Axis Oilfield Rentals, LLC v. Mining, Rock Excavation and Construction, LLC et al
Filing
47
ORDER & REASONS: ORDERED that Defendants' MREC's Motion for Partial Summary Judgment and Motion for Declaratory Judgment and ACC's Motion for Summary Judgment and Motion for Declaratory Judgment (Rec. Doc. 31) is GRANTED IN PART and DENIED IN PART. Plaintiff's claims for redhibition under Louisiana law against MREC and ACC, and claims for breach of contract against MREC are DISMISSED WITH PREJUDICE. Defendants' motion for a declaratory judgment is DENIED. Signed by Judge Carl Barbier on 2/22/16. (sek)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
AXIS OILFIELD RENTALS,
LLC
CIVIL ACTION
VERSUS
NO: 15-1627
MINING, ROCK, EXCAVATION
AND CONSTRUCTION, LLC,
ET AL.
SECTION: “J”(4)
ORDER & REASONS
Before the Court is MREC’s Motion for Partial Summary Judgment
and Motion for Declaratory Judgment and ACC’s Motion for Summary
Judgment and Motion for Declaratory Judgment (Rec. Doc. 31) filed
by Mining, Rock, Excavation and Construction LLC (formerly known
as
Atlas
Copco
Construction
Mining
Technique
USA
LLC),
individually and on behalf of its business unit Chicago Pneumatic
Construction Equipment, (“MREC”) and Atlas Copco Compressors LLC
(“ACC”) (collectively “Defendants”); an opposition thereto (Rec.
Doc. 36) filed by Plaintiff, Axis Oilfield Rental, LLC (“Axis”);
Defendants’ reply (Rec. Doc. 44); and Plaintiff’s surreply (Rec.
Doc. 46). Having considered the motion and legal memoranda, the
record, and the applicable law, the Court finds that the motion
should be GRANTED IN PART and DENIED IN PART for the reasons set
forth more fully below.
FACTS AND PROCEDURAL BACKGROUND
Axis commenced this litigation in state court on March 25,
2015, seeking damages allegedly sustained in connection with its
purchase of forty-one air compressors manufactured by ACC and
allegedly sold by MREC in 2014. 1 (Rec. Doc. 1-1, at 3-4.) According
to Axis’s complaint, the air compressors began to experience
mechanical problems within months of being put into service. Id.
at 4. Axis alleges causes of action against ACC and MREC for
redhibition under Louisiana law, and asserts additional causes of
action
against
MREC
for
breach
of
contract
and
negligent
misrepresentation. Id. at 4-10. Axis seeks damages in the form of
(1) return of the purchase price of the air compressors at issue,
with interest from the time it was paid; (2) reimbursement of the
reasonable expenses occasioned by the sale; (3) the costs incurred
for the preservation of the air compressors; (4) all other damages
1
The facts surrounding the purchase of the air compressors at issue continue
to develop throughout the course of this litigation. Axis’s complaint alleges
that Axis purchased forty-one compressors from MREC in two sales: thirty-four
units in March 2014 and seven units in April 2014. (Rec. Doc. 1-1, at 3.)
Defendants have provided evidence to the contrary, but they have changed
positions since their previous motion to transfer venue. Previously Defendants
admitted that all forty-one air compressors were sold by MREC. According to
Defendants, five of the air compressors at issue were sold to Axis by MREC in
May 2013, and the rest were sold in 2014. (Rec. Doc. 15-1, at 2 n.2.) Now
Defendants claim that only thirty-six of the air compressors at issue were sold
by MREC. (Rec. Doc. 31-1, at 3.) According to Defendants, the thirty-six air
compressors sold by MREC were purchased in three separate sales: twenty-seven
units in March 2014, seven units in April 2014, and two units in July 2014. Id.
(citing Rec. Doc. 31-9). Defendants assert that the remaining five air
compressors at issue were purchased from Big Eight Supply & Tool—not MREC—on
May 16, 2014. Id. (citing Rec. Doc. 31-10). Axis has provided no evidence in
dispute.
2
associated with the air compressors’ mechanical problems; and (5)
attorney’s fees. Id.
On August 7, 2012, Axis submitted a “Credit Application” with
MREC. (Rec. Doc. 31-4.) The Credit Application, signed by Axis’s
president, stated that Axis, “intending to be legally bound hereby,
herein agrees and will comply with [the] Terms and Conditions of
sale, located on page three (3) of this application.” Id. at 2.
The “Terms and Conditions of Sale” (“original Terms”) on page three
of the Credit Application included the following choice-of-law
provision: “(d) Governing Law: These terms and conditions are
governed exclusively by the laws of the State of Colorado without
regard to its conflict of laws principles that would have a
contrary result.” Id. at 3. The Terms and Conditions of Sale in
the Credit Application also included a limitation-of-liability
provision,
a
provision
excluding
consequential
damages,
and
warranty disclaimers. Id.
On January 1, 2014, the original Terms were amended. (Rec.
Doc. 31-8.) Paragraph 17 of the amended Terms and Conditions of
Sale
(“amended
Terms”)
contains
the
following
choice-of-law
provision:
17.
Miscellaneous.
.
.
.
17.8.
The
validity,
performance, and all other matters arising out of or
relating to the interpretation and effect of these Terms
and/or the contract shall be governed by and construed
in accordance with the internal laws of the U.S. State
in which Seller’s applicable sales or service facility
is located without giving effect to any choice or
3
conflict of law provision or rule . . . that would cause
the application of the laws of any jurisdiction other
than those of such State.
Id. Similar to the original Terms, the amended Terms include a
limitation-of-liability
provision,
a
provision
excluding
consequential damages, and warranty disclaimers. Id.
Defendants claim that the amended Terms were attached to the
invoices Axis received for its purchase of air compressors from
MREC. 2 (Rec. Doc. 31-1, at 2.) However, Axis claims that it
initially received the invoices through electronic mail and the
invoices it received electronically included only the front side
of the invoices—not the reverse side, which Defendants claim
included the Terms and Conditions of Sale. (Rec. Docs. 36, at 2.)
According to Axis, its president signed the invoices, returned the
signed invoiced though electronic mail, and directed JPMorgan
Chase Bank to pay Defendants on behalf of Axis. See id. Axis claims
Defendants then shipped the air compressors to Axis and mailed
hard-copy invoices to Axis’s headquarters. Id. These hard-copy
invoices included the reverse side with the Terms and Conditions
of Sale. Id.
Defendants
filed
the
instant
MREC’s
Motion
for
Partial
Summary Judgment and Motion for Declaratory Judgment and ACC’s
Motion for Summary Judgment and Motion for Declaratory Judgment
2 Defendants assert that the invoices for Axis’s purchase of air compressors
from MREC were printed on paper that was preprinted with the applicable Terms
and Conditions of Sale on the reverse side. (Rec. Doc. 31-5, at 3.)
4
(Rec. Doc. 31) on December 24, 2015. In their motion, Defendants
move for (1) summary judgment as to the Louisiana redhibition
claims on the grounds that such claims are not recognized by the
law applicable to this action; (2) summary judgment as to the
breach of contract claims on the grounds that such claims are
barred by the amended Terms and Conditions of Sale agreed to by
the
parties;
and
(3)
declaratory
judgment
that
Axis’s
total
recovery, if any, is limited to the price paid for the compressors
at issue. 3 Axis filed its opposition on January 19, 2016. The Court
granted leave for Defendants to file their reply and for Axis to
file its surreply on January 28, 2016. The Court now considers the
motion on the briefs.
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R.
Civ. P. 56(c)); Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994). When assessing whether a dispute as to any
material fact exists, the Court considers “all of the evidence in
3
Defendants have not moved for summary judgment on Axis’s negligent
misrepresentation
claims
and
have
clarified
that
Axis’s
negligent
misrepresentation claims are not subject to the instant motion. (Rec. Doc. 44,
at 9.)
5
the record but refrains from making credibility determinations or
weighing
the
evidence.”
Delta
&
Pine
Land
Co.
v.
Nationwide
Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). All
reasonable inferences are drawn in favor of the nonmoving party,
but
a
party
cannot
defeat
summary
judgment
with
conclusory
allegations or unsubstantiated assertions. Little, 37 F.3d at
1075. A court ultimately must be satisfied that “a reasonable jury
could not return a verdict for the nonmoving party.” Delta, 530
F.3d at 399.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int'l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991). The nonmoving party can then defeat the motion by either
countering with sufficient evidence of its own, or “showing that
the moving party’s evidence is so sheer that it may not persuade
the reasonable fact-finder to return a verdict in favor of the
moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in the
record is insufficient with respect to an essential element of the
nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden
6
then shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a
genuine issue exists. See id. at 324. The nonmovant may not rest
upon the pleadings, but must identify specific facts that establish
a genuine issue for trial. See, e.g., id. at 325; Little, 37 F.3d
at 1075
PARTIES’ ARGUMENTS AND DISCUSSION
A.
Whether the Terms and Conditions of Sale Are Part of an
Agreement Between the Parties
A district court applies the choice-of-law rules of the state
in which it sits in a diversity case. Klaxon Co. v. Stentor Elec.
Mfg.
Co.,
313
U.S.
487,
496-97
(1941).
Under
Louisiana
law,
contractual choice-of-law provisions are presumed valid unless the
chosen law contravenes the public policy of the state whose law
would otherwise apply. La. Civ. Code art. 3540. A choice-of-law
provision in a contract is presumed valid; the party seeking to
prove such a provision invalid bears the burden of proof. Barnett
v. Am. Const. Hoist, Inc., 91 So. 3d 345, 349 (La. App. 1 Cir.
2012).
However,
“‘preliminary’
issues
that
pertain
to
the
existence of the choice of law clause, such as consent and vices
of consent, . . . should be judged according to the law applicable
under Article 3537.” La. Civ. Code art. 3540, cmt. (d). Here,
Defendants argue that the Court should rely on the choice-of-law
provision in the amended Terms and Conditions of Sale and apply
7
Colorado law to Axis’s claims. The threshold question, however, is
whether the provisions contained in the amended Terms are part of
the contract between the parties.
Louisiana’s generally applicable choice-of-law rule specifies
that “an issue in a case having contacts with other states is
governed by the law of the state whose policies would be most
seriously impaired if its law were not applied to that issue.” 4
La. Civ. Code art. 3515. Specifically regarding contracts, article
3537 instructs courts to determine which state’s law applies by
evaluating the strength and pertinence of the relevant policies of
the involved states in the light of the following considerations:
(1) the pertinent contacts of each state to the parties
and the transaction, including the place of negotiation,
formation, and performance of the contract, the location
of the object of the contract, and the place of domicile,
habitual residence, or business of the parties; (2) the
nature, type, and purpose of the contract; and (3) the
policies referred to in Article 3515, as well as the
policies of facilitating the orderly planning of
transactions,
of
promoting
multistate
commercial
intercourse, and of protecting one party from undue
imposition by the other.
La. Civ. Code art. 3537.
In the instant case, the parties point to three states with
a connection to this action. Defendants argue that both Colorado
4
Under article 3515, the state whose policies would be most seriously impaired
if its law were not applied is determined by evaluating the strength and
pertinence of the relevant policies of all involved states in the light of (1)
the relationship of each state to the parties and the dispute and (2) the
policies and needs of the interstate and international systems, including the
policies of upholding the justified expectations of parties and of minimizing
the adverse consequences that might follow from subjecting a party to the law
of more than one state. La. Civ. Code art. 3515.
8
and Texas have significant contacts with the transactions at issue.
(Rec.
Doc.
31-1,
at
6.)
According
to
Defendants,
the
air
compressors were sold from MREC’s sales facility in Colorado, the
sales
were
compressors
“booked”
were
at
shipped
MREC’s
to
headquarters
Axis’s
in
facility
Colorado,
in
Texas,
the
the
compressors were used by Axis in Texas, the compressors are and
have been physically located in Texas, and the alleged defects
arose from Axis’s use of the compressors in Texas. Id. at 6-7. On
the other hand, Axis argues that Louisiana has the most significant
connection to the transactions at issue. According to Axis, this
matter involves determinations of loss to a Louisiana entity caused
as a result of a contract accepted, executed, and finalized in
Louisiana. (Rec. Doc. 36, at 9.) Further, Axis argues that some of
the pertinent air compressors were utilized in Louisiana. Id. at
10. Moreover, Axis asserts that Defendants are domiciled in New
Jersey and Delaware; no Colorado or Texas entities are involved
and no persons have been injured in Colorado or Texas. Id. at 9.
Therefore, Axis argues that no public policy concerns of Colorado
or Texas to apply their substantive laws exist in this case. Id.
at 9.
As to the preliminary issue pertaining to the existence of
the choice-of-law clause, the parties have not demonstrated that
a conflict of laws exists. Accordingly, the Court applies Louisiana
law to determine whether the parties formed a valid contract that
9
included the amended Terms; however, the Court would reach the
same conclusion under Colorado or Texas law.
Under Louisiana law, the perfection of a sale requires a
thing, a price, and the consent of the parties. La. Civ. Code art.
2439. Consent necessary to form a contract is established “through
offer and acceptance.” Id. art. 1927. For a proposal to qualify as
an offer, “it must reflect the intent of the author to give to the
other party the right of concluding the contract by assent.” Delta
Testing
&
Inspection,
Inc.
v.
Ernest
N.
Morial
New
Orleans
Exhibition Hall Auth., 699 So. 2d 122, 124 (La. App. 4 Cir. 1997).
“[A] price list sent upon request to a customer constitutes an
offer and the contract of sale is completed when the customer
accepts the offer by placing an order for goods in accordance with
the price list.” Gulf S. Mach., Inc. v. Kearney & Trecker Corp.,
756 F.2d 377, 380 (5th Cir. 1985). Accordingly, the invoices sent
to Axis, which described the things to be sold and the prices,
were offers; Axis accepted the offers by signing the invoices and
making payment, forming contracts of sale upon the conditions
mentioned in the invoices. See id.
The next issue is whether the amended Terms were a part of
the contracts between the parties. “Importantly, consent envisions
agreement on all elements of a given sale or contract.” Marseilles
Homeowners Condo. Ass'n, Inc. v. Broadmoor, L.L.C., 111 So. 3d
1099, 1111 (La. App. 4 Cir. 2013). Here, Defendants contend that
10
the amended Terms were a part of their contracts with Axis because
each invoice received by Axis from MREC contained the following
language
in
all
capital
letters:
“THE
ADDITIONAL
TERMS
AND
CONDITIONS ON THE NEXT PAGE OF THIS INVOICE ARE MADE PART OF THIS
INVOICE.” (Rec. Doc. 31-1, at 2-5.) Moreover, Defendants claim
that both the original and amended Terms and Conditions of Sale
were actually received by Axis throughout the parties’ course of
dealing, as evidenced by the fact that Axis produced copies of
signed invoices with the Terms attached. Id. at 2 n.2 (citing Rec.
Doc. 31-14).
Axis contends that it did not consent to the choice-of-law
provision in the amended Terms. (Rec. Doc. 36, at 6.) Axis states
that it requested from Defendants the price for a certain amount
of air compressors prior to each sale. Id. at 2. Axis argues that
Defendants provided an offer to Axis through invoices sent through
electronic mail, which described the air compressors and included
a price. Id. Further, Axis argues that it subsequently provided
its acceptance and consent to the sale by signing the invoices and
directing its bank to pay Defendants on its behalf. Id. Notably,
Axis claims that the invoices sent by Defendants through electronic
mail and subsequently signed by Axis’s president included only the
front page. Id. According to Axis, Defendants did not send the
reverse
page
containing
the
amended
electronic mail. Id.
11
Terms
to
Axis
through
As a general rule of contract law, separate documents may be
incorporated into a contract by attachment or reference thereto.
Arthur J. Gallagher & Co. v. Babcock, 703 F.3d 284, 289 (5th Cir.
2012); AWC, Inc. v. CSF Const., Inc., 931 So. 2d 382, 386 (La.
App. 4 Cir. 2006). In addition, reference on the face of a document
to conditions to be found on the reverse is accepted practice and
is sufficient to put a party on notice that the author of the
document intends to incorporate terms and conditions into the
document in addition to those shown on its face. AWC, Inc., 931
So. 2d at 387. For example, in AWC, Inc. v. CSF Construction, Inc.,
a buyer and seller disputed which of them bore the burden of paying
sales tax on two purchase orders. Id. at 383. In the purchase
agreement, which was prepared by the buyer, the reverse side of
the contract contained a provision indicating that the seller was
to pay sales tax for the transaction. Id. at 385. The contract was
sent by fax, and the seller contended that the buyer faxed only
the front page of the purchase orders, not the reverse page
containing the provision requiring the seller to pay sales tax.
Id.
The
face
of
the
purchase
orders
there,
similar
to
the
Defendants’ invoices in this case, provided the following language
in all capital letters: “THIS PURCHASE ORDER SUBJECT TO TERMS AND
CONDITIONS ON REVERSE.” Id.
The court in AWC, Inc. held that the seller’s receipt of the
fax of the front page of the purchase order, which referred to the
12
terms and conditions on the reverse, was “sufficient to put [the
seller] on notice that [the buyer] intended to incorporate terms
and conditions into the Purchase Order in addition to those shown
on the face of the document.” Id. at 387. “It then became incumbent
upon [the seller] to inquire further as to the nature of those
terms and conditions.” Id. Furthermore, the concurring opinion in
AWC, Inc. explains that there was evidence in the record to
establish that the seller actually received the terms contained on
the reverse of the purchase order. Id. (Belsome, J., concurring).
In the instant case, the invoices make reference to terms and
conditions
to
be
found
on
the
reverse.
The
receipt
through
electronic mail by Axis of the front pages of the invoices, which
refer to terms and conditions on the reverse, is sufficient to put
Axis on notice that there were reverse pages containing terms and
conditions. See id. at 386 (majority opinion). Axis does not argue
that the choice-of-law provision was not part of the terms and
conditions contained on the reverse of the invoices, but only that
the reverse pages were not transmitted through electronic mail.
However, like the seller in AWC, Inc., Axis should have inquired
as to the nature of the terms and conditions referred to on the
face of the invoices that it acknowledges having received through
electronic mail. See id.
In addition, there is undisputed evidence in the record that
Axis
actually
received
the
original
13
and
amended
Terms
and
Conditions
of
Sale,
both
of
which
contained
a
choice-of-law
provision. During discovery, Axis produced several invoices it
received from Defendants that included the terms and conditions on
the reverse. (Rec. Doc. 31-14, at 1-20.) The front pages of these
invoices were signed by Axis’s president and each page, including
the terms and conditions, bears an Axis bates number. Id. At least
one invoice, dated January 21, 2014, contained the amended Terms
that Axis claims it never received with the invoices for the air
compressors
at
issue.
See
id.
at
13-14.
Accordingly,
Axis’s
knowledge of the terms and conditions referred to in the invoices
could not be the subject of disagreement among reasonable minds.
Therefore, Axis is bound by the amended Terms referred to on the
face of the invoices it received from MREC, including the choiceof-law provision.
The choice-of-law provision in Paragraph 17 of the amended
Terms provides that all matters arising out of the contract “shall
be governed by and construed in accordance with the internal laws
of the U.S. State in which the Seller’s applicable sales or service
facility is located.” (Rec. Doc. 31-8.) Axis contends that the
choice-of-law provision is ambiguous because the term “applicable
sales or service facility” is vague and undefined. (Rec. Doc. 36,
at 7.) Axis argues, for example, that the term “applicable sales
or service facility” could mean that multiple states’ laws could
apply if the sales facility and service facility are not located
14
in the same state. Id. at 8. Further, Axis claims that one
interpretation
of
applicable
“service
facility”
could
be
the
service facility closes to Axis’s principal place of business. Id.
Axis points out that Defendants have service centers in over 400
locations, including three near New Orleans. Id. at 7-8. Defendants
contend that because Axis’s claims are related to the sale of
equipment—not a transaction in which MREC was engaged by Axis to
perform service on existing equipment— the choice-of-law provision
requires the Court to apply Colorado law, the law of the state
where MREC’s sales facility is located. (Rec. Doc. 31-1, at 5.)
Axis’s argument that the choice-of-law provision is ambiguous
lacks merit. The choice-of-law provision must be interpreted in
light of the contract’s other provisions in order to give each
provision the meaning suggested by the contract as a whole. In re
Liljeberg Enterprises, Inc., 304 F.3d 410, 443 (5th Cir. 2002)
(applying Louisiana law); accord Level 3 Commc'ns, LLC v. Liebert
Corp., 535 F.3d 1146, 1154 (10th Cir. 2008) (applying Colorado
law); Tittle v. Enron Corp., 463 F.3d 410, 419 (5th Cir. 2006)
(applying Texas law). Here, the amended Terms apply to contracts
for MREC to sell products and also to contracts for MREC to perform
services. (Rec. Doc. 31-8.) For example, Paragraph 9 of the amended
Terms states that MREC warrants that certain products sold are
free of defects and that services performed by MREC are performed
in a workmanlike manner. Id. Axis’s argument ignores the fact that
15
the choice-of-law provision refers to the applicable “sales or
service
facility.”
Id.
(emphasis
added).
Therefore,
a
sales
facility and a service facility cannot both be applicable. The
determination of which facility is applicable depends on whether
the claim relates to a contract of sale or a contract for service.
As Defendants point out, had Axis made a claim for improper
service, then the law of the state where the service facility that
rendered the service was located would provide the substantive
law.
When read together with the other provisions in the amended
Terms, the choice-of-law provision requires the Court to apply the
law of the state in which the sales facility that sold the air
compressors
at
issue
is
located.
Defendants
have
provided
undisputed evidence that the sales at issue were made out of MREC’s
sales facility in Colorado. (Rec. Doc. 31-11, at 1.) In addition,
each invoice for the compressors at issue listed MREC’s address as
being
located
in
Commerce
City,
Colorado.
(Rec.
Doc.
31-9.)
Therefore, the choice-of-law provision unambiguously provides for
the application of Colorado law to matters arising out of the sale
of the air compressors in this case.
B.
Summary Judgment as to Louisiana Redhibition Claims
Defendants argue that if the Court enforces the choice-of-
law provision agreed to by the parties, Axis cannot raise claims
of
redhibition
because
such
claims
16
are
only
available
under
Louisiana law. “Sales of goods in Louisiana carry an implied
warranty that the goods are free of hidden defects (‘redhibitory
vices’) and are reasonably fit for their intended use.” Datamatic,
Inc. v. Int'l Bus. Machines Corp., 795 F.2d 458, 461 (5th Cir.
1986); accord La. Civ. Code arts. 2520, 2524. Louisiana law permits
waiver of the warranty against redhibitory defects in contracts
between commercially sophisticated parties if the waiver is clear
and unambiguous and brought to the buyer’s attention.
Hollybrook
Cottonseed Processing, LLC v. Carver, Inc., No. 09-0750, 2010 WL
1416781, at *9 (W.D. La. Apr. 1, 2010) (citing La. Civ. Code art.
2548); see also Prince v. Paretti Pontiac Co., 281 So. 2d 112, 117
(La. 1973).
In
this
application
case,
of
the
Colorado
choice-of-law
provision
law
dispute.
to
this
mandates
Even
the
assuming
Louisiana law would otherwise apply, the choice-of-law provision
does not contravene the public policy of Louisiana. The policy
behind Louisiana’s redhibition law is one of consumer protection.
R-Square Invs., Inc. v. Teledyne Indus., Inc., No. 96-2978, 1997
WL 436245, at *5 (E.D. La. July 31, 1997) (citing Stumpf v.
Metairie Motor Sales, Inc., 212 So. 2d 705, 710 (La. App. 4 Cir.
1968)). Although Louisiana’s interest in protecting its consumers
is important, when viewed in the context of a purely commercial,
multistate transaction, it may be outweighed by another state’s
interest in furthering its procommerce policies. Id. Furthermore,
17
Louisiana law permits parties to contractually limit or exclude
the warranty against redhibitory defects. See La. Civ. Code art.
2548.
Accordingly,
Axis’s
Louisiana
redhibition
claims
are
precluded by the valid choice-of-law provision in the amended Terms
and Conditions of Sale. See Hollybrook, 2010 WL 1416781, at *9.
C.
Partial Summary Judgment as to Breach of Contract Claims
Axis asserts a cause of action against MREC for breach of
contract on the grounds that the air compressors’ failure to
function as intended is a breach of the warranty of fitness.
According to Axis, the air compressors sold by MREC were not
reasonably fit for their intended use or Axis’s particular purpose.
MREC moves for summary judgment on Axis’s breach of contract
claims, arguing that such claims are barred by the amended Terms
and Conditions of Sale agreed to by the parties. (Rec. Doc. 31-1,
at 7.)
Paragraph
warrants
to
9
of
Buyer
the
that
amended
any
and
Terms
all
provides
that
“Seller
Seller-manufactured
(or
affiliate-manufactured) Products delivered to Buyer hereunder are
delivered free of defects in workmanship and material.” (Rec. Doc.
31-8.)
Further, Paragraph 9 of the amended Terms provides the
following language in bold, all capital letters: “THE FOREGOING
WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES
(WRITTEN, ORAL, IMPLIED, OR OTHERWISE), AND ALL OTHER WARRANTIES,
INCLUDING
BUT
NOT
LIMITED
TO
18
ANY
IMPLIED
WARRANTIES
OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
EXPRESSLY DISCLAIMED.” Id. Pursuant to this provision, MREC argues
that Axis has expressly disclaimed the warranty for fitness for a
particular purpose and warranty for an intended use.
Under Colorado law, warranties of merchantability and fitness
arise in every contract for sale unless properly excluded. Lease
Fin., Inc. v. Burger, 575 P.2d 857, 861 (Colo. App. 1977) (citing
Colo. Rev. Stat. §§ 4-2-314 to -316). Section 2-316 of the Uniform
Commercial Code as adopted in Colorado governs the modification
and exclusion of warranties. See Colo. Rev. Stat. § 4-2-316. The
implied
warranty
of
merchantability
may
be
disclaimed
by
a
conspicuous writing that actually mentions “merchantability.” Id.
§ 4-2-316(2); see also Richard O'Brien Cos. v. Challenge-Cook
Bros., 672 F. Supp. 466, 469 (D. Colo. 1987). The implied warranty
of fitness may be disclaimed by conspicuous, disclaiming language,
although the warranty need not be specifically mentioned. See Colo.
Rev. Stat. § 4-2-316(2). For example, the following language is
sufficient to exclude all implied warranties of fitness: “There
are no warranties which extend beyond the description on the face
hereof.” Id.
A disclaimer is “conspicuous” if it is written so that a
reasonable person against whom it is to operate ought to have
noticed it. Id. § 4-1-201(10). Whether a term is conspicuous or
not is a decision for the court. Id. An exclusion is conspicuous
19
if, for example, it is “in larger type than the surrounding text,
or in contrasting type, font, or color to the surrounding text of
the same size, or set off from surrounding text of the same size.”
Id. §4-1-201(10)(B). But see Lutz Farms v. Asgrow Seed Co., 948
F.2d 638, 646 (10th Cir. 1991) (holding that although the language
in the disclaimer was printed in a different color, it was “so
minute in size and detail” as to render it inconspicuous as a
matter of law). When the contract is between a commercial buyer
and a commercial seller, the seller is not obligated to draw the
buyer’s attention to the clause. Richard O'Brien Cos., 672 F. Supp.
at 470.
In the instant case, the warranty disclaimer in the amended
Terms and Conditions of Sale was conspicuous and, by virtue of the
language on the face of the invoices incorporating the amended
Terms, agreed to by Axis. The relevant clause appears written
entirely in uppercase letters and bold print, in contrast to the
surrounding text of the same size. See Irwin Seating Co. v. Int'l
Bus. Machs. Corp., 306 F. App'x 239, 244 (6th Cir. 2009) (applying
Colorado law) (holding disclaimer written entirely in uppercase
letters was conspicuous); Richard O'Brien Cos., 672 F. Supp. at
470
(holding
that
disclaimer
was
conspicuous
because
it
was
indented, though not in bold print). For this reason, the provision
comes within the requirements insofar as disclaimer of the implied
warranty of fitness is concerned. Furthermore, as required, the
20
provision
specifically
mentions
the
word
merchantability.
See
Colo. Rev. Stat. § 4-2-316(2). Thus, the provision meets the
requirements
for
disclaiming
any
implied
warranty
of
merchantability as well.
Axis’s breach of contract claims are for MREC’s breach of the
warranty of fitness. However, Axis has disclaimed all warranties
other than the warranties that the products be delivered free from
defects in workmanship and material. Because Axis disclaimed the
warranties that form the basis of its breach of contract claims
against MREC, MREC is entitled to summary judgment on those claims.
D.
Limitation of Remedies
Defendants argue that Axis agreed that Defendants would not
be liable for any consequential, indirect, incidental, or special
damages. Paragraph 16 of the amended Terms and Conditions of Sale
contains the following provision excluding certain damages:
16. No Consequential Damages, etc.. NOTWITHSTANDING
ANYTHING ELSE, UNDER NO CIRCUMSTANCES SHALL SELLER BE
LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, OR
SPECIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF
PROFITS OR REVENUE, LOSS OF TOTAL OR PARTIAL USE OF THE
PRODUCTS OR SERVICES, DOWNTIME COSTS, AND DELAY COST)
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR IF
SUCH DAMAGES ARE FORESEEABLE (REGARDLESS OF WHETHER
DAMAGES ARE CHARACTERIZED AS ARISING OUT OF BREACH OF
WARRANTY, TORT, CONTRACT, OR OTHERWISE).
(Rec. Doc. 31-8.) In addition, Paragraph 9 of the amended Terms
limits
the
remedies
available
to
Axis
for
defects
in
MREC’s
products to either repair, replacement, or return of the purchase
21
price. See id. Defendants argue that by virtue of the limitation
of remedies set forth in the amended Terms, Axis is precluded from
recovering any damages other than the price paid for the allegedly
defective air compressors.
The Court need not reach a conclusion on any limitation of
remedies for the purposes of the instant motion. As discussed
above, Defendants are entitled to summary judgment dismissing
Axis’s claims for redhibition under Louisiana law and breach of
contract. Therefore, any discussion of a limitation-of-remedies
provision applicable to those claims is moot. Further, Axis’s
negligent misrepresentation claims are not subject to the instant
motion. (Rec. Doc. 44, at 9.) To the extent Defendants argue that
the parties agreed to limit the remedies available for Axis’s
negligent
representation
claims,
Defendants
may
reurge
such
argument in an appropriate motion.
E.
Declaratory Judgment Regarding Liability
Lastly, Defendants seek a declaratory judgment limiting their
aggregate liability, if any, to the actual purchase price paid for
the air compressors at issue. Defendants point to the following
limitation-of-liability
provision
in
the
amended
Terms
Conditions of Sale:
15. Limitation of Liability. NOTWITHSTANDING ANYTHING
ELSE, THE TOTAL LIABILITY, IN THE AGGREGATE, OF SELLER
ARISING OUT OF THE CONTRACT OR THE PERFORMANCE OR BREACH
THEREOF, OR THE DESIGN, MANUFACTURE, SALE, DELIVERY, .
. . OPERATION OR USE OF ANY PRODUCT OR SERVICE SHALL BE
22
and
LIMITED TO THE ACTUAL PURCHASE PRICE AMOUNT PAID BY BUYER
TO SELLER FOR THE SPECIFIC PRODUCT/SERVICE GIVING RISE
TO THE CLAIM (REGARDLESS OF WHETHER DAMAGES ARE
CHARACTERIZED AS ARISING OUT OF BREACH OF WARRANTY,
TORT, OR CONTRACT, OR OTHERWISE).
(Rec. Doc. 31-8.) Defendants argue that this provision places a
cap on the total amount for which Defendants can be liable to Axis
with regard to any claims having to do with the air compressors at
issue.
Specifically,
Defendants
argue
that
Axis
agreed
that
Defendants’ liability would be limited to the purchase price of
the
equipment
declaratory
discovery
delivered.
judgment
has
not
is
been
In
opposition,
inappropriate
completed
and
at
Axis
Axis
this
has
argues
time
not
that
because
had
the
opportunity to fully develop its case for damages.
The Declaratory Judgment Act, 28 U.S.C. §§ 2201-02, allows a
federal court to issue declaratory relief “[i]n a case of actual
controversy
within
its
jurisdiction.”
The
Supreme
Court
has
indicated that this act “confer[s] on federal courts unique and
substantial discretion in deciding whether to declare the rights
of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995).
Declaratory relief is appropriate under the act when a substantial
controversy of sufficient immediacy and reality exists between
parties having adverse legal interests. Md. Cas. Co. v. Pac. Coal
& Oil Co., 312 U.S. 270, 273 (1941).
As noted above, Axis’s negligent misrepresentation claims are
not subject to the instant motion. (Rec. Doc. 44, at 9.) Therefore,
23
to the extent Defendants seek a declaratory judgment limiting their
total liability to a specific amount, the Court exercises its
substantial discretion to deny a declaratory judgment at this time.
Wilton, 515 U.S. at 286; see also Hollybrook, 2010 WL 1416781, at
*10 (denying motion for declaratory judgment because buyer had not
yet had the opportunity to develop its case for damages and seller
had not demonstrated that buyer could not establish damages beyond
the range seller requested).
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Defendants’ MREC’s Motion for
Partial Summary Judgment and Motion for Declaratory Judgment and
ACC’s Motion for Summary Judgment and Motion for Declaratory
Judgment (Rec. Doc. 31) is GRANTED IN PART and DENIED IN PART.
Plaintiff’s claims for redhibition under Louisiana law against
MREC and ACC, and claims for breach of contract against MREC are
DISMISSED WITH PREJUDICE. Defendants’ motion for a declaratory
judgment is DENIED.
New Orleans, Louisiana, this 22nd day of February, 2016.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
24
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