LAUREL BEELER, United States Magistrate Judge.
In this action, several entities sued each other after a microtunnel boring machine broke down while it was boring an underground tunnel on a construction project for the San Francisco Public Utilities Commission ("SFPUC"). Plaintiff Nada Pacific Corporation ("Nada") leased and operated the machine as a subcontractor for the project's general contractor, and Defendant/counter-defendant Besser Company ("Besser") manufactured a component in the machine. Besser moves for summary judgment against Nada on three grounds: (1) Nada is judicially estopped from arguing that Besser's allegedly defective component caused the boring machine to fail because Nada argued before a dispute resolution board established by its general contractor's contract with the SFPUC that site conditions caused the machine to fail; (2) alternatively, Nada cannot use the collateral source rule to obtain a duplicate recovery of the amounts it recovered from its general contractor for the same damages it seeks in this case; and (3) alternatively, Nada has put forth evidence of only its economic losses and thus the economic loss rule bars its tort claims. Upon consideration of the parties' papers and their arguments at the November 6, 2014 hearing, the court holds that (1) judicial estoppel does not apply because the dispute resolution board did not decide the dispute, (2) Nada's potential recovery is offset by the money it recovered from its general contractor, and the collateral source rule does not apply, and (3) the economic loss rule bars Nada's tort claims against Besser. The court thus
This case arises out of the September 2010 failure of a microtunnel boring machine ("MTBM") while it was boring an underground tunnel on a construction project referred to as the San Francisco Public Utilities Commission-Alameda Siphon Project No. 4, in Alameda County, California (the "Project"). Joint Statement of Undisputed Facts ("JSUF"), ECF No. 71-2 at 2.
To perform its work as a tunneling subcontractor on the Project, Nada leased an MTBM from third-party defendant, Akkerman, Inc. ("Akkerman"). Id. Because the leased MTBM had a 74" diameter and the Project required a 96" diameter, Nada separately leased an "increase kit" from non-party Walter C. Smith Co., Inc. to enlarge the diameter of the face of the MTBM to the required project dimensions. Id. at 2-3. Nada also installed on the leased MTBM a "cutter head" that Nada owned. Id. at 3. The cutter head is the front-most piece of an MTBM, which rotates to bore through the ground. Id.
In September of 2010, while Nada was operating the MTBM to bore a tunnel on the Project, the MTBM became immobilized underground. Id. The immobilization occurred roughly 254 feet into tunnel bore, and 12 lengths of 20-foot interconnected steel casing pipe had been installed behind the MTBM when it became immobilized. Id. With Nada unable to advance the MTBM forward or move it backwards because of the pipe sections that had been installed behind the MTBM, a rescue shaft (or "911 shaft") was constructed above the MTBM to expose it and then raise it out of the ground with a crane. Id. at 3-4.
After the MTBM was removed from the ground, it was sent to Nada's facility in Caruthers, California for examination and repair. Id. at 4. Upon examination, Nada discovered that the gearbox within the MTBM was cracked. Id. Nada subsequently obtained a replacement gearbox, performed other repairs to the MTBM, returned the MTBM to the site, lowered it into the tunnel bore alignment, restored the earthen cover removed to create the 911 shaft, and re-launched the MTBM on the Project, which Nada was then able to complete. Id.
The failed gearbox was sent to PEM's facility where a non-destructive inspection was performed on or about November 16, 2010. Id. The Besser-manufactured planetary carrier within the gearbox then was sent to the University of Northern Iowa ("UNI") in Cedar Falls, Iowa, where it underwent destructive testing on or about February 28, 2011 at PEM's request. Id. Based on that destructive testing, UNI prepared a report dated March 31, 2011. Id. Structural Integrity Associates, Inc. then prepared a report dated April 12, 2011, which analyzed the UNI report. Id. Both reports were available to Nada prior to the Dispute Review Board proceeding discussed below. Id.
In connection with the costs Nada incurred to rescue and repair the immobilized MTBM, Nada submitted a Request for Change Order to Rados on September 6, 2011 and Rados passed that Request for Change on to the SFPUC. Id. Nada's Request for Change sought compensation for additional costs as follows:
Item Date of Work Description of Work Extended Costs
A Sept 21, 2010 to Sept 24, 2010 Additional Costs related to Initial Lockup of $ 144,061.23
Mtbm Cutter Bit and efforts to free Mtbm
B Sept 27, 2010 to Oct 7, 2010 Additional Costs incurred during installaiton $ 266 847.06
of Recovery Shaft
C Oct 8, 2010 to Oct 13, 2010 Additional Costs — NPC Shop Repairs to $ 264,304.75
Mtbm
D Oct 8, 2010 to Oct 14, 2010 Additional Costs incurred during Mtbm $ 152,130.39
Repairs and Relaunching Mtbm.
E Sept 25, 2010 to Dec 1, 2010 SPR Additional Costs for support to Install, $ 308,047.13
Maintain and Close Recovery Shaft
F Sept 8th, 2010 to Nov 8th, 2010 Additional Costs associated with $ 343,339.77
Microtunneling due to the DSC's
Requested for Change — Total Costs $ 1,478,730.33
After the SFPUC refused to execute a change order on Nada's Request for Change, the SFPUC, Rados, and Nada, in accordance with the prime contract between the SFPUC and Rados, submitted the dispute to a Dispute Review Board ("DRB"). Id. The DRB, which was established by the prime contract between the SFPUC and Rados and whose purpose was "to assist the parties by facilitating the timely resolution of disputes relating to" work on the Project, consisted of one member selected by the SFPUC, one member selected by Rados, and a third member selected by the other two members. Id., Ex. G ("DRB Specification"), ECF No. 71-9 ¶¶ 1.1, 2-3. Each DRB member was required to hold a certification or pre-qualification from the Dispute Resolution Board Foundation or the American Arbitration Association evidencing that the member received training the DRB process and meets the requirements for DRB members. Id. ¶ 3.2.
The DRB review process proceeds as follows. Either party to the prime contract could initiate the DRB's review of a dispute. Id. ¶ 7.2. The DRB then sets deadlines for the parties to provide pre-hearing submittals, which are position papers supported by evidence, and for a hearing. Id. ¶ 7.3, 7.4. The pre-hearing submittal contains a brief statement of the dispute, a summary of the party's position and the basis and justification for that position (with reference to contractual language and other evidence), and cost details. Id. ¶ 7.4.
The DRB then conducts a formal hearing that is attended by the parties. Id. ¶ 2.2. Attorneys are not allowed to attend the DRB hearing without prior written approval, and if they are granted such approved, they may only observe. Id. ¶ 8.4. The party who referred the dispute to the DRB presents its position first, followed by the other party. Id. ¶ 8.5. Both parties are then allowed successive rebuttals until the DRB believes that all aspects of the dispute have been fully and fairly covered. Id. The DRB members may ask questions, request clarification, or ask for additional information. Id. Either party may request that the DRB direct a question to, or request a clarification from, the other party, although the DRB will not allow one party to be directly questioned by the other party. Id. The DRB, in its sole discretion, may allow the introduction of arguments, exhibits, handouts, or documentary evidence that were not included in a party's pre-hearing submittal or were not previously given to the other party. Id. In the latter circumstance, the other party is given time to review the new material and prepare a rebuttal. Id. With prior disclosure, a party may also offer an analysis of an outside expert. Id. ¶¶ 8.8, 8.9. In difficult or complex cases, the DRB may find an additional hearing to be necessary. Id. at ¶ 8.5.
After the formal hearing, the DRB issues a nonbinding, written recommendation (the "DRB Report"), which is admissible in subsequent litigation or other dispute resolution proceedings. Id. ¶ 2.5. The recommendation in the DRB Report is based on the pertinent contractual provisions, applicable laws and regulations, and facts and circumstances of the dispute. Id. ¶ 9.1. It includes an explanation of the DRB's reasoning in reaching the recommendation. Id. The recommendation must be consistent with the application provisions of the prime contract between the SFPUC and Rados. Id. Within 10 days of receiving the DRB Report, either party may request clarification or reconsideration. Id. ¶¶ 9.5, 9.6. Within 30 days of receiving the DRB Report, the parties must submit their written
In accordance with the procedures outlined above, the parties submitted a factual record of "Common Reference Documents" relevant to the Project and the MTBM's immobilization. JSUF, ECF No. 71-2 at 5. On November 14, 2011, Nada submitted a Pre-Hearing Submittal to the DRB, executed by Nada's president, Cal Terassas, explaining Nada's position as to the cause of the MTBM's immobilization (essentially, site conditions). Id. Nada also provided an Appendix of separate documents to the DRB. Id. Among other analyses and reports provided in the Appendix, Nada provided the DRB with expert reports authored by David Mathy and David Bennett, "two very respected industry professionals who devote their careers to geotechnical issues and most substantively to microtunnelling." Id. Nada also created PowerPoint presentations that it submitted to the DRB on November 28, 2011 and in rebuttal on December 1, 2011, after the DRB's hearing. Id. at 6.
The DRB conducted a hearing on November 29, 2011 and issued its recommendation on January 6, 2012. Id. The DRB's decision made recommendations concerning Nada's entitlement to the costs requested in Nada's Request for Change. Id.
As a result of the DRB's January 6, 2012 recommendation, the SFPUC agreed to pay Rados the sum of $850,000. JSUF, ECF No. 71-2 at 6. Rados then agreed to pay Nada $481,755.49 ($850,000 less deductions for a $350,000 Rados back charge and $18,244.51 in DRB charges). Id. Nada's final progress billing to Rados reflects a line item credit of $850,000 to Nada and debits for the Rados back charge and DRB costs for net billing of $481,755.49 and a net balance due under the Nada-Rados subcontract of $847,383.74. Id. Rados paid Nada the $847,383.74 outstanding on the subcontract by check dated July 10, 2012. Id. The $850,000 credit (and net payment of $481,755.49) that Nada received from Rados compensated Nada for no costs other than the costs categorized as items A-F on the chart shown above. Id.
Nada has no obligation — existing, inchoate, contingent, or otherwise — to repay either Rados or the SFPUC for the $850,000 credit or $481,755.49 net payment that Nada received in settlement of its Request for Change. Id. Nada did not purchase insurance or pay insurance premiums to either Rados or the SFPUC in exchange for the credit and payment it received in settlement of its Request for Change. Id. at 6-7.
In this litigation, Nada seeks to recover the following categories of costs in the amounts shown below:
Item Date of work Description of Work Costs Incurred A September 21, 2010 to September Costs related to initial $144,061.23 24, 2010 lockup of MTBM cutter bit and efforts to free MTBM B September 27, 2010 to October 7, Costs incurred during $266,847.06 2010 installation of recovery shaft C October 8, 2010 to October 12, 2010 NPC shop repairs to $246,346.89 MTBM D October 8, 2010 to October 14, 2010 Costs incurred during $152,130.39 MTBM repairs and relaunching MTBM E September 25, 2010 to December 1, Costs incurred for $308,047.13 2010 support to install, maintain and close recovery shaft F October 15, 2010 to October 22, Additional costs $252,122.07 2010 incurred during relaunch of MTBM Total $1,369,554.84
Id. at 7. The categories and amounts of costs listed in items A-F of Nada's damages disclosures are identical to the categories and amounts of costs listed in items A-F of Nada's Request for Change as summarized in the previous chart, except that Nada deducted from item C of Nada's damage disclosures costs that Nada incurred for cutter head repairs and deducted from item F additional costs that Nada incurred after the MTBM had been re-launched. Id.
For purposes of California's economic loss rule, Nada claims that it suffered four items of damage to property other than the MTBM as a result of the MTBM's immobilization:
First, Nada claims that it suffered damage to the cutter head in that the MTBM's immobilization caused the cutter head to be "effectively `lost' underground unless and until the MTBM could be rescued." Id. at 7-8.
Second, Nada claims that it suffered damage to the pipe lengths installed in the tunnel at the time the MBTM failed in that the MTBM's immobilization caused the pipe lengths to be "effectively `lost' underground unless and until the MTBM could be rescued since they could not be used for their intended purpose (or any purpose)." Id. at 8.
Third, Nada claims that it suffered damage to its "license to use the property of SFPUC" in that "Nada was unable to use its contractual license to use the real property owned by SFPUC unless and until the MTBM could be rescued, and Nada had a contractual duty to promptly remedy and/or repair the immobilized MTBM's interference with the tunnel profile." Id.
Fourth, and finally, Nada claims that it suffered damage to its "lease obligations to Walter C. Smith and Akkerman" in that "when the MTBM became immobilized due to a gear box failure, the MTBM that Nada had leased from Akkerman, and the increase kit that Nada had leased from Walter C. Smith, were effectively `lost' underground
Nada claims no other elements of damage to "other property" within the meaning of California's economic loss rule. Id.
Nada filed its original complaint, which named only Besser as a defendant, on September 18, 2013. Nada Original Complaint, ECF No. 1. On October 4, 2013, Nada filed its First Amended Complaint, which added PEM as a defendant. Nada Complaint, ECF No. 6. Against Besser, Nada brings claims for strict liability based on a manufacturing defect, negligence in the context of products liability, equitable indemnity, fraud, and negligent misrepresentation. See id. ¶¶ 43-87.
On September 11, 2014, Besser filed the instant motion for summary judgment. Motion, ECF No. 71. Nada filed an opposition on September 25, 2014, and Besser filed a reply on October 2, 2014. Opposition, ECF No. 84; Reply, ECF No. 89. The court held a hearing on the matter on November 6, 2014. 11/6/14 Minute Order, ECF No. 100.
The court must grant a motion for summary judgment if the movant shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Material facts are those that may affect the outcome of the case. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A dispute about a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248-49, 106 S.Ct. 2505.
The party moving for summary judgment bears the initial burden of informing the court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits which demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To meet its burden, "the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th Cir.2000); see Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir.2001) ("When the nonmoving party has the burden of proof at trial, the moving party need only point out `that there is an absence of evidence to support the nonmoving party's case.'") (quoting Celotex, 477 U.S. at 325, 106 S.Ct. 2548).
If the moving party meets its initial burden, the burden shifts to the non-moving party to produce evidence supporting its claims or defenses. Nissan Fire & Marine Ins. Co., Ltd., 210 F.3d at 1103. The non-moving party may not rest upon mere allegations or denials of the adverse party's evidence, but instead must produce admissible evidence that shows there is a genuine issue of material fact for trial. Devereaux, 263 F.3d at 1076. If the non-moving party does not produce evidence to show a genuine issue of material fact, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.
In ruling on a motion for summary judgment, inferences drawn from the underlying facts are viewed in the light most
Besser first argues that Nada should be judicially estopped from asserting any of its claims against Besser because its factual allegations and theory of recovery in this action contradict the factual allegations and theory of recovery that it presented to the DRB and which led to a settlement in its favor. See Motion, ECF No. 71 at 7, 9-16. If Nada is estopped from asserting its current theory, then it will not be able to prove that the cast iron planetary carrier manufactured by Besser caused the harm for which it seeks relief, and therefore its claims against Besser necessarily fail. See id. at 7, 16.
Federal law on judicial estoppel governs cases in federal courts regardless of whether they involve state law claims. Johnson v. Oregon Dep't of Human Res. Rehab. Div., 141 F.3d 1361, 1364 (9th Cir. 1998); Rissetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 603 (9th Cir. 1996). Judicial estoppel is an equitable doctrine that prevents a party from benefitting by taking one position but then later seeking to benefit by taking a clearly inconsistent position. Hamilton v. State Farm Fire & Cas. Ins. Co., 270 F.3d 778, 782 (9th Cir.2001). It "applies to positions taken in the same action or in different actions," Samson v. NAMA Holdings, LLC, 637 F.3d 915, 935 (9th Cir.2010) (citing Rissetto, 94 F.3d at 603)), and is intended to protect the integrity of the judicial process by preventing a litigant from "playing fast and loose with the courts," Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir.1990). "It also `applies to a party's stated position whether it is an expression of intention, a statement of fact, or a legal assertion.'" Samson, 637 F.3d at 935 (quoting Wagner v. Prof'l Eng'rs in California Gov't, 354 F.3d 1036, 1044 (9th Cir. 2004)).
Judicial estoppel may be invoked by the court at its discretion. Morris v. California, 966 F.2d 448, 453 (9th Cir. 1991). Several factors help determine whether judicial estoppel applies. Hamilton, 270 F.3d at 782 (citing New Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001)). "`First, a party's later position must be `clearly inconsistent' with its earlier position.'" Id. (quoting New Hampshire, 532 U.S. at 750, 121 S.Ct. 1808). Second, the party must have "`succeeded in persuading a court to accept that party's earlier position.'" Id. at 782 (quoting New Hampshire, 532 U.S. at 750, 121 S.Ct. 1808). "`Third, the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.'" Id. (quoting New Hampshire, 532 U.S. at 751, 121 S.Ct. 1808). These
But before the court applies these (and other) factors, it must determine whether judicial estoppel can be applied when the allegedly inconsistent position was taken before the DRB. The Ninth Circuit has made clear that the doctrine of judicial estoppel applies not only where prior inconsistent statements were made to a court, but also where those statements were made in an administrative proceeding. See Rissetto, 94 F.3d at 604 (noting that "[t]hough called judicial estoppel, the doctrine has been applied, rightly in our view, to proceedings in which a party to an administrative proceeding obtains a favorable order that he seeks to repudiate in a subsequent judicial proceeding" and holding that "the doctrine of judicial estoppel is not rendered inapplicable in this case by the fact that plaintiff's prior position was taken in a workers' compensation proceeding rather than in a court"); see also Smith v. Montgomery Ward & Co., 388 F.2d 291, 291 (6th Cir.1968) (workers' compensation proceeding); Milton H. Greene Archives, Inc. v. CMG Worldwide, Inc., 568 F.Supp.2d 1152, 1184-85 (C.D.Cal. 2008) (California inheritance tax appraiser); Simo v. Home Health & Hospice Care, 906 F.Supp. 714, 718 (D.N.H.1995) (Social Security Administration disability proceeding); UNUM Corp. v. United States, 886 F.Supp. 150, 158 (D.Me.1995) (Maine Bureau of Insurance approval proceeding); Zapata Gulf Marine Corp. v. Puerto Rico Maritime Shipping Auth., 731 F.Supp. 747, 750 (E.D.La.1990) (Interstate Commerce Commission proceeding). And at least one court has applied the doctrine where the inconsistent position was taken before the United States Patent and Trademark Office. See Synopsys, Inc. v. Magma Design Automation, Inc., C 04-3923 MMC, 2007 WL 322353, at *25-26 (N.D.Cal. Jan. 31, 2007) (applying the doctrine with respect to prior statements made to the U.S. Patent and Trademark Office); cf. Lampi Corp. v. Am. Power Prods., Inc., 228 F.3d 1365, 1377 (Fed.Cir. 2000) (stating that "we are troubled by the inconsistencies between [the plaintiff's] statements to the PTO ... and the position taken by [the plaintiff] in this litigation," but ultimately affirming the decision not to judicially estop the plaintiff where the district court found that the plaintiff's inconsistencies were inadvertent). "This rule has been justified on the ground that `[t]he truth is no less important to an administrative body acting in a quasi-judicial capacity than it is to a court of law.'" Rissetto, 94 F.3d at 604 (quoting Muellner v. Mars, Inc., 714 F.Supp. 351, 357 (N.D.Ill.1989)).
Besser cites many of these opinions and argues that the DMB proceeding likewise is a "quasi-judicial" proceeding such that judicial estoppel may be applied. See Reply, ECF No. 89 at 8-9. The court disagrees. It is true that the DRB proceeding had many of the hallmarks of a judicial or quasi-judicial-proceeding: it was adversarial; the parties submitted briefs making arguments and citing to evidence; the parties could respond to each other's arguments; the parties could submit the opinions of experts; etc. But it lacked the most important hallmark — the
The DRB had no such power. Instead, it was empowered "to assist the parties by facilitating the timely resolution of disputes" and was limited to issuing a nonbinding (albeit written) recommendation that the SFPUC, Rados, and Nada could accept or reject. DRB Specification, ECF No. 71-9 ¶¶ 1.1, 2.5, 9.7. The DRB Specification itself even recognized that possibility that the DRB process might not result in a resolution of the dispute. Id. ¶ 10.1. If the DRB process itself might not result in a resolution of the dispute, it certainly cannot be considered to have adjudicated it. Besser cites no authority holding, or even suggesting, that the doctrine of judicial estoppel may be applied in the context of a body with no power to make a decision that is binding on the parties before it. Without it, and after considering the authority on this issue, the court will not judicially estop Nada from asserting its claims against Besser.
Besser next argues that Nada's potential recovery must be offset by the money is received from the settlement with the SFPUC and Rados. See Motion, ECF No. 71 at 16-20. Besser asserts that because Nada (according to Nada's own calculations) received $680,627.07 from Rados (which received the payment from SFPUC), it is limited to recovering $688,927.70 from Besser in this action. See Reply, ECF No. 89 at 11.
Normally, a plaintiff is "entitled to no more than a single recovery for each distinct item of compensable damages supported by the evidence," "[r]egardless of the nature and number of legal theories advanced by the plaintiff." Tavaglione v. Billings, 4 Cal.4th 1150, 1158-59, 17 Cal.Rptr.2d 608, 847 P.2d 574 (1993) (citing Shell v. Schmidt, 126 Cal.App.2d 279, 291, 272 P.2d 82 (Cal.Ct.App.1954)). Thus, "[d]ouble or duplicative recovery for the same items of damage amounts to overcompensation and is therefore prohibited." Id. at 1159, 17 Cal.Rptr.2d 608, 847 P.2d 574 (citing Shell, 126 Cal.App.2d at 291, 272 P.2d 82). But under the collateral source rule, "if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor." Helfend. v. S. Cal. Rapid Transit Dist., 2 Cal.3d 1, 6, 84 Cal.Rptr. 173, 465 P.2d 61 (1970).
In Helfend, the plaintiff was injured by a tortfeasor during an automobile collision. Id. at 4, 84 Cal.Rptr. 173, 465 P.2d 61. The plaintiff sued the tortfeasor and asserted damages that included his medical expenses. Id. at 5, 84 Cal.Rptr. 173, 465 P.2d 61. The tortfeasor wanted to introduce evidence showing that the plaintiff's medical insurance carrier paid about 80% of the plaintiff's medical bills and that other insurance carriers may have paid for some of the rest. Id. Based on this evidence, the tortfeasor argued that the collateral source rule did not apply and thus the money that the plaintiff sought to recover from him should be offset by the money that the plaintiff received from his insurance carriers. Id.
The superior court rejected the tortfeasor's argument, and the California Supreme Court affirmed that decision. Id. at 14, 84 Cal.Rptr. 173, 465 P.2d 61. In concluding that the collateral source rule did in fact apply to this situation, the Court reasoned that the plaintiff "received benefits from his medical insurance coverage only because he had long paid premiums to obtain them." Id. at 9, 84 Cal.Rptr. 173, 465 P.2d 61. "Such an origin," the court found, "constitute[s] a completely independent source." Id. It went on to
Id. For these reasons, the Court "reaffirm[ed] our adherence to the collateral source rule in tort cases in which the plaintiff has been compensated by an independent collateral source — such as insurance, pension, continued wages, or disability payments — for which he had actually or constructively ... paid or in cases in which the collateral source would be recompensed from the tort recovery through subrogation, refund of benefits, or some other arrangement." Id. at 13-14, 84 Cal.Rptr. 173, 465 P.2d 61.
Besser rightly points out that this case has none of the characteristics of the cases in which the collateral source rule has been applied. "While commonly applied to exclude evidence of insurance payments, over the years, a variety of benefits provided to plaintiffs have been held to be collateral sources of compensation that should not be considered in mitigation of a plaintiff's damages." Smock v. State, 138 Cal.App.4th 883, 886-87, 41 Cal.Rptr.3d 857 (Cal.Ct.App.2006) (citing Helfend, 2 Cal.3d at 9-14, 84 Cal.Rptr. 173, 465 P.2d 61 (medical insurance benefits); Fifield Manor v. Finston, 54 Cal.2d 632, 637, 7 Cal.Rptr. 377, 354 P.2d 1073 (1960) (value of gratuitous medical services); McKinney v. California Portland Cement Co., 96 Cal.App.4th 1214, 1220, 117 Cal.Rptr.2d 849 (Cal.Ct.App.2002) (social security and pension benefits); Arambula v. Wells, 72 Cal.App.4th 1006, 1008, 85 Cal.Rptr.2d 584 (Cal.Ct.App.1999) (continued wages paid by an employer); Pac. Gas & Elec. Co. v. Superior Court, 28 Cal.App.4th 174, 176-177, 33 Cal.Rptr.2d 522 (Cal.Ct.App.1994) (fidelity insurance proceeds); Hanif v. Housing Authority, 200 Cal.App.3d 635, 644, 246 Cal.Rptr. 192 (Cal.Ct.App.1988) (value of home care provided by a child's parents); Rodriguez v. McDonnell Douglas Corp., 87 Cal.App.3d 626, 662, 151 Cal.Rptr. 399 (Cal.Ct.App.1978) (value of nursing services provided by a spouse); Tremeroli v. Austin Trailer Equip. Co., 102 Cal.App.2d 464, 482, 227 P.2d 923 (Cal. Ct.App.1951) (continued wages paid by an employer)). Besser also cites an opinion that suggests that additional money paid to a contractor pursuant to a change order does not constitute money from a collateral source, although this opinion does not discuss the issue in detail. See Huber, Hunt & Nichols, Inc. v. Moore, 67 Cal.App.3d 278, 304, 136 Cal.Rptr. 603 (Cal.Ct.App. 1977).
For its part, Nada cites no authority holding or even suggesting that the collateral source rule should be applied in the circumstances present here. Instead, it
It also tries to analogize this case to Helfend by arguing that the SFPUC and Rados cannot be considered "other tortfeasors" for purposes of the collateral source rule and were "wholly independent" from Besser (the alleged tortfeasor) because SFPUC and Rados had to pay Nada Pacific pursuant to California Public Contracts Code § 7104. That statute provides:
Cal. Pub. Contracts Code § 7104. In other words, Nada Pacific received money from the SFPUC and Rados under statutory/contract theory, not a tort theory.
Even so, the larger point is that the facts of this simply are different from the situations where courts have applied the collateral source rule. Nada was not "compensated by an independent collateral source — such as insurance, pension, continued wages, or disability payments — for which he had actually or constructively ... paid," and the SFPUC will not be "recompensed from the tort recovery through subrogation, refund of benefits, or some other arrangement." Helfend, 2 Cal.3d at 13-14, 84 Cal.Rptr. 173, 465 P.2d 61. As explained in Helfend, the collateral source rule is a limited exception to the more general rule against duplicate recoveries, and the court does not believe that the rule applies here. To the extent that Nada tries to come within Helfend by arguing that it "constructively `paid' for the right to receive [the additional compensation that Rados received under the change order] by promising to perform, and actually performing, its work under [its subcontract with Rados]," see Opposition, ECF No. 84 at 20, it provides no evidence to support this assertion.
Accordingly, the court finds that Nada is limited to recovering $688,927.70 from Besser in this action.
Finally, Besser argues that California's so-called "economic loss rule" bars the tort claims that Nada brings against it. See Motion, ECF No. 71 at 20-23.
In California, "[t]he economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise." Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal.4th 979, 988, 22 Cal.Rptr.3d 352, 102 P.3d 268 (2004). "Economic loss consists of 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. (internal citations and ellipses omitted). Under the rule, a plaintiff may recover in tort only where he or she can allege personal injury or "damage to `other property,' that is, property other than the product itself." Jimenez v. Superior Court, 29 Cal.4th 473, 482-83, 127 Cal.Rptr.2d 614, 58 P.3d 450 (2002) (emphasis in original). "The function of the economic loss rule is to prevent tort law from shifting back to sellers a specific risk that better rests with buyers — the risk that a product will not perform to a particular level beyond that warranted by the seller. If a buyer desires protection against this risk, she can and should negotiate for a higher warranty or seek it out from other sellers in the marketplace." Robinson, 34 Cal.4th at 997, 22 Cal.Rptr.3d 352, 102 P.3d 268 (2004) (Werdegar, J., dissenting) (citing Seely v. White Motor Co., 63 Cal.2d 9, 18-19, 45 Cal.Rptr. 17, 403 P.2d 145 (1965)).
Nada asserts only tort claims against Besser, and through this action it seeks only economic damages that cannot be recovered through them. It is undisputed that the damages to "other property" that Nada seeks are based on its inability to use the MTBM's cutter head, the pipe lengths installed in the tunnel behind the MTBM, its "license to use the property of SFPUC," and its "lease obligations to Walter C. Smith and Akkerman" while the MTBM was stuck underground. Nada cites several opinions that make clear that,
With the exception of W./Scott Fetzer, Nada ignores the authorities cited by Besser. See Opposition, ECF No. 84 at 22-29. As for W./Scott Fetzer, Nada says that the escaped oxygen at issue there was gone forever, while here it contends that the "other property" was "physically restrained and/or blocked." Id. at 23. The court fails to see a meaningful distinction; in both instances, the "other property" was made unusable.
Nada also cites Catalyst Old River Hydroelectric Ltd. P'ship v. Ingram Barge Co., 639 F.3d 207 (5th Cir.2011), where the plaintiff, the owner of a hydroelectric station, suffered damages after the defendant's boat caused a collision which in turn caused less water to flow into the plaintiff's station. Id. at 209. Because less water flowed into the station, the plaintiff produced less electricity than usual. Id. The plaintiff brought tort claims against the defendant to recover damages for the value of the electricity that it was not able to generate. Id. at 210. The Fifth Circuit found that the plaintiff's tort claims were not barred by the economic loss rule. Id. at 211, 214. But the ruling is inapposite because in Catalyst, the Fifth Circuit was
In addition, Nada cites Shade Foods, Inc. v. Innovative Prods. Sales & Mktg., Inc., 78 Cal.App.4th 847, 866, 93 Cal.Rptr.2d 364 (Cal.Ct.App.2000), for its statement that "California courts have held that the presence of something where it should not be can constitute property damage." Opposition, ECF No. 84 at 28. But, as Besser points out, Shade is inapposite because the court there was construing the meaning of "property damage" as defined in an insurance policy. That opinion says nothing about physical damage to "other property" for purposes of the economic loss rule. Nada also cites Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 877-84, 117 S.Ct. 1783, 138 L.Ed.2d 76 (1997), for its statement that "courts have also found other instances of a piece of `other property' being physically harmed when the defective product caused the `other property' to be physically prevented from being used as intended." Opposition, ECF No. 84 at 28. This opinion also is inapposite because there, the "other property" was lost at sea when a ship sank; the "other property" was physically destroyed. See Saratoga Fishing, 520 U.S. at 877, 117 S.Ct. 1783 ("This case asks us how [the economic loss rule under federal maritime law] treats the physical destruction of" other property).
Finally, Nada argues that, even if the economic loss rule bars its claims against Besser for strict liability, negligence, equitable indemnity, and negligent misrepresentation, it does not bar its claim for fraud. Opposition, ECF No. 84 at 22. Nada makes this argument in a single sentence in its opposition, stating that "the courts have held that the economic loss rule does not bar fraud and intentional misrepresentation claims." Id. (citing Robinson, 34 Cal.4th at 991, 22 Cal.Rptr.3d 352, 102 P.3d 268). But as Besser correctly notes, Robinson does not state for such a broad proposition. In Robinson, the plaintiff made helicopters, and the defendant made clutches that the plaintiff incorporated into its helicopters. 34 Cal.4th at 985, 22 Cal.Rptr.3d 352, 102 P.3d 268. According to the parties' contact, the defendant was supposed to ground the clutches to a particular level of hardness. Id. The plaintiff needed them ground to this hardness because its "type certificate" from the Federal Aviation Administration ("FAA") required it. Id. When the defendant made and sold the clutches to the plaintiff, the defendant included along with the clutches a certificate stating that the clutches were ground to the required hardness. Id. at 985-86, 22 Cal.Rptr.3d 352, 102 P.3d 268. At a certain point, the defendant starting grinding the clutches to a different hardness — in violation of the parties' contract — but it
When the plaintiff found out what happened, it sued the defendant for breach of contract, breach of warranty, and negligent and intentional misrepresentation. Id. at 987, 22 Cal.Rptr.3d 352, 102 P.3d 268. The defendant argued that the plaintiff's tort claims were barred by the economic loss rule, but the California Supreme Court concluded otherwise. See id. at 988-93, 22 Cal.Rptr.3d 352, 102 P.3d 268. What allowed the claims to survive was the fact that they were based not on the defendant's provision of clutches that did not conform to the contract but instead was based on the defendant's continued certification that the clutches were conforming when it knew they were not. See id. at 990-91, 22 Cal.Rptr.3d 352, 102 P.3d 268. As the Court explained:
Id. (footnote omitted). In a footnote accompanying its holding, the Court further explained that
Id. at n. 7. Careful not to extend the economic loss rule too far, the Court went on to make clear that its holding "is narrow in scope and limited to a defendant's affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiff's economic loss." Id. at 993, 22 Cal.Rptr.3d 352, 102 P.3d 268; United Guar. Mortg. Indem. Co. v. Countrywide Fin. Corp., 660 F.Supp.2d 1163, 1183 (C.D.Cal.2009) (noting Robinson's narrow and limited holding).
Accordingly, the court concludes that the economic loss rule applies and bars Nada's tort claims against Besser.
Based on the foregoing, the court
