Coleman Cable Systems, Inc. v. Shell Oil Co.

• Decision Date: 17 September 1997
• Docket Number: 96-3600,Nos. 96-3445,s. 96-3445
• Citation: 124 F.3d 203
• Parties: NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit. COLEMAN CABLE SYSTEMS, INCORPORATED, Plaintiff-Appellant, v. SHELL OIL COMPANY, a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 203

124 F.3d 203

NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit.

COLEMAN CABLE SYSTEMS, INCORPORATED, Plaintiff-Appellant, v. SHELL OIL COMPANY, a Delaware corporation, Defendant-Appellee.

Nos. 96-3445, 96-3600.

United States Court of Appeals, Seventh Circuit.

Argued April 23, 1997.

Decided Sept. 17, 1997.

Before BAUER, RIPPLE, and MANION, Circuit Judges.

ORDER

Coleman Cable Systems manufactured electric cable with insulation made, in part, from a compound produced by Shell Oil Company. When the electric cable failed because of chemical incompatibility between the Shell product and the rest of the insulating sheathing, Coleman sued Shell in diversity for breach of warranty and fraud. The district court entered summary judgment for Shell. We affirm.

I.

This case involves a technically complex interaction between two compounds commonly known as plastic or rubber. Coleman Cable Systems manufactures industrial electrical cable. The process includes sheathing metal wire or cable conductors with various materials that insulate and "jacket" the conductor (the jacket is the outer layer of material designed to protect the inner layer of insulation which in turn surrounds the wire or cable conductor). In the past, Coleman had insulated certain of its industrial electrical cables with two compounds purchased from Uniroyal. Shell manufactures and sells petroleum based products such as synthetic rubbers. These include a number of synthetic rubber compounds known as thermoplastic elastomers which are sold under the trade name Elexar. One of those elastomers, Elexar 8451, is at issue here. Shell successfully convinced Coleman that it could substitute Elexar 8451 for the two compounds it previously had purchased from Uniroyal. Beginning in 1982, and carrying on through 1991, Coleman purchased Elexar 8451 from Shell.

Around the time when it switched over to the Shell product, Coleman designed and began to produce an electric cable that contained a copper wire conductor, an Elexar 8451 insulating layer, and an outer jacket made of Garaprene/NS308. Garaprene, manufactured by Gary Corporation, is a polyvinylchloride (PVC)-based compound containing plasticizers which render the PVC flexible. Coleman claims it used Garaprene/NS308 as an outer jacket because it was more fire resistant than Elexar 8451.

As it turned out this was an unfortunate combination: Elexar contains polystyrene end blocks which exert an attractive force on the plasticizers in Garaprene. The plasticizer "migrates" within the Garaprene causing it to break down and become oily or gummy. As a result, Coleman's industrial clients who had purchased and installed this particular electrical cable over a ten-year period, began to experience costly failures for which they sought recovery from Coleman. In turn, Coleman sought to cover its losses by suing Shell for breach of express warranty, breach of implied warranty, and fraud. Shell counterclaimed for money owed to it but withheld by Coleman for purchases of Shell products. The district court dismissed Coleman's express warranty count for failure to state a claim, granted summary judgment for Shell on the implied warranty and fraud claims, and also granted summary judgment for Shell on the counterclaim.

II.

A. Express Warranty

The district court dismissed count one of Coleman's complaint which alleged breach of express warranty for failure to state a claim. Fed.R.Civ.P. 12(b)(6). We review such a dismissal de novo, accepting as true all factual allegations in the complaint and drawing all reasonable inferences from these facts in favor of the plaintiff Murphy v. Walker, 51 F.3d 714, 717 (7th Cir.1995) (emphasis added).

In its breach of express warranty count, Coleman alleged that Shell's brochure for Elexar contained provisions which could reasonably be interpreted as expressly warrantying Elexar 8451 for use as electrical cable insulation. It argues that an express warranty need not be explicit but may be implied from other language. ¹ Accepting this proposition, at least for purposes of analysis, the district court determined that implying an express warranty from the language in the brochure would not be reasonable given Shell's explicit warnings in the same brochure that Elexar was incompatible with PVC. One such warning stated: "[d]o not use color concentrates based on a PVC carrier resin because it is incompatible with Shell Elexar rubber." The "it" appears to refer to PVC carrier resin. Another statement warns that it is necessary to clean a particular processing machine, noting it is "particularly important if PVC was previously processed because it is not compatible with Shell Elexar rubber. Without a thorough clean-out, a high incident of spark failure in Shell Elexar rubber coatings will occur due to PVC contamination." A table in the brochure titled "troubleshooting guide" states that a possible cause for one problem with Elexar could be "PVC contamination." These warnings clearly indicate some incompatibility between Elexar and PVC. The question is to what extent they are incompatible.

Coleman contends these warnings at most suggest that Elexar and PVC are what Coleman calls "process incompatible," meaning that the products should not be mixed. The statements do not warn, Coleman argues, against "contact incompatibility," by which it means the Elexar and PVC should not come into contact in a finished product. Because Coleman's problem involved contact incompatibility and not process incompatibility, Coleman contends that the statements in the brochure were insufficient to negate the express warranty.

Shell argued and the district court concluded that because the warning made no such limitation, "incompatibility" could not be confined to "process incompatibility" but could also mean "contact incompatibility." Although the district court discounted Coleman's argument on the limitations of the warning, the argument does have merit. Taken in context, the warning statements appear more limited than the district court suggests, they seem only to warn of process incompatibility.

Nevertheless, even if the brochure is not read to explicitly warn about contact incompatibility, the warning should render a certain caution on Coleman's part with regard to placing Elexar in contact with PVC. This is especially so given the fact that Coleman had similar contact problems between Garaprene/NS308 and a thermoplastic they used prior to Elexar 8451, manufactured by Teknor Apex. With such experience, a reasonable person would not just assume that the two products were contact compatible without inquiring further, especially in light of the warnings.

But whether the warnings were confined only to process incompatibility, or whether a reasonable person would be sufficiently warned of contact incompatibility is irrelevant. Coleman's express warranty claim hinges not on whether there was a warning, but on whether there was an express warranty in the first place. Coleman still has not presented any language in the brochure which suggests that the two compounds are compatible. Under Texas law ² (which has adopted the UCC) an express warranty requires an affirmation of fact or promise relating to goods or a description of the goods which becomes part of the basis of the bargain. Tex. Bus. & Comm.Code § 2.313. "[A]n affirmation merely of the value of goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty." Id. § 2.313(b). Crosbyton Seed Co. v. Mechura Farms, 875 S.W.2d 353, 361 (Tex.Ct.App.1994) (setting out terms of § 2.313 and describing elements of express warranty). Coleman argues that certain language in the Shell brochure pertaining to Elexar created an express warranty that Elexar was suitable and safe when used in contact with other reasonably expected materials, including PVC with plasticizers. Fifth Amended Complaint at p 38. Specifically, Coleman directs us to the following language from the brochure:

Shell Elexar rubber is the trade name for compounds used specifically in the manufacture of wire and cable insulation and jacketing.

This brochure was developed to assist processors of Shell ELEXAR rubber ... when extruding wire and cable insulation and jacketing or injection molding electrical plugs and connectors.

The wide range of properties, excellent performance and ease of thermoplastic processing of Shell ELEXAR rubber have led to its growing use in a variety of wire and cable applications.

We do not read this as a representation that Elexar may be used with PVC. This language only speaks of Elexar's use, generally, as a compound which has a wide range of properties in wire and cable insulating and jacketing applications. There is no dispute that Elexar is a trade name or that it is used in the manufacture of insulation and jacketing. Nor is there dispute about why the brochure was developed. The only passage cited which might approach an express warranty is the third passage which describes Elexar as having a wide range of properties, excellent performance and ease of processing. Yet Coleman does not contend that this statement is not true, only that it is not true for one specific use-for contact use with PVC containing plasticizers. But the passage does not state that it is good for every use and it is silent about any specific uses. Not only does it not warranty Elexar for use with PVC containing plasticizers, it makes no assertions about its compatibility with any other compounds. Nothing we have learned about Elexar's properties undercuts the truth of the statements in Shell's brochure as excerpted for us by Coleman. And the passages not excerpted by Coleman, those containing the warnings about incompatibility with PVC, at a minimum suggest that...