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LOEFFEL STEEL PRODUCTS, INC. v. DELTA BRANDS

February 25, 2004.

Loeffel Steel Products, Inc., Plaintiff,
v.
Delta Brands, Inc. d/b/a/ DBI; Samuel F. Savariego, Defendants; Delta Brands, Inc., Counter-Plaintiff, v. Loeffel Steel Products, Inc., Counter-Defendant; Delta Brands, Inc. and Samuel Savariego, Third-Party Plaintiffs, v. Industrial Magnetics, Inc., Third-Party Defendant



The opinion of the court was delivered by: ARLANDER KEYS, Magistrate Judge

MEMORANDUM OPINION AND ORDER

In this diversity action arising out of the sale of industrial Page 2 machinery, Defendants, Delta Brands, Inc. and Samuel Savariego (collectively "DBI"), move this Court for partial Summary Judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure.*fn1 For the reasons set forth below, DBI's motion is denied.

BACKGROUND FACTS

  Plaintiff, Loeffel Steel Products ("Loeffel"), processes steel and delivers finished product to various equipment manufacturers. In late 1999, Loeffel began looking for a new piece of equipment. Acting on Loeffel's interest, a DBI salesperson, Gautam Mahtani, contacted Loeffel in January of 2000 touting their new product, a multi-blanking line.

  Purchase negotiations subsequently began and various representations were made. The parties' recollections of these representations sharply diverge. For instance, DBI claims that Loeffel represented that its primary business was processing prime steel and that Loeffel only intended to run quality product on the new line. Loeffel denies this, and says that DBI was aware that Loeffel also processed secondary steel. Loeffel also contends that DBI represented that the new line would not require separator-disks in the stacker area and would have automatic blade gap adjustment.

  Further, Loeffel claims that DBI made additional Page 3 representations during an escorted trip to an Indiana warehouse to view, an. existing DBI line. According to Loeffel, DBI promised that Loeffel's line would be designed so that it could be installed at floor-level. Additionally, Loeffel claims that DBI repeated the assurance that the line would not require separators.

  After Loeffel confirmed its interest in DBI's product, the parties exchanged draft sales contracts. On or about March 1, 2000, the parties executed the final revision (the "Contract"). The Contract contains an Annex A (the "Annex"), which attaches a series of correspondence which were incorporated into the Contract by reference. DBI contends that the Annex contains a provision disclaiming DBI's responsibly for consequential damages. Loeffel disagrees with DBI's interpretation, and claims that the parties intended to limit the consequential damages waiver only to issues arising out of the installation of the equipment. Beyond the Contract's terms, the parties made certain contemporaneous oral agreements. One such agreement regarded the line's installation, which Loeffel claims DBI estimated would cost $70,000.

  After contracting, the parties discovered that Loeffel's plant lacked the electrical capacity to maintain DBI's equipment, and Loeffel was, therefore, forced to incur additional, uncontemplated costs to increase the plant's on-site energy intake. The parties disagree over who is to blame for this oversight. DBI maintains that Loeffel's plant manager made the Page 4 decision that the plant could handle the new line, whereas Loeffel places blame on DBI's inaccurate representations that Loeffel's plant had sufficient electrical capacity for the incoming DBI equipment.

  The next problem involved the new line's installation. DBI complains that Loeffel delayed shipment, and then hired a third-party installer whose work caused significant problems. Again, Loeffel deflects blame and faults DBI's failure to test the machine and improper installation instructions. Also, Loeffel claims that, during his escorted trip to Indiana, DBI assured Loeffel that his line would be designed so that it could be installed at floor-level, but delivered prints calling for a below-ground installation.

  Once installed, operational problems arose, and the parties blame each other for the ensuing difficulties. Among its complaints, Loeffel cites continuous problems with the line's stacker, even when processing "pristine" coils.*fn2 Additionally, Loeffel complains that the line's leveler did not perform to its represented range and created unsatisfactory products. Further, Loeffel cites problems with the line's slitting unit, in that it lacks the represented tooling and/or software program. Finally, Page 5 Loeffel claims that the new line required separators in the multi-blanking mode, which is directly contrary to DBI's explicit representations. While DBI does not specifically refute each of Loeffel's complaints, it claims that the line will meet production expectations, so long as Loeffel runs commercial quality steel through the machine.

  Faced with continuing operational difficulties, Loeffel initiated the present action. Loeffel's complaint fashions five counts against DBI, including breach of contract (Count I), breach of express warranty (Count II), breach of implied warranty of merchantability (Count III), breach of implied warranty of fitness for a particular purpose (Count IV), and fraud(Count V).*fn3 Following written discovery, DBI now moves for summary judgment on Count V. DBI claims that Loeffel has not produced evidence to sustain its fraud claim and that summary judgment is, therefore, appropriate. DBI further moves the Court to reject Loeffel's prayer for consequential damages because, it claims, the Contract specifically relieves DBI from liability for such damages.

  STANDARD OF REVIEW

  The Court will grant summary judgment only if the pleadings and supporting documents show that there is no genuine issue of material fact, and that the moving party is entitled to a judgment Page 6 as a matter of law. Fed.R.Civ.P. 56(c) (2003). A genuine issue of material fact exists if the evidence is such that a reasonable jury could return a verdict for the nonmoving party, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a genuine issue of material fact exists, the Court views the facts in the light most favorable to the nonmoving party and draws all reasonable inferences in the nonmoving party's favor. Shank v. William R. Hauge, Inc., 192 F.3d 675, 681 (7th Cir. 1999).

  The moving party in a motion for summary judgment bears the initial burden of demonstrating that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party's burden is met, then the nonmoving party must set forth specific facts showing that there is a genuine issue for trial in order to survive summary judgment. Schacht v. Wisconsin Dep't of Corrs., 175 F.3d 497, 504 (7th Cir. 1999), In a summary judgment proceeding, the Court ...


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