ACE American v. Fountain Powerboats 06-CV-066-SM 08/24/07 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

ACE American Insurance Company, as Subrogee of Mark Brewster, Plaintiff

v. Civil No. 06-CV-66-SM Opinion No.

Fountain Powerboats. Inc. and Silver Sands Marina. Inc.. Defendants

O R D E R

On July 5, 2003, Mark Brewster was operating a 38 foot,

high-performance "Lightning" Fountain Powerboat on Lake

Winnipesaukee in New Hampshire. According to Brewster, while

traveling at high speed, he throttled back on the engines and

decelerated to a speed of approximately 45 miles per hour, and

began a turn to port. At that point, says Brewster, the boat

suddenly and unexpectedly dropped to starboard, the bow dove

down, and the stern rose out of the water, ejecting Brewster and

his four passengers. No one was seriously injured, but the boat

capsized and sustained severe damage. According to Brewster, his

insurance company declared the boat a total loss. The insurance company, ACE American Insurance Company ("ACE

Insurance"), brings this subrogation claim seeking to recover

$260,340.00 in claims it paid out as a result of the accident.

As defendants, it has named the manufacturer of the boat -

Fountain Powerboats, Inc. ("FPI") - and the agent through which

Brewster purchased the boat - Silver Sands Marina, Inc. ACE

Insurance advances four claims: strict product liability (count

one); failure to warn (count two); violation of the New Hampshire

Consumer Protection Act, N.H. Rev. Stat. Ann. ("RSA") ch. 358-A

(count three); and breach of the implied warranty of fitness for

a particular purpose (count four). By prior order (document no.

22), the court dismissed counts one and two for failure to state

a claim.

Pending before the court is FPI's motion for summary

judgment as to count four. For the reasons set forth below, that

motion is denied.

Standard of Review

When ruling on a party's motion for summary judgment, the

court must "view the entire record in the light most hospitable

to the party opposing summary judgment, indulging all reasonable

inferences in that party's favor." Griqqs-Rvan v. Smith. 904

, 115 (1st Cir. 1990). Summary judgment is appropriate

when the record reveals "no genuine issue as to any material fact

and . . . the moving party is entitled to a judgment as a matter

of law." Fed. R. Civ. P. 56(c). In this context, "a fact is

■'material'’ if it potentially affects the outcome of the suit and

a dispute over it is ■'genuine'’ if the parties' positions on the

issue are supported by conflicting evidence." Int'l Ass'n of

Machinists & Aerospace Workers v. Winship Green Nursing Ctr.,

(1st Cir. 1996) (citations omitted).

Nevertheless, if the non-moving party's "evidence is merely

colorable, or is not significantly probative," no genuine dispute

as to a material fact has been proved, and "summary judgment may

be granted." Anderson v. Liberty Lobby. Inc..

, 249-

50 (1986) (citations omitted). The key, then, to defeating a

properly supported motion for summary judgment is the non­

movant's ability to support his or her claims concerning disputed

material facts with evidence that conflicts with that proffered

by the moving party. See generally Fed. R. Civ. P. 56(e) . It

naturally follows that while a reviewing court must take into

account all properly documented facts, it may ignore bald

assertions, unsupported conclusions, and mere speculation. See

Serapion v. Martinez.

(1st Cir. 1997).

3 Background

Viewed in the light most favorable to the plaintiff, the

relevant facts are as follows. Following the accident, Brewster

contacted Chris Gagnon, President of Silver Sands Marina, and

notified him that the boat had capsized. Employees of Silver

Sands and Tow Boat US, using a barge equipped with a crane,

recovered the boat and returned it to the marina. Brewster says

he spoke with Gagnon on several occasions about the accident and

explained that he was surprised the boat was unable to

successfully perform the turn he had attempted. Among other

things, he noted that he had performed nearly identical maneuvers

with other Fountain Powerboats he had owned, without any

problems. The import of Brewster's conversations with Gagnon is

clear: Brewster believed (and unmistakably conveyed to Gagnon)

that the accident was caused by a defect in the design and/or

construction of the boat.

According to Brewster, Gagnon responded that he believed

operator error caused the accident, explaining that the boat's

engines and trim tabs should have been configured in a different

manner than would have been the case with the smaller and less

powerful Fountain Powerboats Brewster owned previously. In other

words, Gagnon suggested that, while Brewster may have had the

4 engines and trim tabs in the proper positions for one of his

smaller Fountain Powerboats, he should not have used the same

configuration for his new boat, but likely did. Gagnon also

opined that, given the extensive damage to the boat, he believed

Brewster was traveling faster than 45 miles per hour immediately

prior to the accident.

Brewster did not notify FPI of the accident, nor did he have

any contact or communication with representatives of FPI

following the accident. But, Silver Sands says that shortly

after it recovered the boat, it contacted FPI's regional

representative. Chuck Arnold, to let the company know of the

accident. Silver Sands also says that shortly thereafter, Arnold

came to the marina to personally inspect the damaged boat.

For its part, FPI admits that Chuck Arnold was its Northeast

Sales Representative. But, says FPI, Arnold is no longer

employed by the company and, despite a diligent search, it has

been unable to locate any record of Arnold (or any other company

employee) having been informed of the accident in 2003. Instead,

says FPI, it first learned of Brewster's accident on March 24,

2006, when it was served with a copy of ACE Insurance's

complaint. Subsequently, on August 18, 2006, FPI received a

5 letter from plaintiff's counsel, notifying the company that ACE

Insurance (as Brewter's subrogee) was asserting "claims of breach

of implied warranty and breach of express warranty." Letter of

Attorney Paul Cavanaugh (document no. 23-3).

In support of its motion for summary judgment as to count

four of plaintiff's complaint, FPI asserts that neither Brewster

nor ACE Insurance provided it with timely notice of the warranty

claims, as is required by the New Hampshire Uniform Commercial

Code, RSA 382-A:2-607(3)(a). ACE Insurance, on the other hand,

asserts that neither it nor Mr. Brewster had any obligation to

notify FPI of the warranty claims, since the "seller" in this

case (and the party entitled to such notice) was Silver Sands

Marina. Moreover, says ACE Insurance, even if FPI was entitled

to such notice, it was notified of the accident through its

agent. Silver Sands Marina, which notified its employee (Arnold).

According to ACE Insurance, the fact that FPI was made aware of

not only the accident, but also Brewster's contention that it was

caused by a design and/or manufacturing defect in the boat

(rather than operator error), was sufficient to meet the notice

requirements of the Uniform Commercial Code.

6 Discussion

Section 2-607(3)(a) of New Hampshire's Uniform Commercial

Code provides that "the buyer must within a reasonable time after

he discovers or should have discovered any breach notify the

seller of breach or be barred from any remedy." With regard to

that notice requirement, this court has concluded that:

the notice requirement of RSA 382-A:2-607(3)(a) imposes on plaintiffs the obligation to give defendants notice of potential breach of warranty claims prior to filing suit. If that notice requirement is to have any meaning at all, a civil complaint cannot serve the dual purpose of providing the defendant(s) with notice of potential warranty claims and actually initiate legal action based on those warranty claims.

Herne v. Cooper Indus..

(D.N.H. Oct. 19, 2005)

(emphasis in original). Plainly, then, neither ACE Insurance's

complaint, nor the subsequent letter authored by Attorney

Cavanaugh, was sufficient to meet the U.C.C. notice requirement.

Consequently, the questions presented by FPI's motion for summary

judgment are: (1) whether FPI, as manufacturer of the allegedly

defective boat, was entitled to notice of potential warranty

claims; and, if so, (2) whether, by informing FPI's sales agent.

Silver Sands Marina, of the accident, Mr. Brewster (indirectly)

provided FPI with adequate notice of his intent to pursue

warranty claims under the U.C.C.

7 The New Hampshire Supreme Court has yet to determine

whether, in the context of a consumer transaction such as this,

buyer must notify not only his immediate seller of potential

warranty claims, but also all other parties who either

manufactured parts for the allegedly defective product or

actually constructed the allegedly defective product (known as

"remote sellers"). Courts from several jurisdictions have

debated the point, but there remains a decided lack of agreement

concerning the proper interpretation of the UCC's notice

requirements. See, e.g.. Compaq Computer Corp. v. Laprav,

(Tex. 2004) (collecting cases); Halprin v.

Ford Motor Co.,

(N.C. A p p . C t . 1992)

(collecting cases).

The court is persuaded that the better-reasoned approached

(and the approach the New Hampshire Supreme Court would likely

adopt if presented with the issue) is the one that requires the

buyer in a consumer transaction to notify only his or her

immediate seller of potential U.C.C. warranty claims. See, e.g.

Halprin.

("The majority of courts in other

jurisdictions that have construed this notice provision in the

Code have held that buyers need notify only their immediate

sellers."). As the Colorado Supreme Court observed: Many such courts have recognized that in most nationwide product distribution systems, the seller/representative dealer may be presumed to actually inform the manufacturer of any major product defects. Furthermore, as one commentator has noted, "[i]t is perhaps more reasonable to treat notice to an immediate seller as sufficient against a remote seller than vice versa, in view of the immediacy of relation that exists in the one instance but not in the other." This presumption forms the basis of the principle that a remote manufacturer may raise as its own defense the buyer's failure to give timely notice to the immediate seller. In view of the unambiguous language of section 4-2-607(3)(a), we conclude that a purchaser injured by a product is not required to give notice of such injury to a remote manufacturer prior to initiating litigation against such manufacturer.

Cooley v. Big Horn Harvestore Systems. Inc..

(Colo. 1991) (citations omitted). Interpreting the notice

requirement of the U.C.C. in this manner, while plainly

benefitting the consumer, imposes little hardship on the

manufacturer of the allegedly defective product.

[F]rom the standpoint of the remote manufacturer, notice to the immediate seller, in the ordinary course of events, will inure to the manufacturer's benefit. This is so because the Code envisions that when the consumer's notice of breach is given to his immediate seller, such person to preserve any right of action he may have for breach of implied warranty will give notice to his immediate seller, and so on upstream until the seminal point of the distributive chain is reached. This sequential notice requirement is thus calculated to provide the remote manufacturer with notice and an opportunity to correct the defect, where possible, and to investigate claims that might eventuate in litigation.

9 Palmer v. A.H. Robins Co.,

(Colo. 1984)

(citations and internal punctuation omitted).

Finally, it is probably worth noting that requiring a

"buyer" to notify only his or her "seller" (and not remote

sellers or the manufacturer) of potential warranty claims is

consistent with the plain language of the governing statute. The

New Hampshire Uniform Commercial Code defines "buyer" as "a

person who buys or contracts to buy goods" and "seller" as one

"who sells or contracts to sell goods." RSA 382-A:2-103(1).

Here, Mr. Brewster, the "buyer," complied with the statutory

notice requirements when he arguably notified his "seller,"

Silver Sands Marina, that his boat capsized as a result of

(alleged) design and/or manufacturing defects. Because FPI was

not the "seller" from whom Brewster purchased the boat, it was

not entitled to notice of his potential warranty claims. See,

e.g.. Cooley.

("[T]he language of section 2-

607(3)(a) is unambiguous: it requires a buyer to give notice of a

defective product only to the ■'seller.'' The General Assembly has

not elected to require advance notice to a manufacturer of

litigation for breach of the manufacturer's warranty of a

product, and we find no compelling reason to create such a

10 condition precedent judicially in the context of commercial

litigation.") (citation omitted).

The court concludes that, in a consumer transaction such as

this, the New Hampshire Supreme Court would likely hold that the

notice provisions of RSA 382-A:2-607 require a buyer to notify

only his or her immediate seller of potential U.C.C. warranty

claims; the buyer need not provide such notice directly to remote

sellers. See generally Moores v. Greenberg.

, 1107

n.3 (1st Cir. 1987) ("a federal court may assume that the state

courts would adopt the rule which, in its view, is supported by

the thrust of logic and authority.") (citations and internal

punctuation omitted).

When Brewster informed his immediate seller (Silver Sands

Marina) of the accident and his belief that it was caused by a

defect in the boat, he provided notice to the only party entitled

to such notice under RSA 382-A:2-607. Of course, whether his

words constituted sufficient notice that he (and/or his insurance

company) intended to pursue warranty claims, and whether it was

given in a reasonably timely fashion, are generally questions of

fact to be resolved by a jury. See Dudley v. Business Express.

(D.N.H. 1994). The record as currently

11 developed does not support resolution of those issues by summary

judgment.

Conclusion

In a diversity case, such as this, if the governing state

law is unclear, the presiding federal court must either predict

how the state's highest court would likely resolve the pending

legal question or certify that question to the state court. See,

e.g.. Sisson v. Jankowski.

at *6,

(D.N.H. Jan. 29, 2002). Here, neither party has moved the court

to certify any legal questions to the New Hampshire Supreme

Court. Given the facts of this case, and for the reasons set

forth above, the court concludes that the New Hampshire Supreme

Court would likely hold that a consumer/buyer need only notify

his or her direct seller of potential warranty claims under the

Uniform Commercial Code. Notice to remote sellers is not

required.

As required by RSA 382-A:2-607(3)(a), Brewster notified his

seller. Silver Sands Marina, that he had an accident while

operating his boat, and arguably that the accident was caused by

a design/manufacturing defect in the boat. As noted above,

whether that notice was sufficient and timely are generally

12 factual questions. Accordingly, Fountain Powerboats' motion for

summary judgment as to count four of ACE Insurance's complaint

(document no. 23) is necessarily denied.

SO ORDERED.

McAulrffe .hief Judge

August 24, 2 00 7

cc: Paul F. Cavanaugh, Esq, Timothy G. Sheedy, Esq, Dean B. Eggert, Esq. Michael S. Kinson, Esq,

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