Summary
In Avondale Industries, Inc. v. Tyco Valves and Controls, 2003 WL 22697180 (E.D.La. 2003), the Court was faced with opposing Motions for Summary Judgment involving the alleged purchase and installation of defective valves.
Summary of this case from Bladen v. C.B. Fleet Holding Co.Opinion
CIVIL ACTION NO. 01-2923, SECTION "L"(2)
November 7, 2003
ORDER REASONS
Before the Court are the Plaintiff's and the Defendants' cross motions for summary judgment. For the following reasons the Plaintiffs motion is DENIED and the Defendants' motion is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND
Plaintiff Avondale entered into contracts with defendants Tyco Valves and Controls, Inc., Tyco Valves and Controls, LP, and Tyco Flow Control, Inc. (hereinafter, collectively "Tyco" or "Defendants") for the purchase of valves for installation and use in the cargo, tank cleaning, and fire and foam systems aboard several oil carrier ships that Avondale was constructing for ARCO. Avondale alleges that it informed Tyco that the specifications for the vessel it was building called for valves with a 225 pound per square inch ("psi") rated system operating pressure. Avondale further asserts that Tyco warranted that certain valves manufactured by the company would meet these requirements and that Tyco would provide a full remedy for valves that failed to meet the specifications.
In reliance on these warranties, Avondale purchased and installed these valves on several oil carriers under construction in its shipyard. Thereafter, on November 9, 2000, Avondale claims Tyco informed it that the operating capacities of the valves was not as previously represented and that Avondale should not use the valves for the very purpose which Avondale had used the valves. As a result, Avondale incurred considerable costs in removing the incorrect valves and replacing them with new valves.
On September 21, 2001, Avondale filed suit in this Court against Tyco asserting causes of action relating to the purchase of these valves. Avondale sued based on the following causes of action: (1) redhibition/implied warranty; (2) the Louisiana Products Liability Act; (3) tort; (4) breach of contract; and (5) the Louisiana Unfair Trade Practices Act. In addition, Avondale contends that the Defendants are liable for all damages flowing from the breach of express warranties and contracts, including the damages resulting from the removal and replacement of the valves and the reasonable cost of overhead. The parties have filed cross motions for summary judgment on the different causes of action and on the issue of damages. There is substantial overlap in the cross motions, and the Court addresses them issue-by-issue rather than sequentially.
II. ANALYSIS
A. Avondale's Unfair Trade Practices and Tort Claims
Tyco urges that Avondale's claim under the LPLA precludes the Plaintiff from bringing suit under the Louisiana Unfair Trade Practices Act or claims arising in tort. The Louisiana Products Liability Act serves as the exclusive theory of liability for damages caused by a product. The relevant portion of the Louisiana Products Liability Act notes:
This Chapter establishes the exclusive theories of liability for manufacturers for damage caused by their products. A claimant may not recover from a manufacturer for damage caused by a product on the basis of any theory of liability that is not set forth in this Chapter. Conduct or circumstances that result in liability under this Chapter are "fault" within the meaning of Civil Code Article 2315.
La. Rev. Stat. Ann. § 9:2800.52 (West 2003).
Avondale does not oppose dismissal of its Unfair Trade Practices Act claims or the tort claims that it raises under Civil Code Article 2315 to the extent that they are precluded by the LPLA. Pl.'s Opp'n Mem. at 1. Accordingly, the Defendants' motion for summary judgment is hereby GRANTED IN PART as it relates to Avondale's claims in tort brought under Civil Code Article 2315 and to Avondale's claims brought under the Louisiana Unfair Trade Practices Act.
B. Redhibition/Implied Warranty
Tyco moves for summary judgment on Avondale's redhibition claim. Tyco argues that Avondale has produced no evidence of a "redhibitory defect," precluding Avondale from arguing that the valves are so useless that a buyer would not have bought the thing had he known of the defect. La. Civ. Code Ann. art. 2520 (West 2003). Tyco argues that the language of the amended version of Civil Code article 2529 limits Avondale to a claim under conventional obligations law.
The 1993 revisions to the Civil Code leave little doubt that a remedy in redhibition requires the existence of a redhibitory defect. The requirement of a redhibitory defect appears to exist even when the object of the contractual bargain has not been delivered or fails to conform with an express warranty. However, the Civil Code specifies that the law of conventional obligations — not redhibition — provides the appropriate remedy where the product sold is not fit for the buyer's intended use or for his particular purpose. La. Civ. Code Ann. art. 2524 (West 2003). Moreover, Article 2529 provides clear support for Tyco's argument that Avondale's action must be brought in contract and not in redhibition; "When the thing the seller has delivered though in itself free from redhibitory defects, is not of the kind or quality specified in the contract or represented by the seller, the rights of the buyer are governed by other rules of sale and conventional obligations." La. Civ. Code Ann. art. 2529 (West 2003).
The 1993 comments to article 2529 draw a firm distinction between redhibition and contract. Comment b provides "[t]he provisions of [old 2529] to the effect that a seller's mistaken declaration as to quality gives rise to redhibition when such quality was the buyer's principal motive for entering the sale, have been eliminated." La. Civ. Code Ann. art. 2529, cmt. b (West 2003). The comments demonstrate the Louisiana legislature's decision to "legislatively overrule" Louisiana Supreme Court precedent that allowed redhibition "even though the thing sold is in itself free of defects. . . ." La. Civ. Code Ann. art. 2529, cmt. c (West 2003).
Avondale contends that Tyco reads the redhibition law too narrowly, and cites to Chastant v. Oasys Imaging, Inc., 839 So.2d 1124 (La.App. 4 Cir. 2003), a post-revision case in which the Louisiana Third Circuit awarded damages in redhibition to a plaintiff who had discussed his need for a computer program to interface with an existing computer program. Because the system was not capable of performing the specified functions, the court ruled that the system had a redhibitory defect. Id. at 1128.
Avondale reads Chastant to stand for the proposition that a defendant's representation of quality "gives rise to a claim in redhibition if this quality was the principal motive for making the purchase." Pl.'s Opp'n Mem. at 17. That "principal motive" test has been explicitly abandoned by the 1993 revision to Civil Code article 2529. See La. Civ. Code Ann. art. 2529, cmt. b (West 2003). To state a claim in redhibition, a plaintiff must demonstrate the existence of some redhibitory defect. Where the parties merely dispute whether the quality of the product conformed to that required by the contract, the claim "purely and simply" arises in contract. S. H. Hanville Lumber and Export Co. v. C-B Lumber Co., 52 So.2d 61, 64 (La.App. 1951). Accordingly, the Defendants' motion for summary judgment is GRANTED IN PART on the redhibition claims.
C. Louisiana Products Liability Act
The Louisiana Products Liability Act provides that the manufacturer of a product shall be liable for damage proximately caused by a characteristic of the product that renders the product "unreasonably dangerous." La. Rev. Stat. Ann. § 9:2800.54 (West 2003). One way in which a product can be deemed to be "unreasonably dangerous" is its failure to conform "to an express warranty of the manufacturer about the product. . . ." La. Rev. Stat. Ann. § 9:2800.54(B)(4) (West 2003). The Louisiana Products Liability Act's express warranty cause of action has four elements: (1) the existence of an express warranty; (2) the plaintiff was induced to use the product because of that warranty; (3) the product failed to conform to that warranty; and (4) the plaintiff's damage was proximately caused because the express warranty was untrue. Caboni v. General Motors Corp., 278 F.3d 448, 452 (5th Cir. 2002).
In its motion for summary judgment, Tyco argues that it is entitled to summary judgment on the LPLA claim because Avondale cannot prove that the disputed valves failed to conform to an express warranty and also because Avondale cannot prove causation.
Avondale's LPLA claim is pregnant with facts. The parties dispute both the nature of any express warranty and whether the valves failed to meet that warranty. In addition, the parties dispute whether or not Avondale would have removed the Tyco valves regardless of the presence of a warranty. Accordingly, both the Defendants' and the Plaintiff's motions for summary judgment on Avondale's Louisiana Products Liability Act claim are DENTED.
D. Breach of Contract
Avondale and Tyco each moves for summary judgment on Avondale's breach of contract claim. Tyco argue that it was not privy to the contract and thus is not bound by it. Avondale contends that its contract claim is based on undisputed facts and that it is entitled to summary judgment for breach. The Court denies both motions for summary judgment on the breach of contract issue.
First, Tyco moves for summary judgment arguing that Avondale's contract claim should be brought against Hazleton, not Tyco. Although Tyco purchased Hazleton's assets, argues Tyco, it is not a successor in liability nor is it privy to the contract. Tyco asserts that Avondale's claim for breach of contract should be brought against Hazleton's shareholders, and cannot be maintained against Tyco absent proof that Tyco operates Hazleton as "the same legal entity."
Certain pre-merger contractual obligations survive where substantial performance has been made. J.C. Trahan Drilling Contractor, Inc., v. Hagy, 172 So.2d 732, 733(La.App. 4 Cir. 1965). In addition, a successor corporation may be held to the terms of the prior contract where that company expressly or impliedly adopts that contract as its own. See Int'l Harvester Co. of Am. Inc. v. Shreveport Nu-Grape Bottling Co., Inc., 127 So. 47, 48 (La.App. 2 Cir. 1930).
Viewing the facts in a light most favorable to Avondale, a genuine factual dispute exists as to whether Tyco adopted and ratified the prior valve contract. Evidence suggests that after Tyco acquired Hazleton, it continued to perform the previous valve contract. In addition, evidence suggests that Tyco — not a predecessor — was the entity that downgraded the Figure 106 valves. Summary judgment is thus inappropriate and the Tyco's Motion for Summary Judgment on Avondale's breach of contract claim is DENIED.
Second, Avondale moves for summary judgment on its contract claim stating that Tyco failed to deliver valves compliant with contractual specifications. The parties dispute the technical specifications required and whether the valves complied with the requirements. Avondale's breach of contract claim is pregnant with factual questions precluding summary judgment. Accordingly, Avondale's Motion for Summary Judgment on its breach of contract claim is also DENTED.
E. DAMAGES
Tyco moves for summary judgment on Avondale's damage claims, challenging the Plaintiff's right to certain damages. Tyco asserts that Avondale cannot recover the cost of different (and more expensive) valves as part of the measure of damages.
Article 2609 of the Louisiana Civil Code allows a buyer in good faith to purchase substitute goods and to recover the difference between contract price and the cost of the substitute goods. La. Civ. Code Ann. art. 2609 (West 2003). The substitute goods must be "reasonable substitutes under the circumstances of the particular case." La. Civ. Code Ann. art. 2609, cmt. b (West 2003). Whether the higher rated replacement valves are commercially reasonable substitutes presents a factual issue to be resolved at trial.
Tyco also argues that Avondale is not entitled to overhead as part of damages. Louisiana law permits parties may stipulate to liquidated damages in the case of nonperformance. La. Civ. Code Ann. art. 2005 (West 2003). In those circumstances, the obligee need not prove his actual damages. La. Civ. Code Ann. art. 2009 (West 2003). In response to Tyco's motion, Avondale asserts that the measure of overhead damages is governed by the contract's liquidated damages clause. Accordingly, summary judgment is inappropriate.
Finally, Tyco contends that because Avondale never actually purchased valves for the fourth and fifth ARCO vessels (Hulls D and E), Avondale cannot obtain "cover" damages on the Hull D and Hull E valves. Whether these damages are recoverable turns on the nature of the disputed contract and on the exercise of the option clause. These facts must be resolved at trial. Accordingly, Tyco's Motion for Summary Judgment on the issue of damages is DENIED.
III. CONCLUSION:
For the foregoing reasons, the Defendant's Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART. The Plaintiff's Motion for Partial Summary Judgment is DENIED.