Citisteel USA, Inc. v. General Electric Co.

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
10-28-2003
CitiSteel USA Inc v. GE Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-1197
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-1197
CITISTEEL USA, INC.,
Appellant
v.
GENERAL ELECTRIC COMPANY,
including its GE Apparatus
Service Division and GE
Industry Sales and Service Division
Appeal from the United States District Court
for the District of Delaware
(D.C. Civil Action No. 99-cv-00810)
District Judge: Honorable Gregory M. Sleet
Argued on September 16, 2003
Before: ALITO, AM BRO and CHERTOFF, Circuit Judges
(Opinion filed: October 28, 2003)
OPINION
AM BRO, Circuit Judge
CitiSteel USA, Inc. (“CitiSteel”) appeals the decision of the United States District
Court for the District of Delaware granting General Electric Company’s (“GE”) motion
for judgment on the pleadings. CitiSteel filed a complaint against GE in the District
Court in November 1999 alleging damages for breach of warranty and contract. GE
moved for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil
Procedure. In January 2001, the District Court issued a Memorandum and Order granting
GE’s Rule 12(c) motion and directed the clerk to mark the record “case closed.”
CitiSteel appealed the District Court’s ruling. In June 2002, we dismissed the
appeal and remanded the case to the District Court because, as unresolved claims
remained, the appeal was from a non-final order. In response, the parties negotiated a
settlement of the remaining unresolved claims and filed a stipulation with the District
Court. Pursuant to that stipulation, the District Court entered a final judgment in
January 2003. CitiSteel thereafter filed a timely notice of appeal challenging the District
Court’s entry of partial judgment on the pleadings in favor of GE.
This Court has jurisdiction under 28 U.S.C. § 1291. For the reasons set forth
below, we affirm the decision of the District Court.
I. Factual Background
CitiSteel owns and operates a steel processing plant located in Delaware. To
generate the power used in melting steel for this plant, CitiSteel makes use of several
industrial-sized transformers. In 1997, it decided to overhaul and upgrade, among others,
a 56 MVA power transformer in operation at its facility. After an exchange of
correspondence with GE, CitiSteel prepared and forwarded a purchase order to GE dated
2
May 23, 1997 (the “Purchase Order”). GE completed the transformer overhaul work it
contracted to perform pursuant to the Purchase Order.
A short while after its overhaul, however, the transformer sustained significant
internal damage. According to CitiSteel’s complaint, this “resulted in a reduction of
CitiSteel’s production capability, depletion of CitiSteel’s steel supply, and inability of
CitiSteel to fulfill its contracts.” CitiSteel’s complaint further alleges the transformer
failure was a direct and proximate result of GE’s faulty workmanship.1
The dispute, however, centers on the terms of the Purchase Order. The first page
of the Purchase Order, in addition to listing certain parts and pricing information, contains
the following language:
Warranty offering:
One year from installation with the understanding that CitiSteel will install
the unit within 12 months of completion of repair. Also included for
general warranty information is GE ISS form 4887 (CS 1/89).
Form 4887 is the “GE Industry Sales & Services Conditions of Sale for Services” (the
“GE Conditions of Sale”).2 Section 2 of the GE Conditions of Sale is entitled
“Warranty.” Subsection 2.a states GE warrants that all goods and services sold will be
free from “defects in material, workmanship and title,” and if any defect is discovered
1
As we review the District Court’s decision in the context of Rule 12(c), we must
accept all well pled facts alleged by CitiSteel as true. See discussion infra Part II.B.
2
Technically, the GE Conditions of Sale is form number 487, not 4887. At oral
argument, however, counsel for CitiSteel acknowledged that the Purchase Order’s
reference to form 4887 instead of 487 was a typographical error. Despite the error, for
the sake of convenience we continue the reference to form 4887.
3
within one year of the completion of the work performed, GE will “correct any such
failure by reperforming any defective portion of the services furnished.” This, per
Subsection 2.b, is the “exclusive remedy for all claims based on failure of, or defect in,
goods or services sold hereunder,” whether such a claim is based on “contract, indemnity,
warranty, tort (including negligence), strict liability or otherwise.” In addition,
Subsection 8.b (“Limitations of Liability”) specifically disclaims liability for any “special,
incidental, exemplary or consequential damages.”
The reverse side of the CitiSteel Purchase Order, however, contains its own
“General Terms and Conditions of Purchase” (the “CitiSteel General Terms”), which
appear to contradict the GE Conditions of Sale. Specifically, Section II, Clause No. 17 of
the CitiSteel General Terms states that all remedies “shall be cumulative and in addition
to any other remedies provided by law or equity,” and Section II, Clause No. 24 states that
GE will indemnify CitiSteel for “any and all liability, loss, damages or expense” resulting
from “any failure of [GE] to comply with the provisions hereof.”
II. Discussion
CitiSteel appeals the District Court’s judgment in favor of GE on two separate
grounds. First, CitiSteel argues the District Court erred by failing to convert GE’s Rule
12(c) motion for judgment on the pleadings to a Rule 56 motion for summary judgment.
Second, CitiSteel argues the District Court erred by concluding the GE Conditions of Sale
were incorporated into the Purchase Order, thus precluding the recovery of monetary
damages as a matter of law. We exercise plenary review over these legal conclusions.
4
See, e.g., Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988).
A. Rule 12(c)
Rule 12(c) states:
If, on a motion for judgment on the pleadings, matters outside the pleadings
are presented to and not excluded by the court, the motion shall be treated
as one for summary judgment and disposed of as provided in Rule 56, and
all parties shall be given reasonable opportunity to present all material made
pertinent to such a motion by Rule 56.
F ED R. C IV. P ROC. R. 12(c). To its Rule 12(c) motion, GE attached a letter from GE to
CitiSteel (which, among other things, alludes to the GE Conditions of Sale), the Purchase
Order itself and the GE Conditions of Sale. In its response, CitiSteel attached the
affidavit of an employee and the CitiSteel General Terms.
Merely attaching documents to a Rule 12(c) motion, however, does not convert it
to a motion under Rule 56. In ruling on a motion to dismiss, a trial court “may consider
an undisputedly authentic document that a defendant attaches as an exhibit to a motion to
dismiss if the plaintiff’s claims are based on the document.” PBGC v. White Consol.
Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). 3 Further, in ruling on the motion a court
generally has “discretion to address evidence outside the complaint . . . .” Pryor v. Nat’l
Collegiate Athletic Ass’n, 288 F.3d 548, 559 (3d Cir. 2002).
Applied to this case, we conclude the District Court did not err by continuing to
3
While White Consol. Indus. involved a motion to dismiss for failure to state a
claim under Rule 12(b)(6), we have long recognized the overlap of standards between a
Rule 12(b)(6) motion to dismiss and a Rule 12(c) motion. See Shelly v. Johns-Manville
Corp., 798 F.2d 93, 97 n.4 (3d Cir. 1986).
5
consider GE’s motion as under Rule 12(c). Neither side has questioned the authenticity
of any document attached to GE’s motion or CitiSteel’s response. Indeed, most of those
documents are critical to CitiSteel’s claim for damages. 4 Conversely, the District Court
appears to rely on the GE letter to CitiSteel solely for the proposition that CitiSteel had a
copy of the GE Conditions of Sale prior to issuing the Purchase Order — a fact not
disputed by CitiSteel and otherwise inferable from the reference to the GE Conditions of
Sale on the face of the Purchase Order. Finally, the affidavit tendered by CitiSteel is a
legally irrelevant statement of its previously unexpressed, subjective intent which the
District Court was not required to consider or to give weight.
B. The Purchase Order
As the District Court’s ruling was in the context of Rule 12(c), we must decide if
its standards have been satisfied. Under Rule 12(c), a court must “view the facts in the
pleadings in the light most favorable to the plaintiff and must grant the motion only if the
moving party establishes that no material issue of fact remains and that it is entitled to
judgment as a matter of law.” Shelly, 798 F.2d at 97 n.4.
Basic contract interpretation standards are well established. Determining whether
4
We also find unpersuasive CitiSteel’s argument that the District Court’s decision
— stating CitiSteel should be barred “from recovering consequential damages” —
indicates it improperly considered evidence outside the pleadings because the CitiSteel
complaint never uses the term “consequential damages.” As stated previously, CitiSteel’s
complaint seeks damages due, in part, to a reduction of production capacity, depletion of
steel supply and inability to fulfill contracts, all of which flow consequentially from the
contractual violation CitiSteel alleges.
6
a contract provision is ambiguous is a question of law. Sanford Inv. Co. v. Ahlstrom
Mach. Holdings, Inc., 198 F.3d 415, 421 (3d Cir. 1999). Absent ambiguity, a court
enforces a contract as written absent ambiguity. Id. A contract is not ambiguous unless
“the provisions in controversy are reasonably or fairly susceptible of different
interpretations.” Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392, 395 (Del. 1996)
(internal citations omitted); 5 see also Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d
159, 163-64 (3d Cir. 2002). The test is not the parties’ subjective intent, but rather “what
a reasonable person in the position of the parties would have thought” the contract
provision meant. Kaiser Aluminum Corp., 681 A.2d at 395 (internal citations and
quotations omitted); see also Emerson Radio Corp., 253 F.3d at 164 (stating that a court
must “determine if there [are] objective indicia that . . . the terms of the contract are
susceptible of different meanings”) (internal citations and quotations omitted).6
As the dispute in this case centers on whether the GE Conditions of Sale were
incorporated into the Purchase Order, we must also examine the specific standards for
incorporation by reference. These standards are also well established. A contract may
5
The parties agree that Delaware law applies regardless which contractual terms
apply.
6
It is for this reason that CitiSteel’s reliance on its own subjective intent is
misplaced. Although not an exhaustive list, objective indicia of intent could include past
dealings between CitiSteel and GE, general custom in the industry or representations
made by GE to CitiSteel regarding the warranty. CitiSteel has failed to allege the
existence of, or allude to, any objective evidence, nor has it alleged any legal defense,
such as fraud or mistake, which warrants looking beyond the Purchase Order.
7
incorporate provisions contained in another instrument so long as the incorporated
provisions are “specifically set forth or identified.” State v. Black, 83 A.2d 678, 681
(Del. Super. 1951), as cited in Star States Develop. Comp. v. CLK, Inc., No. 93L-08-048,
1994 Del. Super. LEXIS at *10 (Del. Super. 1994). We recently reiterated this tenet of
hornbook law in Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 447 (3d Cir.
2003). Moreover, in the context of incorporation by reference, it “is appropriate to
require a merchant to exercise a level of diligence that might not be appropriate to expect
of a non-merchant” because the “goal of commercial contract law is to efficiently
facilitate business transactions between seasoned merchants.” Id. at 447 n.10.
In accordance with these standards, we find that the Purchase Order
unambiguously incorporated the GE Conditions of Sale. This is the only reasonable
interpretation of the language used in CitiSteel’s Purchase Order — “included for general
warranty information is [the GE Conditions of Sale].” See Citadel Holding Corp. v.
Roven, 603 A.2d 818, 822 (Del. 1992) (stating courts typically determine the parties’
intent “from the language of the contract” and give those terms their ordinary meaning).7
CitiSteel falls far short from asserting successfully that the language of the Purchase
Order should not be given its plain meaning. See Hercules, Inc. v. AIU Ins. Co., 784
7
The cases CitiSteel cites to attack the specificity of the language of incorporation
in the Purchase Order are distinguishable. They generally stand for the proposition that a
specific reference to another document for the purpose of defining the applicable
standards of performance, or to define the scope of work involved, does not incorporate
other, more general terms. See, e.g., Falcon Steel Co. v. Weber Engineering Co., Inc.,
517 A.2d 281 (Del. Ch. 1986). Such is not the case here.
8
A.2d 481, 490 n.24 (Del. 2001) (stating a party cannot create ambiguity where none
exists). Accordingly, we reject as unpersuasive the arguments advanced by CitiSteel in
support of its position that the Purchase Order is ambiguous.8 We also note that CitiSteel
(not GE) prepared the Purchase Order. Therefore, even assuming the Purchase Order’s
language is ambiguous, that language is construed against CitiSteel as the drafter.
Graham v. State Farm Mut. Auto. Ins. Co., 565 A.2d 908, 912 (Del. 1989).
Finally, CitiSteel argues the CitiSteel General Terms prevented incorporation of
the GE Conditions of Sale and expressly reserved the rights and remedies supposedly
disclaimed by the GE Conditions of Sale. These arguments are also unpersuasive. Courts
must strive to give effect to all provisions of a contract and not render any provision
meaningless. Elliott Assocs., L.P. v. Avatex Corp., 715 A.2d 843, 854 (Del. 1998). If
CitiSteel’s argument were to be accepted, then the language “included for general
warranty information” on the Purchase Order is meaningless. In addition, when the terms
of a contract cannot be reconciled, the more specific terms control over the general and
8
In arguing the Purchase Order’s ambiguity, CitiSteel misconstrues and mis-cites
several cases. In Emerson Radio Corp., the district court granted summary judgment
despite finding that the contract term at issue was ambiguous. 253 F.3d at 164. As such,
we held the district court improperly prevented the jury from resolving this ambiguity
through extrinsic evidence. Id. We did not conclude, however, that a district court must
analyze extrinsic evidence in determining whether a contract is ambiguous. Further, the
issue in J.A. Jones Constr. Co. v. City of Dover, 372 A.2d 540 (Del. Super. 1977), was
whether a contract provision disclaiming liability applied to a particular fact situation.
Denying summary judgment, the Court noted that a contract must disclaim liability with a
sufficient degree of clarity. Id. at 553. CitiSteel, however, has never argued that the GE
Conditions of Sale (if applicable) failed to disclaim liability clearly.
9
typewritten terms prevail over printed or standardized language. Stasch v. Underwater
Works, Inc., 158 A.2d 809, 812 (Del. Super. 1960); see also Goldstein v. Blumenfield,
574 A.2d 109, 110 (Pa. Super. 1990); 11 S AMUEL W ILLISTON, A T REATISE ON THE L AW
OF C ONTRACTS § 32.13 (4th ed. 1999). While both the GE Conditions of Sale and the
CitiSteel General Terms are standardized, the specific language of incorporation in the
Purchase Order is typewritten. This indicates the terms referenced by the language of
incorporation control.
*****
For these reasons, we affirm the District Court’s judgment in favor of GE.
TO THE CLERK:
Please file the foregoing Opinion.
By the Court,
/s/ Thomas L. Ambro, Circuit Judge
10