Oswalt v. RESOLUTE INDUSTRIES, INC.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

CURTIS OSWALT; FEDERAL 
INSURANCE COMPANY,
Plaintiffs-Appellees,
v. No. 10-35313
RESOLUTE INDUSTRIES, INC.,
Defendant-third-party-plaintiff-  D.C. No.
2:08-cv-01600-MJP
Appellant, OPINION
v.
WEBASTO PRODUCTS NA, INC.,
Third-party-defendant-Appellee.

Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, District Judge, Presiding

Argued and Submitted
January 12, 2011—Seattle, Washington

Filed June 16, 2011

Before: Susan P. Graber, Raymond C. Fisher and
Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Fisher

8189
8192 OSWALT v. RESOLUTE INDUSTRIES

COUNSEL

Dennis Moran (argued) and William A. Keller, Moran
Windes & Wong, PLLC, Seattle, Washington, for the
defendant-third-party-plaintiff-appellant.

Anthony J. Gaspich (argued) and Russell R. Williams,
Gaspich & Williams PLLC, Seattle, Washington, for the
plaintiffs-appellees.
 OSWALT v. RESOLUTE INDUSTRIES 8193
Troy D. Greenfield, Deborah L. Carstens, Erica A. Krikorian
and Jerret E. Sale (argued), Bullivant Houser Bailey PC, Seat-
tle, Washington, for third-party-defendant-appellee.

OPINION

FISHER, Circuit Judge:

In this admiralty case, Resolute Industries, Inc., appeals an
adverse summary judgment on its products liability claims
against Webasto Products NA, Inc., the manufacturer of a
heater that caught fire on Curtis Oswalt’s boat during repairs
performed by Resolute’s employee. Resolute also challenges
a judgment in Oswalt’s favor on his claim against Resolute
for breach of the implied warranty of workmanlike perfor-
mance. We must decide whether the district court correctly
rejected Resolute’s products liability claims, correctly found
Resolute liable to Oswalt and properly awarded Oswalt and
his insurer damages for surveyor’s fees and for the loss of use
of the boat during repairs.

BACKGROUND

In September 2006, Oswalt smelled burning coolant com-
ing from the heater on his boat, the M/V CHUG, which was
docked at a marina in Anacortes, Washington. Oswalt asked
Jeff Albrecht, the general manager of a local repair shop, to
fix the heater. When Albrecht arrived to begin the scheduled
repair, he noticed that the heater, a diesel-powered model that
uses electricity to control the fuel flow, was cold. Albrecht
had been told by Oswalt that the circuit breaker labeled “boat
heat” controlled power to the heater, so he flipped that
breaker and began the repair.

Albrecht opened the heater’s cover to remove the burner
unit, a component ordinarily contained by a cylindrical canis-
8194 OSWALT v. RESOLUTE INDUSTRIES
ter inside the heater. When the heater is running, the end of
the burner unit emits “a very intense flame, similar to a blow-
torch,” although there was no flame at the time Albrecht
opened the cover. Albrecht removed the burner unit and set
it on end on a shelf very close to the boat’s overhead, or ceil-
ing. Then his cell phone rang. It was the repair shop, asking
Albrecht to move another boat in the marina. Albrecht left the
CHUG, moved the other boat and returned 30 minutes later
to the sight of smoke pouring from the stern of the CHUG,
which had caught fire while he was away.

The parties agree that the burner unit was the source of the
fire. It is also undisputed that the burner unit cannot turn on
and emit a flame unless there is electricity flowing to the unit.
Thus, although the means by which electricity reached the
unit remain unknown, it is clear that Albrecht’s flipping the
circuit breaker did not cut the power.

Oswalt and his insurer, Federal Insurance Company, sued
Albrecht’s employer, Resolute, for negligence and breach of
contract, including breach of the implied warranty of work-
manlike performance. Resolute filed a third-party complaint
against the heater’s manufacturer, Webasto, alleging the fire
was caused by the heater’s inadequate warnings and instruc-
tions and its defective design. The district court granted sum-
mary judgment to Webasto on Resolute’s products liability
claims. Then, after a two-day bench trial, the court held that
Resolute had breached the implied warranty when Albrecht
moved the burner unit “to a position where it was certain to
start a fire if it turned on” without first ensuring the heater’s
power was disconnected. The court awarded more than
$200,000 in damages to Oswalt, including $4110 for hotel
expenses Oswalt incurred while the boat was being repaired
and $12,495 in fees Federal paid to its damage surveyor.

On appeal, Resolute challenges the adverse summary judg-
ment on its products liability claims, the adverse liability ver-
dict on Oswalt’s implied warranty claim and the damages
 OSWALT v. RESOLUTE INDUSTRIES 8195
awarded for hotel expenses and surveyor’s fees. We have
jurisdiction under 28 U.S.C. § 1291. We conclude that the dis-
trict court properly granted summary judgment to Webasto on
Resolute’s inadequate warnings claim but erroneously granted
summary judgment to Webasto on Resolute’s design defect
claim. Resolute raised a genuine issue of material fact as to
whether Webasto’s failure to include an automatic current
shutoff device made the heater’s design defective. We hold,
however, that the district court properly held Resolute liable
on Oswalt’s implied warranty claim and properly awarded
damages for surveyor’s fees and for loss of use of the CHUG.
We accordingly affirm in part and vacate in part the judgment
of the district court and remand for further proceedings on
Resolute’s design defect claim.

STANDARD OF Review

We review de novo the district court’s grant of summary
judgment. See Wallis v. Princess Cruises, Inc., 306 F.3d 827,
832 (9th Cir. 2002). “We determine, viewing the evidence in
the light most favorable to the nonmoving party, whether
there are any genuine issues of material fact and whether the
district court correctly applied the relevant substantive law.”
Id.

Findings of fact made after a bench trial are reviewed for
clear error, and conclusions of law are reviewed de novo. See
Havens v. F/T Polar Mist, 996 F.2d 215, 217 (9th Cir. 1993).
We review de novo the legal conclusion that damages are
available and review for clear error factual findings underly-
ing the damages award. See Bergen v. F/V St. Patrick, 816
F.2d 1345, 1350 (9th Cir. 1987).

DISCUSSION

I. Products Liability Claims

[1] Resolute’s products liability claims against Webasto
are controlled by the federal common law of maritime torts,
8196 OSWALT v. RESOLUTE INDUSTRIES
which is informed by the American Law Institute’s Restate-
ment of Torts. See Pan-Alaska Fisheries, Inc. v. Marine Con-
str. & Design Co., 565 F.2d 1129, 1134 (9th Cir. 1977). We
have previously adopted Section 402-A of the Restatement
(Second) of Torts as the law of products liability in admiralty
cases. See id. at 1134-35; see also Saratoga Fishing Co. v.
Marco Seattle Inc., 69 F.3d 1432, 1437-38 (9th Cir. 1995),
rev’d on other grounds sub nom. Saratoga Fishing Co. v. J.M.
Martinac & Co., 520 U.S. 875 (1997). In Saratoga Fishing,
we also relied on a preliminary version of the Products Liabil-
ity Section of the Restatement (Third) of Torts, although we
declined at that time to adopt that early draft as controlling.
See Saratoga Fishing, 69 F.3d at 1441 (citing Restatement
(Third) of Torts: Products Liability § 2, Tentative Draft No.
1, 1994)).

[2] Since the Restatement (Third) was finalized in 1998,
however, we and other circuits have relied on it. See St. Paul
Fire & Marine Ins. Co. v. Lago Canyon, Inc., 561 F.3d 1181,
1190 n.18 (11th Cir. 2009); Krummel v. Bombardier Corp.,
206 F.3d 548, 552 (5th Cir. 2000); All Alaskan Seafoods, Inc.
v. Raychem Corp., 197 F.3d 992, 995 (9th Cir. 1999). We
agree with the parties that we should look to the Restatement
(Third) of Torts: Products Liability to guide our assessment of
Resolute’s products liability claims, and we therefore apply
its principles below.1 See Restatement (Third) of Torts: Prod-
ucts Liability § 2 (1998) (hereinafter Restatement) (defining
1
Judge Fisher acknowledges that his former co-clerk, Professor Gary T.
Schwartz, a distinguished professor of tort law at UCLA School of Law
until his untimely death, served as an adviser to the American Law Insti-
tute on the Products Liability Restatement. See American Law Institute,
Restatements of the Law – Torts – Torts: Products Liability,
http://www.ali.org/index.cfm?fuseaction=publications.ppage&node_id=54
(last visited May 20, 2011); Richard H. McAdams & Thomas S. Ulen,
Tribute to Gary T. Schwartz, 2002 U. Ill. L. Rev. 789, 789 (2002).
 OSWALT v. RESOLUTE INDUSTRIES 8197
categories of product defects, including design defects and
defects due to inadequate instructions and warnings).2

A. Inadequate Warnings Claim

Resolute contends that the warnings on the heater and the
instructions in its user’s manual were inadequate to inform the
user of the proper means of disconnecting power to the unit
before repair. In granting summary judgment to Webasto on
this claim, the district court first concluded that the instruc-
tions were irrelevant because Albrecht had never read them.
The parties agree that if Albrecht read the instructions, he
read them at a Webasto training session conducted by Sure
Marine, a heater supply company. The district court found,
however, that Webasto had “establish[ed] as a fact beyond
dispute that Albrecht could not have attended a Webasto
training prior to the fire aboard the boat,” thereby proving
Albrecht had not reviewed the user’s manual and instructions
at the time of the repair. It also reasoned that “[e]ven assum-
ing arguendo that Albrecht had read the Webasto manual and
the adequacy of its warnings was in issue,” Resolute pre-
sented insufficient evidence of the instructions’ inadequacy to
raise a fact question for trial. We reject the first of the district
court’s reasons for granting summary judgment, but conclude
its alternative holding was proper.

1. Relevance of Warnings and Instructions

[3] The district court erred in concluding that there was no
genuine issue of material fact as to whether Albrecht attended
a Webasto training before the fire. In his declaration, Albrecht
insisted that he was “certain” he attended a class training him
on the Webasto heater system “prior to the fire aboard the
CHUG[ ] in October 2006.” In support, Resolute submitted
2
Because the parties agree that the Restatement (Third) controls here,
we decline to decide whether its principles presumptively govern in every
case.
8198 OSWALT v. RESOLUTE INDUSTRIES
illegible timesheets purporting to demonstrate Albrecht
attended a training session on September 26, 2006, six days
before the fire on October 2. Webasto countered with a decla-
ration from the president of Sure Marine, stating that Sure
Marine’s only 2006 Webasto training took place on October
18, 2006, well after the fire. The Sure Marine declaration was
accompanied by a class roster showing that Albrecht was at
an October 18 training class, although it did not prove that no
additional classes were held earlier in the year.

[4] Neither party’s evidence established — beyond the
declarants’ conflicting assertions — whether Albrecht
attended a training before the fire. The district court chose to
credit the Sure Marine declaration, however, dismissing
Albrecht’s contrary declaration as unsubstantiated. In accept-
ing one account over the other, the court improperly resolved
an evidentiary conflict at the summary judgment stage. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)
(explaining that “[c]redibility determinations, the weighing of
the evidence, and the drawing of legitimate inferences from
the facts” are inappropriate at the summary judgment stage).

2. Adequacy of Warnings and Instructions

We nonetheless hold that the district court properly granted
summary judgment to Webasto because Resolute failed to
establish a genuine issue that the heater’s warnings and
instructions were inadequate.

[5] Resolute contends the warnings and instructions
improperly left to the repair technician, Albrecht, the method
of disconnecting power to the burner unit. We disagree. A
product “is defective because of inadequate instructions or
warnings when the foreseeable risks of harm posed by the
product could have been reduced or avoided by the provision
of reasonable instructions or warnings . . . and the omission
of the instructions or warnings renders the product not reason-
ably safe.” Restatement § 2(c). In general, however, “a prod-
 OSWALT v. RESOLUTE INDUSTRIES 8199
uct seller is not subject to liability for failing to warn or
instruct regarding risks and risk-avoidance measures that
should be obvious to, or generally known by, foreseeable
product users.” Id. § 2 cmt. j.

[6] In this case, the risk that failure to disconnect the
power could cause a fire should have been obvious to
Albrecht, an experienced technician who undertook to repair
a flame-emitting burner unit in the confined space of a boat
where fire is a generally known risk. Indeed, Albrecht himself
admitted in his deposition that “kill the power” is an elemen-
tary rule for “working on a piece of equipment powered by
electricity.” Moreover, a warning on the outside of the burner
unit advised the user to “[d]isconnect the current before open-
ing,” confirming what Albrecht acknowledged was a basic
precautionary principle. Thus, even if Webasto was required
to inform Albrecht he needed to “kill the power” before
beginning the repair, Webasto provided such a warning.

[7] Resolute nonetheless argues that Webasto failed to
advise Albrecht of the proper mechanism for disconnecting
the power. But if Albrecht, an experienced technician, was
unsure how to go about disconnecting the power, he could
have looked to the heater’s repair manual, which included the
following instruction:

6.3 Removing the burner unit

Replacement of certain components in the combus-
tion unit is made easier if the burner unit is first
removed and placed on a bench.

1. Remove the cover on the thermostats, and pull out
the connection for the overheat fuse[ ], control ther-
mostat [ ] and temperature limiter [ ], unscrew the
clamp [ ] and lift up the connectors.
8200 OSWALT v. RESOLUTE INDUSTRIES
2. Remove block connectors A and B from the con-
trol unit and disconnect the fuel lines from the heater
connection pipes. Plug the pipes.

3. Loosen two eye bolt nuts [ ], swing out, remove
the hinge pin[ ] and lift off the burner unit.

Removal of the block connectors from the control unit, as
directed in paragraph 2, disconnects power to the unit. Thus,
read together with the warning on the outside of the burner
unit, the manual advised Albrecht to disconnect the power
before removing the burner unit, and provided for disconnec-
tion of the power, through removal of the block connectors,
in the process of removing the burner unit.

Resolute argues that its expert, Paul Way, raised a triable
issue as to the instructions’ adequacy. Way read instruction
6.3 as applying only when the burner unit was removed from
the boat entirely, and opined that the instructions should have
directed the user to “disconnect the power cord from the unit
. . . in all cases,” not just when the burner unit was removed
from the boat. Even were we to assume Way’s restrictive
interpretation of instruction 6.3 was reasonable, however, it
does not negate the fact that the instruction showed Albrecht
how to be sure the power source was disconnected, by remov-
ing the block connectors.

Way also testified that “the later version of the instruction
repair manual [instruction 6.3] . . . added the statement that,
with a big bold warning, ‘this is a dangerous situation,’ ” sug-
gesting that, “to avoid an unsafe condition,” a similar safety
warning should have been included in the earlier version of
the manual that was available to Albrecht. It is true that
instruction 6.3 initially was framed as a way to replace burner
unit components more easily, not as an explicit safety warn-
ing. But, as we have explained, the safety implications of dis-
connecting the power to the burner unit should have been
obvious to Albrecht, especially when he left the connected
 OSWALT v. RESOLUTE INDUSTRIES 8201
burner unit lying close to and pointed toward the flammable
cabin ceiling. In this context, the absence of a “big bold warn-
ing” was not unreasonable. See Restatement § 2 cmt. j.

[8] For these reasons, we affirm the summary judgment on
Resolute’s inadequate warnings claim.

B. Design Defect Claim

Resolute also contends the heater was defectively designed
because it “should have been equipped with an automatic cur-
rent shutoff like all home furnaces are equipped with.” The
district court rejected this claim for three reasons: (1) the pro-
posed alternative design “is not based on any industry regula-
tions or standards”; (2) Resolute presented no evidence “that
any other marine heater manufacturer includes such a [shut-
off] device on their products”; and (3) Resolute presented no
evidence that the proposed shutoff device would have been
simple and cheap to implement. We find the first two obser-
vations inadequate to justify granting summary judgment, and
we disagree with the third.

[9] Compliance with applicable safety standards does not
insulate a manufacturer from defective product claims. See
Saratoga Fishing, 69 F.3d at 1441-42 (affirming the district
court’s conclusion that “although . . . [the manufacturers’]
failure to use [the proposed alternative design] at the time of
construction did not violate any industry rules or standards . . .
the design [was] unreasonably dangerous and defective
because the design included a high risk of danger and there
was a feasible alternative”). Furthermore, even though “it may
be difficult for the plaintiff to prove that an alternative design
could have been practically adopted” when the defendant’s
product is “the safest in use at the time of sale,” this fact is
not necessarily dispositive. Restatement § 2 cmt. d. If it were,
there could be no first case demanding improvement of an
unsafe (but widely accepted) product design.
8202 OSWALT v. RESOLUTE INDUSTRIES
[10] Finally, we do not agree with the district court that
Resolute failed to present any proof that its proposed alterna-
tive design would be simple and cheap to implement. Way
opined that the heater should have been designed with a
“built-in safety switch to automatically disconnect power to
the heater in the same manner as is commonly used in home
furnaces.” He stated that this design modification would have
been simple to implement, because “[i]n the Webasto case
there were two components that could be disassembled, and
there was a very easy place to mount either a wire coupling
or a safety switch so that if the burner head were removed, it
would automatically and positively disconnect power.” Way’s
description of the simplicity of the proposed design modifica-
tion, together with the evidence that similar safety features are
routinely included in home heaters, sufficed to raise a genuine
issue of material fact. See Restatement § 2 cmt. d (“If the
plaintiff introduces expert testimony to establish that a reason-
able alternative design could practically have been adopted, a
trier of fact may conclude that the product was defective not-
withstanding that such a design was not adopted by any man-
ufacturer, or even considered for commercial use, at the time
of sale.”).

We therefore vacate summary judgment on the design
defect claim.3

II. Resolute’s Liability to Oswalt

[11] Resolute disputes its liability for breach of the implied
warranty of workmanlike performance, arguing that, because
there was no “affirmative admissible proof of a causal link”
3
The district court did not consider Webasto’s argument — raised only
in its reply brief — that Way’s testimony was inadmissible because he was
not a properly qualified expert under Daubert v. Merrell Dow Pharmaceu-
ticals, Inc., 509 U.S. 579 (1993). We therefore decline to address the issue
here. On remand, the district court may, if appropriate, address the suffi-
ciency of Way’s qualifications in the first instance.
 OSWALT v. RESOLUTE INDUSTRIES 8203
between Albrecht’s actions and the fire, the district court
clearly erred by finding that Albrecht caused the fire. We
reject this argument, however, because there was ample cir-
cumstantial evidence to support the causation finding.
Albrecht himself admitted that many boats are miswired, per-
haps explaining why flipping the breaker did not actually cut
the power to the heater. Moreover, the parties agree that the
burner unit was the source of the fire and that it could have
ignited only if there was power flowing to the heater. This cir-
cumstantial evidence supports the district court’s finding that
Albrecht’s failure to disconnect the power allowed electricity
to flow to the heater, causing the unattended burner unit to
ignite. See United States v. Standard Oil Co. of Cal., 495 F.2d
911, 916 (9th Cir. 1974) (affirming a finding that a boat
caused an oil fire based on “substantial circumstantial evi-
dence”).

III. Loss of Use Damages

Resolute argues the district court erred in awarding Oswalt
damages for hotel charges he incurred while the fire damage
to the CHUG was being repaired. The parties do not dispute
the relevant facts, which the district court found as follows:

At the time of the loss, Curtis Oswalt worked as
a flight attendant for Southwest Airlines. His work
assignments started and ended in Oakland, and he
had to pay for hotels in Oakland at his own expense
before and after each flight. To save this cost, he
used the CHUG as a second home when working in
Oakland, California in the winter months. When the
loss occurred, the M/V CHUG was being readied to
take to Oakland for the winter. Unable to use the
CHUG as his residence, Curtis Oswalt incurred hotel
expenses.

Citing The Conqueror, 166 U.S. 110 (1897), Resolute con-
tends that “[l]oss of use damages are not recoverable for a
8204 OSWALT v. RESOLUTE INDUSTRIES
pleasure craft” and that Oswalt therefore cannot recover hotel
fees he incurred when unable to use the CHUG, a “pleasure
yacht,” as a second home.

[12] The Conqueror held that a wronged boat owner seek-
ing recovery for loss of use of his boat must show “a pecuni-
ary loss, or at least a reasonable certainty of pecuniary loss,
and not a mere inconvenience arising from an inability to use
the vessel for the purposes of pleasure.” 166 U.S. at 133. It
therefore rejected a claim for damages for loss of use of a
yacht that was “designed for pleasure only, and [had] never
been put to any other use.” Id. at 112. This conclusion flowed
from the Court’s concern that the value of the lost recreational
use claimed in that case, which was based on unsupported
witness testimony, was “too uncertain and conjectural to form
a proper basis for estimation” of damages due. Id. at 127. We
later interpreted The Conqueror as establishing that, “[u]nder
federal maritime law loss of use of a private pleasure boat is
not a compensable item of damages.” Oppen v. Aetna Ins.
Co., 485 F.2d 252, 257 (9th Cir. 1973) (citing The Conqueror,
166 U.S. 110).4

[13] In this case, however, Oswalt sought to recover not
for lost recreational use of his boat, as was the case in The
Conqueror and Oppen, but for deprivation of the use of the
CHUG to defray his work-related expenses. The loss of use
4
This general rule against compensation for loss of use of a private plea-
sure boat has been questioned both as a matter of tort law and as a matter
of basic fairness. See Brooklyn E. Dist. Terminal v. United States, 287
U.S. 170, 175 (1932) (sharply criticizing this rule in dicta); N. Assurance
Co. of Am. v. Heard, 755 F. Supp. 2d 295, at *4-5 (D. Mass. 2010) (ques-
tioning the wisdom of a rule that “results in similarly situated plaintiffs
and defendants facing vastly different outcomes depending not on mone-
tizable damages but on the character of the loss”). Regardless, although
we are bound to apply Oppen, we find it readily distinguishable, as
explained in text. In Oppen, we had no occasion to decide whether a plain-
tiff may recover for loss of use of a private pleasure boat that is also used
for business-related purposes.
 OSWALT v. RESOLUTE INDUSTRIES 8205
damages awarded to Oswalt are both business-related and
entirely nonspeculative; as the district court observed, the
hotel charges Oswalt incurred are supported by “extensive,
uncontroverted documentation.” We have never denied loss of
use damages under such circumstances. Cf. Oppen, 485 F.2d
at 257 (disallowing damages for interference with the plain-
tiffs’ recreational use of their “private pleasure boat[s]” in the
Santa Barbara Channel).

[14] The district court therefore correctly allowed Oswalt
to recover hotel charges incurred while the CHUG was being
repaired.

IV. Surveyor’s Fees

[15] The district court also properly allowed Federal Insur-
ance Company to recover the fees of the surveyor who
assessed the fire damage to the CHUG. Even if Resolute is
correct that Chubb, Federal’s parent corporation, “was the
corporation that [chose] and sent out the surveyor,” the dis-
trict court did not clearly err in finding that it was Federal that
paid the surveyor’s fees and should be compensated for them.
Nor does it matter that the surveyor’s fees were not included
within the amount reflected on the subrogation receipt. In the
receipt, Oswalt subrogated to Federal “all of [his] rights,
claims and interest” for the loss discovered on the day of the
fire. Federal was therefore entitled to recover sums Oswalt
himself could properly have claimed, and Resolute does not
dispute that Oswalt would have been entitled to recover sur-
veyor’s fees. Finally, it is irrelevant for damages purposes that
the district court earlier declined to penalize Federal when a
Chubb employee failed to respond to Resolute’s Rule 30(b)(6)
deposition notice. Resolute cites no authority for the proposi-
tion that the proper remedy for this alleged discovery griev-
ance was to curtail the damages award. We therefore uphold
the award of damages for surveyor’s fees.
8206 OSWALT v. RESOLUTE INDUSTRIES
CONCLUSION

We hold that the district court properly granted summary
judgment to Webasto on Resolute’s inadequate warnings
claim, but erroneously granted summary judgment on the
design defect claim. We further conclude that the court prop-
erly held Resolute liable on Oswalt’s implied warranty claim
and properly awarded damages for loss of use and surveyor’s
fees. Accordingly, we affirm in part and vacate in part the
judgment of the district court and remand for further proceed-
ings on Resolute’s design defect claim. Each party shall bear
its own costs on appeal.

AFFIRMED IN PART, VACATED IN PART,
REMANDED.