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LIVERMORE AMADOR VALLEY WASTEWATER MGMT. AGENCY V.

September 11, 1995

LIVERMORE AMADOR VALLEY WASTEWATER MANAGEMENT AGENCY (LAVWMA), a joint powers agency, Plaintiff,
v.
NORTHWEST PIPE & CASING COMPANY, an Oregon Corporation, L.B. FOSTER COMPANY, a corporation, and DOES 1 through 50, Defendants.



The opinion of the court was delivered by: LYNCH

 I. INTRODUCTION

 Plaintiff is a joint power agency responsible for managing the wastewater for several East Bay cities and areas. Between 1978 and 1979, plaintiff designed and had constructed a wastewater export pipeline. The pipeline was constructed according to bid and contract documents, including a Request for Proposals drafted by plaintiff. These documents established detailed specifications for the pipeline. The coal tar enamel lined pipe used in the construction of the portion of the pipeline at issue here was manufactured by Beall, the predecessor in interest to defendant Northwest Pipe & Casing Company ("Northwest") and was supplied by defendant L.B. Foster Co. ("Foster"). The pipeline contractor, S.J. Groves and Sons ("Groves") is not a party.

 While making unrelated repairs to the pipeline, plaintiff discovered that the coal tar enamel lining was detached from portions of the pipeline. Plaintiff has sued, alleging two causes of action: a claim for negligence, and a claim for products liability. In an Order dated November 18, 1994, the Court denied the defendants' motion to dismiss. Both defendants have now moved for summary judgment on both claims. Oral argument was held on June 14, 1995, with all parties represented by counsel. For the reasons set forth below, the Court GRANTS both defendants' motions for summary judgment.

 II. STANDARD OF REVIEW

 Summary judgment is appropriate where no genuine issue exists as to any material fact and where the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The moving party has the burden of establishing that there is no genuine issue of material fact. Id.; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 After the moving party makes a properly supported motion, the non-moving party has the burden of presenting specific facts showing that contradiction is possible. British Airways Board v. Boeing Co., 585 F.2d 946, 950-52 (9th Cir. 1978). It is not enough for the non-moving party to point to the mere allegations or denials contained in the pleadings. Instead, it must set forth, by affidavit or other admissible evidence, specific facts demonstrating the existence of an actual issue for trial. The evidence must be more than a mere "scintilla" of evidence; the non-moving party must show that the trier of fact could reasonably find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Summary judgment may be granted "if the evidence is merely colorable ... or is not significantly probative." Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1288 (9th Cir. 1987). In reviewing a motion for summary judgment, the Court must take the non-movant's evidence as true and all inferences are to be drawn in the light most favorable to the non-movant. Id. at 1289. It is with this standard in mind that the Court reviews both defendants' motions for summary judgment.

 A. Plaintiff's Complaint

 Plaintiff alleges that the contract governing the downhill portion of the pipeline, which is the portion at issue here, "called for the pipe to be coated with coal tar enamel, to a particular thickness." Complaint at P 11. "One purpose of the lining is to protect the pipe from corrosion and, ultimately, leakage." Id. In 1992, plaintiff discovered that one-third of the lining in the downhill portion of the pipeline was missing from the pipe interior. Id. at PP 12, 14. This delamination of the pipe has resulted in corrosion of the pipe. Id. at P 15. This corrosion, in turn, has exposed the pipe to the risk of leakage. Id. at P 27. Plaintiff alleges that the delamination resulted from the improper application of the enamel coating to the pipe. Id. at P 15. Plaintiff contends that "the entire downhill portion of the pipeline must be repaired or replaced in order to avoid complete corrosion and leakage." Id. at P 27. The complaint seeks between $ 10 million and $ 30 million in damages for "the cost of repairing and/or replacing the pipe in question" as well as for the costs of constructing an alternative pipeline to be used while repairs are underway. Id. at P 29.

 Plaintiff alleges two causes of action. In the first cause of action, captioned "Negligence," plaintiff alleges that the pipe was negligently manufactured and supplied "in that the coating failed to adhere properly to the pipe, and could not and did not withstand the wastewater load for which it was designed." Complaint at P 20. Plaintiff further alleges that the pipe was specifically manufactured and specifically supplied for its pipeline project, id. at PP 21-22, and that both defendants were aware of the intended use of the pipe, the purpose of the lining, and the consequences that would result if the lining did not properly adhere to the pipe. Id. at PP 21-23, 25.

 Plaintiff's second cause of action is titled "Products Liability" and states a claim for strict liability. In this claim, plaintiff alleges that the coating on the pipe "was defective in that the coating failed to adhere properly to the pipe, and became detached." Complaint at P 36. Plaintiff alleges that "as a proximate result of the defective coating, the pipe is damaged in that it became, and is becoming, corroded, and that corrosion will, if not repaired, result in leakage of sewage and consequent personal injury and property damage." Id. at P 37. Plaintiff again alleges damages in the amount of between $ 10 million and $ 30 million for the repair and/or replacement of the pipe. Id. at P 39.

 Both defendants move for summary judgment on both causes of action. Defendants contend that because plaintiff is seeking purely economic damages, and because purely economic damages are not available for either negligence or strict liability claims, defendants are entitled to judgment in their favor. Plaintiff contends first that it has alleged property damage, and not purely economic damages, and secondly that even if it had alleged purely economic damages, such damages are available in this case.

 B. Economic Damages

 The first issue facing the Court is whether plaintiff has alleged more than purely economic damages. California law distinguishes between physical damage to property, and damage that consists solely of economic damages. *fn1" See, e.g., Seely v. White Motor Co., 63 Cal. 2d 9, 45 Cal. Rptr. 17, 403 P.2d 145 (1965); Sacramento Regional Transit Dist. v. Grumman Flxible, 158 Cal. App. 3d 289, 204 Cal. Rptr. 736 (1984). While "not always easy to draw," Huang v. Garner, 157 Cal. App. 3d 404, 420, 203 Cal. Rptr. 800 (1984), "the line between physical injury to property and economic loss reflects the line of demarcation between tort theory and contract theory." Sacramento Regional Transit, 158 Cal. App. 3d at 294. Economic damages are defined as "damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits -- without any claim of personal injury or damages to other property . . . ." Id. Purely economic damages result when a plaintiff fails "to allege ...


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