Dacor Corp. v. Sierra Precision, 93-2708
| Citation | 19 F.3d 21 |
| Decision Date | 07 April 1994 |
| Docket Number | No. 93-2708,93-2708 |
| Parties | NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within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. DACOR CORPORATION, an Illinois corporation, Plaintiff-Counterdefendant-Appellee, v. SIERRA PRECISION, a California corporation, Defendant-Counterplaintiff-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Before CUMMINGS, Circuit Judge COFFEY, Circuit Judge EASTERBROOK, Circuit Judge
In a two-count complaint, Dacor Corporation, an Illinois corporation ("Dacor"), sued defendant Sierra Precision, a California corporation ("Sierra"), alleging breach of contract (R. 1 at 1, Complaint Count One) and breach of implied warranty of merchantability (R. 1 at 4, Complaint Count Two). Diversity jurisdiction was asserted under 28 U.S.C. Sec. 1332. After Dacor voluntarily dismissed the breach of contract claim, the remainder of the case proceeded, by consent of the parties, before Magistrate Judge Gottschall. Sierra then filed a counterclaim, alleging that the parties had reached an accord and satisfaction of their dispute and that Dacor had breach that agreement when it filed suit (R. 35 at 7, Answer and Counterclaim). Sierra prayed for its attorneys' fees and administrative costs as consequential damages (id. at 7-8). After a two-day trial, the magistrate judge awarded Dacor $136,721.78 on its breach of warranty claim and dismissed Sierra's counterclaim. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. Sec. 636(c)(3).
Dacor manufactures and sells a breathing apparatus denominated a regulator, which is inserted into divers' mouths and connected to air tanks that are transported under water on divers' backs. Since at least 1979 Dacor has purchased from Sierra hoses and hose assemblies that serve to connect the regulator to the air tank. Dacor sells these products to go with its regulator. Before 1985 the hose assemblies were constructed by Sierra with a 3/8" thread on the male end and an internal diameter of .190". This male end contained a fitting machined from one piece of metal, and Dacor apparently had never experienced problems with it.
In 1985 Dacor learned that a competitor, U.S. Divers, was marketing and selling a larger internal hose and hose assembly on its equipment. The larger internal diameter--at that time .201"--of those products would allow divers' air to flow more freely from the tank to the breathing apparatus. These hoses and hose assemblies were also manufactured by Sierra. Dacor therefore asked Sierra whether it could manufacture a hose and hose assembly with an internal diameter as large or larger than that of U.S. Divers, specifying its preferred internal diameter to be .250".
Sierra then forwarded to Dacor samples of the hose and hose assemblies that it was manufacturing for U.S. Divers. They differed from those being manufactured for Dacor as follows: (1) The U.S. Divers hose assembly then being manufactured by Sierra was a two-piece hose assembly in contrast to the one-piece assembly being manufactured for Dacor, and (2) the U.S. Divers samples had a greater internal hose and assembly diameter. Sierra informed Dacor that it could not safely make a hose assembly with a .250" diameter, but offered to make one with a .234" diameter. Dacor agreed. Later Sierra requested a change in the internal diameter to .230", and Dacor agreed. Sierra thereupon incorporated the new hose and hose assembly diameter into its two-piece hose assembly design, and filled several of Dacor's orders for the new product, which Dacor then sold as accessories for its regulator.
By the fall of 1986 approximately twelve of the new hose assemblies had been returned to Dacor by consumers or dealers on account of cracking or shearing in the two-piece male fitting to the hose assembly. The shearing always occurred at the gap between the two pieces of metal in the male fitting to the hose assembly. Sierra then conducted laboratory tests that confirmed that the two-piece assembly was subject to breakage. Because any failure of the hose assemblies during an actual dive could be life-threatening, Dacor and Sierra agreed that Sierra would redesign the fitting for the hose assembly and that the parties would conduct a recall of the defective product. Sierra redesigned the fitting so that the male end would be machined from one piece of metal, as it had been prior to the new design. Thereafter no failures of the redesigned hose assemblies were experienced by Dacor's customers.
During the recall, the details of which were negotiated at a meeting between the parties on July 8, 1987, Sierra replaced all remaining two-piece hose assemblies still in Dacor's possession with the new one-piece design. It also supplied replacement hose assemblies to be provided to customers pursuant to the recall. In so doing Sierra incurred approximately $141,000 in expenses. Dacor conducted the administrative side of the recall, and incurred $136,721.78 in expenses for notice to customers and in shipping the new hose assemblies. The dispute between the parties centers on responsibility for the costs of the recall: Dacor contends that Sierra is liable under the Uniform Commercial Code for breach of implied warranty of merchantability, thereby making Sierra liable for the recall costs, while Sierra contends, first, that it is not liable for breach of an implied warranty, and second, that the parties reached an accord and satisfaction whereby it was agreed that each party would assume the costs of its own portion of the recall.
Magistrate judge's findings
The magistrate judge found that an implied warranty of merchantability had arisen when the parties contracted for Dacor to purchase the two-piece .230"' internal diameter hose assembly from Sierra, and that the warranty had been breached when the product proved to be susceptible to cracking and shearing. She rejected Sierra's argument that the implied warranty of merchantability was excluded from the contract. She also rejected Sierra's contention that the parties had reached an accord and satisfaction concerning the costs of the recall.
To state the applicable standard of review is to dispose of this case: "Findings of fact ... shall not be set aside unless clearly erroneous...." Fed.R.Civ.P. 52(a). A finding is not clearly erroneous if it is "plausible in light of the record viewed in its entirety...." Anderson v. Bessemer City, 470 U.S. 564, 573-574. In ...
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