Rotorex Co., Inc. v. Kingsbury Corp., Civ. H-97-1917.

• Decision Date: 01 April 1999
• Docket Number: No. Civ. H-97-1917.,Civ. H-97-1917.
• Citation: 42 F.Supp.2d 563
• Parties: ROTOREX COMPANY, INC., Plaintiff, v. KINGSBURY CORPORATION, Defendant.
• Court: U.S. District Court — District of Maryland

42 F.Supp.2d 563

ROTOREX COMPANY, INC., Plaintiff, v. KINGSBURY CORPORATION, Defendant.

No. Civ. H-97-1917.

United States District Court, D. Maryland.

April 1, 1999.

Thomas M. Lingan, William D. Dolan, III and Venable, Baetjer and Howard, Baltimore, MD, for plaintiff.

Sarah Chapin Columbia, Eric B. Hermanson and Choate, Hall and Stewart, Boston, MA, for defendant.

ALEXANDER HARVEY, II, Senior District Judge.

This civil action arises as a result of a contract dispute between plaintiff Rotorex Company, Inc. ("Rotorex") and defendant Kingsbury Corporation ("Kingsbury"). Rotorex manufactures air compressors for air conditioning units at its facility located in Walkersville, Maryland.¹ Kingsbury's principal place of business is located in Keene, New Hampshire, and Kingsbury designs and sells assembly line equipment, including automated assembly systems.

In the late 1980s, Rotorex began to investigate the use of an automated alternative to its manual assembly system. Following negotiations between the parties, Rotorex and Kingsbury entered into a contract² whereby Kingsbury would design and manufacture an automated assembly system for purchase by Rotorex and installation in its plant. Pursuant to the parties' agreement, Kingsbury did in fact design and manufacture such a system, and it was delivered and assembled at Rotorex's plant in or about July of 1995.

In this civil action, the parties dispute the terms and conditions of the contract between them, and they also dispute whether each party satisfied its performance obligations under the contract. In its complaint, plaintiff Rotorex alleges that defendant Kingsbury breached the contract between the parties, and plaintiff seeks substantial damages under various legal theories. Defendant Kingsbury in turn has filed a counterclaim charging Rotorex with breach of contract.

Pursuant to Scheduling Orders entered by the Court, the parties have engaged in extensive discovery. Presently pending before the Court are a motion for partial summary judgment as to contract formation and terms filed by plaintiff Rotorex and also a motion for partial summary judgment filed by defendant Kingsbury. The parties have submitted lengthy memoranda and voluminous exhibits in support of and in opposition to the pending motions, including excerpts from numerous depositions taken during discovery. A hearing on the pending motions has been held in open court. For the reasons stated herein, plaintiff's motion for partial summary judgment will be granted in part and denied in part, and defendant's motion for partial summary judgment will be granted in part and denied in part.

I Background Facts

When Rotorex decided to explore the feasibility of switching from a manual assembly system to an automated one, Kingsbury was one of several manufacturers which Rotorex consulted. Discussions with Kingsbury personnel began in the late 1980s. There were several design proposals submitted by Kingsbury in the early 1990s, and in February of 1993 Rotorex presented Kingsbury with a set of formal specifications. On May 23, 1993, Peter Austin ("Austin"), Kingsbury's Sales Manager, submitted a formal Proposal to Rotorex; based on the latter's specifications (Proposal # 14020593A). This Proposal detailed an automated assembly system capable of a gross production rate of 480 compressors per hour.

Rotorex had appointed Jack Andersen ("Andersen") as its Project Engineer to oversee the acquisition of an automated assembly system. Over the next several months after May of 1993, Andersen suggested that various additions and revisions be made to Kingsbury's Proposal. As a result, a revised Proposal dated August 18, 1993 was submitted by Kingsbury to Rotorex (Proposal # 14020593A, Revision 1). Both the original Proposal and the revised Proposal contained boilerplate language termed "Standard Terms and Conditions of Sales" ("Kingsbury's Standard Terms"). Kingsbury's Standard Terms included the following language:

ACCEPTANCE: The proposal ... will become void unless accepted by the Purchaser within 90 days of the date hereof. Purchaser's order must be signed by a duly authorized agent, must indicate acceptance of Seller's proposal, if any terms of Seller's proposal are changed and can be accepted only at the HOME OFFICE of the Seller in Keene, New Hampshire, U.S.A. The resulting contract shall ... be governed by the laws of the State of New Hampshire.... Any of the terms and conditions of the Purchaser's order which are in conflict with, inconsistent with, or in addition to the terms and conditions set forth herein shall [not]³ become a part hereof unless expressly agreed to in writing by the Seller.

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PRODUCTION ESTIMATES. Where production figures are supplied by Seller, it is understood that they are estimates based on information supplied by Purchaser concerning the limits of accuracy and finish required, condition of material and components as supplied to the equipment, machinability and amount of material to be removed, handling facilities provided and locating points as stated in the proposal, and are not guaranteed.

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WARRANTY. Seller warrants that items of its own manufacture or equipment proposed to be furnished under this contract except where failure is due to extraordinary wear and tear, abuse, overloading or alternation [sic] not approved by Seller, will be free from defect in material and workmanship under normal use and service for a period of twelve (12) months from the date of delivery.... SELLER DISCLAIMS ALL OTHER WARRANTIES EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. The exclusive remedy of the Purchaser shall be the replacement by Seller of any material and parts, F.O.B. Keene, New Hampshire, found to be defective within such warranty period without any obligation of the Seller for installation of replacement parts. It is further understood that the Seller shall in no event be liable for consequential damages....

Negotiations between the parties continued through the Fall of 1993. On December 3, 1993, Rotorex's Purchasing Manager, Steve Stock ("Stock") met with Austin at Kingsbury's home office in Keene, New Hampshire, at which time the final terms of the deal were negotiated. Certain agreements were reached based in part on Kingsbury's August 18 Proposal. After Stock's meeting with Austin, a revised proposal dated December 3, 1993 was prepared (Proposal # 14020593A, Revision 2). Thereafter, Rotorex forwarded to Kingsbury its Purchase Order # 932735 dated December 22, 1993 (the "December 22 Purchase Order"). That Purchase Order, which was not received by Kingsbury until December 27, 1993, recited the following terms:

[Contract price of $4,670,231] includes all delivery to Rotorex and late penalty of .5% per week not to exceed 2% for delivery after 8/31/95. This order is for an automated assembly system as per Rotorex specifications dated 8/5/93 in reference to Kingsbury Quotation # 14020593A, Revision 1 dated 8/18/93. Two year warranty included. System includes but is not limited to a complete compressor final assembly operation with end cap welding machines (3) including automatic load and unload. System is to support 39F and 48F production according to the Rotorex machine tool standards, the specifications and the final negotiations between Steve Stock and Peter Austin. No changes may be made to this purchase order or the system specification without written authorization from Rotorex Purchasing.

The back of this Purchase Order contained Rotorex's boilerplate terms and conditions ("Rotorex's Standard Terms"), some of which were in conflict with Kingsbury's Standard Terms. Included are the following provisions:

WARRANTY 6. Seller warrants that the goods and/or services covered by this purchase order shall be in full conformity with all specifications, descriptions, drawings or designs contained or incorporated by reference in this purchase order or submitted to Seller herewith, and with any sample or samples supplied or adopted by Buyer. It is further agreed that the goods and/or services will be merchantable, free from defects in material and workmanship, and fit for the use and purpose intended by the Buyer, and Seller has been informed of such aforesaid use and purpose, and hereby acknowledges that Buyer us [sic] relying on Seller's skill and judgment to select or furnish suitable goods and/or services. These warranties shall survive any inspection, delivery, acceptance or payment by the Buyer of or for the goods and/or services. Said warranties shall be in addition to any warranties, express or implied, of additional scope made by Seller to Buyer, and shall amplify and not circumscribe, such additional warranties.

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INTERPRETATION 17. The validity, interpretation and legal effect of this order and any supplement or modification hereto, shall be governed by the laws of the State of New York.

On January 5, 1994, Austin addressed a letter to Stock which provided as follows:

This is to acknowledge the receipt of your formal Purchase Order # 932735 for the Compressor Final Assembly System that we negotiated on December 3, 1993 and to clarify and/or take exception to certain items listed under the Terms and Conditions on the reverse side of the purchase order that we feel are not applicable.

Even though the purchase order was received at Kingsbury on December 27, I was not able to review it until this week because of the Christmas and New Year holidays. Because of this I was not able to acknowledge it within the (10) days specified under Item 1 of the Acceptance clause. I am assuming this will not be a problem.

Regarding Item 2 under Deliver, Kingsbury believes this clause is not applicable in lieu of the previously negotiated late deliver penalty clause as stipulated on the face of your purchase order.

Regarding Item 12 under Taxes, Kingsbury takes...