Operating Technical Electronics, Inc. v. Generac Power Systems, Inc., No. 4:2013cv00871 - Document 52 (N.D. Tex. 2014)
Court Description: Memorandum Opinion and Order granting in part, denying in part 40 Motion for Summary Judgment filed by Operating Technical Electronics, Inc. re: 40 MOTION for Summary Judgment...Plaintiff have and recover from defendant damages in the amt of $788,885.30, subject to whatever reduction may be warranted if defendant is permitted to pursue its affirmative defenses and does so successfully. Further ORDERS that all in other respects plaintiff's second motion for partial summary judgment is denied. (Ordered by Judge John McBryde on 10/2/2014) (wrb)
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Operating Technical Electronics, Inc. v. Generac Power Systems, Inc. Doc. 52 ' is .t'i.$ 1 ..' 1'1 - - ' Q ' ,S .. ) . ) . 5 t. ' . L.-1,s'12..' (.i,)- . . 1 . NO -- R 1!.7n-'b O1T-,; j R11 N 7!.l7 7 L,- l 1 --'1-#-T , j E !'.-k C è9) . ) .. . Ti! p . - . IN THE UN ITED STATES DIST ICT . C NORTHERN DISTRICT OF IEXAS ' ' FORT WORTH DI SI VI . . ' . .. . -- ) i ,rI Jw s * 2 - I o . é j ) x à t .) . .. . r t .m .. . . t wa . ) tv r . e . . x CLERK,U. D1 FRI Cr tl ; S. S CI . ,t ) By - 1-.pIr -.-...---,..,. ) --- . . . ...-. e .v L .. . :. u- . . -. . OPERATING TECHNICAL ELECTRONICS , INC ., . j 1 ! @ , .. .. .' . Plaintiff , VS . NO . 4 :l3-CV-87l-A GENERAC POWER SYSTEMS , INC ., Defendant . MEMORANDUM OPINION ORD ER Now before the court for consideration is the second motion for partial summary judgment,l filed in the above action by plaintiff, Operating Technical Electronics , Inc . Defendant, Generac Power Systems, Incw filed a response, and plaintiff filed a reply . Having now considered all of the parties ' filings, the entire summary judgment record, the parties' Joint Pretrial Order, and the applicable legal authorities, the court concludes that the second motion for partial summary judgment should be granted in part and denied in part . ' ai ifon J 4, 201 fldi f s moi frp ri s Pl ntf une 4,ie t i t ton o atalummayj dg n,whihisbsqu nl sr r u me t c t u e e ty wihdr w on J y 1 2014. t e ul 0, Dockets.Justia.com 1. Pàaintiff's Complaint and Defendant ' Answer a Plaintiff initiated this action on October 24, 2013, by the filing of its original complaint. Plaintiff later filed a first amended complaint, where it asserted claims and causes of action against defendant for suit on open account , breach of written contract , and quantum meruit . Plaintiff sought damages from defendant in the principal amount of $789,396. 86, plus pre- and post-judgment interest, costs, and attorney ' fees. s In its answer, defendant asserted the affirmative defenses of unclean hands, economic loss, estoppel, offset/credit, and failure to mitigate damages . II . Grounds of Plaintiff' Motion and the s Nature of Defendant 's Response A. Plaintiff 's Motion Plaintiff moved for summary judgment only on its breach of contract claim , on the grounds that a contract existed between the parties, plaintiff complied with its terms, or was excused from compliance, and defendant defaulted in its performance. Plaintiff also argued that defendant 's affirmative defenses of unclean hands, economic loss, estoppel, and offset were ba/red by collateral estoppel, and that no genuine issue of material fact exists concerning plaintiff' attempts to mitigate damages that s would prevent s ummary judgment on that affirmative def ense. B. Defendant 's Response Defendant in its response maintained that fact issues persist regarding the amount of damages plaintiff is claiming , as well as whether plaintiff mitigated its damages, that preclude summary judgment. 111 . The Parties ' Prior Litiqation The instant action is the second between the parties in this court, and a brief summary of those proceedings is useful here . On May 31, 2012, plaintiff filed a complaint for declaratory judgment in Civil Case No. 4: 12-CV-345- before the Honorable Y, Terry R. Means ( HFirst Actionb , pertaining to warranty claims o defendant made on battery chargers it purchased from plaintiff. z Plaintiff sought declarations concerning the scope of the warranty it provided to defendant and the claim s made by defendant thereunder, as well as declarations on the limits of plaintiff's liability to defendant for any such claims. Defendant filed a combined motion to dismiss and answer, and counterclaimed for breach of contract , breach of implied warranty 2 ec urtk sj ca noieoft e ierc di Ci lCa eNo. 1 CV- Th o ta e udiil tc he ntr e or n vi s 4:2- 345Y. of merchantability , breach of express warranty, and breach of warranty for a particular purpose . Both . parties moved for summary judgment. On March l1, 2014, Judge Means signed an order granting plaintiff's motion f summary judgment or to the extent ( plaintiff) requests a declaratory judgment that its January 21, 2008 email ( as supplemented by the included November 2007 quotation) and Generac ' purchase order formed the basis of the s parties ' contract, and that OTE ' expressS warranty prov ision therefore became part of the parties ' agreement . The motion is also GRANTED to the extent OTE seeks summary judgment on Generac' claims for s breach of implied warranties and to the extent Generac claims OTE ' express warranty fails of its essential S purpose because of its twelve-month limitation . Generac' summary-judgment motion is GRANTED to the s extent it requests judgment on OTE'S request for attorney 's fees. The remainder of b0th motions are , however , denied . Pl.' App. at 43. The March 11 order denied summary judgment for s plaintiff on defendant' breach of warranty claim for failure to s provide notice, and also denied plaintiff ' motion as to s defendant ' claim that plaintiff ' 'express warranty failed of s s ' its essential purpose because OTE failed to timely repair oç replace the battery chargers .' Id . at t On March 27, 2014, Judge Means signed a final judgment, ruling that OTE ' January 2l, 2008 eS mail ( supplemented by as the included November 2007 quotation) and the purchase orders sent by defendant Generac Power Systems , Inc . ('Generac') formed the basis of the parties' contract, I ' and OTE 'S express-warranty prov ision therefore became part of the parties ' agreement concerning the sale and purchase of the goods at issue . Additionally, judgment is GRANTED in OTE'S favor and against Generac regarding Generac 's claims for breach of implied warranties and to the extent Generac claims OTE ' express warranty fails of its essential S purpose because of its twelvemonth limitation, . . . and those claims are DISMISSED WITH PREJUDICE to their refiling . Id. at 44. The final judgment also dismissed plaintiff' s remaining causes of action for declaratory judgment without prejudice as moot, and dismissed defendant's remaining claims agai nst plaintiff without prej ce. Defendant has appeale udi d Judge Means' ruli s ngs on t s he ummary judgment moti ons and t he final judgment. IV . Fqçts Pertaininq to the Instant A ction3 The following is an overview of evidence pertinent to the motion for summary judgment that is undisputed in the summary judgment record: Plaintiff designs and manufactures battery chargers . Manufacturing does not commence until a purchase order is received from a customer , and the chargers are then prepared 3 fcsaedei dfom t pate' resi s potoft moi f s The at r rve r he risbif n up r he ton or ummayj dg n a d r u me t n def ndantsr pons asw el ast pari 'J ntPr ralOr . e ' es e, l he tes oi eti der according to the customer' specifications. Defendant s manufactures generators for home , commercial, and industrial purposes . The parties began their business relationship in November 2007, when defendant contacted plaintiff and requested a quotation for potted battery chargers to be used in defendant 's home stand- generators. Plaintiff responded by electronic by f mail dated November 27, 2007, with a quote for both potted and non -potted battery chargers . Defendant has since purchased tens of thousands of battery chargers from plaintiff . The legal difficulties between the parties began in May 2012, when defendant filed a petition seeking the pre-suit deposition of plaintiff in the district court of Tarrant County , Texas. Shortly thereafter, plaintiff initiated the First Action against defendant. Notwithstanding the litigation between the parties, defendant continued ordering battery chargers from plaintiff. Although the First Action addressed warranty claims made by defendant regarding some of the chargers it purchased from plaintiff, defendant has made no warranty claims on plaintiff ' products shipped after January 1, 2013 . s The claims in the instant action pertain to orders placed by 4 poted bater char ri encl d i a pl tc e ementand fle wih epoxy, whiea non- l A t ty ge s ose n asi ncas ild t l poted char ri seal a encl ed wihoute ge s ed nd os t poxy. 6 defendant beginning in January 2013. Over the next several months , defendant ordered more than 50,000 battery charges from plaintiff. From January 1, 2013, through August 1, 2013, 44,732 battery chargers were delivered to, and accepted by , defendant , for which plaintiff sent invoices in the amount of $677,105.08. 5 Plaintiff withheld delivery of 5,976 battery chargers that were to be delivered in August 2013, due to non-payment by defendant . The total amount due on these chargers is $84,918.96. The 5,976 chargers remain in plaintiff' warehouse in Texas. s Plaintiff purchased the components to produce 2 ,000 battery chargers, intended for delivery to defendant in October 2013. However , due to defendant ' non-payment, plaintiff ceased s production of these chargers, and the component parts remain at plaintiff' assembly facility in China . The purchase order price s for the 2,000 chargers is $37,960. 00; however, plaintiff avoided $1,470. in assembly and shipping costs when it ceased assembly . 22 In July and August of 2013, Ed Isaack (rIsaackw), i ' plaintiff' operations manager, sent emails to defendant' s s employees regarding payment of outstanding amounts due ; however , defendant failed to respond . s fnda c ntnd dt ti di n trc i t rpsxc r e sv l da $5115 Alho hplitf De e nt o e e ha t d o e eve hit i ha g r aue t .6. t ug an if diput t cont i i acceded t def s ed hat enton, t o endantscl m f pur esofelm i i any f ualdiput . ' ai or pos i natng act s es Th $6 ,05. a ntrte t ade ucinof$ 15 i pan if cai dda g s e 77 1 08 mou el cs d to 51 .6 n litf s l me ma e . Plaintiff originally demanded $789,396. in damages. In 86 its reply, however, plaintiff clarified that the total amount of damages it is now seeking is $788,885.30, as explained in section VI . ., infra . A V. Applicable Summary Judqment Principles Rule 56 ( of the Federal Rules of Civil Procedure provides a) that the court shall grant summary judgment on a claim or defense if there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56( a); Anderson v . Liberty Lobby, Inc ., 477 U .S . 242, 247 - ( 1986). The movant bears the initial burden of pointing out to the court that there is no genuine dispute as to any material fact. Celotex Corp. v . Catrett, 477 U . . S 323, 325 ( 1986). The movant can discharge this burden by pointing out the absence of evidence supporting one or more essential elements of the nonmoving party ' claim, nsince a complete failure of proof s concerning an essential element of the nonmoving party ' case s necessarily renders all other facts immaterial .' Id . at 323 . ' Once the movant has carried its burden under Rule 56( a), the nonmoving party must identify evidence in the record that creates a genuine dispute as to each of the challenged elements of its case . Id . at 324 7 see also Fed . R. Civ. P. 56 ( c) 8 party asserting that a fact . is genuinely disputed must support the assertion by citing to particular parts of materials in the record . If the evidence identified could not lead a rational trier of fact to find in favor of the nonmoving party as to each essential element of the nonmov ing party 's case , there is no genui dis ne pute f tri and summary j or al udgment is appropriate . Matsushita Elec . Indus . Co . v . Zenith Radio Corp ., 475 U . 574, 587, 597 ( S. 1986). The standard for granting a motion for summary judgment is the same as the standard for rendering judgment as a matter of law . Celotex Corp w 477 U .S . at 323 . If the record taken as a whole could not lead a rational trier of fact to find for the non -moving party , there is no genuine issue for trial . Matsushita , 475 U . . at 597; see also Boeinq Co . v . Shipman, 4ll S F. 365, 374-75 ( 2d 5th Cir. 1969) ( banc) ( en explaining the standard to be applied in determining whether the court should enter judgment on motions for directed verdict or for judgment notwithstanding the verdict). V I. Analvsis A. Breach of Contract Claim To prove the existence of a valid contract under Texas law requ ires plaintiff to show offer and acceptance, meeting of the mind:, consent to the terms, and execution and delivery of the contract with the intent that it be mutual and binding . See Copeland v . Alsobrook, S. W.3d 598, 604 ( TeX . APp .--San Antonio 1999, pet. denied). There appears to be no dispute that the parties entered into a contract or contracts for defendant to purchase battery chargers from plaintiff. Because plaintiff has alleged defendant breached the parties' contract, plaintiff must also show, beyond the existence of a valid contract, that it performed or tendered performance, defendant breached the contract , and plaintiff sustained damages as a Consequence of the breach . Mullins v . TestAmerica , Inc w 564 F. 386, 418 ( 3d 5th Cir. 2009) ( quoting Aquiar v . Seqal, 167 S. W.3d 443, 450 ( . App .--Houston ( Tex 14th DiFt.) 2005, pet. deniedl). Again, defendant did not appear to dispute that it breached the parties ' contract . Instead , defendant argued against summary judgment only on the grounds that genuine issues of material fact exist with respect to ( the number of chargers 1) delivered by plaintiff to defendant , which affects the amount of plaintiff' damages, and ( whether plaintiff failed to mitigate s 2) its damages. In its first amended complaint and in its brief in support of the summary judgment motion, plaintiff contended that it is entitled to $789,396.86 in damages as a result of defendant' s failure to pay for battery chargers manufactured by plaintiff and delivered to defendant under the terms of the parties ' contract . The damages included 1,764 battery chargers plaintiff contended it delivered on June 25, 2013, in accordance With purchase order PDB32l6 . Defendant maintained in its response , however , that it only received 1,728 of those chargers . According to defendant , this discrepancy constitutes a genuine issue of material fact sufficient to defeat summary judgment. Defendant neither objected to any of plaintiff' other arguments or evidence in s support of its breach of contract claim , nor adduced controverting summary judgment evidence. Although plaintiff in its reply disputed the suggestion that defendant did not receive all of the 1,764 battery chargers associated w ith purchase order PDB3216, it indicated its willingness to reduce its claim by the difference in cost of the thirty-six purportedly undelivered chargers, a total of $511. 56. Hence , plaintiff in its reply rev ised the damages amount it is claiming to $788,885. 30. Plaintiff maintained that with its concession on the thirtysix purportedly undelivered chargers, no fact issues remain on its breach of contract claim . The court agrees. It appears to be undisputed that a valid contract existed between the parties and that defendant breached the contract . The court concludes that plaintiff is entitled to summary judgment on this claim. 11 Af firmative Defenses of Unclean Hands , Economic Los s . Estoppel , and Of fset - - - - In its answer to plaintiff ' first amended comp laint , s defendant asserted the following affirmative defenses :6 Unclean hands . OTE 'S claims are barred by the equ itable doctrine of unclean hands because any alleged damages it seeks are offset by its failure to comply with its own warranties and obligations to repair/ replace defective products . Econom ic Loss . OTE ' claims are barred because S its only damages are based upon alleged breach of contract damages . Bstoppel. OTE is estopped from seeking damages because it failed to comply with its agreements with Generac and honor its warranties . Offset/credit. Generac is entitled to an offset or credit for all or part of the damages sought by OTE . Def.'s Answer to First Am . Compl. at 3 (' ' Def.' Answerb s s ( paragraph numbers omitted). Plaintiff alleged that the foregoing affirmative defenses are barred by collateral estoppel . Although the heading in plaintiff's brief on this subject refers specifically to 'collateral estoppely' the brief also discusses ' ' res judicata. It is unclear which doctrine plaintiff has asserted, or if it intended to assert 50th res judicata and collateral estoppel . The preclusive effect of a prior federal court judgment is 6 endantal r s t afimatvedef ns off l e t m ii e dam ages, whih i addr s i Def so aied he fr i e e aiur o tgat c s es ed n s i vl C. i r ecton . , nf a. 12 controlled by federal common law . Taylor v . Sturgell, 553 U .S . 880, 89l ( 2008) However, in diversity cases, federal law incorporates the law of the state in which the rendering court sits . See Semtek Int l Inc . v . Lockheed Martin CQrD ., 53l U .S . l 497, 508 ( 2001) To s w the application of res judicata, or ho claim preclusion, requires plaintiff to prove: ( the parties l) are the same in 50th actions; ( the judgment in the first 2) action was rendered by a court of competent jurisdiction; ( the 3) first action was adjudicated by a final judgment on the merits; and, the same claim or cause of action is involved in both suits . Procter & Gamble Co . v . Amwav Corp ., 376 F .3d 496, 499 ( 5th Cir. 2004) Similarly , collateral estoppel requires a showing that ( l) the issue to be resolved in the second action is identical to that involved in the first action; ( the issue was actually 2) litigated in the first action; and, ( the determination of the 3) issue in the first action was a 'critical and necessary part of the judgment' in the first action. Rabo Aqrifinance, Inc. v. ' Terra XXI, Ltdw 583 F . 348, 353 ( 3d 5th Cir. 2009). Noting portions of the affirmative defehses raised in the First Action , plaintiff argued that ' tlhe issue, if any , of 'l warranty claims due to defective battery chargers has been litigated and is the subject of a Final Judgment.' Br. in Supp. l of Pl .' Second Mot . for Partial Summ . J . at 23 . After s discussing elements of res judicata and collateral estoppel under Texas law , plaintiff asserted that ( iln this case the parties were exactly the same as the prev ious case , facts concerning warranty claims were litigated in the prior case , those facts were the basis of the action, and the parties were adversaries. As such collateral estoppel precludes Defendant from using the same claims as a defense in this action . Id . at 24 . The court finds that plaintiff has failed to show it is entitled to judgment as a matter of law on defendant' s affirmative defenses based on res judicata or collateral estoppel . In the First Action , it appears Judge Means denied summary judgment for plaintiff on the warranty issues raised in the 'unclean hands' and 'estoppeln affirmative defenses , and that ' ' ' defendant dis miss those claims without prejudice. In additi ed on, the First Action considered warranty claims on battery chargers defendant purchased prior to 2013, while the instant action pertains to payment for chargers defendant ordered after January 2013. Plaintiff has not explained the application here of res judicata or collateral estoppel in light of the foregoing facts. Nor is it clear from plaintiff ' brief how collateral estoppel or s res judicata bar the defenses of economic loss or offset. Accordingly , plaintiff' motion is denied as to defendant ' s s 14 affirmati e defen ses of unclean hands , economic loss , estoppel , v and offset . C. Failure to Mitiqate Damaqes Defendant in its answer to plaintiff ' first amended s complaint asserted that plaintiff's claims wqre barred because plaintiff failed to mitigate its damages, specifically, because it 'failed to ' attempt to sale ( sic) battery charger component parts that are in China; and sale ( sicl battery chargers currently in its inventory in Texas.' Def.' Answer. The ' s chargers referenced in this affirmative defense include the 5,976 chargers which were manufactured and remain in plaintiff' s inventory , as well as the 2 ,000 chargers for which manufacturing was stopped due to defendant 's non-payment . The doctrine of mitigation of damages requires a party to make reasonable efforts to minimize damages when he can do so 'at a trifling expense or with reasonable exertions.' Great Am . Ins. ' Co . v . N . Austin Mun . Util . Dist . No . 1, 908 S . . W 2d 415, 426 ( . 1995) ( Tex quoting Walker v . Salt Flat Water Co., 96 S. . W 2d 231, 232 ( 1936)). A defendant that raises failure to mitigate as a defense has the burden of proving lack of diligence by the plaintiff, and it must also show the amount by which damages were increased by such failure to mitigate . Geotech Enerqy Corp . v . Gulf States Telecomm . & Info . Svs., Inc., 788 S. . 386, 390 W 2d 15 ( Tex . App .--Hous. ( 14th Dist . 1990, no writ). Failure to ) mitigate is generally a question of fact for the jury. Sorbus, Inc. v . UHW Corp ., 855 s. . 771, 775 ( W 2d Tex. ApP .--El Paso 1993, writ denied). The standard is one of ordinary care: ' ' what an ordinary prudent person would have done under the same or similar circumstances.' Id . ' ( citation omitted). In its motion, Plaintiff claimed it did not attempt to resell the 5,976 chargers to another entity because those chargers were made to defendant' specifications, and it s admittedly made no attempt to determine if another entity would have purchased the chargers because of a purported previous agreement between the parties. Defendant objected to the testimony concerning the purported agreement on the basis of Rule 1002 of the Federal Rules of Evidence . Plaintiff failed to address this objection in its reply. Additionally , plaintiff claimed it did nothing with the materials it purchased to manufacture the 2,000 chargers because by the time it decided to discontinue the manufacturing process, it was no longer able to return those items to the manufacturer . But plai ntiff also ad tted it made no attem/t to sell the mi component parts to any other entity . The court concludes that fact issues exist concerning whether plaintiff failed to mitigate its damages that preclude 16 summary judgment for plaintiff on this issue. D. Delav Pendinq Appeal I its response to the summary j n udgment motion, def endant asked that the court delay adjudication of this action while the First Action is pending on appeal . The court is declining defendant 's request . VII . Order Therefore, The court ORDERS that plaintiff ' second motion for partial s summary judgment be, and is hereby, granted as to plaintiff' s breach of contract claim , and that plaintiff have and recover from def endant dama ges in the amount of $788, 885. 30, su bject to whatever reduction may be warranted if defendant is permitted to pursue its affirmative defenses and does so successfully . The court further ORDERS that in all other respects plaintiff ' second motion for partial summary judgment be, and is s hereby , denied . SIGNED October 2 , 2014 . . * y z' pre , . s .r . - . . .. ,' Z '. , , ' . . ' . . / z . . JO p . U s / : z X . . . z , ed States District Juig: # / 4 , z & . . , . ' d . 7 z g 2 . .Z Mc . . z , ' , , ,
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