Berge Helene Ltd. v. GE Oil & Gas, Inc.

• Decision Date: 16 November 2011
• Docket Number: Civil Action No. 4:08–02931.
• Citation: 76 UCC Rep.Serv.2d 117,830 F.Supp.2d 235
• Parties: BERGE HELENE LTD., Plaintiff, v. GE OIL & GAS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

76 UCC Rep.Serv.2d 117

830 F.Supp.2d 235

BERGE HELENE LTD., Plaintiff,

v.GE OIL & GAS, INC., et al., Defendants.

Civil Action No. 4:08–02931.

United States District Court, S.D. Texas,Houston Division.

Nov. 16, 2011.

John M. Elsley, Rachel Anne De Cordova, Royston Rayzor et al., Houston, TX, W. Cameron Beard, Michael Patrick Smith, Ryan E. Cronin, Blank Rome, LLP, New York, NY, for Plaintiff.

Shawn M. Bates, Collin Joe Cox, R. Paul Yetter, Wendie Seale Childress, Yetter Coleman LLP, Houston, TX, for Defendants.

MEMORANDUM AND ORDER

NANCY F. ATLAS, District Judge.

+-------------------+
                ¦TABLE OF CONTENTS  ¦
                +-------------------+
                

                I.   BACKGROUND                                                         241
                II.  STANDARD FOR SUMMARY JUDGMENT                                      242
                III. DISCUSSION                                                         243
                

    A.   Choice of Law Analysis                                         243
                

         1.   Maritime Subject Matter                                   243
                         2.   Breach of Warranty Under Maritime Law                     245
                         3.   State Choice of Law                                       247
                

    B.   Merits Analysis                                                249
                

         1.   General Principles on Warranties                          249
                         2.   Privity                                                   250
                         3.   Breach of Implied Warranty of Fitness for a Particular    252
                              Purpose
                

              a.  GE's Knowledge of Berge's “Particular Purpose”        252
                              b.  Reliance on GE's Skill or Judgment                    253
                              c.  Notice of Breach of Warranty                          253
                              d.  Plaintiff Suffered Injury                             253
                              e.  Cause of Plaintiff's Injury                           254
                

         4.   Breach of Express Warranty                                255
                

              a.  Elements of the Claim and Legal Standards             255
                              b.  Analysis of GE's Statements                           257
                

         5.   Damages                                                   263
                

              a.  Measure and Types of Breach of Warranty Damages       263
                              b.  Types of Damages Claimed by Berge                     263
                              c.  Proximate Cause Analysis                              264
                              d.  Mitigation of Damages                                 266
                              e.  Offset of Berge's Recoveries from Settlements with    266
                                  Others
                

    C.   Disclaimers of Warranty and Limitations of Damages             267
                

         1.   Applicable Legal Principles                               267
                

              a.  Requirements for Disclaimers and Limitations          267
                              b.  Disclaimers of Implied Warranties—Conspicuousness     270
                              c.  Disclaimers of Express Warranties—Reasonableness      270
                              d.  Requirements for Damages Limitations                  270
                

         2.   Analysis of Disclaimers and Limitations                   271
                

              a.  February 2004 Data Sheet                              271
                              b.  Packager Manual                                       274
                              c.  GE–Flotech Agreement and Order Acknowledgement        276
                              d.  Contract Chain                                        278
                

                IV. CONCLUSION AND ORDER                                                280
                

This case is before the Court on three Motions for Summary Judgment (“Motions”) ¹ filed by Defendants GE Oil & Gas, Inc., et al. (“GE”), to which Plaintiff Berge Helene Ltd. (“Berge”) has filed a Response [Doc. # 196]. Defendants have filed a Reply [Doc. # 202], and Plaintiff has filed a Sur–Reply [Doc. # 208]. Having considered the full record in this case, the parties' arguments, and governing legal authorities, the Court grants in small part and denies in part Defendants' Motions.

I. BACKGROUND

Plaintiff Berge is the owner of a Floating Production, Storage and Offloading unit (“FPSO”) used in the storage and production of petroleum products. Defendant GE is a company that inter alia manufactures gas compressors. In February 2004, Berge met with representatives from GE, Flotech Limited (“Flotech”), and ABB Offshore Systems AS (“Aibel”) in Oslo, Norway so that the latter three companies could present the use of GE compressors as part of a “compressor solution” aboard the FPSO Berge Helene. During the meeting, Berge received a compact disk titled “Software and Technical Data: GE Oil & Gas High Speed Reciprocating Gas Compressor.” Shortly after the Oslo meeting, Berge received a packet of informational and promotional materials (“Packet”) about the “compressor solution.” These materials—which featured GE, Aibel, and Flotech's logos—included a February 9, 2004 technical data sheet (“February 2004 Data Sheet”) and a three-page promotional flyer called “GE Oil & Gas Compressor News” (“Flyer”).

Subsequently, on May 29, 2004, Berge contracted with third party Woodside Mauritania Pty Ltd. (“Woodside”), to provide the services of Berge's FPSO and to provide 70 mmscfd of gas compression in the Chinguetti oil field off the coast of Mauritania. GE Ex. 1 at BER000016 (“Berge–Woodside Agreement”). In order to meet these compression requirements, Berge entered into a contract with ABB Offshore Systems AS (“Aibel”), dated June 24, 2004, for the purchase and installation of three compressors on the FPSO. GE Ex. 5 at BER005880 (“Aibel–Berge Agreement”). Berge and Aibel also had a pre-existing contract from August 14, 2001 by which Berge selected Aibel to manage, operate, and maintain the FPSO. GE Ex. 4 at BER139588 (“AibelBerge Operations Agreement”). By contract dated November 2003, Aibel agreed with Flotech Limited (“Flotech”) to purchase GE compressors packaged by Flotech. GE Ex. 6 at GEOG 152059 (“Flotech–Aibel Agreement”).² Flotech had a pre-existing Packager Agreement with GE, dated December 2002, that provided that Flotech would package compressors manufactured by GE. GE Ex. 16 at GEOG005857 (“GE–Flotech Agreement”).³

Berge contends that shortly after the compressors were placed into production on the FPSO, they experienced significant and ongoing failures that resulted in Berge being unable to provide the contractually required rate of gas compression. Accordingly, on October 1, 2008, Berge sued GE in this Court alleging breach of express warranties and breach of implied warranties of fitness.⁴ On June 14, 2011, after the parties engaged in extensive discovery, GE filed the instant Motions, which have been fully briefed and are now ripe for decision.

II. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is proper only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits filed in support of the motion, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the burden of demonstrating that there is no evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Nat'l Union Fire Ins. Co. v. Puget Plastics Corp., 532 F.3d 398, 401 (5th Cir.2008). If the moving party meets this initial burden, the burden shifts to the nonmovant to set forth specific facts showing the existence of a genuine issue for trial. See Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998); Hines v. Henson, 293 Fed.Appx. 261, 262 (5th Cir.2008) (citing Pegram v. Honeywell, Inc., 361 F.3d 272, 278 (5th Cir.2004)).

In deciding whether a genuine and material fact issue has been created, the Court construes all facts and considers all evidence in the light most favorable to the nonmoving party. Nat'l Union Fire Ins., 532 F.3d at 401; Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 412 (5th Cir.2003).

A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmovant. Tamez v. Manthey, 589 F.3d 764, 769 (5th Cir.2009) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). There must be “a showing of more than a mere “scintilla” of evidence.” See Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) ( en banc ) (citing Davis v. Chevron U.S.A., Inc., 14 F.3d 1082 (5th Cir.1994)). The nonmovant's burden is not met by mere reliance on the allegations or denials in the nonmovant's pleadings. See Diamond Offshore Co. v. A & B Builders, Inc., 302 F.3d 531, 545 n. 13 (5th Cir.2002), overruled on other grounds, Grand Isle Shipyard, Inc. v. Seacor Marine, LLC, 589 F.3d 778 (5th Cir.2009). Likewise, “conclusory allegations” or “unsubstantiated assertions” do not meet the nonmovant's burden. Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th Cir.2008). Instead, the nonmoving party must present specific facts which show “the existence of a genuine issue concerning every essential component of its case.” Am. Eagle Airlines, Inc. v. Air Line Pilots Ass'n, Int'l, 343 F.3d 401, 405 (5th Cir.2003) (citation and internal quotation marks omitted). In the absence of any proof, the court will not assume that the nonmovant could or would prove the necessary facts. Little, 37 F.3d at 1075 (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)).

In a case to be tried to the Court without a jury, “a district court has somewhat greater discretion to consider what weight it will accord the evidence” on summary judgment. Johnson v. Diversicare Afton Oaks, LLC, 597 F.3d 673, 676 (5th Cir.2010) (quoting In re Placid Oil Co., 932 F.2d 394, 397 (5th Cir.1991)). “When deciding a motion for summary judgment prior to a bench trial, the district court ‘has the limited...