Orica Australia Pty Ltd v. Aston Evaporative Services, LLC
ORDER GRANTING IN PART AND DENYING IN PART 72 Third Party Defendant UE Manufacturing, LLC's Motion for Summary Judgment; GRANTED with respect to any consequential damages awarded to Orica on account of "the choice of fittings...used in t he primary intake to the hydraulic pumps, and the choice ofhose in the case drain lines" in Units 24, and otherwise DENIED. This matter REMAINS SET for a seven-day jury trial beginning on March 28, 2016, with a Final Trial Preparation Conference on March 4, 2016 at 2:00 p.m. in Courtroom A801, by Judge William J. Martinez on 10/21/2015.(cthom, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 14-cv-0412-WJM-CBS
ORICA AUSTRALIA PTY LTD, an Australian proprietary limited company,
ASTON EVAPORATIVE SERVICES, LLC, a Colorado limited liability company,
Defendant/Third Party Plaintiff,
UE MANUFACTURING, LLC, a Colorado limited liability company,
Third Party Defendant/Counterclaimant.
ORDER GRANTING IN PART AND DENYING IN PART THIRD PARTY DEFENDANT
UE MANUFACTURING, LLC’S MOTION FOR SUMMARY JUDGMENT
In this lawsuit, Plaintiff Orica Australia Pty. Ltd. (“Orica”) sues Defendant Aston
Evaporative Services, LLC (“Aston”) to recover the amounts Orica paid Aston to
purchase allegedly defective wastewater evaporation devices. (ECF No. 1.) Aston has
in turn sued Third Party Defendant UE Manufacturing, LLC (“UEM”), to which Aston
subcontracted some of the work on the allegedly defective devices. (ECF No. 14.)
Currently before the Court is UEM’s Motion for Summary Judgment (“Motion”).
(ECF No. 72.) For the reasons explained below, the Motion is granted with respect to
any consequential damages Orica might recover on account of certain alleged technical
deficiencies, but otherwise denied.
I. LEGAL STANDARD
Summary judgment is warranted under Federal Rule of Civil Procedure 56 “if the
movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248–50 (1986). A fact is “material” if, under the
relevant substantive law, it is essential to proper disposition of the claim. Wright v.
Abbott Labs., Inc., 259 F.3d 1226, 1231–32 (10th Cir. 2001). An issue is “g enuine” if
the evidence is such that it might lead a reasonable trier of fact to return a verdict for
the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).
In analyzing a motion for summary judgment, a court must view the evidence
and all reasonable inferences therefrom in the light most favorable to the nonmoving
party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). In
addition, the Court must resolve factual ambiguities against the moving party, thus
favoring the right to a trial. See Houston v. Nat’l Gen. Ins. Co., 817 F.2d 83, 85 (10th
The following facts are undisputed unless otherwise noted.
The Tempest 1600
This case involves technology designed to accelerate the evaporation of
wastewater from collection ponds at places such as mines. (ECF No. 72 at 2.) Aston
builds and sells such water evaporation technology. (Id. at 4, ¶ 3.) The Aston device
relevant to this case is known as the Tempest 1600 SS316 (“Tempest 1600”). (ECF
No. 92 at 2–3.) The Tempest 1600 essentially comprises a power source on the bank
of a wastewater pond connected to fans mounted on a structure that floats on the pond.
(ECF No. 72 at 2.) The fans suck up wastewater and blow it into the air. (Id.)
Aston’s Agreement with UEM
In or around May 2012, Aston agreed to supply Orica with one Tempest 1600
(“Unit 1”), which Orica would in turn lease to an Australian coal mine known as Oaky
Creek. (ECF No. 92 at 2–5, 8–13.) Then, in or around July 2012, Aston agreed to
supply Orica with three additional Tempest 1600s (“Units 2–4”), which were also
intended for Oaky Creek. (Id. at 5–6, 13–14.) Aston subcontracted the assem bly of
Units 2–4 to UEM. (ECF No. 72 at 2.)
The terms of Aston’s agreement with UEM are not clear. UEM claims that a
contract was formed through what it calls the “Letter Proposal.” (Id. at 3–4, ¶¶ 2, 4–5.)
The Letter Proposal is a January 30, 2012 letter from one of UEM’s sales managers to
Aston employee Kevin King (“King”). (ECF No. 72-9.) The letter begins, “[UEM]
recognizes and appreciates Aston’s desire to purchase the products listed below . We
would like to submit to you the following budgetary costs pending a full design review
with Engineering.” (Id. at 1.) The letter then goes on to provide quotes for various
items that might relate to Tempest 1600 units, but have no clear connection to the three
units that UEM eventually built. For example, the Letter Proposal contemplates UEM
building four units, not three, and all four have differing specifications for horsepower
and number of fans. (Id.)
Aston denies that the Letter Proposal embodies the parties’ contract and further
claims that UEM submitted a “completely different quote” sometime later. (ECF No.
78-1 at 4; ECF No. 78 at 2–3, ¶¶ 4–5.) But Aston does not say whether that quote then
became the parties’ contract, nor does Aston submit any document that it claims to be
the parties’ contract.
The parties’ briefs do not specify precisely when UEM began building Units 2–4.
The parties agree, however, that Units 2–4 underwent factory acceptance testing in
September 2012. (ECF No. 72 at 6, ¶ 14.) Orica and Aston representativ es attended
this testing, accepted the Units, and Orica arranged for them to be shipped to Australia.
(Id. at 7, ¶ 19.)
Problems with the Units
King was in Australia when the Units arrived and inspected them during their
unpacking. (Id. ¶ 22; ECF No. 72-8 at 4.) At his deposition, King testified that he
noticed that none of the “power packs . . . were clean,” that a “hose drum was about
halfway full of hydraulic oil,” and that “there was even a broken fitting on one of the
hoses.” (Id.) But these problems “were not such that Mr. King was able to determine
that [Units 2–4] would not operate properly after set up and commissioning.” (ECF No.
78 at 5, ¶ 22.)
Units 2–4 began operating at the Oaky Creek mine in December 2012. (ECF
No. 92 at 6.) In the next few months, Units 2–4 experienced numerous problems which
Orica and/or Oaky Creek attempted to repair. (ECF No. 72 at 8, ¶ 27.) Aston claim s it
had various e-mail and telephone communications with UEM regarding these problems.
(ECF No. 78 at 6, ¶ 30; ECF No. 78-1 at 8.) The first e-mail in the record, however, is a
March 14, 2013 communication from King to Aston employee Chris Schuette, which
begins as follows:
It’s been a while since we spoke but we have tried to make
the units that UE completed trouble and leak free and have
spent lots of time and money on repairs but [are] still having
leaks mainly from failed pipe fittings and the dope used on
these that failed immediately upon commissioning the units.
I have traveled 3 times to Australia and most of the repairs
have been leaks on pipe fittings used in the build process.
Please call me ASAP to discuss solutions and moving
forward so that everyone’s best interests [are] preserved!
(ECF No. 72-15 at 1.) UEM views this e-mail as Aston’s attempt to revoke its previous
acceptance (in September 2012) of Units 2–4. (See ECF No. 72 at 14.)
Timely Revocation of Acceptance
As the parties frame it, this matter turns on acceptance of goods, and alleged
revocation of acceptance, under Article 2 of the Uniform Commercial Code (“UCC”).
See Colo. Rev. Stat. §§ 4-2-101 to -725. 1 Aston admits that, for UCC purposes, it
accepted Units 2–4 “at the time the units were turned over to Orica.” (ECF No. 78 at 9.)
That was sometime in September 2012. (ECF No. 72 at 6–7, ¶¶ 14, 18–19.) T hus,
It is not clear that Aston’s claims against UEM stand or fall on the timeliness of Aston’s
revocation. See Colo. Rev. Stat. § 4-2-714(2) & official cmt. 1 (discussing remedies for breach
of warranty “after the goods have been accepted and the time for revocation of acceptance has
gone by”). Nonetheless, this section analyzes the viability of Aston’s claims to the extent they
turn on timely revocation.
Aston accepted Units 2–4 in September 2012.
Given this, UEM argues that Aston’s revocation was unreasonably late because
it was supposedly expressed for the first time in the March 14, 2013 e-mail discussed at
Part II.D, above. (Id. at 13–15.) Aston responds by invoking the UCC doctrine that
“[t]he buyer may revoke his acceptance of a lot or commercial unit whose
nonconformity substantially impairs its value to him if he has accepted it * * * [w]ithout
discovery of such nonconformity if his acceptance was reasonably induced either by the
difficulty of discovery before acceptance or by the seller’s assurances.” Colo. Rev. Stat.
§ 4-2-608(1)(b).2 Aston further notes that “[r]evocation of acceptance must occur within
a reasonable time after the buyer discovers or should have discovered the ground for
it,” id. § 4-2-608(2), and that “[w]hether a time for taking an action . . . is reasonable
depends on the nature, purpose, and circum stances of the action,” id. § 4-1-205(a).
Under these standards, Aston argues that there is at least a question of fact
regarding whether it revoked within a reasonable time. Aston first asserts that
discovery of the alleged defects was particularly difficult because King (who was
Aston’s main point of contact with Orica) was in Australia when Units 2–4 were placed
into service but returned to the United States shortly thereafter and thus “was not in a
position to personally observe the operation of the units, and to make any
determinations as to any issues that arose, including defects.” (ECF No. 78 at 10.)
Apparently anticipating such an argument, UEM’s Motion points out that King noticed
The UCC also permits revocation where the buyer has accepted goods “[o]n the
reasonable assumption that [their] nonconformity would be cured and it has not been
seasonably cured.” Id. § 4-2-608(1)(a). Aston, however, does not argue that this exception
applies. (See ECF No. 78 at 9–10.)
problems with Units 2–4 “immediately” upon unpacking them from their shipping
containers. (ECF No. 72 at 14.) But as noted in Part II.D, abov e, it is undisputed that
whatever King noticed was not sufficiently problematic to put Aston on notice that Units
2–4 may have UEM-attributable fatal defects. Thus, on the current record, the fact that
King noticed certain problems during the unpacking process is not enough to trigger
Aston’s duty of timely revocation.
Aston further asserts that “the difficulties in determining what defects were
present in [U]nits 2–4 were also compounded . . . by the problems arising from” what
Aston alleges to be a “severe lack of maintenance performed on the units by Orica and
Oaky Creek.” (Id.) UEM does not respond to this argument.
Finally, Aston asserts that, even before the March 14, 2013 e-mail, King
(a) would forward to UEM personnel the Orica e-mails he received regarding problems
with Units 2–4, and (b) had telephone conversations about these problems with UEM
employee Ronnie Stover. (ECF No. 78 at 10–11; see also ECF No. 78-1 at 8.) To this,
UEM responds that Aston has never produced any such e-mails and has not met any of
the Federal Rule of Evidence 1004 criteria for testifying as to their content; and King’s
testimony about the telephone conversations is a “self-serving, bald assertion” that
“amounts to nothing more than his own faded recollection.” (ECF No. 79 at 4.)
As to the purported e-mails, the Court agrees with UEM that Federal Rule of
Evidence 1004 governs the admissibility of King’s testimony:
An original is not required and other evidence of the content
of a writing, recording, or photograph is admissible if:
(a) all the originals are lost or destroyed, and not by
the proponent acting in bad faith;
(b) an original cannot be obtained by any available
(c) the party against whom the original would be
offered had control of the original; was at that time put on
notice, by pleadings or otherwise, that the original would be
a subject of proof at the trial or hearing; and fails to produce
it at the trial or hearing; or
(d) the writing, recording, or photograph is not closely
related to a controlling issue.
Aston has not shown any awareness of, much less attempted to satisfy, any of these
criteria. The Court therefore agrees with UEM that King’s testimony about the
purported e-mails “cannot be presented in a form that would be admissible in
evidence,” Fed. R. Civ. P. 56(c)(2), and therefore cannot create a genuine dispute of
However, UEM has failed to establish that King’s “self-serving . . . faded
recollection” about phone conversations with Stover is inadmissible. “Self-serving” is
not a recognized evidentiary objection (most party testimony is self-serving), and an
allegedly “faded recollection” is a matter for cross-examination. Thus, King’s testimony
in this regard may be admitted at least for the purpose of proving that telephone
conversations with Stover occurred. Moreover, given the lack of a hearsay or similar
objection from UEM, the Court finds for purposes of summary judgment that King’s
testimony may be admitted to prove that his telephone calls with Stover addressed the
problems Orica was having with Units 2–4.
Considering all of the foregoing, the Court agrees with Aston that a genuine
dispute of fact exists regarding whether its March 14, 2013 e-mail constituted a
revocation within a reasonable time. Summary judgment on this issue must therefore
be denied. 3
Availability in General
UEM further argues that Aston, as a matter of law, may not recover
consequential damages from UEM. (ECF No. 72 at 15–18.) The parties’ arguments,
however, display some confusion (or at least imprecision) regarding precisely what the
“consequential damages” might be. UEM assumes that the consequential damages
Aston seeks against UEM are the same consequential damages that Orica seeks
against Aston, “particularly [Orica’s] alleged lost profits.” (ECF No. 72 at 17.) Orica
claims it lost the profits it would have earned by eventually selling the Tempest 1600
units to Oaky Creek. (See ECF No. 92 at 17–18.)
Aston admits that it seeks to hold UEM liable for “any amount for which Aston is
held liable to Orica [based on Units 2–4],” but distinguishes this claim from its claim for
consequential damages, which instead comprises “attorneys’ fees and expenses
incurred in defending Orica’s claims against Aston with regard to [Units 2–4], as well as
the costs and expenses incurred by Aston as a result of its efforts to repair [Units 2–4].”
In its Reply brief, UEM asserts for the first time: (i) the March 14, 2013 e-mail cannot
be considered an effective revocation because it simply solicits help rather than expressing an
intent to revoke and offering to return the units in exchange for a refund; and (ii) revocation of
acceptance is considered an affirmative defense, but Aston never pleaded it as an affirmative
defense to UEM’s counterclaim for the alleged balance owing on Units 2–4. (ECF No. 79 at
3–8.) A party may not raise, and the Court will not consider, truly new arguments asserted in a
reply brief. Starkey ex rel. A.B. v. Boulder Cnty. Soc. Servs., 569 F.3d 1244, 1259 (10th Cir.
2009). These Reply arguments are truly new. They are quite different from UEM’s Motion,
which argued only that the March 14, 2013 e-mail was unreasonably late. (See ECF No. 72 at
13–15; see also id. at 3 (“UEM seeks summary judgment . . . on the basis of acceptance and
untimely rejection.”).) Thus, the Court will not consider, and expresses no opinion on, these
(ECF No. 78 at 7; see also id. at 12.)4
Aston’s intent to hold UEM liable for whatever damages it must pay to Orica
appears to be a claim for indemnity. Aston has not pleaded a specific cause of action
for indemnity, but it has pleaded various causes of action for breach of warranty. (See
ECF No. 14 ¶¶ 22–42.) The Colorado Supreme Court has suggested that breach of
warranty is an appropriate method for a reseller to seek indemnity from the
manufacturer. See Webb v. Dessert Seed Co., 718 P.2d 1057, 1065 (Colo. 1986).
It does not necessarily follow, however, that Aston can hold UEM liable for
Orica’s lost profits, if any, through an indemnity or breach of warranty claim.5 The
problem with such a theory of recovery lies in the foreseeability standard for lost profits.
This Court previously held that the United Nations Convention for the International Sale
of Goods (“CISG”) governs Orica’s contract with Aston. (ECF No. 92 at 7–8.) This
Court further held that article 74 of the CISG permits such damages under the same
standard that Colorado imposes for proving lost profits damages. (Id. at 17.)
Colorado’s standard requires, among other things, that the plaintiff’s potential to lose
business on account of a breach must be reasonably foreseeable to the defendant at
the time of contracting. See Denny Const., Inc. v. City & Cnty. of Denver ex rel. Bd. of
Water Comm’rs, 199 P.3d 742, 750–51 (Colo. 2009). T hus, for Orica to recover lost
These categories of damages (fees and expenses spent against Orica, repair
expenses) are not directly at issue in UEM’s Motion. As the parties prepare for trial, however,
the Court encourages them to consider whether these are truly “consequential damages,” or
are instead direct damages (see Colo. Rev. Stat. § 4-2-711(1)), incidental damages (see id.
§ 4-2-715(1)), or amounts recoverable through the “wrong of another” doctrine (see Colo. Jury
Instr., Civil 5:7 (4th ed.)).
Aston concedes that it is not seeking its own lost profits. (Id. at 12 n.1.)
profits against Aston, it must show that Aston knew or should have known about Orica’s
plans to resell the Tempest 1600 units to Oaky Creek.
Assuming Orica can make that showing and the other showings required for
consequential damages (see ECF No. 92 at 17–18 (discussing additional
requirements)), it would be incongruous if Aston could turn around and, in the guise of
indemnity, stick UEM with the entire bill absent a showing that UEM likewise understood
at the time of its contract with Aston that Orica would lose the chance to sell Units 2–4
to Oaky Creek if those units did not perform as promised. Indeed, the foreseeability
necessary to hold UEM liable may be even more specific than that. To the extent Aston
required UEM to use certain parts or to follow certain designs, the question would be
whether UEM reasonably foresaw at the time of contracting that Orica could lose Oaky
Creek’s business if Units 2–4 failed on account of parts supplied or designs created at
UEM’s discretion, or on account of UEM’s workmanship in assembling the entire
The UCC states that “[c]onsequential damages resulting from the seller’s breach
include * * * [a]ny loss resulting from general or particular requirements and needs of
which the seller at the time of contracting had reason to know.” Colo. Rev. Stat.
§ 4-2-715(2)(a). Thus, even though Aston may be asserting Orica’s lost profits as a
form of indemnity damages against UEM, the Court holds that the Aston must
nonetheless prove the foreseeability of Orica’s lost profits from UEM’s perspective.
In this regard, Aston argues that, “[a]t or around the time UEM entered into its
agreement with Aston to build [U]nits 2–4, UEM was aware that the units were being
provided to Orica, who would in turn provide the units for use at the Oaky Creek Mine.”
(ECF No. 78 at 7, ¶ 3.) In support, Aston of fers one item of evidence, specifically, an
eight-page e-mail chain from July and August 2012. (ECF No. 78-4.) The e-mail chain
begins with various Orica and Aston personnel discussing technical questions related to
the Tempest 1600, and eventually moving on to a discussion of testing and deployment
timelines. (Id. at 3–8.) Finally, on August 21, 2012, King forwards the e-mail chain to
UEM personnel, asking, “How we looking time wise???” (Id. at 2.) The e-mail chain
then continues between Aston (King), UEM, and Orica regarding assembly progress
and scheduling for factory acceptance testing. (Id. at 1–2.)
The only portions of this e-mail chain that mention Oaky Creek are a reference to
building Units 2–4 “for Xstrata” (Oaky Creek’s former name) and a discussion of
“shipping to the mine site.” (Id. at 3, 4.) These references come in the portion of the
chain that preceded King’s forward to UEM on August 21, 2012. UEM, however, does
not argue that the e-mail chain was insufficient to put it on notice of Orica’s hope of
selling the Tempest 1600s to Oaky Creek. Moreover, UEM does not deny that at some
point it became aware of Orica’s intentions with respect to Oaky Creek. UEM instead
emphasizes the requirement that foreseeability be judged at the time of contracting.
(See ECF No. 79 at 6.) UEM argues that the time of contracting was “months before”
(apparently referring to the January 2012 Letter Proposal), and so the July/August 2012
e-mail chain does not suffice to show awareness at the time of contracting. (Id.)
As noted at Part II.B, above, Aston denies that the Letter Proposal constitutes
the parties’ contract. Aston’s denial is supported by: (1) the text of the Letter Proposal
itself, which does not seem to match what the parties eventually agreed to (see ECF
No. 72-9); (2) King’s testimony that UEM later provided a different quote (see ECF No.
78-1 at 4); and (3) the fact that Aston’s contract with Orica to supply Units 2–4 did not
come into existence until July 2012 (see ECF No. 92 at 5–6). Thus, there is a genuine
dispute of fact regarding precisely what “the time of contracting” was for Aston and
UEM. The Court accordingly cannot grant summary judgment to UEM on its claim that
it was unaware of Orica’s intentions at the relevant time.
Effect of Specific Tempest 1600 Components
UEM argues that consequential damages are unavailable for a separate reason,
namely, that “the alleged substandard fittings and hoses installed by UEM [were] not
the proximate cause for the ‘complete failure’ of the units.” (ECF No. 72 at 17.) In
support, UEM cites testimony from King’s deposition where he generally agreed with a
conclusion in UEM’s expert report that certain components would not have caused the
demise of Units 2–4:
I want to read to you a sentence and see if you can
agree or disagree with me. . . .
In [the expert’s] report he states that the choice
of fittings, open paren, multi-screw, versus welded
joint, close paren, used in the primary intake to the
hydraulic pumps, and the choice of hose in the case
drain lines, would not have directly contributed to the
units not being functional. However, they would have
contributed toward earlier than inspected  liability
and level of maintenance repair requirements.
Do you agree with that?
This sentence makes more sense if “expected” is substituted for “inspected,” but the
parties give no indication whether “inspected” was some sort of error (e.g., a misreading or
Yeah, I could probably somewhat agree with that
You say somewhat agree with that statement. Do
you have any hesitation, and if so, what is the—
The only hesitation would be the maintenance part of
it, you know, we just never really got those leaks
resolved. So they were really early-on, and just
continued. So it was, you know, so I would probably
disagree with the time frame that he may be referring
to there, of failure.
But you agree with him that the choice of fittings, and
et cetera, that is referenced there, didn’t necessarily
cause the units not to be functional?
Yeah. We got them functioning . . . .
(ECF No. 72-12 at 9–10.)
Aston counters by highlighting the phrases “somewhat agree” and “didn’t
necessarily cause the units not to be functional.” (ECF No. 78 at 6, ¶ 31 (emphasis
added).) However, King clarified “somewhat agree” to mean that he believed UEM’s
expert underestimated just how quickly maintenance would be needed. King did not
otherwise qualify his assent. Moreover, although in response to an arguably poorly
phrased question, King’s agreement that the fittings and hoses “didn’t necessarily
cause the units not to be functional” is not enough on its own to defeat summary
judgment in light of King’s testimony as a whole. Notably, Aston did not counter with
evidence of its own—or even argument—that the fittings, hoses, and so forth could
indeed have caused the units’ failure.
Accordingly, UEM is entitled to summary judgment as to some aspect of these
claims. The problem in formulating the appropriate scope of summary judgment is that
neither party has explained the full reasons for the Units’ failure. The Court cannot say
on this record that the immateriality of “the choice of fittings . . . used in the primary
intake to the hydraulic pumps, and the choice of hose in the case drain lines”
necessarily means that UEM contributed nothing to the Orica’s inability to resell the
Units to Oaky Creek. Nonetheless, to the extent Orica can prove lost profits or other
consequential damages against Aston, and to the extent Aston can prove that those
lost profits were reasonably foreseeable to UEM, UEM is entitled to summary judgment
on any such damages attributable to “the choice of fittings . . . used in the primary
intake to the hydraulic pumps, and the choice of hose in the case drain lines.”
For the reasons set forth above, the Court ORDERS as follows:
UEM’s Motion for Summary Judgment (ECF No. 72) is GRANTED with respect
to any consequential damages awarded to Orica on account of “the choice of
fittings . . . used in the primary intake to the hydraulic pumps, and the choice of
hose in the case drain lines” in Units 2–4, and otherwise DENIED; and
This matter REMAINS SET for a seven-day jury trial beginning on March 28,
2016, with a Final Trial Preparation Conference on March 4, 2016 at 2:00 p.m. in
Dated this 21st day of October, 2015.
BY THE COURT:
William J. Martínez
United States District Judge
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