United States District Court, D. Maine
ORDER ON MOTION FOR SUMMARY JUDGMENT
JOHN A. WOODCOCK, Jr., District Judge.
In this breach of contract case, Berry Plastics Corporation and Covalence Specialty Coatings, LLC (Berry) move for summary judgment, asserting that Packgen has failed to prove causation and that Packgen's claimed lost profit damages are not foreseeable as a matter of law. The Court denies Berry's motion for summary judgment because, viewed in the light most favorable to Packgen, there is sufficient evidence that the defective material caused the container failures and that the lost profits were foreseeable at the time of contracting to survive Berry's dispositive motion.
A. Procedural History
On March 7, 2012, Packgen filed with this Court a five-count complaint against Berry alleging breach of contract, breach of express warranty, breach of implied warranty of fitness for a particular purpose, breach of implied warranty of merchantability, and negligence. Compl. (ECF No. 2-2). On December 15, 2014, Berry filed a notice of intent to file a motion for summary judgment. Notice to Ct. Regarding Summ. J. Briefing Schedule (ECF No. 77). On January 16, 2015, Berry moved for summary judgment and filed a supporting statement of material fact. Defs.' Mot. for Summ. J. (ECF No. 78) ( Defs.' Mot. ); Statement of Material Facts in Support of Def. Berry Plastics Corporation and Covalence Specialty Coatings' Mot. for Summ. J. (ECF No. 79) (DSMF). On March 6, 2015, Packgen responded to Berry's motion, filed a statement opposing Berry's statement of material facts, and provided its own statement of material facts. Pl. Packgen's Mem. in Opp'n to Defs.' Second Mot. for Summ. J. (ECF No. 82) ( Pl.'s Opp'n ); Pl.'s Responses to Defs.' Statement of Material Facts & Pl.'s Statement of Additional Material Facts (ECF No. 83) (PRDSMF). On March 20, 2015, Berry replied to Packgen's opposition and to its statement of additional material facts. Defs.' Reply to Pl.'s Opp'n to Mot. for Summ. J. (ECF No. 87) ( Defs.' Reply ); Defs.' Reply to Pl.'s Statement of Additional Facts (ECF No. 86) (DRPSAMF). On March 31, 2015, Packgen filed a response pursuant to Local Rule 56(e) to Berry's requests to strike certain of Packgen's statements of additional material facts. Pl.'s Responses to Defs.' Requests to Strike (ECF No. 88) ( Pl.'s Resp. ).
B. Statement of Summary Judgment Facts
Packgen was incorporated in 2001 and has manufactured and sold catalyst containers since then. PSAMF ¶ 50; DRPSAMF ¶ 50. Packgen manufactures intermediate bulk containers (IBCs), which are used by petroleum refineries for the transportation and storage of fresh and spent catalyst. DSMF ¶ 1; PRDSMF ¶ 1. Berry supplied Packgen with woven polypropylene fabric that was chemically bonded to a layer of aluminum foil. DSMF ¶ 2; PRDSMF ¶ 2.
In 2006 and 2007, Packgen redesigned its catalyst containers to be manufactured out of foil-laminated material because bonding foil to the polypropylene substantially increased the strength and the structural integrity of the container. PSAMF ¶ 18; DRPSAMF ¶ 18. As required by regulatory authorities, the redesigned foil-laminated "Cougars" were tested by an independent agency using six times the weight of the catalyst to be placed in the Cougars. PSAMF ¶ 30; DRPSAMF ¶ 30. The testing included vibration, bottom lift, top lift, stacking, and dropping tests; the Cougars, made from foil-laminated material provided by Berry in 2007, passed all of these tests and were certified for use as catalyst containers. PSAMF ¶ 31; DRPSAMF ¶ 31. John Lapoint, Packgen's president, said that one of Berry's sales representatives was "instrumental" in developing the foil-laminated material used to fabricate Cougars. PSAMF ¶ 41; DRPSAMF ¶ 41.
1. Berry's Knowledge of the Cougar Design and Purpose
Berry's sales representatives visited Packgen's manufacturing plant in Auburn, Maine in June 2007. During this visit, they watched Cougars being made, examined Cougar containers, and spoke with Packgen's engineers and manufacturing staff about many issues, including Packgen's requirements for the foil-laminated material, how the Cougars functioned, and how Packgen's customers would use these containers. PSAMF ¶ 42; DRPSAMF ¶ 42.
Before July 2007, Packgen's president was very open in meetings and conversations with Berry's sales representatives about Packgen's catalyst containers and customers because he wanted the Berry sales representatives to have as much information as possible so that Berry would be better able to supply foil-laminated material that met Packgen's requirements for catalyst containers. PSAMF ¶ 32; DRPSAMF ¶ 32. Packgen's president informed Berry's sales representatives of the following:
(1) Berry's foil-laminated material would be the primary component of Cougar catalyst containers manufactured by Packgen, and companies in the catalyst and petroleum industries would use the containers to store and transport catalyst.
(2) The catalyst and petroleum industries are extremely safety conscious.
(3) Catalyst is a hazardous material and is self-heating if exposed to air; therefore, it is critical that catalyst be stored and transported in safe, secure, and reliable containers.
(4) Berry needed to supply foil-laminated material with strong and reliable bonds between all of the layers in order for the containers to have the strength and structural integrity needed to safely and securely store and transport catalyst.
(5) Packgen had a long-term customer that was a major seller of fresh catalyst; Packgen and the customer jointly developed a custom foillaminated Cougar to meet the customer's needs; the customer planned to purchase approximately 15, 000 custom Cougars a year beginning in the second half of 2007, and would increase its purchases in future years.
(6) Packgen had invested substantial labor and working capital to develop the custom Cougars, including purchasing and fabricating specialized manufacturing equipment and inventory items needed to produce the Cougars.
(7) Packgen was marketing foil-laminated Cougars to refineries in North America and was already selling catalyst containers to Exxon Mobil; Packgen's credibility with the refineries would be enhanced because Packgen's long-term customer would be delivering fresh catalyst to the refineries in the custom Cougars; in 2008, Packgen would close deals with many North American refineries for the sale of Cougars for their spent catalyst needs; and, the market for Cougars was potentially very large because there were more than 125 refineries in North America.
(8) Packgen's purchases of foil-laminated material from Berry would increase in the future.
PSAMF ¶¶ 33-40; DRPSAMF ¶¶ 33-40.
2. Packgen's Purchases of Material from Berry Between September 2007 and January 2008
On September 25, 2007, Packgen sent Berry a purchase order for 61-inch laminated polypropylene foil. DSMF ¶ 3; PRDSMF ¶ 3. Berry shipped the 61-inch material on December 22, 2007. DSMF ¶ 4; PRDSMF ¶ 4. On December 28, 2007, Berry sent Packgen an invoice for the 61-inch material. DSMF ¶ 5; PRDSMF ¶ 5. Attached to the December 28, 2007 invoice were Berry's Standard Terms and Conditions. DSMF ¶ 6; PRDSMF ¶ 6. The front of the invoice contained a notice that the order was subject to the attached terms and conditions. DSMF ¶ 7; PRDSMF ¶ 7.
Berry's Standard Terms and Conditions contained the following limited warranty/limitation of damages:
THERE ARE NO WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY, COURSE OF DEALING, USAGE OF TRADE OR NON-INFRINGEMENT OR OTHERWISE ASIDE FROM THE LIMITED WARRANTED ABOVE AND THE DESCRIPTION OF THE GOODS, BERRY'S LIABILITY FOR BREACH OF CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY, PRODUCT LIABILITY, RECALL LIABILITY, NEGLIGENCE OR OTHER CAUSE OR THEORY IS LIMITED TO REPLACEMENT OF DEFECTIVE GOODS OR REFUND OF THE PURCHASE PRICE UPON TIMELY RECEIPT OF NOTICE WITHIN ONE YEAR FROM THE DATE OF DELIVERY REGARDLESS OF WHETHER BERRY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR OTHER DAMAGES. UNDER NO CIRCUMSTANCES WILL BERRY BE RESPONSIBLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES REGARDLESS OF CAUSE.
DSMF ¶ 12; PRDSMF ¶ 12. The 61-inch material is not at issue in this case; it was not tested by Packgen's materials expert and it was either returned to Berry or destroyed. DSMF ¶¶ 16-18; PRDSMF ¶¶ 16-18.
On November 26, 2007, Packgen sent a purchase order to Berry requesting 48inch laminated polypropylene. DSMF ¶ 8; PRDSMF ¶ 8. Berry shipped the 48-inch order on January 18, 2008. DSMF ¶ 9; PRDSMF ¶ 9. On January 21, 2008, Berry sent Packgen an invoice for the 48-inch order, which included Berry's Terms and Conditions. DSMF ¶ 10; PRDSMF ¶ 10. The value of the 61-inch and 48-inch materials Berry sold to Packgen was $115, 000; this total consisted of $48, 200 for the 61-inch material and $66, 800 for the 48-inch material. DSMF ¶ 13; PRDSMF ¶ 13.
On January 8, 2008, Packgen submitted a purchase order to Berry on January 8, 2008 for additional purchases totaling $85, 800 of the 61-inch and the 48-inch foillaminated materials. PSAMF ¶ 49; DRPSAMF ¶ 49. This purchase order was pending at the time of the Cougar failures at CRI's facility in early April 2008. Id.
In addition to the 48-inch foil-laminated material received in January 2008, Packgen purchased foil-laminated material on ten other occasions from Berry and Ludlow Coated Products, a company purchased by Defendant Covalence Specialty Coatings during the development of the foil-laminated material. PSAMF ¶ 48; DRPSAMF ¶ 48. The total purchase price for all eleven purchases of the foillaminated material was $257, 095.49. Id.
3. Signs of Trouble and Subsequent Cougar Failures
On February 11, 2008, Donald Roberts of Packgen submitted two nonconformance reports identifying alleged defects in the products. DSMF ¶ 11; PRDSMF ¶ 11. Other than the non-conformance reports, Packgen did not receive any complaints about delamination or information about incidents of Cougar failures, either failures similar to those at CRI or failures of Cougars when used for their intended purpose. PSAMF ¶ 24; DRPSAMF ¶ 24.
CRI notified Packgen that, in early April 2008, Cougars filled with catalyst at CRI's Louisiana facility failed when the containers were lifted; these failed Cougars were from the last shipment of new Cougars to the Louisiana facility. PSAMF ¶ 25; DRPSAMF ¶ 25. All Cougars shipped to CRI after February 11, 2008 were manufactured from the 48-inch material received from Berry in January 2008. PSAMF ¶ 21; DRPSAMF ¶ 21. Packgen shipped 2, 158 Cougars to CRI after February 11, 2008. PSAMF ¶ 22; DRPSAMF ¶ 22. The last shipment of new Cougars to CRI's Louisiana facility was on February 26, 2008. PSAMF ¶ 26; DRPSAMF ¶ 26. All Cougars shipped to CRI's facility in Lafayette, Louisiana that had been manufactured from the 48-inch foil-laminated material received from Berry in August 2007 would have been used by CRI for catalyst storage and transportation by the first half of March 2008. PSAMF ¶ 23; DRPSAMF ¶ 23.
Ron Silen of Berry told Packgen representatives that the alleged nonconformance in the 48-inch polypropylene material was isolated to certain rolls. DSMF ¶ 14; PRDSMF ¶ 14. Although Packgen is unable to precisely determine how many Cougars were made with the allegedly non-conforming 48-inch Berry material, it knows that it shipped 2, 158 Cougars to CRI that were manufactured from that material. DSMF ¶ 15; PRDSMF ¶ 15. Additionally, Packgen does not know which of its customers other than CRI, if any, received Cougars manufactured with the allegedly non-conforming Berry material. DSMF ¶ 19; PRDSMF ¶ 19.
Packgen knew about both problems and potential problems with Cougars when not used for their intended purpose, including: (1) in 2009, some Cougars melted down when a refinery misused containers by improperly putting "very reactive material" into them, and that refinery did not purchase Cougars in 2008; (2) an end-user put incorrect material in the Cougar and started a fire on site; (3) a forklift punctured a Cougar and caused Cougars to melt down; (4) a catalyst handling company sucked air into the system and blew extremely self-heating pyrophoric catalyst, melting three or four Cougars; (5) "rips and holes" at the top plastic "neck" of the bags after Packgen ceased using Berry products; and, (6) concern about puncture susceptibility due to spaces between slats in the bottom. DSMF ¶ 29; PRDSMF ¶ 29.
4. Packgen Sends Material Samples for Lab Testing
Donald Roberts cut out samples of the following: (1) a roll of the 48-inch foillaminated material received from Berry in January 2008; (2) two foil-laminated Cougars that CRI returned to Packgen after the Cougars failed at CRI's Louisiana facility; and, (3) a foil-laminated Cougar that Packgen manufactured in March 2007 from material provided by Berry. PSAMF ¶ 1; DRPSAMF ¶ 1. Mr. Roberts immediately put these samples in separate envelopes, sealed the envelopes, and labeled each envelope with identifying information such as the sample number, sample taker, sample date, sample description, the recipient, and the date sent. PSAMF ¶ 2; DRPSAMF ¶ 2. Packgen delivered the sealed envelopes to an attorney at Bernstein Shur, a firm representing Packgen at that time. PSAMF ¶ 3; DRPSAMF ¶ 3. Bernstein Shur sent the sealed envelopes to Polymer Solutions, Incorporated, an independent testing lab. PSAMF ¶ 4; DRPSAMF ¶ 4. Polymer Solutions received the sealed envelopes and assigned identification numbers to each sample. PSAMF ¶ 5; DRPSAMF ¶ 5.
James Rancourt, CEO of Polymer Solutions and an expert in material failure analysis, tested the following samples: (1) sample 7863-01, cut from the 48-inch material received from Berry in January 2008; (2) sample 7863-04, cut from a Cougar that Packgen manufactured in March 2007 from foil-laminated material supplied by Berry; and, (3) sample 7863-06, cut from a Cougar returned by CRI after it had failed at CRI's facility in Lafayette, Louisiana. PSAMF ¶ 6; DRPSAMF ¶ 6.
He received the samples from Bernstein Shur; Dr. Rancourt does not know where the samples came to Bernstein Shur from, but each envelope had information about the sample including the sample number, the name of the sample taker, the sample date, and a description of the sample. DSMF ¶ 21; PRDSMF ¶ 21. One of the samples was taken from a container "returned" by a customer. DSMF ¶ 22; PRDSMF ¶ 22. Dr. Rancourt did not have access to the "returned" container or know where it was located; he had access only to the samples. DSMF ¶¶ 22, 23; PRDSMF ¶¶ 22, 23.
Dr. Rancourt does not know the burst or puncture strength of the material he tested. DSMF ¶ 24; PRDSMF ¶ 24. Dr. Rancourt does not know how the burst or puncture strength of the samples he tested compares to non-defective samples, however, he does not need to know the burst or puncture strength to arrive at his opinions. DSMF ¶ 25; PRDSMF ¶ 25; PSAMF ¶ 20; DRPSAMF ¶ 20. He does not know how much force a Cougar can withstand. DSMF ¶ 26; PRDSMF ¶ 26. However, he did not need to test or examine a completed container to reach his opinions in this matter to a reasonable degree of scientific certainty. PSAMF ¶ 19; DRPSAMF ¶ 19.
The physical structure of the multi-strand polypropylene woven layer of sample 7863-06 is similar to the physical structure of the multi-strand polypropylene woven layer of sample 7863-01. PSAMF ¶ 9; DRPSAMF ¶ 9. The physical structure of the multi-strand polypropylene woven layer of samples 7863-01 and 7863-06 is different from the physical structure of the multi-strand polypropylene woven layer of sample 7863-04. PSAMF ¶ 10; DRPSAMF ¶ 10.
Berry's manufacturing specifications required that Dow Affinity 1450 resin be used to enhance the bonding of the polypropylene fabric to the underlying polymer film layers. PSAMF ¶ 11; DRPSAMF ¶ 11. Dow Affinity 1450 resin was not present in samples 7863-01 and 7863-06 but was present in sample 7863-04. PSAMF ¶ 12; DRPSAMF ¶ 12.
Proper adhesion of the individual layers of the foil-laminated material tested by Dr. Rancourt is required for the material to have the necessary physical strength characteristics. PSAMF ¶ 13; DRPSAMF ¶ 13. The lack of adhesion between the multi-strand polypropylene woven layer and the underlying polymer film layer caused the container identified as "CRI Container Returned From Lafayette, " which is sample 7863-06, to fail adhesively between the multi-strand polypropylene woven layer and the underlying polymer film layer. PSAMF ¶ 14; DRPSAMF ¶ 14. Sample 7863-06 showed failure, but sample 7863-01 did not because it is the raw material. PSAMF ¶ 15; DRPSAMF ¶ 15. The insufficient adhesion in sample 7863-06 prevented the five-layer material from acting as a system and gaining the strength of the multi-strand polypropylene woven layer to support the loads applied to the underlying thin polymer films and aluminum layer. PSAMF ¶ 16; DRPSAMF ¶ 16. Without strong bonds, the layers of sample 7863-06 acted independently and the components did not benefit from the synergy of a fully bonded system as was required for the containers to perform properly. PSAMF ¶ 17; DRPSAMF ¶ 17.
Dr. Rancourt opined that one of the samples was a "badly manufactured laminate product." DSMF ¶ 27; PRDSMF ¶ 27. He determined that one sample was already falling apart when he received it and it was easy to delaminate. DSMF ¶ 28; PRDSMF ¶ 28. His expert opinion regarding samples 7863-01 and 7863-06 is that their individual layers were not well-adhered, whereas he found that ...