Pinova, Inc. v. Quality Mill Service, Inc. et al

Filing 54

ORDER granting in its entirety Webster's 31 Motion for Summary Judgment, because Quality Mill and Quality Industries have effectively conceded their damages against Webster. The Clerk is directed to enter the appropriate judgment. Signed by Chief Judge Lisa G. Wood on 3/17/2015. (ca)

3hz Me uniteb tate Dttrict Court
for the southern Jitrttt of 4eoria
jorunobAck tbiion
PINOVA, INC.,
Plaintiff,
VS.

QUALITY MILL SERVICE, INC., and
QUALITY INDUSTRIES OF AMERICA,
INC.,
Defendants.
CV 213-144
QUALITY MILL SERVICE, INC., and
QUALITY INDUSTRIES OF AMERICA,
INC.,
Third-Party Plaintiffs,
VS.

WEBSTER INDUSTRIES, INC.,
Third-Party Defendant.

ORDER

Presently before the Court is Third-Party Defendant
Webster's Motion for Summary Judgment (Dkt. no. 38) as to
Third-Party Plaintiffs Quality Mill Service, Inc. and Quality
Industries of America, Inc.'s Third-Party Complaint (Dkt.
no. 8). Because the Third-Party Plaintiffs' request for

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consequential and incidental damages against Webster is barred
and they have not shown that they seek other damages, ThirdParty Defendant's Motion for Summary Judgment is GRANTED.
FACTUAL BACKGROUND

The facts of this case are not in dispute. See Dkt.
no. 31-2, pp. 4-16, (Webster's Undisputed Material Facts); Dkt.
no. 36-3, p. 2, (Quality Mill's Undisputed Material Facts,
explicitly adopting Webster's statement of the facts).'
Plaintiff Pinova, Inc. ("Pinova") manufactures resin-based
products at a manufacturing plant in Brunswick, Georgia. Dkt.
no. 1, ¶ 1. Pinova purchased 38 ten-foot sections of Webster
WH132 chains from Defendant Quality Mill Service, Inc. ("Quality
Mill") for $15,352.00, to be used in its operations. Id. 591 10,
13. Pinova alleges that a "series of failures occurred while the
subject chains were being used on the conveyor systems. The
failure occurred because of the defective nature of the
sidebars, pins, links and welds of the chains." Id. ¶ 15. These
failures significantly disrupted Pinova's production, and Piriova
brought suit against Defendants Quality Mill and Quality
Industries of America, Inc. ("Quality Industries"), 2 for breach
of express warranty, breach of implied warranty of
1
To aid in explaining the background of this case, the Court will rely in
part on Plaintiff Pinova's Complaint (Dkt. no. 1). while Pinova is the
Plaintiff in the underlying case, it is not a party to this motion.
2
Neither Pinova's Complaint nor Quality Mill and Quality Industries'
Complaint explain the exact relationship between Quality Mill and Quality
Industries.

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merchantability, and breach of implied warranty of fitness for a
particular purpose, based on Georgia's adoption of the Uniform
Commercial Code. Dkt. no. 1. Pinova seeks to recover for
"incidental damages, consequential damages, and lost profits,"
particularly, "the value of at least fourteen (14) days of down
production time and over $81,000 in repair costs for the
unexpected failures . . ." Id. at p. 8 (Prayer for Relief, (a)).
Quality Mill had purchased the chains it sold to Pinova
from the manufacturer, Third-Party Defendant Webster Industries,
Inc. ("'Webster"). After being sued by Pinova, Quality Mill and
Quality Industries filed a Third-Party Complaint against
Webster, alleging breach of implied warranty of merchantability
and breach of implied warranty of fitness for a particular
purpose. Dkt. no. 8. Particularly, Quality Mill and Quality
Industries allege that if they are liable for any loss suffered
by Pinova arising from the failure of the chains Quality Mill
purchased from Webster and then sold to Pinova, then Webster is
liable to Quality Mill and Quality Industries in the same
amount. Dkt. no. 8, 191 13, 17; P. 6 (Prayer for Relief, (b)).
When it purchased the chains from Webster in 2011, Quality
Mill received an order confirmation, which states the following
on its first page, in all capital letters:
WEBSTER INDUSTRIES, INC. TERMS AND CONDITIONS APPLY ON
ALL WEBSITE QUOTATIONS AND ORDERS TO PURCHASE WEBSTER
PRODUCTS. COPIES OF THE WEBSTER TERMS AND CONDITIONS
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OF SALES ARE AVAILABLE UPON REQUEST OR ON OUR WEBSITE
AT WWW.WEBSTERCHAIN.COM .
Dkt. no. 32-2, p. 9 (First Req. for Admis.). Section 4 of the
"terms and conditions" available on Webster's website provide,
in pertinent part:
Our merchandise is fully guaranteed against failure
due to defective material or workmanship for period
[sic] of one year from date of shipment. Merchandise
proven defective will be replaced or repaired, no
charge, F.O.B. original shipping plant, with freight
prepaid and allowed. No charges for field corrections
shall be allowed nor any merchandise returned for
credit unless authorized in writing by the Webster
Corporate Office. In no event, whether as a result of
breach of contract or warranty, tort, or otherwise,
shall we be liable for incidental or consequential
damages including, but not limited to, loss of profits
or revenue, loss of use of the equipment or any
associated equipment, cost of capital, cost of
substitute equipment, facilities or services, downtime
costs, or claims of customer of the buyer for such
damages. Our liability is limited to the cost of
repair or replacement of the merchandise. Any action
for the breach of Section 4 must be commenced within
one (1) year after the cause of action has occurred.
SELLER MAKES NO OTHER WARRANTY OR GUARANTEE OF ANY
KIND WHATEVER, EXPRESS OR IMPLIED. ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNTESS FOR A
PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY THE SELLER
AND EXCLUDED FROM THIS AGREEMENT.
Dkt. no. 32-3, p. 4 (Ex. Attached to Bogner Dep.) (bold in
original)
LEGAL STANDARD

When considering a motion for summary judgment the court
"shall grant summary judgment if the movant shows that there is
no genuine dispute as to any material fact and the movant is

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entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
The facts of this case are not in dispute. See Dkt. no. 31-2,
pp. 4-16, (Webster's Undisputed Material Facts); Dkt. no. 36-3,
p. 2, (Quality Mill's Undisputed Material Facts, explicitly
adopting Webster's statement of the facts). All the Court needs
to consider, then, is whether Webster is entitled to judgment as
a matter of law based on the agreed-upon facts.
DISCUSSION
Webster makes three arguments for why Quality Mill and
Quality Industries' claims against it must fail. First, Webster
argues that Quality Industries was never in privity of contract
with Webster, and thus cannot recover against Webster on a
breach of warranty claim. Second, Webster argues that all of the
damages Quality Mill seeks against Webster are effectively
consequential or incidental damages, which Webster clearly
excluded under its terms and conditions. Finally, Webster argues
that, to the extent the damages Quality Mill seeks are not
barred, the Order Confirmation incorporated by reference
Webster's Terms and Conditions effectively excluded all implied
warranties of merchantability and implied warranties of fitness
for a particular purpose.
The third issue is plainly the most intriguing. The Georgia
Uniform Commercial Code allows for the exclusion or modification
of implied warranties of merchantability and implied warranties
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of fitness for a particular purpose. 3 See Ga. Code Ann. § 11-2314(1) ("unless excluded or modified (Code Section 11-2-316), a
warranty that the goods shall be merchantable is implied in a
contract for their sale . . ."); § 11-2-315 (when a seller knows
of the use the buyer intends to put the goods towards, "there is
unless excluded or modified under Code Section 11-2-316 an
implied warranty that the goods shall be fit for such
purpose.") . However, Code section 11-2-316 requires that such
exclusions or modifications "must mention merchantability and in
case of a writing must be conspicuous, and to exclude or modify
an implied warranty of fitness the exclusion must be by a
writing and conspicuous. . . ." Ga. Code Ann. § 11-2-316(2). The
question in this case, then, is whether the Order Confirmation's
attempted incorporation by reference of the Terms and Conditions
on Webster's website effectively and conspicuously incorporates
the exclusions of these implied warranties stated in the Terms
and Conditions.
The parties have fully briefed this question, but the Court
need not answer it. Webster's first two arguments adequately
dispose of the damages claims Quality Mill and Quality
Industries have brought against Webster.

There is no dispute as to the choice of law issue here. Pinova, Quality
Mill, and Quality Industries all seek relief under Georgia's Uniform
Commercial Code. Dkt. no. 1, Counts II & III; Dkt. no. 8, ¶ 1, pp. 3, 5.
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Quality Industries of America, Inc. Concedes that Its
Claims Fail

Quality Mill, not Quality Industries, purchased the subject
chains from Webster. "An implied warranty claim is a contract
action and requires privity." Coney v. Mylan Pharm., Inc., 6:11CV-35, 2011 WL 3607166, *5 (S.D. Ga. Aug. 16, 2011). Implied
warranties "arise out of a contract for sale of goods and can
only run to a buyer who is in privity of contract with the party
against whom the implied warranty is being asserted." McQueen v.
Minolta Bus. Solutions, Inc., 620 S.E.2d 391, 392 (Ga. Ct. App.
2005). In its Brief in Opposition to Webster's Motion for
Summary Judgment, Quality Industries "concedes that it lacks
contractual privity with Webster and thus cannot recover against
Webster on a breach-of-warranty claim." Dkt. no. 36, p. 2 n.l.
Webster's motion for summary judgment as to Quality Industries'
claims is GRANTED.
II.

Quality Mill Concedes that Webster Effectively Excluded
Consequential Damages Under Its Terms and Conditions

Webster's second argument is that, regardless of whether or
not it conspicuously incorporated its exclusions of the implied
warranties of merchantability and fitness, it has effectively
disclaimed all claims for incidental damages, consequential
damages, and lost profits.

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The disclaimer Webster refers to is in Section 4 of the
Terms and Conditions referenced on the Order Confirmation and
available on Webster's website:
In no event, whether as a result of breach of contract
or warranty, tort, or otherwise, shall we be liable
for incidental or consequential damages including, but
not limited to, loss of profits or revenue, loss of
use of the equipment or any associated equipment, cost
of capital, cost of substitute equipment, facilities
or services, downtime costs, or claims of customer of
the buyer for such damages. Our liability is limited
to the cost of repair or replacement of the
merchandise.
Dkt. no. 32-3, p. 4. The Georgia UCC provides that remedies
generally for breach of warranty can be limited in accordance
with Georgia code sections §§ 11-2-718 and 11-2-719. Ga. Code
Ann. § 11-2-316(4). However, consequential damages may not be
limited or excluded if "the limitation or exclusion is
unconscionable." Ga. Code Ann. § 11-2-719(3)
Georgia Courts have interpreted Georgia Code section 11-2719(3) to allow warrantors to disclaim liability for incidental
and consequential damages and to limit the warrantor's
obligation to repairing or replacing defective parts. Fiat Auto
U.S.A., Inc. v. Hollums, 363 S.E.2d 312, 314 (Ga. Ct. App.
1987). Furthermore, unlike disclaimers of implied warranties of
fitness or merchantability, a disclaimer of consequential or
incidental damages does not have to be conspicuous to be
effective. McCrimmon v. Tandy Corp., 414 S.E.2d 15, 18 (Ga. Ct.

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App. 1991) ("The argument that [a disclaimer of liability for
consequential damages] is unenforceable because [it is] not
conspicuous fails. The statute does not require a conspicuous
writing, analogous to that of OCGA § 11-2-316(2).").
Along with their concession that Quality Industries cannot
bring a breach of warranty claim against Webster, "Quality Mill
concedes that Webster's exclusion of consequential damages
(which, importantly, is not subject to the conspicuousness
requirement imposed by O.C.G.A. § 11-2-316(2)) is not
unconscionable under the circumstances of this case - . ." Dkt.
no. 36, p. 2 n.1. Quality Mill does not argue that Webster's
exclusion of incidental damages is improper.
Because Quality Mill only seeks damages from Webster to the
extent that it is liable to Pinova, the Court must now examine
Pinova's request for relief to see if it includes damages other
than consequential or incidental damages. Pinova's Complaint
seeks damages for "incidental damages, consequential damages,
and lost profits," particularly damages for "at least fourteen
(14) days of down production time and over $81,000 in repair
costs for unexpected failures." Dkt. no. 1,

p. 8. Repair costs

and increased costs of production are recoverable as
consequential damages. See Hawthorne Indus., Inc. v. Balfour
Maclai n e Int'l, Ltd., 676 F.2d 1385, 1387 (11th Cir. 1982);
Poultry Health Serv. of Ga., Inc. v. Moxley, 538 F. Supp. 276,
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279 (S.D. Ga. 1982). Lost profits are also a form of
consequential damages. Multivision Nw., Inc. v. Jerrold Elecs.
Corp., 356 F. Supp. 207 (N.D. Ga. 1972).
Thus, Quality Mill concedes that it cannot seek
consequential damages from Webster, and it has not challenged
Webster's exclusion of incidental damages. But all of the
damages Pinova seeks from Quality Mill are either consequential
or incidental, and Quality Mill seeks damages from Webster only
to the extent that it is liable to Pinova. 4 Therefore, the Court
need not decide whether Webster effectively disclaimed the
implied warranties of merchantability and fitness. Even if
Webster failed to disclaim those implied warranties, all of the
damages Quality Mill seeks from Webster are barred. Webster's
motion for summary judgment, then, is GRANTED in its entirety.
CONCLUSION

Because Quality Mill and Quality Industries have
effectively conceded their damages against Webster, Webster's
motion for summary judgment (Dkt. no. 31) is GRANTED. The Clerk
of Court is directed to enter the appropriate judgment.

While Quality Mill never responded to Webster's arguments that all of the
damages it seeks from Webster are consequential or incidental (except to
concede that it cannot recover consequential damages), Webster nevertheless
preemptively argued against any potential claim that Quality Mill may have
for the defective chains themselves. See Dkt. no. 38, p. 5 n.3. First and
foremost, neither Quality Mill nor Pinova ever asserted a claim for the costs
of the chains. See Dkt. no. 1, ¶I 34, 43; Dkt. no. 8, 11 12-13, 16-17. This
reason alone is sufficient to find that Quality Mill is not entitled damages
for the costs of the chains. Quality Mill has not responded to this argument.
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SO ORDERED, this 17TH day of March, 2015.

LISA GODBEY OOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

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