298 F.3d 13 (1st Cir. 2002), 01-1240, Correa v. Cruisers, a Div. of KCS Intern., Inc.

Docket Nº:01-1240, 01-1241.
Citation:298 F.3d 13
Party Name:Arturo CORREA, Melisa Mosca-De-Correa, Conjugal Partnership Correa-Mosca, Plaintiffs, Appellees, v. CRUISERS, A DIVISION OF KCS INTERNATIONAL, INC., Defendant, Appellant. Arturo Correa, Melisa Mosca-De-Correa, Conjugal Partnership Correa-Mosca, Plaintiffs, Appellees, v. Crusader Engines, Thermo Power Corporation, Defendants, Appellants.
Case Date:July 23, 2002
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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298 F.3d 13 (1st Cir. 2002)

Arturo CORREA, Melisa Mosca-De-Correa, Conjugal Partnership Correa-Mosca, Plaintiffs, Appellees,



Arturo Correa, Melisa Mosca-De-Correa, Conjugal Partnership Correa-Mosca, Plaintiffs, Appellees,


Crusader Engines, Thermo Power Corporation, Defendants, Appellants.

Nos. 01-1240, 01-1241.

United States Court of Appeals, First Circuit

July 23, 2002

Heard March 5, 2002.

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Luis N. Blanco-Matos, for appellant Thermo Power Corporation. Jorge C. Cruz-Jove, with whom Juan B. Soto-Balbas, Mercado & Soto, Michael G. Derrick, Roane Waring, III and Shuttleworth, Williams, Harper, Waring & Derrick were on brief for appellant Cruisers.

Francisco M. Troncoso, with whom Richard Schell-Asad was on brief, for appellees.

Before TORRUELLA, Circuit Judge, COFFIN, Senior Circuit Judge, and SELYA, Circuit Judge.

TORRUELLA, Circuit Judge.

Defendants-appellants, Cruisers, a Division of KCS International, Inc., and Thermo Power Corporation, appeal from a jury verdict finding that they breached a warranty against hidden defects in the sale of a motorboat to plaintiffs. In accordance with the jury's verdict, the United States District Court for the District of Puerto Rico ordered rescission of the sales contract and return of the purchase price of the boat, plus interest. In addition, the jury awarded to the plaintiffs their costs for dockage, repair and maintenance, insurance premiums, and license fees. The district court further awarded attorney's

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fees based on its determination that defendants acted obstinately in the course of the litigation. On appeal, defendants-appellants contend that the plaintiffs' claim for breach of warranty against hidden defects is barred by the statute of limitations. Alternatively, even if the claim was properly before the district court, defendants-appellants contend that the district court erred in allowing the testimony of plaintiffs' expert, in permitting the jury to award non-defect-related expenses, and in granting attorney's fees. We affirm in part and reverse in part, remanding the case for action consistent with this opinion.

I. Background and Procedural History

Despite having weathered an eight-day jury trial, the facts in this case are far from settled. However, since this is an appeal from a denial of judgment as a matter of law, which we review de novo, we will present the relevant facts in the light most favorable to the plaintiffs. See Down E. Energy Corp. v. Niagara Fire Ins. Co., 176 F.3d 7, 13-14 (1st Cir. 1999) (reviewing denial of judgment as a matter of law on limitations grounds de novo and in light most favorable to non-moving party).

On March 22, 1995, plaintiffs-appellees ("plaintiffs"), Arturo Correa ("Correa") and his wife Melissa Correa, purchased a 1995 Cruisers 3570-Esprit motor yacht ("yacht" or "boat") in San Juan, Puerto Rico from People's Marine. The yacht, manufactured by Cruisers, a Division of KCS International, Inc. ("Cruisers"), was equipped with two Crusader, model 454Xli, marine gasoline engines, manufactured by Thermo Power Corporation ("Crusader"). The plaintiffs paid $132,350 for the boat, which was delivered to them at the San Juan Bay Marina on June 11,1995.

Pursuant to the sale of the yacht, both Cruisers and Crusader issued limited warranties, guaranteeing to repair or replace, free of charge, any defects in their respective products. Cruisers' warranty provided five years of coverage for the hull of the boat and one year for all other items manufactured by Cruisers. Crusader's warranty covered the engines for two years.

In the two months after the plaintiffs received their boat, they took several excursions to Fajardo, Puerto Rico and to the U.S. Virgin Islands. On these outings, plaintiffs experienced problems with the engines, including backfiring, stalling, and an inability to start. On July 26, 1995, Correa wrote a letter of complaint to Cruisers, with a copy to People's Marine, describing the problems that plaintiffs had encountered with the boat, including engine troubles.

Correa, in August of 1995, made further complaints to People's Marine about "hard starting" of the engines, meaning that the engines would not restart immediately after they had been running for awhile and were then shut off. Crusader was familiar with "hard starting" as a common symptom of "vapor lock," which other manufacturers had been experiencing in the summer of 1995 due to a new fuel pump in Crusader engines. Crusader had found that the installation of additional fuel booster pumps had solved the hard starting problem. Accordingly, it ordered two booster pumps, which were installed on plaintiffs' yacht by People's Marine sometime during September of 1995.

After the booster pumps were installed, the Correas continued to experience engine problems. On September 25, 1995, Correa wrote another letter to Cruisers, explaining that the engines were stalling and backfiring. In this letter, Correa informed Cruisers that he had already alerted People's Marine of the continuing problem.

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On October 21, 1995, Crusader sent Paul Doppke, a certified Crusader marine engine specialist, to Puerto Rico to examine Correa's engines. Doppke found that the booster pumps had been misinstalled by People's Marine, which explained the continuing engine problems. Doppke removed the booster pumps and instead installed a new fuel delivery system that Crusader had found to eliminate the vapor lock problem. Doppke, with Correa aboard the yacht, then conducted a sea trial and performed diagnostic tests to determine how the engines were running. During the sea trial, which lasted over four hours, the engines ran without any difficulties.

During the trial, there was evidence that after the installation of the new fuel delivery system Correa took his boat out to watch an offshore race in San Juan Bay and experienced engine problems.1 On November 10, 1995, Correa again contacted Cruisers to alert the company. That same day, following the telephone conversation, Correa sent a letter indicating that he expected Cruisers and Crusader to fix his engines and Cruisers to repair the other problems with the boat, including, inter alia, leaks, a rusting ice-maker door, defective wipers, and a broken gas alarm, that had plagued him since the time of delivery or shortly thereafter.

In response to Correa's complaints, Cruisers and Crusader sent a team of their top management and technical personnel to Puerto Rico to inspect Correa's yacht. This team included Gerald Scott, Vice President and General Manager of Crusader; Jim Viestenz, President of Cruisers; Jim Hayes, Customer Service and Quality Control Manager for Cruisers; Andrew Prietz, Customer Service Manager for Crusader; Guillermo Cidre, owner of People's Marine; and Osmani del Pino, a mechanic employed by People's Marine. The Crusader and Cruisers representatives, along with Correa, took the boat out for a sea trial. The group experienced no noticeable engine problems. In addition, computer monitoring of the engines indicated that the engines were functioning properly. Prior to leaving, Gerald Scott asked Correa to call him directly if Correa experienced further engine problems so that he could ensure that Crusader would fix or replace the engines.

Immediately after this inspection visit, on December 6, 1995, Cruisers wrote to Correa to summarize the repairs and replacements that, pursuant to the inspection, would be made under warranty by People's Marine. On December 11, 1995, Crusader wrote to Correa, reassuring him that the engines were running properly according to the inspection, but suggesting that the propellers be repitched. After People's Marine had performed at least some of the prescribed replacements and repairs, Correa wrote another letter to Cruisers on December 26, 1995, detailing repairs that had not been completed by People's Marine and further repairs or replacements that were required. In this letter, Correa also advised Cruisers that People's Marine, in conducting the repairs, had noted that the engine water hoses were blistered and filled with water. In response, on January 12, 1996, Cruisers notified Correa that new water hoses were being sent to People's Marine for installation.

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There was testimony at trial that the boat would have been unusable until the water hoses were replaced because there was a danger of the boat sinking. Sometime after January 12, 1996, People's Marine did replace the engine water hoses, although it is unclear exactly when. Correa testified that the hoses were replaced in March or April of 1996.

At trial, there was testimony that Correa used his boat again in either January or February of 1996 to travel to Palomino Island, off the coast of Fajardo. There is a factual dispute as to whether Correa suffered engine problems during this venture. If Correa did experience problems during this trip, there was no evidence presented at trial that Correa made any further complaints to Cruisers, Crusader, or People's Marine. The evidence was also unclear as to whether this trip to Palomino Island occurred before or after the engine hoses were replaced.

The plaintiffs did not use their boat again until June of 1996. At this time they encountered engine problems while traveling to the U.S. Virgin Islands. On June 18, 1996, Correa again wrote to Cruisers detailing necessary repairs and service that had previously been communicated to Cruisers and/or People's Marine, but had not yet been completed. This letter, however, did not mention any problems with the engines. People's Marine responded on June 19, indicating that they had been trying to contact Correa to arrange a time to perform the...

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