Facts
- Charterers/owners of four oil-transporting supertankers purchased vessels equipped with main propulsion turbines designed and manufactured by Transamerica Delaval Inc.
- After delivery, the turbines on all four ships malfunctioned due to alleged design and manufacturing defects.
- The malfunctions damaged only the turbines (the product itself); there were no personal injuries and no damage to other property.
- The plaintiffs sought damages for repair costs and lost income while the ships were out of service.
- The plaintiffs filed an admiralty complaint asserting tort-based products-liability claims.
Issues
- Whether federal maritime (admiralty) law recognizes products-liability theories, including strict liability, for defective ship equipment.
- Whether a commercial purchaser may recover in admiralty tort (negligence or strict products liability) for purely economic loss when a defective product injures only itself.
Decision
- The Supreme Court unanimously affirmed judgment for the manufacturer.
- The Court held that admiralty law incorporates products-liability principles, including strict liability.
- The Court held that no tort claim lies in admiralty for purely economic loss when the defect causes damage only to the product itself.
- The Court noted that one count should have been dismissed for lack of standing by a charterer, but the remaining tort counts fell within admiralty jurisdiction.
Legal Principles
- Federal maritime law recognizes negligence and incorporates products-liability doctrines, including strict products liability.
- In a commercial transaction, when a defective product damages only itself and the plaintiff claims only economic losses (e.g., repair costs and lost profits), the claim sounds in contract/warranty rather than tort.
- A manufacturer in a commercial relationship owes no duty under negligence or strict products-liability theories to prevent a product from injuring itself.
- The line between tort and contract in product-defect cases turns on the type of harm: personal injury or damage to other property may support tort remedies, while product self-damage and loss of bargain are left to contract and warranty allocations of risk.
Conclusion
The Court held that although maritime law recognizes strict products liability, commercial plaintiffs cannot use tort theories to recover purely economic losses arising from a defective product that harms only itself; such disputes are governed by contract and warranty remedies.