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Full Opinion
OPINION AND ORDER
The above referenced action alleges that Defendant Parker-Hannifin Corporation (“Parker”) improperly designed, manufactured, marketed, and serviced defective industrial oil seals sold to Plaintiff Omni USA, Inc. (“Omni”) specifically for use in its gearboxes,, sold as part of agricultural irrigation systems to a third party. The Court’s Opinion and Order of March 27, 2012, 2012 WL 1038642 (instrument # 26) dismissed with prejudice claims brought by Omni against Parker for fraud, fraudulent inducement, negligent misrepresentation, and violations of the Deceptive Trade Practices Act. Omni’s remaining claims against Parker are for breach of express warranties under § 2.313 of the Texas Business and Commerce Code, breach of implied warranties of merchantability and fitness for a particular purpose under §§ 2.314 and 2.315 of the Texas Business and Commerce Code, and breach of performance contract as defined under §§ 2.201(c), 2.204, and 2.206 of the Texas Business and Commerce Code.
Pending before the Court are the following motions: (1) Parker’s motion for partial summary judgment (# 33) on Omni’s remaining claims on the grounds that there is no defect or no evidence of any defect in Parker’s seals; (2) Parker’s second motion for summary judgment (# 36) on all of Omni’s claims; (3) Parker’s motion for partial summary judgment against Omni on Parker’s counterclaims
After reviewing the briefs, the record and the applicable law, for the reasons stated below the Court concludes that Parker’s three motions for partial summary judgment should be granted as indicated in this document.
Because Omni’s response to # 37 refers the Court to its responses to Parker’s motions for partial summary judgment as evi
I. Standard of Review
Summary judgment under Federal Rule of Civil Procedure 56(c) is appropriate when, viewing the evidence in the light most favorable to the nonmovant, the court determines that “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” A dispute of material fact is “genuine” if the evidence would allow a reasonable jury to find in favor of the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Initially the movant bears the burden of identifying those portions of the pleadings and discovery in the record that it finds demonstrate the absence of a genuine issue of material fact and that the movant is entitled to summary judgment as a matter of law; the movant may, but is not required to, negate elements of the nonmovant’s case to prevail on summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Lujan v. National Wildlife Federation, 497 U.S. 871, 885, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998).
If the movant meets its burden and points out an absence of evidence to prove an essential element of the nonmovant’s case on which the nonmovant bears the burden of proof at trial, the nonmovant must then present competent summary judgment evidence to support the essential elements of its claim and to demonstrate that there is a genuine issue of material fact for trial. National Ass’n of Gov’t Employees v. City Pub. Serv. Board, 40 F.3d 698, 712 (5th Cir.1994). “[A] complete failure of proof concerning an essential element of the nonmoving party’s case renders all other facts immaterial.” Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The nonmovant may not rely merely on allegations, denials in a pleading or unsubstantiated assertions that a fact issue exists, but must set forth specific facts showing the existence of a genuine issue of material fact concerning every element of its cause(s) of action. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998). Conclusory allegations unsupported by evidence will not preclude summary judgment. National Ass’n of Gov’t Employees v. City Pub. Serv. Board, 40 F.3d at 713; Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir.1996). “‘[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment State Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5th Cir.1990), quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “Nor is the ‘mere scintilla of evidence’ sufficient; ‘there must be evidence on which the jury could reasonably find for the plaintiff.’ ” Id., quoting Liberty Lobby, 477 U.S. at 252, 106 S.Ct. 2505. The Fifth Circuit requires the nonmovant to submit “ ‘significant probative evidence.’ ” Id., quoting In re Municipal Bond Reporting Antitrust Litig., 672 F.2d 436, 440 (5th Cir. 1982), and citing Fischbach & Moore, Inc. v. Cajun Electric Power Co-Op., 799 F.2d 194, 197 (5th Cir.1986). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5th Cir.1999), cit
The court must consider all evidence and draw all inferences from the factual record in the light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); National Ass’n of Gov’t Employees v. 'City Pub. Serv. Board, 40 F.3d at 712-13.
II. Relevant Substantive Law
Parker’s motions for partial summary-are grounded in several provisions of the Texas Business and Commerce Code.
Breach of Contract
Under the UCC, a breach of warranty, which is created when a seller makes an affirmation of fact or a promise to the purchaser that relates to the sale of a product and warrants a conformity to the affirmation or promise, is distinguishable from a breach of contract based on whether the buyer has finally accepted the goods
Breach of Contract
Section 2.204, “Formation in General,” provides,
(a) A contract or sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(b) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(c) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
Section 2.206, “Offer and Acceptance in Formation of Contract,” recites,
(a)Unless otherwise unambiguously indicated by the language or circumstances
(1) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
(2) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(b)Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
To recover for breach of contract, a plaintiff must prove (1) the existence of a valid contract', (2) performance or tendered performance by the plaintiff; (3) breach by the defendant, and (4) harm to the plaintiff as a result of the breach. Adams v. H & H Meat Prods., Inc., 41 S.W.3d 762, 771 (TexApp.-Corpus Christi 2001, no pet.).
Section 2.201 addresses “Formal Requirements; Statute of Frauds,” and recites,
(a) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
(b) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of Subsection (a) against such party unless written notice of objection to its contents is given within ten days after it is received.
(c) A contract which does not satisfy the requirements of Subsection (a) but which is valid in other respects is enforceable
*814 (1) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
(2) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
(3) with respect to' goods for which payment has been made and accepted or which have been received and accepted (§ 2.606).6
Comment 2 to § 2.201 states, “Receipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both parties that a contract actually exists.”
Breach of Express Warranties
Section 2.313, titled “Express Warranties by Affirmation, Promise, Description, Sample,” states,
(a) Express warranties by the seller are created as follows:
(1)Any 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.
(2) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(3) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(b) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or ^guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.
The elements of a cause of action for breach of express warranty are (1) the defendant-seller made an express affirmation of fact or promise relating to the goods; (2) that affirmation or promise became part of the bargain; (3) the plaintiff relied upon that affirmation or promise; (4)the goods did not comply with the affirmation or promise; (5) the plaintiff was damaged by the noncompliance; and (6) the failure of the product to comply was the proximate cause of the plaintiffs injury. Berge Helene Ltd. v. GE Oil & Gas, Inc., 830 F.Supp.2d 235, 255 (S.D.Tex.
Section 2.725 applies to an action for breach of warranty for the sale of goods, whether implied or express. See Safeway Stores, Inc. v. Certainteed Corp., 710 S.W.2d 544, 545-46 (Tex.1986). The statute of limitations for breach of express warranty is four years, accruing from the date of delivery, regardless of whether the plaintiff lack knowledge of the breach, unless the warranty explicitly extends to future performance of the goods and discovery of the breach. § 2.725; American Alloy Steel, Inc. v. Armco, Inc., 777 S.W.2d 173, 176 (Tex. App.-Houston [14th Dist.] 1984, no writ).
Where an express warranty is shown to exist, it can only be excluded or modified pursuant to § 2.316(a),
Breach of Implied Warranties
An implied warranty is a representation about the implied quality or suitability of a product that the law implies and imports into a contract, “in view of all facts and circumstances attending the transaction, including the nature of the property, terms of the agreement, and trade usages.” American Tobacco, 951 S.W.2d at 435.
The statute of limitations for breach of implied warranty is four years after delivery of the goods to the original buyer. Tex. Bus. & Com.Code Ann. § 2.725(b) (“A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.”). The statute of limitations for an implied warranty is not the same as that for an express warranty, which can be explicitly extended into the future by the parties. While the “statute of limitations on implied warranties runs from the date of the sale,” the drafters of the UCC “intended to reserve the benefits of an extended warranty to those who bargained for them,” so “only express warranties
Section 2.314, “Implied Warranty: Merchantability; Usage of Trade,” provides in relevant part,
(a) Unless excluded or modified (§ 2.316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind....
(b) Goods to be merchantable must be at least such as
(1) pass without objection in the trade under the contract description; and
(2) in the case of fungible goods, are of fair average quality within the description; and
(3) are fit for the ordinary purposes for which such goods are used; and
(4) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(5) are adequately contained, packaged, and labeled as the agreement may require; and
(6) conform to the promises or affirmations of fact made on the container or label, if any.
(c) Unless excluded or modified (§ 2.316) other implied warranties may arise from course of dealing or usage of trade.
To prevail on an action for breach of implied warranty of merchantability, a plaintiff must prove (1) that the merchant sold goods to the plaintiff; (2) that the goods were unmerchantable, that is, unfit for ordinary purposes; (3) that the plaintiff notified the defendant of the breach; and (4) that the plaintiff suffered injury. Hartford v. Lyndon-DFS Warranty Services, Inc., 2010 WL 2220443, *11 (TexApp.-Houston [1st Dist.] May 28, 2010) (citing inter alia 2.314 cmt. 3, and Hyundai Motor Co., v. Rodriguez, 995 S.W.2d 661, 667-68 (Tex.1999)). Proof of a defect is required for a claim of breach of implied warranty of merchantability under § 2.314. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 443 (Tex.1989). The “defect” in an implied warranty case “means condition of the goods that renders them unfit for the ordinary purposes for which they are used because of lack of something necessary for adequacy” at the time they left the manufacturer’s or seller’s possession. Plas-Tex, 772 S.W.2d at 444.
The defendant may assert a defense of disclaimer under the UCC, Tex. Bus. & Com.Code Ann. 2.316(b), to a claim of implied warranty of merchantability as well as an implied warranty of fitness for a particular purpose. Southwestern Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 577 (Tex.1991); Plas-Tex, 772 S.W.2d at 444. Id. The disclaimer must be conspicuous and include the word, “merchantability.” Plas-Tex, 772' S.W.2d at 444. Whether the disclaimer is conspicuous is a question of law for the court. Id., citing Tex. Bus. & Com.Code Ann. § 1.201(b)(10). A term is conspicuous if a reasonable person against whom it is to operate would have noticed it. Id.; Cate v. Dover Corp., 790 S.W.2d 559, 561 (Tex.1990). Print in a text is conspicuous if it is set off from the surrounding words by symbols, marks that draw attention to it, or larger or contrast
To prove a breach of the implied warranty of merchantability, a plaintiff must demonstrate a defect in the “condition of the goods that renders them unfit for the ordinary purposes for which they are used” under § 2.314(b)(3). Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 443-44 (Tex.1989). The plaintiff, who bears the burden of showing that the goods were defective at the time they left the manufacturer’s or seller’s possession, may use circumstantial evidence to show the goods had a defect; he does not need to use direct or expert evidence. Id. at 444; in accord, Hyundai Motor Co. v. Rodriguez, 995 S.W.2d 661, 667-68 (Tex. 1999).
Section 2.315, “Implied Warranty: Fitness for Particular Purpose,” asserts,
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 the next section an implied warranty that the goods shall be fit for such purpose.
“A ‘particular purpose’ is a specific Use by the buyer that is peculiar to the nature of the buyer’s business. A particular purpose 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.” Berge Helene Ltd. v. GE Oil & Gas, Inc., 830 F.Supp.2d 235, 252 (S.D.Tex. 2011) (citing § 2.315 cmt. 2), superseded in part on other grounds, 896 F.Supp.2d 582 (S.D.Tex.201'2). "
An implied warranty of fitness may also be disclaimed, but the disclaimer may be by general language and need not use the word, “fitness.” Hartford, 2010 WL 2220443, *11. An implied warranty may only be excluded or modified pursuant to §' 2.316(b), which requires that the exclusion or modification be in writing and be conspicuous. Cate v. Dover, 790 S.W.2d 559, 560-61 (Tex.1990).
To prevail on a claim for breach of implied warranty of fitness for a particular purpose, the plaintiff must prove that (1) the seller had reason to know any particular purpose for which the goods were required at the time of contracting; (2) the buyer actually and justifiably relied on the seller’s skill or judgment to select or furnish suitable goods; (3) the plaintiff notified the defendant of the breach within a reasonable time after the buyer discovered or should have discovered any breach of warranty or he is “barred of remedy” 4 pursuant to § 2607(c)(l)(4) the plaintiff suffered injury; and (5) the defendant’s
III. Allegations of Plaintiffs
First Amended Original Complaint (#16)'
Plaintiffs First Amended Original Complaint was filed pursuant to a Court order (# 15) after the Court granted Parker’s motion for more definite statement. In the amended pleading Omni alleges that in 2004 Omni met several times with Parker’s Houston sales representative, Ronnie Lovett (“Lovett”), in Omni’s Houston office. So did Paul Yager (‘Yager”), Parker’s Rotary Seals Market Manager for Parker’s PS Division. Lovett verbally represented to Omni that Parker would be fully capable of designing and manufacturing high quality cartridge seals for Omni’s gearboxes, which Omni would then sell to T-L Irrigation Company (“T & L”) for use in T. & L’s agricultural irrigation • systems. Based on this representation, Omni agreed to have Parker design- and manufacture the seals. The parties also agreed that Parker ultimately would have final design control over the design and manufacture of the seals.
Before this agreement was made, Parker had represented to Omni that Parker had finished an analysis of Omni’s gearbox design and compared it to seal designs of other seal suppliers in the agricultural irrigation market. Through Lovett and Yager, Parker represented that it could design and manufacture a cartridge seal for Omni’s gearbox that would allow Omni’s gearbox to operate and function successfully in an agricultural irrigation system. According to the amended pleading, when these representations were made, Parker did not actually possess the necessary knowledge, skills, technology, or other capabilities or resources that Parker claimed, and Parker was not sure that it could design and manufacture the functional cartridge seal design requested by Omni within the time frame established by Omni.
According to the Amended Complaint, from 2005-07 Parker began supplying Plaintiff with the seals, which Omni installed in its gearboxes and forwarded to T & L. According to Omni, it only later discovered that the seals were defective at the time that they were delivered to Omni. During this time, Omni made several payments to Parker, and Parker sent several invoices to Omni. On the back side of some of these invoices was inconspicuous language that was not referenced in the invoices and that was not noticed when the invoices were received by Omni. All invoices that Omni received from Parker were received after the first shipment of seals; there was no course of dealings between Omni and Parker whereby the additional terms on the reverse side of the invoices became part of the agreement.
T & L subsequently sold the agricultural systems containing the gearboxes and seals to end-users. At some point after 2007, T & L notified Omni that at least some of the gearboxes were leaking oil in the field (the “leakage”) because of a problem in the design and/or manufacturing process of the seals. Omni promptly notified Parker and suspended payment to Parker until the defective design issue could be resolved. Omni allowed Parker to come to its Houston offices to obtain
Nevertheless Parker has disclaimed responsibility for the seal design and/or manufacturing and blamed faulty design failures on Omni, which is not and does not claim to be a designer or manufacturer of seals. In contrast, Parker represents itself to be the “world’s leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets.” Ex. A. Omni asserts that Parker changed its materials supplier(s) during the production of the seals and that Parker chose and used inferior materials that directly caused the leakage. Parker also allegedly changed the seal’s “rib” design during production, evidencing Parker’s own testing of and attempts to correct the design problems.
Omni and T & L continued to report incidents of leakage to Parker, which later indicated that it found certain defects in the design and proposed to correct the deficiencies, but in return it required Plaintiff to agree to make future seal purchases from Parker at a much higher price per seal.
In sum, Omni contends that Parker’s seal manufacturing and related services were defective in design, workmanship, manufacture, production, marketing/ testing, and investigation of corrective design.
IV. Parker’s [First] Mtotion for Partial Summary Judgment (# 33)
Parker contends that Omni’s entire case rests on whether the Parker seals in dispute were defective. Parker argues that the summary judgment evidence establishes that the seals were not defective and that Omni cannot produce any summary judgment evidence of a defect in Parker’s seals which caused the leaks complained of by T & L. Therefore Parker is entitled to summary judgment on Omni’s claims as a matter of law.
The Court observes that there is disagreement about which party is responsible for the design of the seals at issue. Parker asserts that in early 2004 Omni came to Parker and asked for a quotation for a “cartridge” seal that could be used in Omni’s agricultural gearboxes. Ex. B, Feb. 21, 2012 Dep. of Jeff Daniel (“Daniel”), President of Omni, at pp. 114-20.
Omni’s designated corporate representatives, Kemper and Operations Manager Daniel Lloyd Matthews (“Matthews”), both testified that it was Omni’s responsibility to install the seals and ensure that they were installed correctly, and to insure that they were tested and would not be shipped to the customer until they passed. Ex. D, at 28-30; Ex. E, Matthews Dep. at pp. 75-76 and Ex. 2. Both men confirmed that the Parker seals were capable of being properly installed. Ex. D at pp. 29-33 and Ex. 2; Ex. E at pp. 75-76 and Ex. 2. Furthermore Kemper stated that every gearbox was tested for leaks
The first complaints of leakage in the area of the seals inside the gearboxes that were sold and shipped in 2005. by Omni to T & L came in the fall of 2007 from T & L. Kemper Dep. Ex. D at pp. 31-33 & Ex. 9; Matthews Dep., Ex. E at pp. 116-20 and Ex. 9. No “root cause analysis” was performed to determine the cause of the reported leakage. Ex. B, Daniel Dep. at 207-14; Ex. E, Matthews Dep. at pp. 113— 15. What testing was done did not reveal leaking or determine what caused the leakage. Ex. B at 207-24; Ex. E at pp. 122-24 & Ex. 10. Nor was there any evidence of a defect in any Parker seal. At his deposition on October 23, 2012 Kemper testified that he was not aware of any defects with the Parker or the J.M. Clipper
Nor did Omni’s expert, mechanical engineer Merle Lynn Bell (“Bell”)
Thus neither Omni’s designated corporate representatives nor its expert identified a defect in the Parker seals. For Omni to prevail on its breach of contract claim it must prove that Parker breached a contract and caused Omni’s injury; specifically it must prove that its injury was a natural, probable and foreseeable consequence of Parker’s breach. Mead v. Johnson Group, 615 S.W.2d 685, 687 (Tex.1981).
To prevail on its claim of breach of express warranties “with respect to the seals sold to Plaintiff by selling same in a defective condition likely to cause leakage and product malfunction that did occur,” Omni must establish that the seals did not comply with Parker’s alleged representation regarding “the character, quality or title promised at the time of sale.” Chilton Ins. Co. v. Pate & Pate Enters., 930 S.W.2d 877, 891 (Tex.App.-San Antonio 1996, writ denied).
Neither party disputes that Parker knew from the start of the parties’ negotiations the particular purpose for which the seals were to be used: the cartrid