The opinion of the court was delivered by: REENA RAGGI
Plaintiff Jorge Gonzalez, a New York resident, invokes this court's diversity jurisdiction to sue Rutherford Corporation, a used machinery dealer located in New Jersey, for injuries sustained while working with a press brake sold by Rutherford to Gonzalez's employer, Capital Steel Fabrication, Inc. Plaintiff's complaint alleges causes of action in strict liability, breach of express and implied warranties, and negligence. Rutherford, in turn, has filed a third-party complaint seeking contribution and/or indemnification from (1) Capital Steel Fabrication, (2) Cleveland Crane and Engineering Co., the manufacturer of the press
, (3) Daley-Hodkin Corporation, the auctioneer from which Rutherford purchased the press brake, and (4) Pyramid Equipment Leasing Corporation, a finance lessor involved in the transfer of the press brake from Rutherford to Capital Steel Fabrication.
Now pending before the court are Rutherford's motion for summary judgment against Gonzalez and the motions of third-party defendants Daley-Hodkin and Pyramid Equipment Leasing for summary judgment against Rutherford. Having carefully considered the submissions of the parties, and having heard oral argument, the court hereby grants Rutherford's motion for summary judgment as to plaintiff's claim of express warranty, but denies the motion in all other respects. It grants the motions of Daley-Hodkin and Pyramid Equipment Leasing and enters summary judgment in their favor on Rutherford's third-party claim.
Most facts relevant to the motions before this court are not in dispute. To the extent they are, the court views the evidence in the light most favorable to the non-movant on each motion.
At the times relevant to this dispute, Jorge Gonzalez was an employee of Capital Steel Fabrication in Brooklyn, New York. On August 6, 1991, Gonzalez was working a Steelweld mechanical press brake, model number I-4-8, serial number M 3235, a machine used for stamping and puncturing metal. The press brake contained a long vertically movable cutting instrument, called a ram, which would descend onto a point of operation, or bed. The ram could be activated either manually by twin buttons on either side of the machine front plate or by use of a foot pedal. Gonzalez asserts that, while sitting in front of the machine, he at one point leaned forward to better see a metal sheet he was positioning with his right hand on the cutting plane. In the process, tie inadvertently stepped on the foot pedal, activating the ram. The ram crushed and partially amputated parts of four fingers on Gonzalez's right hand.
On November 20, 1991, plaintiff commenced this lawsuit. He contends that the press brake was defectively designed in that it had no foot pedal guards, point of operation safety system, or hand tools for use at the point of operation. He submits that Rutherford is strictly liable for these defects and the failure to warn of them. He further asserts that Rutherford's conduct was negligent and a breach of express and implied warranties.
The Steelweld press brake involved in the Gonzalez accident was originally manufactured sometime during the 1950's by Cleveland Crane and Engineering Co. It eventually became the property of a Massachusetts business, ATF-Davidson Company, Inc. When ATF-Davidson declared bankruptcy, its property was sold for the benefit of creditors, including the Bank of New York. To effect the sale of assets, the Bank of New York hired Daley-Hodkin to conduct a bankruptcy auction. Among the assets thus offered for sale in April 1990 were over three-thousand separate lots of personal property -- including the Steelweld press brake -- and over one hundred forty acres of real property. All bidders were advised that the property was being sold "as is/where is," without any warranties as to quality or merchantability. It is undisputed that Daley-Hodkin made no modifications or repairs to any of the property offered for sale. Rutherford was the successful bidder for the press brake, paying $ 11,000.
For close to twenty years, Rutherford has bought and sold used metal working machine tools. It stores and shows its inventory -- which has included over one hundred different types of machines manufactured by over twenty-five businesses -- at a 10,000 square foot warehouse in Linden, New Jersey. It advertises in various trade magazines, including "Used Equipment Directory," specifically aimed at the used machinery market. It does not dispute that it is a regular dealer in used goods.
Sometime in late 1990, Rutherford's salesman, Frank Sangiorgi, discussed with representatives of Capital Steel Fabrication that company's interest in purchasing a press brake. Alain Blaier, the Vice President of Capital Steel Fabrication, and his father went to Rutherford's warehouse to see the Steelweld press brake here at issue. To meet the $ 30,000 purchase price, Capital Steel Fabrication explored financing with Pyramid Equipment Leasing. As a result, Pyramid Equipment Leasing formally purchased the press brake from Rutherford on November 26, 1990, arranging for shipment directly to Capital Steel Fabrication.
The invoice relating to this sale states that the machinery is sold by Rutherford with "no warranties express or implied. " A similar disclaimer is noted on the bill of sale. The invoice further purports to obligate the "buyer . . to inspect All Machinery On A Continuing Basis, [and] to Provide Proper Safety Devices and Equipment or Means Necessary to Safeguard the Operator from Harm For Any Particular Use, Operation or Set-up of Machines." Finally, the invoice contains an indemnification clause whereby,
Buyer agrees to indemnify and hold seller harmless from . . . (4) any liability, loss or damages, claims, demands, costs or judgments based upon or resulting from any legal theory of strict liability or liability without fault applied to buyer or to seller or to the original manufacturer of the subject machinery or equipment to seller or (5) any liability, loss or damages, claims, demands, costs or judgments based upon or resulting from any theory of breach of warranty of any kind.
Apparently, this document was never signed by any representative of Pyramid Equipment Leasing or Rutherford.
It is well-established that summary judgment is appropriate only when there are no genuine issues of material fact requiring resolution at trial, and when the law supports the moving party. Fed. R. Civ. P. 56(c); e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Turtur v. Rothschild Registry Intern., 26 F.3d 304, 309 (2d Cir. 1994). The movant bears the initial burden of demonstrating the absence of any genuine issue of fact. Tutur v. Rothschild Registry Intern., 26 F.3d at 309. A party opposing summary judgment cannot rely on hypothetical speculation or metaphysical musings to create an issue of fact. Rather, it must point to specific evidence that, if credited, would support a jury verdict in its favor. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). If such evidence is adduced, the weight to accord it, and the resolution of any factual differences between the parties must be left for the jury to determine. This is because a court's sole task is to decide whether genuine factual issues are present, not to weigh the evidence or resolve the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. at 249-50; Turtur v. Rothschild Registry Intern., 26 F.3d at 309.
A federal court sitting in diversity applies the same choice of law rules as the state in which it sits. Klaxon v. Stentor, 313 U.S. 487, 496-97, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Banker v. Nighswander, Martin & Mitchell, 37 F.3d 866, 871 (2d Cir. 1994). In personal injury actions, New York generally applies its own law to injuries occurring in this state. E.g., Cooney v. Osgood Machinery, Inc., 81 N.Y.2d 66, 595 N.Y.S.2d 919, 612 N.E.2d 277 (1993). All parties agree that New York law applies to this case.
III. Rutherford's Motions Against Gonzalez
Rutherford moves for summary judgment in its favor on Gonzalez's strict liability claim, arguing that, under New York law, strict products liability does not apply to used machinery dealers. The legal issue is by no means easily resolved. Generally, this court would look first to New York's ultimate authority, its Court of Appeals, to ascertain controlling state law. See Sphere Drake Ins. Co. v. P.B.L. Entertainment, Inc., 30 F.3d 21, 22 (1994). But that court has not yet ruled on whether regular dealers in used machinery, such as Rutherford, should be held strictly liable for defects in the products they sell. In the absence of any plain ruling by the Court of Appeals, the state law rulings of the Appellate Divisions "are entitled to 'persuasive, if not decisive, consideration.'" Id. at 23 (quoting In re Eastern and Southern Districts Asbestos Litigation, 772 F. Supp. 1380, 1389 (E. & S.D.N.Y. 1991)). Indeed, a federal court is generally obliged to follow the decisions of a state's intermediate courts absent "'convincing evidence that the [New York Court of Appeals] would decide differently.'" Id. (quoting Stoner v. New York Life Ins. Co., 311 U.S. 464, 467, 85 L. Ed. 284, 61 S. Ct. 336 (1940)); Pentech Intern., Inc. v. Wall Street Clearing Co., 983 F.2d 441, 445-46 (2d Cir. 1993). Appellate Division decisions do not, however, speak unequivocally to the facts of this case. Where state law is uncertain or ambiguous, a federal court must "endeavor to predict how the highest court of the state" would resolve the issue. U.S. East Telecommunications, Inc. v. U.S. West Communications Services, Inc., 38 F.3d 1289, 1296 (2d Cir. 1994). Such a task requires a careful review of various resources, including "relevant cases from jurisdictions other than New York in an effort to predict 'what would be the decision of reasonable intelligent lawyers, sitting as judges of the highest New York court, and fully conversant with New York "jurisprudence".'" Travelers Ins. Co. v. 633 Third Assoc., 14 F.3d 114, 119 (2d Cir. 1994) (quoting Cooper v. American Airlines, 149 F.2d 355, 359 (2d Cir. 1945)). In fact, state courts are divided in their application of strict liability to used products dealers.
Of course, serious public policy concerns are always present when the scope of strict liability is being defined. Because such policy questions are generally best resolved directly by the state courts, this court has urged the parties to transfer their claim to New York court. They have not agreed to do this. Although New York does entertain certification of determinative questions of state law to its Court of Appeals, even without the consent of the parties, it requires that such certification be made by the Supreme Court of the United States or by a federal Court of Appeals, and not simply by a district court. N.Y. Rules of Court § 500.17 (McKinney's 1995). The parties having thus chosen to remain in this forum, and this court being without power to certify the question to the New York Court of Appeals, it must do its best to "predict" whether that Court of Appeals will apply strict liability to regular dealers in used machinery in circumstances such as are presented in this case.
1. Court of Appeals Decisions
New York's Court of Appeals has made plain that an action for strict products liability will not lie against a "casual or occasional seller" of used equipment. Sukljian v. Charles Ross & Son Co., Inc., 69 N.Y.2d 89, 95, 511 N.Y.S.2d 821, 824, 503 N.E.2d 1358 (1986). Plaintiff in that case had injured his hand while cleaning a high speed grinding mill. The machine in question was first purchased in 1962 by the General Electric Corporation. Eleven years later, General Electric sold the machine at a surplus equipment sale. It conducted two to three such sales a year. The terms of the sale were "as is, where is," with an express disclaimer of warranty. The mill, which had originally cost General Electric $ 4,000, was sold to Semco Equipment for $ 35. Semco sold the machine a few weeks later for $ 150 to a dealer in new and used machinery, which soon thereafter sold it to another such dealer. Over the course of the next two years, the mill was reconditioned and rebuilt and, in 1976, was sold to plaintiff's employer. General Electric was not sued by plaintiff for the damages he sustained. Rather, it was named as a third-party defendant. It moved for summary judgment on the grounds that it did not sell the machinery in the ordinary course of business and, therefore, owed no duty to plaintiff. Both the trial court and the Appellate Division granted the motion as to the strict liability claim against General Electric. The Court of Appeals affirmed, holding that "both Special Term and the Appellate Division correctly concluded that strict liability was inapposite because there was no showing that General Electric was regularly engaged in the business of selling the equipment in issue." Id. at 96, 511 N.Y.S.2d at 824 (emphasis added). It explained:
The policy considerations that have been advanced to justify the imposition of strict liability on manufacturers and sellers in the normal course of business obviously lack applicability in the case of a party who is not engaged in the sale of the product in issue as a regular part of its business. (See, Restatement [Second] of Torts § 402 A, comment f, concluding: "This Section is also not intended to apply to sales of the stock of merchants out of the usual course of business, such as execution sales, bankruptcy sales, bulk sales, and the like.") The casual or occasional seller of a product does not undertake the special responsibility for public safety assumed by those in the business of regularly supplying those products, nor is there the corollary element of forced reliance on that undertaking by purchasers of such goods. As a practical matter, the occasional seller has neither the opportunity, nor the incentive, nor the protection of the manufacturer or seller who puts that product into the stream of commerce as a normal part of its business, and the public consumer does not have the same expectation when it buys from such a seller.
Id. at 95-6, 511 N.Y.S.2d at 823-24. The decision plainly left open the question of whether strict products liability would apply to regular dealers in used products such as Rutherford.
That issue was presented in Stiles v. Batavia Atomic Horseshoes, Inc., 81 N.Y.2d 950, 597 N.Y.S.2d 666, 613 N.E.2d 572 (1993). In Stiles, plaintiff's hands were crushed by a 56-ton punch press that its employer had purchased from Batavia Atomic Horseshoes, a small manufacturer of horseshoes that also engaged in buying and selling used industrial machinery. Batavia had purchased the press in question at an auction and promptly sold it to plaintiff's employer. This was one of three occasions over the two years it was in business that Batavia bought and resold used machinery. The trial court asked the jury to respond to a specific interrogatory: "At the time of the sale of the punch press was Batavia Atomic Horseshoes engaged in the sale of used punch presses as a regular part of its business?" The jury unanimously found that it was, and proceeded to hold defendant liable. Stiles v. Batavia Atomic Horseshoes, Inc., 174 A.D.2d 287, 290, 579 N.Y.S.2d 790, 792 (4th Dep't 1992).
The Appellate Division affirmed, holding both that the answer to the interrogatory was adequately supported by the evidence and that regular dealers in used products are subject to strict liability. Id. at 290-91, 579 N.Y.S.2d at 792-93. In reaching the latter conclusion, the unanimous five-member court noted that a number of other states had imposed strict liability on used products dealers because, "like sellers of new products, [they] have assumed a special responsibility to the public, [they] may spread the loss caused by defective products and [they] have the ability and knowledge to remove defects before placing the used product in the distribution chain." Id. at 291, 579 N.Y.S.2d at 793. Moreover, such a conclusion was consistent with section 402A of the Restatement (Second) of Torts. Id.3 The Fourth Department acknowledged that the Court of Appeals had not specifically adopted section 402A as a statement of New York law. Id. at 291, n.1, 579 N.Y.S.2d at 793, n.1; see Micallef v. Miehle Co. Div. of Miehle-Goss Dexter, Inc., 39 N.Y.2d 376, 384 N.Y.S.2d 115, 122, 348 N.E.2d 571 (1976) (in which Judge Cook noted that, although he and Judge Fuchsberg favored adoption of section 402A as a statement of strict liability, a majority of the Court was not prepared to join them). Nevertheless, it noted that the Court of Appeals had referred approvingly to the section in cases involving strict products liability, thereby warranting reliance on it. Stiles v. Batavia Atomic Horseshoes, Inc., 174 A.D.2d at 291, n.1, 579 N.Y.S.2d at 793, n.1; see, e.g., Robinson v. Reed-Prentice Div. of Package Mach. Co., 49 N.Y.2d 471, 479, 426 N.Y.S.2d 717, 720, 403 N.E.2d 440 (1980); accord Sukljian v. Charles Ross & Son Co. Inc., 69 N.Y.2d at 95, 511 N.Y.S.2d at 823-24. Finally, the Fourth Department held that "the imposition of strict liability upon sellers of used products" would promote the salutary result of "increased maintenance and inspection" of used goods before they are returned to the stream of commerce. Stiles v. Batavia Atomic Horseshoes, Inc., 174 A.D.2d at 291, 579 N.Y.S.2d at 793.
2. Appellate Division Holdings
There are few Appellate Division holdings that address the question of whether a regular -- as opposed to occasional -- dealer in used products can be sued in strict liability. The Third Department, which originally heard the Sukljian case, did suggest therein that public policy might not support the application of strict liability to any used products dealer.
The policy considerations justifying extension of strict tort liability to sales of new products by commercial dealers do not apply with equal force to sales of used products. Obviously such a dealer, as distinguished from one who sells new products, would have great difficulty in passing on the burden of liability to the original manufacturer whose conduct may have been responsible for the defect.
Sukljian v. Charles Ross & Son Co., Inc., 116 A.D.2d 9, 11-12, 499 N.Y.S.2d 466, 468 (3d Dep't 1986).
That, of course, was not the view of the Fourth Department in Stiles. As already noted, supra, that court cited various policy reasons for applying strict liability to all regular dealers in used products, including (1) the special responsibility assumed by such regular dealers to the public; (2) the ability of such dealers to spread the loss caused by defective used products; (3) the knowledge and ability of such dealers to remove defects before placing used products in the distribution chain; (4) the salutary benefits of encouraging used dealers to increase their maintenance and inspection of used products; and (5) the broad applicability of section 402(A) of the Restatement to sellers of all defective products, whether new or used. ...