WILLIAM H. STEELE, District Judge.
This matter comes before the Court on defendant Kem-Bonds, Inc.'s Motion for Partial Summary Judgment (doc. 37). The Motion has been briefed and is now ripe for disposition.
The basic facts giving rise to this dispute have not been controverted for purposes of the present Motion. Plaintiff, SSAB Alabama, Inc., operates a recycling steel mill in Axis, Alabama. During the steel-making process, SSAB utilizes a product known as tap-hole sand (also known by the trade name EZ-POR). At all relevant times, SSAB purchased EZ-POR directly from defendant, Kem-Bonds, Inc. SSAB maintains that in June 2016, its Axis facility experienced multiple "burn-through" incidents in which the tap-hole sand supplied by Kem-Bonds catastrophically failed,
Based on these events, SSAB brought this action to assert state-law claims against Kem-Bonds on theories of breach of contract (Count One), breach of warranty (Count Two) and the Alabama Extended Manufacturer's Liability Doctrine (Count Three). In Count One, SSAB alleges that Kem-Bonds breached the direct contracts set forth in SSAB's purchase orders numbered MB153592 and MB151229 by supplying SSAB with tap-hole sand that did not satisfy industry standards, failing to perform chemical testing and analysis of its product, and failing to notify SSAB that it had secured a different supplier. (Doc. 24, ¶ 11.) In Count Two, SSAB alleges that by selling it defective tap-hole sand, Kem-Bonds "breached its express and implied warranties to SSAB including . . . the express warranty section found in paragraph ten of the terms and conditions . . ., as well as the implied warranty of merchantability and the implied warranty of fitness for a particular purpose." (Id., ¶ 17.) Finally, in Count Three, SSAB alleges that Kem-Bonds is liable under the AEMLD because the tap-hole sand "reached SSAB . . . in a defective condition and/or in a condition that was unreasonably dangerous to SSAB as the ultimate user or consumer." (Id., ¶ 26.)
In its Answer (doc. 29) to the Amended Complaint, Kem-Bonds raised a pair of affirmative defenses that are of central importance to the Motion for Partial Summary Judgment. In particular, Kem-Bonds explained that its "invoices associated with SSAB Purchase Orders numbered MB153592 and MB151229 contain a waiver of warranties and a limitation of damages." (Doc. 29, at 4.) Kem-Bonds further pleaded that "its Invoices contain a clear and an enforceable limitation of remedy under the Alabama Uniform Commercial Code." (Id.) Kem-Bonds now moves for summary judgment on the basis of those defenses.
In this posture, analysis of Kem-Bonds' Rule 56 Motion requires scrutiny of the relevant contract language contained in both SSAB's purchase orders and Kem-Bonds' invoices for the subject EZ-POR. The mechanics of these transactions, the course of dealing between the parties, and the relevant contract language have not been disputed for purposes of the pending Motion for Partial Summary Judgment. What is disputed is whether the language of the SSAB's Purchase Orders or Kem-Bonds' Invoices governs, such that the parties' disagreement on summary judgment essentially boils down to a "battle of the forms."
Kem-Bonds had been selling tap-hole sand to SSAB for years prior to the June 2016 "burn-through" incidents that gave rise to this litigation. (DeSanto Aff. (doc. 37, Exh. 2), ¶ 5.) The parties' course of dealing was as follows: SSAB would contact Kem-Bonds in Missouri and place an order for EZ-POR, after which SSAB would issue a corresponding Purchase Order. (Id., ¶ 6.) Upon receipt of the Purchase Order, Kem-Bonds would ship truckloads of EZ-POR to SSAB, accompanied by Invoices corresponding with each shipment. (Id.) Both the Purchase Orders and the Invoices were form documents containing preprinted terms and conditions that did not vary from one order or shipment to the next.
SSAB placed large orders of tap-hole sand with Kem-Bonds in both March 2016 (Purchase Order MB151229) and May 2016 (Purchase Order MB153592). (DeSanto Aff., ¶¶ 8, 13.) Each order was for ten truckloads of EZ-POR, with each truckload consisting of 46,800 pounds of tap-hole sand. (Id. at Exhs. B & C.)
(Id., ¶ 2.) And Paragraph 4 unequivocally provided that "[n]o revision or modification of the terms and conditions of this Order shall be binding on SSAB unless such revision or modification is expressly accepted in writing by an authorized officer of SSAB." (Id., ¶ 4.) In Paragraph 18, the Purchase Order addressed the concept of waiver by stating, "No waiver of any provision of this Order shall: (a) be binding unless given in writing and signed by an authorized officer or agent of the party to be bound thereby; or (b) imply a waiver of that provision for the future or of any other provisions in this Order unless the waiver expressly so states." (Id., ¶ 18.) On its face, each Purchase Order designates Alabama law as governing its interpretation, validity and enforceability. (Id., ¶ 20.)
Each of SSAB's Purchase Orders also included a detailed "Warranty" provision in Paragraph 10, which SSAB's Amended Complaint accuses Kem-Bonds of violating. Paragraph 10 reads, in pertinent part, as follows:
(Id., ¶ 10.) Kem-Bonds' evidence is that it never signed Purchase Order MB151229, although Purchase Order MB153592 was admittedly signed by Kem-Bonds, as shown in movant's own exhibits. (DeSanto Aff., ¶ 12 & Exhs. B, C.)
Notwithstanding SSAB's detailed Purchase Orders, Kem-Bonds issued Invoices to SSAB corresponding to each truckload of EZ-POR shipped by Kem-Bonds to SSAB in April, May and June 2016. (DeSanto Aff., ¶¶ 10-11, 13 & Exhs. A, D.) Each of those Invoices contained the following identical preprinted notation at the bottom of the form:
(Id.) Kem-Bonds' evidence, unchallenged by SSAB on summary judgment briefing, is that "SSAB never objected to the language in the KBI Invoices regarding the disclaimer of warranties or limiting the remedies." (DeSanto Aff., ¶ 15.) On summary judgment, Kem-Bonds seeks to enforce the disclaimer of warranties and limitation of remedies contained in its Invoices. SSAB's opposing position is that those provisions are not part of the agreement and are otherwise unenforceable.
Summary judgment should be granted only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 56(a), Fed.R.Civ.P. The party seeking summary judgment bears "the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11
As discussed, there are fundamental inconsistencies between the terms of SSAB's Purchase Orders and the terms of Kem-Bonds' Invoices for the tap-hole sand alleged to have caused the "burn-through" incidents giving rise to this litigation. SSAB's Purchase Orders provided that (i) Kem-Bonds was expressly warranting that the EZ-POR being supplied was fit for its intended purpose, of merchantable quality, and free of defects in material, design or workmanship; (ii) the Purchase Orders contained the sole and exclusive agreement between SSAB and Kem-Bonds, with SSAB rejecting any terms or conditions contained in any document supplied by Kem-Bonds; (iii) acceptance of SSAB's offer was expressly limited to the terms and conditions of the Purchase Orders; (iv) no revision or modification of the terms of the Purchase Orders would be effective unless accepted in writing by SSAB; and (v) no waiver of any term or condition in the Purchase Orders would be binding unless it were in writing and signed by SSAB. By contrast, Kem-Bonds' Invoices specified that there was no warranty of merchantability or fitness for a particular purpose, and that Kem-Bonds' liability was capped at the purchase price of the goods sold.
To reconcile the discrepancy in contract terms, both parties look to Alabama's Uniform Commercial Code.
On its face, § 7-2-207 provides that an expression of acceptance or a written confirmation operates as an acceptance "even though it states terms additional to or different from those offered." Ala. Code § 7-2-207(1). As such, Kem-Bonds' Invoices operate as an acceptance of the offer set forth in SSAB's Purchase Orders even though those Invoices state terms additional to or different from those in the Purchase Orders (i.e., disclaimers of warranties of merchantability and fitness for a particular purpose, and limitation of remedies to recovery of the purchase price of the goods sold). The pivotal question, of course, is what becomes of the additional terms in Kem-Bonds' Invoices. Alabama's UCC provides that "[b]etween merchants such terms become part of the contract unless: (a) The offer expressly limits acceptance to the terms of the offer; (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." Ala. Code § 7-2-207(2).
First, under a straightforward reading of the statute, the additional terms in Kem-Bonds' Invoices (again, the disclaimer of warranties and the limitation of remedies) do not become part of the contract between merchants if "[t]he offer expressly limits acceptance to the terms of the offer." Ala. Code § 7-2-207(2)(a). That is precisely what happened here. Paragraph 2 of the SSAB Purchase Orders specifies that "[a]cceptance of this Order is expressly limited to the terms and conditions set forth in this Order." Under any reasonable construction of that Paragraph 2, coupled with § 7-2-207(2)(a), the additional terms contained in Kem-Bonds' Invoices cannot become part of the contract between SSAB and Kem-Bonds because the SSAB Purchase Order (i.e., the offer) expressly limits acceptance to the terms of such Purchase Order. Confronted with this argument by SSAB, Kem-Bonds remains silent. Although SSAB's Response explicitly relies on § 7-2-207(2)(a) to support its position that Kem-Bonds' Invoices' additional terms are not part of the parties' agreement, Kem-Bonds offers no rejoinder or counterargument. This unrebutted argument is fatal to defendant's Motion for Partial Summary Judgment.
Second, even if § 7-2-207(2)(a) did not apply, summary judgment for Kem-Bonds would remain inappropriate because Alabama's UCC precludes the additional terms (disclaimer of warranties and limitation of remedies) in Kem-Bonds' Invoices from becoming part of the contract where "[t]hey materially alter it." Ala. Code § 7-2-207(2)(b). The official commentary to the statute recites as an example of a "typical clause[] which would normally `materially alter' the contract . . . a clause negating such standard warranties as that of merchantability or for a particular purpose in circumstances in which either warranty normally attaches." Ala. Code § 7-2-207(2), comment 4. Furthermore, the Alabama Supreme Court has held that whether a limitation of remedies clause "materially alters" an agreement is a fact question. See Burbic Contracting, 409 So.2d at 4 ("We hold that the question of whether a limitation of remedies clause materially alters a contract is a question of fact."). More broadly, "[t]he question of whether a clause negates standard warranties or limits remedies in a reasonable manner is [a] question best resolved by the trier of fact." Id. at 5. Kem-Bonds offers no persuasive basis for deviating from these general principles under Alabama law. Likewise, Kem-Bonds does not meet its initial summary judgment burden of demonstrating that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law as to whether the terms of its Invoices materially alter the parties' agreement.
Third, even if we were to assume that § 7-2-207(2)(a) and (b) posed no impediment to entry of summary judgment in Kem-Bonds' favor, the Motion for Partial Summary Judgment would nonetheless founder upon § 7-2-207(2)(c). That subsection provides that additional terms contained in an expression of acceptance such as Kem-Bonds' Invoices do not become part of the contract if "[n]otification of objection to them has already been given." Ala. Code § 7-2-207(2)(c). In its principal brief, Kem-Bonds summarily waves this exclusion aside, stating, "Nor did SSAB provide any objection to the terms during months and months of dealings between the parties." (Doc. 38, at 6.) But this argument cannot be reconciled with unambiguous language from Paragraph 2 of SSAB's Purchase Orders, providing as follows: "SSAB hereby gives notice that it objects to and rejects any terms or conditions contained in any document which has been or may in the future be supplied by Supplier to SSAB which are in addition to, different from, inconsistent with or attempt to vary any of the terms or conditions of this Order." Movant advances no facts or argument why the objection/rejection language in Paragraph 2 is inadequate to trigger the § 7-2-207(2)(c) exclusion. Because additional terms in an expression of acceptance (in this case, Kem-Bonds' Invoices) do not become part of the agreement between merchants where the party making the offer (SSAB) has already notified the accepting party (Kem-Bonds) that it objects to such additional terms, and because SSAB's Purchase Orders clearly notify Kem-Bonds of its objection/rejection of additional terms, the disclaimer of warranties and limitation of remedies provisions in Kem-Bonds' Invoices did not become part of the parties' agreement, by the plain language of Alabama Code § 7-2-207(2)(c).
The foregoing analysis demonstrates that there are serious (and, by all appearances, insuperable) obstacles to Kem-Bonds' ability to show that the disclaimer of warranties and the limitation of remedies set forth in Kem-Bonds' Invoices are even part of the agreement between SSAB and Kem-Bonds for the purchase of the purportedly defective tap-hole sand. Accordingly, Kem-Bonds is not entitled to entry of partial summary judgment enforcing such disclaimer of warranties and limitation of remedies clauses.
For all of the foregoing reasons, it is
