Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

DACOR CORP. v. SIERRA PRECISION

January 9, 1991

DACOR CORPORATION, an Illinois Corporation, Plaintiff,
v.
SIERRA PRECISION, a California Corporation, Defendant



The opinion of the court was delivered by: BUA

 NICHOLAS J. BUA, UNITED STATES DISTRICT JUDGE

 Plaintiff Dacor Corporation ("Dacor") is a manufacturer of scuba diving equipment. Between 1985 and 1987, Dacor purchased scuba regulator hoses from defendant Sierra Precision ("Sierra"). Dacor incorporated the regulator hoses into its products, which were then distributed to Dacor dealers. When Dacor discovered that the regulator hoses were defective, it conducted a product recall. Having initially purchased the defective products from Sierra, Dacor commenced this diversity action against Sierra. Dacor's two-count complaint asserts claims for breach of contract (Count I) and breach of the implied warranty of merchantability (Count II). Sierra has moved to dismiss Count I in its entirety and a portion of Count II. During the pendency of the motion to dismiss, Dacor voluntarily dismissed Count I. Consequently, this order only concerns Count II.

 With respect to Count II, Sierra does not contest the substance of Dacor's breach of warranty claim. Instead, Sierra objects to the damage request contained in paragraph 15 of the complaint. Sierra moves to dismiss paragraph 15 to the extent it contains a request for consequential damages and loss of good will.

 Sierra's final challenge to Dacor's request for consequential damages is that Dacor has not alleged any facts demonstrating its entitlement to consequential damages. Yet, Dacor explicitly alleges that it incurred $ 136,337.08 in damages as a result of recalling the defective products. Sierra suggests that these costs do not fit within the strict definition of consequential damages. See Ill. Rev. Stat. ch. 26, para. 2-715(2). Apparently, Sierra believes that the costs of recall can never be characterized as consequential damages. This assumption is erroneous. See National Crane Corp. v. Ohio Steel Tube Co., 213 Neb. 782, 332 N.W.2d 39, 46 (1983) (Boslaugh, J., dissenting) ("the losses incurred to finance a recall program are consequential, not actual, damages under the Uniform Commercial Code"); see also Stone, Recovery of Consequential Damages for Product Recall Expenditures, 1980 B.Y.U. L. Rev. 485 (1980). Indeed, Sierra has not provided any authority upon which to conclude, as a matter of law, that the costs of a product recall cannot be recovered as consequential damages. Dacor's allegations put Sierra on notice as to the nature of relief sought and the extent of damages. At this stage of the litigation, Dacor's allegations are sufficient. The court will not require Dacor to parrot the language of Ill. Rev. Stat. ch. 26, para. 2-715(2) in order to pursue a claim for consequential damages. Accordingly, Sierra's motion to dismiss is denied as far as consequential damages are concerned.

 Sierra's challenge to the legal sufficiency of Dacor's claim for loss of goodwill is more persuasive. Dacor does not seek damages attributable to a loss of existing customers; rather, Dacor requests damages for the loss of potential customers. Due to the speculative nature of such a damage request, loss of goodwill is not compensable in a contract action. Chrysler Corp. v. E. Shavitz & Sons, 536 F.2d 743, 746 (7th Cir. 1976); see also Manuel Int'l, Inc. v. M.R. Berlin Co., 525 F. Supp. 90, 94 (N.D. Ill. 1981) ("damage to business reputation, or loss of good will, is not recoverable in a breach of contract claim under Illinois law"). The comments of Judge Augustus Hand, as quoted by the Seventh Circuit in Chrysler Corp., supra, are equally apropos here:

 
If the plaintiff . . . can recover for loss of good will, it is difficult to see what limits are to be set to the recovery of such damages in any case where defective goods are sold and the vendee loses customers. Indeed, if such were the holding, damages which the parties never contemplated would seem to be involved in every contract of sale.

 Chrysler Corp., 536 F.2d at 746 (quoting Armstrong Rubber Co. v. Griffith, 43 F.2d 689, 691 (2d Cir. 1930)). Insofar as Dacor seeks damages for loss of goodwill, Sierra's motion to dismiss is granted.

 For the foregoing reasons, Sierra's motion to dismiss is granted in part and denied in part.

 IT IS SO ORDERED.

19910109

© 1992-2004 VersusLaw ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.