Law School Case Brief
E. River S.S. Corp. v. Transamerica Delaval - 476 U.S. 858, 106 S. Ct. 2295 (1986)
Whether stated in negligence or strict liability, no products-liability claim lies in admiralty when the only injury claimed is economic loss. A manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself.
Respondent manufacturer (Transamerica Delaval) designed, built, and installed turbine engines in ships that were eventually chartered by petitioner charterers. The turbine engines were defective and required repair. The charterers filed an admiralty action against the manufacturer of a turbine, which was used as the main propulsion unit on those tankers, to recover the costs they expended to repair their ships, which were damaged by turbine engines the manufacturer installed. The complaint alleged that the turbine manufacturer was liable, under theories of negligence and strict liability in tort, for repair costs and lost income which allegedly resulted from damage to the turbines when the turbines malfunctioned because of defects in their design and installation. The United States District Court granted summary judgment in favor of the manufacturer, on the ground that the strict liability allegations failed to state a cause of action in admiralty. The United States Court of Appeals affirmed, holding that damage to a defective product is not actionable in tort unless the design defect creates an unreasonable risk of, and results in, harm to persons or property other than the product itself. The charterers sought a writ of certiorari.
In a tort claim by ship charters against defendant turbine manufacturer, did the products liability claim lie in admiralty where the defective product malfunctions injured only the product itself and caused purely economic loss?
The Supreme Court of the United States granted certiorari to resolve a conflict among the Courts of Appeals sitting in admiralty. The Court sought to decide whether a cause of action in tort is stated when a defective product purchased in a commercial transaction malfunctions, injuring only the product itself and causing purely economic loss. The Court joined the Courts of Appeals in recognizing products liability, including strict liability, as part of the general maritime law.
The order upholding the order granting summary judgment to the manufacturer was affirmed. The Court held that the economic loss doctrine applied in admiralty cases. However, in this case, the charterers sustained purely economic losses when the turbine engines failed and only the turbines themselves were damaged when they failed. As the failure of the turbine engines to properly function was the essence of a breach of warranty action, the charterers had to pursue a warranty action to recover instead of a tort action. It reiterated that no products liability claim lies in admiralty when the malfunctioning of a defective product purchased in a commercial transaction damages only the product itself, and the only injury claimed is economic loss. The Court ruled that a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself.
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