ITT Corp. v. LTX Corp., Civ. A. No. 88-0967-C.
| Decision Date | 21 March 1990 |
| Docket Number | Civ. A. No. 88-0967-C. |
| Citation | 732 F. Supp. 1225 |
| Parties | ITT CORPORATION, Plaintiff, v. LTX CORPORATION, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Michael J. Liston, Palmer & Dodge, Boston, Mass., for plaintiff.
Joseph L. Kociubes and Richard Mentzinger, Jr., Bingham, Dana & Gould, Boston, Mass., for defendant.
This case is a civil action brought by the plaintiff, ITT Corporation ("ITT"), against the defendant, LTX Corporation ("LTX") for breach of contract.1 ITT alleges that LTX failed to accept delivery of 479 cable assemblies pursuant to a written contract between the parties. ITT seeks the cost of the cable assemblies, approximately $540,000, in damages.
This case was tried before the Court without a jury over four days in November and December 1989. The Court heard the testimony of six witnesses, viewed a videotape, and examined numerous documents and cable assemblies introduced in evidence. The plaintiff and defendant also submitted an agreement as to certain stipulated facts in this case. After the trial, the plaintiff and defendant submitted proposed findings of fact and briefs concerning the legal issues in the case. Based on a careful review of the evidence at trial and the papers submitted, this Court now makes the following findings of fact and conclusions of law.
1. The plaintiff, ITT, is a Delaware corporation with its principal place of business in the city and state of New York. ITT conducts a portion of its business through an unincorporated division known as ITT Cannon.
2. ITT Cannon manufactures and distributes electrical connectors and connector assemblies. An electrical connector is a fitting that joins with another fitting or receptacle to make a circuit. In its simplest and most common form, an electrical connector is an electrical plug.
3. ITT Cannon produces sophisticated forms of electrical connectors. One of ITT Cannon's products is a patented low insertion force multiple-wire power and signal connector known as a DL Connector. The DL Connector involved in this action is a commodity item that ITT Cannon sells in the commercial computer and peripheral equipment marketplaces.
4. The defendant, LTX, is a Massachusetts corporation with its principal place of business in Westwood, Massachusetts. LTX manufactures and distributes sophisticated semiconductor testing equipment. LTX's test equipment is used to test semiconductors at different stages of manufacturing. This equipment often costs in excess of $500,000 for a testing unit. Its customers are major electronics firms around the world.
5. The dispute between ITT and LTX involves a product called a TS 88 test head cable and harness assembly (the "TS 88 cable assembly"). LTX manufactures a model of semiconductor testing equipment known as the TS 88. The TS 88 cable assembly is a cable and electrical connector assembly used in the TS 88 model. The TS 88 cable assembly is used to connect LTX's testing equipment to a test head which then tests a semiconductor device.
6. The complete TS 88 cable assembly is a special purpose item which has virtually no functional use or market value except in connection with the LTX testing equipment. LTX does not manufacture this component of its equipment. LTX has historically looked to others manufacturers to provide the cable and connecter and to assemble those parts to produce the TS 88 cable assembly.
7. Prior to September 1983, LTX did not use TS 88 cable assemblies. The cable assemblies then in use were less sophisticated cable assemblies known as CMO-2 cable assemblies. The CMO-2 cable assemblies were made either by W.L. Gore & Associates ("Gore") using cable manufactured by Gore and connectors made by ITT Cannon or by ITT Cannon using Gore cable and its connectors.
8. In 1983, LTX decided to alter the design of its testing equipment which led to the development of the TS 88 model and the TS 88 cable assemblies. LTX wanted to enlarge the electronic capabilities of its testing equipment and therefore wanted to redesign its test heads and test head cables. Gore designed a new cable for LTX to use in the TS 88 cable assembly. LTX is the owner of the design criteria for the new Gore cable. As with the cable assembly, the cable itself has virtually no functional use or market value except in connection with LTX equipment.
9. During the summer and fall of 1983, ITT Cannon and LTX negotiated an agreement whereby ITT Cannon would produce the new TS 88 cable assemblies. The TS 88 cable assemblies were to be assembled by ITT Cannon utilizing its own patented electrical DL connectors and the newly designed Gore electrical cable. On September 22, 1983, LTX issued a purchase order to ITT Cannon for 1,600 fully assembled TS 88 cable assemblies.
10. The Gore cable used for the new assemblies was a single cable with the cable jacket opened at each end splitting the wires into two bundles. Each bundle entered at one side of a plastic backshell covering the area where the wires made contact with the ITT Cannon electrical connector. The splitting of the cable for entry on two sides of the backshell created a "Y" junction near each end of the cable assembly. The cable assemblies produced pursuant to this purchase order did not perform satisfactorily, and LTX received numerous customer complaints about the cable assembly failures.
11. In the spring of 1984, LTX, ITT Cannon, and Gore discussed the breakage problems of the first TS 88 cable assemblies. Gore suggested changing the cable from a one-cable design to a dual-cable design in order to relieve strain on the "Y" joint. This suggestion was ultimately adopted. ITT Cannon produced amended engineering drawings, routings, and parts lists to produce the dual-cable assemblies.
12. Because of the problems with the one-cable designs, the delivery and payment schedule of the initial purchase order was modified and the one-cable design discontinued. On October 22, 1984, LTX issued a new changed purchase order to ITT Cannon for 4,149 TS 88 cable assemblies using the dual-cable design. The new purchase order contemplated a schedule of weekly deliveries commencing in October 1984 and terminating in July 1985.
13. This dual-cable TS 88 assembly is the particular cable assembly at issue in this case. This TS 88 cable assembly is comprised of two electrical cables, each six feet in length, containing in combination 155 insulated wires and several drain wires. The individual wires and the related insulation of each wire are surrounded and jacketed by a polyurethane cover to form the cable.
14. Each end of each cable—the cables are essentially in parallel—is attached to an ITT Cannon connector with 156 contacts. Each of the 155 wires in the cable is individually crimped to one of the connector contacts. The drain wires are assembled together and crimped to the 156th contact of the connector. In some of the assemblies, a 156-contact ITT Cannon connector is used at one end and a 96-contact ITT Cannon connector is used at the other end. In these assemblies, only 96 of the wires are crimped at the 96-contact end. With a connector at each of the ends, the two-cable assembly will function as a single cable with 156 or, in the alternative form, 96 separate contacts.
15. The area around the ITT Cannon electrical connector where the individual wires and corresponding contacts are crimped is covered with a plastic backshell. The backshell is approximately one inch thick, four inches wide, and two inches long. The bottom of the backshell is cut at angles on each side where the cables enter so that the two cables enter approximately three inches apart.
16. There is a strain relief mechanism where the cables enter near the backshell. This mechanism is intended to relieve the strain placed on the area where the individual electrical strands are connected to the contacts when the cable is flexed.
17. The strain relief includes polyolefin heat-shrinkable sleeving, extending from within the backshell to two inches from the point the cables enter the backshell. The sleeving wraps around each cable. It also includes a stainless steel clamp, attached to each side of the backshell and wrapped around each cable just outside the backshell. The clamp holds the cable in place.
18. Several additional outer jacket polyolefin rubberlike strips, each about two inches in length, wrap around the two cables like wide, firm rubber bands, beginning about eight inches from the bottom of each backshell. These strips hold the two cables side by side through the balance of the cable length.
19. Deliveries and payments for the new dual-cable design continued in accordance with the second purchase order. On March 12, 1985, however, LTX issued a change order modifying the delivery schedule and extending its completion date from July 1985 to October 1986. In October 1985, LTX placed a hold on all further deliveries.
20. LTX ceased accepting deliveries because, at least in part, its customers were experiencing cable failures. Wires were breaking within the cables, generally two to five inches outside the area of strain relief. At the time LTX ceased accepting deliveries, ITT Cannon had an inventory of completed dual-cable design TS 88 assemblies and also raw Gore electrical cable not yet incorporated into TS 88 cable assemblies.
21. ITT Cannon does not contend and has not contended that the dual-cable design TS 88 assemblies produced under the second purchase order are in fact adequate for use with LTX equipment. There was a dispute between the parties, however, as to the responsibility for the failures of the cable assemblies. Despite lengthy negotiations and attempts to deal with the apparent problems, the parties were unable to resolve their contract differences without resorting to litigation.
22. On June 3, 1986, ITT Cannon commenced suit against LTX in this Court for breach of contract and for violation...
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