Arcor, Inc. v. Textron, Inc.

• Decision Date: 06 April 1992
• Docket Number: No. 91-1324,91-1324
• Citation: 960 F.2d 710
• Parties: 17 UCC Rep.Serv.2d 475 ARCOR, INC., Plaintiff-Appellee, v. TEXTRON, INC. and Bridgeport Machines, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 710

960 F.2d 710

17 UCC Rep.Serv.2d 475

ARCOR, INC., Plaintiff-Appellee, v. TEXTRON, INC. and Bridgeport Machines, Inc., Defendants-Appellants.

No. 91-1324.

United States Court of Appeals Seventh Circuit.

Argued Oct. 28, 1991.

Decided April 6, 1992.

Ellen M. Babbitt, Henry C. Krasnow, Mary A. Martin (argued), Butler, Rubin, Newcomer, Saltarelli, Boyd & Krasnow, Chicago, Ill., for Arcor, Inc.

Stephen L. Tyma, Fishman & Merrick, Aaron E. Hoffman (argued), Schwartz & Freeman, Chicago, Ill., for Textron, Inc. and Bridgeport Machines, Inc.

Before CUMMINGS and CUDAHY, Circuit Judges, and WISDOM, Senior Circuit Judge. ^*

CUDAHY, Circuit Judge.

Arcor, Inc. (Arcor), is engaged in the business of metal perforation. In May of 1986, Arcor bought from Bridgeport Machines, Inc. (Bridgeport), then a subsidiary of Textron, Inc. (Textron), a Japax Model SDX10NC small-hole-drilling electrical discharge machine (Japax machine). Two years and approximately 30 service calls later, Arcor sued Bridgeport and Textron for breach of warranty, alleging that the machine did not work properly and failed to meet certain contract specifications as set out in Arcor's purchase order. The case was tried before a jury, which returned a verdict for Arcor in the amount of $200,000. The district court entered judgment on the verdict and denied defendants' motion for a judgment notwithstanding the verdict or a new trial.

On appeal, defendants advance four errors that they claim warrant a reversal of the jury verdict: (1) the jury's verdict was the product of prejudicially improper evidence and argument concerning damages; (2) Arcor failed to prove that the machine's failure to perform as specified in the contract was due to a defect in the machine, rather than to Arcor's misuse; (3) Arcor's claims that the machine failed to conform to the contract's requirements as to hole-diameter accuracy were barred as a matter of law by Arcor's failure to give timely notice of breach under section 2-607(3) of the Illinois Uniform Commercial Code, Ill.Rev.Stat. ch. 26; and (4) the court improperly invaded the province of the jury by preventing the jury from deciding what terms were included in the contract between Arcor and Bridgeport.

I. DAMAGES

Approximately two and one-half years after purchasing the Japax machine, Arcor replaced it with a larger and significantly more expensive Elox brand electrical discharge machine (Elox machine). Early in the trial the district court ruled that Arcor was not entitled to recover the cost of the Elox machine as "cover" under section 2-712(1) of the Illinois Uniform Commercial Code, because Arcor had never revoked its acceptance of the Japax machine. ¹ In a later, written opinion the court also held that the cost of the Elox machine was "not available" as a measure of the difference in value between the Japax machine "as delivered" and the Japax machine "as promised," the standard measure of damages for breach of warranty. ²

Nevertheless, during closing argument Arcor's counsel twice asked for damages of "over $490,000," an amount that included the cost of the Elox machine. Counsel also placed before the jury a chart that included the cost of the Elox machine as an element of damages. The defendants objected to the use of the chart, and Arcor's counsel agreed to take it down. The defendants then requested that the court instruct the jury that the Elox figure "was not material to the damage calculations." Tr. at 1439. The judge did not respond directly to the defendants' request, but instead overruled the defendants' objection.

During the court's instructions to the jury defendants renewed their request that the jury be instructed "not to consider the price of the Elox matching [sic] in their deliberations." Tr. at 1498. The court acknowledged that defense counsel had a "good point," but concluded that a curative instruction was not necessary "because there was no evidence for the jury to consider. You have just the reference to which you objected at the time." Id. Defendants argue that the court committed reversible error by refusing to give a curative instruction regarding the price of the Elox machine in response to Arcor's improper argument.

"It is within the trial court's discretion to determine whether counsel's remarks require admonition to the jury, and that discretion will only be upset for clear abuse." Canada Dry Corp. v. Nehi Beverage Co., 723 F.2d 512, 527 (7th Cir.1983). In this case, there were only two explicit references to the Elox machine during Arcor's closing argument. One of these, as we have noted, was the Elox machine's inclusion on Arcor's damages chart. Defendants make much of the district court's denial of their objection to that chart. It is important to note, however, that at the time the court ruled on that objection it had become moot because Arcor's counsel had agreed to take the chart down as soon as the objection was made. The court sustained defendants' objection to the only other mention of the Elox machine during Arcor's closing and expressed agreement with the defendants' statement that the Elox machine was not relevant to the calculation of damages. Finally, defendants neither objected to Arcor's requests for "over $490,000," nor requested a curative instruction that this amount was more than that to which Arcor was entitled. Under these circumstances, we do not believe that the court abused its discretion in declining to give a curative instruction regarding the price of the Elox machine.

Moreover, the improper arguments of Arcor's counsel do not rise to the level of reversible error. Improper statements during closing arguments warrant reversal only if they "influenced the jury in such a way that substantial prejudice resulted to" the opposing party. Fenolio v. Smith, 802 F.2d 256, 258 (7th Cir.1986). The remarks of Arcor's counsel regarding the Elox machine did not result in substantial prejudice to the defendants because the evidence of damage claims that were properly submitted to the jury fully supported the jury's award of $200,000.

"Because a damage award is an exercise in fact-finding, only those awards that are 'monstrously excessive,' born of passion and prejudice, or not rationally connected to the evidence may be altered." Pincus v. Pabst Brewing Co., 893 F.2d 1544, 1554 (7th Cir.1990). Although the defendants allege error as to several of Arcor's damage claims, the award of $200,000 was rationally connected to the evidence of those claims that were properly submitted to the jury. First, the damage claims which the defendants do not challenge on appeal total $104,707.41. ³ In addition, the defendants' challenge to Arcor's claim for $12,894.17 in profits lost on jobs consists only of a bald statement that the claim was improper, with no argument to support it. Another $68,294.91 of Arcor's claimed damages consists of various costs incurred by Arcor in attempting to produce usable products for its customers. The defendants argue that these costs were at least in part "reasonably avoidable," and therefore not recoverable under section 2-715(2)(a) of the Illinois Uniform Commercial Code. ⁴ The jury was entitled to conclude, however, that these costs resulted from reasonable efforts by Arcor to mitigate its damages by attempting to perform on its contracts. See Burrus v. Itek Corp., 46 Ill.App.3d 350, 4 Ill.Dec. 793, 798, 360 N.E.2d 1168, 1173 (1977) (upholding award of consequential damages to plaintiff who continued to use defective machine "in an effort to maintain his business").

The jury was also entitled, contrary to defendants' argument, to consider the cost of the Japax machine in its damages calculation. Arcor offered evidence that the "current" value of the machine was between $5,000 and $10,000. The jury could reasonably have concluded that the cost of the Japax represented its value as warranted, and its current value represented its value as delivered to Arcor. See Gray v. Davis, 45 Ill.App.3d 55, 3 Ill.Dec. 662, 358 N.E.2d 1347 (1977) (upholding jury award based on difference between purchase price and estimated value two years after delivery). Thus, the jury could reasonably have awarded another $46,000 to $51,000 (value as warranted minus value as delivered) to Arcor as standard warranty damages.

The damages items discussed thus far total $231,896.49. Even after subtracting from this amount the profits Arcor earned from jobs run on the Japax machine ($17,912.31), the evidence as to these claims is sufficient to support the jury's award. In addition, the jury could reasonably have awarded Arcor $100,479.00 for profits lost on jobs not obtained. The defendants argue that these damages were improperly submitted to the jury because the evidence presented in support of those claims was "too speculative." Br. at 34. Arcor's president, Gil Johnson, testified at trial about a number of jobs that Arcor would have received from its pre-existing customers if the Japax machine could have performed as promised. Johnson testified that his knowledge about these jobs was based on information provided by the customers themselves. The defendants argue that such hearsay testimony cannot be an adequate basis for an award of damages. In support of this proposition the defendants cite Alguire v. Walker, 154 Ill.App.3d 438, 107 Ill.Dec. 279, 506 N.E.2d 1334 (1987). That case does not, however, hold that hearsay testimony cannot be an adequate basis for a damages award. Rather, the Alguire court simply held that certain testimony as to damages, to which the defendants had objected on hearsay grounds at trial, should never have been admitted. Because there was no other evidence to support the damages in question, the award had to be reversed once that evidence was excluded. In the present case, by contrast, the defendants do not claim that the evidence in question should not have been admitted--in fact, they explicitly note that the question here is not the...