476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986)
In 1969, Seatrain Shipbuilding Corp., a wholly owned subsidiary of Seatrain Lines, Inc., announced it would build four oil-transporting supertankers—the T. T. Stuyvesant, T. T. Williamsburgh, T. T. Brooklyn, and T. T. Bay Ridge.1 Each tanker was constructed pursuant to a contract in which a separate wholly owned subsidiary of Seatrain engaged Shipbuilding.2 Shipbuilding in turn contracted with respondent, now known as Transamerica Delaval Inc., to design, manufacture, and supervise the installation of turbines costing $1.4 million each that would be the main propulsion units for the 225,000-ton, $125 million supertankers.3 When each ship was completed, its title was transferred from the contracting subsidiary to a trust company as trustee for an owner, which in turn chartered the ship to one of the petitioners, also subsidiaries of Seatrain.4 Queensway Tankers, Inc. chartered the Stuyvesant; Kingsway Tankers, Inc. chartered the Williamsburgh; East River Steamship Corp. chartered the Brooklyn; and Richmond Tankers, Inc. chartered the Bay Ridge.5 Each petitioner operated under a bareboat charter for 20 or 22 years and assumed responsibility for the cost of any repairs to the ships.6
The Stuyvesant sailed on its maiden voyage in late July 1977. On December 11 of that year, as the ship was about to enter the Port of Valdez, Alaska, steam began to escape from the casing of the high-pressure turbine.7 That problem was temporarily resolved by repairs, but before long, while the ship was encountering a severe storm in the Gulf of Alaska, the high-pressure turbine malfunctioned.8 In January 1978, an examination revealed that the first-stage steam reversing ring virtually had disintegrated and had caused additional damage to other parts of the turbine.9 The damaged part was replaced with a part from the Bay Ridge, which was then under construction.10 In April 1978, the ship again was repaired with a part from the Brooklyn.11 Finally, in August, the ship was permanently and satisfactorily repaired with a ring newly designed and manufactured by Delaval.12 The Brooklyn and the Williamsburgh were put into service in late 1973 and late 1974, respectively. In 1978, as a result of the Stuyvesant’s problems, they were inspected while in port, revealing similar turbine damage, and newly designed parts were installed as permanent repairs that summer.13
When the Bay Ridge was completed in early 1979, it contained the newly designed parts and thus never experienced the high-pressure turbine problems that plagued the other three ships.14 In 1980, when the ship was on its maiden voyage, the engine began to vibrate with a frequency that increased even after speed was reduced.15 It turned out that the astern guardian valve, located between the high-pressure and low-pressure turbines, had been installed backwards. Because of that error, steam entered the low-pressure turbine and damaged it.16
The charterers’ second amended complaint, filed in the United States District Court for the District of New Jersey, invokes admiralty jurisdiction.17 It contains five counts alleging tortious conduct on the part of respondent Delaval and seeks an aggregate of more than $8 million in damages for the cost of repairing the ships and for income lost while the ships were out of service.18 The first four counts allege that Delaval is strictly liable for the design defects in the high-pressure turbines of the Stuyvesant, the Williamsburgh, the Brooklyn, and the Bay Ridge, respectively.19 The fifth count alleges that Delaval negligently supervised the installation of the astern guardian valve on the Bay Ridge.20 The initial complaint also had listed Seatrain and Shipbuilding as plaintiffs and had alleged breach of contract and warranty as well as tort claims. After Delaval interposed a statute of limitations defense, the complaint was amended and the charterers alone brought the suit in tort. The nonrenewed claims were dismissed with prejudice by the District Court.21 Delaval moved for summary judgment.22 The District Court granted summary judgment for Delaval, and the Court of Appeals for the Third Circuit, sitting en banc, affirmed.23 The Supreme Court granted certiorari to resolve a conflict among the Courts of Appeals sitting in admiralty.24
Richmond Tankers, Inc., the charterer of the Bay Ridge, did not charter the Bay Ridge until May 1979, after the ship was completed with a newly designed, nondefective, high-pressure turbine.25 The ring was installed in the Stuyvesant where it remained until April 1978, when it was removed due to disintegration.26
Whether a cause of action in tort is stated when a defective product purchased in a commercial transaction malfunctions, injuring only the product itself and causing purely economic loss?27
A manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself. The distinction between tort recovery for physical injuries and warranty recovery for economic loss rests on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. When a product injures only itself the reasons for imposing a tort duty are weak and those for leaving the party to its contractual remedies are strong.28
No. The first four counts allege that each supertanker's defectively designed turbine components damaged only the turbine itself.29 The fifth count alleges injury to the propulsion system itself by the reverse installation of the astern guardian valve.30 The only claimed harms are more than $8 million in repair costs and lost income while the ships were out of service.31 These losses constitute purely economic loss from injury to the product itself rather than damage to other property or persons.32
Therefore, the claims fall outside products liability and remain governed by the parties' contractual allocations of risk, including the charterers' assumption of repair responsibility under bareboat charters and Delaval's warranty limitations.33
No cause of action in tort is stated for purely economic loss from injury to the product itself in a commercial transaction.34
Whether admiralty law incorporates principles of products liability, including strict liability?35
Products liability, including strict liability, is part of the general maritime law because the Court's precedents relating to injuries of maritime workers have long pointed in that direction. The rationale that strict liability should be imposed on the party best able to protect persons from hazardous equipment applies equally to products liability claims. To the extent products actions are based on negligence they are grounded in principles already incorporated into the general maritime law.36
Yes. The charterers' claims satisfy the traditional locality requirement.37 The injuries to the Stuyvesant and Bay Ridge turbines occurred on the high seas while the damage to the Williamsburgh and Brooklyn was discovered in port, a maritime locale.38 Any maritime nexus requirement is met because the ships were engaged in maritime commerce, a primary concern of admiralty law.39 The Court therefore applies substantive admiralty law that now includes products liability concepts drawn from state and federal sources.40
Admiralty law incorporates principles of products liability, including strict liability.41
Whether Richmond Tankers, Inc. has standing to bring a claim relating to the defective ring removed from the Bay Ridge before it chartered the ship?42
A plaintiff must allege a cognizable injury to have standing. Richmond Tankers, Inc. could allege no cognizable injury from the ring that had been removed from the Bay Ridge before Richmond chartered the completed ship with a newly designed nondefective turbine.43
No. Richmond Tankers, Inc. did not charter the Bay Ridge until May 1979 after the ship was completed with a newly designed nondefective high-pressure turbine.44 The ring was installed in the Stuyvesant where it remained until April 1978, when it was removed due to disintegration. Richmond can allege no cognizable injury from that ring.45 The fourth count must be dismissed even though Richmond has standing on the fifth count for post-charter valve damage.46
Richmond Tankers, Inc. lacks standing to bring a claim relating to the defective ring removed from the Bay Ridge before it chartered the ship.47
Whether the tort claims alleging damage to the supertankers' turbines fall within admiralty jurisdiction?48
Torts fall within admiralty jurisdiction when they satisfy the locality requirement that the wrong must have occurred on the high seas or navigable waters and, when occurring within the United States, also satisfy a maritime nexus requirement that the wrong must bear a significant relationship to traditional maritime activity.49
Yes. The first and fifth counts allege injury to the Stuyvesant high-pressure turbine and Bay Ridge low-pressure turbine while the ships were sailing on the high seas.50 The second and third counts allege damage to the Williamsburgh and Brooklyn turbines that occurred at sea and was discovered in port.51 The ships were engaged in maritime commerce so any nexus requirement is satisfied.52 This confirms that the torts alleged fall within admiralty jurisdiction and that substantive admiralty law applies.53
The tort claims alleging damage to the supertankers' turbines fall within admiralty jurisdiction.54