Cont'l Cas. Co. v. Vertiv Servs., Inc.
| Decision Date | 01 July 2021 |
| Docket Number | Case No. 2:20-cv-4880 |
| Parties | CONTINENTAL CASUALTY COMPANY, other The Markley Group, Plaintiff, v. VERTIV SERVICES, INC., now known as Vertiv Corporation, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
John C. DeSimone, John B. DiSciullo, Mitchell & DeSimone, Boston, MA, Michael R. Traven, Robert B. Graziano, FisherBroyles, LLP, Columbus, OH, Stephen M. Winning, Pro Hac Vice, Dugan, Brinkmann, Maginnis and Pace, Philadelphia, PA, for Plaintiff.
Marc J. Kessler, Hahn Loeser & Parks, Columbus, OH, Nathaniel R. B. Koslof, Sullivan & Worcester LLP, Boston, MA, Sarah K. Dunkley, Pro Hac Vice, Hahn Loeser & Parks LLP, Chicago, IL, for Defendant Vertiv Services, Inc.
D. Patrick Kasson, Thomas N. Spyker, Reminger Co., LPA, Columbus, OH, for Defendant SBE, Inc.
D. Patrick Kasson, Reminger Co., LPA, Columbus, OH, for Defendants SB Electronics, Advanced Power Conversion Solutions.
Defendant Vertiv Services, Inc. ("Vertiv") moves for a partial judgement on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). Mot., ECF No. 42. For the following reasons, Defendant's motion is DENIED .
The Markley Group ("Markley") provides "a climate controlled and electronically safe environment for its customers’ computer and networking hardware" at its office in Boston, Massachusetts. Amend. Compl. ¶ 9, ECF No. 37. Vertiv, an Ohio company, manufactures, distributes, and sells uninterrupted power supply ("UPS") systems. Id. ¶ 5. Markley purchased several UPS systems from Vertiv in December 2017. Id. ¶¶ 10–11.
On June 22, 2018, a fire started in one of the UPS systems due to the failure of a capacitor which was not properly rated for the system. Id. ¶¶ 19–23, 28. The failure caused electrical arcing and physical damage to a component part. Id. ¶ 30. The heat from the arcing triggered the fire-prevention sprinklers, the water from which caused substantial damage to Markley's facility. Id. ¶ 31.
As Markley's insurer, Plaintiff covered Markley's losses, and now brings this cause of action pursuant to its rights of subrogation. Id. ¶ 32. Plaintiff asserts claims against Vertiv for negligence, breach of warranty, breach of contract, product liability, and negligent misrepresentation. Id. ¶¶ 33–58. Vertiv moves for a partial judgment on the pleadings. Mot., ECF No. 42. Vertiv argues that Plaintiff's claims for damages are limited by the limitation-of-remedy clause in the contract between Vertiv and Markley. Id.
"For purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment." Fritz v. Charter Twp. of Comstock , 592 F.3d 718, 722 (6th Cir. 2010) (citing JPMorgan Chase Bank v. Winget , 510 F.3d 577, 581 (6th Cir. 2007) (internal citations and quotation marks omitted)). "The standard of review for a Rule 12(c) motion is the same as for a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted." Ziegler v. IBP Hog Market, Inc. , 249 F.3d 509, 511–12 (6th Cir. 2001) (citation omitted). As with a 12(b)(6) motion, a claim survives a motion for judgment on the pleadings if it "contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citation omitted). This standard "calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [unlawful conduct]." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A pleading's "[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the [pleading] are true (even if doubtful in fact)." Id. at 555, 127 S.Ct. 1955 (internal citations omitted). While the court must "construe the [pleading] in the light most favorable to the [non-moving party]," Inge v. Rock Fin. Corp. , 281 F.3d 613, 619 (6th Cir. 2002), the non-moving party must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ; see also Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.
As a preliminary matter, the Court concludes that the operative contract is the 2017 contract ("the Contract"), not the 2015 contract. The Service Terms and Conditions page of the 2017 contract expressly provides that "[t]hese Service Terms and Conditions supersede all other communications, negotiations and prior or written statements regarding the subject matter of these Service Terms and Conditions." Mot., Ex. B 6, ECF No. 42-2. Further, the 2015 contract indicates that it covers a "twelve (12) month service period." Mot. Ex. 1, 9, ECF No. 42-1. For these reasons, the Court concludes that the 2017 contract was the operative contract at the time of the alleged capacitor malfunction (June 2018).
Turning to the parties’ arguments, Vertiv argues that Plaintiff's recovery is limited by the limitation-of-remedy clause in the Contract between Vertiv and Markley. The clause reads as follows:
Mot., Ex. B 13, ECF No. 42-2. Plaintiff responds by pointing to the "delay" language in the clause. Id. () (emphasis added). According to Plaintiff, that language limits the entire clause to damages flowing from a delay and, therefore, judgment for Defendant is improper.
The Court agrees with Plaintiff that judgment for Defendants is inappropriate at this time, but for different reasons. After careful consideration, the Court concludes that the Contract is for the sale of goods, and therefore is governed by Ohio's UCC provisions. Under those provisions, a limitations-of-remedy clause is void if it leaves the buyer without a meaningful remedy. For these reasons, discussed more fully below, Vertiv's motion is denied.
A limitation-of-remedy clause is invalid for failing its essential purpose only in contracts for the sale of goods. See, e.g. , Pichey v. Ameritech Interactive Media Servs., Inc. , 421 F. Supp. 2d 1038, 1050 (W.D. Mich. 2006). Therefore, the Court must first determine whether the Contract is for the sale of goods or services.
The Contract encompasses both goods and services,2 so the Court must apply the predominant purpose test. See Cranpark, Inc. v. Rogers Grp., Inc. , 498 F. App'x 563, 568 (6th Cir. 2012). This test considers "whether the predominant factor and purpose of the contract is the rendition of service, with goods incidentally involved, or whether the contract is for the sale of goods with labor incidentally involved." Id. (internal quotation marks and citations omitted). This Court has previously considered the following factors when applying the predominant purpose test:
1) the nature and language of the contract; 2) the nature of the business of the supplier or seller; 3) the price or value allocation in the contract between goods and services to be provided; and 4) the issues involved in the dispute.... It also is useful to consider the compensation structure of the contract in this analysis.
Executone of Columbus, Inc. v. Inter-Tel, Inc. , 665 F. Supp. 2d 899, 907 (S.D. Ohio 2009) (quoting Heidtman Steel Products, Inc. v. Compuware Corp. , No. 3:97CV7389, 2000 WL 621144, at *5 (N.D. Ohio Feb. 15, 2000) ). As explained in Cranpark, Inc. v. Rogers Group, Inc. , these factors are merely guidance, not required analytical steps. No. 4:04CV1817, 2010 WL 11469140, at *3 (N.D.Ohio Aug. 9, 2010). Thus, the Court does not rely on any of these factors as necessary or dispositive, but it does find them helpful in evaluating the predominant purpose of the contract.
Whether a contract involves goods or services is normally a question of fact for the jury. Executone of Columbus, Inc. , 665 F. Supp. 2d at 907. "A jury, however, should only resolve this issue if there is a true factual dispute, not if the division between goods and services merely involves a close call." Mecanique C.N.C., Inc. v. Durr Env't, Inc. , 304 F. Supp. 2d 971 (S.D. Ohio 2004). Here, the Court discerns no true factual dispute and, therefore, evaluates whether the contract is for goods or services as a matter of law.
Turning to the first factor, the nature and language of the Contract support that it predominantly involves goods, though some of the language also discusses services to be provided. For instance, the Contract is titled a "Proposal for Services" and has subheadings that include "Service Summary" and "Service Performed." Mot., Ex. B 2, 6–10, ECF No. 42-2; but see Timken Co. v. MTS Sys. Corp. , No. 5:19-CV-00584, 539 F.Supp.3d 770, 785–86, (N.D. Ohio May 14, 2021) (). Furthermore, the Contract states that "Vertiv [is] to install Premium Capacitors in UPS ... [and the] work [is] to include all AC & DC capacitors for each of the (4) Modules on UPS 421." Id. at 14. On the other hand, the...
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