Airport Rent-A-Car, Inc., a Florida Corporation v. Prevost Car, Inc., a New Jersey Corporation
Docket: 93-4015
Court: Court of Appeals for the Eleventh Circuit; April 19, 1994; Federal Appellate Court
Airport Rent-A-Car, Inc. (Plaintiff-Appellant) sued Prevost Car, Inc. (Defendant-Appellee) following the destruction of two passenger buses manufactured by Prevost. The buses caught fire while in transport, one during the transport of school children. Rent-A-Car purchased the buses from Associated Cab Company, Inc., which it claimed was neither a supplier nor a distributor, nor a merchant under the Uniform Commercial Code, thus not liable for warranty claims. Rent-A-Car argued that Prevost was liable for strict products liability, negligence, and breach of warranty due to the buses being defective and unreasonably dangerous when sold.
The district court dismissed Rent-A-Car’s first amended complaint, applying the Economic Loss Rule, which bars tort recovery for damages to a product itself unless there is personal injury or damage to other property. Rent-A-Car’s arguments for exceptions to this rule were rejected, and the breach of warranty claims were dismissed for lack of privity.
In its second amended complaint, Rent-A-Car reasserted similar claims while adding that passengers’ property was also lost in the bus fires. This complaint included counts for negligent products liability, strict products liability, and negligent failure to warn. Prevost moved to dismiss the second amended complaint for failure to state a claim. The case was certified to the Supreme Court of Florida due to unresolved questions of state law relevant to the appeal.
The district court dismissed Rent-A-Car's claims, citing the Economic Loss Rule, which prohibits recovery in tort for purely economic losses unless there is personal injury or damage to other property. The court determined that Rent-A-Car could not claim an ownership interest in the passengers' property, thus failing to qualify for the 'other property' exception. In its appeal, Rent-A-Car argues it has a valid cause of action for negligent and strict products liability under the 'no alternate remedy' exception to the Economic Loss Rule. Rent-A-Car contends that tort recovery for purely economic losses was permitted prior to the Economic Loss Rule's adoption, referencing cases like A.R. Moyer, Inc. v. Graham and First American Title Ins. Co. v. First Title Serv. Co. It maintains that the rule is not absolute, allowing for tort claims when no contract remedy exists. Rent-A-Car cites the Florida Supreme Court's rationale in A.R. Moyer for supporting this exception, as well as a recent appellate decision emphasizing that the Economic Loss Rule applies only when alternate remedies are available. It argues that since there are no warranty claims possible against Associated or Prevost, it falls under the 'no alternate remedy' exception. In contrast, Prevost claims that Florida does not recognize such an exception, relying on the Florida Supreme Court's decision in Casa Clara Condominium Association, Inc. v. Charley Toppino and Sons, Inc., which disapproved of the Latite Roofing case and restricted the application of A.R. Moyer to its specific circumstances.
Prevost argues that the Supreme Court implicitly agrees with the Sandarac Association, Inc. v. W.R. Frizzell Architects, Inc. decision, which critiqued the Latite decision for misinterpreting the dicta in AFM as establishing a new duty in negligence to protect economic expectations without a contract. The Sandarac court maintained that no exception to the Economic Loss Rule should exist, emphasizing the contractor's reliance on the architect's abilities and oversight. Prevost concludes that the Supreme Court's ruling in A.R. Moyer was based on the tort duty arising from the architect's actions, rather than the existence of alternative liability theories. Prevost challenges Rent-A-Car's claim that no alternative remedy exists, arguing it lacks factual support and that Associated does not qualify as a 'merchant' under the Uniform Commercial Code.
In a separate argument, Rent-A-Car contends it has established a cause of action for negligent and strict products liability under the 'sudden calamity' exception to the Economic Loss Rule, which compensates for risks to individuals from sudden destructive events. Rent-A-Car cites two cases applying Florida law that recognize this exception: Florida Power and Light Co. v. McGraw Edison Co. and General Dynamics Corp. v. Wright Airlines, Inc. It notes that General Dynamics distinguished a prior case where damage was not due to a sudden calamity. Rent-A-Car asserts that its situation, involving a bus fire during the transport of school children, presents an unreasonable risk of harm, unlike the cases previously cited.
Prevost contends that Florida has not recognized the 'sudden calamity' exception, citing the case of Florida Power and Light Co. v. McGraw, and noting that the court in American Universal Insurance Group v. General Motors Corp. acknowledged the exception but did not find it applicable in Florida. Prevost argues that adopting this exception would result in excessive and unpredictable liability for manufacturers, undermining the Economic Loss Rule, which aims to prevent endless liability to subsequent purchasers. He references East River Steam Ship Corp. v. Transamerica Delaval, Inc. to support this view, emphasizing that allowing recovery for all foreseeable economic losses could impose significant liabilities on manufacturers, complicating their ability to account for downstream expectations.
Prevost further asserts that the 'sudden calamity' exception relies on flawed distinctions dismissed by the Supreme Court in East River, where the court indicated that regardless of whether damage occurs gradually or abruptly, the loss remains purely economic and does not involve damage to persons or other property. He posits that tort and strict liability laws are appropriate for protecting innocent bystanders and consumers, while in commercial contexts, parties should negotiate risk allocation.
In a separate argument, Rent-A-Car claims it has established a cause of action for negligent failure to warn, asserting that such a claim constitutes an independent tort distinct from contractual obligations. Rent-A-Car argues that this independent tort, arising from failures occurring post-manufacturing, falls outside the Economic Loss Rule, referencing AFM Corp. v. Southern Bell and Interstate Securities Corp. v. Hayes Corp. to bolster its position. It distinguishes cases of failure to warn based on the timing of the discovery of defects, advocating that subsequent discoveries of defects should be treated as independent torts.
Prevost counters that Rent-A-Car's argument attempts to apply federal admiralty law, which he believes is less stringent than Florida law.
Prevost argues that the Supreme Court's decision in East River disapproved the Miller decision, asserting that the Economic Loss Rule's applicability hinges on the existence of negligence and the absence of personal injury or property damage—without which there can be no tort. Citing Affiliates for Evaluation and Therapy v. Viasyn Corp., Prevost contends that Florida law supports this limitation. He notes that cases regarding the duty to warn following Tampa Drug Co. v. Wait have consistently involved injuries to persons or property from defective products. Prevost further claims that the lack of tort damages negates the recognition of a proposed third theory by Rent-A-Car. He opposes the adoption of a ‘sudden calamity’ exception, arguing that allowing tort claims in commercial transactions would enable a buyer to claim warranty protections not originally purchased by alleging prior knowledge of potential product failure, which he views as an undesirable intrusion of tort law into commercial relationships.
The document concludes by certifying several questions to the Florida Supreme Court regarding the Economic Loss Rule's application to negligence claims for defective products, the potential for maintaining a cause of action despite the rule in cases of sudden calamity, and the existence of a duty to warn based on information acquired post-manufacture and post-contract. The phrasing of these questions is intended to allow the Court to explore any relevant issues as they arise, with the entire case record and party briefs to be sent for consideration.
