PROVIDENCE & WORCESTER R. v. Sargent & Greenleaf

• Decision Date: 07 October 1992
• Docket Number: Civ. A. No. 90-0647L.
• Citation: 802 F. Supp. 680
• Parties: PROVIDENCE & WORCESTER RAILROAD COMPANY, Plaintiff, v. SARGENT & GREENLEAF, INC., Defendant.
• Court: U.S. District Court — District of Rhode Island

802 F. Supp. 680

PROVIDENCE & WORCESTER RAILROAD COMPANY, Plaintiff, v. SARGENT & GREENLEAF, INC., Defendant.

Civ. A. No. 90-0647L.

United States District Court, D. Rhode Island.

October 7, 1992.

COPYRIGHT MATERIAL OMITTED

Howard E. Walker, R.M. Duffy, Hinckley, Allen, Snyder & Comen, Providence, R.I., for plaintiff.

Brad Cowgill, Wyatt, Tarrant & Combes, Lexington, Ky., Michael Civittolo, Providence, R.I., for defendant.

MEMORANDUM & ORDER

LAGUEUX, District Judge.

INTRODUCTION

This matter is presently before the court on the motion for summary judgment filed by defendant, Sargent & Greenleaf, Inc., ("Sargent & Greenleaf") pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiff Providence & Worcester Railroad Company ("Providence & Worcester") initiated this diversity action seeking damages for a train derailment which it alleges was proximately caused by the failure of a switchlock sold to it by Sargent & Greenleaf. The complaint includes counts based on breach of contract, breach of express and implied warranties, and negligence. Sargent & Greenleaf now moves for summary judgment on the contract and warranty claims contending that they are barred by the statute of limitations and by the warranty disclaimer contained in the contract. Sargent & Greenleaf also claims that it is entitled to partial summary judgment on any counts that survive limiting its liability to replacement of the allegedly defective lock.

BACKGROUND

This action arises from the sale of certain switchlocks by Sargent & Greenleaf, based in Kentucky, to Providence & Worcester, based in Rhode Island. These locks were used to secure track switches that are part of the system for directing trains from one track to another. One such lock was used to secure a switch at a side track in Dayville, Connecticut. On November 17, 1990, a vandal picked this lock in under two minutes, and "threw" the switch secured by it. The next day, a Providence & Worcester freight train was derailed as a result of the switch having been "thrown." The derailment caused nearly $1,000,000 in property damage, but fortunately no personal injuries occurred.

Providence & Worcester's contract claims are based on statements made in various advertising materials it received from Sargent & Greenleaf. Those statements attest in various forms to the lock's endurance and resistance to vandals, and include a statement that the lock meets padlock specifications proposed by the American Society for Testing and Materials ("ASTM"). Those specifications provide, among other things, that even after 10,000 operating cycles the lock cannot be picked by an amateur in less than 4 minutes.

By a printed form purchase order dated November 1986, Providence & Worcester ordered 198 switch locks from Sargent & Greenleaf at $20.95 each. Sargent & Greenleaf sent a form acknowledgement of the purchase order to Providence & Worcester dated December 3, 1986. Sargent & Greenleaf additionally sent an invoice form dated December 15, 1986 to Providence & Worcester with the shipment of locks. The shipment was delivered to Providence & Worcester on December 22, 1986.

The front side of Sargent & Greenleaf's forms contained the printed words "acceptance subject to terms and revisions on reverse side." The reverse side of these forms were entitled "CONDITIONS GOVERNING THE ACCEPTANCE OF ALL ORDERS" and contained provisions which 1) disclaimed express and implied warranties 2) limited remedies to repair or replacement of defective goods and 3) stated that the contract would be governed by Kentucky law. In addition, two clauses stipulated that the document constituted the entire agreement between the parties, and that it was not subject to modification.

Providence & Worcester filed a five count complaint in this action on December 31, 1990. Count I alleges that Sargent and Greenleaf breached its contract with Providence & Worcester by failing to provided it with locks of the quality and characteristics promised. Count II alleges breach of express warranties contained in various oral and written representations to Providence & Worcester. Counts III and IV allege breach of the implied warranties of merchantability and fitness for a particular purpose, respectively. Count V alleges that Sargent & Greenleaf was negligent in the design, manufacture and testing of its locks, and knew or should have known that the locks were defective and did not meet the warranties. Contrary to the assertion in plaintiff's memorandum, the complaint does not contain a count based on strict products liability.

Sargent & Greenleaf has moved for summary judgment on the warranty claims, arguing that they are barred by the warranty disclaimer contained in its acknowledgement. Sargent & Greenleaf also argues that the contract and warranty actions are barred by the applicable four year statute of limitations, since the cause of action accrued at delivery, December 22, 1986, and the action was not filed until December 31, 1990. Finally, Sargent & Greenleaf argues that recovery on any theory is limited by the contract to repair or replacement of the defective lock, and Providence & Worcester is barred from obtaining consequential damages.¹ Providence & Worcester argues that the provisions relied upon by Sargent & Greenleaf are not in fact part of the contract, and that its contract claims accrued after delivery.

The parties engaged in oral argument on May 21, 1992. At the conclusion of oral argument this Court took the matter under advisement. It is now in order for decision.

I. Choice of Law

A federal court sitting in a diversity case must apply the law of the forum state, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), including that state's choice of law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Rhode Island's Supreme Court has held that the parties to a contract may stipulate to have their contract interpreted by the law of a specific state, if that state bears some real relationship to the contract, and if the law of the chosen state is not contrary to the public policy of the forum state. Owens v. Hagenbeck-Wallace Shows Co., 58 R.I. 162, 174, 192 A. 158 (1937). In the absence of such a stipulation, Rhode Island courts will apply the law of the state where the contract was completed. Tim Hennigan Co. v. Anthony A. Nunes, Inc., 437 A.2d 1355 (R.I.1981). Thus, this Court must determine which of the documents and acts in question created the contract as a matter of Rhode Island law.

A. Rhode Island Commercial Code

The contract in question is governed by Section 2 of the Rhode Island Commercial Code, R.I.G.L. §§ 6A-2-101 to 6A-2-725 (1985) (enacting Uniform Commercial Code Sections 2-101 to 2-725), on the sale of goods. Section 6A-2-207 applies when there is an issue involving a "battle of the forms." That section states in full:

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) The offer expressly limits acceptance to the terms of the offer;

(b) They materially alter it; or

(c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplemental terms incorporated under any other provisions of Title 6A.

Under section 2-207(1), a form acknowledgement is ordinarily considered an acceptance of the order, even if it states different or additional terms. Section 2-207(2) determines whether those terms become part of the contract. In this case, where both parties are merchants² and there has been no expression of objection from the offering party, those terms would become part of the contract unless they materially alter the agreement.

However, section 2-207(1) provides an exception to the acceptance rule where "acceptance is expressly made conditional on assent to the additional or different terms." In the instant case, both parties have agreed that Sargent & Greenleaf's acknowledgement was "expressly made conditional on assent." This Court agrees with that assessment. The front side of Sargent & Greenleaf's forms contained the words "acceptance subject to terms and revisions on reverse side." The reverse side contained two provisions limiting the agreement to the terms of the acknowledgement:

7. MODIFICATION OF TERMS AND CONDITIONS

This document contains the entire agreement of Seller and Buyer and no other agreement or other understanding in any way modifying the terms and conditions set forth herein shall be binding upon Seller unless made in writing and signed by Seller's authorized agent or officer.

8. TERMS AND CONDITIONS OF ACCEPTANCE TO GOVERN

The terms and conditions of this acceptance shall apply to and govern Buyer's order, and in case of any inconsistency between said terms and conditions and the provisions of Buyer's order, the said terms and conditions of the acceptance shall prevail.

As defendant's memorandum states, "it is hard to imagine what further language could be required to show that acceptance was expressly conditional on assent to these terms." (Def.Mem. at 12).

Although the parties agree that acceptance was expressly made conditional, they disagree on the effect of that...