United States District Court, D. New Hampshire
P.C. Hoag & Co., Inc.
Man Lift Mfg., Co., et al.
REPORT AND RECOMMENDATION
K. JOHNSTONE, UNITED STATES MAGISTRATE JUDGE.
P.C. Hoag & Co, Inc., (“P.C. Hoag”) brought
this action in state court alleging that an aerial lift it
purchased from defendants Man Lift Mfg., Co. (“Man
Lift”), All Terrain Aerial Lifts (“All
Terrain”), and A-1 Expert Tree Services, Inc.,
(“A-1”) was defective. Man Lift removed the
matter here, invoking this court's diversity jurisdiction
under 28 U.S.C. § 1332, and the case was assigned to the
undersigned magistrate judge. P.C. Hoag and Man Lift
consented to the undersigned's jurisdiction and actively
litigated this matter, ultimately reaching a settlement. A-1
and All Terrain never appeared and, on P.C. Hoag's
motion, were defaulted by the Clerk of Court.
Hoag now moves for an entry of default judgment against A-1
and All Terrain and for an award of damages and costs. Doc.
no. 40. The court held a damages hearing pursuant to Federal
Rule of Civil Procedure 55(b) and granted P.C. Hoag leave to
file additional evidence in support of its damages claim.
Subsequently, the court determined that it could not enter a
final disposition in this matter, as the defaulted parties
had not consented to the undersigned's jurisdiction as
required by 28 U.S.C. § 636(c)(1). See Henry v.
Tri-Servs., Inc., 33 F.3d 931, 933 (8th Cir. 1994);
cf. Roell v. Withrow, 538 U.S. 580, 590 (2003)
(noting that consent can be inferred when “the litigant
or counsel was made aware of the need for consent and the
right to refuse it, and still voluntarily appeared .
. . before the Magistrate Judge” (emphasis added));
Conetta v. Nat'l Hair Care Ctrs., Inc., 236 F.3d
67, 72-73 (1st Cir. 2001) (holding that magistrate judge did
not have the authority on referral under a different
subsection of § 636 to make a final determination on
damages following an entry of default). The case was
accordingly reassigned to a district judge, and P.C.
Hoag's motion was referred to the undersigned for report
and recommendation. See U.S. Fid. & Guar. Co. v.
Guzmán, No. 10-cv-1078-FAB-MEL, 2012 WL 4790314,
at *1 n. 1 (D.P.R. Sept. 20, 2012), R&R adopted sub
nom. U.S. Fid. & Guar. Co. v.
Cobián-Guzmán, No. 10-cv-1078-FAB, 2012 WL
12996294, at *1 (D.P.R. Oct. 5, 2012) (issuing a report and
recommendation because the defaulted parties had not
consented to jurisdiction); Brown v. Bussone, No.
12-cv-10338-LTS, 2012 WL 4758033, at *1 (D. Mass. July 30,
reasons that follow, the court recommends that P.C.
Hoag's motion be granted in part as to liability, that
damages be awarded in the amount of $30, 214.65, and that
P.C. Hoag's request for costs be denied without
STANDARD OF REVIEW
default is entered and when the amount at issue is not a sum
certain, “the party must apply to the court for a
default judgment.” Fed.R.Civ.P. 55(b)(2); see also
KPS & Assocs., Inc. v. Designs by FMC, Inc., 318
F.3d 1, 19 (1st Cir. 2003). Before entering a default
judgment, the court “may examine a plaintiff's
complaint, taking all well-pleaded factual allegations as
true, to determine whether it alleges a cause of
action.” Ramos-Falcón v. Autoridad de
Energía Electríca, 301 F.3d 1, 2 (1st Cir.
2002) (quoting Quirindongo Pacheco v. Rolon Morales,
953 F.2d 15, 16 (1st Cir. 1992)). The defaulted party is
“taken to have conceded the truth of the factual
allegations in the complaint . . . .”
Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 62-63 (1st
Cir. 2002) (internal quotation marks omitted) (quoting
Franco v. Selective Ins. Co., 184 F.3d 4, 9 n. 3
(1st Cir. 1999)). The defaulted party does not, however,
“admit the legal sufficiency of those claims.” 10
James Wm. Moore, Moore's Federal Practice §
55.32[b] (3d ed. 2013). In other words, before entering
default judgment, the court must determine whether the
admitted facts state actionable claims. See Hop Hing
Produces Inc. v. X & L Supermarket, Inc., No.
12-cv-1401- ARR-MDG, 2013 WL 1232919, at *2 (E.D.N.Y. Mar. 4,
2013); E. Armata, Inc. v. 27 Farmers Market, Inc.,
No. 08-cv-5212-KSH, 2009 WL 2386074, at *2 (D.N.J. July 31,
virtue of having defaulted, A-1 and All Terrain concede the
Hoag is a New Hampshire corporation that provides arborist
services. Man Lift is a Wisconsin corporation that designs,
manufactures, sells, markets, promotes, services, and repairs
certain aerial lifts commonly used by arborists and other
professionals working in the tree cutting and tree servicing
industry. A-1 is a California corporation that solicits sales
for Man Lift. All Terrain is a division of A-1.
about November 25, 2012, P.C. Hoag entered into a contract to
purchase an A70TDI (Track Drive Insulator) with Tree Care
Package aerial lift (the “aerial lift”), which
was designed by Man Lift (the “purchase and sale
agreement”). A-1 and All Terrain negotiated this sale.
Pursuant to the terms of the purchase and sale agreement, A-1
and All Terrain were required to provide the aerial lift
“in a condition that fully complied with all applicable
specifications for its intended purpose and [P.C. Hoag's]
needs . . . .” Compl. (doc. no. 1-1) ¶ 6. The
aerial lift “was to be free from all material defects
and in good working and functioning condition and capable of
performing as represented.” Id. To this end,
A-1 and All Terrain expressly warranted to P.C. Hoag that the
aerial lift “was designed and manufactured in a
reasonable and workmanlike manner, . . . was fit for its
intended use, was fit for its specific purpose, was free from
latent and/or material defects, and would perform in a safe
manner and within [P.C. Hoag's] expectations . . .
.” Id. ¶ 22. P.C. Hoag agreed to pay
$189, 097.00 to purchase the aerial lift.
aerial lift started malfunctioning soon after P.C. Hoag
received it. Defendants attempted to repair the aerial
lift in New Hampshire on multiple occasions, but each time
were unable to successfully remedy the malfunctions. P.C.
Hoag shipped the aerial lift to defendants for repairs, but
this, too, was unsuccessful. P.C. Hoag accordingly demanded,
on several occasions, a revocation of acceptance of the
aerial lift on the basis that it was a nonconforming product.
Defendants refused to honor this request, resulting in P.C.
Hoag initiating this action in state court. At the time the
complaint was filed, the aerial lift was not
Hoag's complaint comprises six counts: defective product
(Count I), negligence (Count II), breach of express
warranties (Count III), breach of implied warranties (Count
IV), breach of contract (Count V), and revocation of
acceptance (Count VI). As this matter was removed to this
court solely on the basis of diversity jurisdiction,
see doc. no. 1 at 2, each claim arises under state
Defective Product and Negligence (Counts I and
court turns first to Counts I and II. Both of these counts
appear to assert products liability claims, with the former
brought under a strict liability theory and the latter
alleging negligence. As to strict liability, “New
Hampshire follows the Restatement (Second) of Torts, §
402A . . . .” Bougopoulos v. Altria Grp.,
Inc., 954 F.Supp.2d 54, 58 (D.N.H. 2013) (citing
Kelleher v. Marvin Lumber & Cedar Co., 152 N.H.
813, 824 (2005)). Under this doctrine, “one who sells
any product in a defective condition unreasonably dangerous
to the user or consumer or to his property is subject to
liability for physical harm thereby caused to the ultimate
user or consumer.” Id. (quoting
Kelleher, 152 N.H. at 824). In contrast, to prevail
on a products liability claim based on negligence, a
plaintiff “must demonstrate all that is required to
prove [an] underlying negligence action.” Palmer v.
Nan King Rest., Inc., 147 N.H. 681, 684-85 (2002)
(citing 63 Am. Jur. 2d Products Liability § 206
Hoag is not entitled to an entry of default judgment against
All Terrain or A-1 under either products liability theory.
Assuming without finding that P.C. Hoag has otherwise stated
such claims, both are nonetheless barred by the economic loss
doctrine. It is well established under New Hampshire law
“that a plaintiff may not ordinarily recover damages
for purely economic loss in tort or products liability
claims.” Kelleher, 152 N.H. at 835 (citation
omitted). “In the products liability context, economic
loss is characterized as damage that occurs to the inferior
product itself, through deterioration or non-accidental
causes.” Id. (citation omitted). When the
physical harm is so limited, a plaintiff is barred from
recovering “the resulting loss due to repair costs,
decreased value, and lost profits . . . .” Lockheed
Martin Corp. v. RFI Supply, Inc., 440 F.3d 549, 554 (1st
Cir. 2006) (quoting East Rover S.S. Corp. v. Transamerica
Delaval, Inc., 476 U.S. 858, 870 (1986)).
Hoag has failed to allege in its complaint that the defects
in the aerial lift caused physical harm to any person or
property other than the aerial lift itself. Though the
complaint does allege that the aerial lift's defects
caused “damages to other property, ” see
doc. no. 1-1 ¶¶ 14, 20, nowhere does P.C. Hoag
indicate what specifically those damages were, rendering
those assertions the sort of conclusory statements that the
court need not assume true for the purposes of its analysis,
see 10A Charles A. Wright, Arthur R. Miller &
Mary K. Kane, Federal Practice and Procedure §
2688.1 (4th ed.) (noting that a “a party in default
does not admit conclusions of law”); see also
DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir.
2007); Black v. Lane, 22 F.3d 1395, 1407 (7th Cir.
1994). And even if the complaint did allege noneconomic harm
recoverable under a products liability theory, P.C. Hoag has
plainly abandoned that request, as its motion for default
judgment solely seeks economic damages caused by harm to the
aerial lift itself. See doc. no. 40-1 ¶ 2.
Counts I and II are therefore barred by the economic loss
the court recommends that the district judge deny P.C.
Hoag's motion to the extent it seeks an entry of default
judgment against A-1 and All Terrain on Counts I and II.
Breach of Express and Implied Warranties (Counts III and
Counts III and IV, P.C. Hoag alleges that All Terrain and A-1
breached express and implied warranties with respect to the
aerial lift. As this case involves the sale of a good, the
Uniform Commercial Code (“UCC”) governs.
See N.H. Rev. Stat. Ann. (“RSA”) §
382-A:2-102; see also RSA 382-A:2-105(1)
(“‘Goods' means all things (including
specially manufactured goods) which are moveable at the time
of identification to the contract for sale . . . .”).
Under the UCC, “express warranties can be created by
promises or affirmations of fact which relate to the goods
and become part of the contractual bargain.” Fassi
v. Auto Wholesalers of Hooksett, 145 N.H. 404, 406
(2000) (citations omitted); see also RSA
382-A:2-313(1). The UCC contains two provisions related to
implied warranties: RSA 382-A:2-314, which “generally
provides that a seller impliedly warrants his goods are
merchantable or generally fit for the ‘ordinary
purposes' for which the goods are used, ” Xerox
Corp. v. Hawkes, 124 N.H. 610, 616 (1984), and RSA
382-A:2-315, which provides for an implied warranty of
fitness for a particular purpose “when the seller knows
that the buyer is relying upon the seller's expertise in
selecting goods to fulfill the buyer's particular
requirements, ” id. Unless disclaimed or
limited, “a breach of any of these warranties may give
rise to a cause of action for incidental or consequential
damages.” Id. (citation omitted); see
also RSA 382-A:2-714; RSA 382-A:2-715.
P.C. Hoag has adequately alleged breach of express warranties
on the part of A-1 and All Terrain. The complaint alleges
that A-1 and All Terrain made several express warranties to
P.C. Hoag regarding the quality and workmanship of the aerial
lift, including that it would be free from material defects
and fit for its intended use and specific purposes. There is
no indication the record that A-1 or All Terrain ever
disclaimed or limited these warranties. And the complaint
alleges that the aerial lift started to malfunction soon
after P.C. Hoag received it and continued to malfunction
despite defendants' attempts to repair it. When taken as
true, these allegations are sufficient to sustain P.C.
Hoag's claims under an express warranty theory.
Hoag is also entitled to an entry of default judgment on its
implied warranties claim. Under RSA 382-A:2-314(1), “a
warranty that the goods shall be merchantable is implied in a
contract for their sale if the seller is a merchant with
respect to goods of that kind.” For goods to be
merchantable, they must, among other things, “pass
without objection in the trade under the contract
description” and be “fit for the ordinary
purposes for which such goods are used.” RSA
382-A:2-314(2)(a), (c). Similarly, under RSA 382-A:2-315,
[w]here the seller at the time of contracting has reason to
know any particular purpose for which the goods are required
and that the buyer is relying on the seller's skill or
judgment to select or furnish suitable goods, there is . . .
an implied warranty that the goods shall be fit for such
any indication of a waiver or limitation, the allegations in
the complaint, when assumed true, support a claim that A-1
and All Terrain breached the plain terms of both implied
court accordingly recommends that the district judge grant
P.C. Hoag's motion to the extent it seeks an entry of
default judgment against A-1 and All Terrain on Counts III
Breach of Contract (Count V)
court next considers P.C. Hoag's claim for breach of
contract. Under New Hampshire law, “a breach of
contract occurs when there is a failure without legal excuse
to perform any promise which forms the whole or part of a
contract.” BAE Sys. Info. & Elecs. Sys.
Integration, Inc. v. SpaceKey Components, Inc., 941
F.Supp.2d 197, 213 (D.N.H. 2013), aff'd, 752
F.3d 72 (1st Cir. 2014) (brackets and internal quotation
marks omitted) (quoting Axenics, Inc. v. Turner Constr.
Co., 164 N.H. 659, 668 (2013)). A buyer who accepts a
good, but then discovers a breach of the sale agreement, must
notify the seller of the breach within a reasonable time of
the discovery thereof. RSA 382-A:2-607(3)(a). A buyer that
does so “may recover as damages for any non-conformity
of tender the loss resulting in the ordinary course of events
from the seller's breach as determined in any manner
which is reasonable.” RSA 382-A:2-714(1). These damages
may include incidental and consequential damages under RSA
382-A:2-715. Id. 2-714(3).
P.C. Hoag alleges that A-1 and All Terrain were required,
pursuant to the terms of the purchase and sale agreement, to
provide the aerial lift “in a condition that fully
complied with all applicable specifications for its intended
purposes and [P.C. Hoag's] needs . . . .” Doc. no.
1-1 ¶ 6. P.C. Hoag further alleges that the contract
required the aerial lift to be “free from all material
defects and in good working and functioning condition and
capable of performing as represented.” Id.
But, according to P.C. Hoag, the aerial lift started
malfunctioning soon after it was received. P.C. Hoag alleges
that it informed defendants of these defects, and that
defendants attempted to repair the aerial lift, but that the
repairs were unsuccessful and the aerial lift continued to
malfunction. Assuming the truth of these allegations, P.C.
Hoag has adequately alleged that A-1 and All Terrain breached
the purchase and sale agreement.
Hoag's motion for default judgment should accordingly be
granted as to Count V, the breach of contract claim.
Revocation of Acceptance (Count VI)
the court considers Count VI. In this count, P.C. Hoag
contends that it is “entitled to revocation of
acceptance and rescission of the purchase and sale agreement,
and to all of its general, special, and consequential damages
in an amount to be proven at time of trial . . . .”
Doc. no. 1-1 ¶ 39. Revocation of the acceptance of a
good, formally known as rescission, is governed by RSA
382-A:2-608. Generally speaking, “[r]escission is an
equitable remedy” under New Hampshire law. Cf.
Faiella v. Green Tree Servicing LLC, No. 16-cv-088-JD,
2016 WL 4530452, at *1 (D.N.H. Aug. 29, 2016) (quoting
Ellis v. Candia Trailers & Snow Equip., Inc.,
164 N.H. 457, 462 (2012)). But under the UCC, a buyer need
not choose between revocation of acceptance and the recovery
of damages. See RSA 382-A:2-608 cmt. 1. Indeed,
monetary damages are available under RSA 382-A:2-608 as
allowed by RSA 382-A:2-711. See Beer v. Bennett, 160
N.H. 166, 174 (2010).
court declines to recommend that P.C. Hoag receive equitable
relief under Count VI. Though requested in the complaint,
P.C. Hoag has not sought such relief anywhere in its motion
for default judgment or the affidavit attached thereto.
Rather, the sole request in either document is for monetary
damages related to economic harms allegedly caused by the
defects in the aerial lift. The discussion at the damages
hearing was similarly ...