Timken Co. v. MTS Sys. Corp.
| Decision Date | 14 May 2021 |
| Docket Number | Case No. 5:19-cv-00584 |
| Citation | 539 F.Supp.3d 770 |
| Parties | The TIMKEN COMPANY, Plaintiff, v. MTS SYSTEMS CORPORATION, Defendant. |
| Court | U.S. District Court — Northern District of Ohio |
Andrew H. Cox, Anthony J. Martucci, Jada M. Colon, Laura L.W. Schultz, Thompson Hine, Cleveland, OH, for Plaintiff.
Michelle D. Christensen, Daniel A. Haws, John Paul Gatto, Kyle A. Koebele, HKM, St. Paul, MN, Brendan P. Kelley, Laura K. Hong, Tucker Ellis, Cleveland, OH, for Defendant.
With a public partner, The Timken Company undertook a pioneering project to support the development of wind power. At its heart, that project required the construction of a testing and development facility for ultra-large wind turbines. To develop the key systems in that facility, Timken selected MTS Systems Corporation. As relevant here, the parties entered into two contracts. Then, as one would expect because they are now litigating in federal court, things went south.
Timken filed suit asserting claims for breach of contract, breach of warranty, fraudulent inducement, or, in the alternative, negligent misrepresentation. MTS moves for summary judgment on all claims against it on the grounds that Timken's contract claims are time-barred as are its tort claims because they merge with the contract claims. For its part, Timken moves for summary judgment on MTS's statute of limitations defense. For the reasons that follow, the Court GRANTS IN PART and DENIES IN PART MTS's motion for summary judgment and DENIES Timken's motion for summary judgment.
Plaintiff The Timken Company manufactures ultra-large-wind-energy tapered roller bearings for wind turbines, among other products. (ECF No. 43-1, ¶ 5, PageID #1248.) Defendant MTS Systems Corporation designs and manufactures industrial testing and position sensors. (ECF No. 35-1, ¶ 2, PageID #438.) By way of background, Timken and Stark State College formed a joint venture to develop the Stark State College and The Timken Company Technology and Test Center, known as the Wind Center, where Timken could test products for use in wind-powered turbines and the college could train technicians to service them. (ECF No. 35-3, PageID #450.) This world-class facility was the first of its kind in the Americas and promised to shorten the time for product development while improving reliability and cost-effectiveness. (ECF No. 41-4, PageID #1123–24.)
Timken contracted with MTS to design and construct a bearing test system to allow Timken to "test the performance of its bearings in wind turbines at an accelerated rate," without having to wait years or decades to assess their performance in the field as customers used them." (ECF No. 37-1, ¶ 12, PageID #907.) Timken planned for the test system to run continuously (24 hours per day, seven days per week) to replicate the loads the bearings would experience in the field. (Id. , ¶ 13.) To provide a sense of the scale and scope of this project, the test system required a specially designed foundation at the Wind Center that was 13 feet deep and weighed approximately 1,000 tons. (ECF No. 37-1; ¶ 36, PageID #913; ECF No. 43-1, ¶ 14, PageID #1249.) Among the helpful images and diagrams the parties include in their briefing, the following photo of the foundation under construction illustrates the scale of the project:
(ECF No. 37, PageID #890.)
To simulate the operations of a wind turbine, the test system consists of three main components: (1) the NTL 5U (); (2) the reaction structure to which the test bearing is mounted; and (3) the foundation. (ECF No. 35-1, ¶ 6, PageID #439; ECF No. 37-1, ¶ 15, PageID #908.) One diagram the parties use helps identify these components:
(ECF No. 35, PageID #407; ECF No. 37, PageID #886.)
These components perform the following functions:
1. Basically, the NTL 5U mimics the shaft of a wind turbine and recreates the forces that the wind turbine rotor blades would apply to the main shaft bearing in the field. (ECF No. 37-1, ¶ 20, PageID #910.) The NTL 5U is bolted to the bedplates that are anchored to the foundation, which MTS designed to Timken's specifications. (Id. , ¶ 22, PageID #911.) This picture shows the NTL 5U being installed at the wind center:
(ECF No. 37, PageID #888.)
2. The reaction structure mimics the gear box in a wind turbine. (ECF No. 37-1, ¶ 24, PageID #911.) This structure attaches to Timken's tooling, which holds the test bearing in place. (Id. ) It is also bolted to the foundation. (Id. , ¶ 25.) This image depicts the basic operation of the gearbox:
(ECF No. 37, PageID #883.)
3. Functioning as the test system's base, the foundation supports the NTL 5U and the reaction structure. (ECF No. 37-1, ¶ 27.) Also, the foundation must resist the forces generated during testing and dampen vibrations to protect the surrounding building and equipment at the Wind Center. (Id. )
In June 2011, MTS provided Timken a quote for the NTL 5U that included a potential upgrade to the NTL 10. (See ECF No. 36-5.) That quote remained valid for one year. (Id. , PageID #764.) As quoted, upgrading to the NTL 10 involved increasing axial actuators and adding various hydraulic power supply and distribution components at a price of $650,000. (Id. , PageID #776.) Following negotiations between the parties, MTS provided Timken with a revised quotation, also in June 2011. (ECF No. 36-6.) In the revised quote, the components for an upgrade remained the same, but the price was $695,000. (Id. , PageID #799.) Based on the specifications in the quotation, the design for the frame could accommodate either the NTL 5U or the NTL 10. (ECF No. 35-4, PageID #512; ECF No. 36-6, PageID #794.)
Two purchase agreements govern various components of the system and lie at the heart of the parties’ dispute.
C.1. Bilateral Purchase Agreement, July 1, 2011
On July 1, 2011, Timken and MTS entered into a bilateral purchase agreement for the design, manufacture, testing, and commissioning at the Wind Center of an NTL 5U—the first of the components for the test system. (ECF No. 35-5, PageID #532.) Under this contract, MTS agreed to design, manufacture, deliver, and test the system according to certain technical specifications for a fixed price of $3.49 million. (Id. , PageID #532–33.) In addition to the NTL 5U module itself, Timken required that MTS supply a hydraulic power unit, recommend a gear box, motor, and motor drive for Timken to purchase, provide the electronics to run the NTL 5U, and integrate the NTL 5U and certain components. (ECF No. 36-2, PageID #711.)
Instead of using standard terms of sale, the agreement provides a specific warranty and other terms. (ECF No. 35-5, PageID #535.) Of relevance to this dispute, MTS provided a warranty "for a period of twelve (12) months after Final Acceptance, which occurs after successful passing of acceptance test criteria at [the Wind Center] or not longer than eighteen (18) months after delivery to Point of Delivery, whichever occurs first." (Id. ) This warranty covered the merchandise, defined in the agreement as "one (1) Wind Energy Ultra Large Bearing Test System (MTS Scope of Supply) for delivery and operation at the Wind [Center] ... designed, built, delivered, tested and commissioned in accordance with" a technical specification incorporated into the contract. (Id. , at PageID #532.) Notwithstanding this definition of merchandise, the agreement's warranty extends to "goods and services." (Id. , at PageID #535.) It also provides that the "Merchandise shall perform in accordance with the requirements of the Purchase Order Documents and be fit for the use and purposes specified." (Id. ) Further, the warranty for "Special Services including startup, commissioning, training and engineering services ... shall be of the highest standards." (Id. )
In all-capitalized text, the parties disclaimed any and all warranties other than those specifically provided in the agreement:
Except as otherwise expressly set forth herein, or as is required by law, THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(Id. ) MTS reserved the right to reject warranty claims due to Timken's modifications, improper maintenance, or misuse of equipment. (Id. ) Finally, the agreement contains an integration clause. (Id. , at PageID #541.)
C.2. Bilateral Purchase Agreement, October 17, 2011
On October 17, 2021, the parties entered into a second agreement for the design, manufacture, delivery, testing, and commissioning of the other two components of the test system—the reaction structure and the foundation. (ECF No. 35-6, PageID #544.) This agreement also provides for installation tests and overall system responsibilities for the test system. (Id. ) Like the first agreement, this second agreement provides that "no prior offers or communications will be incorporated in this agreement." (Id. ) The second agreement required MTS to perform in accordance with three technical specifications included in a purchase order, incorporated into the agreement. (Id. , PageID #544–45.) These specifications required MTS to design and supply the reaction structure, design the foundation, and perform specified installation tests. (ECF No. 36-1, PageID #672; ECF No. 36-3, PageID #735–36; ECF No. 36-4, PageID #754–56.)
With respect to the foundation, the agreement called for MTS to deliver its design to certain specifications. (ECF No. 35-6, PageID #544–45.) Those specifications identify delivery of the complete foundation design as the first deliverable for MTS and make final acceptance contingent on a non-party's successful test of the entire system, including the foundation. (ECF No. 36-3, § 9.1, PageID #749.)
The second agreement has a total, fixed contract price of $1,265,000. (ECF No. 35-6, PageID...
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