Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc.

Citations: 152 F.3d 313; 36 U.C.C. Rep. Serv. 2d (West) 286; 1998 U.S. App. LEXIS 18363; 1998 WL 461921Docket: No. 95-3198

Court: Court of Appeals for the Fourth Circuit; August 10, 1998; Federal Appellate Court

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Beard Plumbing and Heating, Inc. (Beard) appeals a summary judgment granted to Thompson Plastics, Incorporated (Thompson) and NIB-CO, Incorporated (NIBCO) regarding Beard's claims of negligence and breach of warranty. The court affirms the district court's decision, noting that summary judgment is appropriate when there is no genuine dispute over material facts, and any inferences must favor the non-moving party. Beard, a Virginia corporation, provided plumbing services and installed CPVC fittings manufactured by Thompson and NIBCO, purchased from third-party suppliers. After the fittings cracked and leaked, Beard was required to replace them and was subsequently dismissed from the job, leading to a settlement with the general contractor for $165,878.93. Beard alleges additional losses, including denied compensation for change orders, repair costs, and legal fees, prompting the filing of this diversity action in 1995. Beard claims the fittings were defective and that certain adapters failed during thermal expansion and contraction. NIBCO and Thompson sought summary judgment, arguing Beard could not recover economic losses under the circumstances.

On November 17, the district court granted summary judgment for Thompson Plastics and NIBCO against Beard's contract and tort claims, citing a lack of dispute in the facts and relying on the precedent set by Sensenbrenner v. Rust, which emphasizes the necessity of privity for recovering economic losses. The judge noted that Beard's claims, including breach of warranty, failed to demonstrate reliance on the seller’s expertise, as neither defendant had direct dealings with Beard or made any representations. Beard’s appeal involves three claims: a negligence claim and two breach of warranty claims under Virginia law. The court found that absent privity, economic losses are not recoverable in negligence actions, as established in multiple Virginia cases. The Sensenbrenner case highlighted that tort law protects against personal and property injury, while contract law addresses economic expectations. Beard's assertion that statutory provisions (Va.Code. 8.2-318 and Va.Code. 8.01-223) negate the privity requirement was deemed insufficient, as the Virginia Supreme Court clarified that these statutes do not eliminate the privity barrier in negligence claims for economic loss.

The Virginia Supreme Court is expected to interpret Va.Code. 8.2-318 consistently with previous rulings, affirming that it does not eliminate the privity requirement in negligence actions for economic loss. This aligns with the court's prior interpretations, as demonstrated in Richmond, F. P.R.R. v. Davis Indus. and other cases, indicating that Va.Code. 8.2-318 is a limiting statute rather than one that expands liability. Beard's argument, which suggests damages extend beyond economic loss, fails since all claimed damages—settlement costs, lost income from contract termination, repair costs, and reputational damage—reflect economic losses and do not pertain to personal or property safety. The court references Sensenbrenner and Ward to classify these claims as economic losses, reinforcing that Beard's negligence claim is legally barred.

Additionally, Beard's breach of warranty claim based on Va. Code. 8.2-315 fails as Beard cannot prove reliance on the seller's skill or judgment, which is a necessary component of the implied warranty. The claim incorrectly draws on express warranties when it should focus on implied warranties. Beard's assertion that implied warranties arise from third-party catalogs does not satisfy the legal requirements for establishing reliance on warranted goods.

Beard did not rely on Thompson or NIBCO’s skill or judgment, but on representations from a more distant merchant, which affects liability under warranty claims. The absence of direct communication between Beard and Thompson or NIBCO confirms that Beard's reliance was misplaced. Beard's reference to Va. Code § 8.2-318, which addresses privity, is inadequate since Beard must prove reliance on Thompson and NIBCO's expertise as a prerequisite for its claim, a requirement Beard fails to meet, leading to the affirmation of summary judgment against its claim.

Regarding Beard's claim of breach of the implied warranty of merchantability, the district court did not address this claim, and the existing record lacks sufficient evidence to determine if a genuine dispute exists. The court can only uphold the summary judgment if Beard’s claim is legally barred. Thompson and NIBCO present three defenses: first, a misuse defense claiming Beard improperly installed products, but Beard's denial of this assertion creates a material fact dispute. Second, they argue that if B.F. Goodrich’s installation guides are considered, then their disclaimers of warranty must also apply, though the court has ruled that disclaimers do not limit a seller's responsibilities to foreseeable users. Lastly, it’s noted that B.F. Goodrich could only disclaim warranties regarding its resin, not the CPVC fittings.

Beard's claim focuses on the finished plumbing components from Thompson and NIBCO rather than any issues with the resin's merchantability. Thompson and NIBCO's reliance on a disclaimer from B.F. Goodrich is ineffective. They argue that Beard cannot recover for economic losses under Virginia's Commercial Code due to a lack of privity, citing provisions in Va.Code. 8.2-714 and 8.2-715(2) in conjunction with Va.Code. 8.2-318, which they claim does not allow recovery for economic losses absent privity. However, they provide no supporting case law for this assertion. Beard contends that Va.Code. 8.2-318 abolishes the privity requirement and interprets relevant case law, including Sensenbrenner, to mean that privity is not necessary for breach of warranty claims. Beard also references dicta from Gasque v. Mooers Motor Car Co., stating that remote manufacturers can be liable for damages without privity, although this case did not address economic loss specifically. The discussion acknowledges that Va.Code. 8.2-318 may conflict with common law regarding privity for economic losses, leading to the certification of a question to the Virginia Supreme Court on whether privity is required for economic loss recovery under Va.Code. 8.2-715(2). The Virginia Supreme Court confirmed that privity is indeed required for such recovery, clarifying that Va.Code. 8.2-715(2) does not specifically address economic loss damages.

The Court of Appeals determined that Beard's claimed economic loss damages were consequential rather than direct damages, focusing specifically on Va.Code 8.2-715(2)(a) of the UCC, which necessitates a contractual relationship for such claims. The language of this section implies an existing contract between the parties, particularly the phrase "at the time of the contracting." Beard's argument that this phrase merely establishes a historical context for foreseeability does not negate the inherent connotation of a contract. 

The document also addresses potential conflicts between Va.Code 8.2-318 and Va.Code 8.2-715(2)(a). While 8.2-318 allows for recovery without privity for damages due to breach of warranty, the rules of statutory construction dictate that the more specific provision (8.2-715(2)(a)) prevails when there is a conflict, as it specifically addresses the contract requirement for consequential damages in warranty breaches. The contract requirement is not a common law privity requirement but rather a limitation imposed within the UCC framework, which includes various stipulations on damage recovery in breach of warranty claims.

Section 8.2-715(2)(a) specifies that the common law privity requirement does not impact a litigant's ability to pursue a breach of warranty claim but focuses solely on the recoverable damages, particularly consequential damages. It establishes that a contract is necessary between the parties when seeking consequential economic loss damages for breach of the implied warranty of merchantability. Consequently, the limited contract requirement outlined in Va. Code 8.2-715(2)(a) takes precedence over the broader common law privity provisions in Va. Code 8.2-318. The Virginia Supreme Court's reasoning leads to the affirmation of the summary judgment in favor of Thompson and NIBCO concerning Beard’s claim for breach of implied warranty of merchantability. The judgment of the district court is upheld. Relevant statutes include Va. Code 8.2-318, which removes privity as a defense in warranty or negligence claims against manufacturers or sellers, and Va. Code 8.2-714, which describes the measure of damages for breach of warranty. Additionally, Va. Code 8.2-715 details consequential damages that may be recovered, emphasizing losses known to the seller at the time of contracting and injuries resulting from warranty breaches.