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Keywords

tortdamageslitigationcorporation

contracttortdefendantdamagesmotioncorporation

Related Cases

Rich Products Corp. v. Kemutec, Inc., 66 F.Supp.2d 937, 41 UCC Rep.Serv.2d 23

Facts

RPC, a Delaware corporation, purchased a Floveyor Conveyor from Kemutec, a Pennsylvania corporation, to replace a malfunctioning auger conveyor in its Appleton, Wisconsin plant. RPC's project engineer, Jeff Sage, engaged in discussions with Kemutec's representative about the conveyor's suitability for food processing applications. After receiving a quotation from Kemutec, RPC issued a purchase order, which referenced RPC's standard terms and conditions. The conveyor was shipped directly from Floveyor to RPC, and issues arose when wire strands were found in RPC's food products, leading to a costly recall.

RPC sued Floveyor, Kemutec and AID for damages suffered because of the alleged failure of the Floveyor Conveyor and the subsequent recall.

Issue

The main legal issues included whether RPC could recover damages for tort claims given the economic loss doctrine, the existence of a breach of warranty, and the applicability of trade usage in limiting recovery.

The Court's decision sets forth the disputed and undisputed facts developed to date and resolves each motion based on those facts.

Rule

The court applied the economic loss doctrine, which precludes recovery in tort for purely economic losses, and examined the Uniform Commercial Code's provisions regarding warranties and trade usage.

To summarize the important points, the Court dismisses RPC's tort claims on economic loss grounds, allows RPC's breach of warranty claims to go forward, allows Kemutec to rejoin Floveyor International, Ltd. (“Floveyor”) for purposes of a contractual indemnification claim, and allows RPC to add Kemutec's insurer as a defendant to this action.

Analysis

The court analyzed the facts surrounding the sale and the communications between RPC and Kemutec, determining that RPC's tort claims were barred by the economic loss doctrine. The court found that while RPC had a valid breach of warranty claim, there were genuine issues of material fact regarding the existence of trade usage that could affect the outcome of the warranty claims.

RPC is a Delaware corporation with its principal place of business located in Buffalo, New York. RPC has numerous plants located throughout the United States and elsewhere, including a plant in Appleton, Wisconsin.

Conclusion

The court concluded that RPC's tort claims were dismissed based on the economic loss doctrine, but allowed the breach of warranty claims to proceed, recognizing the potential for further litigation regarding the terms of the sale and the applicability of trade usage.

In all, 29 pieces of wire were either found by RPC or returned by RPC's customers. RPC estimates that its out-of-pocket costs and lost profits stemming from the recall is in excess of $11 million.

Who won?

Kemutec prevailed in the dismissal of RPC's tort claims due to the economic loss doctrine, which the court found applicable in this case.

RPC recently settled with AID and Floveyor, leaving Kemutec as the sole remaining defendant.

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