978-1285770178 Case Printout Case CPC-18-09

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126 P.3d 928
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126 P.3d 928, 2006 WY 16, 24 IER Cases 78
(Cite as: 126 P.3d 928)
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
435 F.Supp.2d 1160
SCOTWOOD INDUSTRIES, INC., Plaintiffs/Counter-Defendant,
v.
FRANK MILLER & SONS, INC., Defendant/Counter-Plaintiff.
No. 05-2180-JWL.
June 16, 2006.
, District Judge.
This case involves a contractual dispute concerning the sale of goods by Scotwood Industries, Inc. (“Scotwood”)
to Frank Miller & Sons, Inc. (“Miller and Sons”). Scotwood initially sued in Kansas state court for a declaratory
and Sons' counterclaims (doc. 44). For the reasons explained below, the motion is granted in part and denied in
part. Specifically, the court will grant the motion as to the counterclaims based on the theory of rejection, breach
of express warranty, unjust enrichment, and promissory estoppel; the court will deny the motion as to the
counterclaims based on revocation of acceptance and breach of implied warranty of merchantability.
Background
The specific amount of calcium chloride flake that Miller and Sons received is unclear from the conflicted
record. The type of bags it was delivered in is also unclear. At one point, there is a statement that
Scotwood used bulk bags and 25 lb bags, but that is inconsistent with another statement that refers to
use of bulk bags and 25 kg bags.
Although it paid 35 of the 37 invoices for the 37 shipments it received, Miller and Sons alleges that the calcium
it retained the calcium chloride flake and exercised dominion and control by processing much of it for its own use.
Much of the factual record, in fact, is in dispute. The parties dispute the industry standard for a reasonable
inspection of calcium chloride flake; they also dispute whether in this case Miller and Sons conducted a
reasonable inspection of each delivery. Also, the parties disagree about the timing and the extent of Miller and
Sons' objections regarding the quality of the 37 shipments of calcium chloride flake. Miller and Sons alleges that
an email from Miller and Sons to Scotwood on October 8, 2004, purportedly revoked acceptance of any calcium
chloride flake that Miller and Sons had previously accepted from Scotwood.
To be clear, Miller and Sons denies acceptance of any of the goods.
Standard for Summary Judgment
Summary judgment is appropriate if the moving party demonstrates that there is “no genuine issue as to any
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the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. . A fact
is “material” if, under the applicable substantive law, it is “essential to the proper disposition of the claim.” (citing
). An issue of fact is “genuine” if “there is sufficient evidence on each side so that a rational trier of fact could
showing that there is a genuine issue for trial.” (citing ); . The nonmoving party may not simply rest upon its
pleadings to satisfy its burden. accord . Rather, the nonmoving party must “set forth specific facts that would
be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.”
(quoting To accomplish this, the facts “must be identified by reference to an affidavit, a deposition transcript, or
a specific exhibits incorporated therein.” .
For purposes of this motion, the parties agree that Kansas law governs their contractual dispute under the UCC.
Because the choice of Kansas law is entirely reasonable, the court will analyze the substantive issues of the case
under Kansas law.
To the extent the court cites case law from other states, the court emphasizes that “[b]ecause the UCC is
intended to be applied uniformly across the various states, courts routinely turn to decisions from other
accepted these offers and delivered 37 shipments between July 19, 2004, and September 3, 2004. After each
shipment, Scotwood forwarded invoices to Miller and Sons that specifically included its “Terms and Conditions” of
sale. Scotwood identifies that paragraph 8(a) of its “Terms and Conditions” states:
Within forty-eight (48) hours after receipt of each shipment of the goods, Buyer shall examine the goods for any
*1165 damage, defect or shortage. Any and all claims for any cause of action whatsoever whether the cause of
receipt of the goods for which the claim was made, or within ten (10) days after Buyer learns of all facts giving rise
to the claim, whichever occurs first. Failure of Seller to receive written notice of any claim from Buyer within the
acceptable time period as previously set forth, shall be deemed an absolute and unconditional waiver by Buyer of
any and all claims, irrespective of whether the facts giving rise to the claim shall have then been discovered or
whether processing, further manufacture, or other use or resale of the goods shall have taken place.
terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such
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126 P.3d 928, 2006 WY 16, 24 IER Cases 78
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terms become part of the contract unless:
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of
them is received.
.
The parties agree, in fact, that in deciding whether to apply the time limitation provision in each invoice forwarded
2-207(2)(b) is a question of fact that must be determined in light of the facts of the case and the parties'
expectations.” . See also (equating “materially alter” with invoking “hardship or surprise” and urging that this is a
factual question unique to the circumstances of each case) (citing Official Comment 4). To find that paragraph
8(a) does *1166 not “materially alter” the parties' agreement, the court would have to find, as a matter of law, that
paragraph 8(a) is reasonable and therefore does not alter what Miller and Sons' duty would have been had it not
chunking. In other words, any testing before processing would be destructive. It is also a fact issue whether
calcium chloride is a perishable good. This, in turn, further undercuts Scotwood's assertion that its time limitation
provision is reasonable as a matter of law. Therefore, it is ultimately a genuinely disputed issue of material fact
whether paragraph 8(a) of the “Terms and Conditions” of the invoices “materially alters” the contract between
Miller and Sons and Scotwood. The court, therefore, cannot rule as a matter of law that all of Miller and Sons'
Scotwood of its rejection. See ; .
In deciding whether Miller and Sons accepted the calcium chloride, the first step is to define acceptance:
(1) Acceptance of goods occurs when the buyer
(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that
he will take or retain them in spite of their nonconformity; or
calcium chloride flake because it processed many of the shipments it received from Scotwood and then sold this
processed material on its own behalf. See (“A buyer is deemed to have accepted goods when, without making
any effort to reject them, he receives the goods, processes them, and sells the finished product.”) (citation
omitted). Ultimately, Miller and Sons admits that it exercised control over the calcium chloride flake, which
means that “[e]ven if it were said that [it] initially rejected the [goods], [its] continued use of it converted [its]
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its damages, however, is unsupported by any case law. Ultimately, it is undisputed that Miller and Sons
exercised dominion over the shipments of calcium chloride flake by processing them for its own use. This is the
essence of acceptance under § 2-606(1)(c).
Because Miller and Sons cannot meet the first element of rejection, the court need not continue in its analysis of
the rejection counterclaim. In sum, because Miller and Sons accepted the goods and acceptance precludes
little practical significance between revocation and rejection because “[a] buyer who properly revokes has the
same rights with regard to the goods involved as if he had rejected them.” ; see also (“A buyer who so revokes
has the same rights and duties with regard to the goods involved as if he had rejected them.”).
Revocation is governed by , which states:
(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs
their own defects. It is not effective until the buyer notifies the seller of it.
Id.
Thus, a buyer may revoke acceptance when (1) nonconformity substantially *1168 impairs the value of the goods
to the buyer; (2) the buyer revokes within a reasonable time based on difficulty in discovering defects or because
the seller provided assurances; and (3) the buyer revokes before any substantial change in the goods not caused
nonconformity of the goods, the needs and circumstances of the buyer (subjectively), and that the nonconformity
in fact (objectively) impaired the value of the goods to the buyer.” , Kansas Comment 2.
In applying this test, however, “[n]onconformity, the needs and circumstances of the purchaser and substantial
impairment of value to a purchaser are all issues to be determined by a trier of fact.” Syl. 2 (1982); see also
(same).
usable flake and that only 50% of the processed 25 kg bags was usable flake. Miller and Sons also alleges that
Scotwood knew that it required a much higher purity level of flake than it received. Thus, there is a genuine issue
of material fact regarding substantial impairment of the value of the goods to Miller and Sons.
b. Reasonableness of the Timing of Revocation and the Difficulty of Discovering the Alleged Defects
Similarly, the reasonableness of the timing of revocation on October 8, 2004, is a genuinely disputed issue of
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material fact. When asked to decide whether a party pursued an “objectively reasonable” course, the Tenth
Circuit recently instructed that “we leave that determination for the jury.” . In this case, Scotwood cannot
demonstrate, as a matter of law, that Miller and Sons delayed its revocation for an unreasonable amount of time.
See (“The question of whether a buyer's revocation of an acceptance is timely is, as with rejections, a question of
various employees of Scotwood, primarily Carl Wetzel and Chase Wilson. In the first email on August 5, 2004,
Mr. Miller informed Scotwood: “We have had problems on the last three shipments of Flake.... If this cannot be
corrected we will want to stop all shipments. The mess is too much to deal with!!!” Then, on August 13, 2004,
he notified Scotwood in an email: “We continue to have problems.... If this cannot be immediately corrected I
want to stop all further shipments.” He continued to alert Scotwood of defects, as evidenced in a September 1,
instances and that it continually alerted Scotwood numerous times that it was receiving substantially defective
shipments of calcium chloride flake.
The parties agree that Mr. Miller's October 8, 2004, email was intended to revoke acceptance. Scotwood alleges
that this date was unreasonably untimely because of the perishable nature of calcium chloride flake, but this is a
disputed issue of fact based on the opinions of Miller and Sons' experts indicating that, ordinarily, calcium chloride
from it quotes selectively, but this is unavailing. Questions of material fact remain.
Finally, the time frame for a reasonable revocation is further extended where, as here, the alleged defects were
latent, particularly where the buyer could not inspect the goods before beginning production without contaminating
them. Miller and Sons presents evidence that it is not practical to inspect calcium chloride flake until the
beginning of actual production. Its experts have opined that visual inspections are insufficient to identify
its acceptance based on a substantial change in the goods. The court is precluded from ruling as a matter of law
on this issue, however, because “[w]hat constitutes ‘substantial change’ is a question of fact.” (citing § 2-
608(2)). And it is largely disputed whether Miller and Sons revoked its acceptance before a substantial change in
the flake occurred. As the October 8, 2004, email from Mr. Miller quoted above explicitly indicates, Miller and
Sons early on attempted to arrange for Scotwood remove the goods from Miller and Sons' possession, but
stored the flake outdoors, these assertions do not even warrant discussion, particularly given Scotwood's
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126 P.3d 928
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(Cite as: 126 P.3d 928)
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. . A fact
is “material” if, under the applicable substantive law, it is “essential to the proper disposition of the claim.” (citing
). An issue of fact is “genuine” if “there is sufficient evidence on each side so that a rational trier of fact could
showing that there is a genuine issue for trial.” (citing ); . The nonmoving party may not simply rest upon its
pleadings to satisfy its burden. accord . Rather, the nonmoving party must “set forth specific facts that would
be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.”
(quoting To accomplish this, the facts “must be identified by reference to an affidavit, a deposition transcript, or
a specific exhibits incorporated therein.” .
For purposes of this motion, the parties agree that Kansas law governs their contractual dispute under the UCC.
Because the choice of Kansas law is entirely reasonable, the court will analyze the substantive issues of the case
under Kansas law.
To the extent the court cites case law from other states, the court emphasizes that “[b]ecause the UCC is
intended to be applied uniformly across the various states, courts routinely turn to decisions from other
accepted these offers and delivered 37 shipments between July 19, 2004, and September 3, 2004. After each
shipment, Scotwood forwarded invoices to Miller and Sons that specifically included its “Terms and Conditions” of
sale. Scotwood identifies that paragraph 8(a) of its “Terms and Conditions” states:
Within forty-eight (48) hours after receipt of each shipment of the goods, Buyer shall examine the goods for any
*1165 damage, defect or shortage. Any and all claims for any cause of action whatsoever whether the cause of
receipt of the goods for which the claim was made, or within ten (10) days after Buyer learns of all facts giving rise
to the claim, whichever occurs first. Failure of Seller to receive written notice of any claim from Buyer within the
acceptable time period as previously set forth, shall be deemed an absolute and unconditional waiver by Buyer of
any and all claims, irrespective of whether the facts giving rise to the claim shall have then been discovered or
whether processing, further manufacture, or other use or resale of the goods shall have taken place.
terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such
126 P.3d 928
Page 3
126 P.3d 928, 2006 WY 16, 24 IER Cases 78
(Cite as: 126 P.3d 928)
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
terms become part of the contract unless:
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of
them is received.
.
The parties agree, in fact, that in deciding whether to apply the time limitation provision in each invoice forwarded
2-207(2)(b) is a question of fact that must be determined in light of the facts of the case and the parties'
expectations.” . See also (equating “materially alter” with invoking “hardship or surprise” and urging that this is a
factual question unique to the circumstances of each case) (citing Official Comment 4). To find that paragraph
8(a) does *1166 not “materially alter” the parties' agreement, the court would have to find, as a matter of law, that
paragraph 8(a) is reasonable and therefore does not alter what Miller and Sons' duty would have been had it not
chunking. In other words, any testing before processing would be destructive. It is also a fact issue whether
calcium chloride is a perishable good. This, in turn, further undercuts Scotwood's assertion that its time limitation
provision is reasonable as a matter of law. Therefore, it is ultimately a genuinely disputed issue of material fact
whether paragraph 8(a) of the “Terms and Conditions” of the invoices “materially alters” the contract between
Miller and Sons and Scotwood. The court, therefore, cannot rule as a matter of law that all of Miller and Sons'
Scotwood of its rejection. See ; .
In deciding whether Miller and Sons accepted the calcium chloride, the first step is to define acceptance:
(1) Acceptance of goods occurs when the buyer
(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that
he will take or retain them in spite of their nonconformity; or
calcium chloride flake because it processed many of the shipments it received from Scotwood and then sold this
processed material on its own behalf. See (“A buyer is deemed to have accepted goods when, without making
any effort to reject them, he receives the goods, processes them, and sells the finished product.”) (citation
omitted). Ultimately, Miller and Sons admits that it exercised control over the calcium chloride flake, which
means that “[e]ven if it were said that [it] initially rejected the [goods], [its] continued use of it converted [its]
126 P.3d 928
Page 4
126 P.3d 928, 2006 WY 16, 24 IER Cases 78
(Cite as: 126 P.3d 928)
its damages, however, is unsupported by any case law. Ultimately, it is undisputed that Miller and Sons
exercised dominion over the shipments of calcium chloride flake by processing them for its own use. This is the
essence of acceptance under § 2-606(1)(c).
Because Miller and Sons cannot meet the first element of rejection, the court need not continue in its analysis of
the rejection counterclaim. In sum, because Miller and Sons accepted the goods and acceptance precludes
little practical significance between revocation and rejection because “[a] buyer who properly revokes has the
same rights with regard to the goods involved as if he had rejected them.” ; see also (“A buyer who so revokes
has the same rights and duties with regard to the goods involved as if he had rejected them.”).
Revocation is governed by , which states:
(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs
their own defects. It is not effective until the buyer notifies the seller of it.
Id.
Thus, a buyer may revoke acceptance when (1) nonconformity substantially *1168 impairs the value of the goods
to the buyer; (2) the buyer revokes within a reasonable time based on difficulty in discovering defects or because
the seller provided assurances; and (3) the buyer revokes before any substantial change in the goods not caused
nonconformity of the goods, the needs and circumstances of the buyer (subjectively), and that the nonconformity
in fact (objectively) impaired the value of the goods to the buyer.” , Kansas Comment 2.
In applying this test, however, “[n]onconformity, the needs and circumstances of the purchaser and substantial
impairment of value to a purchaser are all issues to be determined by a trier of fact.” Syl. 2 (1982); see also
(same).
usable flake and that only 50% of the processed 25 kg bags was usable flake. Miller and Sons also alleges that
Scotwood knew that it required a much higher purity level of flake than it received. Thus, there is a genuine issue
of material fact regarding substantial impairment of the value of the goods to Miller and Sons.
b. Reasonableness of the Timing of Revocation and the Difficulty of Discovering the Alleged Defects
Similarly, the reasonableness of the timing of revocation on October 8, 2004, is a genuinely disputed issue of
126 P.3d 928
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126 P.3d 928, 2006 WY 16, 24 IER Cases 78
(Cite as: 126 P.3d 928)
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
material fact. When asked to decide whether a party pursued an “objectively reasonable” course, the Tenth
Circuit recently instructed that “we leave that determination for the jury.” . In this case, Scotwood cannot
demonstrate, as a matter of law, that Miller and Sons delayed its revocation for an unreasonable amount of time.
See (“The question of whether a buyer's revocation of an acceptance is timely is, as with rejections, a question of
various employees of Scotwood, primarily Carl Wetzel and Chase Wilson. In the first email on August 5, 2004,
Mr. Miller informed Scotwood: “We have had problems on the last three shipments of Flake.... If this cannot be
corrected we will want to stop all shipments. The mess is too much to deal with!!!” Then, on August 13, 2004,
he notified Scotwood in an email: “We continue to have problems.... If this cannot be immediately corrected I
want to stop all further shipments.” He continued to alert Scotwood of defects, as evidenced in a September 1,
instances and that it continually alerted Scotwood numerous times that it was receiving substantially defective
shipments of calcium chloride flake.
The parties agree that Mr. Miller's October 8, 2004, email was intended to revoke acceptance. Scotwood alleges
that this date was unreasonably untimely because of the perishable nature of calcium chloride flake, but this is a
disputed issue of fact based on the opinions of Miller and Sons' experts indicating that, ordinarily, calcium chloride
from it quotes selectively, but this is unavailing. Questions of material fact remain.
Finally, the time frame for a reasonable revocation is further extended where, as here, the alleged defects were
latent, particularly where the buyer could not inspect the goods before beginning production without contaminating
them. Miller and Sons presents evidence that it is not practical to inspect calcium chloride flake until the
beginning of actual production. Its experts have opined that visual inspections are insufficient to identify
its acceptance based on a substantial change in the goods. The court is precluded from ruling as a matter of law
on this issue, however, because “[w]hat constitutes ‘substantial change’ is a question of fact.” (citing § 2-
608(2)). And it is largely disputed whether Miller and Sons revoked its acceptance before a substantial change in
the flake occurred. As the October 8, 2004, email from Mr. Miller quoted above explicitly indicates, Miller and
Sons early on attempted to arrange for Scotwood remove the goods from Miller and Sons' possession, but
stored the flake outdoors, these assertions do not even warrant discussion, particularly given Scotwood's
126 P.3d 928
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126 P.3d 928, 2006 WY 16, 24 IER Cases 78
(Cite as: 126 P.3d 928)

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