Conveyor Company v. Sunsource Technology Services

• Decision Date: 02 November 2005
• Docket Number: No. C03-4092-MWB.,C03-4092-MWB.
• Citation: 398 F.Supp.2d 992
• Parties: The CONVEYOR COMPANY, Plaintiff, v. SUNSOURCE TECHNOLOGY SERVICES, INC., Defendant.
• Court: U.S. District Court — Northern District of Iowa

398 F.Supp.2d 992

The CONVEYOR COMPANY, Plaintiff, v. SUNSOURCE TECHNOLOGY SERVICES, INC., Defendant.

No. C03-4092-MWB.

United States District Court, N.D. Iowa, Western Division.

November 2, 2005.

COPYRIGHT MATERIAL OMITTED

Edward F. Pohren, Dwyer Smith Grimm Gardner Lazer Pohren Rogers & Forrest, LLP, Omaha, NE, Harold D. Dawson, Dekoter, Thole & Dawson, PLC, Sibley, IA, for Plaintiff.

David H. Bamberger, Dla Piper, Rudnick, Gray & Cary, US, LLP, Washington, DC, Stephen J. Holtman, Simmons Perrine Albright Ellwood, Cedar Rapids, IA, for Defendant.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

BENNETT, Chief Judge.

                TABLE OF CONTENTS
                I.  INTRODUCTION .......................................................995
                      A.  Procedural Background ..........................................995
                      B.  Factual Background .............................................995
                 II.  LEGAL ANALYSIS .....................................................997
                      A.  Standards For Summary Judgment .................................997
                      B.  The Merchantability Claim ......................................998
                          1.  The claim ..................................................998
                          2.  Arguments of the parties ...................................998
                          3.  Applicable law .............................................999
                          4.  Analysis ..................................................1000
                              a. "Merchantability" under § 554.3214(2)(a) ..............1000
                              b. "Merchantability" under § 554.3214(2)(c) ..............1002
                      C.  The Strict Liability Claim ....................................1005
                          1.  The claim .................................................1005
                          2.  Arguments of the parties ..................................1005
                          3.  Applicable law ............................................1006
                          4.  Analysis ..................................................1008
                      D.  The Negligent Misrepresentation Claim .........................1011
                          1.  The claim .................................................1011
                          2.  Arguments of the parties ..................................1012
                          3.  The "economic loss" bar ...................................1012
                          4.  The elements of the claim .................................1013
                

                a.  Definition of the necessary duty ......................1014
                              b.  Did SunSource have the necessary duty? ................1015
                III.  CONCLUSION ........................................................1016
                

What claims can the manufacturer of a stinger stacker, used for unloading certain raw materials from a ship to ground stock piles, maintain against the supplier of the hydraulic lift package identified as the source of the collapse of the stinger stacker? Here, the supplier of the hydraulic lift package has moved for summary judgment on the manufacturer's claims of breach of implied warranty of merchantability, strict products liability, and negligent misrepresentation. The supplier's motion requires the court to consider matters as diverse as the fine distinctions between a claim of breach of warranty for a particular purpose and a claim for breach of warranty for ordinary purposes (merchantability), and the impact of Iowa's "economic loss rule" on tort claims.

I. INTRODUCTION

A. Procedural Background

Plaintiff The Conveyor Company (Conveyor), an Iowa corporation with its principal place of business in Sibley, Iowa, filed its Complaint in this diversity action on September 25, 2003, against defendant SunSource Technology Services, Inc. (SunSource), a Delaware corporation. Conveyor alleges several claims arising from the collapse of a "Rail-Mounted Stinger Stacker with Rail-Mounted Tripper" (the Stinger Stacker) built by Conveyor, for which SunSource had provided the hydraulic lift package. Conveyor sold the Stinger Stacker to non-party Martin Marietta Aggregates. Shortly thereafter, the Stinger Stacker collapsed while in use, causing damages to the Stinger Stacker itself, but no injuries or other property damage. In Count I of its Complaint, Conveyor alleges breach of implied warranty of fitness for a particular purpose; in Count II, breach of implied warranty of merchantability; in Count III, strict products liability; in Count IV, negligent misrepresentation; and in Count V, breach of contract. See Docket No. 1. SunSource answered Conveyor's Complaint on October 27, 2003 (docket no. 8), denying all of Conveyor's claims. Trial in this matter is currently set for December 12, 2005.

On August 10, 2005, SunSource filed a Motion For Partial Summary Judgment (docket no. 47), seeking summary judgment in its favor on Counts II, III, and IV of Conveyor's Complaint. Conveyor resisted that motion on September 6, 2005 (docket no. 48), and SunSource filed a reply in further support of its motion for partial summary judgment on September 16, 2005 (docket no. 51). At SunSource's request, the court set oral arguments on SunSource's motion for partial summary judgment for October 21, 2005. At the oral arguments, plaintiff Conveyor was represented by Edward F. Pohren of Dwyer, Smith, Gardner, Lazer, Pohren, Rogers & Forrest, L.L.P., in Omaha, Nebraska. Defendant SunSource was represented by Stephen J. Holtman of Simmons, Perrine, Albright & Ellwood, P.L.C., in Cedar Rapids, Iowa, who argued the merchantability issues concerning Count I, and by David H. Bamberger of DLA Piper Rudnick Gray Cary U.S. L.L.P., in Washington, D.C., who argued the tort claim issues concerning Counts II and III. SunSource's motion for partial summary judgment is now fully submitted.

B. Factual Background

The court will not attempt here a complete dissertation of the undisputed and disputed facts in this case. Rather, the court will provide sufficient of the facts, undisputed and disputed, to put in context the parties' arguments for and against summary judgment on Counts II, III, and IV of Conveyor's Complaint. Indeed, the court finds that the facts pertinent to SunSource's motion for partial summary judgment are considerably less extensive than the parties assert, because many of the issues raised in that motion are questions of law concerning the viability of certain claims, where the pertinent facts are undisputed.

In late 2000, Conveyor contracted to supply Martin Marietta Aggregates with a "Rail-Mounted Stinger Stacker with Rail-Mounted Tripper" for use at Martin Marietta Aggregate's Savannah, Georgia, Marine Terminal. The Stinger Stacker for Martin Marietta Aggregates was 48" by 170', and was mounted on rails. Such a "stacker" moves product, in this case, aggregate, up a conveyor belt and deposits the product in stock piles. A "stinger" is an extendable conveyor on a stacker used, in this case, to unload aggregate from ships to ground stock piles. The Stacker in question here raised the Stinger by means of a dual hydraulic cylinder system. The parties agree that the extension of the two cylinders to raise the Stinger had to be synchronized, so that both cylinders would lift or lower the Stinger the same distance.

Because Conveyor did not have sufficient expertise with hydraulic systems, Conveyor sought bids from two hydraulics vendors for the hydraulic lift package for the Stinger Stacker. One of the bidders was SunSource. Conveyor provided the vendors with information needed to generate a quotation, although the parties dispute details of what was disclosed about Conveyor's design for the Stinger Stacker, either then or later. The parties agree that SunSource was eventually selected as the successful bidder and that SunSource ultimately designed and provided the hydraulic lift package for the Stinger Stacker for Martin Marietta Aggregates.

SunSource's quotation for the hydraulic lift package, submitted in June 2001, was apparently based on the assumption that there would be a mechanical linkage between the two hydraulic cylinders in the lift package, as shown in the initial design specifications provided by Conveyor; consequently, SunSource did not include in its original design of the hydraulic lift package a "flow divider" to divide and regulate the flow of hydraulic fluid between the two cylinders. However, after the second of only two meetings between representatives of Conveyor and SunSource, this one in late June of 2001, Conveyor requested and SunSource provided a quotation including a flow divider that would provide equal flow of hydraulic fluid (50/50) to the two cylinders. Specifically, SunSource quoted a "50/50" Sterling Flow Divider. Conveyor contends that the "geometry" of the Stinger Stacker did not permit the mechanical linkage of the two hydraulic cylinders, so that the flow divider was the only means of insuring the synchronization of the cylinders. One key "fighting issue" between the parties in this litigation is whether Conveyor ever disclosed to SunSource that there would be no mechanical linkage between the hydraulic cylinders, so that the flow divider would be the only part of the Stinger Stacker that would synchronize the cylinders. Another key "fighting issue" is whether SunSource ever disclosed to Conveyor that the Sterling Flow Divider that SunSource proposed to incorporate into the hydraulic lift package had as much as a 10% variance in flow between the cylinders. The parties do not dispute that more accurate flow dividers, which could have synchronized the extension of the two cylinders to within millimeters of each other, were available and known to SunSource.

SunSource eventually delivered the hydraulic lift package for the Stinger Stacker to Conveyor in the summer of 2001, and Conveyor incorporated it into the Stinger Stacker. Conveyor then delivered the Stinger Stacker to Martin Marietta Aggregates in January 2002. On or about January 16, 2002, the Stinger Stacker totally collapsed while it was in operation, apparently for...