Total Containment, Inc. v. Dayco Products, Inc., CIVIL ACTION NO. 1997-cv-6013 (E.D. Pa. 5/3/2001)
| Decision Date | 03 May 2001 |
| Docket Number | CIVIL ACTION NO. 1997-cv-6013. |
| Parties | TOTAL CONTAINMENT, INC. v. DAYCO PRODUCTS, INC. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
This is a contract dispute stemming from two supply agreements between plaintiff
Total Containment, Inc. ("TCI") and defendant Dayco Products, Inc. ("Dayco"), under which Dayco was to design, manufacture, and deliver TCI's requirements for primary pipe to be used in underground gasoline transportation and containment systems. After the primary pipe deteriorated and leaked at several gas stations sites, TCI sued Dayco on a breach of warranty theory. TCI also sued Dayco for unilaterally raising the price of the primary pipe. Dayco counterclaimed for TCI's failure to pay for pipe which Dayco had already delivered and for failure to purchase TCI's requirements. Following a five week trial, a jury found TCI's breach of warranty claim barred by the applicable statute of limitations. The jury then awarded $23 million to TCI for its breach of pricing claim and $3,715,170 to Dayco on its counterclaim.
The parties have now filed their post-trial motions. TCI seeks the court to declare, as a matter of law, that the statute of limitations does not bar its breach of warranty claim. It further requests the court to find as a matter of law that Dayco breached the warranty provision of the contract. In the alternative, TCI asks for a new trial on all issues, including the statute of limitations question. It then asserts numerous evidentiary rulings and other issues as grounds for error necessitating a new trial. Dayco moves the court to order TCI to remit its $23 million verdict on the breach of pricing claim and for a stay of judgment. Both parties seek to mold the judgment to include pre-judgment interest.
For the reasons set forth below, I will: (1) deny TCI's motions for judgment as a matter of law and a new trial and deny TCI's motion for judgment as a matter of law on the breach of warranty claim; (2) grant Dayco's motion for remittitur for all but $1,325,808 of the $23 million verdict and grant its motion for a stay without bond; and (3) withhold decision on the parties' request to mold the judgment to include prejudgment interest.
In the late 1980s, TCI developed a new system, dubbed Enviroflex, for the underground transportation and containment of gasoline from storage tanks to gasoline dispensing pumps at gasoline stations. Enviroflex consisted of a double pipe, with an outer pipe permanently installed so as to contain any leaks that may occur. A narrower, "primary" pipe ran through the outer pipe and actually conducted the gasoline. The outer pipes were connected to sumps which were designed to collect and contain any leaks or excess gasoline flow.
TCI contacted Dayco in October 1988 for assistance in designing the Enviroflex primary pipe. In 1990, TCI and Dayco formalized their relationship and entered into a contract ("1990 Supply Agreement"). Under the 1990 Supply Agreement, Dayco agreed to design and supply primary pipe and warranted the pipe "to be free from defects in material and workmanship when used under normal operating conditions and without misuse or abuse." 1990 Supply Agreement at ¶ 7.1 (emphasis added). In exchange, TCI was to purchase its primary pipe requirements from Dayco and from no other seller. The parties signed a second Supply Agreement in January 1993, containing similar terms and an identical warranty provision. Pursuant to the 1993 Supply Agreement, the price of the primary pipe was set at $3.75 per foot.
A Dayco chemist, Homer Holden, tested several materials to serve as the outer cover for the primary pipe. By June 1989, Mr. Holden had preliminarily selected "Estane 5710," a polyester polyurethane material with properties of both plastic and rubber. Dayco eventually settled on Estane 5710 as the outer coating for the primary pipe. Mr. Holden testified that he knew that Estane 5710 would degrade if exposed to water over a long period. Mr. Holden left Dayco to work for TCI in July 1990.
TCI sold over four thousand Enviroflex systems and installed them in gasoline stations around the world. Unfortunately, Estane 5710 degrades when exposed to water, due to either hydrolysis (breakdown of molecules caused by water), an insidious microbial fungus, or a combination of the two. The precise cause of the degradation was hotly contested at trial. Dayco experts opined that exposing the primary pipe to water for a prolonged period could cause the pipe to degrade. Once the pipe had been degraded by water, the primary pipe cover was then susceptible to microbial attack. TCI maintained that the microbes attacked the pipe even in the absence of standing water, such as when condensation and humidity are present.
The primary pipe in several Enviroflex systems began to deteriorate. In April 1993, TCI learned that an Enviroflex system in Puerto Rico had leaked gasoline. The primary pipe had deteriorated. Dayco examined the site and found that water had intruded into the secondary pipe and caused the pipe to degrade. Dayco submitted its findings to TCI. Subsequently, in September 1993, John Vautier of TCI informed Dayco that water was present at 45% to 50% of Enviroflex sites.
By the spring of 1993, Dayco had completed development of a polyether-based, water-resistant material for the pipe coating. The polyether-coated pipe proved to be more expensive to manufacture. TCI first received shipments the polyether pipe in 1994. Dayco sought to pass the increased cost on to TCI, but TCI refused. In August 1995, Dayco informed TCI that the cost of the polyether, water-resistant pipe would be raised to $5.00 per foot. The five dollar price remained in effect for five months until Dayco lowered the price to $4.40 and credited TCI $0.60 for each foot of material which TCI had purchased. After accounting for the credits, TCI paid a total of $1,325,808 above what it would have paid had the price remained at $3.75.
On July 29, 1997, TCI informed Dayco of its intent to terminate the contract. On September 24, 1997, TCI filed suit against Dayco for breach of the contract's warranty and pricing provisions. Dayco raised the four-year statute of limitations under the Pennsylvania Uniform Commercial Code as a defense. Under that statute, TCI could not sue for any claims which had accrued before September 25, 1993. In addition, Dayco countersued for nonpayment for pipe which Dayco had already delivered and for lost sales from TCI's failure to purchase its primary pipe requirements from Dayco.
At trial, Dayco maintained TCI had represented that the Enviroflex System would be dry and watertight. For instance, it pointed to a TCI brochure, referred to in the Supply Agreements and attached to them, which described the Enviroflex system as `watertight.' Dayco insisted that it relied on those representations when it selected Estane 5710 as the outer coating of the primary pipe. TCI retorted Mr. Holden had already selected Estane 5710 as the cover material before TCI made any representations of watertightness. It also argued that `watertight' meant that the system would not leak fluid, but that liquid could enter the system. Thus, Dayco knew that the Enviroflex System would contain water in the form of humidity, condensation, or actual standing water.
After five weeks of trial, four questions were posed to the jury. Pursuant to Dayco's statute of limitations defense, the jury was asked whether TCI "knew, or should have known, prior to September 25, 1993 that the polyester covered primary pipe was defective in material and workmanship when used under normal operating conditions without misuse or abuse." The jury answered "yes," and proceeded to mark the second question, dealing with TCI's breach of warranty claim, "N/A." TCI's breach of pricing claim was the third question, and the jury awarded TCI $23,000,000 in answer to this question. To the fourth and final question, the jury awarded $3,715,170 to Dayco for its counterclaim. I entered judgment based on the verdict on November 21, 2000.
The Supply Agreements mandate that Pennsylvania law applies to this contract action. Pennsylvania law enforces choice of law contract provisions if the parties have sufficient contacts with the state whose laws the parties seek to apply and if the transaction is reasonably related to that state. See Meade v. Florida Infusion Servs., 120 F. Supp.2d 499, 501-02 (E.D.Pa. 2000). Courts must also ensure that the selected law does not obviate the fundamental public policy interests of another state whose law would govern but for the choice of law clause. See Cottman Transmission Sys., Inc. v. Melody, 869 F. Supp. 1180, 1183 (E.D.Pa. 1994). All three factors unquestionably favor the application of Pennsylvania law.
Because the Supply Agreements required the manufacture and delivery of pipe, a good, the governing statute is Article 2 of Pennsylvania's version of the Uniform Commercial Code, 13 Pa. Cons. Stat. Ann. § 2101 et seq. ("Pa.U.C.C."). See Pa.U.C.C. § 2102. Both parties agree that the Pa.U.C.C. should apply.
TCI has raised numerous grounds of error which it claims necessitate a new trial or judgment as a matter of law in its favor. Most of their allegations of error attack the jury's finding that TCI's breach of warranty claim is time-barred. However, I find that: (A) the jury's finding on the statute of limitations issue had evidentiary support and; (B) TCI is not entitled to judgment as a matter of law on the statute of limitations question; (C) the jury's statute of limitations finding is not against the weight of the evidence; (D) TCI's motion for a new trial based on jury confusion is without merit; (E) the verdict was not influenced by attorney misconduct; (F) various evidentiary and other rulings do not justify a new trial; and (G) deny TCI's request...
To continue reading
Request your trial