Imc Chemicals, Inc. v. Niro, Inc.

• Decision Date: 27 April 2000
• Docket Number: No. 98-2348-JTM.,98-2348-JTM.
• Citation: 95 F.Supp.2d 1198
• Parties: IMC CHEMICALS, INC., f/k/a North American Chemical Co., Plaintiff, v. NIRO, INC., Defendant and Third-Party Plaintiff, v. DEC International, Inc., Third-Party Defendant.
• Court: U.S. District Court — District of Kansas

95 F.Supp.2d 1198

IMC CHEMICALS, INC., f/k/a North American Chemical Co., Plaintiff, v. NIRO, INC., Defendant and Third-Party Plaintiff, v. DEC International, Inc., Third-Party Defendant.

No. 98-2348-JTM.

United States District Court, D. Kansas.

April 27, 2000.

COPYRIGHT MATERIAL OMITTED

Floyd R. Finch, Jr., Blackwell Sanders Peper Martin LLP, Kansas City, MO, Tara E. Foss, Foland & Wickens, P.C., Kansas City, MO, for IMC Chemicals, Inc.

Samuel P. Logan, James K. Logan, Logan Law Firm LLC, Olathe, KS, E. Hutchinson Robbins, Jefferson V. Wright, Miles & Stockbridge P.C., Baltimore, MD, for Niro, Inc.

Brett C. Coonrod, Spencer J. Brown, Deacy & Deacy, Kansas City, MO, David Easton, Michael J. Modl, Andrew J. Clarkowski, Axley Brynelson, LLP, Madison, WI, for DEC Intern., Inc.

MEMORANDUM ORDER

MARTEN, District Judge.

Currently before the court in this action involving a dispute as to the construction of industrial fluid bed dryers for the production of soda ash are (1) the summary judgment motion by defendant Niro, Inc., seeking dismissal of the claim for consequential damages by plaintiff IMC Chemicals, Inc., (2) IMC's motion to amend its complaint, which would allow the introduction of fraud and fraudulent inducement claims against Niro, and (3) a summary judgment motion by third-party defendant DEC International, Inc. For the reasons stated herein, the court will deny the first motion, grant the second, and grant — in most respects — the third.

1. Niro's Motion for Summary Judgment

Summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court must examine all evidence in a light most favorable to the opposing party. McKenzie v. Mercy Hospital, 854 F.2d 365, 367 (10th Cir.1988). The party moving for summary judgment must demonstrate its entitlement to summary judgment beyond a reasonable doubt. Ellis v. El Paso Natural Gas Co., 754 F.2d 884, 885 (10th Cir.1985). The moving party need not disprove plaintiff's claim; it need only establish that the factual allegations have no legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir. 1987).

In resisting a motion for summary judgment, the opposing party may not rely upon mere allegations or denials contained in its pleadings or briefs. Rather, the nonmoving party must come forward with specific facts showing the presence of a genuine issue of material fact for trial and significant probative evidence supporting the allegation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Once the moving party has carried its burden under Rule 56(c), the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts. "In the language of the Rule, the nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed. R.Civ.P. 56(e)) (emphasis in Matsushita). One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and the rule should be interpreted in a way that allows it to accomplish this purpose. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The evidence before the court establishes that on April 2, 1993, IMC and Niro entered into a $21.8 million contract "for the design, engineering and fabrication of process system equipment" for manufacturing soda ash "as set forth on exhibit A attached hereto." (Def.Exh. A, at 165-49). Exhibit A specifies the completion of the process system equipment by phases, with an associated capacity to produce light or dense soda ash at a given number of tons per hour. Section VII of the preliminary, typewritten portion of the contract provides in part that "Niro guarantees the evaporation rate for all drying equipment as shown in the technical description Section 1.1.2 `Process Conditions', and all equipment delivered hereunder shall be in conformance with the technical description that follow[s]." (Id. at 165-54).

Attached as an appendix to the typewritten portion of the April 2 contract is a printed "General Terms and Conditions" form containing standard contract provisions used by Niro Atomizer, Inc.¹ As incorporated into the contract in question, Section V of the General Terms and Conditions of the Contract provides Niro's warranty terms. It provides:

[Niro] warrants to the Purchaser that the equipment purchased is free from defects in material and workmanship for a period of twelve (12) months from the date of delivery of the equipment provided that: (a) the equipment is installed in accordance with [Niro]'s specifications and instructions and is used and maintained normally and properly in accordance with [Niro]'s instructions as to maintenance and operations, whether given orally or set forth in written operations and maintenance manuals and instruction sheets furnished by [Niro]; (b) the equipment is used in connection with product consistent with the Purchaser's specifications to [Niro] or, if no specifications are given, with the material identical to material provided to [Niro] for testing prior to this proposal; (c) the equipment has not been changed without the prior written approval of [Niro]; (d) Purchaser gives prompt written notice to [Niro] before the end of the warranty period specifying as alleged defects in the equipment purchased; and (e) Purchaser preserves and turns over to [Niro] or permits reasonable inspection by [Niro] of all allegedly defective equipment, parts or items. This warranty shall not cover (i) any equipment furnished by Purchaser or any third party (other than a subcontractor of [Niro]), (ii) any defects arising from corrosion, use of unsuitable lubricants, or negligent attendance or faulty operation, or (iii) any defects caused by errors on the part of the Purchaser in not providing suitable premises in which the equipment is to be located, adequate foundation works, or adequate protection against influences within or outside the premises which may affect the equipment or its operation.

If the Purchaser discovers a defect during installation of the equipment, Purchaser is to advise [Niro] as soon as possible after a problem is detected by telephone, followed by written confirmation, telecopy, telex, etc., giving detailed information of the alleged defect and the reason that it is considered [Niro]'s responsibility. In addition, Purchaser shall provide details to include projected direct costs and delays (number of people, rental equipment, etc.), if any, which may result from such alleged defect. [Niro] and Purchaser will then mutually agree to a reasonable response time. [Niro] will have access to the job site to inspect and review with the erection contractor and Purchaser's personnel when [Niro] feels justified to make such a visit. Backcharges will not be accepted by [Niro] unless [Niro] has authorized such charges prior to commencement of work, except for charges incurred to prevent an emergency; i.e., personnel safety or an occurrence of imminent hazard, etc. If the emergency charges occur, Purchaser will document the incident and submit the details to [Niro] for review. When responsibility for outstanding backcharges cannot be resolved by normal channels, periodic meetings will be held as required to resolve the differences.

UNLESS OTHERWISE EXPRESSLY STATED IN ANY DOCUMENT ATTACHED TO THESE GENERAL TERMS AND CONDITIONS, THIS WARRANTY OF MATERIAL AND WORKMANSHIP IS THE ONLY WARRANTY MADE BY [NIRO] AND IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND [NIRO] DISCLAIMS ON BEHALF OF ITSELF, ITS SUBCONTRACTORS AND SUBSUPPLIERS ANY AND ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE, SUITABILITY OR PERFORMANCE. No other promise or affirmation of fact (including, but not limited to, statements regarding capacity or performance of the equipment) shall constitute a warranty of [Niro] or give rise to any liability or obligation on the part of [Niro].

[Niro]'s obligation under this warranty and any other warranty or guarantee attached to these General Terms and Conditions is strictly and exclusively limited to furnishing repairs or replacements for equipment or parts determined to be defective on inspection by an authorized representative of [Niro]. [Niro] assumes no responsibility and shall have no liability for any repairs or replacements by Purchaser without [Niro]'s prior written authorization.

(Def.Exh. A., at 165-57).

Section VI of the General Terms and Conditions provides a limitation on the damages available under the contract:

NOTWITHSTANDING ANY OTHER PROVISION OF THIS PROPOSAL OR ANY RESULTING CONTRACT TO THE CONTRARY, (A) [NIRO]'S AND ITS SUBCONTRACTORS' AND SUBSUPPLIERS' AGGREGATE RESPONSIBILITY AND LIABILITY, WHETHER ARISING OUT OF CONTRACT OR TORT, INCLUDING NEGLIGENCE AND STRICT LIABILITY, UNDER THIS PROPOSAL OR RESULTING CONTRACT, INCLUDING, BUT NOT LIMITED TO, ALL CLAIMS FOR BREACH OF ANY WARRANTY OR GUARANTEE, FAILURE OF PERFORMANCE OR DELAY IN PERFORMANCE BY [NIRO] OR PERFORMANCE OR NON-PERFORMANCE OF THE PURCHASED EQUIPMENT SHALL NOT EXCEED FIFTY PERCENT (50%) OF THE CONTRACT PRICE FOR THE PURCHASED EQUIPMENT, AND (B) IN NO EVENT SHALL [NIRO], ITS SUBCONTRACTORS OR SUBSUPPLIERS BE LIABLE IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE AND STRICT LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR CHARACTER, INCLUDING, BUT NOT LIMITED TO, LOSS OF USE OF PRODUCTIVE FACILITIES OR...