Opinion
CIVIL NO. CCB-07-2396.
March 27, 2009
MEMORANDUM
Now pending before the court are cross-motions for summary judgment filed by the plaintiff, Polartec, LLC ("Polartec"), and the defendant, 180s LLC ("180s"). The dispute arises from a government contract for the design and manufacture of a garment called the Combat Desert Jacket ("CDJ") for use by United States soldiers serving in desert environments. 180s, a Maryland corporation that designs and develops sporting goods, was the prime contractor on the CDJ project. Polartec, a Delaware corporation, was a subcontractor responsible for providing a specific fabric to be used in the CDJ. The issues in these motions have been fully briefed and no hearing is necessary. For the reasons stated below, the plaintiff's motion will be denied in part and granted in part, and the defendant's motion will be denied.
Prior to March 2007, the plaintiff corporation was known as Malden Mills. The court will refer to the plaintiff as Polartec throughout.
BACKGROUND
In November 2004, the United States Marine Corps ("USMC") issued a solicitation for production of the CDJ, requiring that contractors manufacture the garment in Desert MARPAT ("MARPAT"), one of USMC's patented camouflage prints. The solicitation included information regarding the color and infrared reflectance ("IR") values that the fabric of the CDJ should approximate. In January 2005, 180s submitted a detailed proposal in response to the solicitation. 180s proposed that the CDJ would be manufactured under a subcontract with Tennessee Apparel Company ("TAC"), using fabrics procured from four fabric suppliers including Polartec and W.L. Gore Sons ("Gore"), both of whom were licensed to print in the MARPAT pattern. (Pl.s' Ex. 4 at 7-8, 19-20.) Specifically, the core of the jacket would be manufactured using Gore fabric, and the sleeves of the jacket would be manufactured using a Polartec fabric known as Powershield. Both fabrics would be printed in the MARPAT print. While not specified in the proposal, Polartec supplied an additional fabric for the CDJ's hood, known as Malden 9471, which was purchased as completed fabric from another company, United Knitting.
In late September 2005, USMC selected 180s as a finalist for the CDJ project and instructed 180s to supply 200 sample jackets for field testing. Upon receiving Powershield fabric from Polartec for use in the sample jackets in October 2005, 180s noticed that one of the rolls of fabric had a "distinct pink cast" to it. (Pl.s' Ex. 10.) At this stage in the application process, 180s also knew that Powershield was still in the developmental stages and had not been approved as a shade match by the Natick Soldier Center ("Natick"). (Pl.'s Ex. 9.) Natick is the entity responsible for developing, testing, and managing clothing worn by U.S. soldiers. Despite some color variation in the sample jackets, USMC awarded the CDJ contract to 180s in May 2006. As part of the production process, TAC submitted purchase orders for the Polartec, Gore, and other fabrics directly to the suppliers ( see, e.g., Pl.'s Ex. 16), and 180s placed purchase orders with TAC for the completed CDJs ( see, e.g., Pl.'s Ex. 13).
As early as spring 2004, Polartec began developing the Powershield fabric specifically for use in the CDJ and had submitted samples of its fabric to Natick for shade evaluations. As part of the shade evaluation, Natick would compare the shading of the Powershield to a standard nylon-cotton fabric maintained at Natick that is the desired shade for all MARPAT printed fabric. The goal of the shade evaluations was to get the newly developed fabric as close a match as possible to the shading in the target fabric. Because the fabrics were made of different materials, it was not expected that Powershield would perfectly match the standard fabric; rather, it was expected that the fabric would eventually prove an acceptable match. As such, even fabric deemed to be a negligible shade failure compared to the target fabric was still acceptable for use in the CDJ. It is undisputed that a positive shade evaluation from Natick did not, in itself, constitute formal acceptance of the fabric by the USMC.
After 180s was awarded the CDJ contract, all fabric suppliers were instructed to submit their samples to Rosemary Lomba ("Lomba"), a Natick employee, to work with her toward establishing final shade standards. It is undisputed that Polartec had some difficulties creating an acceptable shade match. Specifically, Powershield was deemed to be too pink. (Def.'s Ex. 79.) Natick evaluations also revealed that Powershield had failing IR values. ( Id.) In an effort to get the CDJ into the field, knowing that the jacket was more likely to be worn around the compound than in combat, Lomba told Polartec to focus on matching the color before focusing on meeting IR values. (Pl.s' Ex. 7 at 25-26.) After months of working with Natick and causing some delay to the CDJ production, Polartec was able to develop an acceptable shade match in the fall of 2006.
In two emails sent in October 2006, Lomba informed Polartec that, based on the most recent sample evaluation, its fabric was "acceptable for shipment" (Pl.s' Ex. 26), and she recommended that Polartec "use the existing dye formulations to get a steady flow of goods" to fill TAC's orders (Def.'s Ex. 105). She also informed TAC via email that Powershield passed its most recent shade requirement and Polartec would be shipping out the material "in the near future and beyond" to fill its purchase orders. (Pl.'s Ex. 26.) Subsequent to these emails, Polartec used the approved dye formulation to print Powershield through the rest of 2006 until mid-January 2007 when problems with the fabric re-emerged. The shipments made during this period contained certificates of compliance, in which Polartec certified the goods delivered complied with contract requirements.
At a January 10, 2007 meeting, Lomba informed Polartec and Gore that the USMC was dissatisfied with the CDJs due to color issues. An internal Polartec email summarizing the meeting acknowledged that the Powershield and Gore fabrics did not match and that Powershield had a "red/pink" cast and metamerism, a condition that causes the fabric to change color under different light sources. (Def.'s Ex. 106.) Approximately two weeks later, on January 26, the USMC ordered TAC to cease all production on the CDJ. (Def.s' Ex. 128.) The parties dispute the reason for the halt in production, with Polartec suggesting the color variations between its and Gore's fabrics were the cause, and 180s contending that the halt was caused solely by the defective Powershield fabric.
On or around February 6, 2007, the USMC rejected all 6,700 of the CDJs in its possession, due to the shading of the sleeves. (Pl.'s Ex. 66.) The USMC's dissatisfaction with the CDJ placed a renewed emphasis on testing the fabrics. In early February, Natick again tested samples of Powershield taken from TAC's supply and from Polartec, and both samples were deemed an unacceptable shade match for being either "too red" or "too pink," particularly when compared to Gore's fabric, which tended toward the greener side of the shade spectrum. (Pl.s' Ex. 59.) Upon learning of the failing test results on February 13, 2007, an internal Polartec email acknowledged its current production of Powershield had been rejected by Natick and should not be shipped to TAC. (Def.s' Ex. 140.) Tests performed on updated Powershield in late February revealed similar problems. While testing in March showed improvements in the Powershield fabric, on April 24, 2007, the USMC modified the contract with 180s to replace Powershield with a Gore fabric. In her deposition, Lomba testified that, in addition to the shading issues, the USMC opted to go with the Gore fabric because it was closer to satisfying the military's IR requirements. (Pl.s' Ex. 7 at 72-73.)
180s's Purchase Order 4448 with Polartec
Meanwhile, in the fall of 2006, during the beginning stages of the CDJ production process, 180s learned that the USMC expected to increase its demand for the CDJs. In response, 180s decided to bring another manufacturer, Propper International ("Propper"), into the production process to perform the same functions as TAC. While still negotiating the terms of an anticipated contract with Propper, 180s approached Polartec about the anticipated increase in fabric that would be required for the additional CDJs. On October 11, 2006, 180s submitted a purchase order to Polartec for 49,950 yards of Powershield at $33 per yard and 14,700 yards of Malden 9471 at $8 per yard, for a total cost of $1,765,950. The terms of the purchase order included a provision permitting 180s to terminate the order at any time and, in the event of a non-default termination, obligating 180s to compensate Polartec for any completed or uncompleted items or raw, semi-processed or completed materials for use in fulfilling the order. (Pl.s' Ex. 38 "Order 4448" ¶ 8(d).) By all accounts, this purchase order, referred to as Order 4448, was designed to serve as a place holder to lock in current prices and lead times for Polartec fabric that would eventually be purchased by Propper for the anticipated CDJ production. In December 2006, Propper placed two orders with Polartec, the first for 13,100 yards of Powershield and the second for 3,950 yards of Malden 9471.
In or around January 2007, the USMC denied 180s's proposal to add Propper as a manufacturer under the CDJ contract. On February 1, 2007, in an email to Polartec, 180s indicated that it had not been allowed to shift any production to Propper and, because of that, Propper needed to cancel any existing purchase orders with Polartec. (Pl.s' Ex. 51.) On February 9, 2007, also in an email, 180s officially cancelled Order 4448, explaining that the USMC was making changes to the current CDJ construction and that all production activities were, therefore, on hold pending these changes. The email further stated that all future purchase orders would be re-issued by TAC. (Pl.'s Ex. 53.) According to Polartec, prior to any cancellations, it had shipped 817 yards of Powershield and 5,252 yards of Malden 9471 to Propper. (Pl.'s Ex. 34.)
On September 10, 2007, Polartec filed a complaint in this court alleging that 180s had breached Order 4448 by failing to compensate Polartec for completed or uncompleted fabric and raw or semi-processed materials in excess of $1.7 million. On October 31, 2007, 180s filed an answer to Polartec's complaint and filed counterclaims alleging that Polartec breached Order 4448 and its express warranty provision by failing to supply a Powershield fabric that met the USMC's requirements. 180s further alleged that, by failing to provide an acceptable fabric, Polartec breached the implied warranty of fitness for a particular purpose in its contracts with TAC, of which 180s was a remote buyer. Currently pending before the court are the parties' cross motions for summary judgment on all of the respective claims.
On August 8, 2008, 180s moved to amend its answer to include the affirmative defense of novation to Polartec's breach of contract claim, which it had neglected to include in its original answer. As the following discussion makes clear, however, the evidence fails to establish that a novation took place, rendering any leave to amend futile. Accordingly, the motion will be denied. See Nolte v. Capital One Fin. Corp., 390 F.3d 311, 317 (4th Cir. 2004).
ANALYSIS
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The Supreme Court has clarified this does not mean that any factual dispute will defeat the motion. "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).
A. Polartec's Breach of Contract Claim
Polartec seeks summary judgment on its claim that 180s breached Order 4448 by failing to compensate Polartec following termination of the contract, which provided that in the event of a non-default termination, the buyer would be responsible for certain "in stock, or on firm order completed or uncomplete items or raw, semi-processed or completed materials for use in fulfilling this Order" (Order 4448 ¶ 8(d)). Specifically, Polartec contends that after 180s terminated the contract for its own convenience, Polartec was left with approximately $1.8 million worth of materials that were completed, in-process, or on firm order to fulfill the contract. 180s also seeks summary judgment on this claim, contending that its obligations were extinguished by novation and, further, that none of the damages alleged by Polartec are attributable to Order 4448 and, thus, not attributable to 180s.
i. Novation
180s claims that Order 4448 was a place holder contract entered into for planning purposes only, and the contract ended and the parties' obligations were extinguished when Propper placed two purchase orders for the materials reserved pursuant to Order 4448. The Propper purchase orders, according to 180s, were a novation to the original place holder contract. To constitute a novation — a new contractual relation made with intent to extinguish an existing contract — the party asserting it must demonstrate four elements: "(1) [a] previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the validity of such new contract, and (4) the extinguishment of the old contract, by the substitution of the new one." I. W. Berman Properties v. Porter Bros., Inc., 344 A.2d 65, 70 (Md. 1975).
It is undisputed that the original contract between Polartec and 180s required explicit, written notice to release the seller from its obligations. (Order 4448 ¶ 22.) Given that the facts, as discussed below, do not lend themselves to a finding of novation, the court need not analyze whether the parties, through subsequent conduct, could effect such a release absent explicit, written notice. See Freeman v. Stanbern Const. Co., 106 A.2d 50, 55 (Md. 1954) (holding that a contract stipulating that variations may only be made in writing may be modified by implication as well as by express oral agreement).
To effect a novation, the parties must agree to extinguish the old obligation and substitute a new one for it. Id. "A novation is never presumed; the party asserting it must establish clearly and satisfactorily that there was an intention, concurred in by all the parties, that the existing obligation be discharged by the new obligation." Id. Where, as here, there is no express agreement to a novation, the requisite intent can be inferred from the facts and circumstances surrounding the transaction, as well as the subsequent conduct by the parties, "but such facts and circumstances, when shown, must be such to establish that the intention to work a novation is clearly implied." Id.
While the defendant continually refers to Order 4448 as a "place holder" purchase order entered into for planning purposes only, there is no doubt that it was a binding contract executed to lock in Polartec's prices and lead times in anticipation of Propper's approval as a subcontractor on the CDJ project. The conduct of the parties suggests that both Polartec and 180s expected Propper eventually to order and pay for all materials secured pursuant to Order 4448. For example, after Propper submitted its orders, Jillian Detellis ("Detellis"), a Polartec employee, transferred Order 4448 into Propper's newly created account. Such evidence demonstrates Polartec's understanding that Order 4448 was a place holder for Propper; however, it is insufficient to show that Polartec, by accepting the relatively small purchase orders submitted by Propper, intended to release 180s from its obligations or, for that matter, that 180s intended to release Polartec from its obligations. See Dahl v. Brunswick, 356 A.2d 221, 228 (Md. 1976) (noting that Maryland courts have found a novation only where there is "evidence establishing a clear and definite intent" to extinguish the original obligations, and that a change of parties alone is not enough to demonstrate that intent). Such a finding would subvert the underlying purpose of the contract — without some guarantee of future orders, Polartec would have had no incentive, but rather strong disincentives, to maintain its production schedule enabling lower prices and faster lead times, and without the negotiated prices and lead times, Propper and 180s, as the prime contractor, would have derived no benefit from the original negotiation. Moreover, critically, the evidence suggests that 180s did not act as though the original contract was extinguished until its February 9, 2007 email "officially" cancelling Order 4448. In light of these circumstances, 180s has failed to establish that the submission of the Propper orders extinguished either party's obligations under Order 4448.
While, as 180s asserts, the new obligation arising from a novation may differ from the existing obligation, s ee Restatement (Second) of Contracts § 280 cmt. a, its suggestion that the large difference in the contract amounts do not create an issue of fact is unpersuasive. The court examines all of the surrounding facts and circumstances of the transaction and considers the wide variation in the obligations at issue as evidence that neither party intended to extinguish the other's obligations under the original contract.
ii. Damages
Polartec seeks approximately $1.8 million in damages that it alleges were the direct result of 180s's termination of Order 4448, including $105,678 in completed goods damages, $1,215,455 in raw materials damages, and $443,835 in ordered goods damages. It is undisputed that the damages provision of Order 4448 limits the buyer's potential liability to paying certain damages for completed or uncompleted materials "for use in fulfilling this Order." Thus, Polartec, which is not challenging the legitimacy of that provision, is not entitled to any damages beyond what is provided for in the contract.
180s suggests that because Propper submitted separate purchase orders, 180s is not responsible for any damages that arose out of Polartec's efforts to fulfill those orders. The court, however, rejects such an approach. Both parties anticipated and agreed that Propper would submit purchase orders for fabric reserved by Order 4448. That was the underlying purpose of the contract — to lock in prices and lead times that would allow Propper to submit purchase orders in the future and benefit from those negotiated terms (of course, such an agreement stood to benefit 180s, the prime contractor, as well). Thus, the Propper orders are inextricably linked with Order 4448, and they will be analyzed together. In contrast, however, the TAC orders made in the context of the larger CDJ project but not in accordance with Order 4448 are not so linked.
Completed Goods
Polartec contends that it has $105,678 in goods completed to fulfill Order 4448, consisting of 4,638.6 yards of Malden 9471 and 2,078 yards of Powershield. 180s argues that none of this fabric was completed to fulfill Order 4448. In regard to Malden 9471, 180s relies on the deposition testimony of Polartec chief financial officer Michael Garvey ("Garvey") acknowledging that he was unaware of the specific amounts of fabric purchased to fill Order 4448, as opposed to TAC's orders, and admitting that making such a distinction would be difficult. (Def.s' Ex. 152 at 100-01.) Similarly, as to the completed Powershield fabric, Garvey testified that it had not been specifically allocated to fill Order 4448 separate from TAC's orders. ( Id. at 101-02.) Further, 180s offers Polartec's status report, dated January 23, 2007, which indicates that, at that time, all of the Malden 9471 ordered through April 2007 was scheduled to ship to TAC, and the only Powershield fabric currently in process was slated to fill TAC orders. 180s also offers evidence that Polartec ceased production of Powershield on January 26, 2007 (Def.'s Ex. 137), suggesting it is unlikely that Polartec completed any Powershield to fill Propper's order after the January 23 status report. In its reply, Polartec offers no evidence to dispute this claim.
Raw Materials
As to the raw materials, Polartec claims that it is owed $1,215,455 for raw materials that it stockpiled to fulfill Order 4448, which includes the cost of freight, overhead, and carrying costs to Polartec. Here again, 180s offers Garvey's deposition testimony indicating that Polartec purchased raw materials "to fulfill the macro demand for garments" (Def.'s Ex. 152 at 24), suggesting that Polartec cannot specify the quantity of raw materials stockpiled specifically to fulfill Order 4448. In response, Polartec suggests that this distinction is immaterial because 180s, as the prime contractor, is responsible for all materials related to the CDJ project. As discussed above, however, the TAC orders are distinct from Order 4448, thus any materials stockpiled to prepare fabric for TAC are distinct from any damages arising out of Order 4448.
The only evidence that materials were ordered specifically to fulfill Order 4448 is a purchase order Polartec submitted to United Knitting, the supplier of Malden 9471, for $70,370.10 worth of fabric. The order, dated December 12, 2006, enumerated eleven monthly deliveries of Malden 9471 with the shipments to be made at the end of each month. The first three shipments, scheduled for the end of January, February, and March 2007, each called for one yard of fabric at a price of $6.70 per yard. The bulk of the delivery was not scheduled to begin until late April 2007, well after Order 4448 was officially cancelled. Polartec has not submitted any evidence of any payments it made pursuant to this order or any evidence of outstanding invoices that it must pay as a result of any cancellation of this order. Thus, it is unclear from the current record what damages, if any, Polartec would be entitled to based on this purchase order.
In the event that any of this fabric was used to fulfill TAC's orders after Order 4448 was cancelled, as noted above, that material cannot be included in any damages calculation arising from the termination of Order 4448.
Ordered Goods Damages
Polartec seeks compensation for an outstanding order of specialty yarn in the amount of $109,704 that was on firm order when 180s terminated Order 4448. Here again, to be entitled to compensation, Polartec must prove that this yarn was ordered specifically to fulfill Order 4448, which, based on the current record, it has failed to do.
Polartec also attempts to recover from 180s the balances owed on outstanding invoices submitted to TAC and Propper contending that the subcontractors acted as agents of 180s in placing the orders and subsequently defaulted as a result of 180s's cancellation of Order 4448. Regardless of any agency relationship between the two subcontractors and 180s, however, Polartec must demonstrate that the damages it seeks stem from losses on materials "for use in fulfilling" Order 4448.
Polartec's breach of contract claim refers only to Order 4448, not any other contracts related to the CDJ project. Polartec presents no evidence, nor does it even allege, that any of TAC's orders were made pursuant to Order 4448. The undisputed evidence suggests that only Propper placed such orders. Accordingly, any damages stemming from 180s's termination of Order 4448 do not include TAC's outstanding invoice balances. In contrast, as discussed above, to suggest that 180s is not responsible for Propper's unpaid invoices because Propper submitted separate purchase orders obscures the larger picture — all of the materials used to fulfill the Propper orders were reserved pursuant to Order 4448. Accordingly, the damages provision of Order 4448 contemplates the goods used to fill the Propper orders, and any unpaid balances on these orders can be attributed to 180s.
Moreover, the court notes that Polartec offers no evidence to suggest that TAC defaulted on its contracts with Polartec because 180s's terminated Order 4448. To the contrary, David Costello, the head of Polartec's military business, suggested TAC may have defaulted due to Powershield's failure to meet the government's shade requirements. (Def.'s Ex. 70 at 177.)
The court notes that it is unclear from the record what amount, if any, remains to be paid on these invoices. 180s submits evidence, undisputed by Polartec, that Propper had satisfied approximately half of the outstanding debt by October 2007. (Def.'s Ex. 151.)
In light of the above discussion, there are material questions of fact regarding the existence and extent of compensation that Polartec is entitled to as a result of 180s's termination of Order 4448. Moreover, as discussed below, any obligation of 180s's to compensate Polartec is not excused by Polartec's alleged breach of Order 4448. Accordingly, neither party is entitled to summary judgment on Polartec's breach of contract claim.
B. Polartec's Alleged Breach of Order 4448
The record strongly suggests that 180s terminated Order 4448 because Propper was rejected as an additional subcontractor on the CDJ project, not because Polartec had defaulted on the contract. Moreover, there is no evidence to suggest that 180s ever gave Polartec notice that it was cancelling due to default, a specific requirement under the order. Nevertheless, 180s, relying on language in the contract that its rights as buyer are not limited by the contract ( see Order 4448 ¶ 8(e)), claims that it is entitled to summary judgment on Polartec's breach of contract claim because it was Polartec which materially breached the contract thus excusing 180s's performance. 180s relies on the same arguments for its own breach of contract counterclaims, which allege damages in the form of lost profits and funds expended to replace Polartec fabric. Both parties have moved for summary judgment on these counterclaims.
In its papers, 180s seems to suggest that, based on the subsequent failure of Powershield to meet USMC's standards for the CDJ, it had reasonable grounds to believe Polartec would not meet its contractual obligations and, thus, had a retroactive basis to terminate Order 4448 for default. 180s contends that, at the time of termination, it was unaware of Polartec's default because Polartec failed to adequately apprise 180s of the problems involved in producing a fabric that conformed to the USMC's requirements. It is undisputed, however, that 180s was the prime contractor on the project and, while it may not have been privy to all communications regarding Powershield's shade evaluations, it certainly had access to all materials being shipped to TAC for the CDJ project. Moreover, by mid-January, prior to cancellation of Order 4448, all parties were aware that the USMC was dissatisfied with the CDJs due to shading issues. In fact, USMC ordered production ceased at the end of January, again, before 180s terminated Order 4448.
i. Time-Is-of-the-Essence Provision
First, 180s contends that Polartec materially breached the contract by failing to adhere to the "time-is-of-the-essence" provision in paragraph 10(a) of Order 4448. Missing from the face of the contract, however, is an explicit delivery schedule. Instead, the contract expressly stated that "delivery instructions" would follow, and, in an email confirming Order 4448 sent October 13, 2006, 180s provided Polartec with a proposed delivery schedule. Contrary to 180s's suggestion, this delivery schedule did not become a term of the contract. Rather, Polartec timely objected to the proposed schedule in an email reply sent by Detellis on October 16, 2006, which stated, "Once the order is planned, we will email over a delivery schedule — once plan dates have been assigned we will do our best to improve any dates that do not match your request schedule." (Def.s' Mot. Ex. 97.) This correspondence indicates that Polartec did not intend to incorporate 180s's proposed schedule into the contract and instead intended to develop its own delivery schedule based on project planning. Accordingly, 180s's proposed delivery schedule never became a provision of Order 4448. See MD Code, Com. Law § 2-207 (stating that additional terms to a contract suggested in a confirmation of the contract do not become part of the contract if the other party timely objects to them); Phillips Bros. v. Locust Indus., Inc., 760 F.2d 523, 525 (4th Cir. 1985) (applying Maryland law and concluding additional term suggested in a warehouse receipt became part of sales contract where other party did not timely object to its inclusion). Thus, 180s's breach of contract argument fails because it relies on specific deadlines that were never incorporated into the contract. Cf. Cambridge Techs. v. Argyle Indus. Inc., 807 A.2d 125, 133-34 (Md.App. 2002) (finding breach of the contract's time-of-the-essence provision where the contract expressly incorporated the delivery schedule).
180s attaches great significance to the notation on the face of the contract, claiming that because the contract referred to follow-up delivery instructions any such instructions were incorporated into the contract. The case cited in support of this contention, Ray v. William G. Eunice Bros., Inc., 93 A.2d 272, 279 (Md. 1952), is easily distinguishable, however, because the referenced writings in that case were construction plans and specifications which, while not fastened to the contract at the time of execution, were specifically referenced to therein. In contrast, the contract at issue in this case did not reference any specific document but rather indicated merely that delivery instructions would follow.
ii. Breach of Warranty Provision
Additionally, 180s claims that Polartec breached the express warranty provision of Order 4448, which provides that "[b]y furnishing goods under this Order, Seller warrants that the goods . . . will be fit for the Buyer's intended use, provided Seller has reason to know of such use." (Order 4448 ¶ 17.) Specifically, 180s contends that Polartec breached the warranty by failing to produce a Powershield fabric that conformed to USMC's requirements for the CDJ. In response, Polartec contends that Order 4448 did not expressly provide that Powershield had to meet all of USMC's specifications nor did it even reference the CDJ project, and, thus, Polartec was under no obligation to produce a fabric that conformed to the CDJ requirements. The express warranty provides, however, that furnished goods would be fit for 180s's intended use, provided Polartec had reason to know of that use. As 180s points out, it is undisputed that Polartec knew that 180s was ordering additional Powershield to meet anticipated future demand for the CDJs and that Polartec was familiar with USMC's specifications for the CDJ.
Polartec further argues that the warranty provision was never triggered because it did not furnish any goods to 180s under Order 4448. As discussed above, however, the subsequent Propper orders are subsumed within Order 4448, and it is undisputed that Polartec did furnish 817 yards of Powershield to Propper pursuant to those orders. It is also undisputed that, because Propper was never approved as a manufacturer, the Powershield furnished to Propper was never incorporated into a CDJ. Moreover, the evidence indicates that the Propper orders and Order 4448 were terminated because of USMC's rejection of Propper and not because of the quality of the Polartec product. Nevertheless, 180s argues that Polartec breached the express warranty of Order 4448 because the Powershield furnished under the separate TAC orders was eventually removed from the CDJ project by USMC. This argument, which relies on Polartec's performance on a distinct, though related, contract, is unavailing. The warranty provision of Order 4448 is triggered only by goods furnished pursuant to that order, and, again, that small amount of fabric was never incorporated into a CDJ. Moreover, as noted below, 180s has not conclusively established that Polartec breached the TAC orders by supplying a product that the designated Natick representative deemed acceptable to ship.
Because 180s has failed to raise a genuine issue for trial that Polartec breached the express warranty of Order 4448, the court will grant Polartec's motion for summary judgment as to this counterclaim and will deny 180s's motion.
C. Polartec's Alleged Breach of TAC's Orders
180s also contends that Polartec breached its orders with TAC, which caused significant damage to 180s, a remote purchaser on those contracts. Specifically, 180s contends that Polartec breached the implied warranty of fitness for a particular purpose by failing to produce a fabric that conformed to the requirements of the TAC contracts and the overall CDJ project.
While Maryland has not expressly waived the vertical privity requirement for a claim of breach of the implied warranty of fitness for a particular purpose, see Pulte Home Corp. v. Parex, Inc., 923 A.2d 971, 1000 (Md.App. 2007), the Maryland Court of Appeals has suggested that "privity itself is not a required element that must be shown independently," and that a plaintiff need only prove that "the buyer had a particular purpose known to seller[.]" Ford Motor Co. v. General Accident Ins. Co., 779 A.2d 362, 376 (Md. 2001). Here, the evidence clearly demonstrates that Polartec knew that 180s, as the prime contractor, was a remote purchaser of materials supplied to TAC, and that any materials involved in the CDJ project had to meet certain USMC requirements.
Section 2-315 of the Maryland Code, Commercial Law Article, states that an implied warranty of fitness for a particular purpose exists:
Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified . . . an implied warranty that the goods shall be fit for such purpose.
The Maryland Court of Appeals has identified three affirmative elements that a plaintiff must prove to establish a breach of warranty: that (1) the seller had "reason to know the buyer's particular purpose," (2) the seller had reason to know that the buyer relied on the "seller's skill or judgment to furnish appropriate goods," and (3) the buyer did, in fact, "rely upon the seller's skill or judgment." Ford Motor, 779 A.2d at 374-75.
While the record suggests that 180s can satisfy these elements, which would go toward proving only that Polartec supplied its fabric to TAC under an implied warranty, not that the warranty was, in fact, breached, there are genuine material disputes of fact regarding Polartec's asserted affirmative defenses that make summary judgment on this claim inappropriate. Questions exist as to whether 180s or TAC gave the required notice to sue under Md. Code, Com. Law § 2-607(3)(a), see Lynx, Inc. v. Ordnance Prods., Inc., 327 A.2d 502, 511-12 (Md. 1974); whether Polartec's disclaimer of the implied warranty contained in its order acknowledgments became a term of the parties' contract under Md. Code, Com. Law § 2-207, taking into consideration whether enforcement of the disclaimers would defeat the essential purpose of the contract, see USEMCO, Inc. v. Marbro Co., 483 A.2d 88, 95 (Md.App. 1984); and whether the disclaimer conflicts with either the express terms of TAC's purchase orders or Polartec's certifications of compliance or both.
Further, there are material questions of fact regarding whether, in the event the warranty existed, Polartec breached that warranty. The evidence demonstrates that the USMC eventually rejected the Powershield fabric, as it failed to meet certain military specifications; however, it is undisputed that Lomba, the designated Natick representative, had deemed that fabric acceptable to ship. While 180s downplays the significance of this recommendation, contending that Lomba had no authority to formally approve the fabric, it is clear from the record that Polartec was instructed to work with Lomba to improve its fabric shading and take direction from her as to how to proceed with production. Moreover, Lomba testified that she informed Polartec that the failing IR value, one of USMC's eventual reasons for removing Polartec from the project, was a secondary consideration during the production process due to the CDJ's primary use in non-combat environments.
In light of the genuine issues of fact that have been raised by both parties, the court will deny both motions for summary judgment as to this claim.
CONCLUSION
As discussed above, the court will grant Polartec's motion for summary judgment only as to 180s's counterclaims that Polartec breached Order 4448, and will deny Polartec's motion for all other counts. The court will also deny 180s's motion for summary judgment as to all counts. A separate order follows.
ORDER
For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that:
1. the defendant's motion to amend/correct answer and counterclaims (docket entry no. 34) is DENIED;
2. the motions to seal and to amend or remedy omissions (docket entries no. 39, 41, 44, 45, and 48) are GRANTED;
3. the plaintiff's motion for summary judgment (docket entry no. 40) is GRANTED in part and DENIED in part;
4. the defendant's motion for summary judgment (docket entry no. 43) is DENIED; and
5. the plaintiff's counsel is requested to arrange and initiate a conference call set for Tuesday, April 28, 2009 at 5:30 p.m. to schedule further proceedings in this case.