Leica Geosystems, Inc. v. L.W.S. Leasing, Inc.

• Decision Date: 31 May 2012
• Docket Number: Civil Action No. 10–cv–01813–PAB–BNB.
• Court: U.S. District Court — District of Colorado
• Parties: LEICA GEOSYSTEMS, INC., a Delaware corporation, Plaintiff, v. L.W.S. LEASING, INC., an Illinois corporation, and L.W. Survey Engineering & Design Co., an Illinois corporation, Defendants.

872 F.Supp.2d 1191

LEICA GEOSYSTEMS, INC., a Delaware corporation, Plaintiff,

v.L.W.S. LEASING, INC., an Illinois corporation, and L.W. Survey Engineering & Design Co., an Illinois corporation, Defendants.

Civil Action No. 10–cv–01813–PAB–BNB.

United States District Court,

D. Colorado.

May 31, 2012.

Byeongsook Seo, David Matthew Clarke, Megan Marie Adeyemo, Gordon & Rees, LLP, Denver, CO, for Plaintiff.

John Alonzo Hutchings, Kevin M. Coates, Dill, Dill, Carr, Stonbraker & Hutchings, PC, Denver, CO, Ronald O. Roeser, Roeser & Vucha, LLC, Elgin, IL, for Defendants.

ORDER

PHILIP A. BRIMMER, District Judge.

This matter is before the court on the Motion for Summary Judgment [Docket No. 52] filed by plaintiff Leica Geosystems, Inc. (“Leica”). Leica seeks summary judgment on the two counterclaims asserted by defendants L.W.S. Leasing, Inc. (“Leasing”) and L.W. Survey Engineering and Design Co. (“Survey”). Docket No. 52 at 2. The motion is fully briefed and ripe for disposition.

I. BACKGROUND¹

This case arises out of a contractual dispute between plaintiff Leica and defendants Survey and Leasing. Leica is a company that manufactures and distributes, among other things, airborne laser sensing systems. One of Leica's products, the ALS60 Light Detection and Ranging (“LiDAR”) ² system, is the subject of this lawsuit. Survey is a company that specializes in cross-country utility routing for the communications and energy sectors. Leasing provides, maintains, and supplies equipment for Survey's business.

Leasing purchased Leica's ALS60 LiDAR system for use on a Eurocopter AS350B2 helicopter (“Eurocopter”). Leasing claims that it was unable to use the LiDAR system because it could not obtain approval from the Federal Aviation Administration (“FAA”) to install the system. Leica disputed this fact and, after failed attempts to resolve the dispute, filed the current lawsuit. In its complaint, Leica seeks a declaratory judgment that it fully satisfied its duties under the contract and also asserts claims against Leasing and Survey for a breach of contract. Docket No. 1 at 3–5. In response, Leasing filed counterclaims alleging that Leica breached its express warranty and the implied warranty for a particular purpose and negligently misrepresented information during the negotiation process. Docket No. 16 at 6–12.

A. Federal Aviation Administration Regulations

Under FAA regulations, any structural modification to an aircraft must be approved by one of the FAA field offices. To receive FAA approval, a party can either secure a Supplemental Type Certificate (“STC”) or it may execute a “field approval” through the issuance of a 337 Form. The process of obtaining an STC may take anywhere from six months to three years and cost between $50,000 and $200,000. An STC may only be issued by Aircraft Certification Offices (“ACO”), which are in different locations around the country, with each office specializing in a particular field. The ACO located in Forth Worth, Texas focuses on rotorcrafts, which is the FAA's term for helicopters. See Docket 54–23 at 18–22 (Wysong Dep. 27:19–31:9).

Field approval for a structural change to an aircraft, on the other hand, is obtained through one of the Flight Standards District Offices (“FSDO”). If an aircraft repair station attempts to do a particular modification and does not have an STC, the repair station must obtain field approval. To secure field approval, a repair station must first complete the modification work on an aircraft and then file a 337 Form with its local FSDO. The 337 Form is completed by a designated engineering representative (“DER”), an employee who approves or recommends approval to the FAA on any modification done to an aircraft.See Steenholdt v. FAA, 314 F.3d 633, 634–35 (D.C.Cir.2003) (a DER ensures that private industry clients who hire the DER are in compliance with FAA regulations and airworthiness standards). A DER must be licensed under FAA Order 8100.8C, the Designee Management Handbook (“Handbook”). See Jones v. LaHood, 667 F.Supp.2d 714, 715 (N.D.Texas 2009). In the 337 Form, the DER details the work performed on an aircraft and works as a special liaison between FSDO and the aircraft repair station to ensure that the modification is in compliance with FAA regulations.

Because field approval requires that a repair station complete the modification to an aircraft before filing a 337 Form, the field approval process entails a significant risk. Accordingly, it is standard practice for an aircraft repair station to seek verbal approval from an FSDO that the 337 Form will be accepted before undertaking any modification work on an aircraft. In this case, both sides agree that it is industry practice to make initial communication between an FSDO and a repair station. Leica, however, asserts that industry practice envisions an iterative approach, whereby repair stations are not to cease efforts in the event of an initial, verbal rejection, but should maintain dialogue with the FSDO to overcome concerns. Docket No. 59 at 6. Leasing disagrees and claims that, because two modification stations—Uniflight and Wysong—refused to file 337 Forms, it was reasonable to believe that FAA approval was unattainable.

B. The Negotiation Process

In 2008, Survey sought to expand its business into the aerial mapping and surveying field. To do so, Survey purchased a Eurocopter through Leasing. Additionally, Leslie Welch, Survey's president, hired Michael Fielding as Survey's pilot who was given the responsibility for compliance with FAA regulations. Khaled Gebarin, a Survey employee, became Survey's primary negotiator in charge of locating a system to perform the aerial mapping and surveying. However, neither Gebarin, Welch, nor Fielding had any experience with aerial surveying technology, FAA regulations, or helicopter modification.

On March 21, 2009, Welch, Gebarin, and Seth Marsolek, Survey's General Manager, held a meeting with Michael Graves, who ran a helicopter business, to learn more about helicopter modifications. At this meeting, Graves informed the Survey representatives about STC-approved pods ³ and skids ⁴ used to install LiDAR systems on helicopters. Graves also informed the Survey representatives that STC approval could take up to two years.

In the spring of 2009, Shawn Slade, an employee in Leica's Airborne Imaging and LiDAR sales department, informed Gebarin about Leica's LiDAR products. Through several phone conversations, Slade and Gebarin discussed Leica's ALS60 LiDAR system and began negotiations towards a purchase.

During these negotiations, Leasing claims that Leica was aware that Leasing had purchased a Eurocopter. Docket No. 54–14 at 2 (Slade Dep. 82:17–24). Leasing also asserts that, by June 2009, Leica knew that either Survey or Leasing intended to use the LiDAR System on a Eurocopter for which they had a pod. Docket No. 54–14 at 7 (Slade Dep. 119:15–17); see also id. at 13 (Slade Dep. 166:6) (“I understood [Leasing to be affiliated with Survey].”).

On May 27, 2009, Slade submitted a price quote to Survey for Leica's LiDAR system. See Docket No. 52–24. On June 24, 2009, Slade sent Gebarin two revised price quotes for the LiDAR system. See Docket No. 52–25. All three of these quotes included language located at the bottom of the last page which stated:

This quotation is subject to:

a) our “General Conditions of Sale and Supply” and are valid for all our deliveries unless otherwise agreed in writing.

b) our “General Conditions of Warranty”

c) changes in the technical configuration without notice, due to product development.

d) approval of export license.

Docket No. 52–24 at 9; see also Docket No. 52–25 at 14, 22. Gebarin admits reading the entire quote from Leica but states that he never requested copies of the warranty terms. Docket No. 52–21 at 18 (Gebarin Dep. 89:12–17).

Slade sent Gebarin two more revised price quotes on July 8, 2009 and July 10, 2009. Docket Nos. 52–27 and 52–28. Along with the July 10, 2009 price quote, Slade attached pictures of Leica's LiDAR system mounted on a helicopter. Docket No. 52–28 at 11–15. Slade previously informed Gebarin that the pictures of the helicopter were from TerraTec, one of Leica's customers located “in Norway.” Docket No. 59–10 at 1.

On July 24, 2009, Craig Martineau, Survey's Resource Manager, asked Slade whether Leica had a DER to provide data to the FAA and obtain approval to install the LiDAR system in the Eurocopter. Docket No. 52–29 at 3. Slade replied that the modification shop (repair station) would have the information about DERs. Id. Slade also informed Martineau that Leica would only “install, test and train” on the LiDAR system once an aircraft had already been modified. Id. at 1.

On August 24, 2009, Leasing sent Leica a purchase order for the LiDAR system. Docket No. 54–5. Leasing sent a revised purchase order on the same day. Docket No. 52–30. Leasing did not send payment with the purchase order; rather, it asked Leica to consider providing short-term financing. Docket No. 52–23 at 1, ¶ 3. Leasing, however, provided $100,000 to Leica on September 23, 2009. Docket No. 52–23 at 2, ¶ 4. The parties also negotiated a payment schedule for the LiDAR system's purchase price. Docket Nos. 52–31 and 52–32.

On September 29, 2009, the LiDAR system was delivered to Leasing at Leica's office in Colorado; Leica warehoused the equipment until Leasing completed installation of the Dart Pod on the Eurocopter. Docket No. 54–21; see also Docket No. 54–20 at 3–4. On September 30, 2009, Leica sent Leasing an invoice acknowledging the delivery of the LiDAR system. Docket No. 52–33. The third to last page (and also the last page) of this invoice contained links to two previously undisclosed websites concerning Leica's warranty.⁵

On October 27, 2007, Leica shipped the system to Uniflight, LLC, a repair station located in Grand Prairie, Texas. Docket No. 52–37. Once Uniflight received the LiDAR system, Leasing attempted to...