Posttape Assoc. v. Eastman Kodak Co.

• Decision Date: 27 March 1978
• Docket Number: Civ. A. No. 72-1009.
• Citation: 450 F. Supp. 407
• Parties: POSTTAPE ASSOCIATES v. EASTMAN KODAK CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

450 F. Supp. 407

POSTTAPE ASSOCIATES v. EASTMAN KODAK CO.

Civ. A. No. 72-1009.

United States District Court, E. D. Pennsylvania.

March 27, 1978.

Joseph Manta, Philip A. Ryan, Philadelphia, Pa., for plaintiff.

Henry T. Reath, William J. Barker, Jr., Philadelphia, Pa., for defendant.

MEMORANDUM AND ORDER

HUYETT, District Judge.

This suit arises out of a sale of motion picture film by defendant Eastman Kodak Co. (Kodak) to plaintiff Posttape Associates (Posttape), a limited partnership formed to produce a documentary film. In the first trial of this case, the jury found that the film had been manufactured negligently and that the parties had not agreed to limit the manufacturer's liability to replacement of the film. We denied defendant's post trial motions. Posttape Associates v. Eastman Kodak Co., 68 F.R.D. 323 (E.D.Pa. 1975). The Court of Appeals for the Third Circuit reversed our denial of defendant's motion for new trial and remanded the case to determine whether the parties had entered into an agreement limiting defendant's liability. Posttape Associates v. Eastman Kodak Co., 537 F.2d 751, 758 (3d Cir. 1976). At the second trial, the jury found that the parties had agreed to limit defendant's liability for negligent manufacture of film and for breach of warranty to the replacement of film.¹ Plaintiff has now filed a motion for judgment notwithstanding the verdict or in the alternative for a new trial. For the reasons that follow we will deny the motion.

Plaintiff has advanced four arguments in support of its motion. In addressing these arguments, we are mindful that the evidence must be viewed in a light most favorable to the party receiving the jury verdict. Thomas v. E. J. Korvette, Inc., 476 F.2d 471, 474 (3d Cir. 1973). The motion for a judgment notwithstanding the verdict can be granted only where the evidence supports but one reasonable conclusion, while the motion for a new trial is entrusted to the sound discretion of the trial court. Id. at 474-75. "If the evidence in the record, viewed from the standpoint of the successful party, is sufficient to support a jury verdict, a new trial is not warranted merely because the jury could have reached a different result." Gebhardt v. Wilson Freight Forwarding Co., 348 F.2d 129, 133 (3d Cir. 1965). With these principles in mind, we turn our attention to plaintiff's specific contentions.

I. Trade Usage

The parties agree that the provisions of the Uniform Commercial Code (Code), as adopted in Pennsylvania, control the disposition of the motion. Section 1-201(3) of the Code defines "agreement" as the bargain in fact between the parties "as found in their language or by implication from other circumstances including course of dealing or usage of trade . . .." 12A P.S. § 1-201(3). At trial, defendant attempted to show that the agreement between the parties to the sale of the film included a term limiting the manufacturer's liability for faulty film to the replacement of the raw stock. In addition to relying upon the language printed on the side of film boxes and canisters,² defendant contended that this term was established by a usage in the commercial film industry. To prove this trade usage, defendant introduced a number of witnesses who testified to the existence of such a practice in the film industry as well as the reasons underlying its adoption.³

While defendant's evidence supports a finding that such a limitation was accepted and reasonable, the record does not include any specific instances of negligently manufactured film or the application of the limitation. Indeed, under cross-examination the witnesses were unable to recall any specific applications of the limitation. This absence of record evidence forms the basis for plaintiff's contention that defendant's proof failed as a matter of law to establish a trade usage. Plaintiff argues that the evidence only established Kodak's attempts to impose a limitation of liability. Trade Usage is defined in Section 1-205(2) as follows:

A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question.

12A P.S. § 1-205(2). Focusing on this definition, plaintiff argues that usage as defined by "practice" and "method" necessarily connotes repeated applications of the limitation. Plaintiff reasons that only through repeated applications of the limitation can a buyer know or be expected to know that a trade usage exists. Before a trade usage could be established under plaintiff's theory, the record would have to reflect the repeated assertion of claims against Kodak and the invocation of the limitation by Kodak in response to these claims. Plaintiff notes that because of the rarity of film problems, there were no instances of application of the limitation on the record. Plaintiff concludes, therefore, that defendant's evidence could not have established a trade usage.

While plaintiff's theory is not without appeal, we must reject it. Although the evidence does not show specific implementations of the limitation, there was abundant testimony that the usage did exist and that it was accepted by film makers as well as manufacturers and processors. Although plaintiff's argument focuses on practice and method, we believe that the key concept incorporated into Section 1-205(2) is "regularity of observance." See 12A P.S. § 1-205 Comment 5. This "regularity of observance" refers to the recognition and acceptance within the industry sufficient "to justify an expectation that it will be observed with respect to the transaction in question." 12A P.S. § 1-205(2); see id. Comment 7. In other words, repeated applications would be one manner in which to prove the requisite "regularity of observance", but a showing of industrywide recognition and acceptance of such a practice would also suffice. It is clear that the evidence at trial went beyond the unilateral imposition of a limitation by Kodak as suggested by plaintiff.

The definitions ascribed by the plaintiff to the words "method of dealing" and "practice" do not counsel against our view of "regularity of observance." "Practice" or "method of dealing" refer to the exact policy in question and do not in themselves require proof at trial of repeated applications of the usage sought to be invoked.

In sum, Section 1-205(2) requires that "the existence and scope of such usage are to be proved facts." 12A P.S. § 1-205(2). This factual showing may be made by evidence of repeated applications of the term or of recognition and acceptance by members of the particular industry. We conclude that the testimony offered by defendant was sufficient to support a finding by the jury that at the time of the sale of the film to plaintiff there existed a trade usage limiting a commercial buyer's remedy to replacement of the negligently manufactured film.

II. Exclusivity of the Limited Remedy

Section 2-719(1)(b) provides:

Resort to a limited remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

12A P.S. § 2-719(1)(b). Plaintiff contends that defendant failed to satisfy this requirement because of its failure to show actual instances where the limitation was invoked by defendant. This argument tracks plaintiff's contention with respect to trade usage. There is, however, abundant testimony in the record showing that members of the industry recognized and accepted the replacement of the film as the sole remedy to the commercial user of film. Thus, for the same reasons stated above, we find that defendant introduced sufficient evidence to allow a reasonable jury to find that the return of the film constituted the plaintiff's sole remedy.

III. Disclaimers for Lack of Due Care

Plaintiff argues that the finding of defendant's negligence at the prior trial renders any disclaimer ineffective. See 12A P.S. § 1-102(3). This argument is dependent upon the characterization of the language printed on film boxes or canisters of the trade usage as a disclaimer rather than a limitation. This issue, however, was specifically addressed by the Court of Appeals which found that the replacement of the film constituted a limitation of remedy, rather than a disclaimer. Posttape Associates v. Eastman Kodak Co., supra, 537 F.2d at 755-56. The Court of Appeals concluded that Pennsylvania law did not prohibit such a limitation. Id.⁴

IV. Failure of Essential Purpose and Unconscionability

Even though the defendant has established that the limitation was agreed to be the buyer's sole remedy, Sections 2-719(2) and (3) "provide that the buyer may be relieved of its strictures" "if the limitation is unconscionable or fails of its essential purpose." Posttape Associates v. Eastman Kodak Co., supra, 537 F.2d at 756-57 citing 12A P.S. §§ 2-719(2) and (3). See generally Fahlgren, Unconscionability: Warranty Disclaimers and Consequential Damage Limitations, 20 St. Louis U.L.J. 435, 445-63 (1976). Plaintiff contends that the facts of this case demonstrate that the limitation both is unconscionable and fails of its essential purpose. If plaintiff can convince us to accept either of these arguments, the limitation will not be enforced.

Plaintiff asserts that its argument finds support in Neville Chemical Co. v. Union Carbide Corp., 294 F.Supp. 649 (W.D. Pa.1968), aff'd, 422 F.2d 1205 (3d Cir. 1970). In Neville, the court refused to enforce a clause limiting the buyer's remedy to return of the purchase price. The buyer alleged that the exclusion was unconscionable because the defect in the resin which plaintiff had purchased was not discoverable until the resin had been resold to manufacturers and had been incorporated into finished products. In concluding that the limitation clause failed of its essential purpose, the court reasoned:

Such a limited remedy would be wholly inadequate in the case

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