Dresser Industries, Inc., Waukesha Engine Div. v. Gradall Co.
| Decision Date | 10 July 1992 |
| Docket Number | No. 91-1493,91-1493 |
| Parties | 18 UCC Rep.Serv.2d 43 DRESSER INDUSTRIES, INC., WAUKESHA ENGINE DIVISION, Plaintiff-Appellee, v. The GRADALL COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Jon P. Christiansen, Hollis E. Wright, Foley & Lardner, Milwaukee, Wis., Christopher Culver Pappas, Dunn, Kacal, Adams, Pappas & Law, Houston, Tex., for plaintiff-appellee.
John A. Rothstein, Quarles & Brady, Milwaukee, Wis., Michael L. Tinaglia, Michael M. Lorge, Brad A. Levin, David A. Shapiro, Bruce M. Friedman, Laser, Schostok, Kolman & Frank, Chicago, Ill., for defendant-appellant.
Before BAUER, Chief Judge, COFFEY, Circuit Judge, * and WISDOM, Senior Circuit Judge. **
In this diversity suit, Dresser Industries, Inc. ("Dresser") sued the Gradall Company ("Gradall") for breach of both oral and written contracts. A jury awarded Dresser damages of $582,000 and interest. Gradall appeals, alleging that the district court erred in denying its motion for summary judgment. Gradall also challenges the court's denial of its motion for a new trial or remittitur, its interpretation of Wisconsin's version of the Uniform Commercial Code, and its jury instructions. We affirm.
Beginning in 1982, Gradall manufactured and sold a small 4-wheel drive vehicle known as the 534B, primarily used in construction where its maneuverability makes it ideal for delivering materials to workers on a construction site. The 534B requires a 4-cylinder, turbo-charged diesel engine. Dresser made such an engine, called the VRD220S. From 1982 to 1985 Gradall bought VRD220S engines from Dresser for use in the 534B. When it ordered engines, Gradall mailed Dresser a purchase order, containing its (Gradall's) terms as to price, delivery date and location, quantity, and warranty coverage. The purchase orders stated that acceptance of the order would constitute an acceptance of all of Gradall's terms. Dresser then responded with an order acknowledgement which stated that it would accept Gradall's offer, but only on the condition that its (Dresser's) terms, as set forth in the order acknowledgement, would govern the transaction. Needless to say, Gradall's and Dresser's terms were quite different, especially as to the warranties applicable to Dresser's engines. Dresser's form disclaimed all implied warranties and limited its express warranty to one year, whereas Gradall's form included all implied warranties and called for a fifteen-month express warranty. Without attempting to resolve this discrepancy or decide whose warranty terms controlled, the parties acted as if a contract had been formed with Dresser shipping the engines and Gradall paying for them.
Beginning in 1983, many of Gradall's customers had problems with the Dresser engine in the 534B. Gradall referred the customers to Dresser's service centers, but the number of problems continued to increase and the service centers could not keep up with the requests for repair work. Finally, on April 18, 1985, company executives met to discuss possible solutions to the problems with the 534B and its engine. They agreed to a program known as the "85-2 campaign." In this campaign, Gradall would repair problems unrelated to the engine, while Dresser would perform some engine work and sell Gradall new oil pump kits to replace faulty ones. The parties failed to agree on all the terms of the campaign, however. Dresser blamed Gradall for this failure, and, in hopes of forcing Gradall to agree to its terms, stopped delivering the oil pump kits. As a result, Gradall did not have the necessary parts to repair the engines in the field as originally contemplated under the campaign. By late 1985 Gradall decided that the 85-2 campaign was a failure, and that the only solution to the problem was to abandon the campaign and replace the Dresser engines with another company's engines, which it did.
Dresser sued Gradall, seeking payment of an outstanding balance for engine parts sold and delivered and a declaratory judgment as to the parties' contractual rights. Gradall answered with affirmative defenses and counterclaims. Its main affirmative defense was that Dresser's engines were defective from the start and that Dresser knew of these defects. Its counterclaims related to these allegedly defective engines, charging breach of express warranty, breach of the implied warranties of fitness and merchantability, breach of contract, negligence, both negligent and intentional misrepresentation, strict liability, and a right to punitive damages.
Dresser then filed a motion for summary judgment. For our purposes, the primary issue raised in this motion was whose warranty covered the engines. Dresser argued that its warranty applied, because Gradall passed it along to its customers and directed them to Dresser for engine repairs. Gradall countered that it had not adopted Dresser's warranty, and that because the parties' terms and written forms were in conflict, the contract was formed through their course of conduct, and the implied warranties of the Uniform Commercial Code ("U.C.C.") should govern. Wis.Stat. §§ 402.314 & 402.315. The court denied summary judgment on this issue, finding that issues of fact remained as to whether Gradall adopted Dresser's warranty. Consequently, the jury would have to decide the issue by examining the parties' course of performance, course of dealing, and the custom and usage in the trade. Dresser Industries, Inc., Waukesha Engine Division v. The Gradall Company, 702 F.Supp. 726, 731-34 (E.D.Wis.1988). Thus, the Uniform Commercial Code's "gap-fillers," such as the implied warranties of merchantability and fitness for a particular purpose, would only become relevant if Gradall had not adopted Dresser's warranty by any of these means.
Dresser added a count to its complaint, claiming that Gradall breached the oral contract between the parties to carry out the 85-2 campaign. Gradall denied that there was an oral contract. It contended that the parties agreed to conduct simultaneous campaigns, but that Dresser's failure to ship the necessary parts made that impossible. As a result, it was forced to abandon the campaign and seek another way to satisfy its customers--namely, by replacing Dresser's engines with those of a competitor.
After trial, the jury held (1) that Gradall owed Dresser $113,154.12 plus interest for engine parts Dresser sold and delivered to it, (2) that Dresser substantially performed the oral agreement and that Gradall breached it, making Gradall liable for $582,000 plus interest, and (3) that Gradall's counterclaims were meritless. The district court denied Gradall's motions for a new trial, judgment notwithstanding the verdict, and remittitur.
Gradall raises three issues on appeal. First, it challenges the sufficiency of the evidence supporting the jury's $582,000 verdict. In the alternative, Gradall contends the verdict was so excessive in relation to the evidence that it must have been the product of passion and prejudice. Second, Gradall argues that the trial court improperly allowed the jury to consider the course of performance, course of dealing and usage of trade to decide whether Gradall accepted Dresser's warranty. Gradall argues that once the court found that the parties documents had not formed a contract, § 2-207(3) dictates that neither party's warranty controls, and that missing terms of the contract are supplied by the U.C.C.'s gap-filling provisions. Finally, Gradall asserts that the jury instructions give the misleading impression that Gradall had the burden of proving that Dresser did not substantially perform the alleged oral contract.
Gradall's first claim is that the $582,000 damage award was excessive. In diversity cases, we apply the federal standard to determine whether a jury verdict is excessive, though our determination is guided by state standards where precedent exists. Pincus v. Pabst Brewing Co., 893 F.2d 1544, 1554 (7th Cir.1990). In this circuit, we will alter jury awards only if they are "monstrously excessive, born of passion and prejudice, or not rationally connected to the evidence." Id.; Matter of Innovative Construction Systems, Inc., 793 F.2d 875, 887 (7th Cir.1986). Because damage calculations are essentially an exercise in fact-finding, our review of the jury's damage award is deferential. Further, because the district judge denied Gradall's post-trial motions to erase or reduce the award, "we demand a particularly persuasive showing of excessiveness when the initial fact-finder--the jury--and the judge--who monitored the proceedings--agree that the award is appropriate." Innovative Construction Systems, 793 F.2d at 888.
Dresser sought damages for lost profits and harm to its reputation caused by Gradall's decision to replace its engines. Gradall contends that the evidence of lost profits, at best, could support an award of $261,000, because that is the only evidence of loss and is the amount Dresser's attorney asked for at closing argument. It argues that there is no rational connection between this evidence and the jury's award of $582,000. Further, Gradall argues that the "extra" $321,000 cannot be upheld as compensation to Dresser for damage to its business reputation because the evidence on this point was minimal and vague. In addition, Gradall argues that reputation damages are not available in contract cases. Finally, Gradall contends that the award was so large that it must have been the result of the jury's passion and prejudice, necessitating a new trial on the merits. We address each argument separately.
Dresser's main contention with regard to the oral contract was that Gradall's breach caused it to lose future profits, which would have derived from the sale...
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