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POTOMAC PLAZA TERRACES, INC. v. QSC PRODS.

November 28, 1994

POTOMAC PLAZA TERRACES, INC., Plaintiff,
v.
QSC PRODUCTS, INC., et al., Defendants.



The opinion of the court was delivered by: STANLEY S. HARRIS

 Before the Court is the motion for summary judgment of defendant QSC Products, Inc. ("QSC") in an action brought by plaintiff Potomac Plaza Terraces, Inc. ("PPT") for breach of implied warranty of merchantability, breach of contract, negligence, and strict liability. The Court denies defendant's motion for summary judgment on the implied warranty and contract claims, but grants defendant's motion for summary judgment on the negligence claim. Lastly, the Court grants in part defendant's motion for summary judgment on the strict liability claim for damages for the loss of value or use of defendant's polyurethane coatings, and denies summary judgment on the strict liability claim for damages related to the remainder of the roofing system and the PPT building structure. Although findings of fact and conclusions of law are unnecessary in ruling on a summary judgment motion, the Court nonetheless sets forth its reasoning. See Fed. R. Civ. P. 52(a).

 Background

 Plaintiff, a housing cooperative corporation with its principal place of business located at 730 24th Street, N.W., Washington, D.C., seeks compensatory, consequential, and incidental damages, and pre- and post-judgment interest for damages allegedly arising from a defective roofing system that included materials manufactured and warranted by defendant. Plaintiff alleges four counts against defendant: breach of an implied warranty of merchantability, breach of contract, negligence based on duties established by the contract, and strict liability for the performance of a product introduced into the stream of commerce by defendant.

 In 1989, plaintiff accepted an offer by Ron-Ike Foam Insulators, Inc. ("Ron-Ike"), a Pennsylvania corporation, to sell and install two roofing systems using a polyurethane coating manufactured by QSC. *fn1" Ron-Ike agreed to cover the building's main roof, located above the ninth floor ("Roof 1"), with an insulating layer of polyurethane foam manufactured by IPI Chemical Corporation ("IPI"). Ron-Ike would then spray the foam with a specified thickness of defendant's QSC-510 Polyurethane Protective Coating, which is intended to protect the foam underneath from weather damage and ultraviolet light.

 In August of 1989, plaintiff and Ron-Ike entered into a supplemental agreement in which a canopy over the building's main entrance ("Roof 2") would be covered with a specified thickness of defendant's QSC-5013 Pedestrian Waterproofing Coating, applied directly to the roof's concrete surface. The 5013 coating is designed to protect the concrete from water and other weather damage.

 On August 27, 1989, Ron-Ike tendered the described materials and installed the two roofing systems. After a field representative inspected the site, defendant issued a ten-year warranty for its 510 coating and a five-year warranty for its 5013 coating. Plaintiff alleges that the roofs began leaking water after only three years, and that the coatings on both roofs deteriorated, cracked, and failed to provide the protection described in defendant's technical data sheets.

 Plaintiff notified defendant in December of 1992 that its roofs were leaking, and defendant's field representative inspected the PPT facility in early January. The representative observed "deterioration" of the coating and "adhesion loss and delamination of coating . . . where ponding occurs." Letter from Stauffer to Flanagan of 1/6/93. He concluded, however, that the roofs did not leak.

 Plaintiff then expressed its dissatisfaction with the roofing systems and informed defendant that, as a remedy pursuant to its warranty, it wished to have the foam roofing system replaced with a more conventional "tar and gravel" system. Defendant notified plaintiff on February 5, 1993, that it would not finance the removal of the foam roofing system as a remedy under the warranty. Defendant offered to provide at no charge its "second generation" QSC-701 Adhered Membrane as well as technical assistance if plaintiff decided to remove the existing roof at its own expense. Otherwise, defendant refused to finance any other costs arising from replacement of the foam roofing systems.

 On April 1, 1993, defendant's representatives again inspected the PPT facility. They observed water damage to the building's ninth floor but noted that the age of this damage was indeterminate. To fulfill its obligation under the warranty, defendant offered to respray Roof 1 with its 510 coating, which it contends would have repaired any areas where the coating had deteriorated. Defendant repeated this offer on two other occasions, but plaintiff rejected the proposed repairs based on its belief that a second coating would fail to prevent further leaks.

 Plaintiff ultimately retained another contractor to replace the foam roofing system. Subsequently, plaintiff filed this suit against defendant on July 9, 1993.

 Discussion

 A court should grant summary judgment if the pleadings, depositions, answers to interrogatories, and affidavits show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). If material facts are "susceptible to divergent inferences bearing upon an issue critical to the disposition of the case, summary judgment is not available." Alyeska Pipeline Serv. Co. v. EPA, 272 U.S. App. D.C. 355, 856 F.2d 309, 314 (D.C. Cir. 1988). Furthermore, the Court must consider the facts in such as way that its inferences are drawn in a light most favorable to the nonmoving party. White v. Fraternal Order of Police, 285 U.S. App. D.C. 273, 909 F.2d 512, 516 (D.C. Cir. 1990). Defendant contends that there are no genuine issues of material fact and that judgment of a matter of law is appropriate on all four counts.

 1. Breach of Implied Warranty of Merchantability

 In the District of Columbia, a contract for the sale of goods includes an implied warranty of merchantability if the seller has reason to know of any particular purpose for which the goods are required and that the buyer is relying on the seller's skill to furnish suitable goods. D.C. Code Ann. § 28:2-315 (1981). However, the parties may delete this implied warranty by including an exclusion clause within the contract that specifically mentions merchantability and is sufficiently conspicuous. Id. § 28:2-316(2). Here, the written warranties announce, in capital letters, "THE FOLLOWING IS MADE AND GIVEN IN LIEU OF ANY AND ALL OTHER WARRANTIES AND GUARANTEES, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTY OF MERCHANTABILITY. . . ." *fn2" This clause is both sufficiently conspicuous and specific to exclude an implied warranty of merchantability. *fn3"

 Plaintiff argues, however, that the exclusion clause is inapplicable on the ground that defendant's products fall within an exception to § 2-316(2) for "consumer goods." Id. § 28:2-316.1(1). The Court disagrees. For the purposes of § 2-316.1(1), consumer goods consist of products used or bought for use primarily for personal, family, or household purposes. Id. § 28:9-109. Although District of Columbia courts have not specifically defined "household purposes" as they relate to an implied warranty of merchantability, the D.C. Code elsewhere defines "household goods" to include "furniture, furnishings and personal effects used by the depositor in the dwelling." Id. § 28:7-209. A court interpreting a statute should, whenever possible, read the provision in harmony with other provisions to which it naturally relates. Carey v. Crane Serv. Co., 457 A.2d 1102, 1108 (D.C. 1983) ("Statutory provisions are to be construed not in isolation, but together with other related provisions.") (citing United Marine Workers of Am. v. Andrus, 189 U.S. App. D.C. 110, 581 F.2d 888, 892 (D.C. Cir.), cert. denied, 439 U.S. 928, 99 S. Ct. 313, 58 L. Ed. 2d 321 (1978)). *fn4" Because roofing materials are not furniture, furnishings, or personal effects, defendant's products cannot be considered to be used for household purposes. *fn5" Defendant's roofing products thus do not fall within the consumer goods exception and the clause excluding the implied warranty is valid.

 Despite the apparent validity of the exclusion clause, summary judgment for the defendant on the implied warranty of merchantability is inappropriate. The law imposes an obligation of good faith in the enforcement or performance of every contract. See D.C. Code Ann. § 28:1-203. See also 1 Ronald A. Anderson, Uniform Commercial Code § 1-203:14, at 382 (3d ed. 1981) ("When a party acts in bad faith, he will ordinarily be denied the benefit of any provision or concept that would improve his position."). If bad faith is alleged pertaining to a disclaimer of warranty, the disclaimer will not be held binding if it is shown that its inclusion in the contract was a violation of the obligation of good faith. See, e.g., 1 James J. White and Robert S. Summers, Uniform Commercial Code § 12-11, at 611 (3rd ed. 1988) ("Section 2-316 does not state expressly that all disclaimers meeting its requirements are immune from general policing provisions like . . . 1-203."); 3 Anderson, supra § 2-316:36, at 349.

 For a contract made by a merchant, good faith is defined as "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." D.C. Code Ann. § 28:2-103(1)(b). Allegations concerning a party's honesty in fact focus on the parties' subjective mental states, and are thus "notoriously difficult to resolve on motion for summary judgment." See Gatoil (U.S.A.), Inc. v. WMATA, 801 F.2d 451, 456, 255 U.S. App. D.C. 237 (D.C. Cir. 1986). See also 1 Anderson, supra ...


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