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Onebeacon Insurance Company As Assignee of Gage Farms v. Deere & Company D/B/A John Deere

March 11, 2011



This matter is before the Court on defendant's Motion for Summary Judgment or, in the Alternative, for Partial Summary Judgment, filed November 1, 2010 (#20). Responsive pleadings have been filed, and this matter is now ripe for disposition.

I. Case Summary

The following facts are undisputed.*fn1 Plaintiff OneBeacon Insurance Company ("OneBeacon") filed its complaint on behalf of its insured, Gage Farms (a partnership consisting of Jeff and Donald Gage), against defendant Deere & Company d/b/a John Deere ("John Deere"). On September 25, 2008, Donald Gage was operating a combine manufactured by the defendant. The combine suddenly caught on fire and was completely destroyed. The attached cornhead was also damaged, but it had a salvage value of $10,000. The combine (with its cornhead) was the only thing to sustain significant damage. Notably, the combine and cornhead operate as an integrated harvesting unit. Without a John Deere cornhead attached to the combine, the John Deere combine cannot harvest corn. Gage Farms paid $198,000 to French Implement Company for the combine on March 20, 2008. Gage Farms separately purchased the cornhead from French Implement Company for $37,000 on July 28, 2008. Because Gage Farms had purchased the combine and cornhead second-hand from French Implement Company, there was no warranty furnished by John Deere.

As a result of the fire, Gage Farms made a property insurance claim with its insurer, OneBeacon. OneBeacon paid $235,000 to Gage Farms for the loss of the combine and cornhead (including the $10,000 salvage value of the cornhead). Gage Farms subsequently assigned its rights to OneBeacon, and OneBeacon thus claims it is subrogated to the rights of Gage Farms to bring this action against parties it believes should be held responsible. On January 6, 2010, OneBeacon filed its complaint against defendant John Deere for negligence (Count I) and strict liability (Count II). Defendant seeks summary judgment on both counts.

II. Summary Judgment Standard

Courts have repeatedly recognized that summary judgment is a harsh remedy that should be granted only when the moving party has established his right to judgment with such clarity as not to give rise to controversy. New England Mut. Life Ins. Co. v. Null, 554 F.2d 896, 901 (8th Cir. 1977). Summary judgment motions, however, "can be a tool of great utility in removing factually insubstantial cases from crowded dockets, freeing courts' trial time for those that really do raise genuine issues of material fact." Mt. Pleasant v. Associated Elec. Coop. Inc., 838 F.2d 268, 273 (8th Cir. 1988).

Pursuant to Federal Rule Civil Procedure 59(c), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that "there is no genuine issue as to material fact and the moving party is entitled to judgment as a matter of law." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467 (1962). The burden is on the moving party. Mt. Pleasant, 838 F.2d at 273. After the moving party discharges this burden, the nonmoving party must do more than show that there is some doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the nonmoving party bears the burden of setting forth specific facts showing that there is sufficient evidence in its favor to allow a jury to return a verdict for it. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).

In ruling on a motion for summary judgment, the court must review the facts in a light most favorable to the party opposing the motion and give that party the benefit of any inferences that logically can be drawn from those facts. Buller v. Buechler, 706 F.2d 844, 846 (8th Cir. 1983). The court is required to resolve all conflicts of evidence in favor of the nonmoving party. Robert Johnson Grain Co. v. Chem. Interchange Co., 541 F.2d 207, 210 (8th Cir. 1976). With these principles in mind, the Court turns to the discussion.

III. Discussion

Defendant's motion hinges on the application of the economic loss doctrine to plaintiff's claims. Missouri's economic loss doctrine bars recovery under strict liability or negligence theories if "the only damage is to the product sold." See, e.g., Sharp Bros. Contracting Co. v. Am. Hoist & Derrick Co., 703 S.W.2d 901, 902 (Mo. 1986) (en banc); Clevenger & Wright Co. v. A. O. Smith Harvestore Prod. Inc., 625 S.W.3d 906, 909 (Mo. Ct. App. 1981). The remedy available in such cases is limited to contract or warranty claims. See East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871-72 (1986). In this case, the plaintiff pursues tort theories to the exclusion of any contract or warranty theories, apparently because the manufacturer's warranty for the combine here had expired.

Defendant seeks summary judgment on plaintiffs' tort claims because defendant argues they are precluded by the economic loss doctrine. Plaintiff states that the economic loss doctrine should not apply here for two reasons: (1) there was no privity between Gage Farm and John Deere; and (2) the combine's failure caused damage to the cornhead, which should be considered "other property."

A. Privity and the Application of the Economic Loss Doctrine

Plaintiff claims that there was no equal bargaining power nor privity between Gage Farm and John Deere, and that, as a result, the economic loss doctrine does not apply. Plaintiff cites to no authority to support this argument. Rather, plaintiff constructs this argument from the concurring opinion in Sharp Bros. Contracting Co., 703 S.W.2d at 903, which stated "[t]he rationale for [the economic loss] doctrine was that consumers and remote parties are not on an equal footing with the manufacturer or seller to bargain effectively for the allocation of risk." However, as the Supreme Court observed in East River S.S. Corp., "[w]hen a product injures only itself the reasons for imposing a tort duty are weak and those for leaving the party to its contractual remedies are strong." 476 U.S. at 871. Indeed, "[i]f the buyer does not obtain a warranty, he will likely receive a lower price in return. Given the availability of warranties, the courts should not ask tort law to perform a job that contract law might perform better." Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 880 (1997) (citing East River S.S. Corp., 475 U.S. at 872-73). Although plaintiff attempts to make a case based on its "inability" to contract directly with John Deere, plaintiff in fact chose not to contract directly with John Deere. Rather than negotiate with John Deere directly (as it might have done, being a commercial farming operation), Gage Farm chose to purchase a previously-owned combine and pay a lower price. Jeff Gage testified at his deposition that Gage Farm knew it was forfeiting any warranty from ...

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