AXIALL CORPORATION v. DESCOTE S.A.S. et al
MEMORANDUM OPINION granting Axialls motion for partial summary judgment against descote (ECF No. 268 ); (2) granting in part and denying in part descotes motion for summary judgment against Axiall (ECF No. 272 ) granting as to Axialls misrepresent ation claims and denying in all other respects; (3) granting ARIs motion for summary judgment (ECF No. 276 ) as to descotes cross-claims against it; (4) and granting ARIs motion for partial summary judgment (ECF No. 278 ) as to Axialls implied warranty claims against it. The Court will also dismiss ARIs cross-claims against descote. Signed by Magistrate Judge Lisa Pupo Lenihan on 1/30/2018. (jmb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
DESCOTE S.A.S., and AMERICAN
RAILCAR INDUSTRIES, INC.,
ECF NOS. 268, 272, 276 & 278
Pending before the Court are four motions for summary judgment: (1) Axiall’s
motion for partial summary judgment against descote (ECF No. 268); (2) descote’s
motion for summary judgment against Axiall (ECF No. 272); (3) ARI’s motion for
summary judgment against descote (ECF No. 276) on descote’s cross-claim for
contribution and indemnity; and (4) ARI’s partial motion for summary judgment
against Axiall (ECF No. 278) on Axiall’s breach of implied warranty claims. For the
reasons set forth below, the Court will: (1) grant Axiall’s motion for partial summary
judgment against descote (ECF No. 268); (2) grant in part and deny in part descote’s
motion for summary judgment against Axiall (ECF No. 272)—granted as to Axiall’s
misrepresentation claims and denied in all other respects; (3) grant ARI’s motion for
summary judgment (ECF No. 276) as to descote’s cross-claims against it; (4) and grant
ARI’s motion for partial summary judgment (ECF No. 278) as to Axiall’s implied
warranty claims against it. The Court will also dismiss ARI’s cross-claims against
This litigation arises out of a commercial transaction for the purchase of
manually operated dual angle valves (“MOVs” or the “descote 922 valves”),
manufactured by descote S.A.S. (“descote”), a French company with a principal place of
business in Feyzin, France, by Axiall Corporation (“Axiall”),2 a manufacturer of
chemicals, including chlorine, at several plants in the United States and Canada.
(Stipulations, ¶¶ 1-2, ECF No. 304-18.) Most of the chlorine sold by PPG, and now
Axiall, is transported to customers in railroad tank cars. (Axiall Corp.’s Concise
Statement of Material Facts in Support of Motion for Partial Summary Judgment
(“Axiall’s CSMF”) at ¶ 5, ECF No. 270 at 2; descote’s Responsive Concise Statement of
Material Facts in Response to Axiall’s Motion for Partial Summary Judgment
(“descote’s Resp. CSMF”) at ¶ 5, ECF No. 308 at 2 (neither admitted or denying this
As the parties are familiar with the background of this case, the Court has set forth
only the facts relevant to the pending summary judgment motions. Facts that relate
only to a particular summary judgment motion will be discussed in the section on the
motion to which they relate.
PPG Industries, Inc. (“PPG”) spun off its commodity chemical business in January
2013, which subsequently merged with Georgia Gulf to form Axiall Corporation.
(Deutsch Dep. at 12:10-13, Axiall App. Ex. N, ECF No. 304-14 at 3.)
statement).)3 The chlorine is loaded into railroad tank cars through a valve system.
(Axiall’s CSMF at ¶ 6.)
FC Tech, LLC (“FC Tech”), which is headquartered in Baton Rouge, Louisiana,
has held the” exclusive rights to buy and resell all descote-branded products from their
factory in France for [intended sale in] the U.S. and Canada” since 2006. (Id. at ¶4;
Axiall’s CSMF at ¶ 8, ECF No. 270 at 2.) Mark Fucich is the president of FC Tech.
(Stipulations, ¶5.) FC Tech is one of the owners of descote. (Axiall’s CSMF at ¶ 10.)
Salco Products, Inc. (“Salco”) is in the business of, among other things,
distributing products used in railroad tank cars. (Stipulations, ¶ 6.) FC Tech and
descote have an agreement with Salco in which Salco is the exclusive distributor of
descote valves to the railcar industry in the United States and Canada. (Richer Dep. at
61, ECF No. 308-1 at 11; Degutis Dep. at 20, ECF No. 308-1 at 13.) In particular, Salco
was the exclusive distributor in the United States and Canada for the descote 922
valves. (Ex. A to descote’s Resp. CSMF, ECF No. 308-1 at 1.)
American Railcar Industries, Inc. (“ARI”) is engaged in the business of designing
and manufacturing railcars, custom designed railcar parts, and other railcar industry
products. (Id. at ¶¶ 7-8.)
On October 29, 2007, Mark Fucich communicated with Julie Bart at PPG, Axiall’s
predecessor-in-interest, via email regarding the price of descote bellows seal chlorine
angle valves that were available for purchase. (ECF No. 285 at 109.) In this email,
For brevity purposes, where the responsive concise statement of material fact admits
the opposing party’s statement of fact, or neither admits or denies the fact, the Court
will not cite to the responsive CSMF.
Fucich represented to Ms. Bart that “[t]his valve will carry a 100% descote warranty
back (sic) by the factory.” (Id.) Ultimately, PPG decided not to purchase these valves.
(11/11/15 Fucich Dep. at 56, descote App., ECF No. 308-1 at 5.)
Sometime thereafter, Frank Reiner of The Chlorine Institute4 and Julie Bart from
PPG approached Mark Fucich to ask if descote would manufacture a manually
operated dual angle valve similar to one produced by a competitor, Midland, and this
was the impetus for descote’s decision to produce this valve (the descote MOVs).
(11/11/15 Fucich Dep. at 51:2-7, 235:18-22, ECF No. 304-1 at 13, 27.) When asked if a
100% descote warranty went with the descote 922 valves sold to PPG, Fucich stated that
he “believe[d] that when a valve manufactured by descote is purchased by an end user
in the United States for transportation or process, that that warranty applies.” (Fucich
Dep. at 56-57, ECF No. 304-1 at 15-16.) Other than the sales to Axiall, descote has never
sold its MOVs for chlorine service to another customer. (11/11/15 Fucich Dep. at 23839, ECF No. 304-1 at 29-30; Richer Dep. at 15, ECF No. 304-8 at 3.)
On March 29, 2011, PPG purchased ten (10) retrofit kits, each of which contained,
among other things, three descote MOVs, by submitting a purchase order to Salco.
(Stipulations, ¶9.) In 2012, PPG either purchased, or directed ARI to purchase, railcar
kits from Salco which collectively included a total of nine hundred (900) descote MOVs,
for use in PPG’s chlorine railroad tank cars. (Axiall’s Add’l Mat. Facts in Opp’n to
The Chlorine Institute is a trade association consisting of chlorine manufacturers,
users, equipment suppliers, and railroads, which assist in regulating the safe
production, distribution, and use of chlorine and other chemicals. (Stipulations, ¶ 21.)
Axiall is a member of The Chlorine Institute; descote and ARI are “associate members.”
(Id., ¶ 22.) The record does indicate that FC Tech held membership in the Institute.
descote’s Mot. for Summ. J. (Axiall’s Add’l Mat. Facts in Opp’n”), ¶ 64, ECF No. 303 at
24; descote’s Resp. to Axiall’s Add’l Mat. Facts in Opp’n at ¶64, ECF No. 319 at 27.) Ms.
Bart requested that ARI install 600 of the descote MOVs for chlorine transportation on
the 150 railcars it was manufacturing for PPG. (Bart Aff. dated 10/26/17, ¶29, ECF No.
204-19 at 5; descote’s Resp. to Axiall’s Add’l Mat. Facts in Opp’n at ¶71, ECF No. 319 at
30.) Salco also shipped a number of retrofit kits containing the descote MOVs to
various locations for installation on Axiall’s existing tank cars and for future installation
at a later date. (Axiall’s Add’l Mat. Facts in Opp’n”), ¶ 78, ECF No. 303 at 27; descote’s
Resp. to Axiall’s Add’l Mat. Facts in Opp’n at ¶ 78, ECF No. 319 at 34.)
In August of 2013, a spring in the descote check valve located below the gas
valve on car AXLX broke after three loadings. (Stipulations, ¶15.) Axiall informed
descote of the problem and, in response, FC Tech was present on 10/29/13 on site and
participated in the removal of the 922 and 926 parts and replaced all of the damaged
parts. (Report dated 11/18/13 by Jean-Pierre Richer re: Descote Valves Failure on
Chlorine Axiall Tank Cars (“descote Report”), Axiall App. Ex. U, ECF No. 304-21 at 4.)
On 11/5/13, Fucich and Richer participated in a complete investigation of the four
damaged valves. (Id., ECF No. 304-21 at 4-5.)
In October of 2013, Axiall reported a second valve failure to descote. (Id., ECF
No. 304-21 at 5.) On 11/13/13, Fucich participated in a full examination of the four
valve sets (926/922) at Watco along with representatives from ARI, SALCO, and Axiall.
(Id.; Stress Eng’g Rept. Dated 12/4/13, Axiall App. Ex. R, ECF No. 270-1 at 157.) At the
instruction of descote’s president, Mr. Richer, FC Tech/Mark Fucich, on behalf of
descote, hired Stress Engineering to conduct a valve failure analysis, and the
information was sent directly to the factory. (2/24/16 Fucich Dep. at 283:24-25 to 284:215, Axiall App. F, ECF No. 270-1 at 53-54; 11/11/15 Fucich Dep. at 256:3-16, Axiall App.
Ex. D, ECF No. 270-1 at 43; Stress Eng’g Final Rpt., Axiall App. Ex. R, ECF No. 270-1 at
154-202.) On December 2, 2013, Stress Engineering issued a draft report to Mark Fucich.
(Stipulations, ¶16.) Subsequently, Mr. Richer instructed Fucich to direct Stress
Engineering to delete the last two sentences on page 10 of its draft report. (2/24/16
Fucich Dep. at 288, Axiall App. Ex. F, ECF No. 270-1 at 55; Fucich email to M. Bartel
dated 12/4/13, Axiall App. Ex. JJ, ECF No. 304-36 at 2.) Stress Engineering issued its
final report to FC Tech on December 4, 2013. (Axiall App. Ex. R, ECF No. 270-1 at 154202.) Following the issuance of that report, Axiall engaged Stress Engineering to
conduct further analysis. (Stipulations, ¶ 17.)
Unable to reach a resolution of the various issues, Axiall commenced this civil
action on February 24, 2015 against descote and ARI. Axiall has asserted four claims
against descote: (1) breach of express warranty (Count I); (2) breach of implied
warranty of merchantability (Count II); (3) breach of implied warranty of fitness for a
particular purpose (Count III); and (4) misrepresentation (Count IV). (Am. Compl.,
ECF No. 9.) In addition, Axiall has asserted four claims against ARI: (1) breach of
contract (Count V); (2) breach of express warranty (Count VI); (3) breach of implied
warranty of merchantability (Count VII); and (4) breach of implied warranty of fitness
for a particular purpose (Count VIII). (Id.) Descote has filed a cross-claim against ARI
for contribution or indemnity (ECF No. 15 at 10). ARI has filed a cross-claim for
contribution and/or indemnity against descote (ECF No. 20 at 18).
Discovery has been completed and Defendants have moved for summary
judgment on some or all of the claims and cross-claims asserted against them. In
addition, Axiall has moved for partial summary judgment on the issue of agency. The
motions have been fully briefed and are now ripe for disposition.
STANDARD OF REVIEW
Summary judgment is appropriate if, drawing all inferences in favor of the
nonmoving party, “the pleadings, depositions, answers to interrogatories and
admissions on file, together with the affidavits, if any, show that there is no genuine
issue of material fact and the movant is entitled to judgment as a matter of law.” FED. R.
CIV. P. 56(c). Summary judgment may be granted against a party who fails to adduce
facts sufficient to establish the existence of any element essential to that party’s case,
and for which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986).
More specifically, the moving party bears the initial burden of identifying
evidence which demonstrates the absence of a genuine issue of material fact. Once that
burden has been met, the nonmoving party must set forth “specific facts showing that
there is a genuine issue for trial” or the factual record will be taken as presented by the
moving party and judgment will be entered as a matter of law. Matsushita Elec. Indus.
Corp. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting FED. R. CIV. P. 56(e))
(emphasis added by Matsushita Court). An issue is genuine only “if the evidence is
such that a reasonable jury could return a verdict for the non-moving party.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
AXIALL’S MOTION FOR PARTIAL SUMMARY JUDGMENT
Axiall has moved for partial summary judgment on the issue of whether, as a
matter of law, Mark Fucich and/or FC Tech were descote’s agents at all times material
in soliciting, and consummating the agreement to purchase descote’s valves with, PPG,
Axiall’s predecessor. Specifically, Axiall seeks a determination from this Court that FC
Tech and Mark Fucich are descote’s agents based on the following theories: (1)
descote’s counsel has made binding judicial admissions that FC Tech and Mark Fucich
are its agents; (2) the evidence of record clearly demonstrates that FC Tech and Fucich
acted as descote’s apparent agents; and (3) descote is estopped from disavowing FC
Tech and Fucich as its agents as a matter of law. In response, descote disputes that it
made a judicial admission that FC Tech/Mark Fucich were agents of descote with
regard to the transaction at issue, as well as Axiall’s conclusion that FC Tech and its
president, March Fucich, are now or were ever its actual agents, or had apparent
authority to act as descote’s agents. descote also disagrees with Axiall’s interpretation
of the record evidence. The Court will address each of Axiall’s arguments seriatim.5
Both parties cite to a number of federal and state cases applying Pennsylvania law in
support of their positions. Thus, on the issue of agency, it appears that the parties agree
that Pennsylvania law applies. Accordingly, the Court will analyze this issue under
Judicial Admission of Agency
Initially, Axiall argues that descote has made a judicial admission that Mark
Fucich and FC Tech are its agent. To constitute a judicial admission under
Pennsylvania law, the statement must be “’an express waiver made in court or
preparatory to trial by a party or his attorney, conceding for the purposes of trial, the
truth of the admission,’ and may be contained in pleadings, stipulations and other like
documents.” Sherrill v. W.C.A.B., 624 A.2d 240, 243 (Pa. Commw. Ct. 1993) (quoting
Jewelcor Jewelers & Distributors, Inc. v. Corr, 542 A.2d 72, 75 (Pa. Super. Ct. 1988), petition
for allowance of appeal denied, 524 Pa. 608, 569 A.2d 1367 (1989). See also Parilla v. IAP
Worldwide Serv., VI, Inc., 368 F.3d 269, 275 (3d Cir. 2004) (“Judicial admissions are formal
concessions in the pleadings, or stipulations by the party or its counsel, that are binding
upon the party making them.”) (quoting Keller v. United States, 58 F.3d 1194, 1198 n. 8
(7th Cir. 1995)). A critical element of a judicial admission “is that it has been made for
the advantage of the admitting party and once the admission has been made, the party
making it is not allowed to introduce evidence attempting to disprove it.” Id. (citing
Jewelcor Jewelers, 542 A.2d 72) (other citation omitted). Moreover, “[t]o be binding,
judicial admissions ‘must be statements of fact that require evidentiary proof, not
statements of legal theories.’” Anderson v. Comm’r of Internal Revenue, 698 F.3d 160, 167
(3d Cir. 2012) (quoting In re Teleglobe Commc'ns Corp., 493 F.3d 345, 377 (3d Cir.2007)).
The judicial admission proffered by Axiall occurred during oral argument on
Axiall’s Motion to Compel Discovery (ECF No. 38). Axiall first argues that in response
to a subpoena to produce documents, information or objects, FC Tech, a non-party,
withheld or redacted numerous responsive documents on the grounds that they were
privileged, including many of its direct email communications with descote and
communications between counsel for FC Tech and descote. See FC Tech Ans. to Mot. to
Compel, ¶ 6 (ECF No. 41). In its Answer to the Motion to Compel Discovery, FC Tech
stated that it was a “part-owner of Descote S.A.S. with a real and important interest in
this lawsuit far beyond that of a mere witness or non-interested third party,” (FC Tech
Ans., ¶ 2), and that it “shares the identical interest as Descote,” (Id. at ¶ 16). FC Tech
further stated that it was not involved with the failure analysis of the valves “on its
own”, but “rather the failure analysis was done solely for the benefit of, as an agent of
and as part-owner of Descote.” Id. at ¶3. FC Tech further stated that as part owner of
descote, it was a “client” of descote’s counsel and entitled to discuss the litigation with
descote’s counsel, and those communications, as well as communications between its
counsel and descote’s counsel are protected by the attorney-client privilege. Id. at ¶¶ 9,
11.6 However, Axiall filed a Reply in support of its motion to compel discovery (ECF
No. 52) in which it provided evidence showing that FC Tech is not a part owner of
descote S.A.S., but rather, is a part owner of descote Holdings, the parent company of
descote S.A.S. (ECF No. 52-1). Subsequently, counsel for FC Tech reached an agreement
with Axiall’s counsel to provide the documents which were the subject of the motion to
compel discovery, and Axiall withdrew its motion. See ECF No. 58. In any event,
To the extent that Axiall is attempting to argue that the statements of FC Tech’s
counsel are judicial admissions of an agency relationship between FC Tech/Mark
Fucich and descote, that argument must fail as FC Tech/Mark Fucich are not parties to
this litigation. See Sherrill, 624 A.2d at 243 (“A judicial admission is an express waiver
made . . . by a party or his attorney” . . ..).
allegations regarding non-party FC Tech’s discovery conduct and statements, while
evidence of the parties’ business structure and relationship, cannot support a finding of
a judicial admission against descote.
Axiall next contends that during oral argument on its motion to compel
discovery, descote’s counsel, Ms. Fedullo, made several statements on the record that
constitute admissions that FC Tech and Mark Fucich were agents of descote. See
Axiall’s Mem. of Law in Supp. of Part. Mot. for Summ. J. at 12 (ECF No. 269). However,
when Ms. Fedullo’s statements are read in context with the entire transcript from oral
argument, it is clear that she made no concessions of fact as to relevant agency.
she was asserting an inconsistency between Axiall’s position in its amended complaint
that FC Tech was descote’s agent and Axiall’s argument in support of its motion to
compel discovery that FC Tech was not a client of descote’s counsel because it was a
part-owner of descote’s parent rather than descote. The Court notes that it was FC
Tech’s counsel who was opposing the subpoena and motion to compel, and arguing in
support that FC Tech and Mr. Fucich were agents of descote in order to avoid
production of communications on the basis of privilege; descote’s counsel refrained
from taking any further position on the issue. Again, FC Tech’s discovery conduct
cannot be a ground for finding that descote made a judicial admission that Mark Fucich
and FC Tech are its agents.
Having found no judicial admission of agency, the Court turns to Axiall’s second
argument—that Mark Fucich and FC Tech acted with descote’s apparent authority.
Although Axiall acknowledges that the issue of agency generally raises factual
questions, it submits that where the facts relating to the issue of agency have been
established of record, such that no genuine issue remains, the court can properly find
agency as a matter of law, citing K.A. Steel Trading v. Penn Terminals, No. 96-4687, 1998
U.S. Dist. LEXIS 16379, at *7 (E.D.Pa. Oct. 13, 1998) (citing Const. Bank v. DiMarco, 836 F.
Supp. 304, 307 (E.D.Pa. 1993)), and other state and federal court decisions applying
In opposition, descote argues that Axiall has failed to provide the necessary
evidence to support its theory that FC Tech had apparent authority to serve as descote’s
agent. descote also argues that the undisputed facts do not show an actual agency
relationship between FC Tech and descote.
Under Pennsylvania law, the liability of a principal to third parties for the acts of
its agent can be established based on either: "(1) express authority, or that which is
directly granted; (2) implied authority, to do all that is proper, usual and necessary to
the exercise of the authority actually granted; (3) apparent authority, as where the principal
holds one out as agent by words or conduct, and (4) agency by estoppel." Apex Fin. Corp. v.
Decker, 369 A.2d 483, 485 (Pa. Super. Ct. 1976) (citation omitted) (emphasis added); see
also Bolus v. United Penn Bank, 525 A.2d 1215, 1221 (Pa. Super. Ct.1987) (citation
omitted); Penn City Investments, Inc. v. Soltech, Inc., No. 01-5542, 2003 WL 22844210, * 14
(E.D.Pa. Nov. 25, 2003) (citation omitted). 7 The party asserting an agency relationship
Express and implied authority are included in the more general term, actual authority.
Jones v. Van Norman, 522 A.2d 503, 511 (Pa. 1987). Express authority, which is found
bears the burden of proof on that issue. Apex Fin. Corp., 369 A.2d at 485 (citing Girard
Trust Bank v. Sweeney, 231 A.2d 407 (Pa. 1967)).8
"Apparent authority exists where a principal, by words or conduct, leads people
with whom the alleged agent deals to believe that the principal has granted the agent
authority he or she purports to exercise." Turner Hydraulics, Inc. v. Susquehanna Constr.
Corp., 606 A.2d 532, 534 (Pa. Super. Ct. 1992) (citation omitted; emphasis in original). In
determining the apparent authority of an agent, the court must focus on the actions of
the principal, not the agent. Bolus, 525 A.2d at 1222 (citations omitted); Penn City
Investments, 2003 WL 228442210, at * 14 (citation omitted).
The Pennsylvania Supreme Court has provided the following explanation of
where the principal directly states that an agent has authority to perform a specific act
on its behalf, is to be strictly construed. Jones, 522 A.2d at 511 (citations omitted).
Based on the grant of express authority, an agent also acquires implied authority "to do
all that is proper, necessary and ordinary to exercise the authority that has expressly
been granted to him." Id. (citation omitted). Although implied, such authority is
considered actual authority based on the presumption that the principal reasonably
would want the act done in order to achieve the express purpose of the agency. Id.
Implied authority, therefore, does not exist if there is no express authority in the first
instance. Ortiz v. Duff-Norton Co., 975 F.Supp. 713, 718 n.2 (E.D.Pa. 1997).
Unlike implied authority, apparent authority can exist without express authority.
The party with the burden of establishing an agency relationship need not provide
direct proof of specific authority, as long as “’it can be inferred from the facts that at
least an implied intention to create the relationship of principal and agent existed.’”
Walton, 66 A.3d at 787 (quoting Commw. v. Maker, 716 A.2d 619, 623 (Pa. Super. Ct.
1998), aff’d per curiam 761 A.2d 1167 (Pa. 2000)). Agency cannot be assumed, however,
merely by showing that one person has done an act for another. Id. (citing Ferry v.
Fisher, 709 A.2d 399, 405 n. 5 (Pa. Super. Ct. 1998)).
Apparent authority is power to bind a principal which the
principal has not actually granted but which he leads
persons with whom his agent deals to believe that he has
granted. Persons with whom the agent deals can reasonably
believe that the agent has power to bind his principal if, for
instance, the principal knowingly permits the agent to
exercise such power or if the principal holds the agent out as
possessing such power.
Azur v. Chase Bank, USA N.A., 601 F.3d 212, 219 (3d Cir. 2010) (quoting Revere Press, Inc.
v. Blumberg, 246 A.2d 407, 410 (Pa. 1968) (citing RESTATEMENT (SECOND) OF AGENCY §§ 8,
27 (1958) (other citation omitted))). Usually, apparent authority is shown by:
some communication from the principal to the third party,
such that it would be reasonable for the third party to infer
that the principal consents to have the agent act for him.
This can be shown, though, by the grant of limited authority
to the agent, and conduct of the agent which demonstrates to
the third party the agent’s apparent authority to bind the
Ortiz, 975 F.Supp. at 718 n. 3 (citing Leidigh v. Reading Plaza Gen., Inc., 636 A.2d 666, 66768 (Pa. Super. Ct. 1994); Turner Hydraulics, 606 A.2d at 534)). If the third party has
actual knowledge of the limits of the agent’s authority, the third party cannot rely on
the agent’s apparent authority to bind the principal. Bolus, 525 A.2d at 1222; see also
Universal Computer Sys., Inc. v. Med. Serv. Ass’n of Pa., 628 F.2d 820, 823 (3d Cir. 1980)
(citing Schenker v. Indem. Ins. Co., 16 A.2d 304, 306 (Pa. 1940)). Without that actual
knowledge, however, the third party is required to exercise only reasonable diligence to
ascertain the agent’s authority. Bolus, 525 A.2d at 1222 (citation omitted). As explained
by the Pennsylvania Superior Court:
The third party is entitled to believe the agent has the
authority he purports to exercise only where a person of
ordinary prudence, diligence and discretion would so
believe. Thus, a third party can rely on the apparent
authority of an agent when this is a reasonable interpretation
of the manifestations of the principal.
Id. (internal citations omitted). See also Azur, 601 F.3d at 219 (“[t]he test for determining
whether an agent possesses apparent authority is whether a man of ordinary prudence,
diligence and discretion would have a right to believe and would actually believe that
the agent possessed the authority he purported to exercise.”) (quoting In re Mushroom
Transp. Co., Inc., 382 F.3d 325, 345 (3d Cir.2004) (quotations and citations omitted))
Most often, the nature and extent of an agent’s authority presents a question of
fact for the jury. Bolus, 525 A.2d at 1221 (citations omitted); Turner Hydraulics, 606 A.2d
at 534-35 (citing Bolus, supra; other citations omitted). Where, however, the facts relating
to the nature and existence of the agency relationship are sufficiently established, the
court may properly decide the issue. Penn City Inv., 2003 WL 22844210, at * 14 (citation
omitted). See, e.g., Am. Eagle Outfitters, Inc. v. Lyle & Scott Ltd., 644 F.Supp.2d 624, 644–
45 (W.D. Pa. 2008), aff'd in part, rev'd in part and remanded sub nom. Am. Eagle Outfitters v.
Lyle & Scott Ltd., 584 F.3d 575 (3d Cir. 2009). The existence of apparent authority is
evaluated in light of all the circumstances of the parties’ conduct. Turner Hydraulics,
606 A.2d at 535 (citations omitted). Moreover, apparent authority may be gleaned from
a course of dealing or a single transaction. Id. (citations omitted). Although “[a]pparent
authority is created by and flows from the acts of the principal, not from the personal
beliefs of the third-party[,] . . . [t]he manifestation of such authority to the third person
may be made directly to the third person, to the community, by advertising, by
authorizing the agent to state that he is authorized or by continuously employing the
agent.” Fields v. Horizon House, Inc., Civ. A. No. 86-4343, 1987 U.S. Dist. LEXIS 11315, at
*13-14 (E.D.Pa. Dec. 8, 1987) (citations omitted).
Of particular usefulness in assessing the facts sub judice is this Court’s previous
summation of the law of apparent authority:
“Apparent authority can exist only to the extent that it is
reasonable for the third party dealing with the agent to
believe the agent is authorized.” Jones v. ABN AMRO Mortg.
Group, Inc., 551 F.Supp.2d 400, 410 (E.D.Pa.2008) (quoting D
& G Equip. Co., Inc. v. First Nat'l Bank of Greencastle, 764 F.2d
950, 954 (3d Cir.1985)). ‘The test for determining whether an
agent possesses apparent authority is whether ‘a man of
ordinary prudence, diligence and discretion would have a
right to believe and would actually believe that the agent
possessed the authority he purported to exercise.’ ‘ Universal
Computer Sys., Inc. v. Med. Svcs. Ass'n of Pa., 628 F.2d 820, 823
(3d Cir.1980) (citation omitted). Comment b to Section 3.03
of the Restatement (Third) of Agency (2006) explains that a
principal may manifest an agent's authority to a third party:
by placing an agent in a defined position in an
organization or by placing an agent in charge of a
transaction or situation. Third parties who interact
with the principal through the agent will naturally
and reasonably assume that the agent has authority
to do acts consistent with the agent's position or role
unless they have notice of facts suggesting that this
may not be so. A principal may make an additional
manifestation by permitting the agent to serve as the
third party's exclusive channel of communication to
Am. Eagle Outfitters, 644 F.Supp.2d at 644–45 (finding apparent authority of “sole
representative” as a matter of law in suit by American retailer against European
Axiall proffers the following “undisputed facts”9 as evidence that Mark Fucich
and FC Tech acted with descote’s apparent authority:
Mark Fucich, in his Rule 30(b)(6) deposition as the designee of FC Tech,
testified that he “represented FC Tech, who is the agent for descote in the
U.S.” (2/24/16 Fucich Dep. at 324:15-19, Axiall App. Ex. F, ECF No. 270-1
descote’s website identifies Mr. Fucich as the “Area Manager” for descote
in the U.S. and Canada. (Axiall App. Ex. I, ECF No. 270-1 at 98.)
descote’s website also specifically lists FC Tech and Mark Fucich as the
contacts for descote in the U.S. and Canada, and provides their U.S. phone
number and website. (Axiall App. Ex. I, ECF No. 270-1 at 96-97.)
Over the course of the parties’ relationship, Mr. Fucich personally visited
Axiall’s Lake Charles Plant 20 to 30 times, sometimes accompanied by
descote’s president, Jean-Pierre Richer. (11/11/15 Fucich Dep. at 26:24-25
to 27:1-7, 32:19-23, 33:8-11, Axiall App. D, ECF No. 270-1 at 29-32.)
Mr. Richer testified that Mark Fucich observed the testing of the
pneumatically-operated descote valves at the Lake Charles Plant as
descote’s representative. (12/10/15 Richer Dep. at 28:22-25 to 29:2-6,
Axiall App. Ex. M, ECF No. 270-1 at 133-34.)
Mr. Fucich was also present in his capacity as descote’s representative for
some of the testing that took place by Stress Engineering in connection
with the failed valves at issue in this case. (11/11/15 Fucich Dep. at
257:15-25 to 258:2-5, Axiall App. Ex. D, ECF No. 270-1 at 44-45.)
Mr. Fucich represented descote in numerous chlorine industry functions:
Initially, descote appears to accept, for argument sake, that Axiall’s statement of facts
in support of its agency argument are not disputed. Yet it later disputes several factual
statements. As discussed herein, evaluation of apparent authority is made from the
entirety of the record.
At meetings of The Chlorine Institute from the 1990s through the
commencement of this action, Mr. Fucich regularly identified himself
as a representative of descote. (Minutes of Chlorine Inst., Axiall Ex. G,
ECF No. 270-1 at 60-61, 66-67, 69, 73, 75, 77, 81, 83, 85, 87-88, 90.)
The president of The Chlorine Institute testified that Mark Fucich is
descote S.A.S’s U.S. agent. (Reiner Dep. at 30:13-21, Axiall App. Ex. H,
ECF No. 270-1 at 94.)
Axiall’s employees attended Chlorine Institute meetings where Mr.
Fucich represented descote. (Axiall App., Ex. G, ECF No. 270-1 at 5991.)
Mr. Fucich and FC Tech are also descote’s representatives to the American
Association of Railroads (“AAR”).10 (2/24/16 Fucich Dep. at 302:10-13,
Axiall App. Ex. F, ECF No. 270-1 at 57.)
In 2007, Mr. Fucich solicited Axiall’s predecessor-in-interest, PPG, for the
purpose of marketing descote’s MOVs. (Emails between Fucich & Julie
Bart of PPG, Axiall App. Ex. N, ECF No. 270-1 at 136-37; 11/11/15 Fucich
Dep. at 57:12-24, Axiall App. Ex. D, ECF No. 270-1 at 34.)
On October 29, 2007, Mr. Fucich represented to Julie Bart of PPG that
“[t]his valve will carry a 100% descote warranty back (sic) by the factory.”
(Axiall App. Ex. N, ECF No. 270-1 at 136) (email referring to descote
bellows seal chlorine angle valve for tank car service).11
Based on representations made by Mark Fucich to PPG’s representatives
at PPG’s offices in Allegheny County, Pennsylvania, PPG ultimately
decided to purchase the MOVs manufactured by descote. (Am. Compl.,
¶27, ECF No. 9; Axiall App. Ex. Q, ECF No. 270-1 at 146-52.)
American Association of Railroads (“AAR”) is a trade association whose
members include the largest freight railroads in the United States. The AAR establishes
safety, security, and operating standards for the United States rail system. (Stipulations,
In addition, the record indicates that Fucich made the same representation orally to
Julie Bart in conjunction with PPG’s decision to purchase the descote MOVs. (Bart Aff.
dated 10/26/17 at ¶ 14, Axiall App. Ex. S, ECF No. 304-19 at 3; 11/11/15 Fucich Dep. at
56-57, Axiall App. Ex. A, ECF No. 304-1 at 15-16.)
After PPG purchased the descote MOVs, Mr. Fucich conducted training
sessions for Axiall’s employees on how to use them and for ARI personnel
on how to install them. (11/11/15 Fucich Dep. at 80:17-25 to 82:2-12,
91:16-25 to 92:2-12, Axiall App. Ex. D, ECF No. 270-1 at 36-38, 39-40; Bart
Dep. at 113:2-8, 183:11-22, Axiall App. Ex. B, ECF No. 270-1 at 17-18.)
Nicole Sims, a former PPG employee and current chlorine loading
operations supervisor for Axiall, testified that “it was just well known that
Mark Fucich was the point of contact for descote.” (2/11/17 Sims Dep. at
89:5-10, Axiall App. Ex. O, ECF No. 270-1 at 140.)
Thomas Hester, one of Axiall’s operations personnel, also testified that
Mark Fucich “was one of our contacts for descote valves.” (2/4/16 Hester
Dep. at 63:21-25 to 64:2-9, Axiall App. Ex. P, ECF No. 270-1 at 143-44.)
At the instruction of descote’s president, Mr. Richer, and as descote’s
agent, FC Tech/Mark Fucich hired Stress Engineering to conduct a valve
failure analysis. (2/24/16 Fucich Dep. at 283:24-25 to 284:2-15, Axiall
App. F, ECF No. 270-1 at 53-54; 11/11/15 Fucich Dep. at 256:3-16, Axiall
App. Ex. D, ECF No. 270-1 at 43; Stress Eng’g Final Rpt., Axiall App. Ex.
R, ECF No. 270-1 at 154-202.)
Mr. Richer directed Mark Fucich to instruct Stress Engineering to remove
two key sentences from its draft report, which had the effect of concealing
from Axiall the fact that the dual angle valve springs were not suitable for
Axiall’s flow rates at the Lake Charles Plant. (12/4/13 email from M.
Fucich, Axiall App. Ex. U, ECF No. 270-1 at 262; 2/24/16 Fucich Dep. at
288:14-19, Axiall App. Ex. F, ECF No. 270-1 at 55.)
Axiall Mem. of Law in Supp. of Mot. for Partial Summ. J. at 15-16 (ECF No. 269).
Axiall thus submits that descote held Mr. Fucich and FC Tech out as its agents to
Axiall, PPG, other members of the commodity chemicals industry, and the public.
Therefore, Axiall contends, it was reasonable for it and PPG to believe that Mr. Fucich
and FC Tech acted with descote’s apparent authority with regard to all matters
involving the valves at issue.
In response, descote initially argues that the undisputed facts fail to show an
actual agency relationship between FC Tech and descote, even though Axiall has not
asserted an agency relationship based on actual authority. descote goes on to argue that
without any evidence of an underlying agent/principal relationship, this Court should
be reluctant to find an agency relationship based on apparent authority or agency by
estoppel. The Court rejects this argument outright as contrary to Pennsylvania law on
agency. See supra.
Next, descote argues that the “undisputed facts” upon which Axiall relies to
establish apparent authority do not provide the necessary evidence to support its theory
that FC Tech had apparent authority to serve as descote’s agent. With regard to Axiall’s
evidence focusing on Mr. Fucich’s testimony that he identified himself as a
representative of descote at chlorine industry events and meetings, descote argues that
these statements do not support apparent authority because an agency relationship
cannot be assumed from the mere fact that one does an act for another, or from the
agent’s own words. descote misapplies the Pennsylvania law it states. An agency
relation cannot, without more, be assumed from the agent’s own act or words. But Mr.
Fucich’s acts and statements are far from the only evidence of apparent authority being
proffered. Axiall is not relying solely on Fucich’s statements to establish apparent
authority, to the contrary it has proffered extensive evidence from other sources,
including most significantly, descote, to meet its burden. As the Court noted above,
apparent authority may be gleaned from a course of dealing. Turner Hydraulics, 606
A.2d at 535. Mr. Fucich’s statements are evidence of PPG’s/Axiall’s course of dealing
with descote and FC Tech/Fucich over a 10 plus year period.
Next, descote attempts to discount evidence from descote’s current website and
Mr. Fucich’s testimony regarding his role as “descote’s representative” during the
Stress Engineering tests and valve installation training, on the basis that this evidence
manifested subsequent to (1) FC Tech’s/Fucich’s representation that the descote valves
came with a 100% factory backed warranty and (2) Axiall’s reliance on that
representation in 2012. In support, descote cites Jurimex Kommerz Transit G.M.B.H. v.
Case Corp., No. 06-3523, 2007 U.S. App. LEXIS 18113, at *8 (3d Cir. July 9, 2007), for the
proposition that “’[a]lleged subsequent agency authority, real or apparent’ is irrelevant
to alleged agency in earlier negotiations.” descote’s Mem. of Law in Opp’n at 16 (ECF
No. 309). Jurimex is not precedential, and even if it were, it applied Delaware law on
agency. Most importantly, descote cannot now remove the cloak of apparent authority
with which it draped FC Tech/Fucich by cherry-picking bits of what remains
overwhelming undisputed evidence before the Court.
With regard to Axiall’s evidence that (1) Fucich served “as descote’s
representative during the testing of the pneumatically-operated descote valves that was
conducted at the Lake Charles Plant” in the early to mid-1990s, and (2) Fucich visited
“Axiall’s Lake Charles Plant 20 to 30 times, sometimes accompanied by descote’s
president, Jean-Pierre Richer,” descote argues that this evidence is insufficient to show
that descote provided FC Tech with authority to act on its behalf.12 To the extent that
some of Fucich’s 20-30 visits to the Lake Charles Plant were on behalf of companies
other than descote, those visits should not be considered as evidence of an agency
relationship between FC Tech/Fucich and descote. Nonetheless, the evidence shows
that Fucich made several visits to the Lake Charles Plant for testing of the pneumatic
valves, and for training of Axiall’s employees on the use and installation of the descote
922 valves after they were purchased. Moreover, Mr. Richer testified that over the twoyear testing period on the valves at the Lake Charles Plant, descote’s representative to
observe the testing was Mark Fucich. (Richer Dep. at 28-29, Axiall’s App. Ex. H, ECF
No. 304-8 at 5-6.) The evidence of record is that Fucich negotiated the sale of the
descote 922 valves with PPG/Axiall, sold the valves on behalf of descote, and provided
training after that sale.
Finally, descote maintains that even if the “undisputed facts” could support a
finding of apparent authority, Axiall fails to show how its belief that FC Tech was
descote’s agent is traceable to anything descote did, said, or manifested. This argument
lacks merit. It is clear from the record evidence that by virtue of descote’s purposeful
business structures and relationships, the only way for a company in the United States
or Canada to purchase valves from descote, a company with its principal place of
descote contends that the 3 to 4 visits Fucich made to the Lake Charles Plant with Mr.
Richer are reflective of their respective roles distributor and manufacturer, and do not
suggest a principal/agent relationship. Again, the Court is assessing descote’s creation
of apparent authority created in its United States/Canadian exclusive representative
over the course of many years’ dealings (i.e., in light of all of the evidence proffered by
business in Feyzin, France, was to contact, and conduct its descote-related commercial
transactions through, FC Tech/Mark Fucich, descote’s exclusive distributor/sales
representative in the United States and Canada. (descote’s website, Axiall App. Ex. I,
ECF No. 270-1 at 96-100; Richer Aff. dated 9/28/17 at ¶7, descote’s App., ECF No. 285
at 144; Email from Fucich to Bart dated 10/29/07,13 descote’s App., ECF No. 285 at 109;
11/11/15 Fucich Dep. at 236, Axiall App. Ex. D, ECF No. 270-1 at 41; Fucich Aff. dated
9/28/17 at ¶ 5, descote App., ECF No. 285 at 147; Fucich Aff. dated 10/27/17 at ¶ 5,
ECF No. 308-1 at 14.) descote’s website clearly identifies FC Tech/Fucich as the contact
person for U.S. and Canadian sales. (Axiall App. Ex. I, ECF No. 270-1 at 96-100.) All
promotional literature and technical information on the descote valves was provided to
Axiall by Mark Fucich. (Bart Aff. dated 10/26/17 at ¶¶ 10-11, Axiall App. Ex. S, ECF
No. 304-19 at 3.) The negotiations for the purchase of the descote 922 valves were
conducted by Mark Fucich with Julie Bart. (Id. at ¶ 20, ECF No. 304-19 at 4; 11/11/15
Fucich Dep. at 57, Axiall App. Ex. D, ECF No. 270-1 at 34.) Training as to the use and
operation of the descote 922 valves was provided by FC Tech. (11/11/15 Fucich Dep. at
80:17-25 to 82:2-12, 91:16-25 to 92:2-12, Axiall App. Ex. D, ECF No. 270-1 at 36-38, 39-40;
Bart Dep. at 113:2-8, 183:11-22, Axiall App. Ex. B, ECF No. 270-1 at 17-18.) Questions or
problems with descote valves were directed to and addressed by FC Tech and descote.
See, e.g., footnote 15, infra.
Fucich’s 10/29/07 email to Julie Bart references an attached letter from Tyco,
announcing FC Tech as the exclusive factory authorized distributor for descotes valves
in the USA and Canada. (descote’s App., ECF No. 285 at 109.)
The extensive undisputed evidence of apparent authority from descote to FC
Tech/Mark Fucich is not surprising given their common ownership interests,14 and
broad presentation of joint acts (as with the investigation into the valve failures,15 or
participation/joint membership in the Chlorine Institute and AAR). (11/11/15 Fucich
Dep. at 67, Axiall App. Ex. D, ECF No. 270-1 at 35; 2/24/16 Fucich Dep. at 302, Axiall
App. Ex. F., ECF No. 270-1 at 57; Fucich Aff. dated 10/27/17 at ¶ 8, ECF No. 308-1 at
15.) Members of these professional organizations shared Axiall’s belief that FC
FC Tech first developed an ownership interest in descote in 2006, which still existed in
November of 2015. (11/11/15 Fucich Dep. at 17& 19, Axiall App. Ex. A, ECF No. 304-1
at 5 & 7.)
For example, on 11/18/13, Mr. Richer issued a Report (Rev. 3) on the descote valves
failure on chlorine Axiall tank cars, which listed Mark Fucich and JPR (i.e., Jean-Pierre
Richer) as participants. (descote Report, Axiall App. Ex. U, ECF No. 304-21 at 4-6.)
Mark Fucich distributed this report to Tom Logston at Axiall on 11/21/13. (Fucich
Email dated 11/21/13, Axiall App. Ex. U, ECF No. 304-21 at 2-3.) The descote Report
indicates that Axiall informed descote in August 2013 of the first valve failure, and in
response, FC Tech was present on 10/29/13 on site and participated in the removal of
the 922 and 926 parts and replaced all of the damaged parts. (descote Report, ECF No.
304-21 at 4.) In addition, the descote Report states that on 11/5/13, Fucich and Richer
participated in a complete investigation of the four damaged valves. (Id., ECF No. 30421 at 4-5.) In October of 2013, Axiall reported a second valve failure to descote. (Id.,
ECF No. 304-21 at 5.) On 11/13/13, Fucich participated in a full examination of the four
valve sets (926/922) at Watco along with representatives from ARI, SALCO, and Axiall.
(descote Report, ECF No. 304-21 at 5; Stress Eng’g Rept. Dated 12/4/13, Axiall App. Ex.
R, ECF No. 270-1 at 157.) Finally, at the instruction of descote’s president, Mr. Richer,
FC Tech/Mark Fucich, as descote’s agent, hired Stress Engineering to conduct a valve
failure analysis, and the information was sent directly to the factory, (2/24/16 Fucich
Dep. at 283:24-25 to 284:2-15, Axiall App. F, ECF No. 270-1 at 53-54; 11/11/15 Fucich
Dep. at 256:3-16, Axiall App. Ex. D, ECF No. 270-1 at 43; Stress Eng’g Final Rpt., Axiall
App. Ex. R, ECF No. 270-1 at 154-202), and directed Stress Engineering to delete the last
two sentences on page 10 of its draft report (2/24/16 Fucich Dep. at 288, Axiall App. Ex.
F, ECF No. 270-1 at 55; Fucich email to M. Bartel dated 12/4/13, Axiall App. Ex. JJ, ECF
No. 304-36 at 2).
Tech/Fucich were descote’s designated agent in the United States. (Reiner Dep. at
30:13-21, Axiall App. Ex. H, ECF No. 270-1 at 94; Minutes of Chlorine Inst., Axiall Ex. G,
ECF No. 270-1 at 60-61, 66-67, 69, 73, 75, 77, 81, 83, 85, 87-88, 90; 2/24/16 Fucich Dep. at
302:10-13, Axiall App. Ex. F, ECF No. 270-1 at 57.)
Thus, the totality of this evidence leaves no reasonable conclusion other than that
descote – by its business relationships and designations, and long and broad course of
conduct - held FC Tech/Fucich out as its agent, created apparent authority by its words
and deeds, and led Axiall and others to believe that FC Tech/Fucich was acting with
descote’s consent. More particularly, descote created the appearance that FC
Tech/Fucich possessed apparent authority to act as descote’s agent in all matters
involving the sales of the descote 922 valves to PPG/Axiall, and the subsequent
investigation into the valve failures. Accordingly, the Court will grant Axiall’s motion
for partial summary judgment on the issue of FC Tech’s apparent authority; it
concludes that “no reasonable jury could find otherwise”. Am. Eagle Outfitters, 644
F.Supp.2d at 646 (concluding as a matter of law, and on entirety of the relevant
evidence, that individual appointed by manufacturer as “the conduit” for interactions
between the litigants “possessed at least apparent authority”); id. (noting that principal
placed individual in a position which clearly justified an assumption of agency and
principal pointed to nothing in record that would have put plaintiff on notice that
authority was lacking).16
Because the Court finds that FC Tech/Fucich possessed apparent authority to act as
descote’s agent, it need not reach Axiall’s alternative argument of agency by estoppel.
DESCOTE’S MOTION FOR SUMMARY JUDGMENT
In its motion for summary judgment, descote asks this Court to enter judgment
in its favor on all of Axiall’s claims against it—breach of express warranty (count I),
breach of implied warranty of merchantability (count II), breach of implied warranty of
fitness for a particular purpose (count III), and misrepresentation (count IV). The Court
turns first to descote’s argument supporting dismissal of Axiall’s breach of warranty
Axiall’s Breach of Warranty Claims Against descote
Resolution of descote’s request for summary judgment in its favor on Axiall’s
warranty claims requires the Court to engage in a choice-of-law analysis. The parties
dispute which state’s laws should be applied—Axiall argues that Pennsylvania law,
which does not require privity of contract for breach of warranty claims involving only
economic loss,17 should be applied, while descote submits that Illinois law which, under
the circumstances here, requires privity of contract when only economic loss exists,
should be applied.
The parties agree, however, that in a diversity case such as this, the choice-of-law
rules of the forum state—Pennsylvania—must be applied by this Court. Pacific
Employers Ins. Co. v. Global Reinsurance Corp. of Am., 693 F.3d 417, 432 (3d Cir. 2012)
It notes, however, that the explication provided above indicates that descote caused
Axiall to believe an agency relationship existed and descote neglected to disavow that
17 See Kassab v. Central Soya, 246 A.2d 848, 856 (Pa. 1968), overruled on other grounds by
AM/PM Franchise Ass’n v. Atlantic Richfield Co., 584 A. 2d 915, 925-26 (Pa. 1990).
(citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)); Hammersmith v. TIG
Ins. Co., 480 F.3d 220, 226 (3d Cir. 2007). “Pennsylvania applies the more flexible,
‘interests/contacts’ methodology to contract choice-of-law questions.” Hammersmith,
480 F.3d at 226-27 (footnote omitted). Under this approach, courts must analyze the
policies and interests underlying the particular issue before it, and “apply the law of the
forum with the ‘most interest in the problem,’ rather than the law of the place of
injury.” Id. at 227 (quoting Griffith v. United Air Lines, Inc., 203 A.2d 796, 805-06 (Pa.
The first step in a choice-of-law analysis involves the identification of the
jurisdictions whose laws might apply. Hammersmith, 480 F.3d at 230. In this case, the
parties have identified Illinois and Pennsylvania. Next, the court must examine the
substance of the identified states’ laws, and look for actual, relevant differences between
them. Pacific Employers, 693 F.3d at 432 (citing Hammersmith, 480 F.3d at 230). In
conducting this examination:
If [the] two jurisdictions' laws are the same, then there is no
conflict at all, and a choice of law analysis is
unnecessary.”[Hammersmith, 480 F.3d at 230]. (emphasis in
original). If there are actual, relevant differences between the
laws, then we “examine the governmental policies
underlying each law, and classify the conflict as a ‘true,’
‘false,’ or an ‘unprovided-for’ situation.” Id. “A deeper
[choice of law] analysis is necessary only if both jurisdictions'
interests would be impaired by the application of the other's
laws (i.e., there is a true conflict).” Id.
Id. at 432 (internal quotation marks, footnote, and citations omitted) (emphasis in
original).18 The court of appeals further explained:
If a true conflict exists, the Court must then determine which
state has the “greater interest in the application of its law.”
Cipolla, 267 A.2d at 856. In Melville, we described the Griffith
methodology as a combination of the “approaches of both
[the] Restatement II (contacts establishing significant
relationships) and ‘interests analysis' (qualitative appraisal
of the relevant States' policies with respect to the
controversy).” 584 F.2d at 1311. This analysis requires more
than a “mere counting of contacts.” Cipolla, 267 A.2d at 856.
“Rather, we must weigh the contacts on a qualitative scale
according to their relation to the policies and interests
underlying the [particular] issue.” Shields v. Consol. Rail
Corp., 810 F.2d 397, 400 (3d Cir.1987).
Hammersmith, 480 F.3d at 231 (footnote omitted) (emphasis in original).
As the moving party, descote argues that because Illinois has a strict privity
requirement for warranty claims based purely on economic loss while Pennsylvania
does not, and there is no applicable exception under Illinois law to its strict privity
requirement in purely economic loss cases, a true conflict exists between Illinois and
Pennsylvania warranty law with respect to whether buyers not in privity can bring
claims against remote manufacturers for purely economic loss. descote then proceeds
directly to a discussion of which jurisdiction has the most significant relationship to the
dispute.19 In so doing, descote analyzes the five factors cited in the Restatement
An “unprovided for” situation arises when “neither state’s interests would be
impaired if its laws were not applied. Hammersmith, 480 F.3d at 230 n. 9 (citing Garcia,
421 F.3d at 220). If the court determines that the situation is “unprovided for,” then the
traditional, lex locus contractus rule (i.e., the law of the place of contract) is applied. Id.
19 This is actually the third step in the choice-of-law analysis. descote skipped the
second step, which requires an examination of the governmental policy interests
(Second) of Conflicts of Law, § 188(2) (1971), and concludes that Illinois was the focal
point of the relevant sales of the descote valves, and therefore has the most significant
relationship to Axiall’s warranty claims.
In opposition, Axiall submits a two-fold argument. First, Axiall argues that an
actual conflict does not exist between Illinois and Pennsylvania law because Illinois
provides several applicable exceptions to the privity rule, and therefore, even under
Illinois law, it would not be required to prove privity of contract to maintain its breach
of warranty claims. Second, Axiall maintains that even if the Court were to find an
actual conflict exists between Illinois and Pennsylvania law, it would be a false conflict
because Illinois’ interest in enforcing its privity requirement is not implicated here
where descote is neither a remote manufacturer nor lacked the ability to foresee a claim
in Pennsylvania regarding the sale of its valves. Moreover, Axiall submits that no party
to this lawsuit is a resident of Illinois. Therefore, any conflict that exists is a false
At first blush, the laws of Illinois and Pennsylvania regarding warranty claims
appear to be in conflict—one requires privity of contract while the other does not.
underlying each law to determine if both jurisdictions’ interests would be impaired by
the application of the other’s laws, see Pacific Employers, 693 F.3d at 432 (citing
Hammersmith, 480 F.3d at 230), thus indicating the existence of a true conflict. The third
step is only reached if the court determines that the interests of both jurisdictions would
be impaired by the other’s laws. Id.
Axiall also maintains that if there were an actual, true conflict, application of the five
restatement factors would result in the Court finding that Pennsylvania has the more
significant relationship with the descote valves, thus triggering application of its law to
the warranty claims. The Court need not reach this argument, however, because of its
determination that an actual, true conflict does not exist here.
However, when the Court looks below the surface, it finds that—in light of applicable
Illinois privity rule exceptions—the laws do not actually conflict.
Express Warranty Claim
With regard to its express warranty claim, Axiall argues that Illinois does not
require privity “if a manufacturer expressly warranted its goods to the ultimate
consumers and this was the basis for the bargain and relied upon by the plaintiffs,”
quoting Rosenstern v. Allergan, Inc., 987 F. Supp. 2d 795, 805 (N.D. Ill. 2013). Axiall
submits that this exception tracks Section 2-313 of the Illinois Uniform Commercial
Code, which states: “Any affirmation of fact or promise made by the seller to the buyer
which relates to the goods and becomes part of the basis of the bargain creates an
express warranty that the goods shall conform to the affirmation or promise.” 810 ILL.
COMP. STAT. 5/2-313(1)(a) (West 1994). See also 13 Pa. Cons. Stat. § 2313(a)(1) (West
In response, descote contends that Axiall’s reliance on Rosenstern is misplaced, as
that case involved personal injury, and thus, was not purely an economic loss case.
While descote is correct that the plaintiff in Rosenstein alleged personal injuries with
regard to a products liability claim in addition to economic losses from breach of
warranty claims, a close examination of the court’s analysis in Rosenstein reveals that its
ruling on the express warranty claim was not predicated upon the existence of personal
injuries.21 Rather, the court looked at the communications made directly with the buyer
The existence of personal injuries was a dispositive factor in the court’s ruling with
regard to the plaintiff’s claim for breach of an implied warranty. 987 F. Supp. 2d at 804.
prior to the purchase and whether this was the basis of the bargain and relied upon by
the buyer. 987 F. Supp. 2d at 805. The court went on to hold that “because the
assertions became part of the basis of the bargain unless clear affirmative proof shows
otherwise[,]”the ultimate consumer may proceed against the manufacturer on an
express warranty claim despite an absence of privity. Id. (citation and internal
quotation marks omitted).
Here the record shows that descote’s agent, Mark Fucich, in a 2007 email, told
Julie Bart at PPG that the descote bellows seal chlorine angle valve, which PPG was
considering to buy, came with a 100% factory warranty. (Fucich Email dated 10/29/17,
Axiall App. Ex. G, ECF No. 304-7 at 2.) Later in 2011, when Julie Bart was negotiating
the purchase of the descote MOVs with Fucich, Bart stated that Fucich represented to
her that any purchase of descote’s MOVs would have a descote factory warranty. (Bart
Aff. dated 10/26/17, ¶ 14, Axiall App. Ex. S, ECF No. 304-19 at 3.) Fucich testified that
he believed that when a valve manufactured by descote is purchased by any end user in
the United States for transportation or process, the 100% descote warranty applies.
(11/11/15 Fucich Dep. at 56-57, Axiall App. Ex. A, ECF No. 304-1 at 15-16.) Moreover,
Axiall contends that Fucich was acting as descote’s agent when he made the
representations that the descote valve came with a 100% factory backed warranty.
As the Court held above, the undisputed evidence shows that FC Tech/Fucich
was acting as the apparent agent of descote in marketing and selling the descote valves
to PPG/Axiall. Thus, at trial, a reasonable jury could conclude that the requirements of
Illinois UCC--§ 2-313((1)(a) have been met, in which case privity of contract would not
be required between descote and Axiall, thereby affording Axiall a basis under Illinois
law to proceed on its express warranty claim against descote.
descote attempts to avoid application of § 2-313 by arguing that in the absence of
privity, there must be an assignment of the express warranty from a party in privity
with descote. This argument misses the mark because if the jury believes Axiall’s
evidence, the exception to the privity requirement in § 2-313(1)(a) applies, as the express
warranty was made directly to the buyer who relied on it. Under these circumstances,
no assignment of the warranty is required. Nor is the Court convinced otherwise by
descote’s reliance on Collins Co., Ltd. v. Carboline Co., 864 F.2d 560, 561 (7th Cir. 1989)
(“Collins II”), and Caterpillar, Inc. v. Usinor Industeel, 393 F. Supp. 2d 659, 677 (N.D. Ill.
2005), for the position that the strict privity requirement in purely economic loss cases is
also extended to express warranty claims in the absence of an assignment of express
warranty rights from a party in privity.22
In Collins, the question before the court of appeals was whether plaintiff, who
was not in privity with the defendant manufacturer, could maintain a claim against the
manufacturer for both economic losses and consequential damages on a breach of
express warranty claim, where the original owners of the warehouse assigned their
express warranty from the manufacturer against roof leakage to plaintiff, the
descote also cites to Spiegel v. Sharp Electronics Corp., 466 N.E. 2d 1040, 1043 (Ill. App.
1984), for the general proposition that Illinois law has a different body of warranty law
for purely economic losses. However, Spiegel is factually distinguishable from the case
at bar, as there were no facts alleged in that case to suggest that manufacturer expressly
warranted its goods to the ultimate consumer and this was the basis for the bargain and
relied upon by the plaintiff. Therefore, the appellate court did not consider the
argument that Axiall has raised here.
subsequent purchaser of the warehouse. Collins Co., Ltd. v. Carboline Co., 837 F.2d 299,
301 (7th Cir. 1988) (“Collins I”). The court of appeals declined to answer this question
and instead certified it to the Illinois Supreme Court. Id. at 302. Upon consideration of
this issue, the Illinois Supreme Court held that “the assignee of a warrantee’s rights
under an express warranty, if the assignment is otherwise valid, succeeds to all those
rights and thus stands in privity with the warrantor.” 532 N.E. 2d 834, 837 (Ill. 1988).
Interestingly, the Illinois Supreme Court declined to address the district court’s
conclusion that privity is required of a plaintiff who seeks recovery under an express
warranty. Id. Subsequently, having received the Illinois Supreme Court’s decision on
the certified question, the court of appeals concluded that the manufacturer’s warranty
extended to plaintiff and reversed the district court’s judgment granting the
manufacturer’s motion for judgment on the pleadings. Collins II, 864 F.2d at 561.
It is clear that Collins is factually distinguishable from the case at bar. In that
case, the plaintiff sought to establish privity through a valid assignment of an express
warranty. Here, Axiall is seeking to enforce an express warranty allegedly made
directly from descote’s agent, Mark Fucich, to PPG’s employee, Julie Bart, upon which
she relied and which formed the basis of the bargain. No such allegations were present
in Collins. Moreover, Axiall is not arguing that Fucich made a valid assignment of the
descote warranty to Axiall.
And, contrary to descote’s contention, the Illinois Supreme
Court, on certification, did not explicitly clarify that in the absence of a valid
assignment, strict privity is required to recover for economic losses on an express
warranty claim. That question was not addressed by the Illinois Supreme Court in
either Collins, see 532 N.E. 2d at 842, or Szajna v. General Motors Corp., 503 N.E. 2d 760,
767 (Ill. 1986)23 (declining to abolish the privity requirement in actions to recover only
economic losses for breach of implied warranty claims).24
In addition, under Illinois law, “oral statements made in the course of a business
relationship may rise to the level of express guarantees.” Abco Metals Corp. v. J.W.
Imports Co, Inc., 560 F. Supp. 125, 129 (1982)(citing Capital Equip. Enters., Inc. v. North Pier
Terminal Co., 254 N.E. 2d 542 (Ill. App. 1st Dist. 1969)). The Court finds that undisputed
evidence exists from which a reasonable jury could find that the oral and written
statements made by Fucich regarding the descote values during the course of his
business relationship with PPG/Axiall, and under apparent authority as descote’s
agent, rise to the level of express guarantees, sufficient to meet the privity requirement.
Thus, under this theory or Illinois UCC § 2-313, Axiall’s express warranty claim would
not be precluded by Illinois law.
See Ampat/Midwest, Inc. v. Illinois Tool Works, Inc., No. 85 C 10029, 1988 WL 53222, at *3
n. 2 (N.D. Ill. May 12, 1988). Indeed, the plaintiff in Szajna, like Axiall here, relied on
UCC § 2-313(a)(1) to establish an express warranty claim. 503 N.E. 2d at 770-71. The
supreme court upheld the trial court’s dismissal of the express warranty claim, holding
that an automobile’s trade name alone did not create an express warranty of the kind or
nature of the car’s components. Id. at 771. In so holding, the Szajna court implicitly, if
not explicitly, acknowledged that an express warranty claim could be maintained under
UCC 2-313(a)(1) without privity. Ampat/Midwest, 1988 WL 53222, at *3 n. 2 (citing Szajna
v. Gen. Motors Corp., 474 N.E. 2d 397 (Ill. App. 1985), rev’d on other grounds 503 N.E. 2d
760 (Ill. 1986)).
Similarly, descote’s reliance on Caterpillar is misplaced. In holding that only a valid
assignment of the express warranty created privity of contract, the Caterpillar court cited
to the court of appeals’ decisions in Collins I and Collins II, but, as explained above,
neither of those decisions supports the Caterpillar court’s overly broad statement of
Illinois law regarding privity and express warranties.
Therefore, Axiall appears to have a viable express warranty claim against descote
under both Illinois and Pennsylvania law.
And therefore, no actual conflict exists
between the two states’ laws as to Axiall’s express warranty claim. As such, no further
choice-of-law analysis is mandated with regard to Axiall’s express warranty claim
Implied Warranty Claims
With regard to Axiall’s implied warranty claims against it, descote initially
argues that Illinois law has a strict privity requirement for implied warranty claims
against remote manufacturers in purely economic loss cases, while Pennsylvania does
not. descote maintains that while Illinois has relaxed the privity requirement for cases
involving personal injuries, it has not done so for cases involving purely economic
losses, citing Collins, 837 F.2d at 301. descote further argues that the preponderance of
the evidence shows that there is no applicable exception under Illinois law to the privity
requirement in purely economic loss cases. descote contends that the cases cited by
Axiall for the proposition that under some circumstances privity of contract is not
required to enforce a manufacturer’s warranty, are distinguishable, and thus,
inapposite. As the undisputed facts demonstrate that PPG was not in privity with
descote, and based on Szajna, Collins II, and Caterpillar, descote maintains that Axiall’s
implied warranty claims are barred by Illinois law. As such, descote argues that Illinois
law actually conflicts with Pennsylvania law with regard to Axiall’s implied warranty
claims against descote.
In response, Axiall disagrees with descote’s statement of Illinois law, and
submits that the Illinois courts have recognized several exceptions to the privity
requirement for implied warranty claims involving only economic loss which apply
here. The Court turns first to the direct relationship exception.
The direct relationship exception “applies when there are direct dealings
between the manufacturer and the remote customer.” Elward v. Electrolux Home Prods.,
Inc., 214 F. Supp. 3d 701, 705 (N.D. Ill. 2016)(citing Frank’s Maint. & Eng’g, Inc. v. C.A.
Roberts Co., 408 N.E. 2d 403, 412 (Ill. App. 1980)); see also Abco Metals, 560 F. Supp. at 128
(applying direct relationship exception to relationship between remote manufacturer
and buyer). This direct relationship can be established through direct dealings between
the customer and the manufacturer’s agent. Elward, 214 F. Supp. 3d at 705 (citing Abco
Metals Corp., 560 F. Supp. at 128; In re Rust-Oleum Restore Marketing, Sales Practices &
Prods. Liab. Litig., 155 F. Supp. 3d 772, 806-07 (N.D. Ill. 2016)).
Axiall argues that the overwhelming evidence of record demonstrates that
descote had direct relationships with both PPG and Salco, either of which is sufficient to
meet the direct relationship exception and overcome the privity requirement for
implied warranty claims in Illinois.25 In its reply brief, descote focuses only on the
relationship between it and Salco, in rejecting Axiall’s argument that Frank’s
Maintenance supports the application of the direct relationship exception. descote
maintains that no Illinois court has actually held that there is an exception to the privity
requirement based on the relationship between a manufacturer and the seller. Actually,
Axiall does not provide any edification on this point in its responsive brief.
in Frank’s Maintenance, the Illinois appellate court recognized just such an exception, but
did not apply it, choosing instead to apply the third-party beneficiary exception
discussed below. Instead of focusing on the relationship between Salco and descote, the
Court turns its attention to the relationship between descote and Axiall /PPG.
In determining whether a direct relationship exists between Axiall and descote,
the Court finds several cases instructive on this issue. In Elward, the plaintiff and other
remote customers purchased dishwashers through retailers who were the
manufacturer’s agents. 214 F. Supp. 2d at 703. Plaintiff alleged that she and the other
remote customers had a direct relationship with the dishwasher manufacturer’s agents.
Id. at 705. She also alleged direct dealings with the manufacturer through its
advertisements, warranty forms, and registration cards. Based on these direct dealings,
plaintiff alleged that she and the other remote customers expected their dishwashers to
last considerably longer than they actually did. The court found that these allegations
stated a plausible claim for breach of implied warranty against the manufacturer under
the direct relationship exception to the privity requirement. Id.
Similarly, in Abco Metals, the district court found that plaintiff had alleged a
plausible breach of implied warranty claim based upon the direct dealings exception.
In that case, the plaintiff, which operated a scrap metal processing business, brought,
among other things, breach of warranty claims against a Denmark corporation which
manufactured an allegedly defective wire chopper that plaintiff purchased for use in its
business. Plaintiff purchased the wire chopper from the manufacturer’s exclusive
distributor for North America. Plaintiff had prior business dealings with the distributor
and had previously purchased a smaller capacity wire chopper manufactured by the
same Denmark corporation through the distributor. 560 F. Supp. at 126-27. Prior to the
sale at issue, plaintiff’s president, the distributor’s president, and an engineer employed
by the Denmark corporation met to discuss plaintiff’s particular requirements and the
details of the proposed sale. Id. at 127. The distributor’s president and the
manufacturer’s engineer agreed that the manufacturer would sell to plaintiff the wire
chopper and they guaranteed that the wire chopper would meet the requirements
outlined by plaintiff’s president. Id. Significantly, the Denmark corporation sold the
wire chopper to the distributor, who in turn sold the wire chopper to an equipment
leasing company, who leased it to plaintiff with an option to purchase the chopper at
the end of the lease. Id. Plaintiff alleged that it had informed the distributor and
manufacturer that the arrangement with the lessor was strictly for financing purposes,
and despite the “lease” characterization, the nature of the entire arrangement was that
plaintiff was purchasing the wire chopper from the distributor and the manufacturer.
When the wire chopper failed to work as expected, plaintiff brought breach of
express and implied warranty claims against the manufacturer. The manufacturer
challenged the warranty claims arguing that privity of contract did not exist between it
and plaintiff. Id. at 128. The district court observed that “Illinois law does not always
require privity of contract between the user and the manufacturer of the product, at
least insofar as the enforceability of implied warranties of merchantability and fitness
for a particular purpose are concerned.” Id. The district court then noted that the
Illinois court of appeals in Frank’s Maintenance had recognized two exceptions to the
privity requirement in implied warranty cases—the direct relationship exception and
the third-party beneficiary exception. Id. (citing Frank’s Maint., 408 N.E. 2d at 412;
Rhodes Pharmacal Co. v. Continental Can Co., 219 N.E. 2d 726, 732 (Ill. App. 1966)).
Based on the complaint, the Abco Metals court found that a direct relationship
between the manufacturer and plaintiff could be found from the allegations that (1) the
manufacturer’s engineer attended the meeting where the purchase of the wire chopper
was discussed, and he promised that the machine would meet plaintiff’s requirements;
(2) plaintiff notified the manufacturer that the wire chopper did not operate as
expected; (3) after such notification, the manufacturer assured plaintiff that the chopper
would be fixed and appeared to take some steps to do so, although the attempted
repairs failed. Id.
The district courts in Elwood and Abco Metals relied on Frank’s Maintenance in
determining that a direct relationship exception exists to the privity requirement. In
Frank’s Maintenance, the plaintiff, a manufacturer of motorcycle front fork tubes,
ordered steel tubing from an intermediary seller, who ordered the product from the
manufacturer and directed that it be sent directly to plaintiff. When the plaintiff
discovered that the steel tubing was defective, it sued the intermediary seller and
manufacturer for breach of implied warranty of merchantability. 408 N.E. 2d at 405-06.
The manufacturer moved for summary judgment arguing that it could not be liable to
plaintiff because it was not in privity with it. Id. at 412. The Illinois appellate court held
that although implied warranties are usually not applicable between the buyer and a
remote manufacturer, that is not the case where a direct relationship exists between the
manufacturer and the seller, or where, as in that case, “the manufacturer knew the
identity, purpose and requirements of the dealer’s customer and manufactured or
delivered the goods specifically to meet those requirements.” Id. (citing Rhodes
Pharmacal Co., Inc. v. Continental Can Co., Inc. 219 N.E. 2d 726 (Ill. App. 1966) (other
citations omitted). The court reached its conclusions based on its finding that the
manufacturer was clearly aware that the order from the intermediary seller was on
behalf of plaintiff and it shipped the order directly to the plaintiff. Id.
Based on its review of the Illinois case law, the Court predicts that Illinois would
recognize a direct relationship exception to the privity requirement under the
circumstances presented here. The evidence here clearly supports a finding that a direct
relationship existed between descote and PPG/Axiall.
First and foremost, this Court has found that FC Tech/Mark Fucich had apparent
authority to act as descote’s agent. Therefore, FC Tech/Fucich’s direct negotiations and
communications with PPG/Axiall regarding the sales of the descote MOVs26 are
attributable to its principal, descote. In addition, Richer made several trips with Fucich
to PPG/Axiall’s Lake Charles plant which produces chlorine and loads it into rail tank
cars for transportation to is customers. The evidence further shows that Fucich was
For example, evidence in the record supports a finding that FC Tech was the
facilitator of the sales of the descote MOVs, and was instrumental in facilitating PPG’s
desire to purchase these valves. (11/11/15 Fucich Dep. at 57, Axiall App. Ex. D, ECF
No. 270-1 at 34.) The evidence also shows that the negotiations for the purchase of the
descote MOVs by PPG were conducted by Julie Bart and Mark Fucich. (Bart Aff. dated
10/26/17 at ¶ 20, Axiall App. Ex. S, ECF No. 304-19 at 4.)
approached by Reiner of The Chlorine Institute and Julie Bart of PPG/Axiall to ask if
descote would manufacture a MOV similar to one produced by a competitor, and this
was the impetus for descote’s decision to manufacture the 922 valves.
Moreover, after it purchased the descote valves, PPG/Axiall continued to have
direct communications with FC Tech and descote. (Bart Aff. dated 10/26/17 at ¶¶ 2526, Axiall App. Ex. S, ECF No. 304-19 at 5; see also email correspondence among and
between PPG/Axiall, descote, and FC Tech, Jan. 2013 to Feb. 2014, Axiall App. Ex. Y,
ECF No. 304-25 at 2-8, 44-56, 82-108, 123-139, 189-218.) Fucich also trained Axiall’s
employees on the use and operation of the descote MOVs. When the valves failed to
operate properly, Axiall contacted descote. Both Fucich and Richer conducted an
investigation of the four damaged valves, and Fucich participated in the removal of the
922/926 parts and replaced all of the damaged parts in response to Axiall’s first
reported valve failure. Fucich also participated in a full examination of the four valve
sets involved in the second reported valve failure by Axiall. Mr. Richer authorized FC
Tech to engage the services of Stress Engineering Services to conduct an investigation as
to why the springs of the MOVs cracked in service.
In addition, descote established that FC Tech was its exclusive distributor of its
products in the United States and Canada, and descote and FC Tech selected Salco as
the exclusive distributor of its descote MOVs in the transportation industry in the
United States. Because of this structure established by descote, the only way for
PPG/Axiall to receive the descote MOVs was through descote’s agent, FC Tech, and
their U. S. distributor, Salco. Thus, direct shipment was impossible, and therefore,
should not negate the application of the direct relationship exception.
Accordingly, the Court finds that the evidence clearly establishes that a direct
relationship existed between descote and PPG/Axiall, thereby excusing the privity
requirement, and no reasonable jury could find otherwise. Therefore, no conflict exists
between Illinois and Pennsylvania law as to Axiall’s breach of implied warranty claims
against descote. As such, no further choice-of-law analysis is required.27 At trial, the
parties shall apply Pennsylvania law with regard to Axiall’s breach of express and
implied warranty claims.
Accordingly, the Court will deny descote’s motion for summary judgment as to
Axiall’s implied warranty claims against it.
Descote has moved for summary judgment on the issue of whether, as a matter
of law, Axiall’s claims for misrepresentation (Count IV) are barred by the economic loss
doctrine. 28 Descote correctly observes that, under Pennsylvania law, “the economic loss
doctrine has been construed to hold that negligence, strict products liability, fraud and
negligent misrepresentation theories do not apply to actions between commercial
In light of its conclusion with regard to the direct relationship exception, the Court
need not address the two other exceptions that Axiall contends would be recognized by
the Illinois courts.
28 descote has moved for summary judgment on Count IV solely on the basis of an
economic loss doctrine bar, and not on the basis of the particular elements of a common
law tort claim for negligent or fraudulent misrepresentation. See Memorandum in
Support of Motion for Summary Judgment (“Descote’s Memo on Summary Judgment”),
ECF No. 283, at 22.
enterprises where the only damages alleged are economic losses.” Partners Coffee Co.,
LLC v. Oceana Servs. & Prod. Co., 700 F.Supp.2d 720, 733 (W.D. Pa. 2010). Although
Section 552 of the Restatement (Second) of Torts provides an exception permitting some
negligent misrepresentation claims for purely economic loss, this Court concurs with
Defendant descote that the Pennsylvania Supreme Court’s limited adoption of Section
552, as set forth in Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270 (Pa.
2005), does not apply. The Court finds, in accordance with the language of other
relevant District Court decisions, that the State Supreme Court’s adoption of the
Restatement (Second) of Torts, Section 552 extends an exception to the economic loss
doctrine’s bar of negligent misrepresentation claims only to those who “suppl[y] false
information for the guidance of others” in the course of their “business, profession or
employment”, such as architects and accountants providing professional work product.
See Section 552. This exception does not encompass manufacturers or their
representatives/agents who allegedly supply misinformation in the form of
transactional misrepresentation(s) as to a commercial product/subject of sale. 29 As to
Axiall’s claim of fraudulent misrepresentation, this Court is bound by the determination
and prediction of Pennsylvania law made by the Court of Appeals for the Third Circuit
in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002). The Third Circuit assessed
the split of authority among lower State courts and concluded that the Pennsylvania
Supreme Court would apply the economic loss doctrine bar to claims for intentional
As descote notes, the parties agree to the applicability of Pennsylvania law on this
issue. See Descote’s Memo on Summary Judgment, ECF No. 283, at 2.
fraud, with the narrow exception of claims for fraud-in-the-inducement not intertwined
with any claims for breach of warranty - through which related claims should be
“properly remedied”. Werwinski, 286 F.3d at 680-81.30 This Court will therefore grant
Defendant’s motion as to Count IV, Axiall’s misrepresentation claims.
As noted supra, the March 12, 2015 Amended Complaint, ECF No. 9, includes
allegations that Mark Fucich made misrepresentations as to both the appropriateness of
the descote valves and their manufacturer’s warranty. Count IV alleges the elements of
misrepresentation, i.e., that Defendant knew or should have known said representations
were false, that they were intended to induce purchase of the valves, that Axiall
justifiably relied on said representations, and that “monetary damages resulted”. ECF
No. 9, at paragraph 89. Plaintiff makes further allegations, in subsequent pleadings and
based on information obtained in the course of litigation, that descote made
misrepresentations in its promotional literature including, e.g., misrepresentations
related to the purchased valves’ appropriateness to Axiall’s intended use. See Axiall’s
Memorandum of Law in Opposition to Descote’s Motion for Summary Judgment
(“Axiall’s Memo in Opposition to Summary Judgment”), ECF No. 305, at 11. The
Amended Complaint alleges “consequences” as costs of valve replacements, pressure
plate installations, and tank car lease. ECF No. 9, at paragraphs 57-65. Axiall does not
dispute that its losses were purely economic. See ECF No. 305.
The Werwinski plaintiffs brought claims for breach of express and implied warranty,
fraudulent concealment and violations of Pennsylvania’s Unfair Trade Practices and
Consumer Protection Law (the “UTPCPL”). 298 F.3d at 663.
(b) Negligent Misrepresentation
Section 552(1), “Information Negligently Supplied for the Guidance of Others”,
provides the following negligent misrepresentation exception to the economic loss
One who, in the course of his business, profession or employment, or in
any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information.
Restatement (Second) of Torts, Section 552(1) (emphasis added).
The Pennsylvania Supreme Court has adopted and applied this exception as to
the first category of information providers, i.e., one who makes information
misrepresentation “in the course of his business, profession or employment”. Section
552(1). See Bilt-Rite, 866 A.2d at 285-86 (holding that economic loss rule did not bar
contractor’s negligent misrepresentation claim against architect, which was not defeated
by absence of privity of contract as circumstances gave rise to foreseeable duty, and
finding claim maintainable as a matter of law under Section 552, which Court was
“persuaded” to formally adopt “as applied by [cited sister] jurisdictions in the
architect/contractor scenario”); id. at 286 (“[W]e see no reason why Section 552 should
not apply to architects and other design professionals.”); id. at 287 (“Accordingly, we
hereby adopt Section 552 as the law in Pennsylvania in cases where information is
negligently supplied by one in the business of supplying information, such as an architect or
design professional, and where it is foreseeable that the information will be used and
relied upon by third persons, even if the third parties have no direct contractual
relationship with the supplier of information.”) (emphasis added); id. (further
discussing rationale of “imposing such a duty upon design professionals”).
A few years later, in affirming an economic loss doctrine bar to a negligent
misrepresentation claim against a utility company, the Pennsylvania Supreme Court
found the Bilt-Rite exception inapplicable because the defendant was not a “professional
information provider” and not “in the business of providing information for pecuniary
gain”. Excavation Techs., Inc. v. Columbia Gas Co. of Pennsylvania, 985 A.2d 840, 843 (Pa.
2009). In so holding, the State Supreme Court further observed that the utility company
was not “akin” to one who is paid for the professional service of preparing detailed
information for a client’s project. See id. Although there have been no subsequent
relevant State Supreme Court decisions, the Pennsylvania Superior Court last
September considered the Bilt-Rite exception’s scope, and found that it should be read
to encompass not only architect-contractors, but also accountants who are similarly
“providing professional information”. Fulton Bank, N.A. v. Sandquist, 2017 WL 4284923,
at *8 (Pa. Super. Sept. 27, 2017); id. (citing with approval Kirschner v. K&L Gates, LLP, 46
A.3d 737, 741 (Pa. Super. 2012) (applying Bilt-Rite exception to law firm and
investigating fraud company which were “professional firms in the business of
Axiall overextends the analysis and holding of Fulton in asserting that it renders the
Bilt-Rite exception “appropriate when the facts presented” show reliance on
misinformation provided to potential customers in a commercial transaction, and the
Finally, as descote correctly notes, our sister Court for the Eastern District of
Pennsylvania has repeatedly addressed application of the economic loss doctrine to
negligent misrepresentation claims against manufacturers and other sellers of goods
under Pennsylvania law. It has concluded that manufacturers, and their
representatives/agents, are not subject to liability for negligent misrepresentation under
the Bilt-Rite exception to the economic loss doctrine. See, e.g., Whitaker v. Herr Foods,
Inc., 198 F.Supp.3d 476, 491-92 (E.D. Pa. 2016) (holding that manufacturer’s provision of
product information “ancillary to” sale “materially differ[ed] from the professional
representations made by an accountant, lawyer or architect for pecuniary gain
discussed in Bilt-Rite”); Elliott-Lewis Corp. v. Skanska USA Bldg., Inc., 2015 WL 4545362, at
*5 (E.D. Pa. July 28, 2015) (“A manufacturer and a manufacturer’s representative are
very different from [ ] accountants, lawyers and architects . . . . The sale of a product is
fundamentally different than the sale of information, even if the seller provides
information about the product to consummate the sale.”); Integrity Carpet Cleaning, Inc.
v. Bullen Cos., 2011 WL 31397, at *4 (E.D. Pa. Jan. 5, 2011). See also Partners Coffee, 700
F.Supp.2d at 732-36.
(c) Fraudulent Misrepresentation
As noted above, there are split opinions among the Pennsylvania lower courts on
application of the economic loss doctrine to claims of intentional fraud. However, the
Third Circuit reviewed and provided its expository analysis of these cases in Werwinsk.
cases Axiall cites in support are not analogous. See Axiall’s Memo in Opposition to
Summary Judgment, ECF No. 305, at 30-32.
See 286 F.3d at 675 (discussing cases and concluding: “We are satisfied from our review
of the case law . . . that the law in Pennsylvania with respect to the application of the
economic loss doctrine to intentional fraud actions remains unsettled, and the district
court opinions interpreting Pennsylvania law on the point provide little guidance.”).32
The Werwinski Court predicted that the Pennsylvania Supreme Court would
apply the economic loss doctrine bar to claims of fraudulent misrepresentation and
noted that “even if [the Court] were torn between two competing yet sensible
interpretations of Pennsylvania law . . . [it] should opt for the interpretation that
restricts liability . . . .” Id. at 680-81 (observing that “[t]he economic loss doctrine is
designed to place a check on limitless liability for manufacturers and establish clear
boundaries between tort and contract law”).
The Third Circuit recognized a narrow exception for fraud-in-the inducement
claims which are “extraneous to” those misrepresentations which “relate to the quality
or character of the goods sold” which are “properly remedied through claims for breach
of warranty”. Id. at 676, 678.33 This holding is binding on this Court.34
Axiall errs in its assertion that “Pennsylvania courts generally recognize that the
economic loss doctrine does not apply to fraudulent misrepresentation claims.” Axiall’s
Memo in Opposition to Summary Judgment, ECF No. 305, at 33 (citing David Pflumm
Paving & Excavating v. Found Servs. Co., 816 A.2d 1164, n. 2 (Pa. Super. 2003). Indeed,
the Court in Pflumm expressly did not reach the issue. See id.
33 See also Capricorn Power Co., Inc. v. Siemens Westinghouse Power Corp., 324 F.Supp.2d
731, 734–35 (W.D. Pa. 2004) (explaining that where “bargained for product” causes
purely economic loss, “the law governing breach of warranty would be the appropriate
cause of action”) (citing REM Coal Co. v. Clark Equipment Co., et al., 563 A.2d 128 (1989));
id. at 742 (“The Third Circuit's in depth analysis of the doctrine's application upheld the
district court's finding that an exception for intentional fraud should not be found
within the economic loss doctrine, where the Plaintiffs alleged fraudulent concealment
Axiall acknowledges that “[t]here is a limited exception” for only “extraneous”
fraud claims under Werwinski, but asserts that the Court “should decline to apply the
economic loss doctrine to Axiall’s fraudulent misrepresentation claims against descote”
because “there is no contract between” these particular parties and thus “no danger of
confounding [their] contractual duties.” ECF No. 305 at 34 (citing Capricorn Power,
supra). The Court observes that “fraud in the inducement” claims speak to the
negotiation and execution of a contract between the parties, while the
misrepresentations alleged in the Amended Complaint were assertedly intended to
induce product purchase and Axiall itself here asserts the absence of any contract
between Axiall and descote. More importantly, the alleged misrepresentations in Count
of defective automotive parts in vehicles manufactured by Ford. In coming to this
conclusion, the Third Circuit essentially agreed with the court in Huron Tool &
Engineering Co. v. Precision Consulting Services, Inc., 209 Mich. App. 365, 373, 532 N.W.2d
541, 545 (1995) which found an exception for fraud-in-the-inducement claims to the
economic loss doctrine so long the ‘fraud is ‘extraneous to the contract,’ not ‘interwoven
with the breach of contract.’ Werwinski at 676.”).
Axiall’s citation to Sadler v. Balboa Capital Corp., 2012 WL 6591713 (W.D. Pa. Dec. 18,
2012) is misstated, as this Court declined to apply the economic loss doctrine where the
claims of negligent and fraudulent misrepresentation were dismissed under the gist of
the action doctrine. 2012 WL 6591713, at *4 (“Because I have already ruled that Counts
II and III of Plaintiffs' complaint are barred by the gist of the action doctrine, I need not
assess the applicability of the economic loss doctrine as to those Counts.”). The Court
notes that Count IV is purely a claim for misrepresentation. Sadler proceeded to analyze
the plaintiff’s separate claim for “fraud in the execution” (including allegations that the
contract signatures were not plaintiff’s), and declined “to extend the [economic loss]
doctrine to intentional acts taken by one party to subvert the purpose of a contract.” Id.
at *5 (quoting Price v. Freeze & Frizz Inc., 2009 WL 6602437 (Pa.C.C.P. Nov. 29, 2009)
(citing Smith Reinhart Ford, 69 Pa. D. & C. 4th 432, 437 (Pa.C.C.P. 2004)). The facts at
hand are distinguishable. Cf. Axiall’s Memo in Opposition to Summary Judgment, ECF
No. 305, at 33.
IV also underlie Plaintiff’s breach of express warranty claims in Count I. See Amended
Complaint, ECF No. 9, at 3 (“descote Convinces PPG to Purchase Dual Valves . . .”); 8-9
(Breach of Express Warranty). See also id. at 9-11 (Count II – Breach of Implied Warrant
of Merchantability; Count III – Breach of Implied Warranty of Fitness for a Particular
Purpose). As the Third Circuit noted in Werwinski, when the Supreme Court adopted
the economic loss doctrine, it “observed that the need for a remedy in tort is reduced”
when “the customer has received ‘insufficient product value’” and “explained that in
such a situation express and implied warranties under contract law are best suited to
compensate for a loss . . . .” 286 F.3d at 671 (quoting East River S.S. Corp. v. Transamerica
Delaval, Inc., 476 U.S. 858, 872-73 (1986) )(emphasis added); East River S.S., 476 U.S. at
873 (holding that damages available under “contract law, and the law of warranty in
particular” most naturally met subject claims for “purely economic loss”).35
As analyzed at length in Section B(1), supra, this Court has concluded that “Axiall
appears to have a viable express warranty claim against descote under both Illinois and
Pennsylvania law” and will also deny descote’s motion for summary judgment as to
Axiall’s implied warranty claims against it. Thus, in accordance with the Third Circuit’s
holding on application of the economic loss doctrine in Werwinski, Axiall’s claims for
See also East River, 476 U.S. at 868 (citing Seely v. White Motor Co., 403 P.2d 145 (1965)
which “held that preserving a proper role for the law of warranty precludes imposing
tort liability if a defective product causes purely monetary harm”); REM Coal, 563 A.2d
at 129 (“[C]ontract theories such as breach of warranty are specifically aimed at and
perfectly suited to providing complete redress in cases involving . . . economic losses.”)
(quoted in Werwinski, 286 F.3d at 671).
breach of warranty afford it a proper vehicle for remedy of the economic harm
alleged.36 Plaintiff cannot seek to recover in tort economic losses to which its
entitlement flows from breach of contract and/or breach of warranty; “express
warranties and state warranty statutes can provide for compensation . . . regardless of
whether the misrepresentation is innocent, negligent, or intentional.” Werwinski, 286
F.3d at 680. Summary judgment is thus appropriate on Count IV seeking recovery for
the same harm on the basis of tort liability for alleged negligent or fraudulent
Cf. DeFebo v. Anderson Windows, Inc., 654 F.Supp.2d 285 (E.D. Pa. 2009) (dismissing
misrepresentation claims under gist of the action doctrine, and intentional fraud claim
under economic loss doctrine, where plaintiff also brought claims for breach of contract,
breach of express warranty, and breach of implied warranties); id. 292-93 (rejecting
plaintiff’s contention that intentional fraud “generally alleged” under the UTPCPL was
not barred and holding that, “despite seeming conflicting [subsequent] holdings”, and
whatever the merits of concerns expressed, the District Court is bound by the Third
Circuit’s prediction and interpretation of Pennsylvania law).
Cf. Stein v. Fenestra America, L.L.C., 2010 WL 816346 (E.D. Pa. Mar. 9, 2010) (dismissing
negligent misrepresentation and/or fraudulent inducement claims against both
defendants under economic loss doctrine and Werwinsk, where plaintiff maintained
claim for breach of contract against window manufacturer, and claims for breach of
express and implied warranties against manufacturer and intermediary entity, with
which plaintiff had no contract but which also made alleged product
misrepresentations which induced purchase); id. at *3-4 (rejecting plaintiff’s attempt to
“plead around the economic loss doctrine, which certainly applies to negligent
misrepresentation claims” by asserting “fraudulent inducement” and holding that “the
Third Circuit has predicted that the Pennsylvania Supreme Court would find the
economic loss doctrine applicable” in the circumstances); id. at *5 (holding that “alleged
fraud . . . is ‘undergirded by factual allegations identical to those supporting their
breach of contract counts’” and did not cause distinct harm) (quoting Werwinski at 678).
ARI’S MOTION FOR SUMMARY JUDGMENT ON DESCOTE’S
CROSS-CLAIM FOR CONTRIBUTION & INDEMNITY
In its Partial Motion for Summary Judgment as to descote’s Cross-Claims for
Contribution and Indemnity (“ARI’s Motion on Cross-Claims”), ECF No. 276, ARI asks
this Court to enter judgment in its favor on descote’s cross-claims against it for
contribution and indemnity. ARI concedes in its Brief that if the Court grants summary
judgment on descote’s cross-claims, summary judgment should also be granted on
ARI’s own cross-claims for contribution and indemnity. See Brief in Support of Partial
Motion for Summary Judgment as to Descote S.A.S.’ Cross-Claims for Contribution and
Indemnity (“ARI’s Brief on Cross-Claims”), ECF No. 277. The Court concurs in this
conclusion, and in ARI’s focused and well-grounded analysis of the inapplicability of
these cross-claims. The Court turns first to the issue of contribution.
As well-summarized in ARI’s Reply Brief in Support of its Partial Motion for
Summary Judgment as to Descote S.A.S.’ Cross-Claims for Contribution and Indemnity
(“ARI’s Reply Brief on Cross-Claims”), ECF No. 320, descote’s cross-claim for common
law contribution is unmaintainable under Pennsylvania law. Contribution is governed
by the Uniform Contribution Among Tort-Feasors Act (“UCATA”) and permits
contribution among joint tort-feasors, i.e., “two or more persons jointly or severally
liable in tort for the same injury to persons or property . . . .” 42 PA. CONS. STAT. § 8322
(emphasis added). See also, e.g., Voyles v. Corwin, 441 A.2d 381, 383 (Pa. Super. Ct. 1982).
Axiall has brought no tort claim against ARI, a fact which is determinative despite
descote’s assertions that Axiall could have made out a negligence or tort claim against
ARI; descote acknowledges, as it must, that Axiall did not. descote has no standing to
bring Axiall’s claims for it, and descote’s assertion that the nature of a plaintiff’s claims
(e.g., a limitation to contract and warranty), “should not bar [a defendant] from seeking
the equitable remedy of contribution” mistakes fundamentals of the UCATA and
related doctrine. See descote’s Memorandum of Law in Opposition to ARI’s Motion for
Partial Summary Judgment on CrossClaims (“descote’s Memo in Opposition on CrossClaims”), ECF No. 307, at 5 n. 3. As explicated in ARI’s Reply Brief on Cross-Claims,
ECF No. 320, at 3-4, descote’s citations to cases involving underlying tort claims against
each defendant are simply inapposite.
Turning now to the issue of common law indemnification, the Court again
concurs with ARI’s summation of applicable law. See ARI’s Reply Brief on CrossClaims, ECF No. 320, at 4-5. As set forth above, Axiall has filed one (1) tort claim
against descote for negligent misrepresentation and three (3) claims against descote for
breach of express warranty, implied warranty of merchantability and implied warranty
of fitness for a particular purpose. Common law indemnification is available for breach
of contract where an express provision exists between the parties; as descote
acknowledges, there is no such contractual provision between ARI and descote. See
Richardson v. John F. Kennedy Mem. Hosp., 838 F.Supp. 979, 990 (E.D. Pa. 1993); descote’s
Memo in Opposition on Cross-Claims, ECF No. 307, at 9. It is also available where a
party’s liability is solely secondary, i.e., where it arises without fault because of a legal
relationship to the party at fault; this is distinguished from actions in which – as here the party’s liability is based on its breach of a contract between that party and the
plaintiff. See Higgins Erectors & Haulers, Inc. v. E.E. Austin & Son, Inc., 714 F. Supp. 756,
759 (W.D. Pa. 1989); Willet v. Pa. Med. Catastrophe Loss Fund, 702 A.2d 850, 854 (Pa. 1997).
Axiall has raised separate claims predicated on separate acts of the Defendants,
as to which ARI and descote may each raise defenses. That ARI’s improper
manufacture of tank pressure plates caused a descote valve malfunction is an assertable
defense, but descote errs in maintaining that contribution and/or indemnity apply
between it and ARI. Axiall’s tort claim of negligent and/or fraudulent
misrepresentation and contract-based claims of breach of warranty against descote arise
directly from descote’s alleged conduct, i.e., from its own representations and
undertakings; they are patently not secondary to ARI’s conduct. To the contrary, ARI’s
conduct did not contribute to any descote misrepresentation or undertaking, and ARI’s
performance of its undertakings is separate and distinct from whether descote made an
actionable misrepresentation or whether its valve(s) conformed to descote’s warranty.
These questions are evidentiary ones.38
Accordingly, the Court concludes that ARI is entitled to judgment as a matter of
law on descote’s cross-claims against ARI for contribution and indemnity. Likewise,
ARI’s cross-claims against descote for contribution and indemnity fail, as a matter of
descote’s citation to a personal injury case imposing indemnification on a compressor
manufacturer primarily responsible for the product’s defect, which the secondarilyliable supplier failed to detect is, as ARI correctly observes, inapposite. Axiall has not
sued descote for failing to detect ARI’s alleged tank misconstruction. descote’s Memo
in Opposition on Cross-Claims, ECF No. 307, at 10 (citing Tromza v. Tecumseh Prods., 378
F.2d 601 (3d Cir. 1967)); ARI’s Reply Brief on Cross-Claims, ECF No. 320, at 4.
law, and therefore, descote is entitled to judgment in its favor on ARI’s cross-clams
ARI’S MOTION FOR PARTIAL SUMMARY JUDGMENT
AS TO AXIALL’S IMPLIED WARRANTY CLAIMS
In its Motion for Partial Summary Judgment as to Axiall’s implied warranty
claims (“ARI’s Motion on Implied Warranty”), ECF No. 278, ARI asks this Court to
enter partial summary judgment in its favor on the basis of the parties’ contractual
provisions. Axiall concedes in its Brief the contract terms, including provisions of
express warranty and disclaimer, but asserts (1) that it is nonetheless entitled to pursue
breach of implied as well as express warranty under the language, or ambiguity created
by the language, of contract paragraph 4, and/or (2) that paragraph 4’s repair and
replacement remedy has failed of its essential purpose, thus entitling Axiall to pursue
implied warranty claims. Because Axiall errs in its analysis, this Court will grant ARI’s
Motion on Implied Warranty, ECF No. 278, and enter judgment in favor of ARI on
Counts VII (breach of implied warranty of merchantability) and VIII (breach of implied
warranty of fitness for a particular purpose) of Axiall’s Amended Complaint against
ARI entered into a contract with Axiall pursuant to which ARI sold tank cars to
Axiall. The parties’ written agreement (the “Agreement”) is governed by its choice of
As noted supra, Axiall has brought four (4) claims against ARI: breach of contract,
breach of express warranty, breach of implied warranty of merchantability, and breach
of implied warranty of fitness for a particular purpose.
Delaware law40 and includes an express warranty together with an appropriately
prominent disclaimer, in paragraph 3, of any implied warranties of merchantability or
fitness for purpose. See ARI’s Appendix of Exhibits, ECF No. 287-6 (ARI’s “Standard
Terms and Conditions”, which were expressly included in the parties’ governing
Agreement). See ARI’s Concise Statement of Material Facts, ECF No. 287, at paragraph
26 (quoting paragraph 3: “Subject to the limitations on remedies and liabilities set forth
below, Builder warrants each Unit to be built in accordance with the Specifications
therefore and, except for Parts (for which Builder makes no warranties whatsoever), to
be free from defects in material and workmanship . . . .”). Pargraph 3, headed
“Warranty”, then goes on to provide, in capitalized letters and boldface, that: “Builder
makes no other warranty and this warranty is in lieu of all other warranties, express or
implied, including those of merchantability, fitness for a particular purpose and noninfringement.” ECF No. 287-6.41
The parties’ Agreement also provides, at paragraph 4, headed “Builder’s
Liability and Buyer’s Sole and Exclusive Remedy”, that “Builder’s sole and exclusive
liability to Buyer and Buyer’s sole and exclusive remedy against Builder for breach of
See ARI’s Concise Statement of Material Facts, ECF No. 287, at paragraph 23 (citing
the Agreement and Judge Conti’s June 28, 2016 Opinion, ECF No. 68); see also ECF No.
68 at 1 (citing Concise Combined Statement of Facts, ECF No. 60).
See also ECF No. 287 at paragraph 27 (quoting paragraph 3, disclaiming responsibility
for loss/damage “due in whole or in part to commodities shipped in the Units” and
stating that: “Builder makes no representation or warranty, express or implied, that the
Unit is suitable for any commodity that may be shipped in it and Builder and Buyer
expressly agree that, . . . , it is the sole responsibility of Buyer to ensure that the
Specifications are satisfactory to cover all potential contingencies that may arise from
the storage of products in, and/or the transportation of products by, railcar . . . .”).
Builder’s warranty or any other claims or causes of action against Builder . . . with
respect to a delivered and accepted unit shall be limited to the prompt repair or
replacement of any Unit found to be in breach of warranty, or, at Builder’s option, a
refund of the purchase price therefor.” ECF No. 287-6. This paragraph further provides
that: “If Builder fails to repair or replace a Unit in response to a valid warranty claim,
Buyer may pursue a breach of warranty claim against Builder. Under no circumstances
shall Builder be liable for incidental, punitive, or consequential damages . . . .” Id.42
ARI correctly invokes the contractual provisions, express warranty and
disclaimer. See ARI’s Brief in Support of Partial Motion for Summary Judgment as to
Axiall Corporation’s Implied Warranty Claims (“ARI’s Brief in Support on Implied
Warrant”), ECF No. 279; id. at 1-2 (“Axiall ignores the very language negotiated and
agreed upon by the parties . . . by pursuing claims specifically excluded by the contract
terms.”). See also id. at 7-8 & nn. 4-6 (noting that sellers may disclaim warranties for
merchantability and fitness for a particular purpose as specified under Delaware’s
codification of the Uniform Commercial Code (“UCC”) at 6 Del. C. Section 2-316).
In response, Axiall does not dispute the written contract’s express warranty or
prominent disclaimer. See Axiall’s Memorandum of Law In Opposition to ARI’s Partial
Motion for Summary Judgment as to Axiall’s Implied Warranty Claims (“Axiall’s
Opposition on Implied Warranty”), ECF No. 301. But it makes two arguments. First,
Cf. ECF No. 68 at 3 (predicting that the Delaware Supreme Court “would conclude
that under the Delaware UCC, a contractual provision barring a party’s recovery of
consequential damages should be independently interpreted and applied from the . . .
provision permitting a party to recover all remedies provided for in the code when a
limited remedy fails of its essential purpose”).
Axiall seizes upon the provision in paragraph 4 that “[i]f [ARI] fails to repair or replace
a Unit in response to a valid warranty claim, [Axiall] may pursue a breach of warranty
claim against [ARI].” Axiall contends this language gives it a right to make a claim not
only on breach of the express warranty actually made, but on disclaimed warranties as
well, or that it creates an entitlement by ambiguity. See ECF No. 301 at 2. This assertion,
to which Axiall devotes two paragraphs of analysis, is meritless; i.e., it lacks textual,
logical and jurisprudential support. See ECF No. 301 at 6-7. As noted above, ARI
clearly set forth limited express warranty and disclaimer provisions in the Agreement’s
warranty paragraph; it was not incumbent on ARI to do so again in the remedy
paragraph which immediately followed.
Second, Axiall contends that the limited remedy of repair and replacement in
paragraph 4 fails of its essential purpose and that such failure eliminates the disclaimer
of implied warranties.43 But Axiall’s proffered analysis (rather than the Agreement
itself) conflates remedies with warranties.44 Axiall cites Section 2-719(2) of the Delaware
UCC: “[w]here circumstances cause an exclusive or limited remedy to fail of its
essential purpose, remedy may be had as provided in this title.” ECF No. 301 at 8. To
begin with, the parties’ agreement expressly provides for action for breach of warranty
By Opinion of June 28, 2016, this Court held, in denying a motion for partial summary
judgment by Axiall (ECF No. 47), that “there are material disputes of fact with respect
to whether the limited remedy provided for in the contract entered into between [the
parties] failed of its essential purpose” and indeed “whether the contract was breached
in the first instance.” ECF No. 68 at 2.
Cf. EF No. 279 at 3 (“Like many commercial contracts, the Agreement between Axiall
and ARI contains both limitations of liability and damage provisions . . . .”).
upon failure of repair or replacement. It is doubtful the parties’ agreed upon remedy
can be deemed to have failed while that action is pending. In any event, the UCC
provision broadening available remedies, i.e., Section 2-719, cannot fairly be read to
create additional warranties expressly disclaimed by contract.
The case Axiall strives to distinguish is, as ARI asserts, analogous. See ARI’s
Brief in Support on Implied Warranty, ECF No. 279 at 10-12 (providing a thorough and
correct explication of Lecates v. Hertrich Pontiac Buick Co., 515 A.23 163 (Del. Super.
1986)). In Lecates, the Court clearly distinguishes between modification of remedies and
warranty disclaimers. In dismissing plaintiff’s claims for breach of implied warranties
and addressing the applicability of Section 2-719 to Section 2-316, the Court points out
that if an implied warranty is effectively disclaimed in accordance with 6 Del. C. Section
2-316 (as here), there can be no breach of that warranty and therefore no need to analyze
allowed remedies for such a breach. See 515 A.2d at 171-72 (discussing distinction and
independence of Delaware UCC’s provision for “Contractual modification or limitation
of remedy” and that for “Exclusion or modification of warranties”); id. at 172 (quoting
Comments to Section 2-719 stating that seller is free to disclaim warranties as provided
in 2-316 and “[i]f no warranty exists, there is of course no problem of limiting remedies
for breach of warranty”); ECF No. 279 at 10-11. Compare ECF No. 301 at 9 (ARI’s
reference to jury determination of “whether the repair and replacement warranty failed
of its essential purpose”).
The sound rationale of Lecates clearly applies to the facts sub judice. Axiall’s
contrary assertion - that ARI’s reference to a breach of warranty remedy in paragraph 4
of the agreement precludes reliance on the Lecates distinction - is simply not tenable. See
ECF No. 301 at 8. Axiall cites two cases from other jurisdictions: Trgo v. Chrysler Corp.,
34 F.Supp.2d 581, 591 (N.D. Ohio 1998) and John Deere Co. v. Hand, 319 N.W.2d 434, 437
(Neb. 1982). See ECF No. 301 at 8-9. The Court observes that although these decisions
indicate that the failure of a limited remedy’s essential purpose vitiates a disclaimer of
implied warranties, they do so without substantive discussion. Indeed, Hand actually
refers to breach of implied warranties as a “remedy”, reflecting the Nebraska Court’s
confusion. In short, this Court finds each decision unpersuasive as well as nonprecedential.
The Court concurs with ARI’s explication of the decision of the Delaware
Superior Court in Lecates, and holds that the parties’ contractual warranty disclaimer is
valid and enforceable, and claims for breach of implied warranty brought by Axiall in
Counts VII and VIII should be dismissed.
For the reasons set forth above, the Court will: (1) grant Axiall’s motion for
partial summary judgment against descote (ECF No. 268); (2) grant in part and deny in
part descote’s motion for summary judgment against Axiall (ECF No. 272)—the motion
will be granted as to Axiall’s misrepresentation claims and denied in all other respects;
(3) grant ARI’s motion for summary judgment (ECF No. 276) as to descote’s crossclaims against it; (4) and grant ARI’s motion for partial summary judgment (ECF No.
278) as to Axiall’s implied warranty claims against it. In addition, Court will dismiss
ARI’s cross-claims against descote.
An appropriate order will follow.
Dated: January 30, 2018
BY THE COURT:
LISA PUPO LENIHAN
United States Magistrate Judge
All Counsel of Record
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