
USCA1 Opinion

	




          December 6, 1995      [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________        No. 95-1265                           CMB CONSTRUCTION COMPANY, INC.,                                 Plaintiff, Appellee,                                          v.                                  WEIL-McLAIN, ETC.,                                Defendant, Appellant.                                                                                      ____________________        No. 95-1343                           CMB CONSTRUCTION COMPANY, INC.,                                 Plaintiff, Appellee,                                          v.                             EMERSON ELECTRIC CO., ETC.,                                Defendant, Appellant.                                                                                      ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                   [Hon. Steven J. McAuliffe, U.S. District Judge]                                              ___________________                                                                                      ____________________                            Selya and Cyr, Circuit Judges,                                           ______________                            and Casellas,* District Judge.                                           ______________                                                                                      ____________________                                    ____________________             *Of the District of Puerto Rico, sitting by designation.             James D. Crawford, with whom Jennifer DuFault James and Schnader,             _________________            ______________________     _________        Harrison, Segal & Lewis were on brief for appellants.        _______________________             Wilbur A. Glahn III, with whom Kelly A. Ayotte, McLane, Graf,             ___________________            _______________  _____________        Raulerson & Middleton Professional Association, Normandin, Cheney &        ______________________________________________  ___________________        O'Neil and Duncan J. Farmer were on brief for appellee.        ______     ________________                                                                                      ____________________                                   December 8, 1995                                                                                      ____________________                    Per Curiam.   In  1988, CMB Construction  Company, Inc.                    Per Curiam.                    __________          ("CMB") completed  a condominium project in  New Hampshire's Loon          Mountain ski area, and placed all twenty-six units on the market.          The months of  December through  April are the  prime season  for          condominium  sales in the area.  The heating systems installed in          the condominiums  failed during  December 1988 and  January 1989,          which caused water  pipes to  freeze and burst,  and resulted  in          extensive  water and  structural damage  to thirteen  condominium          units.  The needed repairs on the damaged units were not complet-          ed until May  1989.  Although CMB  sold the damaged  units during          the  following  winter  (1989-1990),  less   advantageous  market          conditions brought  prices well  below those which  had prevailed          during the 1988-89 season.                    CMB promptly  initiated a  product liability action  in          New  Hampshire  federal  district court,  against  appellant  The          Marley  Company,  Weil-McLain  Division   ("Weil-McLain"),  which          manufactured the heating  systems, and against appellant  Emerson          Electric  Company ("Emerson"),  which  manufactured the  "surface          ignitors"  incorporated  in  the  heating systems.    CMB  sought          compensatory  damages for  its repair  and replacement  costs, as          well as consequential damages consisting of the reduced condomin-          ium sale  revenues resulting  from the one-year  delay associated          with repairing the thirteen  damaged units.  Relying on  a strict          liability  theory,  CMB ultimately  obtained  a  $503,597.22 jury          award  for  its repair  and replacement  costs, and  a $1,400,400          consequential damages award.  Appellants unsuccessfully moved for                                          3          judgment as a matter of law and for a new trial.  On appeal, they          challenge only the consequential damages award.1                     Although  the  district court  ruling denying  the Rule          50(b)  motion for  judgment  as a  matter  of law  is  subject to          plenary review, the jury verdict will  not be set aside unless no          rational factfinder  could have reached  the same verdict  on the          evidence adduced at trial.   See Bezanson v. Fleet  Bank-N.H., 29                                       ___ ________    ________________          F.3d 16, 20 (1st Cir.  1994).  A district court ruling  denying a          motion for new trial will be upheld absent an abuse of discretion          which results in a "miscarriage of justice."  See Lama v. Borras,                                                        ___ ____    ______          16 F.3d  473, 477 (1st  Cir. 1994).   We review  both rulings  by          considering the evidence and all rational inferences therefrom in          the light most favorable  to the nonmoving party, viz.,  CMB, but          making allowance  for evidentiary weight and credibility determi-          nations  on the latter motion only.  See Levesque v. Anchor Motor                                               ___ ________    ____________          Freight, Inc., 832 F.2d 702, 703 (1st Cir. 1987).          _____________                    The first contention pressed  by appellants is that New          Hampshire  strict liability  law does  not permit  a claimant  in          CMB's position to recover consequential damages based exclusively          on "commercial losses."  Like  the majority of jurisdictions, New          Hampshire has  endorsed the  so-called "economic loss"  doctrine,          see,  e.g., Public Serv. Co. of N.H. v. Westinghouse Elec. Corp.,          ___   ____  ________________________    ________________________          685  F. Supp. 1281 (D.N.H. 1988), which holds that damages relat-          ing to product liability    whether based in negligence or strict                                    ____________________               1St. Paul's Insurance Company,  CMB's subrogee, received the          $503,597.22 in compensatory damages.  Appellants settled with St.          Paul's during this appeal.                                          4          liability     normally  are not  recoverable as  compensation for                                      ___          injury exclusively caused to the defective "product" itself; that                                    __ ___ _________  _______  ______          is, where the defect  in the failed product causes  no collateral          "physical" damage, either to the person of the consumer or anyone          else, nor  to  any property  other than  the defective  "product"                                       _____ ____  ___ _________   _______          itself.  See East  River S.S. Corp. v. Transamerica  DeLaval, 476          ______   ___ ______________________    _____________________          U.S.  858,  866, 868,  870 (1986)  (surveying various  rules, and          adopting  the majority  rule for  use in  admiralty cases).   For          example, if a defective  widget simply malfunctions, recovery for          this sort of insurable loss    the diminution in the value of the                       _________          widget    normally must be based in contract or warranty law, not                                              ________    ________          tort  liability.   Id.  at 870-71  (noting that  such "insurable"                             ___          losses  "essentially [involve]  the failure  of the  purchaser to          receive  the benefit of  its bargain    the  core concern of con-          tract law").   This traditional  tort-law bar to  "economic loss"                                           ________ ___ __   ________ ____          recoveries presumably  would extend  also to  preclude recoveries          __________          for  consequential damages attributable  to the defective-product          malfunction, including  loss of  business opportunities.   Id. at                                                                     ___          874 (noting that warranty law is better suited to redressing such          losses,  since  it limits  consequential  damages,  such as  lost          profits,  to  those  which  are  a  "foreseeable  result  of  the          breach").                     The only  pre-verdict  exegesis offered  by  appellants          below on this issue appears in their pretrial memorandum support-          ing a motion to dismiss the claims  of CMB and its insurer.   See                                                                        ___                                          5          supra  note  1.2   Appellants  repeatedly stressed  that  the New          _____          Hampshire law relating to "economic  loss" was already "clear"             and  that the New Hampshire  state courts had  "long held" strict          liability unavailing     where a claimant alleges only "damage to                                                                  ______ __          the product itself and economic losses caused  thereby" and there          ___ _______ ______          is no allegation of "bodily injury or serious threat or probabil-          ity of bodily injury."  Memorandum, at 2-3.  See Fed. R.  Civ. P.                                                       ___          50(a) ("motion shall specify . . . the law and the facts on which          the  moving party  is entitled  to judgment").   Thus,  given the          evidence of extensive structural damage to the condominium units,                                __________ ______ __ ___ ___________ _____          appellants'  argument  before  the  district   court  necessarily                                                                ___________          implied  that appellants  were  relying on  the premise  that the          _______          "product"  at issue  was the  condominium units,  not  merely the                                        ___________ _____          heating systems.          _______ _______                    Their argument on appeal has been transformed, however.          Following a  passing reference  to the highly  dubious contention          that  the condominium  units  must be  considered the  integrated          "product" which  implicated settled New Hampshire  law, see Brief                                      _______                     ___                                    ____________________               2When they argued their  motion for judgment as a  matter of          law at  the close of  the evidence,  see Fed. R.  Civ. P.  50(a),                                               ___          appellants  simply referred to their pretrial motion:  "We do not          waive  our  right to  our position  expressed  in our  motion for          summary judgment (sic) that in a case of pure economic loss there          is no such thing as  a products liability claim."   Their attempt          to avoid  waiver by relying  on their post-verdict  motions under                                                ____          Rule 50(b)  is unavailing as  well.   See Perdoni Bros.,  Inc. v.                                                ___ ____________________          Concrete Systs., Inc., 35 F.3d 1, 3 (1st Cir. 1994)  ("The law is          _____________________          crystal clear that  `a party may not base its  motion for a judg-          ment  n.o.v. on a ground that was not argued in its [pre-verdict]          motion for directed verdict.'").                                           6          for  Appellant at  13 n.3,3 appellants  contend, in  the alterna-          tive,  that this  case presents  a question  of first  impression                                                          _____  __________          under New Hampshire law.  Id. at 15.  Thus, even if the "product"                                    ___          consisted of the heating  systems only, and even if  the heating-          system malfunctions  caused collateral damage  to the condominium                                      __________          units (i.e., to property  other than the product itself),  appel-          lants  now  argue  that the  New  Hampshire  courts surely  would          "extend" the East River rationale to these claims.  Consequently,                       __________          whether or not  it was proper  to award damages to  CMB's insurer          for the repair/replacement costs under a strict liability theory,          see supra note 1  and accompanying text, appellants now  say that          ___ _____          CMB cannot use strict liability to recover consequential "commer-          cial"  losses  flowing from  the  malfunctioning  of the  heating          systems.  Their revisionist argument on appeal     never broached          below    urges nothing  less than that New Hampshire's  "economic          loss"  doctrine should be extended beyond the context of cases in                                             ______          which the  defective product  causes damage only  to the  product          itself.   We  think it too  ambitious an initiative  to be enter-                                    ____________________               3Appellants waived any claim that the condominium units were          the "product," both on appeal, see FDIC v. Bay St. Dev. Corp., 32                                         ___ ____    __________________          F.3d  636, 639 n.3 (1st Cir. 1994) (appellate arguments presented          in perfunctory fashion without developed argumentation are deemed          waived), and before the district court, see Lee v.  Life Ins. Co.                                                  ___ ___     _____________          of N.A., 23 F.3d 14, 20 n.11 (1st Cir.), cert. denied, 115 S. Ct.          _______                                  _____ ______          427 (1994); see also Perdoni, 35 F.3d at 3 ("Sweeping invocations                      ___ ____ _______          of conclusory  theories or abstract principles  will not suffice"          for  pre-verdict Rule 50 motion).  Moreover, it seems most likely          that  their double  waiver traces  to the  complete lack  of case          authority supporting their contention.  See East River,  476 U.S.                                                  ___ __________          at 867 (normally,  "product" is the "integrated package"  sold to          the consumer).                                           7          tained for the  first time on  appeal.4  See,  e.g., Lee v.  Life                                                   ___   ____  ___     ____          Ins. Co. of N.A., 23  F.3d 14, 20 n.11 (1st Cir.),  cert. denied,          ________________                                    _____ ______          115 S. Ct. 427 (1994).                      Second,  appellants  contend that  the  superseding and          efficient cause of the  damages sustained by CMB was  the unfore-          seeable real estate market downturn in 1989.  See,  e.g., Reid v.                                                        ___   ____  ____          Spadone Mach. Co., 404 A.2d 1094, 1099 (N.H. 1979) (noting that a          _________________          "superseding   cause"   may  sever   proximate-causation  chain).          Therefore, they  say, CMB  failed to produce  sufficient evidence          that  its  lost sales  revenues  were proximately  caused  by the          defective heating  systems.  Once  again we conclude  that appel-          lants  failed to  preserve  these arguments  before the  district          court.5                                    ____________________               4Our waiver ruling analysis is corroborated by the rationale          upon which the district court relied in denying appellants' post-          verdict motion  for judgment as a matter of law: "[t]his is not a          case in which Plaintiff CMB or its subrogee, St Paul's, sought to          recover for damage  to or  loss of the  defective products  them-                                                  _________ ________  _____          selves, but rather sought recovery for damage to CMB's condomini-          ______          um project and  business occasioned by the defective condition of          the hot surface ignitors."   CMB Constr. Co. v.  Weil-McLain, No.                                       ______________      ___________          90-181-M,  slip  op. at  3 (D.N.H.  Dec.  30, 1994)  (emphasis in          original).               5Appellants cite  to  their  pleadings,  which  suggest  the          embryonic defense that the  damages sustained by CMB  were caused          by undesignated "third parties" over whom appellants exercised no          control.   Appellants  likewise point  to  a pretrial  motion  in                                                                         __          limine, wherein they argued that experts would "detail the manner          ______          in which  the financial losses  and failure of the  units to sell          are related to the burst pipes as opposed to the economic  rever-          sals suffered by the  economy in general."  Although  this state-          ment  might suggest a defensive stance that some of CMB's damages                                                      ____          might  eventually prove  not  to have  been  attributable to  the          "product" defect, in no  sense does it suggest that  the evidence          adduced  at  trial would  establish  that  the economic  downturn          constituted a superseding cause  which entirely severed the chain                                                 ________ _______          of causation set in motion by the malfunctioning product.                                           8                    Finally, appellants argue that the district court erred          in finding that  CMB had  adduced sufficient evidence  as to  the          amount of consequential damages sustained.  They assert  that the          ______          court misapplied New Hampshire  law, which has sometimes required          plaintiffs in so-called "lost profits" cases to  prove the amount          of actual damages to  "a reasonable certainty," rather than  by a          mere  preponderance  of the  evidence.   See,  e.g.,  Great Lakes                                                   ___   ____   ___________          Aircraft  Co. v.  City of  Claremont, 608  A.2d 840  (N.H. 1992).          _____________     __________________          Appellants argue that the  $1,400,400 consequential damages award          was based on pure speculation.  They point out that  only four of          the  twenty-six units had been  sold, or were  under contracts of          sale, at the time the defective heating systems failed; that only          one among the four  condominium sales in process failed  to close          thereafter;  and,  further, that  CMB's  evidence     that  other          condominium  units in  the  Loon Mountain  area  sold during  the          winter of 1988-1989     did  not prove that  any specific  buyers                                                           ________          existed at that  time who  would have been  prepared to  purchase          these particular units but for the structural damage.6                __________                    We  have  held that  the  heightened  burdens of  proof          called  for in such New  Hampshire "lost profits"  cases as Great                                                                      _____                                    ____________________               6Considerable confusion  attended  the parties'  use of  the          terms  "lost profits" and "lost sales [revenues]," as well as the          question whether these terms have distinctive connotations  which          might  affect the burden of proof under the Great Lakes decision.                                                      ___________          Appellants point out, however,  that we have noted that  the term          "lost profits" is "too  mutable" to serve as a  reliable indicium          of the applicability of Great Lakes.  See Bezanson, 29 F.3d at 21                                  ___________   ___ ________          n.6.   Since  appellants did  ask the  district court  to require          proof of  consequential damages to a  "reasonable certainty," and          explicitly  cited Great Lakes, we will assume that this claim was                            ___________          duly preserved for appeal.                                          9          Lakes pertain exclusively to  damages calculations that involve a          _____          "complex conjectural judgment" that "depend[s] upon how a variety          of variables  affecting a stream  of revenues and  expenses would          have  played out over time if the [defendant's wrongdoing had not          occurred.]"  Bezanson, 29 F.3d at 21.  Whatever label the parties                       ________          might assign  to CMB's consequential damages, state law offers no          bright-line  or  "hard-edged"  test  for  determining  whether  a          claimant  must prove damages by more than a mere preponderance of          the evidence.  Id. at 21 n.6.  Each case essentially turns on its                         ___          particular circumstances.  We think the damages sustained by  CMB          are not in the Great Lakes mold.                           ___________                    First, its  condominium units     fully completed prod-          ucts    were already on the open market in 1988.   Second, before          appellants'  defective  products  ever failed,  CMB  had received          serious "package offers" for all twenty-six units, but decided to          attempt to generate greater sales revenues by marketing the units          individually during the auspicious 1988-89 skiing season.  Third,          roughly comparable  condominium units  in the Loon  Mountain area          did  sell  briskly during  the  1988-1989 season,  while  CMB was          repairing its damaged units.  Fourth, notwithstanding the ensuing          economic downturn,  CMB's condominiums  did sell during  the very          next "peak" selling season, but at reduced prices.  The relative-          ____          ly  short interval     between  the lost  selling season  and the          actual selling  season    contrasts sharply  with the attenuation          evidenced  in the "lost profit"  cases cited by  appellants.  Cf.                                                                        ___          Great  Lakes, 608 A.2d  at 857 ("At  trial, [plaintiff's] damages          ____________                                          10          expert  []  based his  lost  profit estimates  on  a hypothetical                                                             _ ____________          business entity  producing Great Lakes and  Champion aircraft and          ________ ______          on forecasted  profits from 1986  through 1995.").   Since  these                                 ____ ____  _______ ____          factors  bring this case more  in line with  the "specific [frus-          trated] transaction"  in Bezanson, which would  have gone forward                                   ________          on  fairly predictable  terms but  for defendant's  wrongful act,          Bezanson, 29 F.3d at 21, we think it quite clear that the jury in          ________          this case was  not presented with an especially  "complex conjec-          tural judgment."                      The district court judgment is affirmed.                       The district court judgment is affirmed.                    ___ ________ _____ ________ __ ________                                          11
