Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 5:97CV335.

• Decision Date: 03 June 1998
• Docket Number: No. 5:97CV335.,5:97CV335.
• Citation: 7 F.Supp.2d 954
• Parties: The GOODYEAR TIRE & RUBBER COMPANY, Plaintiff, v. CHILES POWER SUPPLY, INC., dba Heatway Systems, Defendant.
• Court: U.S. District Court — Northern District of Ohio

7 F.Supp.2d 954

The GOODYEAR TIRE & RUBBER COMPANY, Plaintiff, v. CHILES POWER SUPPLY, INC., dba Heatway Systems, Defendant.

No. 5:97CV335.

United States District Court, N.D. Ohio, Eastern Division.

June 3, 1998.

COPYRIGHT MATERIAL OMITTED

Orville L. Reed, III, David P. Bertsch, Betty Joan Konen, Karen K. Grasso, Buckingham, Doolittle & Burroughs, Akron, OH, James K. Archibald, Melissa Force, Venable, Baetjer & Howard, Baltimore, MD, for Plaintiff.

Sergio Anthony Carano, Duvin, Cahn & Hutton, Cleveland, OH, Robert A. Goodman, James S. Wertheim, Drew A. Carson, Goodman, Weiss, Miller, Cleveland, OH, Randall S. Herrick-Stare, Walberg & Dagner, Englewood, CO, for Defendant.

ORDER

SAM H. BELL, District Judge.

Now before the court is a motion for summary judgment filed by Plaintiff Goodyear Tire & Rubber Co. (Docket # 114.) In its motion and memoranda in support thereof, Goodyear argues that there are no genuine issues of material fact relevant to each of its claims against Defendant Chiles Power Supply, Inc., dba Heatway Systems ("Heatway"). As a result, Goodyear further argues, it is entitled to judgment on these claims as a matter of law.

These claims, as well as counterclaims brought by Heatway which are not the subject of this order, arise from a series of contracts between Goodyear and Heatway for the supply of rubber hose used in hydronic radiant heating systems. Goodyear's motion requires that the court consider fundamental questions under Ohio law concerning the formation of contract rights, as well as their application. For the reasons that follow, the court finds that Goodyear is entitled to summary judgment on its claims, but only in part. This court has jurisdiction over this case pursuant to its diversity jurisdiction under 28 U.S.C. § 1332.

I.

Heatway is a Missouri manufacturer of hydronic radiant heating systems. These systems are embedded in either outdoor pavement or indoor flooring, and include pipes, tubes or hoses which circulate warm fluid. As the fluid travels throughout the system, it transfers heat to the surrounding material. Customers purchase hydronic radiant heating systems for various uses, from melting snow on a driveway to warming the floor tiles of a bathroom.

Heatway has sold its heating systems since 1985. Heatway initially used fixed piping to circulate fluid throughout its system. But in contrast to some of its competitors, Heatway later decided that flexible rubber hose was superior as a fluid conduit. Thus, it began purchasing hose from various companies, and in 1988 approached Goodyear about supplying the rubber hose it wanted for its finished products. Goodyear is an Ohio manufacturer of diversified rubber products. Approximately one year later, the parties reached an agreement, and Goodyear began supplying Heatway with Entran II rubber hose. In 1995, Heatway switched to Entran III hose, which Goodyear continued to supply.

Entran II was designed in response to Heatway's plastic pipe-based competition. These competitors claimed that rubber hose was more susceptible to oxygen transfer across the hose membrane, thereby increasing the likelihood that a heating system's metal components would corrode. To answer these claims, Heatway sought the superior oxygen protection of an Entran II hose designed with a nitrile inner tube and chernivic outer cover. Subsequently, Heatway converted to the Entran III hose, which has an ethylene propylene diene monomer ("EPMD") tube and a hypalon cover.

The parties bitterly dispute exactly what representations were made during the negotiations which in the purchase of rubber hose. According to Heatway, it entered the negotiations as a relative neophyte in the world of rubber hoses. It approached Goodyear, a recognized world leader in rubber products, with only a general idea of what it wanted in and from the rubber hose. Heatway knew only that it wanted a flexible hose to carry warmed fluid. It wanted hose which could either be embedded in concrete or installed under floors. Furthermore, it wanted the hose to last twenty years or more, and to be suitable for general hydronic radiant heating applications. These simple goals, says Heatway, were expressly made known to Goodyear.

In Heatway's view, Goodyear, with full knowledge of Heatway's intended applications, Goodyear promised to deliver a hose that would meet all of Heatway's expectations, and more. Heatway further claims that Goodyear made these promises, however, despite knowing full well that the Entran II hose, as proposed, was prone to hardening, cracking, and leaking. These problems had the potential to inflict enormous damages that would cost untold sums to repair.

Not surprisingly, Goodyear tells a very different story. Its story begins with Heatway's founders, brothers Mike and Dan Chiles. The Chiles brothers initially sold heating systems which used fixed, inflexible tubing. But seeking greater flexibility, the brothers switched Heatway's systems to rubber hose which included an inner tube made of EPMD. That tubing, however, also disappointed Heatway, because of its relatively high rate of oxygen permeation. As a result, Heatway worked with another hose supplier, Dayco Rubber Company ("Dayco") to develop a hose that was not only flexible, but included an inner tube made of styrene enthdiene rubber ("SBR"). SBR, like nitrile, has a lower oxygen permeation rate than EPDM. The end product of these design efforts was the Entran II hose.

In July 1986, the Chiles brothers applied for a patent for a flexible hose heat exchange construction. The application disclosed a system for transferring heat that, in Goodyear's opinion, reveals a sophisticated knowledge of tubing composition and properties. On October 5, 1988, the United States Patent and Trademark Office granted the brothers a patent for the construction, United States Patent Number 4,779,673.

Just before the patent was granted, Heatway contacted Goodyear about supplying Entran II hose. Then, on March 3, 1989, after discussing the particulars of Heatway's requirements, the parties agreed to a set of ten performance specifications for any Entran II supplied by Goodyear. In addition, Heatway insisted that the hose include nitrile inner tubing.

The parties also discussed the warranty that would apply to any Goodyear Entran II hose. As did its competitors, Heatway sought to assure its customers that the rubber hose would last at least twenty years. Goodyear, however, knew that it could not reasonably guarantee any such performance. It insisted, and Heatway ultimately acknowledged, that it would warrant only the hose's material and workmanship. Goodyear put its position in writing, declaring that

[a]ll such products sold by The Goodyear Tire & Rubber Co. are warranted to be free from defects in material and workmanship but such products are not warranted for any particular purpose, application or use.... Goodyear's responsibility shall not exceed the original purchase price of the product claimed to be defective, and in no event shall Goodyear be responsible for special, incidental or consequential damages.

Other than those specifically set forth herein, there are no warranties which extend beyond the description of the products on the face hereof, either express or implied. No representative has authority to make any representation, promise or agreement, except as stated herein.

(Alfredson Letter, Pl.'s Ex. 19.) In addition, Goodyear included its warranty in its standard terms and conditions, as set forth on the invoice accompanying every delivery of hose.

In any event, both parties agree that between 1989 and 1993, Heatway purchased Entran II hose from Goodyear for a total price of approximately $8 million. Subsequently, Heatway began purchasing Entran III hose as a substitute conduit for its radiant heating systems. Between 1995 and 1996, Heatway purchased over $2 million worth of Entran III hose for which it has not yet paid Goodyear. In its complaint, Goodyear asks this court to find that it is entitled to payment on its 1995 and 1996 sales to Heatway of Entran III hose. It also asks that the court declare that its warranty on Entran II hose:

(1) limits the liability of Goodyear to repair or replacement of the hose for defects in the hose's material or workmanship, at a cost not to exceed the original purchase price of the hose;

(2) excludes all other warranties, either express or implied; and

(3) excludes claims for special, incidental or consequential damages.

II.

In general, when considering a party's motion for summary judgment, a court must establish whether the nonmoving party can present evidence sufficient to support a reasonable verdict in its favor. In Hall v. Tollett, 128 F.3d 418, 422 (6th Cir.1997), the Sixth Circuit Court of Appeals explained the standard for summary judgment under Fed. R.Civ.Pro. 56 as follows:

[a] court must grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Under this test, the moving party may discharge its burden by "pointing out to the district court ... that there is an absence of evidence to support the nonmoving party's case." The nonmoving party cannot rest on its pleadings, but must identify specific facts supported by affidavits, or by depositions, answers to interrogatories, and admissions on file that show there is a genuine issue for trial. Although [the court] must draw all inferences in favor of the nonmoving party, it [the non-moving party] must present significant and probative evidence in support of its complaint. "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff."

(citations omitted). The court shall...