Unpublished Disposition, 886 F.2d 334 (9th Cir. 1988)

MEMORANDUM^* 

We consider whether the district court properly dismissed a dairy farmer's claims of negligence, breach of contract warranties, and violations of the Idaho Consumer Protection Act against the seller of a feed storage system.

BACKGROUND

Burdette and Charlotte Branscum, Idaho dairy farmers, contracted in 1983 to buy a feed storage system from 4-J Harvestore, Inc. ("4-J"), doing business as Washington Harvestore Systems. They bought two silos and other equipment after discussing the system with 4-J personnel and examining brochures provided by the manufacturer, A.O. Smith Harvestore Products, Inc. ("AOSHPI"). AOSHPI is not a party to this action.

In the purchase agreements, 4-J expressly warranted that the system's foundation would be properly installed and that the product would be erected in conformance with manufacturer's specifications. 4-J made no other express warranties, and disclaimed all implied warranties. In signing the purchase agreements, the Branscums acknowledged that they were relying upon no promises or conditions not set forth in the contracts.

Shortly after 4-J completed construction of the system in the summer of 1984, some of the Branscums' cows became ill and died. The Branscums refused to make payments on the purchase price. In October 1984, they sued in state court 4-J, a Nebraska corporation,¹  asking rescission of the contracts and alleging fraud and negligent misrepresentation. After removal to federal court, 4-J counterclaimed for the purchase price. Several months after the lawsuit was filed, the Branscums discovered leakage in one of the silos.

4-J moved for summary judgment. On December 22, 1987, the court denied 4-J's motion on its counterclaim, and granted the motion on Branscums' claim with leave to amend their complaint. On December 29, 1987, the Branscums filed an amended complaint, alleging negligence in construction, breach of contract warranties, res ipsa loquitur, and violation of the Idaho Consumer Protection Act. The court granted 4-J's motion for summary judgment on April 12, 1988.

The Branscums moved for relief from the judgment pursuant to Fed. R. Civ. P. 60(b) and 59(e). The court denied this motion on June 1, 1988. The Branscums filed a notice of appeal on June 16, 1988. The district court certified the appeal under Fed. R. Civ. P. 54(b) on October 17, 1988. 4-J's counterclaim to the original complaint is still pending.

DISCUSSION

The Branscums' appeal is timely because it was filed within 30 days of the district court's denial of their motion for relief from the judgment under Fed. R. Civ. P. 60(b) and 59(e). Fed. R. App. P. 4(a) (1) & 4(a) (4) (iii). The district court had jurisdiction under 28 U.S.C. § 1332, and we have jurisdiction under 28 U.S.C. § 1291. Both parties agree that Idaho law applies.

This court reviews de novo the district court's grant of summary judgment. Ferguson v. Greater Pocatello Chamber of Commerce, 848 F.2d 976, 979 (9th Cir. 1988). As the reviewing court, we apply the same standard to summary judgment motions under Fed. R. Civ. P. 56(c) as applied by the district court. Lew v. Kona Hospital, 754 F.2d 1420, 1423 (9th Cir. 1985). We affirm the order if the record, read in the light most favorable to the Branscums, establishes that there is no genuine issue of material fact and that 4-J is entitled to judgment as a matter of law. Id. At oral argument, counsel for the Branscums agreed that only the summary judgment on the amended complaint is before this court on appeal.

I. Branscums' Motion for Relief Under Fed. R. Civ. P. 60(b)

In moving for relief from summary judgment, the Branscums filed additional discovery materials which they had not made available to the court on the original motions. The court rejected their argument that this additional information should be considered because of inadvertence and excusable neglect. Fed. R. Civ. P. 60(b) (1).

Branscums' counsel stated that he was under the mistaken impression that all discovery is routinely filed with the federal district court. Lack of familiarity with the rules is not a valid excuse under Rule 60(b) (1). 11 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2858, at 170 (1973). "A defeated litigant cannot set aside a judgment ... because he failed to present on a motion for summary judgment all the facts known to him that might have been useful to the court." Id. at 173 (citing Smith v. Stone, 308 F.2d 15 (9th Cir. 1962)).

The court properly denied the Branscums' motion for relief. This court does not consider the additional information provided with the motion in reviewing the summary judgment order.

The court also correctly refused to provide relief from the judgment for a claim based on strict liability. This claim was not asserted in either the original or amended complaint. It is barred in any event for the same reasons negligence claims are barred, as discussed below.

II. Claims Based on Negligence and Res Ipsa Loquitur

The district court dismissed the Branscums' claims based on negligence and res ipsa loquitur. On appeal, 4-J argues that the negligence claim is barred, based on language in the contracts. The purchase agreements state:

IRRESPECTIVE OF ANY STATUTE, THE BUYER RECOGNIZES THAT THE EXPRESS WARRANTY SET FORTH ABOVE, IS THE EXCLUSIVE REMEDY TO WHICH HE IS ENTITLED AND HE WAIVES ALL OTHER REMEDIES, STATUTORY OR OTHERWISE.

The Branscums do not challenge the validity of this provision. Their negligence claim was properly dismissed. See Agristor Credit Corp. v. Schmidlin, 601 F. Supp. 1307, 1317 (D. Or. 1985) (upholding the validity of identical contract language under Oregon law).

The negligence claim is barred in any event because the Branscums seek only economic damages. Faced with a fact situation almost identical to this case, the Idaho Court of Appeals recently concluded that damage to feed and cattle was economic damage, not recoverable on a tort or strict liability theory. Myers v. A.O. Smith Harvestore Products, 114 Idaho 432, 757 P.2d 695, 698-99 (Ct.App.), petition for review denied (1988). The court stated that, although the plaintiffs arguably alleged property damage,

these injuries did not result from a calamitous event or dangerous failure of the product. Rather, they arose from the failure of the product to match the buyers' commercial expectations. In sum, the Myers' claim is for lost profits and consequential business losses resulting from alleged failures of the silo. ... Here these economic losses were properly addressed as predicated upon contract claims, not in tort.

Id. at 699 (citing Clark v. International Harvester Co., 99 Idaho 326, 581 P.2d 784 (1978)).

The Branscums attempt to distinguish Myers by referring to other language in the opinion:

Each case must be examined on its particular facts and in light of the foundations of the rule. Here, the Myers did not plead any specific damages due to losses in feed or cattle value. The losses suffered as a result of feed deterioration and cattle illness were manifested by income changes brought on by reduced milk production.

Id. In this case, the Branscums pleaded specific damages to feed and cattle.

The Myers decision applies to bar the Branscums' tort claim. The alleged damages to the feed and cattle resulted from the failure of the product to meet the Branscums' commercial expectations, not from a calamitous event or dangerous failure of the product. These are economic losses which are addressed properly as contract claims. See also Agristor Leasing v. Guggisberg, 617 F. Supp. 902, 907-08 (D. Minn. 1985) (reaching the same result on similar facts).

We reject the claim based on res ipsa loquitur for the same reason. The doctrine is not a separate theory of recovery, but rather a way of establishing the element of breach in a negligence action where no other evidence of breach is available. See Brizendine v. Nampa Meridian Irrigation Dist., 97 Idaho 580, 548 P.2d 80, 83 (1976). The doctrine does not apply in any event because the instrumentality causing the injury was not under the exclusive control of the defendant. See id.

The Branscums argue that 4-J breached both implied and express contract warranties. The purchase agreements are governed by Article 2 of the Idaho Uniform Commercial Code because they involve sales of goods. See Idaho Code Sec. 28-2-105 (defining "goods" as "all things (including specially manufactured goods) which are movable at the time of identification to the contract ...").

The Branscums argue that 4-J breached its implied warranty of constructing the feed storage system in a workmanlike manner. They rely on Hoffman v. Simplot Aviation Inc., 97 Idaho 32, 539 P.2d 584 (1975). The Idaho Supreme Court imposed an implied warranty that services will be performed in a workmanlike manner in the context of personal service contracts. 539 P.2d at 588.

We need not decide whether this implied warranty would apply in the context of an Article 2 contract because 4-J disclaimed all implied warranties. Sellers may disclaim them, using language "which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." Idaho Code Sec. 28-2-316(3) (a).

The contracts disclaimed implied warranties in clear, unequivocal language. After relating the express warranties, the contracts state:

SECOND DISCLAIMER

NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED AND INCLUDING A WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE HAS BEEN OR WILL BE MADE BY OR IN BEHALF OF THE MANUFACTURER OR THE SELLER OR BY OPERATION OF LAW WITH RESPECT TO THE EQUIPMENT AND ACCESSORIES OR THEIR INSTALLATION, USE, OPERATION, REPLACEMENT OR REPAIR.

The claim of breach of implied warranties was properly dismissed. See also Myers, 757 P.2d at 700-01 (holding that identical language disclaimed all implied warranties).

The Branscums argue that 4-J breached the contracts by violating their express warranties. Under the heading, "WARRANTY OF MANUFACTURER AND SELLER," the contracts state:

The Seller warrants only that the foundation will be properly installed and that the product will be erected in strict conformance with the Manufacturer's specifications.

We must determine whether a genuine issue of material fact exists as to whether 4-J breached these warranties.

1. Warranty to Properly Install the Foundation

On appeal, the only evidence the Branscums refer to in arguing that 4-J breached the first express warranty is that 4-J did not use rebar in installing the foundation. Mr. Branscum admitted, however, that leaving rebar out of the foundation had not caused any damage. No issue of material fact exists on this breach of warranty claim.

2. Warranty to Follow Manufacturer's Specifications

On appeal, the Branscums point to several examples of problems which have come to their attention regarding the construction of the feed storage system.²  They present no evidence that any of these difficulties were due to 4-J's failure to follow AOSHPI's specifications. The record contains neither the specifications nor expert testimony regarding the improper construction of the system. It contains only deposition testimony of the Branscums and their children stating their personal observations and relating statements of others.³ 

For example, the Branscums claim that the silos were not pressure tested properly. In his deposition, however, Mr. Branscum stated that he did not know whether 4-J pressure tested the silos. Moreover, the Branscums offer no expert testimony that the silos were not sealed properly.⁴  A 4-J representative, on the other hand, had inspected the system and testified that both silos were pressure tested. Based on the record before us, no issue of material fact exists as to whether the system was constructed in accordance with manufacturer specifications. 4-J prevails as a matter of law.

IV. Violation of Idaho Consumer Protection Act

The Idaho Consumer Protection Act provides:

Any person who purchases or leases goods or services and thereby suffers any ascertainable loss of money or property ... as a result of the use or employment by another person of a method, act or practice declared unlawful by this act, may treat any agreement incident thereto as voidable ...

Idaho Code Sec. 48-608(1) (emphasis added). It allows recovery of attorney fees and punitive damages. Id. Sec. 48-608(1) & (3). Unlawful acts include representing that goods are of a particular standard, quality, or grade if they are of another. Id. Sec. 48-603(7).

4-J argues, and the district court held, that the Act requires the Branscums to prove reliance on the alleged misrepresentations. They reach this conclusion based on statutory construction and citation to case law construing analogous statutes in other jurisdictions.

The Branscums refute 4-J's citation of cases in other jurisdictions, but neither distinguish those cases nor offer contrary authority. Requiring reliance is a reasonable construction of the statute.

The Branscums acknowledged in the purchase agreements that they were not relying on promises or conditions outside the contracts. The contracts state (in a section initialed separately by Mr. Branscum):

ACKNOWLEDGMENT AND RELIANCE

I HAVE READ AND UNDERSTOOD THE TERMS AND CONDITIONS OF THIS PURCHASE ORDER INCLUDING THE WARRANTIES, DISCLAIMERS AND TERMS AND CONDITIONS HEREIN GIVEN TO ME, EITHER BY THE MANUFACTURER OR THE SELLER. I RELY ON NO OTHER PROMISES OR CONDITIONS AND REGARD THAT AS REASONABLE BECAUSE THEY ARE FULLY ACCEPTABLE TO ME.

There is no issue of material fact regarding reliance, and 4-J prevails as a matter of law on the Consumer Protection Act claim.

4-J requests this court to award attorney's fees. Under Idaho law, in civil actions to recover on a contract, "the prevailing party shall be allowed a reasonable attorney fee to be set by the court ..." Idaho Code Sec. 12-120(3); Spidell v. Jenkins, 111 Idaho 857, 727 P.2d 1285, 1289 (Ct.App.1986) ("Idaho Code Sec. 12-120 mandates an award of attorney fees to the prevailing party on appeal as well as in the trial court."); see also United States v. Twin Falls, 806 F.2d 862, 879 (9th Cir. 1986) ("Federal courts must follow state law as to attorney fees in diversity actions."), cert. denied, 482 U.S. 914 (1987).

In determining whether 4-J is a prevailing party, the trial court considers:

(a) the final judgment or result obtained in the action in relation to the relief sought by the respective parties; (b) whether there were multiple claims or issues between the parties; and (c) the extent to which each of the parties prevailed on each of the issues or claims.

Evans v. Sawtooth Partners, 111 Idaho 381, 723 P.2d 925, 931 (Ct.App.1986) (quoting Chadderon v. King, 104 Idaho 406, 659 P.2d 160, 165 (Ct.App.1983)); see also Idaho R.Civ.P. 54(d) (1) (B). In this case, 4-J's counterclaim is still pending before the district court. A determination of whether 4-J is entitled to attorney's fees is premature.

The district court's order granting summary judgment is AFFIRMED, and the is case is REMANDED for resolution of 4-J's counterclaim and determination of attorney's fees under Idaho law.