Binks Mfg. Co. v. National Presto Industries, Inc.
| Decision Date | 20 May 1983 |
| Docket Number | No. 82-1609,82-1609 |
| Citation | 709 F.2d 1109 |
| Parties | 36 UCC Rep.Serv. 14, 14 Fed. R. Evid. Serv. 1705 BINKS MANUFACTURING COMPANY, Plaintiff-Counterdefendant-Appellee, v. NATIONAL PRESTO INDUSTRIES, INC. and Presto Manufacturing Company, Defendants- Counterplaintiffs-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Keith A. Klopfenstein, Jr., Ross, Hardies, O'Keefe, Babcock & Parsons, Chicago, Ill., for defendants-counterplaintiffs-appellants.
Roger Pascal, Schiff, Hardin & Waite, Chicago, Ill., for plaintiff-counterdefendant-appellee.
Before WOOD, COFFEY and TIMBERS, * Circuit Judges.
This appeal involves a contractual dispute concerning the manufacture and sale of an "industrial spray finishing and baking system." Binks Manufacturing Company, the System's manufacturer, brought an action in federal district court to collect the purchase price of the System. Presto Manufacturing Company, 1 counterclaimed alleging damages resulting from defective design and manufacture of the System as well as late delivery. The jury returned verdicts in favor of Binks on its purchase price claim and against Presto on its counterclaims. We affirm.
Presto is engaged in the manufacture and sale of electrical appliances, including hamburger cookers. Binks Manufacturing Company is a leading manufacturer of industrial spray finishing equipment. In 1975, Presto management decided to increase its production capacity of electric hamburger cookers and as part of its expansion plan, determined to purchase an automatic system designed to coat aluminum castings (the principal components of hamburger cookers) with a non-stick "teflon-like" coating for installation at its Alamogordo, New Mexico plant. Presto entered into negotiations with Binks Manufacturing Company for the design and manufacture of the system.
The negotiations between Binks and Presto continued from October 1975 through March 1976, resulting in a contract with Binks agreeing to manufacture "a custom designed, custom built automatic spray application and oven curing system intended to apply coatings to various Presto products" (hereinafter the "System"). The System was to consist of one continuous conveyor 858 feet long, designed to carry an aluminum casting through a six-step manufacturing process: (1) a booth in which the castings would be sprayed with a primer; (2) an oven where the primer would be baked on to the aluminum castings; (3) a cooling area; (4) a booth where the castings would be sprayed with a non-stick coating; (5) three progressively hotter ovens in which the non-stick coating would be baked on to the aluminum castings over the primer; and (6) a final cooling area.
One of the prime considerations in this lawsuit is the interpretation of the following provision of the contract pertaining to the System's maximum capacity: 2
"DESCRIPTION
In accordance with your request, we are pleased to submit for your consideration, a revised quotation covering:
One Item of Equipment designed to coat any one of the following parts on one
and/or both sides in quantities, as listed at the conveyor rate of 25 fpm with either 16 or 18 inch spindle spacing:
#60-001 * Upper Double Burger at (13 oz.) 1,125 pcs./hr
#60-002 * Lower Double Burger at (24 oz.) 1,125 pcs./hr
#60-003 * Upper Square Burger (9.5 oz.) 2,250 pcs./hr
#60-004 * Lower Square Burger (12 oz.) 2,250 pcs./hr.
#60-121 * Upper Round Burger (7 oz.) 2,250 pcs./hr.
#60-120 Lower Round Burger (5 oz.) 2,250 pcs./hr.
#28-006 Fry Pan at 3.8#--Quantities as later
established.
* Asterisk to indicate item coated on both sides. Hinges on 60-001 and 60-003 coated both sides.
The maximum capacity of the system is limited to the above parts or parts of similar size and cross section with a maximum loading of 4,500 pounds per hour and 4,500#/hr. of work holders, which would pass through each oven.
Maximum part size will be 12"' high X 18"' diameter." (emphasis added).
The contract also provided that shipment of the System to Presto's plant "will not be made later than June 2, 1976" and further states that "[t]ime is of the essence ...." On May 26, 1976, Binks informed Presto that shipment of the System could not be completed until mid-June of 1976, approximately two weeks later than the agreed upon delivery date. In reality, shipment of the System to Presto's Alamogordo, New Mexico plant was not accomplished until July 19, 1976. Binks' late delivery of the System was due to their inability to obtain timely delivery from the oven subcontractor, Radiant Products. 3 Radiant, in turn, attributed their late shipment to an unforeseen shutdown of a Radiant supplier's plant (U.S. Gypsum) and an unforeseen injury to a key Radiant employee.
Binks offered to supervise installation of the System, but Presto chose not to accept the offer and hired their own local independent contractors to install the System. According to Binks, Presto's independent contractors committed installation errors of major proportions, including a failure to properly align and anchor the conveyor equipment. Binks further contends that Presto insisted upon initially operating the System at maximum capacity, thereby ignoring Binks' advice that the System be brought up to full capacity only gradually.
After installation of the System had been completed, Presto personnel made several unsuccessful attempts to operate the System's conveyor. In the ensuing weeks representatives of Presto, Binks and Radiant 4 made other attempts to operate the System, but experienced a myriad of problems. Binks contends that Presto's independent contractors failed to properly synchronize the electric motors used to run the conveyor causing the conveyor to run sporadically and jam. These problems in conveyor synchronization continued for some two months causing the System to operate at less than half capacity.
Binks and Presto disagree as to the underlying cause of the System's faulty performance. Presto alleges that the System was defectively manufactured in that the conveyor, contrary to the contract specifications, was totally enclosed in the System's ovens, causing the conveyor components to overheat, contributing to the twisting, bending and eventually breakage of the conveyor chain.
Binks, on the other hand, contends Presto: (1) improperly installed the System; (2) inadequately lubricated the conveyor; (3) operated the System's oven at excessive temperatures; (4) ignored Binks' advice in initially operating the System at maximum capacity; and (5) ran defective castings through the System, resulting in pieces breaking off the castings and jamming the conveyor.
Binks also asserts that Presto abused the System by "double loading" the castings used to make upper components of the hamburger cookers, thereby exceeding the System's maximum capacity set forth in the contract. According to Binks, "double loading" the System resulted in twice as many upper burger castings being loaded into the System per hour as specified in the contract (2,250 "upper double burger" castings per hour instead of the 1,125 castings per hour outlined in the contract and 4,500 "upper square burger" castings per hour rather than 2,250 castings per hour set forth in the contract).
In early January of 1977, Richard Lavers, a Presto in-house attorney, traveled to their Alamogordo, New Mexico plant to interview plant personnel about the System's problems. Lavers thereafter summarized the information obtained in several "inter-office letters" dealing with Presto's problems. In a January 7, 1977 memorandum to James Bartl, Presto's General Counsel, Lavers set forth a recommended strategy to be employed in negotiations with Binks concerning the System's operational problems. In a January 21 "inter-office letter" to Bartl (Presto's General Counsel), entitled "Evaluation of Binks Situation," Lavers described a conversation he had had with three corporate officers of Presto, and recited in detail the mechanical problems Presto experienced in the operation of the System. A third memorandum dated January 25, 1977, sent by Lavers to Presto's Production Manager, consisted of a more detailed list of each of the System's malfunctions and the duration of each breakdown. The memorandum also contained Lavers' opinion as to the allocation of responsibility between Presto and Binks for each of the System's respective breakdowns.
In the months following Lavers' trip to Alamogordo, Binks and Presto made several unsuccessful attempts to reach a negotiated settlement and failing to achieve this, on November 4, 1977, Binks filed a complaint seeking recovery under the contract for the balance of the purchase price. Presto answered by filing a $9.5 million counterclaim against Binks alleging late delivery of the System, breach of contractual warranties, breach of implied warranties, negligence and misrepresentation in connection with the design, manufacture and sale of the spraying and baking system. 5
In ruling on a Binks' discovery motion prior to trial, the district court found Attorney Lavers' (Presto's in-house counsel) January 7 memorandum protected from disclosure under the work-product doctrine, but did allow Binks to discover both the memoranda of January 21 and January 25 prior to trial, and subsequently allowed Binks to introduce these two memoranda into evidence during the trial. The case came to trial on March 1, 1982, and after the four-week jury trial, judgment was entered in favor of Binks on its claim for the balance of the purchase price and on the counterclaims for damages.
On appeal, Presto contends that the district court erred:
1. In granting Binks' pre-trial motion in limine, precluding Presto from introducing parol and extrinsic evidence to attempt to show that the parties intended to define...
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