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Indeck Power Equipment Co. v. Ring Power Corp.

September 14, 2006

INDECK POWER EQUIPMENT COMPANY, AN ILLINOIS CORPORATION, PLAINTIFF,
v.
RING POWER CORPORATION, A FLORIDA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Honorable David H. Coar

MEMORANDUM OPINION AND ORDER

On October 23, 2003, Defendant Ring Power Company filed a notice of removal of Plaintiff Indeck Power Equipment Company's original complaint, filed in the Circuit Court of Cook County. Plaintiff filed an amended three-count complaint in this Court on May 19, 2004. Count I alleged consumer fraud and deceptive business practices in connection with a 1999 purchase of a 1750 KW generator set. Count II alleged that Defendant breached an express warranty made in connection with the 2001 purchase of 24 XQ 2000 generator sets. Count III requested the remedy of reformation in connection with the 2001 purchase.

By order dated January 25, 2005, this Court granted summary judgment in favor of Ring Power as to Count I. See January 25, 2005 Memorandum Opinion and Order. As for Counts II and III, however, this Court found that significant factual issues remained. Consequently, those claims were set for trial. On February 28, 2005, a bench trial proceeded on those claims.

At the close of trial, both parties submitted post-trial memoranda on the subject of liability. Based on the trial, and parties' pre-trial and post-trial submissions, the Court makes the following findings of fact and conclusions of law. To the extent that any findings may be deemed conclusions of law, they shall also be considered conclusions. To the extent that any conclusions may be deemed findings of fact, they shall also be considered findings. See Miller v. Fenton, 474 U.S. 104, 113-14 (1985).

FINDINGS OF FACT

The Parties

1. Plaintiff Indeck Power Equipment Company ("Indeck") is an Illinois corporation with its principal offices in Wheeling, Illinois.

2. Plaintiff is in the business of buying and leasing power plant equipment.

3. Defendant Ring Power Corporation is a Florida corporation with its principal offices in Jacksonville, Florida.

4. Defendant is in the business of, among other things, selling and leasing power plant equipment.

5. Defendant is an authorized Caterpillar, Inc. ("Caterpillar") machinery dealer.

The Transaction

6. The business transaction at issue in this case was triggered by an energy shortage on the West Coast in 2001.

7. Plaintiff's CEO and Chairman Gerald Forsythe ("Forsythe") wanted to capitalize on the shortage by purchasing diesel generator sets and leasing them to utilities. The utilities that leased the sets could use them to generate additional power. Defendant had a similar plan and had already sent between twenty and thirty generator sets to the West Coast by the time that the events that are the subject of this litigation took place.

8. A generator set is a piece of power generation equipment. A "power module" is generator set in a container. The term generator is sometimes used as a short hand way of saying generator set or power module.

9. Forsythe had heard and seen the term "utility grade" used in connection with generator sets, including sets made by companies other than Caterpillar.

10. Forsythe understood utility grade to mean capable of paralleling with utilities.

11. In March of 2001, Forsythe did not know the Caterpillar-specific terminology that was used for any of Caterpillar's generator items, models, or units, but expected to purchase equipment that could parallel with utilities.

12. Prior to 1997, Caterpillar made generator sets with two different types of switchgear--the company referred to one type as "Standard Grade" ("SG") switchgear and the other type as "Utility Grade" ("UG") switchgear. The latter had more features, was more complex, and could be used by utilities.

13. In light of the increasing demand for generators that could be rented to utilities, Caterpillar created a switchgear that did not have the full features of the UG switchgear but could still safely link to utilities. Caterpillar refers to that switchgear as "Utility Convertible" ("U C"). Like UG switchgear, it can safely parallel with utilities. The UG module is better suited to permanent installations while the UC module was specifically designed for rental applications.

14. Switchgear is housed in a power module. Caterpillar describes UC power modules as those that contain automatic paralleling switchgear and have supplemental "Utility Conversion panels" which allow the UC modules to be used for more complex utility paralleling applications. In contrast, UG modules contain switchgear that is intended for either automatic or manual paralleling with a utility and do not have the panels.

15. The UC module is easier to transport than the UG module because it has a fixed mount circuit breaker as opposed to a draw-out circuit breaker. It also comes with two less protective relays. It cannot be customized in the same way as a UG module.

16. The UC module is significantly cheaper than the UG module. At trial, the testimony suggested that at the time of the transaction the price difference may have been about $80,000 per unit.

17. Forsythe did not know that Caterpillar had two different types of generator sets capable of paralleling with utilities. He had previously purchased power modules that could parallel with utilities. He did not expect the Caterpillar equipment he was about to purchase to be identical to that previous purchase but did expect it to be "utility grade."

Trade Usage of the Term "Utility Grade"

18. Bana Dominick, a former employee of Plaintiff, testified that on numerous occasions he had heard and used the term utility grade as a descriptive term for generator sets that could parallel to a utility. Dominick testified that he had managed projects where "many times" a utility convertible model had been successfully paralleled to a utility.

19. Both Schultz and Forsythe understood the term utility grade to mean capable of paralleling with utilities. That was also the definition used in the industry.

The March 7, 2001 Phone Conversation and Subsequent Transaction

20. On or about March 7, 2001, Forsythe contacted Lyndon Schultz, an assistant used engines sales manager for Defendant.

21. Forsythe told Schultz that he was looking to purchase used generator sets that he could rent to utilities. He said he was looking to purchase those sets as quickly as possible.

22. Forsythe asked Schultz if the sets listed in a Ring brochure were available. That brochure did not use the word ...


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