.3d at 366 n.2 (emphasis added). Here, Detroit Diesel arguably did not
intentionally abandon the defense since it had withdrawn the defense in error. See Zuckerman
Spaeder, LLP v. Auffenberg, No. 10-7041, slip op. at 6(D.C. Cir. July 29, 2011).
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is an express warranty, which is not the case here. Lee v. Wolfson, 265 F. Supp. 2d 14, 20
(D.D.C. 2003) (because “no express warranty existed,” breach of warranty accrued from date of
purchase); Britt v. Schindler Elevator Co., 637 F. Supp. 734, 738 (D.D.C. 1986) (exception
clause “applies only when a warranty explicitly extends to future performance”). Thus, because
Capital Motor has not suffered any prejudice from the original interrogatory response, the Court
concludes that Detroit Diesel’s error did not constitute a waiver of the statute of limitations
defense, and the breach of warranty claim is barred by the statute of limitations.6
II. NEGLIGENCE: ECONOMIC LOSS RULE
The economic loss rule prevents a party suing in tort “from recovering on a strict
products liability claim where the only damage is to the product itself.”7 Liberty Mut. Ins. Co. v.
Equipment Corp. of America, 646 F. Supp. 2d 51, 56 (D.D.C. 2009) (citing Potomac Plaza
Terraces, Inc. v. QSC Products, Inc., 868 F. Supp. 346, 354 (D.D.C. 1994)). “[T]he failure of
the product to function properly . . . is the essence of a warranty action, through which a
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Additionally, although the parties do not raise this issue, the decision as to whether attorney
error may constitute excusable neglect is within the discretion of this Court. Pioneer Inv. Servs.
Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (1993). The Supreme Court addressed the
meaning of “excusable neglect” in Pioneer by setting forth a four-factor test, subject to the
discretion of the trial judge, providing:
(1) the danger of prejudice to the party opposing the modification,
(2) the length of delay and its potential impact on judicial proceedings,
(3) the reason for the delay, including whether it was within the reasonable
control of the movant; and
(4) whether the movant acted in good faith.
Pioneer Inv. Servs. Co., 507 U.S. at 395; see also In re Vitamins Antitrust Class Actions, 327
F.3d 1207 (D.C. Cir. 2003); Yesudian v. Howard Univ., 270 F.3d 969 (D.C. Cir. 2001).
7
The economic loss rule applies equally to strict liability and negligence claims. See Potomac
Plaza Terraces, Inc. v. QSC Products, Inc., 868 F. Supp. 346, 354 (D.D.C. 1994); (Def.’s Mot. at
9 n.6).
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contracting party can seek to recoup the benefit of its bargain,” and thus, the doctrine maintains
the traditional distinction between contract and tort. E. River Steamship Corp. v. Transam.
Delval, Inc., 476 U.S. 858, 868 (1986). Under the economic loss doctrine, a plaintiff may not
recover the “loss of value or use of the product itself, cost to repair or replace the product, or the
lost profits resulting from the loss or use of the product.” Potomac Plaza, 868 F. Supp. at 354(internal citations omitted). However, a plaintiff may recover on “other property” damaged
through a defective product even when barred from recovery on the product itself. Saratoga v.
J.M. Martinac & Co., 520 U.S. 875, 877 (1997).
Capital Motor alleges that it is only seeking to recover damages to “other property”
caused by the fire and does not dispute that recovery for the engine, as opposed to the motor
coach, is barred under the economic loss rule.8 (Pl.’s Reply at 3.) Capital Motor relies
exclusively on the decision in Nat’l Coach Works of Va. v. Detroit Diesel Corp., 128 F. Supp. 2d
821 (D. Md. 2001). In that case, National Coach, purchaser of a motor coach, brought suit
against Detroit Diesel, manufacturer of the engine, for damages arising out of an engine fire that
destroyed the motor coach. Nat’l Coach, 128 F. Supp. 2d at 831. The district court denied
defendant’s motion for summary judgment, holding the defendant liable for damages arising
from the loss of the motor coach, since the motor coach constituted “other property” and
therefore was exempt from the economic loss doctrine. Id.While National Coach is on all fours with this case, this Court is not bound by that
decision nor does it find it to be persuasive. The holding in National Coach is based on
Saratoga, a product liability suit brought by an owner of a fishing vessel. Saratoga, 520 U.S at
8
Although the District of Columbia Court of Appeals has not formally adopted the economic
loss rule, other judges in this Court have consistently applied the doctrine. See Liberty Mut. Ins.
Co., 646 F. Supp. 2d at 56; RLI Ins. Co. v. Pohl, Inc. of Am., 468 F. Supp. 2d 91, 94 (D.D.C.
2006); Furash & Co., Inc. v. McClave, 130 F. Supp. 2d 48, 56 (D.D.C. 2001).
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877. In Saratoga, the Supreme Court found that a plaintiff could recover for damage to “extra
equipment (a skiff, a fishing net, spare parts) added by the initial user after the first sale and then
resold as part of the ship,” although it could not recover for physical damage caused to the
“product itself”, which was defined as including “at least of a ship as built and outfitted by its
original manufacturer and sold to an initial user.” Id. Anticipating the risk of an overly
expansive interpretation, the Supreme Court held that “[w]hen a manufacturer places an item in
the stream of commerce by selling to an Initial User, that item is the ‘product itself,’” id. at 879,
and, thus, the economic loss rule applied where “a component part” of the vessel, “as placed in
the stream of commerce by the manufacturer and its distributors,” caused the harm. Id. at 883.
Consistent with the rule announced in Saratoga, several circuit courts have narrowly
interpreted the “other property” exception to the economic loss doctrine. For example, the Third
Circuit noted that “it is well-settled law that the buyer of a finished product cannot maintain a
tort claim against the manufacturer if one of the finished product’s components is defective and
causes damage to the other parts . . . .” Travelers Indem. Co. v. Dammann & Co., 594 F.3d 238,
252 (3d Cir. 2010). Similarly, the Sixth Circuit held that a nursing home operator was barred
from recovering “other property” damages, resulting from a structural failure attributed to fire
retardant chemicals, from the chemical manufacturer which produced chemical to treat lumber
used in the building’s trusses. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc.,
276 F.3d 845 (6th Cir. 2002). Construing Kentucky law, the Sixth Circuit held “the product is
the entire nursing home because [plaintiff] had the ability to allocate risk contractually and/or
insure against loss with respect to the entire nursing home.” Id. at 851; see also Chevron USA,
Inc. v. Aker Maritime, Inc., 604 F.3d 888, 901 (5th Cir. 2010) (damage to “floating spar,” an oil
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production facility, caused by defective replacement bolts was not economic loss, but property
loss).
In contrast to these cases, National Coach held that, under Maryland law, an engine
manufacturer was liable for “other property” damages to a motor coach resulting from the engine
fire. Unlike Saratoga, however, the plaintiff in National Coach received the motor coach from
the manufacturer with the component engine installed and did not add any additional equipment.
National Coach purchased the motor coach fully assembled with the engine, and was thus an
“initial user” under the standard established in Saratoga. Accordingly, the motor coach,
complete with the Detroit Diesel engine, was received into the “stream of commerce” as a single
product. Nevertheless, the National Coach court, applying Maryland tort law, held that because
Detroit Diesel “manufactured and sold the engine” only, the “loss of the coach was ‘other
property’ and may be recovered” by National Coach. National Coach, 128 F. Supp. 2d at 831.
In doing so, it also relied upon an earlier Maryland case, cited by the Supreme Court in Saratoga,
which allowed recovery for the value of livestock lost because of a faulty ventilation system in a
poultry processing center. Id. (citing A.J. Decoster Co. v. Westinghouse Elec. Corp., 634 A.2d
1330, 1333 (Md. 1994)). However, the recovery in A.J. Decoster was consistent with Saratoga
because the livestock was not part of the ventilation system or the poultry processing center
when it entered the stream of commerce but rather, the livestock was later added by the
plaintiffs. A.J. Decoster, 634 A.2d at 1333.
In short, National Coach is inconsistent with the Supreme Court’s ruling in Saratoga, the
Maryland Court of Appeals’ decision in A.J. Decoster, and several circuit opinions, for it failed
to apply Saratoga’s distinction between entering the stream of commerce as a single unit and
adding other property after the product is sold.
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Here, because the motor coach and engine were part of the same “product,” the economic
loss doctrine, as construed by the Supreme Court in Saratoga, precludes Capital Motor from
recovering damages to the motor coach. To hold otherwise would mean that “nearly any
component part would be a product and [this] would, as a result, effectively eviscerate the
distinction between contract and tort law” for any machine more complex than an inclined plane.
Mt. Lebanon, 276 F.3d at 850; see also Restatement (Third) of Torts § 21 cmt. E (1998).
Therefore, the Court will grant summary judgment to Detroit Diesel on the negligence claims.
CONCLUSION
For the foregoing reasons, the Court grants summary judgment in favor of Detroit Diesel.
A separate Order accompanies this Memorandum Opinion.
/s/
ELLEN SEGAL HUVELLE
United States District Judge
Date: July 29, 2011
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