Dermalogix Partners, Inc. v. Corwood Laboratories, Inc., Civ. No. 99-149-P-C (D. Me. 3/14/2000)
| Decision Date | 14 March 2000 |
| Docket Number | Civ. No. 99-149-P-C. |
| Parties | DERMALOGIX PARTNERS, INC., Plaintiff, v. CORWOOD LABORATORIES, INC., Defendant. |
| Court | U.S. District Court — District of Maine |
CHRISTOPHER C. TAINTOR, ESQ. for DERMALOGIX PARTNERS, INC. plaintiff, NORMAN, HANSON & DETROY, 415 CONGRESS STREET, P.O. BOX 4600 DTS, PORTLAND, ME 04112
TODD S. HOLBROOK, ESQ. for CORWOOD LABORATORIES, INC. defendant, BERNSTEIN, SHUR, SAWYER, & NELSON, 100 MIDDLE STREET, P.O. BOX 9729 PORTLAND, ME 04104-5029
Now before the Court is Defendant's Motion for Partial Summary Judgment on All Counts of the Complaint ("Defendant's Motion") (Docket No. 5). Plaintiff's four-count Complaint (Docket No. 1) alleges breach of contract (Count I), negligence (Count II), and fraudulent misrepresentation (Counts III and IV). The Court will grant Defendant's Motion for Partial Summary Judgment on Counts I and II and deny Defendant's motion on Counts III and IV.
Corwood Laboratories, Inc., ("Corwood") manufactured a pharmaceutical product known as "Dermazinc" for Dermalogix Partners, Inc., ("Dermalogix"). DSMF ¶ 1; Unsworn Declaration of Irwin Thaler ("Thaler Declaration") ¶ 4 (Docket No. 6).2 On October 21, 1998, Dermalogix sent purchase order number 10218 to Corwood, ordering 15,000 four-ounce bottles of Dermazinc for $0.70 per bottle. DSMF ¶ 2; Thaler Declaration ¶ 10, Exhibit B. On December 17, 1998, Corwood sent Dermalogix a purchase order acknowledgment form referencing purchase order 10218, acknowledging an order for 15,000 bottles of Dermazinc at $0.70 per bottle. DSMF ¶ 2; Thaler Declaration ¶ 12, Exhibit D. On January 19, 1999, Corwood sent Dermalogix a second purchase order acknowledgment form referencing purchase order 10218. DSMF ¶ 2; Thaler Declaration ¶ 12, Exhibit E. This second purchase order acknowledgment form references an increase in price from $0.70 per bottle to $0.75 per bottle, apparently reflecting a change in the cap Dermalogix wanted placed on the bottles.3 DSMF ¶ 2; Thaler DSMF ¶ 2; Thaler Declaration ¶ 10, Exhibit E. On January 27, 1999, Dermalogix faxed purchase order 00126B to Corwood, ordering 10,000 bottles with the "yorker cap" and 5,000 "blank" bottles, without a reference to price. DSMF ¶ 2; Thaler Declaration ¶ 10, Exhibit C. On January 27, 1999, Corwood sent two purchase order acknowledgment forms to Dermalogix. DSMF ¶ 2; Thaler Declaration ¶ 12, Exhibits F, G. The first referenced purchase order 000126A and was for 5,000 bottles with "no label, no box, no sprayer," at a price of $0.63 per bottle. DSMF ¶ 2; Thaler Declaration ¶ 12, Exhibit F. The second purchase order acknowledgment form referenced purchase order 00126B, and was for 10,000 bottles at $0.75 per bottle. DSMF ¶ 2; Thaler Declaration ¶ 12, Exhibit G.
Each purchase order acknowledgment form sent from Corwood to Dermalogix included, on the back side, the following language:
6. No claims, damages or liability, of any kind, whether as to products delivered or for non-delivery of products shall be greater in amount than the purchase price of the products in respect of which such damages are claimed; no charges or expenses incident to any claim will be allowed unless approved in writing by an authorized representative of Seller.
DSMF ¶ 3; Thaler Declaration ¶ 6, Exhibit A; Unsworn Declaration of Todd Holbrook ("Holbrook Declaration") ¶ 4, Exhibits J, K. In response to every order placed by Dermalogix, before Corwood began to work on the products, it sent Dermalogix an acknowledgment form containing the same damage cap provision. DSMF ¶ 4; Thaler Declaration ¶ 7-9; Holbrook Declaration ¶ 4 & Exhibits J, K, M-Q. The purchase orders sent from Dermalogix to Corwood contained no language contrary to the damage limitation provision in the Corwood purchase order acknowledgment forms, nor did Dermalogix otherwise raise an objection to the damage limitation provision. DSMF ¶ 5; Thaler Declaration ¶ 10-11, 13, Exhibits B, C; Holbrook Declaration ¶ 4, Exhibit L.
Corwood apparently shipped Dermazinc to Dermalogix pursuant to purchase order 00126B. DSMF ¶ 7, 9-10; Thaler Declaration ¶ 15. Dermalogix complained about the quality of the Dermazinc it had received. DSMF ¶ 10; Thaler Declaration ¶ 15-16. In response to the complaint, Corwood recalled the goods, reworked the product, and reshipped the product to Dermalogix. DSMF ¶ 9, Thaler Declaration ¶ 15. Dermalogix never paid Corwood for the original shipment of Dermazinc, or for the reshipped batch of Dermazinc. DSMF ¶ 9; Thaler Declaration ¶ 15; Deposition of L. Lee Harrington at 65-66 (). The shipment of Dermazinc from Corwood to Dermalogix pursuant to Dermalogix purchase order 00126B is the only shipment of Dermazinc about which Dermalogix has complained to Corwood. DSMF ¶ 10, 12; Thaler Declaration ¶ 10, 16.
The forms exchanged by the parties do not indicate a choice of law. Since this is a diversity case, the Court must apply the choice-of-law rules of the state in which it sits. McAllaster v. Bruton, 655 F. Supp. 1371 (D.Me. 1987) (citing Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). The Maine Law Court applies the local law of the state which "has the most significant relationship to the transaction and the parties" when a choice-of-law issue arises in a contract dispute. Baybutt Const. Corp. v. Commercial Union Ins. Co., 455 A.2d 914, 918 (Me. 1983) (), overruled on other grounds, Peerless Insurance Co. v. Brennon, 564 A.2d 383 (Me. 1989). The potential state laws to be applied here are Maine and New York.4 Because both Maine and New York have adopted the applicable portions of the Uniform Commercial Code's article on sales, 11 M.R.S.A. § 2-201 et seq. and N.Y. Uniform Commercial Code § 2-201 et seq. (McKinney), the Court will bypass the choice-of-law issue.5 See Fashion House, Inc. v. K mart Corp., 892 F.2d 1076, 1094 (1st Cir. 1989).
Corwood's argument presupposes that it breached the contract for sale of Dermazinc and the undisputed facts support this finding. Thaler Declaration ¶ 15. With respect to contract damages, Corwood does not make a comprehensive argument on the facts of this case. Instead, it relies on the recent First Circuit case of JOM, Inc. v. Adell Plastics, Inc., 193 F.3d 47 (1st Cir. 1999), to provide the Court with all necessary legal analysis. The Court finds that implicit in Corwood's reliance on JOM is the assertion that the contract between the parties is controlled by the Uniform Commercial Code ("UCC") § 2-2076 which authorizes the use of a damages limitation clause, like the one printed on the back of Corwood's purchase order acknowledgment form, in the commercial context. Dermalogix responds by arguing that Article 2 of the UCC does not apply to this case. Alternatively, Dermalogix argues that even if Article 2 does apply, the applicable section is 2-206 rather than 2-207. Finally, Dermalogix argues that even if the Court finds that § 2-207 does apply, the term damage limitation incorporated in the purchase order acknowledgment "materially alters" the parties bargain or "fails of its essential purpose," preventing that provision from becoming part of the contract. The Court will address only Dermalogix's last two arguments because its first two arguments are based on facts not contained in the undisputed record before the Court.
In JOM, a case factually analogous to the instant one, the plaintiff purchased chemicals from the defendant for use in the manufacture of casino chips. JOM, 193 F.3d. at 49. Each shipment resulted in a purchase order from the plaintiff which "contained no language relating to warranties or remedies in the event of breach" and an invoice from the defendant which contained a damages-limitation clause stating "[n]o claim of any kind . . . shall be greater in amount than the purchase price of the materials in respect of which damages are claimed." Id. The district court granted summary judgment establishing the resin purchase price as the cap on the plaintiff's damages; but prior to trial the Magistrate Judge ruled, based on what was seen as a change in the law, that evidence of damage in excess of the cap was admissible. Id. After the jury rendered its verdict for an amount far in excess of the purchase price of the resin, the defendant appealed. In reversing the decision of the Magistrate Judge and reinstating the decision of the District Judge, the Court of Appeals held that "the UCC provisions require that the `silent' buyer establish that it would have rejected a damages-limitation clause as a `material alteration,' within the meaning of § 2-207(2)(b)." Id. at 58. The JOM court remanded the case for a determination of whether the plaintiff could show that the damages limitation clause was a "material alteration."
The operable facts of this case are the same as those in JOM. The purchase order sent by Dermalogix was silent as to remedies in the event of a breach. The purchase order acknowledgment form sent from Corwood to Dermalogix included the following language:
No claims, damages or liability, of any kind, whether as to products delivered or for non-delivery of products shall be greater in amount than the purchase price of the products in respect of which such damages are claimed; no charges or expenses incident to any claim will be allowed unless approved in writing by an authorized representative of Seller.
DSMF ¶ 3; Thaler Declaration ¶ 6, Exhibit A; Holbrook Declaration ¶ 4, Exhibits J, K. The purchase orders sent from Dermalogix to Corwood contained no language contrary to the damage limitation provision in the Corwood purchase order acknowledgment forms, nor did Dermalogix otherwise raise an objection to the damage limitation provision. DSMF...
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