NANCY F. ATLAS, District Judge.
TABLE OF CONTENTS I. Findings of Fact ..........................................................588A. Parties and Background ................................................588B. Bidding and Sale Process ..............................................590C. SHMB604 Compressors and Packaging into the M60 Model ..................590D. Features of the Parties' Contracts ....................................592E. Procedural History ....................................................594II. Legal Analysis: Privity in Maritime Warranty Claims .......................595A. Maritime Jurisdiction .................................................595B. Sources of Maritime Law ...............................................5951. Maritime Uniformity ................................................5972. Local or State Interests ..........................................5983. East River Principles .............................................5994. Conclusion ........................................................603III. Merits of Warranty Claims .................................................603A. Affirmations ..........................................................6031. Express Warranties ................................................603a. February 2004 Statements ......................................604b. August 2004 Statements ........................................6062. Implied Warranty of Fitness for a Particular Purpose ..............6073. Failure to Comply with Affirmation and Lack of Fitness for Particular Purpose ..............................................607B. Basis of the Bargain Reliance .........................................608C. Causation .............................................................6101. Base Day Rates .....................................................6102. Lost Capacity Damages .............................................6173. Conclusion ........................................................617IV. Fraud by Omission .........................................................618A. Falsity and GE's Knowledge of Falsity .................................619B. Duty to Disclose .......................................................620C. Conclusion ............................................................621V. Conclusion ............................................... .................621
Plaintiff Berge Helene Ltd. ("Berge") asserts in this action against Defendants GE Oil & Gas, Inc. and John Does 1-10
This case was tried to the Court on seventeen separate days from May 21 through July 5, 2012. Each party presented numerous live witnesses, depositions, and extensive exhibits. Having carefully
Plaintiff Berge Helene Ltd. ("Berge")
There are five participants and four contracts relevant to the events in issue. All participants are highly sophisticated businesses.
Woodside Mauritania Pty. Ltd. ("Woodside") sought bids for the lease and operation of an FPSO in 2003. Woodside hoped to be the first to develop the Chinguetti oil field off the coast of Mauritania, Africa. On May 29, 2004, Berge entered into a contract with Woodside to provide the requested FPSO.
Woodside's contract with Berge was to have the BERGE HELENE refitted to receive and produce processed crude oil at Chinguetti. The Woodside-Berge contract obligated Berge, inter alia, to operate and maintain the BERGE HELENE to "receive Production from the subsea system into the FPSO," "process the Production by separating oil, gas and water," "produce Processed Crude at a rate which [meets]
Berge contracted with a Norwegian company, ABB Offshores Systems AS (referred to hereafter as "Aibel")
In the oil and gas industry, it is common practice for one company's gas compressors to be "packaged" by third parties, called "packagers," into a compression module. The packager generally constructs and may also be involved in the design of the machinery, piping, and other components that surround and are sold with the compressors in a compression module. In July 2004, Aibel contracted with Flotech Limited ("Flotech"), a New Zealand-based packager of compressors. Flotech was to package the M60 gas compression module for Aibel for the BERGE HELENE for approximately $2 million.
For the M60 compression module, Flotech ordered from GE three SHMB604 model reciprocating compressors at a total cost of $593,679.
As noted, in 2003, Woodside sought bids for the lease and operation of an FPSO to be deployed in the Chinguetti field. In 2003, Berge submitted a tender to Woodside.
Because Aibel learned that Berge was seriously considering selecting the other bidder to supply the M60 compression module, Aibel sought a meeting with Berge to introduce Aibel's proposed compression module team. On February 5, 2004, Berge representatives met with Aibel, Flotech, and GE at a sales meeting in Oslo, Norway. Two GE sales people attended. At that time, GE mentioned the idea of using a new model compressor, the SHMB604, for the FPSO BERGE HELENE. GE provided Berge representatives a compact disk ("CD") titled "Software and Technical Data" with background information on GE compressors.
Shortly after the Oslo meeting, Berge received from Aibel a hard-copy packet of promotional materials. GE contributed to these materials, which included a three-page flyer called "GE Oil & Gas Compressor News" ("Flyer") reflecting a maximum gas rod load of 72,000 pounds ("lbs.") for the SHMB604 compressors. The materials also contained a GE "EZ Size Data Sheet" dated February 9, 2004 ("February 2004 Data Sheet"), which reflected a maximum rod load of 72,752 lbs. in tension and in compression for the SHMB604.
The SHMB604 compressors were promoted, designed, and sold under American Petroleum Industry 11 ("API 11") standards.
An "application limit" is the advertised limit used by an application engineer to size a compressor and includes a safety margin below the "hard limit." A "hard limit" is the maximum allowable limit for continuous and safe operation and includes a safety margin below the "fatigue fail limit."
The SHMB604 compressor consists of an Italian frame and four American cylinders. The first two cylinders constitute the compressor's "first stage," the third cylinder is the "second stage," and the fourth cylinder constitutes the "third stage." The frame of the compressor is considered a stationary part. The moving parts (called the "running gear") inside the compressor comprise a piston, piston rod, crosshead, crosshead pin, crankshaft, and connecting rod.
In late 2003 or early 2004, Berge supplied the parties with a detailed Chinguetti field projection that included a "P50" estimate of the probable reserves of oil, gas, and water composition expected in the seabed fluids to be extracted.
GE set the gas flow capacity of the SHMB604 compressors using its American EZ Size software. The EZ Size software also calculates the gas rod loads acting on a compressor's frame, for each stage of compression. GE distributed its EZ Size software widely to its packagers, at trade shows, and to potential customers (including Berge, in the Technical Data CD). A user of this software is able to do extensive analysis and may print out a one-page summary data sheet that shows the maximum gas rod load application limits at the top of the sheet and the calculated operating gas rod loads at the bottom of the sheet. EZ Size software calculates, for each stage of compression, the gas-plus-inertia loads acting on the certain components of the compressors' running gear, such as the piston rod and crosshead pin. The gas-plus-inertia load limits and the calculated gas-plus-inertia loads for each stage of compression are visible to the person operating the EZ Size program on the computer.
GE set machine strength of the SHMB604 compressors (e.g., application and hard limits of piston rod load and crosshead pin load) using Italian Calc-26 software,
GE delivered the compressors to Flotech on or about October 7, 2004. The compressors were thereafter "packaged" into the M60 module by Flotech. The M60 compression module contained and was connected to numerous other components, such as pulsation bottles, tubing, coalescers/coolers, and separators. The M60 module was delivered to Aibel in Thailand. Aibel incorporated the M60 compression module into the rest of the FPSO topside equipment and delivered it to Berge on or about March 25, 2005, at a shipyard in Singapore. Testing of the compression module by Aibel commenced on or about October 28, 2005. The BERGE HELENE was moved from Singapore to Africa and anchored at Chinguetti in November 2005. Additional testing and start-up of all the topside equipment proceeded thereafter.
Difficulties with the M60 (and other) equipment occurred and became an issue in or about May 2006. Berge reported more than 180 "stops" of the M60 module between May and November 2006. Berge and Woodside decided to shut down the M60 module in early November 2006 because of concerns of accidents that could harm personnel and the FPSO.
Final documentation accompanying GE's compressors in the M60 module included a GE supplied August 13, 2004 Data Sheet ("August 2004 Data Sheet").
As noted, there are four contracts relevant to this dispute. First, there is the Woodside-Berge contract. The primary Woodside goal was oil production. The contract also provided a base day rate ("BDR") to be paid by Woodside to Berge based in pertinent part on the amount of gas compressed by the FPSO. The BDR could be reduced if the gas injection system was operating at less than 90% of the required level. However, after production began, Woodside realized that extraction of oil from the Chinguetti field was very difficult, and the field never performed as expected. Gas and water content of the seabed fluids were much higher than expected. Woodside's projected oil production during the first year was far lower than expected from the P50 which formed the basis of the entire FPSO topside design. The gas-oil ratio ("GOR") of the produced fluid was much higher than expected and in 2006, was climbing at a very problematic rate. To maximize oil production, as it turned out, Woodside needed lower suction pressure for the M60 module.
Woodside and Berge renegotiated the rates and penalties in light of the materially changed field circumstances. Woodside and Berge allocated and controlled risk through mutual indemnity provisions and
Berge agreed with Woodside that Berge would be the "agent" of all its subcontractors (any company "engaged by [Berge] to execute a portion of the Work"). Prior to the start of operations, Berge did not disclose to GE the terms of the Woodside-Berge contract.
The Berge-Aibel Operations Contract was significant in that Aibel agreed to be "responsible for its subcontractors and all parts of the Work performed by such subcontractors from time to time."
Aibel entered into a contract with Flotech in July 2004, wherein Flotech agreed to provide the engineering, fabrication, and supply (i.e., the "packaging") of the M60 gas compression module on the BERGE HELENE. Flotech agreed it had "overall responsibility for the proper technical completion of the equipment and services" as defined in the contract.
Flotech submitted a purchase order to GE on June 3, 2004
This contract excluded liability for consequential damages and set a total liability limit of the purchase price of the compressors, $593,679.
On October 1, 2008, Berge sued GE and John Does 1-10 in this Court alleging breach of express warranties and breach of implied warranty of fitness for a particular purpose. After the parties engaged in extensive worldwide discovery, GE moved for summary judgment. The Court denied this relief in large part on November 16, 2011. See Memorandum and Order, 830 F.Supp.2d 235 (S.D.Tex.2011) [Doc. # 230] (denying Defendant's Motion for Summary Judgment on Plaintiff's Implied Warranty Claims [Doc. #179], granting in small part and denying in part Defendants' Motion for Summary Judgment on Plaintiff's Express Warranty Claims [Doc. # 180], and denying Defendants' Motion for Summary Judgment on Plaintiff's Damages Claims [Doc. #181]).
At Docket Call on January 18, 2012, the Court set trial to start February 13, 2012. On February 2, 2012, the Court held a discovery hearing on sixty-one documents, consisting of 2,500 pages, belatedly produced by GE in January 2012 — more than seven months after the close of discovery and less than one month before the original trial date in February 2012. Hearing Minutes & Order [Doc. #280]. At the hearing, the Court granted Berge leave to amend to add a fraud claim. See id.
On February 9, 2012, Berge filed a First Amended Complaint [Doc. #282], adding a fraud claim related to piston rod loads. Berge seeks $17,710,486 in damages for lost BDR and $23,649,185 in damages for the purchase, transportation, and installation of a supplemental compressor. Berge also seeks punitive or exemplary damages for GE's alleged fraudulent conduct as well as attorneys' fees for GE's conduct in litigation.
On May 15, 2012, GE filed a Motion to Strike [Doc. #305], seeking to strike references by Berge in its pretrial filings [Docs. #291, 292, 293] of a fraud claim related to crosshead pin loads. The Court granted GE's Motion to Strike [Doc. #305] because the crosshead pin issue had not been pleaded in Berge's First Amended Complaint.
To ascertain the extent of admiralty jurisdiction over contracts and claims arising from contract, courts look first to the nature or subject matter of the contract. Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 23-24, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004) (citations omitted). Contracts for repair, alteration, conversion, or reconstruction of a vessel which, previous to such work, was actively engaged in maritime commerce or navigation generally are considered maritime contracts. N. Pac. S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co., 249 U.S. 119, 128, 39 S.Ct. 221, 63 L.Ed. 510 (1918); One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 262 (5th Cir.2011). Disputes over warranties arising from such contracts also fall within maritime jurisdiction. 1 THOMAS J. SHOENBAUM, ADMIRALTY & MAR. LAW § 5-8 (5th ed.) ("SHOENBAUM"). The parties agree that this Court has maritime jurisdiction over the breach of warranty claims. See First Amended Complaint [Doc. #282-2], at 3; Revised Joint Pretrial Order [Doc. #290], at 4.
"Absent a relevant statute, the general maritime law, as developed by the judiciary, applies. Drawn from state and federal sources, the general maritime law is an amalgam of traditional common-law rules, modifications of those rules, and newly created rules." E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864-65, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986) (citations omitted); One Beacon Ins., 648 F.3d at 262 (5th Cir.2011). The key policy underlying federal maritime jurisdiction is need for uniformity in the development of maritime law. See S. Pac. Co. v. Jensen, 244 U.S. 205, 216, 37 S.Ct. 524, 61 L.Ed. 1086 (1917), superseded by statute on other grounds, Longshoremen's & Harbor Workers' Compensation Act of 1927, 44 Stat. 1424; Green v. Vermilion Corp., 144 F.3d 332, 340 (5th Cir.1998) ("[T]he constant theme of these Supreme Court opinions is that the uniformity of admiralty law must be preserved and that state law may be applied only where it works no `material prejudice to the essential features of the general maritime law.' That uniformity is not to be sacrificed to accommodate state law is a fundamental premise of admiralty jurisdiction." (citations omitted)); Coats v. Penrod Drilling Corp., 61 F.3d 1113, 1137 (5th Cir.1995).
"[T]he need for predictability in the commercial maritime arena is arguably greater than in other areas of law and commerce. This is true because there are already numerous and inherently unpredictable factors stemming from the perils of the sea and the continual — and frequently fortuitous — interaction with enterprises of other nations. It is axiomatic that when the rules of law are clear, parties may contract within or around their boundaries, and the commercial system is facilitated in many ways, including reduced litigation, more favorable insurance coverage, and overall ease of application." Coats, 61 F.3d at 1137; see also 1 SHOENBAUM § 4-1.
Generally, there are four sources of admiralty law: (1) the general maritime law, (2) federal statutes, (3) international agreements, and (4) state law (insofar as appropriate in the admiralty context). The first category, general maritime law, is a body of concepts, principles, and rules that have been adopted and expounded over time by the federal courts. Because general maritime law is not a complete or all-inclusive system, federal courts may fashion a rule for decision when situations arise that are not directly governed by
In the summary judgment Memorandum and Order issued November 16, 2011, 830 F.Supp.2d 235 (S.D.Tex.2011) [Doc. #230] ("November 2011 Memorandum"), this Court held that the Supreme Court's decision in East River Steamship Corp. v. Transamerica Delaval did not establish maritime rules governing key issues in this case, such as privity, reliance, disclaimers, and consequential damages. The Court, believing this case had substantial connections to Texas, applied several Texas legal doctrines as maritime rules to evaluate Berge's claims for breach of express warranty and breach of implied warranty of fitness of particular purpose. However, having presided over the trial and reviewed the full factual record presented by the parties as well as the governing legal authorities, the Court's view has changed. The Court now concludes that its pretrial legal conclusion is not legally correct, at least as applied to the facts proven at trial. The Court accordingly withdraws its earlier holding that the loose privity requirement of Texas state warranty law applies to this dispute. As explained in more detail hereafter, the facts adduced at trial reveal a great need for uniform legal rules in the circumstances presented. Applying Texas law — or even the general Uniform Commercial Code ("U.C.C.") — on the scope of privity would hinder development of consistent and predictable maritime rules. In addition, the State of Texas has
There is no explicit maritime rule, federal statute, or federal common law on privity in warranty claims in maritime actions. Thus, the Court must consider whether or not a state common law or the law of a single state should apply.
When federal courts apply state law in admiralty, courts prefer to borrow the general common law rather than the law of any particular state because this promotes uniformity in the general maritime law. Marastro Compania, 959 F.2d at 53; see, e.g., Har-Win, Inc., 794 F.2d at 987; Revelle Shipping, 750 F.2d at 459. Accordingly, courts look to the U.C.C. as a reliable source for federal admiralty law. See N. Pac, 249 U.S. at 127, 39 S.Ct. 221; Clem Perrin Marine Towing, Inc. v. Panama Canal Co., 730 F.2d 186, 189 (5th Cir.1984); see also Princess Cruises, Inc. v. Gen. Elec. Co., 143 F.3d 828, 832 (4th Cir.1998); Southworth Machinery Co. v. F/V Corey Pride, 994 F.2d 37, 41 n. 3 (1st Cir.1993) (citations omitted). Here, the Court concludes that applying general U.C.C. rules or the law of Texas to decide privity requirements in maritime warranty actions would not advance the maritime goal of uniformity.
The U.C.C. does not supply a clear rule on the privity requirement in warranty actions. Instead, U.C.C. § 2-318 sets forth two statutory alternatives which relax the privity requirement for natural persons bringing breach of express or implied warranties claims for personal injuries, plus another less restrictive alternative.
Berge seeks economic damages as the ultimate user which was in the distributive chain, but was not the buyer of GE's compressors or even the M60 compression module in which the compressors were packaged. Because the U.C.C. does not supply a clear rule on privity in these circumstances and because state law on privity has not developed uniformly, applying Texas or general state warranty law to the dispute at bar to eliminate the privity requirement would create significant inconsistency and unpredictability in maritime law.
In its November 2011 Memorandum, the Court concluded that Texas is the state within the United States with the greatest connections to the transactions, events in issue, and the parties, and thus concluded that application of Texas warranty law was appropriate. The trial record establishes clearly, however, only several relevant GE employees lived in Texas. All other participants were from foreign countries, i.e., New Zealand, Norway, and Italy. It is clear now that while some sizing analysis for the compressors occurred in Texas, the compressors were manufactured in Wisconsin. Virtually all other key events occurred in foreign countries, including Norway, Italy, Thailand, Singapore, and off the coast of Mauritania. Further, the compressors in dispute not tested in Texas. Nor is Texas — or the United States — where the compressors were packaged into the complex M60M60 compression module. Indeed, the module was assembled by others in Thailand, tested by others in Singapore, and delivered by others to the BERGE HELENE in Africa. Texas also is not where the compressors or module allegedly malfunctioned and caused Berge economic injury. The evidence thus demonstrates that Texas
Texas warranty law, especially as interpreted by Plaintiff, is oriented toward protecting consumers. See Nobility Homes of Tex., Inc. v. Shivers, 557 S.W.2d 77, 81 (Tex.1977) ("The fact that a product injures a consumer economically and not physically should not bar the consumer's recovery. Economic loss can certainly be as disastrous as physical injury."). In contrast, maritime law is designed to protect freedom of contract and allocation of risk among commercial parties. See Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 25, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004) ("We have reiterated that the fundamental interest giving rise to maritime jurisdiction is the protection of maritime commerce." (internal quotation marks and citation omitted)). Here, the dispute is not between a manufacturer and consumer over a defective product that caused physical injury in Texas or to a Texas resident. Rather, the claims in the suit involve two sophisticated parties concerning commercial equipment purchased by a New Zealand company for sale through a Norwegian entity to another Norwegian entity for use on a vessel (an FPSO) located off the coast of Africa. There were no physical injuries. In these circumstances, Texas's interest is insufficient to justify application of its state warranty law as federal maritime law.
Although East River was not a breach of warranty case, it established a core maritime law principle: Manufacturers are not required to protect, independent of any contractual obligation, a commercial product from injuring itself. See 476 U.S. at 866-75, 106 S.Ct. 2295. Applying East River's core principle, the Court concludes that Berge's warranty claims against GE for economic damages are not legally viable under maritime law because Berge lacks contractual privity with manufacturer GE.
In East River, the Supreme Court decided two issues. First, it recognized that the law of products liability, including negligence and strict liability, is a part of the general maritime law. Id. at 865, 106 S.Ct. 2295. Second, it limited the scope of products liability in the maritime tort context by holding that "a manufacturer in a commercial relationship has no duty under either a negligence or strict products-liability theory to prevent a product from injuring itself." Id. In reaching the latter conclusion, the Court reviewed the purposes of product liability and its relationship to contract law, noting that "[p]roducts liability grew out of a public policy judgment that people need more protection from dangerous products than is afforded by the law of warranty." Id. at 866, 106 S.Ct. 2295 (citation omitted).
In addition to the nature of the injury, the Court identified other reasons why contract doctrines, indeed, warranty law as a subset of contract, is the proper route to pursue defective product claims for economic loss. First, warranty law is "well suited to commercial controversies ... because the parties may set the terms of their own agreements": "The manufacturer can restrict its liability, within limits, by disclaiming warranties or limiting remedies" and a plaintiff buyer can obtain "the full benefit of its bargain" by seeking expectation damages as well as repair costs and lost profits. Id. at 872-73, 106 S.Ct. 2295. Second, warranty actions have a "built-in limitation on liability." Id. at 874, 106 S.Ct. 2295. In a contract claim, the limitation derives from "the agreement of the parties and the requirement that consequential damages, such as lost profits, be a foreseeable result of the breach." Id. (citation omitted). "In a warranty action where the loss is purely economic, the limitation derives from the requirements of foreseeability and of privity, which is still generally enforced for such claims in a commercial setting." Id. (citing U.C.C. § 2-715; WHITE & SUMMERS, at 389, 396, 406-10). The Supreme Court thus expressed a core principle that warranties, and limitations on them, in the maritime context are creatures of commercial parties' negotiations and agreement.
In the instant action, Berge asserts claims for breaches of express warranty and implied warranty of fitness for a particular purpose seeking economic losses from GE arising from GE's design and manufacture of reciprocating gas compressors. In name, Berge's warranty claims for economic damages do not appear barred by East River because they are distinct from the strict products liability and negligence actions expressly barred by the Court. See id. at 876, 106 S.Ct. 2295.
First, there is no contract between GE and Berge. Instead, there are three separate contracts regarding the gas compression equipment for the BERGE HELENE. Berge's predecessor in interest, Bergesen d.y. ASA, entered into a contract with Aibel for the purchase and installation of the M60, a complex compression module. Aibel separately entered into a contract with Flotech to create and package that multi-component module. Finally, Flotech contracted with GE to purchase three SHMB604 compressors for the module. GE's only contract was to sell its compressors to Flotech for installation into the modules Flotech sold to Aibel. The testimony of Berge, Aibel, Flotech, and GE witnesses establishes — and the documentary evidence reinforces — that with the one exception of a sales promotion meeting on February 5, 2004, attended by representatives of all four companies, Berge conferred with its contractual partner
Second, unlike the circumstances envisioned in East River, GE lacked meaningful opportunity to negotiate the scope of any warranties to Berge or to limit remedies owed to Berge. The only pertinent direct communication between GE and Berge occurred at the February 2004 sales pitch meeting in Oslo. Trial testimony established that no participant believed that negotiations or definitive promises were made at that meeting. GE and Berge had no communications between February and August 2004, when negotiations for the compressors and compressor design concluded and the various agreements between parties in the contractual chain were signed. All parties in the contractual chain — Berge with Aibel, Aibel with Flotech, and Flotech with GE — limited their respective liabilities to their contractual partner.
GE, however, had no negotiations or contract with, nor opportunity to reach terms with Berge directly. Although Flotech apparently complied with the "pass-along" requirement of liability limitations, as evidenced by a provision in the Flotech-Aibel contract,
Finally, Berge is and was a sophisticated commercial party. Had it so desired, it could have negotiated express warranties in an agreement with GE. Berge, in this manner, could have memorialized any promises or warranties related to GE's design and manufacture of the compressors on which it sought to rely. But, Berge did not do so. Under East River principles, Berge's failure to enter into such an agreement at the outset weighs against permitting it to obtain such relief now. See id. at 873-75, 106 S.Ct. 2295.
This result is consistent with Fifth Circuit decisions applying East River. The Fifth Circuit has extended that case's economic loss rule to the maritime warranty of workmanlike performance arising from contracts for professional services. See Emp'rs Ins. of Wausau v. Suwannee River Spa Lines, Inc., 866 F.2d 752, 766 (5th Cir.1989) ("[A] party that provides professional services as part of the manufacture or construction of a product has no duty in maritime tort, independent of its contractual
In this case, the need for uniformity in maritime law, the absence of strong Texas state interests, and East River's broad concern for preserving the integrity of contract law, preclude the application of general U.C.C. or Texas warranty law on privity in this case. Applying East River by analogy, this Court holds that Plaintiff Berge's breach of express warranty and implied warranty of fitness claims are not legally viable.
Even if East River did not bar Plaintiff Berge's warranty claims, this Court concludes that Berge has not proved under Texas law its warranty claims by a preponderance of the evidence.
An express warranty is created when "[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise." TEX. BUS. & COM. CODE § 2.313(a)(1); see also Am. Tobacco
Berge argues that GE made two sets of express warranties. Berge contends that GE made express warranties (a) during and immediately after the February 2004 Oslo meeting and (b) in the August 13, 2004 EZ Size Data Sheet, a one-page computer printout of information about the proposed compressors.
According to Berge, the February 2004 warranties consisted of affirmations (1) that GE's compressors could reliably provide 70 mmscfd of compressed gas at a specified design suction pressure and, thus, were suitable for Berge's FPSO needs, (2) that the units were suitable for operation at 1200 rpm, (3) that all components of the compressor could tolerate 72,752 lbs. of pressure on the components when the compressors were in continuous operation, (4) that the compressors would be equipped with stainless steel piston rods, and (5) that the compressors would present "no problems" and be "problem-free" in operation. Berge urges that GE made statements (1) and (5) orally at the February 2004 Oslo meeting and statements (1), (2), (3), and (4) in writing via a promotional flyer and a February 9, 2004 EZ Size Data Sheet given to Berge within a few days after the Oslo meeting.
This Court finds the February 2004 statements regarding 70 mmscfd output, 1200 rpm, and 72,752 lb. rod load were made preliminarily, based on various assumptions and conditions of which the parties were aware and which later were unmet. These three statements therefore were too tentative to constitute affirmations of fact or promises for warranty purposes. The February 2004 Oslo gathering was a sales pitch meeting arranged by Aibel
In February, 2004, all participants in the project also understood from the outset that the Chinguetti oil and gas field was totally undeveloped; no wells had even been attempted. Indeed, at this time, the participants were awaiting specific actual (as contrasted with merely projected) data on the seabed fluid's composition and pressures. More definite field data was not provided to GE until at least May 2004,
The Court also holds that GE's statements in the promotional flyer about including stainless steel piston rods in the compressors is not an "affirmation" for purposes of an express warranty. See Chilton Ins., 930 S.W.2d at 890-91. The evidence establishes that GE originally planned to use stainless steel piston rods in its compressors for the BERGE HELENE,
Berge also contends that GE's representative stated that the compressors would be suitable for Plaintiff's needs and have "no problems." The evidence that GE representatives made these statements as promises of flawless operation of the compressors is unpersuasive. To the extent these "no problems" phrases were spoken, they more likely than not referred to the delivery of the equipment and are not actionable affirmations of fact regarding problem-free performance of the compressors or the M60 compression module throughout their operation, as Berge contends. The witnesses did not persuade the Court that these statements constituted anything more than sales promotion touting of GE's skills and experience generally, essentially puffing, during a "get-to-know-you" meeting. The comments, to the extent made, were made at a time when field conditions were unknown, before any work had been done in the field, prior to the design of the compressors and the associated equipment, and under circumstances that all concerned knew were extremely tentative. These were not actionable warranties. See Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 163 (Tex.1995); Dowling v. NADW Mktg., Inc., 631 S.W.2d 726, 729 (Tex.1982) (citing Gulf Oil Corp. v. Fed. Trade Comm'n, 150 F.2d 106, 109 (5th Cir.1945)); Dinn v. Hooking Bull Boatyard, Inc., No. C-08-309, 2010 WL 3909323, at *11 (S.D.Tex. Sept. 30, 2010) (Rainey, J.).
According to Berge, the August 2004 warranties consisted of certain specifications in the August 13, 2004 EZ Size Data Sheet created by GE and eventually provided to Berge by Flotech, through Aibel, as part of the compression module's final documentation. Specifically, Berge points to alleged affirmations (1) that the compressors could reliably provide 70 mmscfd at the design suction pressure (148 psig), (2) that the units were suitable for continuous operation at 1200 rpm, and (3) that all components of the compressor could tolerate 72,752 lb. "rod load" in continuous operation. GE's figures on the August 2004 Data Sheet supplied in August 2004 (unlike the figures in February 2004) were made after GE had received some additional information about the actual field conditions, although well before meaningful drilling or development of the field.
Generally, statements describing the specific capacity or performance capabilities of goods constitute affirmations for warranty purposes. See, e.g., S-C Indus. v. Am. Hydroponics Sys., Inc., 468 F.2d 852, 854-55 (5th Cir.1972) (applying Texas law and holding that a greenhouse plan specification stating "42' Rigid Steel Frame all bolt connections-20 PSF Snowload, 16 PSF Windload" constituted an express warranty that the greenhouse structure, as a unit, would withstand a vertical load of 20 pounds per square foot); Cmty. Television Servs. v. Dresser Indus., 586 F.2d 637, 639-41 (8th Cir.1978) (applying South Dakota law and holding that an advertising brochure statement that a broadcasting tower could withstand wind velocity and ice loads typical to that region constituted an express warranty). The Court will assume without definitively deciding that the requirement of an affirmation of fact or promise was met by the August 2004 Data Sheet's specifications that the compressors, when operating at 1200 rpm, would compress 70 mmscfd of gas and would withstand 72,752 lbs. of rod load. See S-C Indus., 468 F.2d at 853-55.
These affirmations, however, were conditioned specifically on Flotech and/or Aibel's
"Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under [TEX. BUS. & COM. CODE § 2.316] an implied warranty that the goods shall be fit for such purpose." TEX. BUS. & COM. CODE § 2.315; see also Am. Tobacco Co., 951 S.W.2d at 435; LaBella v. Charlie Thomas, Inc., 942 S.W.2d 127, 131 (Tex.App.-Amarillo 1997, writ denied) (discussing implied warranties and disclaimers). To prevail in an action for breach of implied warranty of fitness for a particular purpose, the plaintiff must establish, inter alia, that the defendant knew or should have known the plaintiff was buying goods for a particular purpose. See Crosbyton Seed, 875 S.W.2d at 365-66. A "particular purpose" is a specific use by the buyer that is peculiar to the nature of the buyer's business, and differs from an ordinary purpose, which is the purpose envisaged in the concept of merchantability and goes to the uses that are customarily made of the goods. TEX. BUS. & COM. CODE § 2.315 cmt. 2; ASAI v. Vanco Insulation Abatement, Inc., 932 S.W.2d 118, 122 (Tex.App.-El Paso 1996, no writ) (citing Crosbyton Seed, 875 S.W.2d at 365) (other citation omitted).
The Court finds that GE generally knew that the three SHMB604 compressors were to be installed in a compression module aboard the BERGE HELENE for use in satisfying Berge's contractual duties to Woodside. GE did not know the terms of the Woodside-Berge contract but understood when it submitted the August 2004 Data Sheet that the compressors were expected to compress up to 70 mmscfd at 148 psig suction pressure.
The record also is clear, however, that all were aware that satisfying this particular purpose depended heavily on the actual field conditions being similar to the P50 predictions for quantities and quality of oil, gas, and water being extracted. Significantly, achievement of Berge's particular purpose also depended upon proper assembly, installation, and maintenance by Flotech, Aibel, and/or Berge of the M60 compression module, and the FPSO's other critical topside components.
To recover for breach of express warranty, a plaintiff must also prove that the goods failed to comply with the affirmation. See TEX. BUS. & COM. CODE § 2.313; Am. Tobacco Co., 951 S.W.2d at 436; Lyda Constructors, 103 S.W.3d at 637; Crosbyton Seed, 875 S.W.2d at 361. To recover
A plaintiff pursuing an express warranty claim must prove that the affirmation of fact became a part of the basis of the bargain.
Berge argues that in reliance on the express warranties: (1) Berge notified Woodside that it had decided to purchase from Aibel a GE-based gas compression module; (2) a contract was entered into on May 29, 2004, between Berge, as owner of the BERGE HELENE, and Woodside, which required the BERGE HELENE to provide 70 mmscfd of compression and operate at 1,200 rpm without overload; and (3) Berge entered into a contract with Aibel on June 24, 2004, for supply of the M60 gas compression module (with GE's compressors) and other equipment to be installed topside aboard the BERGE HELENE. Berge also argues, in connection with its claim for implied warranty of fitness for a particular purpose, that it relied heavily on GE's skill and knowledge to provide the appropriate compressor selection and to inform Berge if the product was not suitable. GE counters that Berge could not rely on the 72,752 lb. rod load figure on the February or August 2004 Data Sheets because none of Berge's representatives understood their meaning. In the alternative, GE argues that reliance does not exist or is unreasonable where a buyer enjoys skill or knowledge equal to that of the seller and includes its own detailed specifications for the product in the contract.
The Court finds that Berge has not proven that it relied on GE's express affirmations of a maximum rod load of 72,752 lbs. or that the compressors would be able to operate continuously at 1200 rpm. There is no indication that Berge's representatives engaged in a detailed analysis of GE's compressors' specifications that there would be a maximum rod load of 72,752 lbs. and continuous operation at 1200 rpm — indeed, there is no evidence that Berge's representatives even reviewed or
Similarly, there is no evidence that Berge bargained for or expressly asked GE for compressors with any particular rod load or rpm capabilities. Had Berge wanted to ensure a particular maximum rod load or rpms, in and of themselves, Berge could and should have sought an agreement on these matters directly from GE. Berge did not do so.
Regarding the express warranty of 70 mmscfd or the implied warranty of suitability of the compressors for Berge's FPSO, the weight of the evidence establishes that Berge relied on Aibel, a company with which Berge had worked previously, for judgment on the selection of the compression module's components.
In any event, Berge's reliance on GE's specifications as a guarantee of capacity was not reasonable. Representatives of both Berge and its FPSO topside equipment expert, Aibel, were aware during the bid and design phases that the SHMB604 model was a prototype and had never previously been operated in the field.
Neither Berge nor GE nor any of the other parties had assurances of GE's compressor design when Berge entered into the Woodside contract in late May 2004. At that time, no actionable promises or affirmations by GE had been made. The February 2004 Data Sheet was obviously tentative, as the parties were relying on a preliminary P50 analysis of the totally unexplored Chinguetti field at the time.
Also, during negotiations and as late as Summer 2004, because of new field information and newly predicted lower suction pressures, Flotech (and GE) recommended the use of the larger, slightly more expensive F-606 compressor model to enable Berge comfortably to meet the requirement of 70 mmscfd at 133 psig.
Berge accordingly has not met its burden of proving by a preponderance of the evidence that it reasonably relied on GE's February or August 2004 Data Sheets as warranties of performance on the capacity of the compressors or that those representations were a basis for Berge's bargain.
Additionally, to recover on a warranty claim, Berge must prove by a preponderance of the evidence that GE's alleged breaches of actionable warranties were a substantial cause of Plaintiff's financial damages. The parties have briefed only Texas law governing causation in this breach of warranty case, and the Court assumes without deciding that Texas law applies, as Berge contends. After consideration of the evidence from trial, the Court is unpersuaded Berge has met its burden to show by a preponderance of the evidence that GE's conduct was a proximate cause of the damages sought. There were many significant contributing causes of the innumerable problems experienced by the M60 compression module.
Berge seeks damages of $17,710,486 for lost BDR. Under Berge's contract with Woodside, Woodside was permitted to reduce the BDR paid to Berge if the compression module produced less than 90% of Woodside's requirement each day. The Court assumes that Berge's BDR claim is for consequential damages.
To obtain consequential damages for breach of express or implied warranties, a plaintiff must prove that defendant's breach of warranty was a proximate cause of the plaintiff's injury. See TEX. BUS. & COM.CODE § 2.715; Hyundai Motor Co. v. Rodriguez, 995 S.W.2d 661, 667 (Tex.1999) (citing Signal Oil & Gas Co. v. Universal Oil Prods., 572 S.W.2d 320, 328 (Tex. 1978)); Crosbyton Seed Co. v. Mechura Farms, 875 S.W.2d 353, 361 (Tex.App.-Corpus Christi 1994, no writ); General Supply & Equip. Co. v. Phillips, 490 S.W.2d 913, 917 (Tex.Civ.App.-Tyler 1972, writ ref'd n.r.e.); see also Otis Spunkmeyer, Inc. v. Blakely, 30 S.W.3d 678, 683-84 (Tex.App.-Dallas 2000, no pet.). Proximate cause consists of both cause in fact and foreseeability. Travis v. City of Mesquite, 830 S.W.2d 94, 98 (Tex.1992) (citation omitted). "Cause in fact" requires that the defendant's conduct or product be "a substantial factor" in bringing about the injury which would not otherwise have occurred. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex.2006) (citation omitted); Mott v. Red's Safe & Lock Servs., Inc., 249 S.W.3d 90, 99 (Tex.App.-Houston [1st Dist.] 2007, no pet.) (citation omitted); Paragon General Contractors, Inc. v. Larco Constr., Inc., 227 S.W.3d 876, 887 (Tex. App.-Dallas 2007, no pet.) (citations omitted). Under the Texas U.C.C., there is no requirement that a buyer and seller "tacitly agree" that the seller be liable for consequential damages, though an aggrieved buyer must attempt to minimize its damages in good faith. See TEX. BUS. & COM. CODE § 2.715 cmt. 2.
Berge contends that it should prevail because the SHMB604 compressors in the M60 module broke down allegedly from compressor overload more than 180 times, starting in early 2006, until Berge and Woodside agreed to shut the system down for a thorough evaluation beginning in early November 2006. Significantly, however, Berge has not presented persuasive proof that the compressors in the modules actually were operating above their permissible rod load and thus were "overloaded" compared to the data sheet figures. At trial, the parties focused on the meaning of the specifications "R/L TENSION: 72,752" and "R/L COMPR[ESSION]: 72,752" listed at the top of the August 2004 Data Sheet for compressor. Berge argues that these figures are a compressor's "maximum rod load" and should always be set with reference to what all the components of the compressor, including its running gear,
The evidence demonstrates that there are significant differences within the compressor industry regarding the meaning and use of the terms "rod load" and "gas rod load." There is wide variation as to what these terms mean within different companies and among potential purchasers and users.
In any event, the dispositive issue is whether the compressors were actually overloaded, not merely whether the parties agree on the meaning of the term "rod load." At trial, Berge offered no empirical or direct evidence of the actual loads experienced by the BERGE HELENE compressors during the relevant damages period or otherwise. No scientific testing was performed. Berge instead relies on the fact that the compressors experienced numerous breakdowns and the testimony of Philip Tolk, a Shell Global Solutions International employee retained by Woodside as a consultant who late in 2006 reviewed the design and operation of the compressors and the compression module.
Berge also contends that the failures were due to destructive pulsations and possibly vibrations caused by the flawed designs of the compressors.
The Court finds further that design, assembly, installation errors, and other conduct by Flotech, Aibel, and Berge played material roles leading to many of the M60 compression module stops and therefore much, if not all, of Berge's claimed lost BDR. First, for cost reasons, Berge did not purchase a larger model or a spare compressor to avoid or replace capacity during expected — and unexpected — compressor downtimes. Reciprocating compressors are usually spared due to their greater need for maintenance, especially where the processing plant is new.
Second, Berge also elected not to conduct a debottlenecking study as proposed by Aibel in May 2006. This study would have enabled the parties to determine how much gas could be handled by the equipment surrounding the compressors — such as the inlet heaters, the first stage and second stage separators, the pressure control valves on the separators, the piping,
Further, one of the major stops for which Berge seeks damages is a 65-day stoppage from May 8, 2006 to August 12, 2006,
The Court finds further that Flotech, Aibel, and/or Berge were also substantially responsible for other major stops. For instance, one stop resulted from undertorquing of bolts and likely caused a piston
In another example, a stop, this time of Compressor C in September, 2006, was caused by problems in the coalescers, a crucial part of the M60 module packaged by Flotech, and not a part of the compressors provided by GE. This issue was also an important contributing factor for the four-month shutdown starting in November 2006.
Over and above these issues, there is evidence that that debris and other foreign material in the gas stream,
Additionally, there are indications that the suction pressure at the compressor inlets was materially lower than necessary for GE's design and lower than promised by Flotech from time to time during operations, either unexpectedly or because Woodside wanted to boost oil production and other equipment required lower suction pressure.
The Court does not find that GE's design and manufacture were ideal. Rather, the evidence shows that both GE Houston and GE's Italian affiliate were not always communicating effectively during design of the SHMB604 phase. There were issues regarding the exact load limits,
Berge also seeks $23,649,185 in damages for the purchase, transportation, and installation of a supplemental compressor.
There is also no evidence that Berge in fact currently requires 70 mmscfd of gas compression to satisfy its contractual obligations to Woodside or any future contracts proven at trial to exist. Berge was able to renegotiate the Woodside contract compression volume requirements.
Further, there is no evidence that $23,649,185 is the difference, at the time and place of Berge's acceptance in 2004 or 2006, between the value of the compressors as accepted and the value they would have had if they had been as warranted. See TEX. BUS. & COM. CODE § 2.714(b) (providing the general measure of damages for breach of warranty). Nor is there evidence of the value of any reduction in the FPSO's resale value. See TEX. BUS. & COM. CODE § 2.715.
Berge has not proven by a preponderance of the evidence its claim against GE for recovery of the lost BDR due to GE's compressor design and manufacturing flaws and to GE's faulty instruction manual.
Berge also seeks recovery on a fraud by omission theory. Berge alleges two omissions. The first focuses on April 30, 2004, when GE Houston engineers allegedly became aware of the falsity of the representations about the compressors having a gas rod load tolerance of 72,752 lbs. in both tension and compression and failed to advise Plaintiff of the falsity of that representation.
Plaintiff asserts its fraud by omission claims under the Court's maritime, diversity, and supplemental jurisdiction. Regardless which jurisdiction is invoked, maritime law generally applies if the alleged tort is a maritime tort. See Pope & Talbot v. Hawn, 346 U.S. 406, 411, 74 S.Ct. 202, 98 L.Ed. 143 (1953) (citing Seas Shipping Co. v. Sieracki, 328 U.S. 85, 88-89, 66 S.Ct. 872, 90 L.Ed. 1099 (1946)), superseded by statute, Longshore and Harbor Workers' Compensation Act of 1972, Pub.L. 92-576, 86 Stat. 1263; Keefe v. Bahama Cruise Line, Inc., 867 F.2d 1318, 1320-21 (11th Cir.1989); Ali v. Offshore Co., 753 F.2d 1327, 1332 (5th Cir.1985), overruled on other grounds by In re Air Crash Disaster Near New Orleans, La., 821 F.2d 1147 (5th Cir.1987); Cont'l Cas. Co. v. Canadian Universal Ins. Co., 605 F.2d 1340, 1344 (5th Cir.1979) (citing Fitzgerald v. U.S. Lines Co., 374 U.S. 16, 83 S.Ct. 1646, 10 L.Ed.2d 720 (1963); Romero v. Int'l Terminal Operating Co., 358 U.S. 354, 79 S.Ct. 468, 3 L.Ed.2d 368 (1959)). The Court does not need to decide whether the case involves a maritime tort or whether maritime, U.C.C., or Texas law applies. Even if Texas law is applied, as Berge requests, Berge has not proved by a preponderance of the evidence that GE is liable for fraud by omission.
To recover for fraud by omission under Texas law, the plaintiff must prove: (1) the defendant failed to disclose facts to the plaintiff when the defendant had a duty to disclose such facts; (2) the facts were material; (3) the defendant knew of the facts; (4) the defendant knew that the plaintiff was ignorant of the facts and did not have an equal opportunity to discover the truth; (5) the defendant was deliberately silent and failed to disclose the facts with the intent to induce the plaintiff to take some action; (6) the plaintiff relied on the omission or concealment; and (7) the plaintiff suffered injury as a result of acting without knowledge of the undisclosed facts. United Teacher Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 566-68 (5th Cir.2005); Omni USA, Inc. v. Parker-Hannifin Corp., No. H-10-4728, 2012 WL 1038642, at *3, 2012 U.S. Dist. LEXIS 41694, at *10 (S.D.Tex. Mar. 27, 2012) (citation omitted); Bittick v. JPMorgan Chase Bank, NA, No. 4:11-CV-812-A, 2012 WL 1372126, at *6 n. 9, 2012 U.S. Dist. LEXIS 55057, at *19-20 n. 9 (N.D.Tex. Apr. 18, 2012) (citation omitted); Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex.1998) (citations omitted); Horizon Shipbuilding, Inc. v. Blyn II Holding, LLC, 324 S.W.3d 840, 849-50 (Tex.App.-Houston [14th Dist.] 2010, no pet.) (citation omitted); BP Am. Prod. Co. v. Marshall,
Preliminarily, the Court is not persuaded that the wrong or false "gas rod load" limit was given to Berge on the August 2004 Data Sheet. Because the SHMB604 was an API 11 model, the evidence does not convince the Court that it was improper or an omission by GE to disclose loads on maximum stationary parts only.
Berge points out that in subsequent promotional materials for the SHMB604, GE states the maximum rod load as 50,000/60,000 lbs. This evidence, however, is insufficient prove the falsity or GE's knowledge of any falsity of the 72,752 lb. maximum gas rod load figure on the February and August 2004 Data Sheets. While it may have been better practice for GE to advertise lower, more conservative limits, as GE ultimately did, the Court is persuaded by testimony of GE engineers Simone Pratesi and Simone Bassani that the compressors' frames and running gear could operate under predicted conditions at the disclosed pressures of 72,752 lbs. in tension and compression.
The April 30, 2004 email from Eric Keifer,
Finally, the evidence does not establish by a preponderance that the 72,752 lb. maximum rod load figure was incorrect. As explained above, there is no direct evidence of the actual operating loads of the compressors on the BERGE HELENE. The frequent breakdowns do not, in and of themselves, prove there was overloading caused by GE's design or assembly of the compressors. The many participants in the Chinguetti project had numerous hypotheses for the different stops. The causes, most likely, were various and multifaceted. None of the explanations were definitive. While GE's compressors may not have been problem-free, the many other likely contributing causes of the failures, including the unexpectedly complex field conditions that were dramatically different from the basis of design, problematic module components supplied and installed by Flotech and Aibel, the module's questionable design, the M60 module's questionable assembly, problems with aspects of the module's installation, and the questionable on-site module maintenance, lead the Court to conclude that the stops do not prove that the compressors in fact were overloaded and that GE's design was a significant cause of the stops.
Evidence also shows that GE acted in good faith during the design phase. When it knew it had a problem meeting a requirement — e.g., when Flotech and Aibel requested that the compressors compress 70 mmscfd at suction pressures of 133 or 144 psig — GE engineers refused to agree. Furthermore, once the M60 module was installed, GE made extensive efforts, when requested, to assist in diagnosing the issues with the module's and compressors' performance under the difficult conditions presented.
The Court notes that Texas law is unsettled on whether a duty to disclose can exist absent a fiduciary or confidential relationship. See United Teacher Assocs., 414 F.3d at 566-67; NuVasive, Inc. v. Renaissance Surgical Ctr. N., L.P., 853 F.Supp.2d 654, 660-63 (S.D.Tex.2012) (Ellison, J.); Citizens Nat'l Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459, 476-77 (Tex.App.-Fort Worth 2003, no pet.).
Independent of the factual weaknesses in the claim that the compressors actually were overloaded, GE's only duty was to inform Flotech, GE's customer, if GE knew of an overloading problem. GE's only contract was with Flotech. After the February 2004 sales meeting in Oslo, GE's communications about the BERGE HELENE compressors and their capabilities were with Flotech until the M60 module demonstrated repeated performance issues. All witnesses confirmed that there was a strict protocol that permitted communications only with a participant's contract partner, not outside the formal contract chain. Berge has not met its burden to show that GE had a duty to make disclosures to Berge.
For the foregoing reasons, Berge has not shown by preponderance of the evidence that earlier statements in fact were false, that GE knew of any falsity, or that GE had a duty to make disclosures to Berge, an entity with which GE had no contract or direct relationship.
For all the foregoing reasons, the warranty claims against Defendant GE are not legally viable under maritime law and have not been proven by a preponderance of evidence. Further, Berge has not proven by a preponderance that GE committed fraud by omission. It is therefore
PX 29, at 13-14 (GE-Flotech Agreement).
E. River, 476 U.S. at 875, 106 S.Ct. 2295 (citations omitted).
Although some cases list "basis of bargain" and "reliance" as separate elements, other courts blend them together because of their conceptual overlap. See PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P'ship, 146 S.W.3d 79, 99 (Tex.2004) ("The basis-of-the bargain requirement `loosely reflects the common-law express warranty requirement of reliance....'" (quoting Am. Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 436-37 (Tex. 1997))); Compaq Computer Corp. v. Lapray, 135 S.W.3d 657, 675-77 (Tex.2004) (noting varied interpretations of the level of reliance required by the "basis of bargain" element); Indust-Ri-Chem Lab., Inc. v. Par-Pak Co., 602 S.W.2d 282, 293-94 (Tex.Civ.App.-Dallas 1980, no writ) (noting that in some instances, a jury instruction on lack of reliance may be germane to the "basis of the bargain" issue; "the weight of authority does not require reliance as an element to recover on an express warranty" (citation omitted)).
Flotech acknowledged misalignment of the discharge bottle and the cylinder head on the third stage. See DX 186, at 6-7; DX 190; see also PX 458; PX 474, at 4; PX 558, at 10;PX 558, at 10. The Court rejects Berge's contention that this report is fraudulent because certain conclusions in it differ from the expert's initial draft. The provision to the client by a specialized expert of his draft report for checking factual accuracy is acceptable practice. Moreover, the expert's use of a form, including a signature line, in his draft does not alter this finding.
It is noted that GE designed the pistons, which are relatively inexpensive compressor components, to break at a particular spot when the compressors were under excessive stress so that more dangerous or expensive failures in the compressors would not occur. Thus, the piston design was a type of fail-safe.
Furthermore, the Court takes issue with other aspects of Berge's calculations of damages. Given the above, however, there is no need to address these matters in any detail.