Sure-Trip, Inc. v. Westinghouse Engineering
| Decision Date | 08 February 1995 |
| Docket Number | INC,D,Nos. 721,SURE-TRI,875,s. 721 |
| Citation | 47 F.3d 526 |
| Parties | , Plaintiff-Appellant Cross-Appellee, v. WESTINGHOUSE ENGINEERING and Instrumentation Services Division, Defendants-Appellees, Westinghouse Electric Corporation, Defendant-Appellee Cross-Appellant. ockets 94-7619, 94-7637. |
| Court | U.S. Court of Appeals — Second Circuit |
David C. Douglas, Lockport, NY (Jackson, Wilson & Douglas, of counsel), for plaintiff-appellant-cross-appellee Sure-Trip, Inc.
Paul K. Stecker, Buffalo, NY (Phillips, Lytle, Hitchcock, Blaine & Huber, of counsel), for defendants-appellees and defendant-appellee-cross-appellant Westinghouse Engineering and Instrumentation Services Div., Westinghouse Elec. Corp.
Before: CARDAMONE, PIERCE, and MINER, Circuit Judges.
Plaintiff Sure-Trip, Inc. appeals from a judgment entered on May 20, 1994 in the District Court for the Western District of New York (Curtin, J.) granting it damages against defendants Westinghouse Electric Corporation and its Westinghouse Engineering and Instrumentation Services Division (collectively Westinghouse). Plaintiff contends the district court erred when it calculated contract damages using taxable income as plaintiff's measure of lost profits. An earlier order by the same court, dated October 31, 1991, granted plaintiff summary judgment, holding that the contract between the parties had been breached by Westinghouse. Westinghouse cross-appeals from that determination of liability.
In one of his proverbs Benjamin Franklin capsulizes the truism that a little neglect can cause a good deal of mischief, saying that "for want of a Nail, the Shoe was lost; for want of a Shoe the Horse was lost; for want of a Horse the Rider was lost." The Prefaces, Proverbs, and Poems of Benjamin Franklin, in Poor Richard's Almanac for 1758, at 275 (G.B. Putnam's Sons 1889). The record on this appeal reveals Sure-Trip's neglect in presenting its financial records, for want of which, proof of expenses was lost; for want of proof of expenses, proof of damages was lost; for want of proof of damages, plaintiff's suit might well have been lost. Here however plaintiff will get a second chance to establish its damages, as we conclude the district court erred in granting summary judgment on the issue of liability. Accordingly, we reverse the order granting summary judgment insofar as it held Westinghouse liable for breach of contract, vacate the damage award to Sure-Trip, and remand for a new trial.
Sure-Trip, Inc., a Delaware corporation with its principal place of business at Olcott, New York, manufactures circuit breaker retrofit kits that are used to upgrade commercial electrical systems. Westinghouse is a Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania. It uses retrofit equipment of the type manufactured by Sure-Trip, and itself manufactures similar kits. Beginning in March 1987 Westinghouse divisions around the In the summer of 1987, because Westinghouse became interested in testing Sure-Trip's product and exploring continued purchases, its representatives contacted Sure-Trip officers, James Fitts and William Penniston. Fitts, Penniston, and a Sure-Trip technician met with a Westinghouse representative at Westinghouse headquarters in Pittsburgh and delivered a sample kit and company literature. On October 1, 1987 Westinghouse representatives, including Raymond Baranowski, the purchasing manager of the Westinghouse Engineering & Instrumentation Services Division, met with Fitts and Penniston at the Sure-Trip plant in Olcott. At this meeting, the quality and quantity of retrofit kits Sure-Trip was capable of producing and the possibility of Westinghouse purchasing kits in bulk quantities at a discount were discussed. Westinghouse indicated it could potentially use 1200 of Sure-Trip's kits in 1988. Sure-Trip assured Westinghouse it could produce that number.
country periodically purchased small quantities of retrofit kits from Sure-Trip.
On October 5, 1987 Penniston sent a letter to Baranowski proposing a "pricing structure exclusive to Westinghouse based on an average volumn [sic] of one hundred kits per month." Baranowski thereupon drafted a contract incorporating this pricing proposal, reflecting the parties' earlier discussion of a volume discount. The proposed contract stated that Pennsylvania law, including the Uniform Commercial Code as in effect in Pennsylvania, would govern its terms. Baranowski sent this document to Sure-Trip on October 12, 1987. Both parties executed it a few days later.
The dispute centers on Paragraph I of the contract, which provides:
a. [Westinghouse] agrees to purchase a minimum of 100 kits per month starting January 1, 1988 through December 31, 1988. The 100 kits per month minimum to be calculated on a three-month average. If in any three-month period [Westinghouse] does not meet this volume commitment, then Sure-Trip will invoice the difference to [Westinghouse] between the 1987 list price of $889 and the contract price specified below.
* * * * * *e. Pricing
15 frame level without ground $756.00
25 frame level without ground $756.00
50 frame level without ground $756.00
75 frame level without ground $841.00
100 frame level without ground Quote only
15 frame level with ground $799.00
25 frame level with ground $799.00
50 frame level with ground $799.00
75 frame level with ground $844.00
100 frame level with ground Quote only
According to Baranowski, his aim in drafting Paragraph I was to permit Westinghouse to enjoy the proposed discounted prices if its purchases amounted to an average of 100 kits or more per month, with the price reverting to Sure-Trip's standard list price in the event that Westinghouse's purchases did not reach that level. Westinghouse commonly entered into similarly structured pricing agreements, and Baranowski stated that he crafted this contract by "paste and patch" from existing documents in his files. It was not his purpose, he averred, to commit Westinghouse to the purchase of any particular number of kits since he was not in fact authorized to commit his employer to the expenditure of more than $25,000 in any one contract.
Fitts and Penniston insist they understood the writing Baranowski sent them as committing Westinghouse to purchase 1200 retrofit kits in 1988. They understood Paragraph I as guaranteeing Sure-Trip quarterly "cash-flow protection" by providing that at the end of any quarter in which Westinghouse's purchases fell below 300 units, Sure-Trip could invoice Westinghouse for the difference between the $889 list price and the $756 discount price for 300 of the lowest-priced units--the difference being $133 times 300 or a total of $39,900--regardless of the number of units actually purchased.
As it turned out, Westinghouse only purchased 75 kits in all of 1988, paying the discount prices set forth in the contract. At the end of January 1988, at which point Westinghouse had purchased only 20 kits, Penniston sent a letter to Baranowski in response to defendant's negative engineering report on Sure-Trip's retrofit kits What does this mean? Is it a good product or not a good product. [sic] If we do not have a contract, please advise us so immediately so we may adjust our inventory and if we do have a contract, we would like a report from the Engineering Department accepting our product, and it being distributed [sic] to all Engineering Services Divisions.
A few months later, on May 3, 1988 Penniston sent Westinghouse an invoice accompanied by a letter stating
As it appears Westinghouse has no intent on [sic] fulfilling their portion of the agreement with Sure-Trip Inc., [sic] would you please process this invoice for immediate payment.
The invoice amounted to $12,655, the difference between list price and discount price for the kits Westinghouse had purchased between October 1987 and February 1988. Westinghouse disputed the portion of the invoice relating to 1987 purchases as being outside the October 1987 contract, and refused to pay it. Sure-Trip never invoiced Westinghouse further.
At some point in 1988 Sure-Trip contacted the Veterans Administration Medical Center (V.A.) in Milwaukee about submitting a bid for retrofitting circuit breakers. Sure-Trip included Westinghouse among its customer references. When the V.A. learned from Westinghouse during the summer of 1988 about the allegedly unsatisfactory engineering reports, it informed Sure-Trip that its product did not qualify for the retrofitting contract.
Sure-Trip sued Westinghouse in New York state court in April 1989 alleging five tort causes of action, including defamation, malicious interference and unfair competition, in connection with the V.A. contract. Defendant had the action removed to federal court in May 1989. In November 1989 plaintiff amended its complaint to allege a cause of action for breach of contract arising out of Westinghouse's failure to purchase the 1200 retrofit kits. Westinghouse moved for summary judgment as to the entire action, and Sure-Trip moved for summary judgment on its contract claim.
The district court granted Westinghouse's motion with respect to Sure-Trip's original complaint and dismissed all of Sure-Trip's tort claims. On the remaining cause of action for breach of contract, the trial court found for Sure-Trip, ruling that Westinghouse had breached its contractual obligation. Focusing on the first sentence of Paragraph I.a., the trial court found Westinghouse was obligated to purchase 100 kits per month or a total of 1200 for 1988. It concluded that this sentence was unambiguous. The third sentence of Paragraph I.a., the district court continued, was inherently ambiguous, as it permitted alternative interpretations of the measure of...
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