Standard Alliance Industries, Inc. v. Black Clawson Co.
| Decision Date | 30 November 1978 |
| Docket Number | Nos. 76-2006,76-2007,s. 76-2006 |
| Citation | 25 U.C.C.Rep. 65,587 F.2d 813 |
| Parties | 25 UCC Rep.Serv. 65 STANDARD ALLIANCE INDUSTRIES, INC., Plaintiff-Appellee, v. The BLACK CLAWSON COMPANY, Defendant-Appellant. STANDARD ALLIANCE INDUSTRIES, INC., Plaintiff-Appellee-Cross-Appellant, v. The BLACK CLAWSON COMPANY, Defendant-Appellant-Cross-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Robert T. Keeler, Taft, Stettinius & Hollister, Lawrence D. Walker, Cincinnati, Ohio, for defendant-appellant.
Stanley M. Chesley, Waite, Schindel, Bayless & Schneider, Cincinnati, Ohio, for plaintiff-appellee.
Before PHILLIPS, Chief Judge, KEITH and MERRITT, Circuit Judges.
This case concerns a machine, a 175 ton "green monster," 1 more formally known as a horizontal automatic radial forging facility. This machine is the cause of this multimillion dollar breach of warranty litigation between its manufacturer, the Black Clawson Company, (Black Clawson), and its purchaser, Standard Alliance Industries, Inc. (Standard Alliance). After protracted discovery, three separate trials and an unsuccessful mandamus petition to this court, this case comes before us on appeal and cross appeal from the final judgments below.
This litigation principally concerns whether the Black Clawson-built machine was in compliance with certain express warranties. After a four-week trial on the liability issue, a jury found that the machine did not comply with the warranties and, implicitly, that defendant Black Clawson had adequate notice of the breach. That same jury, at a separate trial, assessed damages at $525,000.00. Finally, at a bench trial, the district court ruled on two peripheral issues arising from the transaction. Black Clawson appeals from the jury's verdict on liability, raising a host of issues. Standard Alliance, although victorious below, cross appeals, complaining that it did not receive the full damages to which it was entitled. Black Clawson also appeals from the damages award. Finally, Standard Alliance appeals from the judgment of the court below, at the bench trial. We reverse the judgment of liability entered at the jury trial and affirm in part, reverse in part, the judgment at the bench trial.
This saga began in the early 1960's. Plaintiff, Standard Alliance Industries, Inc., 2 manufactured railroad car axles, using the drop hammer method of forging, by which the axles were formed from steel bars by steam hammers. Fearing that its competitors were forging ahead with more sophisticated manufacturing techniques, plaintiff began to actively explore newer technology.
By 1965 the plaintiff determined that it should automate the forging process and purchase an automatic forging machine. There were two manufacturers who could provide such a machine: one was a European concern, known as the GFM company, 3 the other was the Black Clawson Company. Black Clawson had never manufactured an automatic forging machine before, but it did have general experience as a major machine builder.
The plaintiff was swayed by Black Clawson's reputation, its proposed design and its promised fast delivery time. 4 Serious negotiations commenced between the two companies in January of 1965. All aspects of the proposed sale were carefully reviewed and negotiated. A major stumbling block was the warranty. The seller, Black Clawson, did not wish to warrant the quality or quantity of the machine's production. The buyer, Standard Alliance, insisted on a series of performance guarantees, notably a forging cycle of two minutes and a finished axle within certain tolerances. Finally, a compromise was reached. Black Clawson would guarantee that the machine would perform a series of mechanical functions but would not guarantee the quality or quantity of production. A contract was signed on August 16, 1965, excluding implied warranties, 5 but containing certain agreed upon express warranties:
The following express warranties, which relate to mechanical function only become an adjunct to our contract clause # 1 page 11 and supersede all references to warranties that may be contained in the description of the machine pages 2-7, either expressed or implied.
Black Clawson warrants that the subject machinery will perform the following mechanical functions:
1. Press will deliver 1000 ton ram capacity at 150 strokes per minute @ 1/4 from bottom dead center.
2. Press will have a maximum speed of 250 strokes per minute with a range of 10 to 250 SPM.
3. Rams at bottom of stroke will have a parallelism of within .005 .
4. Peel and press will trace template within plus or minus .015 .
5. Feed adjustments will have a range up to 0.375 per second.
6. Peel rotation will have a range of 5 to 100 RPM and will be designed to lock at the 90o positions.
7. Peel traverse speed will have a range of 1 ft/minute to 45 ft/minute, and will be designed to lock in position.
8. The mechanical functions can be programmed to operate in automatic sequence in the specified capacities and accuracies or may be operator interrupted and/or commanded as required.
The quality and quantity of production is not the responsibility of the seller.
We shall refer to these warranties as the "page twelve" warranties, as do the parties. The contract further limited the seller's obligations under the warranty to repair or replace defective parts for a one-year period. Selling Condition 1 states:
1. Seller warrants the equipment manufactured by it will be free from defects in workmanship and material. Equipment manufactured by others than the Seller is sold exclusively under such warranty as the manufacturer may give to the Seller and to the extent enforcible by the Seller. The Seller does not warrant the amount or quality of production unless expressly stated in the specifications. If any part be found within one year from date of delivery to have been defective when delivered (any shortcoming which prevents performance to the specific standards, if any, set forth * being deemed a defect) and provided immediate notification in writing is given to the Seller, the Seller will replace or repair such part. The liability of Seller under this warranty is limited to repair or replacement of the defective part, all damage claims being excluded.
Finally, the contract specifically excluded consequential damages for any established breach of warranty. 6
The contract also contained six pages of technical specifications for the machine and provided for a delivery time of ten to twelve months. The parties have stipulated that the total amount paid for the machine was $571,790.00.
Immediate problems arose. The manufacturing process took longer than expected and many design changes were made while the machine was being built. Finally, in July, 1967, Black Clawson began to ship the machine to Standard Alliance's East Chicago, Indiana plant. Installation was completed by October, 1967.
The machine proved troublesome from the start. On December 27, 1967, Standard Alliance sent a letter to Black Clawson outlining the machine's problems. The parties met to discuss the situation on January 2, 1968. In a follow-up letter, on January 3, 1968, Black Clawson's president promised that his company would work with Standard Alliance to fix the machine. Accordingly, a team of Black Clawson employees was sent to commence repairs. For over five months, both sides labored to make the machine operable. On June 21, 1968, defendant ceased working on the machine and withdrew its employees. 7
On September 30, 1968, plaintiff sold its entire Standard Forgings Division to a group of buyers termed "the Wiener Group." The new purchasers also attempted to get the machine to function properly, but with no success. An outside consultant was called in; he pronounced the machine underdesigned and, as a practical matter, irreparable. The instant action was filed on May 29, 1969, almost eight months to the day after Standard Alliance completely disposed of its interests in the machine to "the Wiener Group." On July 14, 1969, "the Wiener Group" began to dismantle and to sell the machine for scrap. Eventually, a new GFM axle forging machine was brought in and put into operation.
Plaintiff originally sued under four different theories: 8 1) breach of the page twelve express warranties; 2) breach of the express warranty to repair or replace defective parts; 3) breach of implied warranties of merchantability and fitness for particular purpose; and 4) negligence in the building and installation of the machine. These different causes of action were based on the same factual allegations despite repair efforts, the machine could not be made to forge axles as it was supposed to. The judge directed verdicts in favor of the defendant on the negligence and implied warranty claims. 9 He then submitted the remaining two claims to the jury: 1) whether defendant had breached any of the page twelve performance warranties in the contract; 2) whether defendant had breached the "warranty" 10 to repair or replace defective parts. The jury found in favor of the plaintiff on both causes of action. In reality, the two causes of action are synonymous; 11 but they must be separated for purposes of the following discussion.
Defendant Black Clawson does not seriously dispute the extensive record of the machine's defects. 12 Instead, it claims that Count I is barred by the statute of limitations and that Count II is barred because Standard Alliance failed to give proper notice as required by UCC § 2-607(3)(a). We agree that these arguments have merit.
Chronology is important to a precise understanding of the issues. The machine was delivered and assembled at Standard Alliance's plant in the fall of 1967. The machine proved defective, and Standard Alliance wrote Black Clawson on December 27, 1967, delineating...
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