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Lincoln Composites, Inc. v. Firetrace Usa, LLC

United States District Court, D. Nebraska

January 2, 2015

LINCOLN COMPOSITES, INC., Plaintiff,
v.
FIRETRACE USA, LLC, Defendant.

MEMORANDUM AND ORDER

JOHN M. GERRARD, District Judge.

This matter is before the Court on defendant Firetrace's Motion for Remittitur and for New Trial. Filing 105. For the reasons discussed below, Firetrace's motion will be denied.

I. BACKGROUND

Plaintiff Lincoln Composites, Inc. ("Lincoln") manufactures equipment for storing and transporting natural gas. One of the products Lincoln manufactures is the "Titan Module." As typically sold, the Titan Module consists of four large tanks, assembled into a single framework. It is used for bulk transportation of compressed natural gas, and is primarily marketed to overseas customers. Firetrace manufactures fire detection equipment, including "fire detection tubing."

Lincoln decided to use Firetrace's tubing as part of the fire detection system in its Titan Modules. From around 2008 to 2012, Firetrace worked with Lincoln to supply it with tubing. Throughout this period, Lincoln noticed certain defects in the tubing, which caused it to become brittle or break. Each time a new defect arose, Firetrace attempted to fix it, and Firetrace provided Lincoln with replacement batches of tubing. But defects continued to arise, and around May 2012, Lincoln determined that it was no longer going to do business with Firetrace. Lincoln then brought this suit. Lincoln claims that Firetrace failed to provide non-defective tubing in a timely fashion, in breach of the parties' contract and certain express and implied warranties contained therein.

That there was a contract for the purchase and delivery of Firetrace tubing was not disputed. The terms of that contract, however, were very much in dispute. Lincoln argued that the contract consisted of the terms and conditions contained on Lincoln's website and referenced in purchase orders it sent to Firetrace. Firetrace contended that it had delivered its own terms and conditions to Lincoln, and that these formed the basis of the parties' contract. Lincoln denied receiving a copy of Firetrace's terms prior to forming the contract, and Firetrace disputed that Lincoln's terms and conditions were actually available on its website during the relevant period. Firetrace's terms provided an express warranty, but disclaimed all implied warranties, and limited Lincoln's remedies to repair or replacement of any defective tubing. Lincoln's terms contained an express warranty, which was silent on implied warranties, and contained no limitation of remedies. Lincoln argued that, even if Firetrace's terms controlled, any repair and replacement remedy had failed of its essential purpose, entitling Lincoln to seek the full range of damages and pursue its claims for breach of the implied warranties.

The case proceeded to a jury trial. Following an 8-day trial, the jury returned a verdict in favor of Lincoln on its claim for breach of express warranty, in the amount of $920, 277.76.

II. STANDARD OF REVIEW

Pursuant to Fed.R.Civ.P. 59, the Court may grant a new trial when the first trial resulted in a miscarriage of justice, through a verdict against the weight of the evidence, an excessive damage award, or legal errors at trial. Trickey v. Kaman Indus. Technologies Corp., 705 F.3d 788, 807 (8th Cir. 2013). With respect to legal errors, a "miscarriage of justice" does not result whenever there are inaccuracies or errors at trial; instead, the party seeking a new trial must demonstrate that there was prejudicial error. Id. Generally speaking, Firetrace argues that it is entitled to a new trial because (a) the verdict, as to elements of both liability and damages, was against the great weight of the evidence; and (b) the Court erred in instructing the jury.

A. SUFFICIENCY OF THE EVIDENCE

A motion for a new trial should only be granted if the jury's verdict is against the great weight of the evidence so as to constitute a miscarriage of justice. Bank of America, N.A. v. JB Hanna, LLC, 766 F.3d 841, 851 (8th Cir. 2014). In determining whether a verdict is against the weight of the evidence, the Court can rely on its own assessment of the evidence-it can weigh the evidence, disbelieve witnesses, and grant a new trial even where there is substantial evidence to sustain the verdict. Harris v. Secretary, U.S. Dept. of the Army, 119 F.3d 1313, 1318 (8th Cir. 1997); see also Boesing v. Spiess, 540 F.3d 886, 890 (8th Cir. 2008). However, the Court may not reweigh the evidence and set aside the jury verdict merely because the jury could have drawn different inferences or conclusions or because the Court feels that another result is more reasonable. Boesing, 540 F.3d at 890; Harris, 119 F.3d at 1318. Because this is a diversity action, whether the jury's verdict was against the great weight of the evidence is judged in accordance with substantive state law. JB Hanna, 766 F.3d at 851.

B. JURY INSTRUCTIONS

A new trial may be appropriate when a jury has been improperly instructed. See, e.g., McKay v. WilTel Commc'n Sys., Inc., 87 F.3d 970, 976 (8th Cir. 1996). The Court examines whether, taken as a whole and viewed in the light of the evidence and applicable law, the instructions fairly and adequately submitted the issues in the case to the jury. Gill v. Maciejewski, 546 F.3d 557, 563 (8th Cir. 2008). A party is entitled to an instruction on its theory of the case so long as it is legally correct and there is factual evidence to support it. Boesing, 540 F.3d at 890. But the instructions need not be technically perfect, Gill, 546 F.3d at 563, and a party is not entitled to any particular wording in the instructions. Ryther v. KARE 11, 108 F.3d 832, 847 (8th Cir. 1997). Erroneous jury instructions entitle a party to a new trial only if the error affected the party's substantial rights. Id. at 846.

III. ANALYSIS

Firetrace argues that it is entitled to a new trial as to liability and damages on the sole claim decided by the jury: Lincoln's claim for breach of express warranty. Firetrace contends that Lincoln failed to present sufficient evidence in support of several aspects of its claim and argues that the Court erred in instructing the jury. Before turning to each of Firetrace's arguments, it will be helpful to put them in some context.

As noted above, Lincoln's claims required the jury to determine the terms of the parties' contract. This was a multi-step undertaking that required the jury to make a number of factual determinations. Depending on the jury's determination at one step, the inquiry at the next step might be different. For example, the jury first had to decide whether Firetrace had actually provided a copy of its terms and conditions in a timely manner, and whether Lincoln's terms and conditions were actually available on Lincoln's website at the relevant time. If the jury had found that neither parties' terms and conditions were available, there would have been no express warranty. So, the jury might have found that only one party's terms were incorporated into the contract. Or the jury might have found that both sets of terms were in play, which would mean that the jury was confronted with a "battle of the forms" situation governed by § 2-207 of the Uniform Commercial Code.

In instructing the jury, the Court considered each of the possible factual findings that the jury could make. Based on the jury's decision at each step, the instructions then guided the jury to the next decision that it would need to make, and supplied the corresponding legal principles to apply. The Court did this by structuring its instructions as a decision tree or flowchart. And to aid the jury in navigating these instructions, the Court provided an actual graphical representation of the instructions, as a flowchart.[1] See filing 88.

The parties did not request a special verdict form, and thus the precise route that the jury took to reach its verdict is not known. So, Firetrace has drafted its motion for a new trial to cover each of the possible routes that the jury took. The Court has reviewed each of Firetrace's arguments, and finds that, regardless of the route the jury took to reach its verdict, its decision was supported by sufficient evidence and based on proper instructions.

A. TERMS AND CONDITIONS ON LINCOLN'S WEBSITE

In finding that Firetrace breached an express warranty to Lincoln, the jury may have determined that Lincoln's terms and conditions were available on its website, and that the express warranty found therein formed a part of the contract. Firetrace argues that, if that was the jury's decision, then the verdict was fatally flawed, as Lincoln did not provide any evidence from which the jury could have concluded that Lincoln's terms and conditions were available on its website during the relevant period. The evidence is to the contrary. Lincoln provided sufficient evidence for the jury to find that its terms were available on its website during the relevant period.

Each of the numerous purchase orders that Lincoln sent to Firetrace contained a notice that any contract was subject to Lincoln's terms and conditions, which were available on Lincoln's website. See, e.g., exh. 26; exh. 32; exh. 221. This occurred on at least 10 purchase orders, from the first order issued in 2008 all the way through 2012. See filing 101 at 5-7, 41-42; see, e.g., exh 221 at 1 [Bates no. HL00609]; exh 32. Lincoln presented testimony from Jessica Yockey, who worked as a purchasing agent for Lincoln from November 2008 onward, and eventually as the agent who handled all of Lincoln's transactions with Firetrace. Filing 101 at 3, 7, 10; see also exh 221 at 4. Yockey testified that Lincoln's terms and conditions, exh. 57, had remained the same for the entire time she worked with Lincoln. Filing 101 at 6. And the terms and conditions themselves showed a revision date of October 2005. Exh. 57. While Yockey testified that she did not personally check to ensure that Lincoln's terms were available on its website before she issued each purchase order, she stated that she trusted the terms were, in fact, available on Lincoln's site. Filing 101 at 42. There was no evidence that the terms were not available, or that Firetrace had tried to access them and failed. This was a question for the jury, and based on the evidence, the jury could reasonably have inferred that Lincoln's terms were available on its website during the relevant period.

The result would be the same even if the jury determined that Lincoln's terms were not posted on its website on all occasions. The undisputed evidence shows that, through a series of purchase orders issued over approximately 4 years, Firetrace was put on notice that Lincoln's terms existed. See, e.g., exh. 26; exh. 32; exh. 221. In general, a party is charged with knowledge of the contents of a writing when he signs it and cannot avoid a contract simply because he failed to read the entire writing, including matters incorporated by reference. See, e.g., In re Int'l. Profit Assocs., Inc., 286 S.W.3d 921, 923-24 (Tex. 2009); Ray Tucker & Sons, Inc. v. GTE Directories Sales Corp., 571 N.W.2d 64, 68 (Neb. 1997). Even if the terms were possibly not available on the website at all times, Firetrace was on notice that they existed, and could have requested a copy. As such, Lincoln's terms remained binding on Firetrace. See, Int'l. Profit Assocs., 286 S.W.3d at 923-24; Ray Tucker & Sons, 571 N.W.2d at 68-69.

B. FIRETRACE'S EXPRESS WARRANTY FAILED OF ITS ESSENTIAL PURPOSE

Alternatively, the jury may have found that Firetrace breached its own express warranty. As noted above, that warranty limited Lincoln's recourse to repair or replacement of any defective tubing and excluded consequential and incidental damages. See exh. 27. If that was the jury's decision, then the jury necessarily found that the limited remedy failed of its essential purpose. Firetrace argues that any such finding was not supported by sufficient evidence, and contends that the Court erred in instructing the jury on this point.

1. Sufficiency of the Evidence

Under the U.C.C., a seller is free to establish exclusive, limited written warranties and limit the availability of damages. Neb. U.C.C. § 2-719; John Deere Co. v. Hand, 319 N.W.2d 434, 437 (Neb. 1982). So, repair and replacement warranties and clauses excluding consequential damages are allowed. John Deere Co., 319 N.W.2d at 437. However, Neb. U.C.C. § 2-719(2) also provides that, "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the Uniform Commercial Code." The comments to § 2-719 explain that "where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this article." Neb. U.C.C. § 2-719 cmt. 1.

The purpose of an exclusive repair or replacement remedy is to give the buyer goods which conform to the warranty within a reasonable time after a defect is discovered. John Deere Co., 319 N.W.2d at 437. Where the seller is given a reasonable chance to correct defects and the equipment still fails to function properly, the limited remedy fails of its essential purpose. Id. In such an event, the buyer may invoke any remedies available under the Uniform Commercial Code. Id. These include consequential and incidental ...


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