Affinity Mutual Insurance v. Nidec Avtron Automation Corporation

Filing 48

OPINION AND ORDER The Court GRANTS IN PART and DENIES in PART theDefendants 42 Motion for Summary Judgment. Count II (Breach of Contract) andCount III (Breach of Implied Warranties) of the Complaint remain pending. Signed by Chief Judge Theresa L Springmann on 8/14/17. (kjp)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
AFFINITY MUTUAL INSURANCE as Subrogee )
of HOLMES & COMPANY, INC.,
)
)
Plaintiff,
)
)
)
v.
)
)
NIDEC AVTRON AUTOMATION
)
CORPORATION,
)
)
Defendant.
)

CAUSE NO.: 1:16-CV-155-TLS

OPINION AND ORDER
Plaintiff Affinity Mutual Insurance a/s/o Holmes & Company, Inc., filed a four-count
subrogation action against Defendant Nidec Avtron Automation Corporation.1 The theories of
recovery included negligence, strict products liability, breach of contract, and breach of implied
warranties. The Defendant has moved for summary judgment [ECF No. 42] on all four claims. In
response, the Plaintiff asserts that it has a viable cause of action for breach of contract and breach
of warranty based on lost income and other damages associated with replacing the Defendant’s
failed component parts. However, the Plaintiff is no longer pursuing the negligence and product
liability claims.
The Defendant has presented evidence that the parties’ contract contained language that
would defeat the Plaintiff’s remaining claims, but the Plaintiff maintains that a jury must
determine whether this language was part of the contract between Holmes and the Defendant.
For the reasons stated in this Opinion and Order, the Court finds that this case cannot be resolved
as a matter of law on the record that has been presented.

1

The Defendant’s submission indicate that it has since merged into Nidec Motor Corporation.

STATEMENT OF FACTS
Holmes & Company operates a lumber mill in Columbia City, Indiana. In April 2012,
Holmes purchased an Active Front End motor drive system from the Defendant for use in
conjunction with Holmes’s saw carriage. Such drive systems control the speed and torque of a
motor in an industrial setting.
The Defendant provided Holmes with a thirteen-page quote dated April 5, 2012, and
designated as “Quotation R12-00803.” It was signed by a regional sales manager for the
Defendant. Among the Terms and Conditions set forth in Quotation R12-00803 was a term
regarding warranties and disclaimers:
Company warrants that its products will be free from defects in material or
workmanship for a period of one (1) year following installation, or fifteen (15)
months after shipment from Company, whichever is shorter. NO OTHER
WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE IS
MADE FOR THESE PRODUCTS, AND ALL OTHER WARRANTIES ARE
HEREBY EXPRESSLY EXCLUDED. In the event of a defect, the Company’s
obligation shall be limited to the supply of replacement parts free of charge. . . .
COMPANY SHALL HAVE NO OTHER LIABILITY, DIRECT OR INDIRECT,
OF ANY KIND, INCLUDING LIABILITY FOR SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES.
(Quotation, ECF No. 43-3 at 10.)
On April 6, 2012, Holmes faxed a purchase order to the Defendant’s regional sales
manager regarding “Quote # R12-00803.” (Purchase Order, ECF No. 43-3 at 2.) The description
of the item ordered is a “200 HP Standard Avtron Saw Carriage Electric Drive System per
Quote.” (Id.) On the line reserved for indicating who approved the purchase order is the name
Daniel Almendinger— he is the owner of the saw mill. In his Affidavit, Almendinger
acknowledges that the parties agreed on price and general terms, that his company sent the

2

purchase order, that the Defendant then installed the drive system, and that he received the
written quote designated as R12-00803 (hereinafter “Quote R12-00803” or “the Quote”).
However, he does not identify when he received the Quote (Almendinger Aff. ¶ 6, ECF No. 47-1
(stating that “[a]t some point, Holmes & Company, Inc. received the written quote” that the
Defendant attached to its Summary Judgment Motion)), and maintains that there was never “any
discussion between Defendant and anyone at Holmes about any of the terms contained in that
Quote” (id. ¶ 7).
In 2014, a filter within the Defendant’s product failed to perform correctly and was
damaged. Holmes submitted a claim to the Plaintiff insurance company for the profits it lost
from April 14–28, 2014, while the necessary component part of the drive system was being
commissioned. Holmes also incurred costs for building supplies required to build an addition to
the electrical room so that it would house a larger filter. These costs are the subject of the
Plaintiff’s claims in this litigation.

ANALYSIS
A.

Summary Judgment Standard
Summary judgment is warranted when “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). A court should only deny a motion for summary judgment when the nonmoving
party presents admissible evidence that creates a genuine issue of material fact. Luster v. Ill.
Dep’t of Corrs., 652 F.3d 726, 731 (7th Cir. 2011) (first citing United States v. 5443 Suffield
Terrace, 607 F.3d 504, 510 (7th Cir. 2010); then citing Swearnigen–El v. Cook Cnty. Sheriff’s

3

Dep’t, 602 F.3d 852, 859 (7th Cir. 2010)). A court’s role in deciding a motion for summary
judgment “is not to sift through the evidence, pondering the nuances and inconsistencies, and
decide whom to believe. [A] court has one task and one task only: to decide, based on the
evidence of record, whether there is any material dispute of fact that requires a trial.” Waldridge
v. Am. Heochst Corp., 24 F.3d 918, 920 (7th Cir. 1994). Material facts are those that are outcome
determinative under the applicable law. Smith v. Severn, 129 F.3d 419, 427 (7th Cir. 1997).
Although a bare contention that an issue of material fact exists is insufficient to create a factual
dispute, a court must construe all facts in a light most favorable to the nonmoving party, view all
reasonable inferences in that party’s favor, see Bellaver v. Quanex Corp., 200 F.3d 485, 491–92
(7th Cir. 2000), and avoid “the temptation to decide which party’s version of the facts is more
likely true,” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).

B.

Negligence and Strict Product Liability Claims
Generally, a court sitting in diversity will look to the “whole law of the forum in which it

sits, including that state’s choice-of-law rules.” Soo Line R.R. Co. v. Overton, 992 F.2d 640, 643
(7th Cir. 1993) (first citing Coldwell Banker & Co. v. Karlock, 686 F.2d 596, 600 (7th Cir.
1982), then citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97 (1941)). “When a
federal court hears a case in diversity, it does not necessarily apply the substantive law of the
forum state; rather, it applies the choice-of-law rules of the forum state to determine which
state’s substantive law applies.” Auto–Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d
543, 547 (7th Cir. 2009).
Indiana’s choice-of-law rules dictate that Indiana substantive law governs the torts

4

alleged in the Plaintiff’s Complaint. See Simon v. United States, 805 N.E.2d 798, 805 (Ind.
2004). Without determining whether there is a significant difference between the laws of the
states where the Defendant is incorporated (Delaware) and has its principal place of business
(Missouri), where the Plaintiff is incorporated and has its principal place of business (Ohio), and
where Holmes is located (Indiana), the Court relies on the place of the wrong and the place of
the injury, both of which support the application of Indiana law. Id.; see also Hubbard Mfg. Co.
v. Greeson, 515 N.E.2d 1071 (Ind. 1987). The Plaintiff does not dispute this. Nor does the
Plaintiff dispute the applicability of Indiana Products Liability Act, Ind. Code § 34-20-1-1, as
well as Indiana’s economic loss doctrine. See Insterstate Cold Storage, Inc. v. Gen. Motors
Corp., 720 N.E.2d 727, 731 (Ind. Ct. App. 1999). Accordingly, under Indiana law, the pure
economic losses the Plaintiff is seeking are not recoverable in a products liability or negligence
action. Id.; I/N Tek v. Hitachi, Ltd., 734 N.E.2d 584, 588 (Ind. Ct. App. 2000). Rather, damage to
the product itself and purely economic loss arising from the failure of the product to perform as
expected, are governed by contract law. Indianapolis-Marion Cty. Pub. Library v. Charlier
Clark & Linard, P.C., 929 N.E.2d 722, 731 (Ind. 2010) (citing Gunkel v. Renovations, Inc., 822
N.E.2d 150, 153 (Ind. 2005)).
The Plaintiff’s Response to Defendant’s Motion for Summary Judgment [ECF No. 47]
makes no mention of the Defendant’s arguments about the economic loss rule. Rather, the
Plaintiff’s brief focuses solely on the breach of contract and breach of implied warranty claims—
an apparent acknowledgment that contract law is its only remedy. Although the Plaintiff did not
address the Defendant’s argument that the economic loss rule bars recovery in tort, neither did
the Plaintiff expressly state that it was abandoning the negligence and product liability claims.

5

For sake of clarity, the Court deems that the Plaintiff has waived and abandoned those claims.
See Palmer v. Marion Cty., 327 F.3d 588, 597–98 (7th Cir. 2003) (deeming the plaintiffs
negligence claim abandoned because he failed to delineate it in his brief to the district court in
opposition to summary judgment); Laborers’ Int’l Union v. Caruso, 197 F.3d 1195, 1197 (7th
Cir. 2003) (stating that arguments not presented to the district court in response to a summary
judgment motion are waived).

C.

Breach of Contract and Warranties
“Indiana choice of law doctrine favors contractual stipulations as to governing law.”

Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d 1157, 1162 (Ind. 2002) (citing Hoehn v. Hoehn,
716 N.E.2d 479, 484 (Ind. Ct. App. 1999)). The Defendant notes that the contract includes a
choice of law provision indicating that Ohio law would govern the rights and obligations of the
parties and the construction and effect of any contract formed. (Quotation, ECF No. 43-3 at 11.)
Although this language is located in Quotation R12-00803 created by the Defendant on April 5,
2012, the Plaintiff disputes whether any of the terms in Quotation R12-00803 were part of its
contract with the Defendant. In so arguing, the Plaintiff cites exclusively to Indiana contract law
in its Response to Defendant’s Motion for Summary Judgment. The Defendant, in reply, also
turns to Indiana law to refute the Plaintiff’s claims that a question of fact exists as to whether the
terms found in Quotation R12-00803 were part of the contract between the parties that led to the
installation of the drive system. The Court need not resolve which state’s laws would govern the
contract, as there is a genuine dispute that precedes that inquiry.
There is no dispute that, on April 6, 2012, Holmes entered into a contract for the

6

purchase of a 200 horsepower Avtron Saw Carriage Electric Drive System from the Defendant.
The Plaintiff claims that a genuine issue of fact remains with respect to whether there was a
meeting of the minds regarding the term in Quote R12-00803 that disclaims any express or
implied warranties. The Plaintiff notes that Quote R12-00803 is not signed by anyone from
Holmes, and there is no evidence regarding when it was sent to or received by Holmes. The
Defendant’s rebuttal is that Holmes’s own purchase order of April 6 references Quote R1200803. Obviously, Holmes’s purchase order could not reference the Defendant’s quote by its
specific number and request purchase “per Quote” if a quote had not already been delivered to
and received by Holmes. This is a valid point and one that the Plaintiff does not address head on.
However, the Defendant also fails to create an unambiguous record. Holmes’s reference to Quote
R12-00803 in its purchase order does not establish that Holmes received all the written terms of
that Quote, including the term regarding warranties, before it entered into the contract with the
Defendant. The evidence, as presented to the Court at this stage, is subject to more than one
reasonable interpretation.
The Defendant designates Exhibit C as its contract with Holmes. Exhibit C is sixteen
pages long and is comprised of several documents. The first page is a Contract/P.O. Comment
Sheet dated April 6, 2012. The second page is the faxed purchase order from Holmes to the
Defendant dated April 6, 2012. The third page is a Sales Summary Sheet that references Quote
R12-00803. It cites to a quote date of August 5, 2012, even though the document was
purportedly created by the Defendant’s regional sales manager on April 6, 2012.2 The next page

2

All reasonable inference suggest that the August 5 date was a typographical error, and that the
parties entered into a contract on April 6, 2012, based on a quote created on April 5. The product was
installed in June 2012.

7

of Exhibit C is “PAGE: 1 of 4” of Quotation R12-00803 dated April 5, 2012, and sets out the
standard basic features of the 200 HP Standard Avtron Saw Carriage Electric Drive System.
(Quotation, ECF No. 43-3 at 4.) It also contains the mailing address and fax number for Holmes.
The next page purports to be “PAGE: 2 of 13.” The remaining pages of Exhibit C are pages 3
through 13 (of 13). The warranties and disclaimers appear on page 7, as does the integration
clause indicating that an order for purchase is subject only to the terms and conditions set forth
in the Quotation. This is the only place within the sixteen pages that these terms are located.
There is no evidence within the thirteen pages of the Quote that sheds light on how—or if—it
was communicated to Holmes, such as a received date stamp, or fax header. No representative or
employee of the Defendant has offered testimony to provide clarification to this missing detail,
or to explain why the first page of the Quote suggests there was a 4-page quote. For the Plaintiff,
Almendinger maintains that the parties agreed on the price and general terms before he sent the
purchase order, but that they did not have any discussion about the terms contained in the Quote.
Although a discussion of all the terms would not have been necessary to accept the terms and
thus enter a contract based on those terms, Holmes’s faxed order to purchase the Defendant’s
product “per Quote” is not, by itself, proof of acceptance of those terms. It simply has not been
established what portion of Quote R12-00803 Almendinger had received and was therefore
referencing in the purchase order. With the limited evidence before the Court, the use of the
Quote number could have been in response to an oral quote, or in response to a 4-page Quote,
the terms of which are unknown.
This Court does not weigh the evidence and determine the truth of matters. With the
sparse, and somewhat confusing, record before it, the Court cannot say that the contract between

8

the parties contained the terms listed in all thirteen pages of Quote R12-00803. Although it
seems unlikely that Quote R12-00803 was not delivered to Holmes in its entirety before Holmes
issued the purchase order, it is not an implausible assertion. See Pourghoraishi v. Flying J, Inc.,
449 F.3d 751, 761–62 (7th Cir. 2006) (stating that the court had to credit the non-moving party’s
version of the facts and “and resist the temptation to evaluate the relative veracity of each party’s
facts, provided the claims are not implausible on their face” (citing Payne, 337 F.3d at 770–71)).
“This is true even when the one-sidedness of the allegations causes us to raise a brow.” Id.
(citing Payne, 337 at 771). The Court cannot “vouch for the truth of the facts,” but only “use
them to determine whether the case can be resolved as a matter of law.” Id. (citing Herzog v.
Vill. of Winnetka, 309 F.3d 1041, 1044–45 (7th Cir. 2002)). In this case, there remain issues that
properly can be resolved only by a finder of fact because they may reasonably be resolved in
favor of either party.

CONCLUSION
For the reasons stated above, the Court GRANTS IN PART and DENIES in PART the
Defendant’s Motion for Summary Judgment [ECF No. 42]. Count II (Breach of Contract) and
Count III (Breach of Implied Warranties) of the Complaint remain pending.
SO ORDERED on August 14, 2017.
s/ Theresa L. Springmann
CHIEF JUDGE THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT

9