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A. 1. a.(1)(a) i) a) I A 1 a (1)(a) i) a)@@BQck QuoteSingle spaced indented quote - Circv C   (  Cd  ( ( ( 2HACHIFootnotes*rsFormats for ASTERISK footnotes'#[ P['CdP# ddf < X01Í Í1*'(Í Í #o P['Cn&P#X` hp x (#%'0*,.8135@8: River, supra, at 865; see also Fitzgerald v. United States  J Lines Co., 374 U.S. 16, 20 (1963); Kermarec v.  J ԚCompagnie Generale Transatlantique, 358 U.S. 625, 630 (1959). The context is purely commercial. The particular question before us requires us to interpret the  Jv Court's decision in East River: does the term other property, as used in that case, include the equipment added by the Initial User before he sold the ship to the Subsequent User? We conclude that it does: When a Manufacturer places an item in the stream of commerce by selling it to an Initial User, that item is the product  J itself    under East River. Items added to the product by the Initial User are therefore other property, and the Initial User's sale of the product to a Subsequent User does not change these characterizations.  J  East River arose at the intersection of two principles that govern recovery in many commercial cases involving defective products. The first principle is that tort law in this area ordinarily (but with exceptions) permits recovery from a manufacturer and others in the initial  J chain of distribution for foreseeable physical harm to"   property caused by product defects. See Restatement (Second) of Torts 402A (1965); W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts  J 101 (5th ed. 1984); East River, supra, at 867. The second principle is that tort law in this area ordinarily  J8 (but with exceptions) does not permit recovery for purely economic losses, say, lost profits. See Restatement  J (Third) of Torts: Products Liability 6, Comment d (Proposed Final Draft, Preliminary Version, Oct. 18,  J 1996); e.g., Rardin v. T & D Machine Handling, Inc.,  Jp 890 F.2d 24, 27!30 (CA7 1989). The Court in East  JH River favored the second principle, for it held that an injury to the defective product itself, even though physical, was a kind of economic loss, for which tort  J law did not provide compensation. East River, 476 U.S., at 871.  The Court reasoned that the loss of the value of a product that suffers physical harm"say, a product that destroys itself by exploding"is very much like the loss of the value of a product that does not work properly or  J does not work at all. See id., at 870. In all such cases, the Court held, [c]ontract law, and the law of warranty in particular, is well suited to setting the responsibilities of a seller of a product that fails to perform the  J@ function for which it was intended. Id., at 872!873. The commercial buyer and commercial seller can negotiate a contract"a warranty"that will set the terms of compensation for product failure. If the buyer obtains a warranty, he will receive compensation for the product's loss, whether the product explodes or just refuses to start. If the buyer does not obtain a warranty, he will likely receive a lower price in return. Given the availability of warranties, the courts should not ask tort law to perform a job that contract law  J might perform better. Ibid.; Seely v. White Motor Co., 63 Cal. 2d 9, 18!19, 403 P.2d 145, 151 (1965) (en banc).`"  Ԍ J  The Ninth Circuit reasoned that East River required it to define the defective product itself by looking to that which the plaintiff had purchased, for that is the product that, in principle, the plaintiff could have asked the seller to warrant. Since Saratoga Fishing, the Subsequent User, might have asked Madruga, the Initial User, to warrant the M/V Saratoga, skiff, nets, and all, that product, skiff, nets, and all, is the product itself 7  that stands outside the reach of tort recovery. In our  J view, however, this holding pushes East River's principle beyond the boundary set by the principle's rationale.  For one thing, the Ninth Circuit's holding creates a tort damage immunity beyond that set by any relevant tort precedent that we have found. State law often distinguishes between items added to or used in conjunction with a defective item purchased from a Manufactur J er (or its distributors) and (following East River) permits recovery for the former when physically harmed by a dangerously defective product. Thus the owner of a chicken farm, for example, recovered for chickens killed when the chicken house ventilation system failed, suffo J cating the 140,000 chickens inside. A.J. Decoster Co. v.  J Westinghouse Electric Corp., 333 Md. 245, 634 A. 2d 1330 (1994). A warehouse owner recovered for damage  J@ to a building caused by a defective roof. United Air  J Lines, Inc. v. CEI Industries of Ill., Inc., 148 Ill. App. 3d 332, 499 N.E. 2d 558 (1986). And a prior case in admiralty (not unlike the one before us) held that a ship charterer, who adds expensive seismic equipment to the ship, may recover for its loss in a fire caused by a  JP defective engine. Nicor Supply Ships Assocs. v. General  J( Motors Corp., 876 F.2d 501 (CA5 1989). Indeed, respondents here conceded that, had the ship remained in the hands of the Initial User, the loss of the added equipment could have been recovered in tort. See Tr. of Oral Arg. 29!30. We have found no suggestion in state (or in federal) law that these results would change with`"   a subsequent sale"that is, we have found no case, other than the Ninth Circuit case before us, that suggests that the courts would deny recovery to a subsequent chicken farmer, who had later purchased the farm, chickens, coop, ventilation system, and all.  Indeed, the denial of recovery for added equipment simply because of a subsequent sale makes the scope of a manufacturer's liability turn on what seems, in one important respect, a fortuity, namely whether a defective product causes foreseeable physical harm to the added equipment before or after an Initial User (who added the equipment) resells the product to a Subsequent User. One important purpose of defectiveproduct tort law is to encourage the manufacture of safer products. The various tort rules that determine which foreseeable losses are recoverable aim, in part, to provide appropriate safeproduct incentives. And a liability rule that diminishes liability simply because of some such resale is a rule that, other things being equal, diminishes that basic incentive. That circumstance requires a justification. That is to say, why should a series of resales, after replacement and additions of ever more physical items, progressively immunize a manufacturer to an ever greater extent from the liability for foreseeable physical damage that would otherwise fall upon it?  J  The East River answer to this question"because the parties can contract for appropriate sharing of the risks of harm"is not as satisfactory in the context of resale after an initial use. That is because, as other courts have suggested, the Subsequent User does not contract directly with the Manufacturer (or distributor.) Cf.  J( Peterson v. Idaho First Nat. Bank, 117 Idaho 724, 727,  J 791 P. 2d 1303, 1306 (1990); Tillman v. Vance Equip J ment Co., 286 Ore. 747, 755!756, 596 P. 2d 1299, 1304 (1979). Moreover, it is likely more difficult for a consumer"a commercial user and reseller"to offer an appropriate warranty on the used product he sells akin`"   to a manufacturer's (or distributor's) warranty of the initial product. The user/reseller did not make (or initially distribute) the product and, to that extent, he normally would know less about the risks that such a  J` warranty would involve. Cf. Tillman, supra, at 755, 596  J8 P. 2d, at 1303!1304; Peterson, supra, at 726!727, 791 P.2d, at 1305!1306. That is to say, it would seem more difficult for a reseller to warrant, say, a ship's engine; as time passes, the ship ages, the ship undergoes modification, and it passes through the hands of users and resellers.  Of course, nothing prevents a user/reseller from offering a warranty. But neither does anything prevent a Manufacturer and an Initial User from apportioning through their contract potential loss of any other items"say, added equipment or totally separate physical property"that a defective manufactured product, say an exploding engine, might cause. No court has thought that the mere possibility of such a contract term precluded tort recovery for damage to an Initial User's other property. Similarly, in the absence of a showing that it is ordinary business practice for user/resellers to offer a warranty comparable to those typically provided by sellers of new products, the argument for extending  J@ East River, replacing tort law with contract law, is correspondingly weak. That is to say, respondents have not explained why the ordinary rules governing the manufacturer's tort liability should be supplanted merely because the user/reseller may in theory incur an overlapping liability in contract.  Respondents make two other important arguments. First, they say that our reasoning proves too much. They argue that, if a Subsequent User can recover for damage a defective manufactured product causes to property added by the Initial User, then a user might recover for damage a defective component causes the manufactured product, other than the component itself. `"   Saratoga Fishing, for example, could recover the damage the defective hydraulic system caused to any other part  J of the ship. But the lower courts, following East River, have held that it is not a component part, but the vessel"as placed in the stream of commerce by the manufacturer and its distributors"that is the product  J that itself caused the harm. See Shipco 2295, Inc. v.  J Avondale Shipyards, Inc., 825 F.2d 925, 928 (CA5  J 1987); see also, e.g., National Union Fire Ins. Co. of  J Pittsburgh v. Pratt & Whitney Canada, Inc., 107 Nev. 535, 539!542, 815 P.2d 601, 604!605 (1991). As the  JH Court said in East River,BQ H C   , , (     `Since all but the very simplest of machines have component parts, [a contrary] holding would require a finding of `property damage' in virtually every case where a product damages itself. Such a holding would eliminate the distinction between warranty  J and strict products liability.' !  East River, 476 U.S.,  Js at 867 (quoting Northern Power & Engineering Corp.  JK v. Caterpillar Tractor Co., 623 P.2d 324, 330 (Alaska 1981)).IBQ #d   ( , ,  Our holding here, however, does not affect this rule, for the relevant relations among initial users, manufacturers, and component suppliers are typically different from those at issue here. Initial users when they buy typically depend upon, and likely seek warranties that depend upon, a manufacturer's primary business skill, namely the assembly of workable product components  JG into a marketable whole. King v. HiltonDavis, 855  J F.2d 1047, 1052 (CA3 1988); Shipco 2295, supra, at  J 929; National Union Fire Ins., supra, at 541, 815 P.2d, at 605. Moreover, manufacturers and component suppliers can allocate through contract potential liability for a manufactured product that does not work, thereby ensuring that component suppliers have appropriate incentives to prevent component defects that might/"    J destroy the product. King, supra, at 1054; cf. Shipco  J 2295, supra, at 930. There is no reason to think that initial users systematically control the manufactured product's quality or, as we have said, systematically allocate responsibility for useradded equipment, in similar ways. Regardless, the case law does suggest a distinction between the components added to a product by a manufacturer before the product's sale to a user,  J e.g., Airlift Int'l, Inc. v. McDonnell Douglas Corp., 685  J F.2d 267 (CA9 1982); King, supra; Shipco 2295, supra; and those items added by a user to the manufactured  JH product, e.g., Nicor Supply Ships Assocs. v. General  J Motors Corp., 876 F.2d 501 (CA5 1989); and we would maintain that distinction.  Second, respondents argue that our holding would impose too great a potential tort liability upon a manufacturer or a distributor. But we do not see how that is so. For one thing, a host of other tort principles, such as foreseeability, proximate cause, and the economic loss doctrine already do, and would continue to, limit liability in important ways. For another thing, where such principles are satisfied, liability would exist anyway had the manufactured product simply remained in the hands of the Initial User. Our holding merely maintains  J@ liability, for equipment added after the initial sale, despite the presence of a resale by the Initial User.  We conclude that equipment added to a product after the Manufacturer (or distributor selling in the initial distribution chain) has sold the product to an initial User is not part of the product that itself caused  JP physical harm. Rather, in East River's language, it is other property. (We are speaking, of course, of added equipment that itself played no causal role in the accident that caused the physical harm.) Thus the extra skiff, nets, spare parts, and miscellaneous equipment at issue here, added to the ship by a user after an initial sale to that Initial User, are not part of the product (the` "   original ship with the defective hydraulic system) that itself caused the harm.  The decision of the Ninth Circuit is  J `{JReversed.