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Transamerica Delaval Inc. designed and manufactured propulsion systems for four supertankers. The propulsion systems eventually failed due to design and manufacturing flaws. Only the propulsion systems themselves were damaged - no other part of the ship was damaged, and no one was injured.

East River Steamship and the other companies that had purchased the supertankers sued Transamerica under the negligence and products-liability doctrines of tort law, a branch of law that deals with injuries not covered by contractual agreements. They sought compensation for the cost of repairing the ships as well as for the income they lost while the ships were out of service. The district court, however, granted summary judgment to Transamerica. It held that the injuries were not covered by tort law because only the propulsion systems themselves had been injured, and that the case therefore dealt with the product's warranty rather than tort law. The Third Circuit Court of Appeals heard the case en banc and affirmed the district court's decision.

When a product fails as a result of design and manufacturing flaws, damaging only itself and causing only economic harm, can the owner of the product bring suit against the manufacturer under the negligence or products-liability doctrines of tort law?

No. A unanimous Supreme Court ruled that when a defective product injures only itself and causes only economic harm, tort law claims do not apply. Justice Harry A. Blackmun, writing for the Court, stated "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 suit, therefore, could only be brought under warranty claims, which could no longer be filed because of a time limit in the contract.