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Curtis Oswalt; Federal Insurance Company v. Resolute Industries

June 16, 2011

CURTIS OSWALT; FEDERAL INSURANCE COMPANY, PLAINTIFFS-APPELLEES,
v.
RESOLUTE INDUSTRIES, INC.,
DEFENDANT-THIRD-PARTY-PLAINTIFF-APPELLANT,
v.
WEBASTO PRODUCTS NA, INC.,THIRD-PARTY-DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Western District of Washington Marsha J. Pechman, District Judge, Presiding D.C. No. 2:08-cv-01600-MJP

The opinion of the court was delivered by: Fisher, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted January 12, 2011-Seattle, Washington

Before: Susan P. Graber, Raymond C. Fisher and Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Fisher

OPINION

In this admiralty case, Resolute Industries, Inc., appeals an adverse summary judgment on its products liability claims against Webasto Products NA, Inc., the manufacturer of a heater that caught fire on Curtis Oswalt's boat during repairs performed by Resolute's employee. Resolute also challenges a judgment in Oswalt's favor on his claim against Resolute for breach of the implied warranty of workmanlike performance. We must decide whether the district court correctly rejected Resolute's products liability claims, correctly found Resolute liable to Oswalt and properly awarded Oswalt and his insurer damages for surveyor's fees and for the loss of use of the boat during repairs.

BACKGROUND

In September 2006, Oswalt smelled burning coolant coming from the heater on his boat, the M/V CHUG, which was docked at a marina in Anacortes, Washington. Oswalt asked Jeff Albrecht, the general manager of a local repair shop, to fix the heater. When Albrecht arrived to begin the scheduled repair, he noticed that the heater, a diesel-powered model that uses electricity to control the fuel flow, was cold. Albrecht had been told by Oswalt that the circuit breaker labeled "boat heat" controlled power to the heater, so he flipped that breaker and began the repair.

Albrecht opened the heater's cover to remove the burner unit, a component ordinarily contained by a cylindrical canis- ter inside the heater. When the heater is running, the end of the burner unit emits "a very intense flame, similar to a blow-torch," although there was no flame at the time Albrecht opened the cover. Albrecht removed the burner unit and set it on end on a shelf very close to the boat's overhead, or ceiling. Then his cell phone rang. It was the repair shop, asking Albrecht to move another boat in the marina. Albrecht left the CHUG, moved the other boat and returned 30 minutes later to the sight of smoke pouring from the stern of the CHUG, which had caught fire while he was away.

The parties agree that the burner unit was the source of the fire. It is also undisputed that the burner unit cannot turn on and emit a flame unless there is electricity flowing to the unit. Thus, although the means by which electricity reached the unit remain unknown, it is clear that Albrecht's flipping the circuit breaker did not cut the power.

Oswalt and his insurer, Federal Insurance Company, sued Albrecht's employer, Resolute, for negligence and breach of contract, including breach of the implied warranty of work-manlike performance. Resolute filed a third-party complaint against the heater's manufacturer, Webasto, alleging the fire was caused by the heater's inadequate warnings and instructions and its defective design. The district court granted summary judgment to Webasto on Resolute's products liability claims. Then, after a two-day bench trial, the court held that Resolute had breached the implied warranty when Albrecht moved the burner unit "to a position where it was certain to start a fire if it turned on" without first ensuring the heater's power was disconnected. The court awarded more than $200,000 in damages to Oswalt, including $4110 for hotel expenses Oswalt incurred while the boat was being repaired and $12,495 in fees Federal paid to its damage surveyor.

On appeal, Resolute challenges the adverse summary judgment on its products liability claims, the adverse liability verdict on Oswalt's implied warranty claim and the damages awarded for hotel expenses and surveyor's fees. We have jurisdiction under 28 U.S.C. § 1291. We conclude that the district court properly granted summary judgment to Webasto on Resolute's inadequate warnings claim but erroneously granted summary judgment to Webasto on Resolute's design defect claim. Resolute raised a genuine issue of material fact as to whether Webasto's failure to include an automatic current shutoff device made the heater's design defective. We hold, however, that the district court properly held Resolute liable on Oswalt's implied warranty claim and properly awarded damages for surveyor's fees and for loss of use of the CHUG. We accordingly affirm in part and vacate in part the judgment of the district court and remand for further proceedings on Resolute's design defect claim.

STANDARD OF Review

We review de novo the district court's grant of summary judgment. See Wallis v. Princess Cruises, Inc., 306 F.3d 827, 832 (9th Cir. 2002). "We determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Id.

Findings of fact made after a bench trial are reviewed for clear error, and conclusions of law are reviewed de novo. See Havens v. F/T Polar Mist, 996 F.2d 215, 217 (9th Cir. 1993). We review de novo the legal conclusion that damages are available and review for clear error factual findings underlying the ...


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