United States District Court, N.D. Illinois
March 12, 2004.
Loeffel Steel Products, Inc., Plaintiff,
Delta Brands, Inc. d/b/a/ DEI; 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, Third-Party Defendant, Industrial Magnetics,
Inc. ("IMI"), moves for partial summary judgment, pursuant to Rule 56
of the Federal Rules of Civil Procedure, For the
reasons set forth below, the motion is GRANTED in part and DENIED
IMI is a Michigan corporation that produces and sells magnets for use
in industrial machinery. IMI sold Third-Party Plaintiff, Delta Brands,
Inc. ("DBI"), magnets that DBI incorporated into equipment manufactured
for Plaintiff, Loeffel Steel Products, Inc. ("Loeffel"). When the
equipment malfunctioned, Loeffel initiated the present action against
DBI. In response, DBI brought a third-party complaint against IMI,
alleging that IMI misrepresented the magnets' capabilities and must,
therefore, share in DBI's liability, if any, IMI now moves for partial
summary judgment. The following facts are relevant to the issues raised
in IMI's motion.
Sometime in mid-1999, DBI requested that IMI's regional sales
representative, Jim Branch, provide pricing information for certain
magnets. On June 22, 1999, Mr. Branch sent DBI a written proposal
describing the requested magnets and their possible uses ("June
Proposal"). The June Proposal also included a terms and conditions page
that included conspicuous warranty disclaimers.
Months later, Mr. Branch again visited DBI's office. DBI informed Mr.
Branch that it needed more magnets for a number of new applications,
including the Loeffel project. Mr. Branch drew up a quotation, explaining
pricing and payment terms for the requested magnets ("Branch Quotation").
The Branch Quotation described the same magnets referenced in the June
Proposal, but was not
accompanied by any warranty disclaimers.
On May 10, 2000, DBI issued a purchase order requesting the magnets
described in the Branch Quotation ("Purchase Order"). The Purchase Order
included certain terms and conditions intended to govern the purchase,
including a provision expressly providing for implied warranties. DBI
claims that it hand-delivered the Purchase Order to Mr. Branch. IMI
disputes this, and claims that it cannot locate the Purchase Order in its
IMI shipped the ordered magnets, and DBI incorporated them into
Loeffel's equipment. When Loeffel brought the present action, DBI filed a
third-party complaint against IMI, raising the following claims:
Indemnity (Count I), Contribution (Count II), Breach of Contract (Count
III), Breach of Express Warranty (Count IV), Breach of Implied. Warranty
of Fitness for a Particular Purpose (Count V), and Breach of Implied
Warranty of Merchantability (Count VI). IMI now moves for summary
judgment on the implied warranty counts (Counts V and VI). IMI argues
that DBI is collaterally estopped from pursuing these claims, and also
that the parties' contract conspicuously disclaims implied warranties.
IMI also moves to dismiss the contribution claim (Count II), arguing that
DBI's contract-based complaint precludes tort-based remedies.
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 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 will
disregard all facts not properly supported by the record. Brasic v.
Heinemann's Inc., 121 F.3d 281, 284 (7th Cir. 1997).
1. Implied Warranties (Counts V and VI)
IMI presents two arguments against Counts V and VI. First, IMI claims
that DBI is collaterally estopped from litigating the issue of implied
warranties because previous litigation conclusively decided the matter.
Next, IMI claims that the June Proposal expressly and conspicuously
waived all implied warranties.
A. Collateral Estoppel
The doctrine of collateral estoppel bars relitigating identical issues
decided by a previous adjudication. Kunzelman v. Thompson, 799 F.2d 1172,
1176 (7th Cir. 1986). IMI claims that the validity of IMI's warranty
disclaimers was previously litigated and decided in Caine Steel of
Michigan, Inc. v. Delta Brands, Inc. ("Caine Steel"). In Caine Steel, DBI
filed a similar third-party complaint against. IMI after suit was brought
against. DBI for selling defective equipment. On September 23, 2003, the
court recognized IMI's disclaimers, and dismissed DBI's implied warranty
claims. INI argues that the Caine Steel decision bars DBI's present
claims. The court disagrees.
The above-referenced decision is not accompanied by reasoning or
citations to authority. Rather, the half-page order states that the
decision was based on reasons stated "more fully on the record at a
hearing held on September 23, 2003." As IMI has not supplied the
transcript from this hearing, the court is unable to determine if the
disputed issues were identical to those surrounding the present dispute.
While it may be true that the complaints in each case are similar, this
alone cannot decide the matter. Without further insight into what
prompted the judge's actual decision, the court cannot accept IMI's
assertion that the Caine Steel decision turned on identical issues.
Moreover, DBI provides evidence demonstrating that the present case
involves a key issue that was not disputed in Cains Steel. In
that case, the parties agreed that the terms of the controlling offer
included implied warranty disclaimers, See DBI's Statement of Material
Facts, Ex. F. Here, DBI disputes that the relevant offer contained any
such disclaimers. Because the two cases differ in this one significant
respect, they do not share identical issues, and IMI cannot invoke
collateral estoppel to bar DBI's implied warranty claims.
B. Implied Warranty Disclaimers
IMI also argues that the terms of the June Proposal expressly and
conspicuously disclaimed all implied warranties. While DBI does not
dispute that the June Proposal contained conspicuous waivers, DBI
advances two positions as to why the disclaimers are without force.
First, DBI claims that waivers were not part of the parties' bargain
because UBI based the Purchase Order on the Branch Quotation and not the
June Proposal, Alternatively, DBI claims that, even if the parties'
contract incorporates the terms of the June Proposal, the Purchase Order
contained conflicting provisions that cancel out the disclaimers.
Neither party disputes that a contract was formed when DBI issued the
Purchase Order. But the parties disagree as to what constituted the
controlling offer. DBI argues that the Branch Quotation is the relevant
offer, whereas IMI argues for the June Proposal. IMI characterizes the
Branch Quotation as a "mere confirmation" of the June Proposal and not a
separate offer inviting DBI's acceptance. While IMI is certainly free to
position at trial, the court finds that the Branch Quotation exhibits
enough characteristics of a definite proposal to create a genuine dispute
of material fact regarding whether it constituted the controlling offer.
The Branch Quotation contains definite terms, including specifically
described subject matter, quantity, and pricing information.
Additionally, the Branch Quotation invites DBI's acceptance, as it sets
forth the required payment schedule. Lastly, the Branch Quotation fails
to reference the June Proposal. If the Branch Quotation was merely a
confirmation of a prior offer, it would be reasonable to expect at least
some reference to the June Proposal. Based on these observations, the
court finds that the Branch Quotation could serve as the controlling
offer. If it does, then IMI's warranty disclaimers would not apply to the
But even assuming that the July Proposal's terms were incorporated into
the contract, the court would still find that a dispute of fact exists as
to whether the warranty disclaimers survived DBI's acceptance. This is
because the Purchase Order provides its own warranty provisions that
directly conflict with IMI's terms and conditions excluding such
warranties.*fn1 Under relevant law, conflicting warranty provisions
cancel each other out,
and neither become part of the contract. Challenge Mach. Co. v. Mattison
Mach. Works, 359 N.W.2d 232, 236-37 (Micn. App. 1984).*fn2 Applying this
principle here, the conflicting implied warranty provisions would knock
each other out, and the parties' contract-would be silent with respect to
implied warranties. In such a case, the court would look to the Uniform
Commercial Code to determine whether the gales transaction gave rise to
implied warranties. Id at 237. The parties do not address this latter
issue, and resolution of this factual question is better left for trial.
In sum, the court finds that DBI has presented sufficient evidence to
raise a dispute of material fact as to whether the June Proposal's
warranty disclaimers were made part of the contract. Even assuming that
they were, a dispute of material fact exists as to whether the Purchase
Order's conflicting terms knocked out the disclaimers, and whether
implied warranties arose by operation of law. Accordingly, Counts V and
VI may stand.
2. Contribution (Count II)
IMI argues that DBI cannot bring a tort-based contribution claim
because the third-party complaint sounds entirely in contract, IMI is
correct that a tort claim cannot be maintained when a contractual
agreement exists and no separate and distinct duty from the contractual
obligation is established. See Sherman v. Sea Ray
Boats, Inc., 649 N.W.2d 783, 788-89 (Mich. App. 2002).*fn3 Here, DBI's
complaint focuses solely on its disappointed contractual expectations.
DBI does not allege that IMI engaged in any tortious behavior, or that
IMI's conduct established a separate and distinct duty beyond its
contractual obligations. Because DBI has not presented any argument as to
why the court should impose tort liabilities on the parties' contractual
relationship, the contribution claim must fail.
IT IS THEREFORE ORDERED that IMI's Motion for Partial Summary Judgment
be, and the same hereby is, GRANTED in part and DENIED in part. Count II
is dismissed. All other counts remain.