Living Vehicle, Inc. v. Aluminum Trailer Co.

Decision Date01 July 2022
Docket NumberCAUSE NO. 3:21-CV-149 DRL-MGG
Citation609 F.Supp.3d 687
Parties LIVING VEHICLE, INC., Plaintiff, v. ALUMINUM TRAILER COMPANY, Defendant.
CourtU.S. District Court — Northern District of Indiana

Craig S. Hilliard, PHV, Pro Hac Vice, Gene Markin, PHV, Pro Hac Vice, Stark & Stark PC, Lawrenceville, NJ, Patrick J. O'Rear, Paul Edgar Harold, John D. LaDue, SouthBank Legal: LaDue Curran & Kuehn, South Bend, IN, for Plaintiff.

Jacob T. Palcic, Jeffrey L. Lund, Nathaniel M. Jordan, Yoder Ainlay Ulmer & Buckingham LLP, Goshen, IN, for Defendant.

OPINION AND ORDER

Damon R. Leichty, Judge Living Vehicle, a company that designs high-end travel trailers, contracted with Aluminum Trailer Company (ATC) to manufacture units under a 2018 Master Services Agreement (MSA) and three statements of work (classified A, B, and C). Living Vehicle says the trailers that ATC built were lemons. Twelve claims remain.

Today's motion concerns six claims—contract (count 1), negligent misrepresentation (count 2), implied and express warranties (counts 3-5), and indemnity (count 6). ATC argues that the companies created a liquidated damage fund that solely compensated these claims. This fund was exhausted at the time of suit, so ATC says Living Vehicle cannot establish the damages necessary to sustain these claims.

The MSA required the trailers to be produced according to the statements of work. Each statement of work obligated Living Vehicle to make deposits to purchase the trailers. For trailers manufactured under the first production run, Living Vehicle deposited $250,000 plus individual deposits for trailers. For the next run, the company deposited $100,000 plus individual deposits. For the last, the company made only individual deposits for trailers. ATC built thirty trailers in total.

The deposits under each statement of work were applied to Living Vehicle's purchases. ATC says these funds exclusively established the recoverable liquidated damages. No balance remains today. ATC thus requests summary judgment. Living Vehicle counters that its six claims elude just liquidated damages and that enforcement of this remedy would be unconscionable and contrary to public policy.

STANDARD

Summary judgment is warranted when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The non-moving party must present the court with evidence on which a reasonable jury could rely to find in her favor. Beardsall v. CVS Pharmacy, Inc. , 953 F.3d 969, 972 (7th Cir. 2020). The court must construe all facts in the light most favorable to the non-moving party, view all reasonable inferences in that party's favor, Bellaver v. Quanex Corp. , 200 F.3d 485, 491-92 (7th Cir. 2000), and avoid "the temptation to decide which party's version of the facts is more likely true," Payne v. Pauley , 337 F.3d 767, 770 (7th Cir. 2003) ; see also Joll v. Valparaiso Cmty. Sch. , 953 F.3d 923, 924-25 (7th Cir. 2020).

In performing its review, the court "is not to sift through the evidence, pondering the nuances and inconsistencies, and decide whom to believe." Waldridge v. Am. Hoechst Corp. , 24 F.3d 918, 920 (7th Cir. 1994). Nor is the court "obliged to research and construct legal arguments for parties." Nelson v. Napolitano , 657 F.3d 586, 590 (7th Cir. 2011). Instead, the "court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial." Waldridge , 24 F.3d at 920. The court must grant summary judgment when no such genuine factual issue—a triable issue—exists under the law. Luster v. Ill. Dept. of Corrs. , 652 F.3d 726, 731 (7th Cir. 2011).

DISCUSSION

As a federal court sitting in diversity, the court honors a choice-of-law clause unless it would contravene public policy. Life Plans, Inc. v. Sec. Life of Denver Ins. Co. , 800 F.3d 343, 357 (7th Cir. 2015). The MSA says Indiana law applies. The parties cite Indiana law. The court sees no reason to depart. See Erie R.R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; McCoy v. Iberdrola Renewables, Inc. , 760 F.3d 674, 684 (7th Cir. 2014) ; Ruiz v. Blentech Corp. , 89 F.3d 320, 323 (7th Cir. 1996).

A. Scope of Liquidated Damage Provisions.

The parties advance different interpretations of the liquidated damage provisions. A contract's interpretation is generally a question of law, Song v. Iatarola , 76 N.E.3d 926, 933 (Ind. Ct. App. 2017), controlled by the parties’ intent as expressed by clear contractual language, City of Jeffersonville v. Env't Mgmt. Corp. , 954 N.E.2d 1000, 1008 (Ind. Ct. App. 2011). "[W]hen the terms of a contract are drafted in clear and unambiguous language, [the court] will apply the plain and ordinary meaning of that language and enforce the contract according to those terms." Haegert v. Univ. of Evansville , 977 N.E.2d 924, 937 (Ind. 2012). "If a contract is ambiguous, the court may consider extrinsic evidence, and the construction of the contract becomes a matter for the trier of fact." Song , 76 N.E.3d at 933 (citation omitted).

The court starts with a preliminary issue: whether statement of work C has a liquidated damage provision. Living Vehicle argues there is none. ATC says there is. Statements of work A and B contain an express liquidated damage provision [ECF 1-2, SOW A § 2(a)(iv), SOW B § 2(a)(iii)]. In lieu, statement of work C says the next tranche of trailers will be produced by ATC per the terms of statement of work A, supplanting the very section (entitled "The Manufacturing Line") where the liquidated damage provision otherwise appeared in statement of work A [SOW C § 2(a)]. Nothing carves out the liquidated damage provision in statement of work A from this plain directive for the last manufacturing run.1

Living Vehicle argues that statement of work C could not have intended a liquidated damage remedy because ATC never required an advance deposit for the trailers in this last tranche (akin to statements of work A and B). All this perhaps shows is that the funding differed, not that a liquidated damage remedy was omitted. Statement of work C still required initial deposits of $46,500 per trailer [SOW C § 1(b)(iii)]. A difference in funding doesn't negate its clear language. In terms of this liquidated damage remedy, statement of work C was governed by the terms of statement of work A.

The court thus turns to the heart of the matter: when the liquidated damage provisions apply. They identically state that, "[s]hould ATC be in breach of this Agreement in any way including the prompt delivery of all of the Production Living Vehicles, building the manufacturing line, etc., LV shall be entitled to the full recovery of the [initial deposit amount] or any balance remaining from deposits ... whichever is less, as liquidated damages for said breach ..." [e.g. SOW A § 2(a)(iv)].

Living Vehicle wants badly to argue that this clause is ambiguous, even pressing this point at oral argument, but the company cannot point to a word or phrase that proves ambiguous. It only views the provision as a whole ambiguous because of this litigation's differing interpretations, but a "contract term is not ambiguous merely because the parties disagree." Roy A. Miller & Sons, Inc. v. Indus. Hardwoods Corp. , 775 N.E.2d 1168, 1173 (Ind. Ct. App. 2002). "An ambiguity exists only [when] reasonable people could come to different conclusions about the contract's meaning." Id. (quotations omitted).

To begin, the liquidated damage provisions apply to a "breach of this Agreement in any way" [e.g. SOW A § 2(a)(iv)]. Rather than debate the point, both parties argue that "this Agreement" means the specific statement of work at issue [Tr. 19, 26-27, 33], and the court agrees with this interpretation.

A single master agreement (such as this MSA) may create independent contractual duties. See, e.g., Heritage Dev. of Ind., Inc. v. Opportunity Options, Inc. , 773 N.E.2d 881, 891 (Ind. Ct. App. 2002) ; Stoneburner v. Fletcher , 408 N.E.2d 545, 549 (Ind. Ct. App. 1980). This isn't uncommon in developing production runs when a master agreement will govern the overall arrangement between the parties and individual statements of work will govern the precise tranches. A master agreement often will direct this; after all, whether a contract is divisible is controlled by what the parties intended as disclosed in the contract's terms, including "whether it could be completed in part only." Heritage , 773 N.E.2d at 891.

The MSA does this very thing. The MSA governs the overall contractual relationship. It then requires ATC to produce certain tranches of units per individual statements of work [MSA §§ 5, 5(a)-(b), 5(d)]. The overarching MSA recognizes that the parties could agree to different designs, specifications, standards, and other terms for a particular production run; and, indeed the parties agreed, as an example, to separate funding for the liquidated damage clauses over these three separate runs in their specific statements of work.

This same intent to treat the statements of work divisibly in respects appears in the MSA's plain language about damages. The MSA says if a party breaches a "specific" statement of work, the company "shall be liable for damages as defined in that [statement of work]" [MSA § 9(f)].2 This language expressly directs the parties to the individual statements of work to consider what damages prove recoverable when one is breached. The court considers the contract as a whole and adopts an interpretation that harmonizes the agreement's various provisions. See Barrington Mgmt. Co. v. Paul E. Draper Fam. Ltd. P'ship , 695 N.E.2d 135, 140 (Ind. Ct. App. 1998). Doing so underscores the view that "this Agreement" in the liquidated damage provisions means the particular statement of work—just as the MSA directs.

The court also avoids interpreting terms in a way that renders them meaningless, see id. , and...

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