BMC Industries, Inc. v. Barth Industries, Inc.

• Citation: 160 F.3d 1322
• Decision Date: 18 November 1998
• Docket Number: Nos. 95-5137,95-5338,s. 95-5137
• Parties: 37 UCC Rep.Serv.2d 63, 12 Fla. L. Weekly Fed. C 267 BMC INDUSTRIES, INC., Plaintiff-Appellee, v. BARTH INDUSTRIES, INC., Nesco, Inc., f.k.a. Nesco Management, Inc., Barth Industries Co. Limited Partnership, BIC Corporation, Nesco Holdings, Inc., f.k.a. Nesco, Inc., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1322

160 F.3d 1322

37 UCC Rep.Serv.2d 63, 12 Fla. L. Weekly Fed. C 267

BMC INDUSTRIES, INC., Plaintiff-Appellee, v. BARTH INDUSTRIES, INC., Nesco, Inc., f.k.a. Nesco Management, Inc., Barth Industries Co. Limited Partnership, BIC Corporation, Nesco Holdings, Inc., f.k.a. Nesco Inc., Defendants-Appellants.

Nos. 95-5137, 95-5338.

United States Court of Appeals, Eleventh Circuit.

Nov. 18, 1998.

Arthur J. England, Jr., John G. Crabtree, Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami, FL, for Defendants-Appellants.

John R. Hargrove, Heinrich, Gordon, Hargrove, Weihe & James, Ft. Lauderdale, FL, for Plaintiff-Appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before TJOFLAT and BARKETT, Circuit Judges, and GODBOLD, Senior Circuit Judge.

TJOFLAT, Circuit Judge:

This appeal arises from a contract entered into between BMC Industries, Inc., and Barth Industries, Inc., for the design, manufacture, and installation of equipment to automate BMC's production line for unfinished eyeglass lenses. Eighteen months after the delivery date set out in the contract had passed, BMC filed suit against Barth for breach of contract. ¹ Barth, in turn, counterclaimed for breach of contract. BMC's suit also included a claim against Barth's parent company, Nesco, Inc. ² According to BMC, Nesco had orally promised to ensure Barth's completion of the contract, and therefore was liable under the theory of promissory estoppel for Barth's nonperformance.

A jury resolved the breach of contract and promissory estoppel issues in favor of BMC, and returned a verdict of $3 million against Barth and $2.1 million against Nesco. After denying Barth's and Nesco's alternative motions for judgment as a matter of law and for a new trial, the district court rendered judgment in accordance with the jury's verdicts, and Barth and Nesco appealed. We affirm the district court's decision denying Barth judgment as a matter of law. We conclude, however, that the court erroneously instructed the jury on the contract issues, and therefore vacate the judgment against Barth and remand the case for a new trial on these issues. As for Nesco, we conclude that the court should have granted Nesco judgment as a matter of law, and thus direct the district court to dismiss Nesco from this case.

I.

A.

BMC, through its Vision-Ease division, manufactures semi-finished polymer opthalmic lenses that are used in the production of eyeglasses. These lenses are created by an assembly-line process. First, an employee fills a mold assembly with a monomer fluid, and places the mold assembly on a conveyor. Next, the assembly is inspected and then heated and cured until the monomer solidifies into a plastic lens. Finally, the lens is removed from the mold assembly through a process called "de-clipping and de-gasketing"; an employee removes the spring clip holding the mold assembly together and slices open the rubber gasket that holds the lens. The lens is then packaged and sold to a finished eyeglass retailer.

In order to decrease labor costs, and thereby remain competitive with other lens manufacturers who were utilizing cheaper foreign labor, BMC decided to become the first company to automate portions of its lens manufacturing process. Consequently, in early 1986, BMC commissioned Barth to complete a preliminary design and feasibility study. Barth's subcontractor, Komech, finished the study in June 1986. Based on this study, Barth and BMC entered into a contract (the "Contract") which provided that Barth would "design, fabricate, debug/test and supervise field installation and start up of equipment to automate the operations of mold assembly declipping, clip transport, mold assembly clipping, and mold filling." The Contract, which stated that it was governed by Florida law, listed a price of $515,200 and provided for delivery of four automated production lines by June 1987. The Contract also stated that time was of the essence.

On November 4, 1986, Barth and BMC executed a written amendment to the Contract, extending the delivery date by one month. In February 1987, Barth terminated Komech as design subcontractor, and hired another engineering company, Belcan, in its place. Belcan subsequently redesigned the automation equipment, which delayed Barth's progress and led the parties to execute the second (and last) written amendment, which extended the delivery date to "October 1987."

After this second amendment, Barth continued to experience technical problems and design difficulties that caused repeated delays. The parties did not extend the delivery date beyond October 1987 to accommodate these delays, however. Instead, Barth and BMC each demonstrated a willingness to continue performance under the Contract.

One such delay, for example, occurred in June 1987, when Belcan decided that the equipment design posed a risk of explosion because of the proximity of certain chemicals to electrical components. Although BMC perceived no such risk, it told Barth and Belcan to "go ahead" and redesign the equipment. Barth revised its estimated delivery schedule to account for the resulting delay, listing December 1987 as the new delivery deadline. It sent this schedule to BMC with a cover letter that stated: "Please look over the attached & let me know what you think." BMC's response, if any, is not contained in the record.

This design problem was only one of many technical difficulties that developed; other problems arose with the filling nozzles and mold assembly springs, among other components. Consequently, by October 1987, the amended Contract's delivery deadline, Barth estimated that it could not deliver the equipment until April 1988. BMC executives were still anxious, however, to continue the automation project. Thus, during the spring of 1988, although they protested Barth's failure to deliver the equipment on time, these executives encouraged Barth to continue working on the project.

In June 1988, Barth completed the four automated de-clip/de-gasket machines and delivered them to BMC. Without the entire automated system, however, BMC could not fully test these machines; the whole production line had to be in place.

By August 1988, BMC's mounting apprehension about Barth's ability to perform led it to seek assurance that Barth would be able to complete performance under the Contract. In an effort to obtain such assurance, BMC executives met with Robert Tomsich, a Barth officer (and director) who also served as Nesco's president. ³ According to these executives, Tomsich ensured them that Barth would perform the Contract, that Nesco's resources were committed to the project, and that, in the future, BMC should deal directly with Nesco.

Although BMC had considered terminating the Contract and suing Barth for breach, BMC took neither step. ⁴ Instead, it continued to lead Barth and Nesco to believe that it was determined to finish the project; BMC collaborated with Barth's engineers to overcome difficulties, suggested design changes, and asked Barth whether more money (presumably provided by BMC) would help it complete the equipment in less time.

By January 1989, Barth still had not produced a functioning automation system. Due to time and cost overruns, Barth had invested over $1 million of its own money in the project. BMC previously had agreed to compensate Barth for these additional expenses; consequently, during that month, Tomsich asked BMC for $250,000 to cover some of Barth's cost overruns. One month later, BMC responded with a $100,000 payment, along with a letter stating that BMC was "insisting on Barth's adherence to the projected schedule," and was "not waiving any rights or remedies" for any breach, including "Barth's failure to meet the delivery dates specified in the contract." Barth's latest schedule called for delivery in June 1989.

Barth's delays and setbacks continued throughout the spring of 1989; but while BMC encouraged Barth to carry on, and continued to cooperate with Barth's engineers to solve problems, BMC also became increasingly impatient. In March, and again in April 1989, BMC pointed out Barth's unacceptable failure to meet deadlines.

Near the end of May 1989, Barth notified BMC that it had finally completed the mold assembly filling machine and that it would deliver the equipment F.O.B. Barth's dock in accordance with the Contract. BMC refused delivery of the mold assembly filler, and instead filed this lawsuit on June 5, 1989.

B.

BMC's complaint ⁵ contained fourteen counts. ⁶ Seven of the counts were based on representations made by Barth and Nesco both prior to the formation of the Contract and during its performance, six of the counts sought to impose liability on Barth's and Nesco's successors in interest, ⁷ and one count sought recovery against Barth's directors under the Delaware Corporate Code. By the time of the final pretrial conference, BMC's complaint had been reduced to three claims: breach of contract against Barth (count I), fraudulent misrepresentation against Barth (count II), and promissory estoppel against Nesco (count VIII).

BMC's breach of contract count alleged that the second written amendment to the Contract established October 1987 as the deadline for Barth's performance. Because Barth failed to deliver the automated equipment by that date, Barth was in default of its contractual obligations. BMC sought damages for Barth's breach in the sum of $6.4 million. Two separate injuries suffered by BMC comprised this measure of damages. First, BMC sought to recover the labor costs that it would have saved had it been able to use the automated equipment rather than pay employees to produce the lenses manually. Because BMC executives predicted that the automated equipment would have a useful life of ten years, BMC sought these lost labor savings for the ten year period from October 1987 until October 1997. Second, BMC sought compensation for what it...