Brisbin v. Superior Valve Co.

• Citation: 398 F.3d 279
• Decision Date: 14 February 2005
• Docket Number: No. 03-1851.,No. 03-1793.,03-1793.,03-1851.
• Parties: Kirk BRISBIN, d/b/a Specialty Manufacturing v. SUPERIOR VALVE COMPANY; Sherwood; Harsco Corporation; Taylor-Wharton Gas Equipment Division Harsco Corporation, Sherwood; Taylor-Wharton Gas Equipment Division, Appellants Kirk Brisbin, d/b/a Specialty Manufacturing, Appellant v. Superior Valve Company; Sherwood; Harsco Corporation; Taylor-Wharton Gas Equipment Division.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

398 F.3d 279

Kirk BRISBIN, d/b/a Specialty Manufacturing v. SUPERIOR VALVE COMPANY; Sherwood; Harsco Corporation; Taylor-Wharton Gas Equipment Division

Harsco Corporation, Sherwood; Taylor-Wharton Gas Equipment Division, Appellants Kirk Brisbin, d/b/a Specialty Manufacturing, Appellant v. Superior Valve Company; Sherwood; Harsco Corporation; Taylor-Wharton Gas Equipment Division.

No. 03-1793.

No. 03-1851.

United States Court of Appeals, Third Circuit.

Argued March 24, 2004.

Decided February 14, 2005.

COPYRIGHT MATERIAL OMITTED

Melissa H. Maxman, Duane Morris, Philadelphia, PA, Samuel Goldblatt, Nixon Peabody LLP, Buffalo, NY, David H. Tennant (Argued), Nixon Peabody LLP, Rochester, NY, for Appellants/Cross-Appellee.

George E. McGrann (Argued), Sarah E. Diedrich, Schnader, Harrison, Segal & Lewis, Pittsburgh, PA, for Appellee/Cross-Appellant.

Before: ROTH, AMBRO, and CHERTOFF, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

This dispute arises out of a long-term supply relationship gone bad. The plaintiff is Kirk Brisbin, an individual doing business as Specialty Manufacturing ("Specialty").¹ Superior Valve Company ("Superior"), one of the named defendants, was acquired by defendant Harsco Corporation in the fall of 1998. After a bench trial, judgment ultimately was entered in favor of Specialty in the amount of $746,675. On appeal, we review the Magistrate Judge's conclusions regarding adequate assurance and damage issues. We affirm in part, reverse in part and remand for further proceedings.

I. Factual Background and Procedural History

In 1997 Brisbin and Superior began negotiating long-term supply contracts whereby Specialty would sell Superior certain industrial goods. The result was two separate contracts in May 1998.² The first was for the sale of brass valves (hereinafter referred to as the "1065 valves"). The second contract was for the sale of two-inch, three-inch, four-inch and five-inch brass shell castings (hereinafter referred to generally as "shells").

The performance of both contracts was subject to certain quality control standards. Before Specialty could manufacture either the 1065 valves or any of the shells on a full-time basis, it had to receive approval from Superior. The initial step in the approval process was known as First Article Inspection ("FAI"). Stated briefly, FAI would test whether the material and dimensions of the item met requirements. Upon FAI approval, Specialty would begin a trial-production run of 100 pieces. Superior would then conduct tests to evaluate the consistency of the pieces. Only after Superior's approval of the samples from the trial-production run could Specialty begin full-time production.

According to a memorandum written by Ed Wingenroth, Superior's Director of Quality Assurance, Superior gave FAI approval to Specialty for the 3" shells on January 25, 1999. Superior then ordered a 100-piece trial-production run. Specialty completed the order in March. But because the shells were manufactured in South Korea,³ Superior did not receive them until the beginning of June. Brisbin testified that Wingenroth tested the trial-production shells in April (in South Korea) prior to shipment. Superior, however, conducted additional testing in late July. Several Superior employees testified that this testing uncovered problems with the bronze alloy with which the shells were made.

For the 1065 valves, Wingenroth gave FAI approval in a letter written May 27, 1999. Superior claims that it never authorized Wingenroth to give FAI approval because the valve samples did not meet testing requirements. Yet Superior asked Specialty to begin the 100-piece trial-production run for the 1065 valves in early June.

Specialty could not complete this trial-production run. According to Brisbin, his South Korean manufacturers were unable to source six of the required component parts for the 1065 valves. In a June 21 letter, Brisbin formally requested that Superior supply these component parts. Superior previously had supplied a limited number of component parts, enabling Specialty to manufacture samples and thus facilitating the FAI approval process. Superior however, decided not to supply the components for the trial-production run.⁴ Specialty apparently was not informed of this decision.

Beginning in late June and continuing through July, Brisbin was frustrated with what he perceived as Superior's dilatory tactics.

Well, I had spent over two years now of my time, considerable expense to my family, my business, and I was just not getting any direction.... At that point management clearly was not supporting the programs. I was having trouble having correspondence returned.... As of June, I will say late June, there was just starting to become a total collapse of effort and support in showing good faith toward the programs.

The one person at Superior with whom Brisbin corresponded was Joe Kilmer, the Director of Purchasing. But Brisbin testified that, while Kilmer was helpful in the sense that he actually returned calls, he did not facilitate Brisbin's repeated attempts to get feedback on the 1065 valves and 3" shells projects.

At the end of July, Brisbin spoke with Kenneth Miller — Vice President and General Manager of a division of Harsco Corporation — concerning the projects' status. As a result, Brisbin and various Superior employees held a conference call on August 2. According to Brisbin, Superior told him for the first time that the FAI approvals for both the 3" shells and the 1065 valves were either missing or did not exist. He was also informed that Superior would require additional testing.⁵ For the 1065 valves, a Superior engineer allegedly informed Brisbin on the call that the project was a low priority and would not receive any attention for several weeks. Despite Brisbin's repeated requests, Superior never supplied Specialty with any of the test results for either the 1065 valves or the shells demonstrating product nonconformance or the specific requirements Specialty would have to meet in order to be reapproved.

Brisbin memorialized his frustrations with Superior in an August 5 fax to Miller. It contained the following statements:

• Additionally, I am now hearing my programs have not passed first article inspections, when I have signed documents from your Quality Control Manager at the time saying they are....

• I can not ... continue to pour my money ... into these programs, having never asked Superior Valve Company to pay one penny, if your employees are going to continue to deny, stall, fabricate, lose documents, lose samples, deny documents exist, issue incorrect purchase orders, change requirements, etc.

• I require these three invoices be paid to me, and that I receive this check of $112,868 in its entirety, before the close of business on Thursday, 19 August 1999, in my office in Texas.

• I want very much for these programs to go forward, but I must have, after two years, your company come forward and finally illustrate its good faith and pay the tooling and molding costs in as much [sic] as they continue to find reason to stall these programs.

• I would certainly expect ... some sort of preliminary agreement be signed by me agreeing with the reason the payment is being made, and to show clearly what my obligations are for this payment.

Brisbin received two responses to his August 5 fax. In an August 11 letter, Superior formally rescinded the FAI approvals given by Ed Wingenroth for the 3" shells and the 1065 valves. The letter informed Brisbin that "a review of inspection documents shows that some required tests were not performed, and some dimensions were in nonconformance to [e]ngineering specifications." In an August 12 fax, Miller accused Brisbin of "attempting to establish a breach of contract" and denied that Superior was obligated to make any payments, but suggested that the parties arrange another conference call.

As a result, another conference call took place on August 17. In a fax that same day, Brisbin wrote:

• I am certainly interested in these programs and only wish they move forward as originally intended.

• However, understand Specialty Manufacturing believes, and has overwhelming documentation to support, our belief, that our products have already been fully test[ed] and approved.

• If additional testing and approvals are now required by Superior Valve Company — I understand. If this is the case, however, Specialty Manufacturing needs these new requirements in writing, and as soon as possible, and would expect Superior Valve Company to [bear] the additional costs incurred by Specialty Manufacturing in complying with these new conditions.

• In view of the delays in moving forward ... [,] I believe it is time for Superior Valve Company to now absorb these startup costs. As earlier stated to you, we request this immediately be discussed and agreed upon. I will discuss different options or arrangements than previously required, but this very importantly needs to be resolved, and soon.

Miller responded with a short fax to Brisbin disagreeing with his characterization of the phone conversation.

On September 1, Brisbin faxed to Miller a final attempt to reconcile the situation. After summarizing the past communications between the two companies, Brisbin stated:

If Superior Valve ... has any last minute ideas which would allow these programs to move forward, I would certainly listen, as I always have. Up to this point, however, I have not seen an expressed interest for these programs ['] forward movement by management....

The only response to this fax was a September 8 letter by Irene Ratajczak, a "Senior Administrative Assistant" at Superior, declaring its intention to refer "this matter over to our legal department."

Brisbin subsequently filed suit in the Western District of Pennsylvania seeking damages for breach of contract. Specifically, he requested lost profits from the two written contracts and the...