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Charleston Marine Containers Inc. v. Sherwin-Williams Co.

United States District Court, D. South Carolina, Charleston Division

February 25, 2016

CHARLESTON MARINE CONTAINERS INC., Plaintiff,
v.
SHERWIN-WILLIAMS COMPANY, THE, Defendant,

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE.

This matter is before the court on defendant The Sherwin-Williams Company’s (“SW”) motion for summary judgment. For the reasons set forth below, the court: (i) grants SW’s motion with respect to plaintiff’s claim for breach of contract; (ii) grants SW’s motion with respect to plaintiff’s claim for breach of contract accompanied by a fraudulent act; (iii) grants SW’s motion with respect to plaintiff’s claim for breach of express warranty; and (iv) denies SW’s motion with respect to plaintiff’s claim for negligent misrepresentation.

I. BACKGROUND[1]

Plaintiff Charleston Marine Containers, Inc. (“plaintiff”) manufactures shipping containers for use by the United States military according to precise specifications provided by the United States Government. Compl. ¶ 5. From 2005 until 2012, plaintiff supplied shipping containers manufactured using a chemical agent resistant coating (“CARC”) system to various government customers. Id. ¶¶ 9- 10. During the relevant time period, SW provided at least three of the four coatings used in the CARC system: (i) the Fast Clad Zinc primer; (ii) the CZO “touchup” paint (“CZO Primer”); and (iii) an intermediate primer known as MP 846.[2] Compl. ¶ 12; Def.’s Mot. 5. The first layer of the CARC system, the Fast Clad Zinc primer, was applied to bare steel panels by plaintiff’s Chinese supplier before the panels were shipped to plaintiff in Charleston, South Carolina. Def.’s Mot. Ex. C, Baker Dep. I 50:24-51:23. Plaintiff would then assemble the component panels into a container, a process which included welding at the container’s joints. Id. at 51:24-53:25. After the welding was complete, the container was hand sanded and the CZO Primer was applied to the welded joint areas while the original Fast Clad Zinc remained on the rest of the container. Id. at 55:1-4. Next, the MP 846 intermediate primer was applied to the entire container. Id. at 55:5-8. Finally, a fourth paint was applied over the MP 846. Id. at 55:9-11.

The CZO Primer, unlike the other coatings, was specifically designed for plaintiff’s use. Def.’s Mot. 5 n.6. At some point prior to 2009, [3] plaintiff asked SW to create a coating that would match certain performance characteristics of another coating product plaintiff used at the time. Pl.’s Resp. Ex. G, Lambrosa Dep. 15:25- 19:8. SW developed the CZO Primer, knowing plaintiff needed it to have certain performance characteristics. Id. at 18:4-8, 18:23-19:8. SW prepared and distributed a product information sheet for the CZO Primer, which was given to customers and explained the physical properties of the product. Id. at 39:16-40:22. Though the product information sheet indicates that the CZO Primer has certain dry times at 40 degrees Fahrenheit, SW never tested the CZO Primer at that temperature. Id. 40:23- 41:8; Def.’s Mot. Ex. R.

In 2009, the parties entered into an agreement (the “Supply Agreement”) that established SW as plaintiff’s “preferred supplier” of paint and coating products, and provided plaintiff with certain rebates for purchases of qualifying products. Def.’s Mot. Ex. Y. Though the term of the Supply Agreement was for one year, plaintiff does not dispute SW’s assertion that the Supply Agreement remained in effect as long as plaintiff cashed the rebate checks. Def.’s Mot. 13. The Supply Agreement was extended in this manner through 2012. Id.

Plaintiff maintained its supply of paint and coating products through periodic purchase orders to SW. Pl.’s Resp. Ex. I. The purchase orders included a statement that “[plaintiff’s] standard terms and conditions for U.S. purchase orders” were modified to include certain Federal Acquisition Regulation clauses. Id. However, there is no evidence that the purchase orders actually contained the referenced terms and conditions. See id.; Def.’s Mot Ex. K, Baker Dep. II 32:11-33:17 (stating that under plaintiff’s ordinary practice the purchase orders “would be accompanied by the [] standard terms and conditions sheets”). Plaintiff cannot confirm that the standard terms and conditions were ever actually presented to, or agreed to, by SW. Baker Dep. II 32:11-33:22; Baker Dep. I 187:11-189:5.

Beginning in January 2012, plaintiff’s customers began reporting delamination problems between the zinc primer layer-the initial coating layer comprised of the Fast Clad Zinc and CZO Primer-and the MP 846 layer-i.e. the coating layers were separating from one another. Pl.’s Resp. Ex. B, Email Support Requests CMCI 0211-13. Plaintiff quickly reported the issue to SW, who contended that the delamination issues were caused by improper preparation or application of the coatings. Pl.’s Resp. Ex. C, SW Site Reports CMCI 0230-232, 234. Plaintiff contends that the delamination issues were actually caused by an incompatibility between the CZO Primer and the MP 846 that occurred when the products were applied at 52 to 57 degrees Fahrenheit, despite language in SW’s product information sheet indicating that the CZO Primer could be applied at temperatures as low as 40 degrees Fahrenheit. Def.’s Reply Ex. 1, Weldon Op. CMCI 0568; Def.’s Mot. Ex. R.

As a result of the delamination problems and related delays, plaintiff allegedly lost a major contract, incurred substantial costs, and lost customer confidence. Pl.’s Resp. 3, Ex. A, Baker Dec. ¶ 9.

On February 11, 2014, plaintiff filed its original complaint in this action. On March 19, 2015, plaintiff filed an amended complaint, and on April 16, 2015, SW filed its answer to the amended complaint. On July 27, 2015, SW filed the instant motion for summary judgment. Plaintiff filed a response on August 20, 2015 and SW filed a reply on September 1, 2015. The court heard arguments on the instant motion on November 16, 2015. The motion is now ripe for the court’s review.

II. STANDARD

Summary judgment shall be granted “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Id. at 248. “[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine, ’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

“[A]t the summary judgment stage the judge’s function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Id. at 249. When the party moving for summary judgment does not bear the ultimate burden of persuasion at trial, it may discharge its burden by demonstrating to the court that there is an absence of evidence to support the non-moving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The non-movant must then “make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Id. at 322. The court should view the evidence in the light most favorable to the non-moving party and draw all inferences in its favor. Anderson, 477 U.S. at 255.

III. DISCUSSION

A. Choice of Law

Plaintiff’s breach of contract and breach of warranty claims present a threshold choice of law question.[4] SW argues that these claims are covered by the Supply Agreement’s choice of law provision, which states that the agreement is to be governed under Ohio law. Def.’s Mot. 19-21, Ex. Y. Plaintiff, however, argues that the individual purchase orders are the operative agreements governing the dispute, and that these purchase orders are governed under South Carolina law-either because they incorporated plaintiff’s standard terms and conditions or under the doctrine of lex loci contractus. Pl.’s Resp. 5-6.

The core of plaintiff’s breach of contract and breach of warranty claims is that: (i) SW agreed/warranted that it would provide a zinc-rich primer-the CZO Primer-which would meet certain performance standards at certain temperatures; (ii) the CZO Primer did not meet such standards; and (iii) as a result, plaintiff suffered damages. Id. at 8. For the purposes of this motion, the court must determine whether there is any state of facts under which the Supply Agreement would not cover plaintiff’s claims regarding the CZO Primer.

“A federal court exercising diversity jurisdiction is obliged to apply the substantive law of the state in which it sits, including the state’s choice-of-law rules.” Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004). “Choice of law clauses are generally honored in South Carolina.” Team IA, Inc. v. Lucas, 717 S.E.2d 103, 108 (S.C. Ct. App. 2011). Therefore, the court must respect the Supply Agreement’s choice of law provision. Pursuant to said provision, the court must determine scope of the Supply Agreement under Ohio law.

Under Ohio law, a contract is governed by the intent of the parties. Foster Wheeler Enviresponse, Inc. v. Franklin Cnty. Convention Facilities Auth., 678 N.E.2d 519, 526 (Ohio 1997) (“The cardinal purpose for judicial examination of any written instrument is to ascertain and give effect to the intent of the parties.”). “If contractual terms are unambiguous, a court may not fashion a new contract or interpret contractual terms in a manner not expressed by the clear intent of the parties.” Money Station, Inc. v. Elec. Payment Serv., Inc., 735 N.E.2d 966, 970 (Ohio Ct. App. 1999). If contractual terms are ambiguous, however, “the court may look to extrinsic, or parol, evidence to determine the parties’ intent.” Id. Contractual terms are ambiguous if their meaning cannot be determined from reading the entire contract, or if the terms are reasonably susceptible to more than one interpretation.” Id.

The Supply Agreement provides that: (i) SW will be the “preferred supplier of paint, coatings, and related products to [plaintiff], ” (ii) plaintiff will pay the price that is in effect at the SW store at the time of purchase, and (iii) plaintiff will receive a rebate from SW based on the amount of products purchased “pursuant to [the Supply Agreement].” Def’s. Mot. Ex. Y. Under the Supply Agreement, plaintiff warranted that it could obtain similar products of like grade and quality from another supplier on similar terms, and acknowledged that SW offered the terms set forth in the Supply Agreement to meet this competitive offer. Id. The Supply Agreement also contains an integration clause, which provides that:

[The Supply Agreement] constitutes the entire agreement between the parties . . . with reference to the subject matter hereof . . . Any term, condition, or language contained in any purchase order or other writing submitted by [plaintiff] to SW shall not be considered an ...

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