Mississippi Chemical Corp. v. Dresser-Rand Co.

• Decision Date: 29 March 2002
• Docket Number: No. 00-60723.,00-60723.
• Citation: 287 F.3d 359
• Parties: MISSISSIPPI CHEMICAL CORPORATION, Plaintiff-Appellee-Cross-Appellant, v. DRESSER-RAND COMPANY, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

287 F.3d 359

MISSISSIPPI CHEMICAL CORPORATION, Plaintiff-Appellee-Cross-Appellant, v. DRESSER-RAND COMPANY, Defendant-Appellant-Cross-Appellee.

No. 00-60723.

United States Court of Appeals, Fifth Circuit.

March 29, 2002.

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John B. Clark (argued), C. Michael Ellingburg, Daniel, Coker, Horton & Bell, Michael Brunson Wallace, Phelps Dunbar, Jackson, MS, for Mississippi Chemical Corp.

Fred H. Krutz, III, Daniel J. Mulholland (argued), David Harrison Fulcher, Forman, Perry, Watkins, Krutz & Tardy, Jackson, MS, for Dresser-Rand Co.

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

Before JOLLY and PARKER, Circuit Judges, and MILLS^*, District Judge.

E. GRADY JOLLY, Circuit Judge:

This appeal presents issues under Mississippi law concerning the statute of limitations for breach of warranty claims, contractual warranties, and the assessment of damages resulting from the failure of machinery.

In 1989, Dresser-Rand Company ("Dresser") designed and sold Mississippi Chemical Corporation ("MCC") a gas compressor train for use in the production of ammonia. The compressor train consisted of, inter alia, two separate compressors — a high case compressor and a low case compressor.¹ The compressor train did not work as promised. The high case compressor broke in 1990. The low case compressor broke in 1993 and again in 1996. Each time one of the compressors malfunctioned, Dresser attempted to repair the compressor train.

MCC eventually filed suit, claiming negligent design, breach of express warranty, and breach of the implied warranties of merchantability and fitness for a particular purpose. A jury awarded MCC damages on the warranty claims in the amount of $4,422,876.92. Dresser appeals the judgment, arguing issues relating to the statute of limitations, to the terms of the warranty, to the proper notice of breach of the warranty, and to damages.²

We hold first that the statute of limitations does not preclude MCC's express warranty claim because the failure of the repair or replace remedy for the warranty occurred within six years of the date that the complaint was filed. Second, we hold that the express terms of the warranty do not bar MCC's cause of action. Third, we hold that MCC provided adequate notice of the defects in the compressor train to trigger liability under the express warranty. Finally, we hold that the damage award calculation made by the jury was not (1) as a substantive matter, incorrect or (2) under the evidence presented, speculative. Accordingly, we affirm the judgment of the district court.

I

MCC produces ammonia at its fertilizer plant in Yazoo City, Mississippi. For the most part, the ammonia is used as an input in fertilizer — a small amount is sold on the market or stored in inventory for future use. The production of ammonia involves the compression of gas in a compressor train. Each train consists of, among other things, a low case and a high case compressor.

In 1989, in an effort to increase its ammonia production, MCC bought a specially designed compressor train from Dresser. The sales contract for the train contained an express warranty guaranteeing that the train would be free from defects and comport with certain technical specifications. As an exclusive remedy for the breach of this warranty, Dresser offered to correct promptly any defect at its own expense.

In April 1990, the high case compressor broke. MCC notified Dresser of the problem and shipped the high case compressor to New Orleans for repair. Dresser supplied a redesigned compressor and assured MCC that this new compressor would cure all the defects in the train.

In December 1992, however, MCC began to experience excessive vibrations in the low case compressor. In May 1993, these vibrations became sufficiently severe to require a reduction in the speed of the compressor train. This reduction resulted in a loss of ammonia production.

In September 1993, Dresser identified a fracture in a component (the 7th stage impeller) of the low case compressor as the cause of the vibration problem and recommended a modification of that component. In December 1993 and again in November-December 1996, similar vibration problems were identified in the other components of the low case compressor (specifically, the 4th, 5th, and 6th stage impellers). Dresser agreed to inspect and modify these components.

In December 1996, Dresser advised MCC that similar repairs would have to be made to the impeller components of the high case compressor.

In March 1997, MCC filed suit for breach of the express warranty, breach of the implied warranties of merchantability and fitness for a particular purpose, and negligent design.

Dresser filed a motion to dismiss, asserting that Mississippi Chemical's warranty claims were barred by the statute of limitations. In denying the motion, the district court found that Dresser's statute of limitations defense contained mixed questions of law and fact and, therefore, was not amenable to summary disposition.

After discovery, Dresser filed a motion for summary judgment asserting again that the statute of limitations barred the warranty claims and, for the first time, asserted that the "economic loss" doctrine barred MCC's negligent-design claim.³ The district court denied this motion.

The case proceeded to trial. At the end of MCC's case-in-chief, Dresser renewed its motion for judgment as a matter of law based on the same reasons given in its summary judgment motion. The district court granted the motion in part, holding that the "economic loss" doctrine barred MCC's negligent design claim. On the remaining warranty claims, however, the case went to the jury.

The jury found that Dresser had breached (1) the implied warranty of merchantability; (2) the implied warranty of fitness for a particular purpose; and (3) the express warranty. The jury based its breach of the express warranty finding on a conclusion that the exclusive "repair and replacement" remedy had failed its essential purpose. The jury awarded MCC $4,422,876.92 in damages for the profits lost during the three different periods when the compressor train was malfunctioning.

The district court then denied Dresser's post-verdict motions for (1) judgment as a matter of law and (2) remittitur or a new trial. Dresser now appeals the denial of these motions.⁴

We review de novo the district court's ruling on a motion for judgment as a matter of law. See Cozzo v. Tangipahoa Parish Council-President Government, 279 F.3d 273, 280 (5th Cir.2002) (citation omitted). However, when an action is tried by a jury, such a motion is a challenge to the legal sufficiency of the evidence supporting the jury's verdict. Brown v. Bryan County, OK., 219 F.3d 450, 456 (5th Cir.2000), cert. denied, 532 U.S. 1007, 121 S.Ct. 1734, 149 L.Ed.2d 658 (2001). Accordingly, we consider the evidence "drawing all reasonable inferences and resolving all credibility determinations in the light most favorable to the non-moving party[.]" Id. Furthermore, we must always keep in mind "that our standard of review with respect to a jury verdict is especially deferential." Id. Thus, we will reverse "only if no reasonable jury could have arrived at the verdict." Snyder v. Trepagnier, 142 F.3d 791, 795 (5th Cir. 1998) (citation omitted), cert. dismissed, 526 U.S. 1083, 119 S.Ct. 1493, 143 L.Ed.2d 575 (1999).

We review the denial of a motion for new trial for abuse of discretion. See Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1049 (5th Cir.1998) ("Absent a clear showing of an abuse of discretion, we will not reverse the trial court's decision to deny a new trial.") (citations and internal quotation marks omitted).

II

We first address Dresser's arguments with respect to liability.

A

(1) Dresser argues that it is not liable for the breach of the express or implied warranties because the statute of limitations bars any warranty-based cause of action.

The Mississippi version of the UCC sets out the statute of limitations for contract claims:

(1) An action for breach of any contract for sale must be commenced within six (6) years after the cause of action has accrued.

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when the tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.

MISS. CODE ANN. § 75-2-725(1)-(2). Dresser argues that the second sentence of Section 75-2-725(2) bars any cause of action based on breach of warranty — implied or express. Dresser correctly states that in breach of warranty cases, the Code defines, as the starting date for the statute of limitations, the date of delivery in all but one situation (i.e., where there has been a guarantee of future performance).

Applying this definition to the facts at hand, Dresser states that it is undisputed that it delivered the compressor train to MCC in 1989, more than six years before MCC filed its complaint. Consequently, Dresser concludes that all of MCC's warranty claims are barred as a matter of law. With respect to MCC's express warranty claim, this argument is unpersuasive.

The express warranty for the compressor train reads in relevant part:

Seller warrants to Purchaser that the Equipment supplied hereunder by Seller will be free from defects in material and workmanship, will be of the kind and quality designated and described in this Offer and will conform with all applicable specifications and drawings incorporated herein. If, within eighteen (18) months from the date of delivery of the Equipment to Purchaser, or (12) months from the date of start-up, whichever occurs first, Seller...