Filed: Mar. 30, 2009
Latest Update: Mar. 02, 2020
Summary: RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 09a0121p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _ X Plaintiff-Appellee/Cross-Appellant, - TINA DILLON, - - - Nos. 07-5458/5459 v. , > - Defendant-Appellant/Cross-Appellee, - COBRA POWER CORP., - - LAKE CUMBERLAND MARINE, L.L.C, - Defendant-Appellee (No. 07-5459). N Appeal from the United States District Court for the Eastern District of Kentucky at London. No. 01-00002—Karen K. Caldwell, District
Summary: RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 09a0121p.06 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _ X Plaintiff-Appellee/Cross-Appellant, - TINA DILLON, - - - Nos. 07-5458/5459 v. , > - Defendant-Appellant/Cross-Appellee, - COBRA POWER CORP., - - LAKE CUMBERLAND MARINE, L.L.C, - Defendant-Appellee (No. 07-5459). N Appeal from the United States District Court for the Eastern District of Kentucky at London. No. 01-00002—Karen K. Caldwell, District ..
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 09a0121p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
Plaintiff-Appellee/Cross-Appellant, -
TINA DILLON,
-
-
-
Nos. 07-5458/5459
v.
,
>
-
Defendant-Appellant/Cross-Appellee, -
COBRA POWER CORP.,
-
-
LAKE CUMBERLAND MARINE, L.L.C, -
Defendant-Appellee (No. 07-5459). N
Appeal from the United States District Court
for the Eastern District of Kentucky at London.
No. 01-00002—Karen K. Caldwell, District Judge.
Argued: July 29, 2008
Decided and Filed: March 30, 2009
*
Before: BATCHELDER and GILMAN, Circuit Judges; ZOUHARY, District Judge.
_________________
COUNSEL
ARGUED: John T. Pruitt, Jr., TRAVIS, PRUITT, POWERS & YEAST, Somerset,
Kentucky, for Appellant. John G. Prather, Jr., LAW OFFICES OF JOHN G.
PRATHER, Somerset, Kentucky, Thomas Pastore, PASTORE & GOODEN,
Indianapolis, Indiana, for Appellees. ON BRIEF: John T. Pruitt, Jr., TRAVIS,
PRUITT, POWERS & YEAST, Somerset, Kentucky, for Appellant. John G. Prather,
Jr., Winter R. Huff, LAW OFFICES OF JOHN G. PRATHER, Somerset, Kentucky,
Thomas Pastore, PASTORE & GOODEN, Indianapolis, Indiana, for Appellees.
*
The Honorable Jack Zouhary, United States District Judge for the Northern District of Ohio,
sitting by designation.
1
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 2
_________________
OPINION
_________________
INTRODUCTION
JACK ZOUHARY, District Judge. This diversity case arises from the sale of a
high-performance speed boat by Defendant Lake Cumberland Marine (“Cumberland”)
to Plaintiff Tina Dillon. Dillon claims the boat was defective. Defendant Cobra Power
(“Cobra”) manufactured the engines and transmissions, and Cumberland installed them
in the boat in May 2000. The subsequent repair history of the boat is long and tortuous
(not unlike the seven-year history of this lawsuit). After several unsuccessful attempts
to repair the boat engines and outdrives, Dillon, in January 2001, sued Cumberland for
breach of contract and warranty, as well as a violation of the Kentucky Consumer
Protection Act (KCPA); she also sued Cobra for breach of warranty.
The district court granted partial summary judgment in October 2003, dismissing
the warranty claim against Cobra (and thereby dismissing it as a party), and also
dismissing the warranty claims against Cumberland. In July 2004, the court held a
bench trial on Dillon’s remaining breach of contract claim against Cumberland. The
court dismissed this remaining claim against Cumberland, but sua sponte reinstated the
breach of warranty claim against Cobra, found it liable, and entered judgment on that
claim in favor of Dillon. The court did so after hearing the testimony of Randy Garciga,
President of Cobra, called by Cumberland to testify at the bench trial. Because Cobra
had been previously dismissed from the lawsuit, counsel for Cobra was not present at the
trial. The court found Garciga’s testimony contradicted his earlier affidavit, which was
the basis for the earlier dismissal of Cobra.
The court also granted Dillon’s post-trial request to amend the complaint to add
conversion and KCPA claims against Cobra, although two years earlier the court had
denied a similar request by Dillon to add a claim of conversion against Cobra. In June
2006, the court entertained briefing from Cobra opposing Dillon’s proposed amendments
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 3
and contesting the court’s post-trial finding of liability. Ultimately, and without further
hearing, the court granted summary judgment in favor of Dillon and entered a verdict of
$50,400 in compensatory damages against Cobra in December 2006, nearly two and a
half years after the bench trial with Cumberland.
Cobra and Dillon each appeal from the adverse decisions against them, including
pretrial and post-trial orders on amendment of pleadings. Cumberland defends the
district court’s decision to dismiss all claims against it.
For the reasons discussed below, we affirm in part and reverse in part, and, given
the already lengthy history of this lawsuit, reluctantly, but properly, remand the matter
for further proceedings.
FACTUAL BACKGROUND
Dillon contracted with Cumberland in November 1999 to purchase a Fountain
power boat with two 800 HP engines, each with an outdrive. After some delay,
Cumberland installed these engines and delivered the boat to Dillon in May 2000. A
purchase agreement between Dillon and Cumberland contained an express warranty
disclaimer.1
Dillon claims that she was given only 720 HP engines, rather than the promised
800 HP, and that she experienced problems with the outdrives. Cobra subsequently
repaired both outdrives, the first free of charge, and then shipped each repaired outdrive
to Cumberland for re-installation on the boat. Cumberland returned the boat to Dillon
1
The disclaimer reads:
EXCEPT TO THE EXTENT REQUIRED BY STATE LAW, SELLER EXPRESSLY
DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. All warranties covering the equipment referenced on page
1 of the Agreement, if any, are made by the manufacturer. A copy of any applicable
manufacturer’s warranty shall be delivered by Seller to Buyer.
* * *
THIS DOCUMENT CONTAINS THE ENTIRE AGREEMENT BETWEEN ITS
PARTIES. NO OTHER REPRESENTATIONS, INDUCEMENTS OR PROMISES
(WRITTEN OR VERBAL) HAVE BEEN MADE WHICH ARE NOT SET FORTH IN
THIS AGREEMENT.
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 4
in July 2000. Neither Dillon nor Cumberland paid Cobra for the second repair bill and
freight charges.
In August 2000, Dillon noticed smoke from the engine compartment and shipped
one of the engines back to Cobra for inspection and repair. Cobra built a new engine and
shipped it to Cumberland for installation. Cobra sent Cumberland an invoice for half the
cost of the new engine ($14,500), but it too was never paid. Nonetheless, the new engine
was installed by Cumberland, and the boat was delivered back to Dillon. The next
month, during a race, the same engine suffered an oil line break and also lost an outdrive.
Dillon disassembled and attempted, unsuccessfully, to repair the outdrive; the engine
was repaired by a Cumberland mechanic at the dock. Dillon sent the repaired engine
back to Cobra for inspection, but Cobra found nothing wrong and retained possession
of the engine while the parties attempted to negotiate responsibility for unpaid charges.
Dillon attempted to revoke acceptance of the boat by way of two letters, dated
October 27, 2000 and November 2, 2000, respectively. Cumberland refused to accept
either a return of the boat (it was then missing the engine still being held by Cobra and
an outdrive remained unrepaired) or a refund of the purchase price. This lawsuit
followed in January 2001.
PROCEDURAL BACKGROUND
Upon completion of discovery, all parties filed motions for summary judgment.
In October 2003, the district court dismissed Dillon’s breach of express warranty claim
against Cobra. This was the only claim against Cobra, and therefore it was dismissed
as a party to the lawsuit. The litigation continued between Dillon and Cumberland. A
two-day bench trial took place in July 2004. Following the bench trial, the court invited
Dillon to address in her post-trial briefing whether the court had authority to reinstate
the lawsuit against Cobra; at that time, the court did not invite briefing from Cobra. It
was not until Cobra’s counsel received a court order in August 2005 that Cobra learned
the court was not only vacating its earlier dismissal of Cobra, but, even further, was
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 5
holding Cobra liable for a breach of warranty that entitled Dillon to recover damages
from Cobra.
Following the court’s August 2005 order, Dillon and Cobra filed numerous post-
trial memoranda and motions, and the district court issued several orders. The district
court orders, both before and after the bench trial, which have been appealed, are as
follows:
• January 10, 2003 (JA 75): The court denied Dillon’s motion to
amend her complaint to assert conversion against Cobra.
• October 27, 2003 (JA 24): The court granted partial summary
judgment, dismissing Cobra as a party.
• August 5, 2005 (JA 110): The court set forth findings of fact and
conclusions of law from the July 2004 bench trial, ruling in favor
of Dillon, in part, and in favor of Cumberland, in part.
• June 14, 2006 (JA 36): The court ordered Cobra to file a pleading
to contest its liability and granted Dillon’s motion for leave to
assert conversion and KCPA claims.
• December 14, 2006 (JA 225): The court terminated the case,
finding Cobra liable for breach of warranty and conversion, but
denying Dillon’s attempted amendment of a KCPA claim, and
awarding Dillon $50,400 (difference in value between the two
engines purchased from Cobra and the value of the single engine
still in Dillon’s possession).
Each of these rulings is reviewed below.
DISCUSSION
The district court erred in reversing its prior grant of summary
judgment in favor of Cobra and later entering judgment in favor of
Dillon.
This Court reviews the grant or denial of summary judgment de novo. Le-Ax
Water Dist. v. City of Athens, 346 F.3d 701, 704 (6th Cir. 2003).
After its order granting summary judgment to Cobra and dismissing Cobra as a
party (JA 24), the court conducted a bench trial on Dillon’s remaining claims against
Cumberland. At this trial, Randy Garciga, President of Cobra, testified that Cobra
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 6
intended to warrant the engines for six months, apparently contradicting Cobra’s
argument in its summary judgment motion that it had extended no warranty to Dillon.
In its findings of fact and conclusions of law following the bench trial, the court ruled
that Cobra had warranted the engines and breached the warranty. The court reaffirmed
this ruling twice, in its June 2006 and December 2006 orders, respectively.
Cobra argues that reversing summary judgment and simultaneously imposing
liability against a party previously dismissed from the litigation violates due process.
In particular, Cobra notes it was dismissed as a party in October 2003 and was no longer
on the docket for service of pleadings or for any court orders. Moreover, Cobra did not
participate in the July 2004 bench trial.
It was not until two years later, in June 2006, that the court invited Cobra to
“show cause” why, in light of Garciga’s sworn testimony at the bench trial, the court
should not alter its summary judgment order of three years earlier to find Cobra breached
the warranty to Dillon (JA 46). This invitation was limited to briefing, with a review
of the bench trial transcript, but no opportunity for discovery.
Dillon cites no legal authority supporting reinstatement of previously dismissed
and absent parties based upon testimony offered at a later trial. Instead, Dillon cites the
interlocutory nature of partial summary judgment orders and argues Cobra had a duty
either to attend trial voluntarily -- though Dillon does not explain what Cobra could have
done beyond acting as a spectator -- or to seek entry of final judgment pursuant to
Federal Civil Rule 54(b). We conclude that the district court erred when it reversed its
grant of summary judgment based on evidence elicited at the later trial.
Federal Civil Rule 56 makes clear that summary judgment is a pretrial
procedure. The district court correctly noted that trial testimony may be submitted for
consideration at the summary judgment stage, but such testimony comes from prior
proceedings that are submitted as part of the pretrial record. In other words, sworn
testimony given in earlier court proceedings is the same as “the pleadings, the discovery
[including depositions] and disclosure materials on file, and any affidavits” which Rule
56(c) expressly allows the court to consider. Here, Garciga’s testimony was produced
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 7
at trial in the very case for which summary judgment was decided, long after the pretrial
process had come to an end. This is not the type of evidence on which a court may base
summary judgment.
Furthermore, the pretrial nature of summary judgment is not changed by Rule
56(a) and its use of “any time” to describe when a summary judgment motion may be
filed. The Advisory Committee Notes on the 1946 Amendments make clear that this
language was used to allow the filing of motions earlier than previously allowed, and
that the language “does not permit the filing of a summary judgment motion so late that
it cannot be decided until after the case has gone to trial.” United States v. Gilbert, No.
93-16113, 1995 U.S. App. LEXIS 3673, at *5 (9th Cir. Feb. 17, 1995). Accordingly, it
was not appropriate for the district court to consider evidence produced at trial in re-
adjudicating the pretrial summary judgment motion that it granted in favor of Cobra.
Moreover, the order that ultimately granted Dillon summary judgment was issued
in December 2006. Up to that point, Dillon’s only motion for summary judgment
claimed that Dillon had properly revoked acceptance of the boat and was entitled to
summary judgment against Cumberland, a motion which the district court dismissed.
Nevertheless, the court revised its 2003 order, to now grant summary judgment in favor
of Dillon, by construing Dillon’s post-trial submission, filed in September 2005, as a
motion for summary judgment. Thus, the post-trial order of 2006 reversing the earlier
summary judgment order -- a pretrial order -- was decided by a motion filed after trial
and based solely on Garciga’s trial testimony. This cannot be right.
In addition to the plain reading of how amendments are made pursuant to Federal
Civil Rule 15 (see later discussion), the case law supports our conclusion on the unusual
procedural path of this case. This Court in O’Daniel v. Parkview Mem’l Hosp., Inc., 533
F.2d 325 (6th Cir. 1976), held that a district court had no authority to “realign” parties
after trial. In that case, the district court had previously dismissed a direct claim by
plaintiff against Parkview, a third-party defendant. However, after a bench trial and on
plaintiff’s motion, Parkview was reinstated and held jointly and severally liable to
plaintiff with other defendants. This Court reversed the judgment, reasoning that
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 8
sometimes Rule 15 “may be availed of to permit an amendment after judgment and a
realigning of parties. However, this may only be done if all parties have notice of the
issues being tried and no prejudice will result.”
Id. at 330. The Court emphasized the
prejudice Parkview suffered in approaching the trial believing it would be only a third-
party defendant, but later being reinstated and held directly liable. O’Daniel highlights
the principles that guide our analysis: notice, opportunity and prejudice.
Other federal circuits have considered the authority of a district court, after trial,
to reverse its previous finding of summary judgment that dismissed a party. See Alberty-
Velez v. Corporacion de Puerto Rico para la Difusion Publica, 242 F.3d 418, 425-26
(1st Cir. 2001) (finding prejudice to defendant when district court reversed, at trial, prior
finding of partial summary judgment, thereby broadening scope of trial -- “the judge
must inform the parties and give them an opportunity to present evidence relating to the
newly revived issue” or grant a continuance of the trial to avoid prejudice); Leddy v.
Standard Drywall, Inc.,
875 F.3d 383, 386-87 (2d Cir. 1989) (finding that failure to
inform parties and provide an opportunity to present evidence relating to a newly revived
issue might cause “substantial prejudice” where district court ruled certain ERISA
claims were barred by res judicata, then reversed this ruling at the beginning of a bench
trial); United States v. Arkansas,
791 F.2d 1573, 1576-77 (8th Cir. 1986) (remanding to
the district court for further proceedings because due process demanded both notice and
an opportunity to be heard on the issue of liability).
This Court has applied Leddy to a similar situation, holding a party that was
present at trial was not prejudiced when the district court reversed its pretrial ruling on
the extent of liability. Huss v. King, 338 F.3d 647 (6th Cir. 2003), cited Leddy
extensively and ultimately concluded:
Here, the district judge informed Huss of the change of his initial ruling
and gave him an opportunity in post-trial briefing to argue that he was
entitled to continued payment of maintenance and cure after January
1998. Although the court’s change of its ruling did not occur until after
trial, it was based on the damage evidence relevant to maintenance and
cure presented at trial. Counsel on brief made no attempt to show that
the post-trial change of the ruling prejudiced his trial presentation.
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 9
Id. at 651.
If notice and opportunity are deficient, the court then must determine whether the
party was substantially prejudiced. The instant case stands in stark contrast to Leddy and
Huss, where the adversely affected parties were present at trial and admitted on appeal
that they suffered no identifiable prejudices as a result of the late reversal. Cobra’s
situation is more analogous to that of the defendant in United States v. Arkansas, where
the state was not a party at trial but was subjected to judgment and liability several years
later. Once dismissed from the case, Cobra had no reason or right to participate in the
later trial. No claim was pending against it at that time.
The prejudice to Cobra in the instant case is obvious. Certainly with a bench
trial, the better procedure would have been to adjourn the trial, join Cobra again as a
party defendant, and allow it an opportunity to respond to the new testimony.
Participation at trial as a party may well have prevented any prejudice by such a late
reversal of summary judgment.
The district court erred in allowing Dillon to amend her complaint
post trial to allege conversion against Cobra.
The district court’s decision to allow the amendment of pleadings pursuant to
Rule 15 is reviewed for an abuse of discretion. Duggins v. Steak ‘n Shake, Inc., 195 F.3d
828, 833 (6th Cir. 1999).
Dillon twice attempted to amend her complaint to add a claim of conversion
against Cobra and/or Garciga. The first occasion was in November 2002, prior to trial.
The court denied this attempt. Dillon’s second attempt came in her post-trial submission
and was interpreted by the district court as a motion under Rule 15(a) -- as opposed to
Rule 15(b), which is how Dillon framed it -- and was granted by the court. The district
court determined that “the issue on Dillon’s conversion claim is whether, in failing to
honor Dillon’s warranty, Cobra converted an engine belonging to Dillon for Cobra’s
own benefit. The facts supporting the breach of warranty claim are the same as those
supporting the conversion claim.” The court further found no additional discovery was
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 10
needed on either claim, and determined that Cobra was not prejudiced by allowing
Dillon to amend her complaint -- nearly five years after the original filing.
Cobra argues that it was prejudiced by the added conversion claim post-
discovery, post-motion deadline and post-trial because it was forced to defend itself
against a claim on which Cobra was never afforded the opportunity to take discovery,
and where the only testimony elicited at trial was by opposing counsel. Because Cobra
was no longer a party, it was not present to call witnesses, cross-examine, or otherwise
introduce evidence.
Rule 15(a) governs “Amendments Before Trial” (emphasis added), and provides
in pertinent part that “[t]he court should freely give leave [to amend] when justice so
requires.” Subsection (b) governs “Amendments During and After Trial” (emphasis
added), and provides in pertinent part:
When an issue not raised by the pleadings is tried by the parties’ express
or implied consent, it must be treated in all respects as if raised in the
pleadings. A party may move -- at any time, even after judgment -- to
amend the pleadings to conform them to the evidence and to raise an
unpleaded issue. But failure to amend does not affect the result of the
trial of that issue.
As mentioned above, although Dillon requested in her post-trial submission that
the district court grant her leave to amend pursuant to Rule 15(b), the district court
actually interpreted this request as a motion under Rule 15(a). In other words, Dillon’s
request made in her post-trial submission was interpreted to be a request for an
amendment before trial. The district court’s only basis for handling Dillon’s request in
this manner was its conclusion, unsupported by any law or reasoning, that Rule 15(b)
was inapplicable because Cobra was not a party to the bench trial. Neither the district
court in its reasoning, nor Dillon on appeal, is able to provide any legal support for
treating an attempt to amend pleadings post-trial as a motion under Rule 15(a). Simply
put, there is no basis in law -- statute, rule, or case -- for handling an amendment in this
manner. This alone requires reversal.
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 11
There is some support for allowing post-trial amendments adding or realigning
parties:
The pleadings may be amended to add parties in very late stages of the
litigation, even after trial, but only when there is no denial of due process
by doing so. Rule 15(b)(2) expressly authorizes amendments of the
pleadings to conform to the proof actually presented at trial by express
or implied consent of the parties (see § 15.18[1]). . . . Similarly, a
defendant who actually appears in the litigation and actively defends
against the plaintiff’s claims may be formally added to the pleadings in
a post-trial amendment to conform to proof.
MOORE’S FEDERAL PRACTICE § 15.16[1] (3d ed. 2008); Saalfrank v. O’Daniel, 533 F.2d
325, 330 (6th Cir. 1976) (“In certain circumstances Rule 15 . . . may be availed of to
permit an amendment after judgment and a realigning of parties.”).
Here, however, the express requirement of Rule 15(b)(2) was clearly not met.
The parties did not consent -- either expressly or impliedly -- to try the issue of whether
Cobra converted Dillon’s engine. Surely Cobra did not give such consent, since it was
neither a party to, nor represented at, the trial. The orders granting the amendment, as
well as finding against Cobra on this claim, are reversed.
The district court did not err in refusing to allow Dillon to amend
her complaint post-trial to allege that Cobra violated the KCPA.
Again, the decision of the district court regarding amendment of pleadings is
reviewed for an abuse of discretion. Duggins, 195 F.3d at 833.
The same reasoning set forth above regarding the claim of conversion applies to
the attempted amendment to assert claims in violation of KCPA: namely, the
requirements of Rule 15(b)(2) are not met. Dillon again argues Cobra could have
attended the trial and should not benefit from its “voluntary absence.” But this is not the
way the system works -- a party is not expected to attend a trial in a case where it is no
longer a party, and its attendance would confer no right to participate in the trial.
Furthermore, Cobra would be prejudiced by the addition of the KCPA claim because the
KCPA claim involves elements for which discovery was never conducted. Such a late
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 12
amendment would clearly prejudice Cobra. Dillon was correctly denied the opportunity
to amend her complaint to add this new claim.
The district court did not err in finding that Cumberland did not
breach any contract.
Dillon’s breach of contract claim against Cumberland proceeded to a bench trial.
We review the district court’s conclusions of law de novo, and its findings of fact for
clear error. Little Caesar v. OPPCO, 219 F.3d 547, 550 (6th Cir. 2000).
As the district court noted, the basis for Dillon’s breach of contract claim is not
entirely clear. The district court concluded that Dillon was asserting a breach of
warranty, and that Dillon’s complaints about the boat motors related to their allegedly
defective condition and poor repair attempts. The district court concluded that the
integration clause of the purchase agreement (see supra, note 1) precluded consideration
of extrinsic promises and therefore found that Cumberland delivered a boat to Dillon that
substantially conformed to the written specifications of the contract.
We conclude that the district court did not commit clear error in holding that
Cumberland did not breach the contract. On appeal, Dillon still fails to articulate a basis
for breach of the contract, or to identify a specific contract provision that Cumberland
allegedly breached. Instead, Dillon focuses on her right to revoke acceptance of the boat
in light of the history of unsuccessful repairs. This argument is unavailing. Her
attempted revocation in October - November 2000, when she sent letters to Cumberland
expressing her dissatisfaction with the boat and seeking to return it, was tardy. By that
time, one of the outdrives had been disassembled for repair and one of the engines was
held by Cobra.
Dillon’s reliance on Capitol Cadillac Olds, Inc. v. Roberts, 813 S.W.2d 287 (Ky.
1991), and Ford Motor v. Mayes,
575 S.W.2d 480 (Ky. Ct. App. 1970), is misplaced.
Both cases dealt with a vehicle buyer’s ability to revoke acceptance under the KCPA and
under the manufacturer’s warranty, and did not address the express disclaimer of
warranty by a seller. Furthermore, these cases do not apply because Dillon attempted
to revoke acceptance after a “substantial change.” Namely, Dillon removed one of the
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 13
boat’s engines for repair by a third party and, as a consequence, the boat no longer had
two engines at the time of Dillon’s attempted revocation.
The district court applied the appropriate legal standard and did not clearly err
in determining that the attempted revocation was improper.
The district court erred in its determination of damages.
The district court awarded Dillon damages of $50,400 on her claim against Cobra
for breach of warranty. Because the summary judgment has been reversed, the damage
award is necessarily reversed as well. However, we will go further and provide guidance
on the issue of damages if that is an issue that the district court finds necessary to reach.
Kentucky law provides the following measure of damages and range of
permissible recovery for breach of warranty:
(2) The measure of damages for breach of warranty is the difference at
the time and place of acceptance between the value of the goods
accepted and the value they would have had if they had been as
warranted, unless special circumstances show proximate damages of a
different amount. (3) In a proper case any incidental and consequential
damages under KRS 355.2-715 may also be recovered.
KRS 355.2-714 (emphasis added).
The district court erred in calculating damages because it used the current value
of the engine Dillon received instead of the value at the time and place of acceptance.
Dillon paid a total of $70,400 for the two engines. The engine which remained in her
possession was valued at $20,000 by the district court, reflecting the current value of the
engine including the normal rate of depreciation. The court then deducted $20,000 from
the original purchase price for both engines, for an award of $50,400. Cobra “held” the
second engine during this dispute and that engine was totally discounted. The district
court erred by not taking into account any value for the second engine, which, even if
defective upon delivery, had to have some value.
Nos. 07-5458/5459 Dillon v. Cobra Power Corp., et al. Page 14
Because the district court did not award damages based on values at the time and
place of delivery, it erred under KRS 355.2-714(2).2
CONCLUSION
For all the reasons stated above, we (1) reverse the district court’s grant of
summary judgment in favor of Dillon on her breach of warranty claim against Cobra;
(2) reverse the district court’s order allowing Dillon to amend her complaint to allege a
claim of conversion against Cobra; (3) affirm the district court’s order refusing to allow
Dillon to amend her complaint post-trial to allege that Cobra violated the KCPA;
(4) affirm the district court’s order that Dillon did not properly revoke acceptance of the
boat; (5) affirm the district court’s orders that Cumberland did not breach the contract,
did not violate the KCPA, and did not breach any warranty; and (6) reverse the district
court’s award of damages.
The case is remanded for further proceedings limited to Dillon’s claim against
Cobra for breach of warranty.
2
Because damages for conversion will not be at issue on remand, the district court should not
address the appropriateness of any damages awarded on the conversion claim. We note, however, that the
measure of damages for conversion is not the same as that for breach of warranty. Under Kentucky law,
“the traditional measure of damages for the conversion of personal property is the fair market value of the
property, with interest from the time of conversion.” Motors Ins. Corp. v. Singleton, 677 S.W.2d 309, 314
(Ky. Ct. App. 1984).
