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Empire Bucket, Inc. v. Contractors Cargo Co.

United States Court of Appeals, Seventh Circuit

January 15, 2014

EMPIRE BUCKET, INC., Plaintiff-Appellee,
v.
CONTRACTORS CARGO COMPANY, Defendant-Appellant.

Argued Oct. 31, 2013.

Page 1069

Kent I. Carnell, Lawton & Cates, Madison, WI, for Plaintiff-Appellee.

George S. Peek, Crivello Carlson, S.C., Milwaukee, WI, for Defendant-Appellant.

Before BAUER, MANION, and ROVNER, Circuit Judges.

MANION, Circuit Judge.

Contractors Cargo Company engaged Empire Bucket, Inc., to fabricate a steel railcar deck. After the deck fractured, Contractors Cargo refused to pay the full purchase price and Empire Bucket sued for breach of the contract. Contractors Cargo countersued for breaches of the contract, the implied warranty of merchantability, and the implied warranty of fitness for a particular purpose. Prior to trial, the district court granted Empire Bucket's motion in limine to exclude any testimony concerning one of the tests performed on the deck after it failed. The jury returned a verdict for Empire Bucket. Contractors Cargo appeals. We affirm.

I. Facts

Contractors Cargo Company, a transportation business engaged in heavy-haul operations throughout the United States, commissioned Empire Bucket, Inc., to fabricate a steel railcar deck to be used with Contractors Cargo's Schnabel railcar— a specialized railroad freight car for transporting heavy and oversized loads. Contractors Cargo hired a third to design the deck. The designs specified that the deck be fabricated from T-1 high-strength steel and that the welding be performed pursuant to American Welding Society specifications. The deck was designed to attach to the Schnabel car and to transport up to an 800,000-pound load. Empire Bucket fabricated the deck, which passed inspection by an outside agency and all nondestructive tests, and delivered it. Contractors Cargo

Page 1070

connected the deck to its Schnabel railcar and loaded it to approximately 820,000 pounds. The next morning, an employee observed that the deck had dropped about three inches overnight. Contractors Cargo attempted to raise the deck with a hydraulic jacking system, but the deck fractured during the attempt.

Contractors Cargo hired a metallurgical engineer, Josh Schwantes, to determine why the deck had fractured. Schwantes determined that the deck contained an inclusion— which in this case meant a portion of the weld was composed of material with properties different from the properties of the material in the rest of the weld. The inclusion was approximately 1/10th of an inch in length at the location where the crack originated. Schwantes also performed various tests on the deck, including a " Charpy v-notch impact test." This test showed that the material around the inclusion had low fracture toughness, which meant that the weld material was more brittle than expected. The deck passed all other nondestructive and destructive tests for the purposes of satisfying American Welding Society specifications.[1]

Based on this testing, Contractors Cargo concluded that the deck failed because Empire Bucket did not properly fabricate it. Thus, Contractors Cargo refused to pay Empire Bucket the full purchase price. Empire Bucket sued in Wisconsin state court for breach of contract. Contractors Cargo removed the action to federal district court and filed various counterclaims, including claims for breaches of the contract, the implied warranty of merchantability, and the implied warranty of fitness for a particular purpose.

Prior to trial, Empire Bucket filed a number of motions in limine, including a motion to exclude any testimony regarding the Charpy impact test performed on the deck. American Welding Society standards provide that if a project is to be welded to Charpy toughness criteria, that criteria must be specified in the contract documents. Thus, Empire Bucket argued, the Charpy impact test was irrelevant because the parties' contract did not specify any Charpy toughness criteria. The district court directed Contractors Cargo to proffer its proposed testimony regarding the Charpy impact test and its relevance to Contractors Cargo's claims.

Contractors Cargo explained that it did not intend to offer testimony regarding the Charpy impact test performed on the deck for the purpose of demonstrating that the parties' contract required the deck to pass such testing. (Indeed, Contractors Cargo stipulated that the contract did not require the deck to satisfy any Charpy toughness criteria.) Rather, Contractors Cargo stated that it intended to offer testimony concerning the Charpy impact testing to establish that the weld material at the location of the inclusion had low fracture toughness (that is, that it was unusually brittle). And the test indicating brittleness supported Contractors ...


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