United States District Court, D. Colorado
Brooke Jackson United States District Judge
are four motions before the Court. First, defendant The
Gorman-Rupp Company (“Gorman-Rupp”) has filed a
motion for summary judgment against plaintiff Aqua-Hot
Heating Systems, Inc. (“Aqua-Hot”). ECF No. 43.
For reasons stated below, that motion is GRANTED in part and
DENIED in part. Second, defendant has filed a motion for
sanctions for spoliation of evidence against plaintiff. ECF
No. 42. That motion is DENIED. Third, defendant moves to
strike, in part, plaintiff's expert witness disclosures.
ECF No. 44. That motion is GRANTED in part and DENIED in
part. Fourth, plaintiff has filed a motion in limine to
restrict defendant's two expert opinions. ECF No. 49.
That motion is GRANTED in part and DENIED in part.
The Parties' Dispute.
case involves a contractual dispute between two merchants,
Aqua-Hot and Gorman-Rupp. Aqua-Hot manufactures heating and
water heating systems for use in recreational vehicles and
trucks. Complaint, ECF No. 1, at 2. It then sells the water
heating systems to third parties for use in the vehicles.
Id. In 2012 Aqua-Hot was contemplating placing a
large order for pumps, a component of its heating systems,
with Gorman-Rupp, which is a pump manufacturer. Before
proceeding with a purchase, however, plaintiff spent several
months inspecting and testing the pumps. Id.
October 17, 2012 defendant provided plaintiff with a price
quote for what the parties refer to as the “‘105
pumps.” See ECF No. 43-6, Ex. 6. The price
quote included a description of the pump; a designated
quantity of 8, 000 pumps; a unit price of $39.87; and
Gorman-Rupp's “Terms and Conditions of Sale”
which was part of what appears to be its standard form price
quote document. On January 10, 2013 plaintiff submitted a
purchase order for 8, 000 ‘105 pumps. ECF No. 43-7. The
purchase order includes “Aqua-Hot Purchase Order Terms
and Conditions, ” id. at 5, which, like
defendant's terms and conditions, are found in a printed
form that appears to be a part of Aqua-Hot's standard
form used for purchases. On January 11, 2013 defendant
returned an order acknowledgment form to plaintiff. ECF No.
43-9 at 2. Defendant did not reattach its terms and
conditions, but it did explicitly incorporate
Gorman-Rupp's standard terms and conditions into the
acknowledgment. Id. at 3. At some point later
plaintiff placed an order for an additional 8, 000 ‘105
pumps. Neither party can locate a purchase order for this
transaction, but defendant has produced an order
acknowledgment form dated March 12, 2014. ECF No. 43 at 3.
alleges that the ‘105 pumps failed at a rate of about
30% after installation. It disassembled and examined failed
pumps returned by customers and determined that they
contained “debris, cracked magnets, shorted circuit
boards, and cracked housings in the ‘105 pumps.”
ECF No. 1 at 2. Aqua-Hot informed defendant of the issues it
was having, and to rectify the problem, Gorman-Rupp offered
to replace the failed pumps with an updated pump model
(“‘108 pumps”). Id. at 3.
October 28, 2014 plaintiff modified its existing order to
swap out the remaining ‘105 pumps scheduled for
delivery with ‘108 pumps. ECF No. 43 at 4. On January
22, 2015 plaintiff submitted another purchase order for an
additional 8, 000 ‘108 pumps. Id.; ECF No.
43-12, Ex. 12. The following day, defendant responded with an
order acknowledgment form. ECF No. 43-13, Ex. 13. On July 13,
2015 plaintiff accepted its last shipment of ‘108
pumps. ECF No. 43 at 4. On August 12, 2015 plaintiff's
product purchaser sent an email to defendant cancelling the
remaining balance of pumps on its final two purchase orders.
ECF No. 43-14, Ex. 14.
September 2015 Aqua-Hot was contemplating legal action based
on losses it had sustained because of the failed ‘105
pumps. Mot. Summ. J., ECF No. 43 at 6. Before filing suit,
however, Paul Harter, Aqua-Hot's president, met with
Michael Hill, Gorman-Rupp's president, to discuss the
pump problems and Aqua-Hot's associated losses.
Id. Allegedly to appease Aqua-Hot, an existing
customer, Mr. Hill agreed to refund plaintiff for the loss of
2, 439 pumps. ECF No. 43-19, Ex. 19.
pump issues continued into 2016. Aqua-Hot customers continued
to complain and file warranty claims against plaintiff after
their water heaters failed. ECF No. 1 at 3. Again, plaintiff
determined that defendant's pumps-this time the
‘108 pumps-were the cause of the failures. Id.
Like its predecessor, the ‘108 pump failed at a rate of
about 30%. In total, plaintiff claims it has incurred over $1
million in out-of-pocket expenses because of the pump
Gorman-Rupp received no communications from Aqua-Hot between
its refund payment made in September 2015 and a demand letter
that it received on March 6, 2017. ECF No. 43 at 8.
The Conflicting Documents.
have noted, the parties did not negotiate and execute a
written contract, as such, for the purchase and sale of the
pumps. Instead, they exchanged price quotes, purchase orders,
and acknowledgement of purchase forms. Some of the terms in
Gorman-Rupp's certain standard “Terms and
Conditions of Sale” conflicted with terms and
conditions in the “Aqua-Hot Purchase Order Terms and
Conditions.” It appears to the Court that each party
paid little, if any, attention to the other party's
printed form. There is no evidence that either party
acknowledged the other's terms and conditions, agreed to
them, rejected them, or made any effort to negotiate a
reconciliation of them. Rather, it appears to me that they
were eager to do a deal which was likely viewed as lucrative
to both sides, and the terms and conditions, likely drafted
by the parties' respective lawyers and shaped to be as
favorable to their respective clients as possible, went by
filed this lawsuit on June 16, 2017. It alleged six claims:
(1) breach of contract; (2) negligence; (3) willful and
wanton breach of contract; (4) breach of express warranty;
(5) breach of the implied warranty of merchantability; and
(6) breach of the implied warranty of fitness for a
particular purpose. ECF No. 1 at 4-8. On September 28, 2018
defendant filed a motion for summary judgment. ECF No. 43.
Plaintiff filed a response brief, ECF No. 46, and defendant
filed a reply brief, ECF No. 50. The motion has been fully
briefed and is ripe for review.
STANDARD OF REVIEW
judgment is appropriate 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). The
moving party has the burden to show that there is an absence
of evidence to support the nonmoving party's case.
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
The nonmoving party must “designate specific facts
showing that there is a genuine issue for trial.”
Id. at 324. A fact is material “if under the
substantive law it is essential to the proper disposition of
the claim.” Adler v. Wal-Mart Stores, Inc.,
144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A
material fact is genuine if “the evidence is such that
a reasonable jury could return a verdict for the nonmoving
party.” Anderson, 477 U.S. at 248. This Court
will examine the factual record and make reasonable
inferences therefrom in the light most favorable to the
nonmoving party. Concrete Works of Colorado, Inc. v. City
& Cty. of Denver, 36 F.3d 1513, 1517 (10th Cir.
Existence and Terms of the Parties'
The Uniform Commercial Code (“UCC”)
case involves a sale of goods between two merchants. Thus,
the UCC applies to this dispute to the extent that state law
has adopted the UCC. Here, although the parties dispute
whether Ohio or Colorado law applies, resolution of this
dispute for the most part does not impact my legal analysis
concerning contract interpretation because both parties agree
that Ohio and Colorado have codified UCC § 2-207. ECF
No. 43 at 11-12; ECF No. 46 at 7; see also Colo.
Rev. Stat. § 4-2-207; Ohio Rev. Code § 1302.10. One
area where choice of law does make a difference is discussed
later in this order.
party denies that a contract existed at some point. However,
they disagree as to when the contract was formed and which
terms govern. Contract interpretation is generally a question
of law for the court to decide. See, e.g., I.M.A., Inc.
v. Rocky Mountain Airways, Inc., 713 P.2d 882, 887
argues that its price quotation was an offer, and that its
terms and conditions accompanying the quote were part of the
offer. ECF No. 43 at 11. Defendant further argues that
plaintiff accepted the offer within the 90-day timeframe
specified in the offer by submitting a purchase order even
though plaintiff attached its own terms and conditions which
included additional or different terms. Id.
Defendant submits that its terms concerning warranty and
limitations on liability control because plaintiff's
terms and conditions are silent on warranty and liability.
Id. at 12. Finally, defendant adds that its terms
and conditions continued to govern plaintiff's subsequent
orders because plaintiff simply modified its existing order.
response brief plaintiff essentially concedes that
defendant's price quote was an offer. Plaintiff's
main argument is that its purchase order was a counteroffer
per UCC § 2-207(1) because plaintiff's terms and
conditions required defendant to accept plaintiff's terms
and conditions. ECF No. 46 at 6. According to the
plaintiff, defendant accepted plaintiff's counteroffer
when it issued a series of order acknowledgments.
Id. at 9. Plaintiff then argues that defendant's
terms and conditions cannot control because defendant's
order acknowledgment failed to attach those terms and
conditions. Id. at 6.
alternative, plaintiff argues that its purchase order was not
a “definite and seasonable expression of acceptance or
written confirmation which [was] sent within a reasonable
time” per UCC § 2-207(1). Id. at 8.
Plaintiff notes that it required three months of testing
prior to assenting to the offer, and thus, it didn't
accept the offer within a reasonable time. Id. This
argument leads plaintiff to UCC § 2-207(3). Plaintiff
believes that the parties' conduct recognized the
existence of a contract per UCC § 2-207(3). Id.
at 7. Therefore, because there was no agreement as to the
warranties or limitations of remedies, those provisions are
“knocked out” of the contract. Id.
cases from this Circuit are instructive here. In Daitom,
Inc. v. Pennwalt Corp., the defendant submitted a price
quote for the sale of rotary vacuum dryers. 741 F.2d 1569,
1571 (10th Cir. 1984). The defendant attached terms and
conditions and explicitly made the terms an integral part of
its proposal. Id. The defendant's terms imposed
a one-year period of limitations for warranties. Id.
at 1572. A month later, the plaintiff submitted a purchase
order for the vacuum dryers. Id. The plaintiff's
purchase order included standard terms and conditions on the
back of its order form. Id. The most relevant
provisions in the plaintiff's terms and conditions were
the provisions reserving all warranties and remedies
available at law. Id. at 1573. Almost two years
after the parties exchanged documents, the plaintiff notified
the defendant that the dryers had stopped working.
Id. at 1572. Unable to resolve the issues, the
plaintiff sued. Id.
plaintiff argued that its purchase order didn't
constitute an acceptance because its purchase order
explicitly made acceptance conditional on the defendant's
assent to the additional or different terms. Id. at
1573. Instead, the contract was formed by the parties'
conduct, and the resulting contract consisted solely of the
written terms agreed upon. Id. Any gaps in the
contract would be filled by relevant UCC provisions.
Id. Alternatively, if the purchase order did
constitute acceptance of the proposal, the plaintiff argued`
that all conflicting terms between the two merchants'
terms and conditions were “knocked out” of the
contract. Id. Thus, the contract solely consisted of
the agreed upon terms and any supplemental terms.
Tenth Circuit found that the defendant's price quote
constituted an offer, and that the plaintiff's purchase
order constituted acceptance. Id. at 1575. The court
ruled that the plaintiff's expressly conditional
“boilerplate” terminology did not preclude the
formation of a contract per UCC § 2-207(1). Id.
at 1575-76. In so ruling, the Tenth Circuit determined that
the plaintiff's purchase order was a “conditional
acceptance.” Id. at 1577. To be a valid
counteroffer, “the offeree must explicitly communicate
his or her unwillingness to proceed with the transaction
unless the additional or different terms in its response are
accepted by the offeror.” Id. In the end, the
Daitom court recognized the existence of the
contract, knocked out any conflicting terms, and used UCC
gap-fillers to complete the contract. Id. at
in Westinghouse Elec. Corp. v. Nielsons, Inc., the
seller submitted a price quotation to sell electrical
material to the buyer. 647 F.Supp. 896, 897-98 (D. Colo.
1986). The seller attached standard terms and conditions to
the quote. Id. at 898. In response, the buyer
submitted a purchase order to buy the items. Id.
Like the seller, the buyer attached its own list of
standardized conditions. Id. Paragraph 12 of the
buyer's conditions stated, “Execution of this
agreement constitutes an acceptance expressly limited to the
terms herein and any additional or different terms suggested
by Seller are hereby rejected unless expressly agreed to in
writing by Buyer.” Id. Unlike in
Daitom, however, the parties disputed whose terms
and conditions would apply. Id. The court used Colo.
Rev. Stat. § 4-2-207 (Colorado's codification of UCC
§ 2-207) to determine the terms of the contract.
court found that the seller's quotation was an offer, and
then found that the buyer's purchase order constituted an
acceptance. Relying on Daitom, the court determined
that paragraph 12's language did not invalidate the
acceptance. Id. at 900. Thus, under Colo. Rev. Stat.
§ 4-2-207(1), the parties formed a contract.
Id. at 899-900. The court then proceeded to §
4-2-207(2), where it found that all three exceptions applied.
Therefore, “[n]either set of terms c[ould] become part
of the contract between these two merchants . . . .”
Id. at 900. Having found that neither party's
terms were added to the contract under § 4-2-207(2), the
court looked to § 4-2-207(3). Id. at 901. The
court determined that the parties' conduct clearly
recognized the existence of a contract. Id. Relying
on Daitom yet again, the court read both
parties' terms and conditions into the contract, but it
eliminated any conflicting terms. Id.
these two cases in mind, I turn to the facts of this case. A
price quote is normally not an offer. Instead, courts
typically treat a price quote as an invitation to negotiate
or bargain. Master Palletizer Sys., Inc. v. T.S. Ragsdale
Co., 725 F.Supp. 1525, 1531 (D. Colo. 1989). However,
some price quotations are so detailed that a court may deem
them an offer. See Id. In this case, I find that
defendant's price quote was sufficiently detailed.
Gorman-Rupp's offer included the specific type of good
(the ‘105 pump), a quantity of 8, 000 pumps, a price of
$39.87, and it stated that the quote would be valid for 90
days. Therefore, I conclude that defendant's price quote
constituted a legal offer.
the end of the 90-day acceptance window, plaintiff submitted
a purchase order for 8, 000 ‘105 pumps for $39.87.
Under most circumstances, plaintiff's purchase order
would easily constitute an acceptance of defendant's
offer. But in this case, plaintiff argues that its purchase
order was a counteroffer because the first paragraph of the
terms and conditions contains conditional language. Per UCC
§ 2-207(1), plaintiff argues that this paragraph's
conditional language precludes acceptance and turns the
purchase order into a counteroffer.
the express language of UCC § 2-207(1) arguably could
support plaintiff's position, the Daitom and
Westinghouse courts rejected that argument.
Plaintiff did not “explicitly communicate [its]
unwillingness to proceed with the transaction unless the
additional or different terms in its response [were] accepted
by the offeror.” Daitom, 741 F.2d at 1577. To
the contrary, plaintiff willingly proceeded with the
transaction without ever discussing its terms and conditions
with defendant. I find that plaintiff's purchase order
constituted a valid acceptance. I now must determine the
terms of the agreement.
§ 2-207(2), because both parties are merchants,
plaintiff's additional terms found in its terms and
conditions become part of the contract unless defendant's
“offer expressly limits acceptance to the terms of the
offer” or plaintiff's additional terms
“materially alter” the contract. UCC §
2-207(2)(a)-(b). In this case, both exceptions apply.
the only paragraph on defendant's one-page price quote
states, “This quotation is made subject to our standard
Terms & Conditions of Sale as printed on the reverse side
of this sheet.” ECF No. 43-6, Ex. 6. Further,
defendant's one-page order acknowledgment form states,
“This acceptance of your order and any sale or delivery
of goods or services there under is subject to the
‘terms and conditions of sale' which are appended
by the reference to and made part of this order
acknowledgment.” ECF No. 43-9, Ex. 9.
the different terms found in plaintiff's purchase order do
attempt to materially alter the terms of the contract. There
are two relevant provisions in plaintiff's terms and
conditions. The terms state that they “supersede any
additional or different terms and conditions” found in
defendant's terms and conditions. ECF No. 43-7, Ex. 7.
And, they include a governing law provision stating that
Colorado law shall apply. Id.
governing law section does not materially alter the contract.
However, the provisions overriding defendant's terms and
conditions do. Courts typically hold that warranty
disclaimers and liability limitations materially alter
contracts under UCC § 2-207(2)(b). See Leica
Geosystems, Inc. v. L.W.S. Leasing, Inc., 872 F.Supp.2d
1191, 1200 (D. Colo. 2012) (collecting case law and applying
it to Colo. Rev. Stat. § 4-2-207(2)(b)). A competing
provision attempting to eliminate such disclaimers materially
alters the contract.
neither party's terms may be added to the contract under
UCC § 2-207(2). See Westinghouse, 647 F.Supp.
at 900. I therefore must look to § 2-207(3).
Rev. Stat. § 4-2-207(3) provides,
Conduct by both parties which recognizes the existence of a
contract is sufficient to establish a contract for sale
although the writings of the parties do not otherwise
establish a contract. In such case, the terms of the
particular contract consist of those terms on which the
writings of the parties agree, together with any
supplementary terms incorporated under any other provisions
of this title.
conclude that both parties' conduct effectively
recognized the existence of a contract under subsection (3).
That leaves the task of determining which terms were actually
plaintiff's purchase order constituted an acceptance to
defendant's price quote, I find that plaintiff accepted
defendant's terms and conditions. “In the absence
of fraud or concealment, a party signing a contract cannot
deny knowledge of its contents.” Master Palletizer
Sys., 725 F.Supp. at 1531. Likewise, when defendant
submitted its order acknowledgment form the day after
receiving plaintiff's purchase order, it accepted
plaintiff's terms and conditions. In such a case, the
conflicting terms of defendant's price quote and
plaintiff's purchase order “eliminate each other
and fall away from the contract.”
Westinghouse, 647 F.Supp. 896, 901 (D. Colo. 1986)
(citing Daitom, 741 F.2d at 1579). If there were any
missing terms, the UCC would step in to fill the gaps in the
Defendant's Warranty, Limitations and
plaintiff's terms and conditions are silent regarding
warranties, limitations, returns, and remedies,
defendant's terms control. Defendant's warranty
reads, “Seller warrants to Buyer that products sold by
it will upon shipment conform to the description on the face
hereof and any written specifications expressly approved by
Seller and be free from defects in title, material and
workmanship.” ECF No. 43-6 at 5. Plaintiff contends
that the pumps delivered by defendant were not as warranted
by defendant. Id. Rather, at least some of the pumps
(excluding the pumps whose cost were refunded per the
agreement between the two presidents) were defective.
Defendant counters that plaintiff fully inspected and tested
the ‘105 pumps before the first purchase; that the
‘108 pumps were an upgraded version; that the majority
of the pumps did not fail; and that the others did not fail
because of any defect in their design or manufacturing. These
are genuine and material fact disputes.
also relies on two limitations that are included in the
warranty section of its price quote. Before discussing those
limitations, I note that plaintiff argues that these
limitations were inconspicuous and should not be honored. ECF
No. 46 at 10-11. For support, plaintiff cites cases from the
Illinois Court of Appeals and the District of Nevada. Neither
case persuades me. Rather, I find useful guidance in Colo.
Rev. Stat. § 4-1-201(10) which states, “[w]hether
a term is ‘conspicuous' or not is a decision for
the court.” Colo. Rev. Stat. § 4-1-201(10). It
then roughly defines a conspicuous term. There should be a
heading “in contrasting type, font, or color, ”
and the language in the body should be “in contrasting
type, font, or color” so to call attention to the
language. Id. I find that defendant's terms and
conditions, including the warranty and its limitations, were
conspicuous. The print was small but readable. The headings
of the different sections, including section 3,
“Warranty, Returns, ” were bolded. The problem was
not that the terms were inconspicuous but that Aqua-Hot
seemingly did not pay attention to them at the time.
first limitation on which defendant relies is the requirement
that notice of a defective or non-conforming product must be
given within 15 months after the manufacturing date of the
product. Defendant notes that after September 2015 it heard
nothing from Aqua-Hot about any alleged pump defects until it
received a demand letter dated March 6, 2017. ECF No. 43 at
8. Because this was more than 15 months after the ‘108
pumps were manufactured, defendant argues that notice was
untimely, and the warranty is void. Id. Plaintiff
responds that this warranty restriction is invalid because
the standard statute of limitations for a breach of contract
claim in Colorado is three years. Colo. Rev. Stat. §
13-80-101. Further, Colorado's UCC states that the period
of limitations “may not be varied by agreement of the
parties.” § 4-2-725(a). Defendant argues that the
length of its warranty is an issue distinct from the
applicable statute of limitations. Plaintiff provides no
authority to the contrary.
with the defendant. The statute governs when a legal claim
for breach of warranty can be asserted; it does not change
the length of the warranty. Nevertheless, I find that there
is a genuine issue of fact as to whether plaintiff provided
timely written notice of its express warranty claim. While it
is undisputed that no pumps were manufactured after September
2015, a reasonable factfinder could conclude that plaintiff
provided notice of the continuing pump failures. For example,
in September 2015 when the presidents of the respective
companies discussed the pump failures, Mr. Harter told Mr.
Hill in an email that plaintiff already had to replace 2, 500
pumps, and that this “number does continue to
increase.” ECF No. 46-1. A reasonable factfinder could
determine that plaintiff put defendant on notice about
impending future pump failures through its September 2015
second relevant limitation is that the remedy for breach is
limited to repair or replacement of the defective or
non-conforming product. Plaintiff contends that this
limitation of remedy is void because it has failed its
essential purpose: the ‘108 pump that defendant offered
as a replacement to the ‘105 pump failed at the same
rate. ECF No. 46 at 14-15. For support, plaintiff cites a
case from the District of Connecticut, where the court noted
that “[w]hether a limited remedy failed of its
essential purpose is, in most instances, a fact-laden issue
inappropriate for determination on summary judgment.”
McKernan v. United Techs. Corp., Sikorsky Aircraft
Div., 717 F.Supp. 60, 69 (D. Conn. 1989).
McKernan, the plaintiffs argued that “no
amount of repair or replacement with similar [helicopter]
engines would correct the inherent defect in the S-76A
helicopter.” Id. at 68. Whether that is true
here is another genuine dispute of fact. On the one hand,
plaintiff admits that the ‘108 pump had a 70% success
rate. See ECF no. 46 at 12. On the other hand,
apparently something like 30% failed. If that failure was
because of a defect, and given that the ‘108 pumps were
supposedly an upgrade over the ‘105 pumps, a reasonable
factfinder could find that repair or replacement of the
failed pumps is a remedy that fails of its essential ...