Hawthorne Industries, Inc. v. Balfour Maclaine Intern., Ltd.
| Decision Date | 28 May 1982 |
| Docket Number | No. 81-7202,81-7202 |
| Citation | 676 F.2d 1385 |
| Parties | 33 UCC Rep.Serv. 1339 HAWTHORNE INDUSTRIES, INC., Plaintiff-Appellant, v. BALFOUR MACLAINE INTERNATIONAL, LTD., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Mitchell, Mitchell, Coppedge, Boyett & Wester, Warren N. Coppedge, Jr., J. Raymond Bates, Jr., Dalton, Ga., for plaintiff-appellant.
McCamy, Minor, Phillips & Tuggle, C. Lee Daniel, III, Dalton, Ga., for Stevens Textile.
Heyman & Sizemore, William B. Brown, Patrick L. Swindall, William H. Major, Atlanta, Ga., for Balfour.
Appeal from the United States District Court for the Northern District of Georgia.
Before INGRAHAM *, HATCHETT and ANDERSON, Circuit Judges.
This suit 1 arises out of a series of contracts between appellant Hawthorne Industries Inc. (Hawthorne), a carpet manufacturer, and appellee Balfour Maclaine International, Ltd. (Balfour), under which Balfour agreed to supply jute for use as carpet backing. The district court found that the jute supplied by Balfour was defective and that Balfour thereby breached its contracts with Hawthorne. These findings are not contested. Hawthorne appeals the district court's denial of its request for consequential damages representing loss of efficiency, excess down time, and additional adhesive materials expended in attempting to utilize the defective jute. We remand for more specific findings concerning the adequacy of Hawthorne's proof of damages.
The parties entered into three contracts, two in August 1975, and one in February 1976, calling for purchases of approximately 248,000 yards of jute. As described at trial, jute carpet backing is an imperfect commodity in which some deviation in quality and dimension is normally expected. As the district court found, however, the parties evidently intended that all the jute purchased under these contracts would conform to the standards and tolerances of the Jute Carpet Backing Council. Although Hawthorne was able to process approximately 80,000 yards of Balfour's jute, with a contract value of approximately $48,000, Hawthorne encountered substantial deviations in the quality of the jute that made production exceedingly difficult. In order to avoid wrinkles, sagging and other undesirable effects, Hawthorne claims it slowed down its machinery to facilitate adjustments by hand and added extra latex adhesive between the jute and the primary carpet surface.
Because of the defects encountered, Hawthorne eventually rejected the balance of the jute supplied by Balfour, withheld the purchase price and brought suit alleging breach of contract in a Georgia state court against Balfour and a Georgia corporation that acted as sales agent. Hawthorne's complaint sought consequential damages of $50,000. Balfour counterclaimed for the purchase price of jute consumed, and consequential damages. The Georgia corporation was dismissed and the case removed to the United States District Court for the Northern District of Georgia.
Hawthorne's evidence of damages may be briefly summarized as follows. Three of Hawthorne's plant supervisors testified that the normal speed of the jute processing in 1975 or 1976 was approximately twenty feet per minute, but that the machinery was slowed approximately three feet per minute to process the Balfour jute. These witnesses also testified that approximately two to four extra ounces of latex adhesive were applied per yard, and that the plant experienced approximately 30% down time while Balfour's jute was in use. Based on the estimates of these witnesses, together with the weekly production reports, Hawthorne's chief financial officer prepared a cost estimate for the value of lost efficiency, additional machine time and materials expended. On cross-examination Balfour established that no written records of the rate of production or additional materials were kept. Balfour's contention, therefore, both at trial and on this appeal, has been that Hawthorne's damage claim is based on guess work and speculation. Interestingly, one of Balfour's witnesses, Dennis Brock, a former financial officer of several other carpet plants in the area, substantially confirmed Hawthorne's estimates of a reasonable reduction in speed of production and increased use of adhesives when jute problems are encountered.
The district court found that the jute varied in quality from one roll to another, as well as within a roll. Thus, the defects did not render all of the jute unusable, but did require Hawthorne to slow down the manufacturing process and make adjustments to attempt to overcome the variations in quality. As the district court described, Hawthorne's machinery was set at the "lowest common denominator" in order to accommodate the full range of variations. The court found that all of Hawthorne's adjustments were commercially reasonable in the carpet manufacturing industry. The court further found that Hawthorne "sustained a loss of machine efficiency in processing the Balfour jute," that slowing the machinery caused "additional cost" and "great trouble and expense," and that "Hawthorne sustained increased costs by virtue of adding extra adhesives to laminate Balfour jute to the primary carpet backing."
Notwithstanding these findings, the district court declined to award damages for loss of efficiency, slow-down or extra adhesives. In finding of fact 45, the district court stated: "Damages claimed by plaintiff are too speculative and uncertain to allow a recovery for cost of excess run time, loss of efficiency and cost of excess down time." The findings were subsequently amended to add finding 46, an identical finding with respect to extra latex adhesives. In conclusion of law 7, the court stated:
The plaintiff's method of proving consequential damages failed to account adequately for the wide deviation in the rate of production with various types of jute. Thus, although the plaintiff has established that the jute was of inferior quality and constituted a "material breach" or "substantial nonconformity", it has failed to prove its damages with a sufficient degree of certainty.
The court then awarded Balfour the contract price for jute consumed by Hawthorne, offset by the...
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