Axis Oilfield Rentals, LLC v. Mining, Rock Excavation and Construction, LLC et al

Filing 82

ORDER & REASONS: ORDERED that Defendants' Motion for Summary Judgment and Declaratory Judgment (R. Doc. 61) is DENIED IN PART and GRANTED IN PART, as set forth in document. FURTHER ORDERED that Plaintiff's potential damages are limited t o "the actual purchase price amount paid by buyer to seller for the specific product/service giving rise to the claim." IT IS HEREBY ORDERED that Defendants' Motion to Exclude Testimony on Economic Losses (R. Doc. 64) is DENIED AS MOOT. Signed by Judge Carl Barbier on 11/29/16. (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 are two motions filed by the Defendant(s) 1
Mining, Rock, Excavation and Construction, LLC (Defendants). First
is a Motion to Exclude Testimony or Evidence on Economic Losses.
(R. Doc.

64.)

Declaratory

Second

is

a

Motion

Judgment. (R. Doc.

61.)

for

Summary

Plaintiff,

Judgment

Axis

Oil

and
Field

Rentals, LLC (Plaintiff or Axis), filed timely oppositions to the
motions. (R. Docs. 65, 66.) Having considered the motions and legal
memoranda, the record, and the applicable law, the Court finds
that Defendants’ Motion

for

Summary

Judgment

and

Declaratory

Judgment (R. Doc. 61) should be GRANTED IN PART and DENIED IN PART
and Defendants’ Motion to Exclude Testimony on Economic Losses (R.
Doc. 64) should be DENIED AS MOOT.

1 Defendant MREC filed both of these motions individually and on behalf of its
division Chicago Pneumatic Construction Equipment. (Rec. Doc. 61-1 at 1; Rec.
Doc. 64-1 at 1.)

1

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 sold by Defendants. (R. Doc.
1-1, at 3-4.) Axis originally alleged causes of action against
Defendant Atlas Copco Compressors, LLC (ACC) for redhibition under
Louisiana

law,

and

for

breach

of

contract

and

negligent

misrepresentation against MREC. Id. On May 13, 2015 Defendant MREC
removed this action on the basis of diversity jurisdiction. (R.
Doc. 1.) On February 2, 2016, this Court issued Order and Reasons
dismissing

Plaintiff’s

redhibition

claim

against

ACC

and

Plaintiff’s breach of contract claim against MREC. (R. Doc. 47.)
Accordingly,

the

only

remaining

claim

before

the

Court

is

Plaintiff’s negligent misrepresentation claim against MREC. (R.
Doc. 47.) On August 9, 2016, Defendant MREC filed a Motion for
Summary Judgment and Declaratory Judgment. (R. Doc. 61.) On August
11, 2016, Defendant MREC filed a Motion to Exclude Axis’ Testimony
or Evidence on Economic Losses. (R. Doc. 64.) These motions are
now before the Court on the briefs and without oral argument.
PARTIES’ ARGUMENTS
1.

Motion to Exclude Testimony on Economic Losses
a.

Defendants’ Arguments

Defendants seek to exclude testimony or evidence on Axis’
alleged economic losses for two reasons: “First, that Axis’ witness
2

lacks the requisite first-hand knowledge and proper education,
training, and experience to present such evidence.” (R. Doc. 64-1
at 5.) And second, that “the methodology employed by Axis in
projecting its alleged economic losses is not consistent with
generally accepted accounting principles and methodologies.” Id.
Defendants argue that Plaintiff’s witness, Mr. Eddie Davis, 2 is
not competent to offer testimony as an expert under Rule 701 or
702 of the Federal Rules of Evidence, because “his testimony is
not rationally based on his own personal knowledge and perception
and in no way satisfies the requirements of Daubert.” Id. at 9.
Defendants

also

argue

that

Mr.

Davis’

testimony

is

based

on

hearsay. Due to these alleged deficiencies, Defendants argue that
Mr. Davis is not permitted to testify to any of the alleged losses
in “Exhibit A.” 3 (R. Doc. 64-2.)
b.

Plaintiff’s Arguments

Plaintiff argues that it is not offering Mr. Davis as a Rule
702 expert. (R. Doc. 65 at 2.) Rather, Plaintiff submits that “Axis
will offer the factual testimonies of Axis employees to establish
the damages Axis has suffered.” Id. Plaintiff argues that the
Federal Rules of Evidence permit these witnesses because their

2

Mr. Davis is the CEO of Axis Oilfield Rentals, LLC.
Exhibit A was produced by Plaintiff as its damages disclosure under Rule 26
of the Federal Rules of Civil Procedure. The document purports to quantify
Plaintiff’s damages. The document lists damages such as “lost revenue because
of cash flow,” loss of future business, lost revenue because of alleged problems
with the “JD7 units,” unit cost and “swap support,” unit mobilization and
demobilization costs, and accrued interest. (Rec. Doc. 38-1.)

3

3

testimony will be rationally based on their perception, helpful in
determining

a

fact

in

issue,

and

not

based

on

scientific,

technical, or other specialized knowledge. Id. Plaintiff argues
that it does not intend to offer Exhibit A as substantive evidence
at trial, rather Plaintiff produced the exhibit to fulfill its
Rule 26 obligation to provide an initial computation of each
category of damages. However, Plaintiff argues that it is not
precluded from offering witness testimony and business records to
prove each category of damages listed in Exhibit A. Id. at 3.
2.

Motion for Summary Judgment and Declaratory Judgment
a.

Defendants’ Arguments

Defendants

argue

that

Plaintiff

is

unable

to

present

sufficient evidence to support its negligent misrepresentation
claim. (R. Doc. 61-1 at 4.) Defendants argue that “Axis testified
that the only misrepresentations it is claiming are statements
made by MREC salesman Paul McClendon that the John Deere powered
air compressors ‘should be better’ and ‘should be more efficient.’”
Id. at 4-5. Defendants argue that the statements allegedly made by
MREC are not actionable as misrepresentations, because the terms
“should be better” and “should be more efficient” are statements
of probability and not firm statements of fact. Id. at 6. Further,
Defendants argue that even if such statements were actionable,
Axis could not have justifiably relied on those statements because:
(1) Axis knew Mr. McClendon was a salesman, (2) knew he had not
4

observed the operation that the compressors were to be used for,
and (3) Mr. McClendon was never given any written or technical
engineering data regarding the specific use Axis had for the
equipment. Id. at 7. Defendants argue that either Colorado or Texas
law applies to Plaintiff’s negligent misrepresentation claim.
Alternatively, Defendants argue that the parties’ agreement
prohibits,

or

at

least

limits,

Plaintiff’s

negligent

misrepresentation claim. Id. at 9. Defendants argue that the
agreement’s integration clause prohibits Axis from maintaining its
negligent misrepresentation claim. Id. If not, Defendants argue
that Plaintiff’s damages are limited by the agreement’s limitation
on liability clause. Id. at 10. Further, Defendants argue that
under Texas law Plaintiff’s claim is barred by the economic loss
rule. Id. at 14-17. Finally, Defendants argue that Plaintiff’s
claim for negligent misrepresentation should be dismissed because
Plaintiff is unable to meet its burden of proving damages. Id. at
13. Defendants reiterate the same objections from their Motion to
Exclude Testimony on Economic Damages (R. Doc. 64.)
b.

Plaintiff’s Arguments

First, Plaintiff argues that Louisiana law should apply to
its negligent misrepresentation claim. (R. Doc. 66 at 4.) Plaintiff
argues that the contract does not contain sufficiently broad
language to encompass tort claims. Id. at 5. Accordingly, Plaintiff
argues that this Court must conduct a choice of law analysis, and
5

such analysis results in Louisiana law applying to Plaintiff’s
negligent misrepresentation claim. Id. at 7-9. Second, Plaintiff
argues that genuine issues of material fact remain that preclude
summary judgment on Plaintiff’s negligent misrepresentation claim.
Id. at 9. Specifically, Plaintiff argues that Paul McClendon told
Axis that the John Deere air compressors would perform the job
required

by

Axis’

customers

under

the

conditions

and

specifications described by Axis. Id. at 10. Despite these alleged
affirmations, and after Plaintiff’s alleged reliance upon such
statements, Plaintiff argues that the air compressors did not
perform up to the conditions and specifications that Mr. McClendon
allegedly assured. Id.
Third,
clause

does

Plaintiff
not

argues

prohibit

that

Axis

the

from

agreement’s
maintaining

integration
a

negligent

misrepresentation claim. Id. at 11. Plaintiff argues, inter alia,
that the clause does not contain clear and specific language
prohibiting Axis from maintaining its claim. Id. Additionally,
Plaintiff argues that the terms and conditions do not limit Axis’
damages.

Plaintiff

argues

that

Defendants’

misrepresentations

prior to the formation of the agreement induced Axis into entering
the contract, and as such, are unrelated to the breach of contract
itself. Id. at 13. Fourth, Plaintiff argues that Axis’ claim is
not barred by the economic loss doctrine regardless of whether
Louisiana, Colorado, or Texas law applies. Id. at 15-17. Finally,
6

Plaintiff argues that its claim should not be dismissed for lack
of evidence on damages. Id. at 15. Plaintiff argues that it has
submitted “thousands of pages of documentation” to prove its
damages, and such evidence will be presented by Axis employees
with personal knowledge of such damages. Id.
LEGAL STANDARD
1.

Summary Judgment
A federal court sitting in diversity must apply federal

procedural law. Rosenberg v. Celotex Corp., 767 F.2d 197, 199 (5th
Cir. 1985). 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, a court considers “all of the evidence in
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
7

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
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.

8

2.

Declaratory Judgment
In analyzing whether to decide or dismiss the declaratory

judgment suit, the district court followed the three steps this
court set out in Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d
891, 895 (5th Cir. 2000). A federal district court must determine:
(1) whether the declaratory action is justiciable; (2) whether the
court has the authority to grant declaratory relief; and (3)
whether to exercise its discretion to decide or dismiss the action.
Sherwin-Williams Co. v. Holmes Cty., 343 F.3d 383, 387 (5th Cir.
2003).
DISCUSSION
1.

Summary Judgment
a.

Governing Law

The

choice

of

law

provision

in

the

Amended

Terms

and

Conditions of the parties’ contract provides:
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
of conflict of law provisions or rule (whether in such
State or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than
those of such State.
(R. Doc. 38-1.) Determining which law applies to Plaintiff’s
negligent misrepresentation claim raises its own choice of law
issues. This Court has already determined that the choice-of-law

9

provision is valid. (Rec. Doc. 47.) However, this Court has not
determined which jurisdiction’s law governs the scope of the
choice-of-law provision.
“[D]etermining which jurisdiction’s law governs the scope of
a valid choice-of-law clause is not a simple matter.” Wright’s
Well Control Servs., LLC v. Oceaneering Int’l, Inc., No. 15-1720,
2015 WL 7281618, at *10 (E.D. La. Nov. 16, 2015) (citing Fin. One
Pub. Co. v. Lehman Bros. Special Fin., 414 F.3d 325, 332 (2d Cir.
2005)). Some jurisdictions have concluded that the scope of a
choice of law provision is a matter of contract interpretation
subject to the law chosen by that provision. Lehman Bros., 414
F.3d at 333; see also Weil v. Morgan Stanley DW Inc., 877 A.2d
1024, 1032 (Del. Ch.) aff'd, 894 A.2d 407 (Del. 2005) (concluding
that, as “a matter of hornbook law,” the scope of a choice of law
provision is determined under the law that the provision selects).
However, the majority view is that the scope of a choice-of-law
clause

is

determined

by

the

same

law

that

governs

its

enforceability, the law of the forum state. Lehman Bros., 414 F.3d
at 332 (collecting cases); Cypress Pharma., Inc. v. CRS Mgmt.,
Inc., 827 F. Supp. 2d 710 (S.D. Miss. 2011); Pyott-Boone Electrs.,
Inc. v. IRR Trust for Donald L. Fetterolf Dated Dec. 9, 1997, 918
F. Supp. 2d 532, 543 (W.D. Va. 2013) (collecting cases); see also
Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 597
(8th Cir. 2007) (concluding that interpreting a choice-of-law
10

clause’s scope under the chosen law rather than the forum law would
“give effect to that provision before the court’s analytical
determination of what effect it should have”).
Fortunately, the Court need not enter this conflict. When
“there are no differences between the relevant substantive laws of
the respective states, there is no conflict, and a court need not
undertake a choice of law analysis.” R.R. Mgmt. Co. v. CFS La.
Midstream Co., 428 F.3d 214, 222 (5th Cir. 2005). Upon reviewing
the applicable law, the Court concludes that regardless of whether
Texas,

Louisiana,

or

Colorado

law

applies

to

the

scope

determination, the choice-of-law provision extends to Axis’ extracontractual claim for negligent misrepresentation. See Wright’s,
2015 WL 7281618, at *10 (noting similarity between Texas and
Louisiana law in interpretation of broad and narrow choice-of-law
provisions and whether such provisions encompass tort claims);
City and Cty. of Denver v. Dist. Court in and For City and Cty. of
Denver, 939 P.2d 1353, 1367 (Colo. 1997) (discussing broadly worded
arbitration clauses as intending to encompass any dispute between
the parties); Goodwin v. Bruggeman-Hatch, No. 13-2973, 2014 WL
3057198, at *1 (D. Colo. July 7, 2014) (characterizing broadly
worded

forum-selection

clause

language

as

“sufficiently

comprehensive to encompass plaintiff’s claims”).
Unlike many of the cases cited by Plaintiff, the choice-oflaw provision in this case contains sufficiently broad language
11

that encompasses Plaintiff’s negligent misrepresentation claim.
Specifically, the provision contains the broad language “all other
matters . . . relating to the . . . contract.” The Court finds
that such language is intended to be all-encompassing, and that
Plaintiff’s negligent misrepresentation is a matter included in
“all other matters” that are related to the contract. Further,
this Court’s previous Order held that “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.” (R. Doc. 47 at 16.) Accordingly, Colorado law applies to
Plaintiff’s negligent misrepresentation claim.
b.
Under

Plaintiff’s Negligent Misrepresentation Claim
Colorado

law,

a

negligent

misrepresentation

occurs

when: (1) one in the course of his or her business, profession or
employment; (2) makes a misrepresentation of a material fact,
without reasonable care; (3) for the guidance of others in their
business

transactions;

(4)

with

knowledge

that

his

or

her

representations will be relied upon by the injured party; and (5)
the injured party justifiably relied on the misrepresentation to
his or her detriment. Allen v. Steele, 252 P.3d 476, 482 (Colo.
2011). In other words, Plaintiff must present a genuine issue of
material fact that Defendants made a misrepresentation of a past
or present material fact at the time of contracting, and that
Plaintiff

entered

the

contract
12

in

reliance

on

that

misrepresentation. See id. Further, Plaintiff must establish that
as

a

result

of

reasonable

reliance

on

the

alleged

misrepresentations that it suffered monetary damages. Black Educ.
Network, Inc. v. AT&T Broadband, LLC, 154 F. App’x 33, 45 (10th
Cir. 2005) (applying Colorado law).
i.

Integration Clause

Defendants argue that the parties’ agreement prohibits or
limits Plaintiff’s negligent misrepresentation claim. (R. Doc. 611 at 9.) Essentially, Defendants argue that the integration clause
defeats Plaintiff’s claim of reasonable or justifiable reliance on
Mr. McClendon’s statements, because the clause provides that the
terms and conditions of the sale are the parties’ entire agreement.
Plaintiff argues that the integration clause is not couched in
clear and specific language and thus does not defeat its negligent
misrepresentation claim. (R. Doc. 66 at 11.) Both parties cite to
Keller v. A.O. Smith Harvestore Products, Inc., 819 P.2d 69 (Colo.
1991) in support of their argument.
In

Keller,

the

Colorado

Supreme

Court

explained

that

integration clauses generally permit contracting parties to limit
future contractual disputes to issues relating to the reciprocal
obligations expressly set forth in the executed document. Id.
(citing KN Energy, Inc. v. Great W. Sugar Co., 698 P.2d 769 (Colo.
1985). The court noted, however, that “the mere presence of a
general integration clause in an agreement does not bar a claim
13

for negligent or fraudulent misrepresentation.” Id. In Keller the
integration clause provided:
Buyer recognizes that any advertisements, brochures, and
other written statements which he may have read . . . as
well as any oral statement which may have been made to
him, concerning the potential of the Harvestore . . .
are not guarantees and he has not relied upon them as
such.
[Buyer has] read and understood the terms and conditions
of this purchase order including the warranties,
disclaimers and terms and conditions herein given to me,
either by the manufacturer or the seller.
[Buyer relies] on no other promises or conditions and
regards that as reasonable because these are fully
acceptable to [Buyer].
The court found that this language did not “clearly and
specifically disclaim reliance” by the buyer-plaintiffs on all
representations made by the seller prior to the execution of the
contract

and

did

not

bar

the

plaintiffs’

negligent

misrepresentation claim. Id. at 73-74; see also Colo. Coffee Bean,
LLC v. Peaberry Coffee, Inc., 251 P.3d 9 (Colo. App. 2010) (finding
contract containing “specific language” that disclaimed accuracy
of

income

information

precluded

plaintiffs

from

claiming

reasonable reliance); Student Mktg. Grp., Inc. v. Coll. P’ship,
Inc., 247 F. App’x 90, 99 (10th Cir. 2007) (finding contract
clauses

negated

claim

for

negligent

misrepresentation

where

warranty clause disclaimed accuracy of information, integration
clause was “specific and unambiguous,” and contract contained a
“broad limitation on tort and negligence liability”).

14

In this case, the integration clause at issue provides:
THESE TERMS CONTAIN THE ENTIRE AGREEMENT BETWEEN SELLER
AND BUYER WITH RESPECT TO TERMS AND CONDITIONS AND
SUPERSEDE ALL PREVIOUS OR CONTEMPORANEOUS STATEMENTS,
AGREEMENTS AND REPRESENTATIONS WITH RESPECT TO TERMS AND
CONDITIONS.
(R. Doc. 31-8.) The Court finds that this integration clause does
not

clearly

and

specifically

disclaim

reliance.

First,

the

language does not reference Plaintiff’s reliance, or lack thereof.
See Keller, 819 P.2d at 74. Second, unlike Colorado Coffee Bean or
Student Marketing Group, Inc., Defendants do not argue, and the
Court is unable to find, that any language within the contract
disclaims the accuracy of any information nor does the contract
contain a broad limitation on tort and negligence liability. (R.
Doc. 38-1.) For these reasons, the Court finds that the integration
clause does not bar Plaintiff’s negligent misrepresentation claim.
i.
Defendants

Economic Loss Rule
also

argue

that

the

economic

loss

rule

bars

Plaintiff’s negligent misrepresentation claim. (R. Doc. 61-1 at
14.) Colorado courts have adopted the “economic loss rule,” which
provides that “a party suffering only economic loss from the breach
of an express or implied contractual duty may not assert a tort
claim for such a breach absent an independent duty of care under
tort law.” Town of Alma v. Azco Constr., Inc., 10 P.3d 1256, 1264
(Colo. 2000); Grynberg v. Agri Tech., Inc., 10 P.3d 1267, 1269
(Colo. 2000). Economic loss includes those “damages other than
15

physical harm to persons or property.” Town of Alma, 10 P.3d at
1264. Whether the economic loss rule bars a negligence claim turns
on whether the defendant owed the plaintiff a duty of care external
to the contract. A.C. Excavating v. Yacht Club II Homeowners
Assoc., Inc., 114 P.3d 862, 866 (Colo. 2005). This is a question
of

law

to

be

determined

by

a

court.

Id.

In

making

this

determination, a court should focus on the contractual setting
between the parties. BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d
66, 74 (Colo. 2004). Three factors guide the inquiry: (1) whether
the relief sought in negligence is the same as that sought in
contract; (2) whether a common law, negligence-based duty of care
exists; and (3) “whether the negligence duty differs in any way
from the contractual duty.” Id.; see Grynberg, 10 P.3d at 1270. If
no duty of care exists independent of the contract, a plaintiff’s
claim must necessarily fail. BRW, 99 P.3d at 74.
This

year

the

Colorado

Supreme

Court

explained

that

“a

contracting party’s negligent misrepresentation of material facts
prior to the execution of an agreement may provide the basis for
an independent tort claim asserted by a party detrimentally relying
on

such

negligent

misrepresentations.”

Van

Rees

v.

Unleaded

Software, Inc., 373 P.3d 603, 607 (Colo. 2016). In Van Rees, the
court found that, “[l]ike the plaintiffs in Keller, Van Rees’s
tort claims are based on misrepresentations made prior to the
formation of the contracts, which he alleges induced him to enter
16

into the contracts and therefore violated an independent duty in
tort to refrain from such conduct. As such, the claims are not
barred by the economic loss rule.” Id. The court also explained
that

there

is

an

independent

misrepresentations

inducing

tort

the

duty

regarding

contractual

negligent

arrangement.

Id.

(emphasis added). Plaintiff raises this exact argument—Defendants’
misrepresentations
arrangement.

induced

(R.

representations

Doc.

were

Plaintiff

66

not

at

into

10.)

the

Further,

negotiated

terms

contractual

these

of

the

alleged
parties’

contract. (R. Doc. 38-1.) Thus, the economic loss rule does not
bar

Plaintiff’s

claim

misrepresentations

that

for
it

Defendants’
argues

allegedly

induced

the

negligent
contractual

arrangement. See Van Rees, 373 P.3d at 607; Cf. Port-A-Pour v.
Peak Innovations, Inc., No. 13-1511, 2014 WL 3512851, at *4 (D.
Colo. July 14, 2014) (finding that economic loss rule barred claim
for negligent misrepresentation when the “duty” at issue arose
from

the

promises

made

between

the

parties

regarding

the

contractual obligations, as the “promises” or “representations” at
issue were negotiated terms of the parties’ contract).
ii.

Summary Judgment

The Court must now determine whether there is a genuine issue
of material fact as to any of the elements of Plaintiff’s negligent
misrepresentation

claim.

Again,

a

negligent

misrepresentation

occurs where: (1) one in the course of his or her business,
17

profession or employment; (2) makes a misrepresentation of a
material fact, without reasonable care; (3) for the guidance of
others in their business transactions; (4) with knowledge that his
or her representations will be relied upon by the injured party;
and

(5)

the

injured

party

justifiably

relied

on

the

misrepresentation to his or her detriment. Allen, 252 P.3d at 482.
Plaintiff must prove that it justifiably relied on the false
information which resulted in monetary damages. See Black Educ.
Network, 154 F. App’x at 45; Barfield v. Hall Realty, Inc., 232
P.3d 286, 290 (Colo. App. 2010). The misrepresentation must be of
a material fact that presently exists or has existed in the past.
Mehaffy, Rider, Windholz & Wilson v. Cent. Bank Denver, N.A., 892
P.2d 230, 237 (Colo. 1995). Expressions of opinion cannot support
a misrepresentation claim. Id.
Plaintiff argues that the company was induced by Mr. McClendon
into buying the John Deere air compressors. (R. Doc. 66 at 10.)
Specifically, Plaintiff argues that “Paul McClendon told Axis that
the [John Deere] air compressors would perform the job required by
Axis’

customers

under

the

conditions

and

specification[s]

described by Axis to Defendants. This statement was not and is not
true.”

Id.

Further,

Plaintiff

argues

that

its

reliance

was

justifiable and reasonable because, as a young company, Axis
believed Defendants were the national leader in manufacturing air
compressors, that Mr. McClendon knew his products, and that Mr.
18

McClendon was capable of providing Axis with accurate information.
Id.

Plaintiff

argues

that

its

reliance

was

reasonable

and

justifiable because Mr. McClendon, as a regional sales manager,
received comprehensive education on the John Deere air compressors
and knew the needs of Axis’ customers. Id. Finally, Plaintiff
claims that it “unquestionably would not have purchased these air
compressors . . . without the assurances provided by Paul McClendon
with

the

subsequent

knowledge

that

those

assurance[s]

and

statements [were] false.” Id.
Defendants argue that the alleged statements made by Mr.
McClendon are not actionable as a misrepresentation. (R. Doc. 611 at 6.) Specifically, Defendants argue that Mr. McClendon’s
statements that the air compressors “should be better” or “should
be more efficient” are statements of probability and not statements
of fact. Defendants argue that even if the statements made by Mr.
McClendon are actionable, Axis did not justifiably rely on such
statements, because: (1) Axis knew Mr. McClendon was a salesman,
(2) Axis knew Mr. McClendon had not observed the operation for
which the compressors were going to be used, and (3) Mr. McClendon
was

never

given

any

“written”

technical

or

engineering

data

regarding the specific use Axis had for the equipment. Id. at 7.
The Court finds that genuine issues of material fact remain
which

preclude

summary

judgment.

Specifically,

the

deposition

testimony reveals that there is a genuine issue of material fact
19

as

to

what

exactly

Mr.

Mclendon

told

Plaintiff’s

employees.

Defendants argue that “Mr. McClendon was never given any written
technical or engineering data regarding the specific use Axis had
for the equipment.” (R. Doc. 61-1 at 7) (emphasis added). However,
Plaintiff argues, inter alia, that Axis described the conditions
and specifications of the compressors to Mr. McClendon, and that
Mr. McClendon made representations that the air compressors would
perform as Plaintiff’s satisfaction. (R. Doc. 66 at 10; R. Doc.
66-1, at 6-10.)
Eddie Davis testified that Chad Breckenridge and Dustin Labat
told him that Mr. McClendon told them that the John Deer air
compressors “should perform better and that they should be more
efficient.” (R. Doc. 66-1, at 10-11.) However, Dustin Labat was
also deposed and testified that Mr. McClendon said that the John
Deere air compressors “were superior to the Perkins [compressors].
[The John Deere compressors] would do the same job, if not the
same or better. It was the new tier 4, which is supposed to be the
best of the best and our customers should be happy because they
are not either meeting or exceeding the government standards for
their diesel [emissions].” 4 (R. Doc. 66-4, at 1-2.) A statement of
fact is one that is “subject to measure or calibration.” Lariviere,
Grubman & Payne, LLP v. Phillips, No. 07-1723, 2011 WL 650001, at

4

These statements are not hearsay as they are not being offered for the truth
of the matter asserted therein.
20

*18 (D. Colo. Feb. 11, 2011). Mr. Labat clearly testified that Mr.
McClendon told him that the John Deere compressors would do the
same

job

or

better

and

specifically

stated

that

Mr.

Labat’s

customers would be happy because “they are not meeting or exceeding
the government standards for their diesel [emissions]. (R. Doc.
66-4, at 1-2.) Thus, Mr. McClendon’s statements appear to be more
than mere puffery or opinion. Additionally, in general, “[w]hether
there has been a misrepresentation of fact is for the fact-finder
to determine.”

Mehaffy, Rider, Windholz & Wilson, 892 P.2d at 238

(citing Feit v. Donahue, 826 P.2d 407, 412 (Colo. App. 1992)).
Therefore, summary judgment is inappropriate as genuine issues of
material fact still exist.
2.

Declaratory Judgment
Defendants seek a declaration that if Plaintiff’s negligent

misrepresentation claim is not barred by the parties’ agreement,
then Plaintiff’s damages are limited by the agreement. (R. Doc.
61-1

at

10.)

“In

a

case

of

actual

controversy

within

its

jurisdiction . . . any court of the United States, upon the filing
of an appropriate pleading, may declare the rights and other legal
relations

of

any

interested

party

seeking

such

declaration,

whether or not further relief is or could be sought.” 28 U.S.C. §
2201. In analyzing whether to decide a declaratory judgment suit,
the district court must determine: (1) whether the declaratory
action is justiciable; (2) whether the court has the authority to
21

grant

declaratory

relief;

and

(3)

whether

to

exercise

its

discretion to decide or dismiss the action. Sherwin-Williams Co.,
343 F.3d at 387. A declaratory judgment is appropriate in this
case because there is an actual controversy between the parties,
diversity jurisdiction is present and the Anti-Injunction Act does
not apply. See id. Defendants argue that sections 15 and 16 the
parties’ agreement limits Plaintiff’s potential damages. Section
15 is a “Limitation of Liability” clause that provides:
15. Limitation of Liability. NOTWITHSTANDING ANYTHING
ELSE, THE TOTAL LIABILITY, IN THE AGGREGATE, OF SELLER
ARISING OUT OF, RELATED TO, OR RESULTING FROM THE ORDER
OR CONTRACT OR THE PERFORMANCE OR BREACH THEREOF, OR THE
DESIGN, MANUFACTURE, SALE, DELIVERY, RESALE, REPAIR,
REPLACEMENT,
INSTALLATION,
TECHNICAL
DIRECTION
OF
INSTALLATION, INSPECTION, SERVICE, OPERATION OR USE OF
ANY PRODUCT OR SERVICE SHALL BE 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, CONTRACT, OR
OTHERWISE).
(R.

Doc.

31-8.)

Section

16

is

a

“No

Consequential

Damages”

provision:
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).

22

Id.

Defendant

argues

that

these

clauses

limit

Plaintiff’s

potential damages to the actual purchase price Plaintiff paid for
the specific product or products which give rise to its claim. (R.
Doc. 61-1 at 13.) Further, Defendants argue that Plaintiff’s claims
for loss of profits or revenue, loss of total or partial use of
products or services, downtime costs, and delay costs are barred
by the “No Consequential Damages” clause. Id.
Plaintiff argues that its negligent misrepresentation claim
does not arise out of relate to the contract, the performance or
breach of the contract, or any of the other causes stated in the
Limitation of Liability clause. (R. Doc. 66 at 13.) Plaintiff
argues

that

its

damages

were

instead

caused

by

Defendants’

misrepresentations which induced Plaintiff to enter the agreement
before its confection. Id. Further, Plaintiff argues that at least
one court has suggested that “provisions purporting to release or
limit liability apply only to duties created by the contract
containing such provisions, and have no application to actions
involving negligent misrepresentations unless they are couched in
clear and specific language.” Id. (citing Williams Field Servs.
Grp., LLC v. Gen. Elec. Int’l Inc., No. 06-0530, 2008 WL 450374,
at *3 (N.D. Okla. Feb, 15, 2008) (applying Colorado law) (emphasis
added)). Alternatively, Plaintiff argues that even if sections 15
and

16

apply

to

Defendants’

allegedly

tortious

conduct

that

occurred prior to the agreement, Colorado law dictates “these
23

provisions still do not bar Axis’ negligent misrepresentation
claim.” (R. Doc. 66 at 14.) Finally, Plaintiff argues that under
Colorado law these provisions must be interpreted against the
drafter, who in this case were the Defendants. Id.
The

Colorado

Supreme

Court

has

outlined

the

general

principles of contract interpretation that the Court must apply to
resolve this issue:
The primary goal of contract interpretation is to
determine and give effect to the intent of the parties.
The intent of the parties to a contract is to be
determined primarily from the language of the instrument
itself. In ascertaining whether certain provisions of an
agreement are ambiguous, the instrument's language must
be examined and construed in harmony with the plain and
generally accepted meaning of the words employed.
Written contracts that are complete and free from
ambiguity will be found to express the intention of the
parties and will be enforced according to their plain
language. Extraneous evidence is only admissible to
prove intent where there is an ambiguity in the terms of
the contract.
Terms used in a contract are ambiguous when they are
susceptible to more than one reasonable interpretation.
Absent such ambiguity, we will not look beyond the four
corners of the agreement to determine the meaning
intended by the parties. The mere fact that the parties
may have different opinions regarding the interpretation
of the contract does not itself create an ambiguity in
the contract.
Ad Two, Inc. v. City & Cty. of Denver, 9 P.3d 373, 376-77 (Colo.
2002). Colorado law recognizes that parties to a sales contract
involving

movable

consequential

goods

damages,

can
so

limit

long

as

or

exclude

that

recovery

provision

is

of
not

unconscionable. Gen. Steel Domestic Sales, LLC v. Rising Sun

24

Missionary Baptist Church, Inc., No. 11-1332, 2012 WL 1801955, at
*4 (D. Colo. May 17, 2012) (citing Colo. Rev. Stat. § 4–2–
719(b)(3))

(upholding

arbitration

provision

which

limited

arbitrator’s authority to award consequential damages). Proof of
willful and wanton conduct is sufficient to defeat a limitation of
liability

clause

in

both

tort

and

contract

actions.

Engeman

Enters., LLC v. Tolin Mech. Sys. Co., 320 P.3d 364, 372 (Colo.
App. 2013).
Plaintiff

does

not

argue

that

Defendants’

alleged

misrepresentations were willful nor wanton. Plaintiff only argues
that the clauses do not limit Defendants’ liability and do not
limit Plaintiff’s claim for consequential or direct damages. Thus,
the Court must ascertain the express intent of the parties through
the plain language of the agreement. See Ad Two, 9 P.3 at 377. The
Court finds that the above-mentioned clauses do not bar Plaintiff’s
negligent misrepresentation claim, but merely limit the extent of
Plaintiff’s

potential

recovery.

Specifically,

Section

15

is

couched in clear and specific language and limits Defendants’ total
liability arising out of, related to, or resulting from the order,
performance, or sale between Plaintiff and Defendants to the actual
purchase price paid by Plaintiff to Defendants for the specific
product or service that gave rise to the claim. (R. Doc. 31-8.)
Accordingly,

Plaintiff’s

recovery

25

is

limited

to

“the

actual

purchase price amount paid by buyer to seller for the specific
product/service giving rise to the claim.”
3.

Motion to Exclude Testimony on Economic Losses
Defendants argue that Plaintiff’s expert, Mr. Davis, is not

permitted to testify under Rule 701 or 702 to the economic losses
identified in Exhibit A. (R. Doc. 64-1; R. Doc. 64-2.) Plaintiff
concedes that Mr. Davis is not a Rule 702 expert. Rather, Plaintiff
argues

that

it

will

offer

factual

testimonies

of

other

Axis

employees to establish the damages the company suffered. Further,
Plaintiff argues that these employees will only testify about
damages to which they have personal knowledge that are helpful to
determine a fact in issue, and such testimony will not be based on
scientific, technical, or other specialized knowledge. (R. Doc. 65
at 2.) However, because Plaintiff’s damages, if any, are limited
to “the actual purchase price amount paid by buyer to seller for
the specific product/service giving rise to the claim,” the Court
finds that Defendants’ request to exclude Mr. Davis’ testimony as
to economic losses identified in Exhibit A is denied as moot.

26

CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion for Summary
Judgment and Declaratory Judgment (R. Doc. 61) is DENIED IN PART
and GRANTED IN PART, as explained above.
IT IS FURTHER ORDERED that Plaintiff’s potential damages
are limited to “the actual purchase price amount paid by buyer
to seller for the specific product/service giving rise to the
claim.”
IT IS HEREBY ORDERED that Defendants’ Motion to Exclude
Testimony on Economic Losses (R. Doc. 64) is DENIED AS MOOT.
New Orleans, Louisiana this ____ day of November, 2016.
29th

____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

27