Princess Cruises, Inc. v. General Elec. Co.

Citation143 F.3d 828
Decision Date08 May 1998
Docket NumberNo. 97-1685,97-1685
Parties, 35 UCC Rep.Serv.2d 804 PRINCESS CRUISES, INCORPORATED, Plaintiff-Appellee, v. GENERAL ELECTRIC COMPANY, Defendant & Third Party Plaintiff-Appellant, v. NORFOLK SHIPBUILDING & DRYDOCK CORPORATION, Third Party Defendant.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

ARGUED: Bruce Taylor Bishop, Willcox & Savage, Norfolk, VA, for Appellant. Francis Xavier McCullough, Watt, Tieder & Hoffar, L.L.P., McLean, VA, for Appellee. ON BRIEF: John A. Wilson, Gary A. Bryant, Willcox & Savage, Norfolk, VA, for Appellant. Benjamin T. Riddles, Heidi B. Hering, Watt, Tieder & Hoffar, L.L.P., McLean, VA, for Appellee.

Before ERVIN and WILLIAMS, Circuit Judges, and GOODWIN, United States District Judge for the Southern District of West Virginia, sitting by designation.

Reversed and remanded by published opinion. Judge GOODWIN wrote the opinion, in which Judge ERVIN and Judge WILLIAMS joined.

OPINION

GOODWIN, District Judge:

This suit arises out of a maritime contract between General Electric Company (GE) and Princess Cruises, Inc. (Princess) for inspection and repair services relating to Princess's cruise ship, the SS Sky Princess. In January 1997, a jury found GE liable for breach of contract and awarded Princess $4,577,743.00 in damages. J.A. at 1876. On appeal, GE contends that the district court erred in denying its renewed motion for judgment as a matter of law, which requested that the court vacate the jury's award of incidental and consequential damages. Specifically, GE argues that the district court erroneously applied Uniform Commercial Code principles, rather than common-law principles, to a contract primarily for services. We agree and hold that when the predominant purpose of a maritime or land-based contract is the rendering of services rather than the furnishing of goods, the U.C.C. is inapplicable, and courts must draw on common-law doctrines when interpreting the contract. Accordingly, we reverse the district court's decision denying GE's renewed motion for judgment as a matter of law and remand for modification of the judgment consistent with this opinion.

I. FACTUAL BACKGROUND

Princess scheduled the SS Sky Princess for routine inspection services and repairs in December 1994 and requested that GE, the original manufacturer of the ship's main turbines, perform services and provide parts incidental to the ship's inspection and repair. Princess issued a Purchase Order in October 1994. The Purchase Order included a proposed contract price of $260,000.00 and contained a brief description of services to be performed by GE. The reverse side of the Purchase Order listed terms and conditions which indicated that Princess intended the Purchase Order to be an offer. These terms and conditions also stated that GE could accept the Purchase Order through acknowledgment or performance; that the terms and conditions could not be changed unilaterally; and that GE would provide a warranty of workmanlike quality and fitness for the use intended. J.A. at 75-76.

On the same day that GE received the Purchase Order, GE faxed a Fixed Price Quotation to Princess. The Fixed Price Quotation provided a more detailed work description than Princess's Purchase Order and included a parts and materials list, an offering price of $201,888.00, and GE's own terms and conditions. When GE reviewed Princess's Purchase Order, it discovered that Princess requested work not contemplated by GE in its Fixed Price Quotation. GE notified Princess of GE's error. On October 28, 1994, GE faxed a Final Price Quotation to Princess. In the Final Price Quotation, GE offered to provide all services, labor, and materials for $231,925.00. Attached to both GE Quotations were GE's terms and conditions, which: (1) rejected the terms and conditions set forth in Princess's Purchase Order; (2) rejected liquidated damages; (3) limited GE's liability to repair or replacement of any defective goods or damaged equipment resulting from defective service, exclusive of all written, oral, implied, or statutory warranties; (4) limited GE's liability on any claims to not more than the greater of either $5000.00 or the contract price; and (5) disclaimed any liability for consequential damages, lost profits, or lost revenue. J.A. at 106-13. During an October 31, 1994 telephone call, Princess gave GE permission to proceed based on the price set forth in GE's Final Price Quotation. J.A. at 825, 1850.

On November 1, 1994, GE sent a confirmatory letter to Princess acknowledging receipt of Princess's Purchase Order and expressing GE's intent to perform the services. J.A. at 115. The letter also restated GE's $231,925.00 offering price from its Final Price Quotation and specified that GE's terms and conditions, attached to the letter, were to govern the contract. Id.

When the SS Sky Princess arrived for inspection, GE noted surface rust on the rotor and recommended that it be taken ashore for cleaning and balancing. The parties agree that during the cleaning, good metal was removed from the rotor, rendering the rotor unbalanced. Although GE attempted to correct the imbalance, Princess canceled a ten-day Christmas cruise as a result of delays caused by the repair. At trial, Princess alleged that the continued vibration and high temperatures caused damage to the ship, forcing additional repairs and the cancellation of a ten-day Easter cruise. It was undisputed, however, that Princess paid GE the full amount of the contract: $231,925.00. J.A. at 1008.

On April 22, 1996, Princess filed a four-count complaint against GE, alleging breach of contract, breach of express warranty, breach of implied maritime warranty, and negligence. The district court granted GE's motion for summary judgment as to the negligence claim. Following Princess's presentation of evidence at trial, GE made a motion for judgment as a matter of law, which the district court denied. At the conclusion of the defendant's presentation of evidence, the district court denied GE's second motion for judgment as a matter of law. In instructing the jury, the district court drew on principles set forth in U.C.C. § 2-207 and allowed the jury to imply the following terms as part of the contract: (1) the warranty of merchantability; (2) the warranty of fitness for a particular purpose; (3) the warranty of workmanlike performance; (4) Princess's right to recover damages for GE's alleged breach of the contact; and (5) Princess's right to recover incidental and consequential damages, as well as lost profits, proximately caused by GE's alleged breach. On January 24, 1997, the jury returned a $4,577,743.00 verdict in favor of Princess. On February 3, 1997, GE renewed its motion for judgment as a matter of law requesting that the court vacate the jury's award of incidental and consequential damages. The district court heard oral argument on May 6, 1997. Following oral argument, the district court denied GE's renewed motion for judgment as a matter of law and issued an opinion clarifying its ruling.

II. STANDARD OF REVIEW

The Court reviews de novo the district court's denial of GE's renewed motion for judgment as a matter of law. See In re Wildewood Litig., 52 F.3d 499, 502 (4th Cir.1995). Judgment as a matter of law is proper "when, without weighing the credibility of the evidence, there can be but one reasonable conclusion as to the proper judgment." Singer v. Dungan, 45 F.3d 823, 826 (4th Cir.1995) (citation omitted). In reviewing the district court's decision, we consider the evidence in the light most favorable to the nonmovant to determine whether the evidence presented at trial was sufficient to allow a reasonable jury to render a verdict in the nonmovant's favor. See Andrade v. Mayfair Management, Inc., 88 F.3d 258, 261 (4th Cir.1996).

III. TO APPLY U.C.C. PRINCIPLES TO A MARITIME CONTRACT FOR SERVICES WOULD HINDER ADMIRALTY LAW'S GOALS OF UNIFORMITY AND PREDICTABILITY

Although GE contended that the district court was required to determine whether goods or services predominated before applying U.C.C. principles to the GE-Princess contract, the district court found it "unnecessary for the Court to determine whether the contract is primarily one for goods or services. In either case, the UCC is regarded as a source of admiralty law." J.A. at 2024. We respectfully disagree.

One of the primary concerns of admiralty law is uniformity and predictability. See American Dredging Co. v. Miller, 510 U.S. 443, 450-51, 114 S.Ct. 981, 986-87, 127 L.Ed.2d 285 (1994) (noting the constitutionally based principle that admiralty law should be "a system of law coextensive with, and operating uniformly in, the whole country") (quoting The Lottawanna, 88 U.S. (21 Wall.) 558, 575, 22 L.Ed. 654 (1900)); Coats v. Penrod Drilling Corp., 61 F.3d 1113, 1137 (5th Cir.1995) ("Uniformity and predictability are important in admiralty...."). To avoid the creation of multiple and conflicting rules of decision in admiralty, the Fourth Circuit has stated that, "Absent reason to do otherwise, we prefer to adopt rules in admiralty that accord with, rather than diverge from, standard commercial practice." Finora Co. v. Amitie Shipping, Ltd., 54 F.3d 209, 213-14 (4th Cir.1995). As discussed in more detail below, standard commercial practice requires that a transaction be predominantly for the sale of goods before the U.C.C. applies. See Coakley & Williams, Inc. v. Shatterproof Glass Corp., 706 F.2d 456, 460 (4th Cir.1983); Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir.1974).

In its May 13, 1997 opinion, the district court correctly noted that U.C.C. principles inform admiralty law. See Southworth Mach. Co. v. F/V Corey Pride, 994 F.2d 37, 40 n. 3 (1st Cir.1993); Clem Perrin Marine Towing, Inc. v. Panama Canal Co., 730 F.2d 186, 189 (5th Cir.1984). However, we are unpersuaded by cases cited to support the district court's legal determination that U.C.C. §...

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