White Consol. Industries, Inc. v. McGill Mfg. Co., Inc.

Decision Date14 January 1999
Docket NumberNo. 97-3941,97-3941
Citation165 F.3d 1185
Parties37 UCC Rep.Serv.2d 575 WHITE CONSOLIDATED INDUSTRIES, INC., doing business as WCI Freezer Division, also known as Frigidaire Company, Appellant, v. McGILL MANUFACTURING COMPANY, INC., Emerson Electric Company, Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

Jerome Brian Adams, Minneapolis, Minnesota, argued (Lauris A. Heyerdahl, Minneapolis, Minnesota, on the brief), for Appellant.

Kenneth R. Heineman, St. Louis, Missouri, argued (Bruce D. Ryder, St. Louis, Missouri, on the brief), for Appellee.

Before McMILLIAN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and LAUGHREY, 1 District Judge.

McMILLIAN, Circuit Judge.

White Consolidated Industries, Inc. (Frigidaire), a subsidiary of Frigidaire Company, appeals from a final judgment entered in the United States District Court 2 for the District of Minnesota upon a jury verdict in favor of McGill Manufacturing Co., Inc. (McGill), a subsidiary of Emerson Electric Co. (Emerson), on its action for breach of contract. For reversal, Frigidaire argues the district court erred in (1) denying its motion for partial summary judgment and motions in limine, (2) giving certain jury instructions and submitting the special verdict form, and (3) denying its motion for new trial. For the reasons discussed below, we affirm the judgment of the district court.

Jurisdiction

This case was originally filed in Minnesota state court. McGill and Emerson removed the case to federal court pursuant to 28 U.S.C. § 1441 on the basis of diversity jurisdiction under 28 U.S.C. § 1332. 3 Jurisdiction on appeal is proper based upon 28 U.S.C. § 1291. The notice of appeal was timely filed under Rule 4(a) of the Federal Rules of Appellate Procedure. In this diversity case, Minnesota law controls the substantive issues. See Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Background

Frigidaire manufactures freezers in St. Cloud, Minnesota. In 1989 Frigidaire began designing a new line of commercial freezers. Frigidaire contacted McGill about obtaining an electrical switch, which McGill had advertised as "water resistant," for placement in the freezers. On January 9, 1991, McGill sent Frigidaire samples of the switches and a price quotation setting forth the conditions of sale on its reverse side. Those terms limited McGill's warranty obligations to repayment of the purchase price or replacement of the returned products. The price quotation also indicated that McGill offered to sell the switches at the quoted price and the offer was made for immediate acceptance by Frigidaire. After Frigidaire received the samples and price quotation, its tests indicated that the switches were not completely resistant to water. Frigidaire contacted McGill about a solution and McGill's engineers recommended the addition of a peripheral gasket to the original switch to prevent moisture penetration. The parties agreed that the addition of the gasket would increase the price of the switch.

On January 14, 1991, Frigidaire sent McGill a blanket purchase order for 30 switches fitted with the additional gaskets. The blanket purchase order set forth Frigidaire's terms and conditions of purchase which included express warranties of merchantability and fitness for a particular purpose. The blanket purchase order stated, in part:

1. ACCEPTANCE. This Purchase Order is to be accepted in writing by Seller by signing and returning promptly to Buyer the Acknowledgment Copy, but if for any reason Seller should fail to sign and return to Buyer the Acknowledgment Copy, the commencement of any work or performance of any services hereunder by Seller shall constitute acceptance by Seller of this Purchase Order and all its terms and conditions. Acceptance of this Purchase Order is hereby expressly limited to the terms hereof. Any terms proposed by Seller which add to, vary from, or conflict with the terms herein shall be void and the terms hereof shall govern if this Purchase Order has been issued by Buyer in response to an offer the terms of which are additional to or different from any of the provisions hereof, then the issuance of this Purchase Order by Buyer shall constitute an acceptance of such offer subject to the express condition that the Seller assent that this Purchase Order constitutes the entire agreement between Buyer and Seller with respect to the subject matter hereof and the subject matter of such offer.

....

7. WARRANTY. Seller warrants that all goods or services ordered or provided hereunder will conform in all respects to the specifications, drawings, samples, or quality control or other procedure or description whether furnished by Seller or provided by Buyer, and will be merchantable and free from any defects in material, design, and workmanship; and Seller further warrants that all material purchased hereunder that is manufactured in accordance with the Seller's specifications shall be fit and sufficient for the purposes for which it was intended. Seller agrees that the foregoing warranty shall survive acceptance of and payment for the material, and that Seller shall save Buyer harmless from any loss, damage or expense, whatsoever, including attorneys' fees, that the Buyer may incur as a result of any breach of such warranties. These warranties shall survive delivery and inspection of all or a part of the goods or services.

The blanket purchase order, however, set the price of the switches at the original, gasket-less price. It did not correctly state the price of the switches Frigidaire intended to purchase, that is, the switches with the additional gaskets.

On January 15, 1991, McGill sent a computer-generated acknowledgment form in response to Frigidaire's blanket purchase order. The acknowledgment form set forth terms similar to the terms on the original price quotation, but included additional limitations and exclusions of warranties. On January 25, 1991, McGill's sales representative changed the price on the purchase order form to reflect the additional cost of the gasket, signed the form and returned it to Frigidaire.

Thereafter, McGill sent the modified switches to Frigidaire, which incorporated them into the freezers. Frigidaire produced 1,717 freezers from March to May 1991 with the gasket-enhanced switches (referred to as "Version I" switches at trial). Sometime in March or April 1991, some of the Version I switches began to fail. Frigidaire contacted McGill about the failing Version I switches, at which time McGill recommended additional modifications, resulting in the so-called "Version II" switches. Frigidaire purchased these switches at an even higher price than the Version I switches and incorporated them into 4,694 freezers. In July 1991 some of the Version II switches also began to fail. Frigidaire again contacted McGill and McGill recommended further modifications, creating the "Version III" switches. Each of these transactions included an exchange of acknowledgment forms and purchase order forms, but, unlike the initial purchase order form, no forms were signed or returned by the recipient.

Frigidaire sued McGill in state court for breach of contract, breach of implied and express warranties, tort liability, and negligent misrepresentation. Frigidaire also sued Emerson on a theory of vicarious liability. Frigidaire sought damages in excess of $1.5 million based on the cost of repairing or replacing the failed Version I and Version II switches with Version III switches and compensating customers for loss of food occurring when the switches failed. After McGill and Emerson removed the case to federal district court on the basis of diversity jurisdiction, the parties filed cross-motions for partial summary judgment. The district court denied Frigidaire's motion for partial summary judgment and granted in part and denied in part McGill's and Emerson's motions for partial summary judgment. White Consolidated Industries, Inc. v. McGill Manufacturing Co., Civil No. 4-95-752 (D.Minn. Mar. 31, 1997) (mem. op. and order on cross-motions for partial summary judgment). The district court dismissed Emerson and also dismissed Frigidaire's tort and negligent misrepresentation claims. Slip op. at 5-9. The district court denied summary judgment on the breach of warranty claims because there were genuine issues of material fact in dispute. Id. at 6-7. The district court also rejected Frigidaire's argument that the purchase order constituted the parties' contract. Id. at 7-8.

At a pretrial hearing, Frigidaire and McGill filed several motions in limine. The district court denied most of these motions, but took under advisement Frigidaire's motion to exclude evidence of McGill's contract terms as set forth in the acknowledgment form. Id., slip op. at 1 (June 27, 1997) (order denying motions in limine). The district court then concluded that the writings of the parties were insufficient to establish a contract and that, pursuant to Minn.Stat. § 336.2-207, 4 the contract between the parties included only those terms upon which Frigidaire's blanket purchase order and McGill's acknowledgment form agreed. Id. at 3. The district court also ruled that evidence of McGill's proposed contract was relevant and admissible. Id.

The case was tried before a jury. Frigidaire objected to several of the district court's proposed jury instructions. Instruction No. 8 informed the jury that the contract between Frigidaire and McGill consisted of those terms upon which Frigidaire's blanket purchase order and McGill's acknowledgment form agreed. The jury was further instructed that, where the two documents did not agree, specifically in regards to the warranties, the contract included implied warranties made part of the contract by operation of law. The district court, relying on § 2-207(3) of the UCC, 5 instructed the jury in the application of express warranties, such as price and quantity, and implied...

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