578 F.2d 953 (3rd Cir. 1978), 77-1493, Copperweld Steel Co. v. Demag-Mannesmann-Bohler

Docket Nº:COPPERWELD STEEL COMPANY, Appellant in No. 77-1493,
Citation:578 F.2d 953
Case Date:May 25, 1978
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 953

578 F.2d 953 (3rd Cir. 1978)

COPPERWELD STEEL COMPANY, Appellant in No. 77-1493,

v.

DEMAG-MANNESMANN-BOHLER, Demag Stranggiess-Technik GmbH,

Demag Aktiengesellschaft, Appellants in No. 77-1494.

Nos. 77-1493, 77-1494.

United States Court of Appeals, Third Circuit

May 25, 1978

Argued Feb. 15, 1978.

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Frank L. Seamans, William B. Mallin, G. Richard Gold, Robert L. Allman, II, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for appellant in No. 77-1493 and cross-appellee in No. 77-1494.

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John H. Bingler, Jr., David G. Ries, John W. Eichleay, Jr., Thorp, Reed & Armstrong, Pittsburgh, Pa., for appellees in No. 77-1493 and cross-appellants in No. 77-1494.

Before SEITZ, Chief Judge, and ROSENN and GARTH, Circuit Judges.

OPINION

ROSENN, Circuit Judge.

Plaintiff, Copperweld Steel Company ("Copperweld") appeals from a final judgment of the district court of the Western District of Pennsylvania in favor of defendants, Demag-Mannesmann-Bohler, Demag Stranggiess-Technik GmbH, and Demag Aktiengesellschaft (collectively "Demag") and requests that we order a new trial because of prejudicial errors committed at trial. Defendants cross-appeal from the district court's exercise of jurisdiction over the action and refusal to dismiss the case pursuant to a forum selection clause providing for the resolution in Germany of any disputes arising from a contract between Copperweld and Demag. They ask for a new trial on the question of damages arising from the failure of the court to enforce this clause of the contract.

This is a diversity suit based on four causes of action: (1) breach of contract, (2) negligent design and manufacture, (3) negligent misrepresentation, and (4) fraudulent misrepresentation. At trial Judge Barron P. McCune denied Demag's motion to dismiss the action, directed a verdict against Copperweld on the fraud claim, and entered final judgment on the jury's verdict against Copperweld on the other claims. We affirm.

I.

In the early 1960's, Copperweld was producing special high quality carbon and alloy structural steels at its Warren, Ohio plant. In order to remain competitive in this specialized business, the company recognized a need to improve its manufacturing facilities at Warren by either increasing productive capacity or reducing costs. To achieve this end, it entered into negotiation with several companies, including Demag, for the purpose of purchasing new and more cost efficient facilities for the production of high quality steels.

Copperweld's Warren plant fashioned its steel by the ingot casting method by which molten steel was poured into a number of ingot molds, allowed to cool slowly, and eventually to solidify into a large chunk or ingot of steel. The ingot would then be cut from the mold, resulting in some loss of structurally sound steel and leaving an unusable chunk of metal. To obtain a saleable product, further processing, therefore, was necessary. At this point, the steel was reheated and passed through rollers like those of an old-fashioned washing machine to reduce the slab of steel into a semi-finished product called a billet (steel bar). This additional processing produced further waste through the reduction in size and cutting of the ingot. Furthermore, casting by this method also proved to be inefficient, for no steel could be cast until the prior ingot was entirely finished and the time required to fill any order for usable steel, consequently, was quite lengthy. To eliminate these costly steps, decrease metal loss, and decrease production time, Copperweld sought to obtain a more efficient machine a continuous casting facility.

Continuous casting increases the yield of usable steel by allowing the direct fabrication of billets from molten metal poured into a casting mold, thereby eliminating the intermediate steps of ingot casting. This is accomplished in the following manner: molten steel is poured into a small, water-cooled mold, the bottom of which is covered by a plug which may be pulled from the mold. When the liquid metal is poured into the machine, its outer shell begins to solidify as a result of contact with the water-cooled walls of the caster. Similarly, the molten steel begins to freeze to the plug at the bottom of the mold. As more metal is poured into the container, the plug at the bottom is slowly withdrawn from the mold and sprayed with water to solidify the core

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while another portion of liquified metal is poured into the now vacated mold. This process continues until all of the available molten metal is poured. After the molds solidify, they are cut into usable lengths and placed on a hotbed to cool.

Because of the opportunity to save both time and expense, Copperweld solicited various bids for a continuous casting system. It received its most serious proposals from Concast, Inc., and Demag, two German designers and manufacturers of steel making facilities. Apparently, both of the bidders offered continuous casting machines, but of radically different designs. Demag offered a straight mold system which would cast the steel strands vertically until they would reach the desired length; they would then be bent into a horizontal plane, finally cut, and then removed from the system. Concast, however, was ready to offer a low head curved mold system which would cast the steel horizontally because the molten liquid would be poured into a curved mold and automatically forced to leave the caster in a horizontal position.

The straight mold caster suffers distinct disadvantages. It requires a highly expensive and tall building in order to cast the steel at an appropriate height to make the vertical mold. The procedure is not only costly requiring most steel companies to construct new tall buildings but dangerous because raising the molten steel to the desired height could induce spillage. The curved mold design alleviates such problems by initiating the steel into the mold in a curved position, thus obviating the need for buildings with high ceilings.

Copperweld, for these obvious reasons, preferred the curved mold low head facility over the straight mold. It informed Demag of this preference. Demag's internal memoranda confirm that its American agent relayed Copperweld's inclination toward the curved mold to Demag and also informed Demag that if it desired to acquire the lucrative Copperweld contract it would either have to make a curved mold offer or demonstrate to Copperweld the superiority of the straight mold. Demag chose to continue its recommendation of the straight mold design and specifically informed Copperweld that the reliability of the curved mold system was questionable, but that its capabilities would be established some time in the following year, after testing of an experimental facility by Demag's research affiliate.

Shortly thereafter, Demag submitted a formal proposal to Copperweld for a vertical casting machine, stressing that the data was insufficient to enable it to recommend a curved mold. However, approximately two weeks later, Demag abruptly changed its proposal and instead offered a curved mold design. Copperweld accepted this proposal which became the basis for the contract sued upon in this case.

No documented explanation exists for this sudden shift of position by Demag and the parties suggest two radically different rationales for the action. Copperweld contends that Demag was forced to alter its proposal to forestall the award of the contract to Concast, asserting that Demag went ahead with its curved mold proposal even though it had no reason for confidence in the reliability of the design. Demag maintains, however, that its proposal came only after extreme pressure by Copperweld to produce a curved mold system. Its position is that it fully informed Copperweld of the risks of the curved mold system, but that it moved forward with the proposal because of the acceptance of the risks by Copperweld's Executive Vice President, C. W. Holmquist, an acknowledged expert in the steel casting business. 1

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No one integrated document makes up the contract between Demag and Copperweld. Although the parties issued various proposals, purchase orders, and correspondence to each other, consolidation of the documents reveals certain elements of the contract with clarity: (1) that the machine was to be designed by Demag, (2) that the machine actually was to be constructed in the United States by Birdsboro Corporation, although it originally was to be manufactured in Germany by Demag, (3) that the machine was warranted as capable of producing 95-97 percent sound strands of steel at a rate of twelve heats per day, 2 (4) that a German crew would operate the caster initially, eventually training Copperweld employees to take control of the operation, and (5) that during this break-in period, various technical problems would be expected which Demag would be required to cure.

Copperweld brought this suit asserting that the machine did not meet, nor was it capable of meeting, the warranted production guidelines regarding yield and number of heats. The record reveals that the machine was made operational on October 26, 1965, and that it ran at various times up to September of 1969 with little success. Copperweld instituted two campaigns to test the capability of the caster, the first from the day the machine because operational until July of 1967 and the second from the winter of 1969 until September of that year. It is undisputed that the caster did not operate satisfactorily to Copperweld. It is disputed, however, whether the machine was capable of meeting the specified production requirements and if it was not, whether this was the fault of Copperweld or of Demag.

The district court found no evidence sufficient to...

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