Rhone Poulenc Rorer Pharmaceuticals Inc. v. Newman Glass Works

OPINION OF THE COURT

SEITZ, Circuit Judge.

Plaintiff Turner Construction Company (“Plaintiff”) appeals from an order of the district court granting Defendant Newman Glass Works’ (“Defendant”) motion for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b). The district court exercised diversity jurisdiction. We have jurisdiction under 28 U.S.C. § 1291. The parties agree that Pennsylvania law governs this matter.

I.

Rhone Poulenc Rorer, Inc. (“Rhone”) contracted with Plaintiff to have Plaintiff install opaque spandrel glass in Rhone’s headquarters and research facility. In turn, Plaintiff, as the general contractor, entered into two subcontracts with Defendant, which required Defendant to supply and to install the opaque spandrel glass that comprised the structure’s curtainwall. The subcontracts, which are identical as relevant here, specify the type of glass Defendant was to install and list the three manufacturers from whom Defendant could purchase the glass. The subcontracts’ specification for the glass reads:

d. Spandrel Glass

(a) Type 8: 1/4 inch thick heat strengthened float glass coated on the face with opaque colored ceramic coating or black polyethylene opacifier on the rear surface.

(Pl.’s Ex. 34A, R. at A801.) For each manufacturer, the subcontracts specify a product identification number, the color, and the type of glass to be purchased.

In compliance with the foregoing terms, Defendant set about installing the specified spandrel glass that it had purchased from Spectrum Glass Products, Inc. (“Spectrum”), one of the three listed manufacturers. Spectrum had attached the opacifier coating, a polyethylene film, to the glass with a glue that product literature stated normally could be expected to perform in temperatures exceeding 180 degrees Fahrenheit. The glass was exposed to such temperatures after installation.

Before Defendant completed the installation, the opacifier coating began to delaminate from portions of the glass. Plaintiff and its architect noticed the delamination because portions of the installed glass exhibited a mottled appearance. Plaintiff demanded in writing that Defendant replace the defective glass. Defendant refused, and Plaintiff instituted this action for breach of contract.

At the close of evidence at the trial, the district court denied both parties’ motions for judgment as a matter of law. The jury then awarded Plaintiff damages of $225,691.15.

The district court thereafter granted Defendant’s renewed motion for judgment as a matter of law without addressing the import of the Defendant’s express warranties against defective materials. The district court held that Defendant complied with the subcontracts’ specifications in purchasing and installing the opaque spandrel glass, and that the jury therefore could not reasonably find Defendant in breach. The court entered judgment for Defendant on its counterclaim for $111,668.00, the balance owed under the subcontracts. Plaintiff appealed.

II.

Our review of the district court’s order granting judgment as a matter of law for Defendant is plenary. See Mosley v. Wilson, 102 F.3d 85, 89 (3d Cir.1996); Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 613 (3d Cir.1995). Defendant is entitled to judgment as a matter of law if after Plaintiff was heard fully, “there is no legally sufficient evidentiary basis for a reasonable jury to find for” Plaintiff. Fed. R.Civ.P. 50(a).

III.

We commence our analysis on this appeal by focusing our attention on the warranty provisions of the subcontracts. Section X of the subcontracts requires Defendant to remove and to replace all materials that Plaintiff or its architect “condemn as unsound, defective or improper.”¹ In Section 4.5.1 of the general contract, Plaintiff expressly warrants to Rhone that all work will be “free from faults and defects.”² Defendant, in turn, assumes this warranty toward Plaintiff in the subcontracts.³

Defendant argues that these express warranties are legally insufficient to support the jury’s verdict because these warranties are nullified by Plaintiffs implied warranty that the specified glass was adequate for use in this building. Defendant asserts that under the Supreme Court’s 1918 decision in United States v. Spearin, 248 U.S. 132, 54 Ct.Cl. 187, 39 S.Ct. 59, 63 L.Ed. 166 (1918), and its progeny, it cannot be held liable for any defects in the glass because it complied with the specifications in the subcontracts.

In Spearin, the Court held that a contractor is not liable for the consequences of defects in specifications provided by the owner. Id. at 136, 39 S.Ct. at 61. The Court explained that by prescribing the character, dimensions and location of the work to be done, the owner “imported a warranty that, if the specifications were complied with, the [work] would be adequate.” Id. at 137, 39 S.Ct. at 61. This implied warranty, the Court noted, is not overcome by general clauses requiring the contractor to visit the site, review plans, or to assume responsibility for the work until completion and acceptance. Id. Pennsylvania law is in accord. Pennsylvania Dep’t of Transp. v. W.P. Dickerson & Son, Inc., 42 Pa.Cmwlth. 359, 400 A.2d 930, 932 (1979).

We need not predict how the Pennsylvania Supreme Court might define the contours of the implied warranty of specification, however. Assuming arguendo, that the implied warranty of specification normally would absolve Defendant of liability for the defective glass, we are presented here with a conflict between the implied and the express warranties. We conclude that the Pennsylvania Supreme Court would find that the express warranties must prevail.

Implied warranties are generally not favored by law and are construed narrowly. See, e.g., Green Constr. Co. v. Kansas Power & Light Co., 717 F.Supp. 738, 742 (D.Kan. 1989). This warranty of specification permits a court to allocate the risk of an inadequate specification, quite equitably, to the party that drafted the specification.⁴ Here, though, the parties have explicitly allocated to Defendant the risk that the glass would be defective. The parties are free to do so, and there is no indication of overreaching or bad faith by Plaintiff. Cf. PBS Coals, Inc. v. Burnham Coal Co., 384 Pa.Super. 323, 558 A.2d 562, 564 (1989) (holding that implied warranties attendant to the sale of goods may be disclaimed if the purchaser reasonably should know of resultant potential liabilities).

Defendant accurately notes that Spearin provides that an implied warranty of specification is not overcome by “general clauses” requiring a contractor to visit a site or to review plans. Spearin, 248 U.S. at 136, 39 S.Ct. at 61. The express warranties in the subcontracts here, however, are not the sort of general clauses about which Spearin speaks. Section X of the subcontracts very specifically requires Defendant to remove and to replace any materials that Plaintiff or its architect deem defective. Through the incorporation of the general contract’s Section 4.5.1 into the subcontracts,. Defendant specifically warranted that all work would be “free from faults and defects.” These duties far exceed site inspection or plan review.

In Green Construction Co. v. Kansas Power & Light Co., the United States Court of Appeals for the Tenth Circuit, applying Kansas law, confronted an issue similar to that before us. 1 F.3d 1005 (10th Cir.1993). Green contracted to build a earthen dam for Kansas Power & Light (“KPL”) out of clay soil found at the construction site. KPL provided geological data on the site’s subsurface conditions, but expressly instructed bidders to investigate these conditions independently. Green faded to investigate independently, built the dam, and sued for excessive costs after the dam cracked and required repair. The Tenth Circuit affirmed the district court’s holding that Green could not rely on the implied warranty of specification because the contract expressly allocated to Green the risk that the conditions could be different. Id. at 1009. Green’s reliance on KPL’s specifications alone was unreasonable in light of KPL’s requiring Green to conduct an independent investigation of the subsurface conditions.

It is true that here, Defendant had virtually no discretion in carrying out its contractual obligations in light of the exacting specifications in the subcontracts. But it is also true that Defendant entered into subcontracts that require it to remove and to replace any defective materials “at its own cost and expense.” We conclude that the implied warranty by Plaintiff based on the specifications of the type and manufacturer of the spandrel glass must yield to Defendant’s express warranties against defective materials. In consequence, the district court erred in granting Defendant’s motion for judgment as a matter of law.

IV.

In its motion for judgment as a matter of law, Defendant moved alternatively for a new trial pursuant to Federal Rules of Civil Procedure 50(b) and 59. The district court dismissed Defendant’s new trial motion as moot. Our reversal of the district court’s order granting judgment as a matter of law for Defendant necessitates consideration of Defendant’s new trial motion. Thus, the motion is not moot.

When granting a motion for judgment as a matter of law, the district court also is required to rule conditionally on any motion for a new trial. Fed.R.Civ.P. 50(c)(1). The court must determine whether the motion for a new trial should be granted or denied if the judgment is thereafter vacated or reversed. The court also must specify the grounds for its conditional ruling. Id. The district court’s dismissal of the new trial motion as moot does not satisfy the rule’s conditional ruling requirement. Thus, we are left with no record and, indeed, no guidance from the parties’ briefs on appeal as to the merits of Defendant’s new trial motion.⁵

In past cases in which the district court failed to issue the conditional ruling required by Federal Rule of Civil Procedure 50(c)(1), we have presumed that the court conditionally granted the motion for a new trial. Motter v. Everest & Jennings, Inc., 883 F.2d 1223, 1229 (3d Cir.1989); Roebuck v. Drexel Univ., 852 F.2d 715, 735 (3d Cir.1988). Those cases are not helpful here, however. In Matter, the district court mentioned in its opinion that it would grant the new trial motion conditionally, but did not rule on it in its order. Motter, 883 F.2d at 1229. In Roebuck, the district court omitted from its opinion any discussion of the new trial motion, but nonetheless granted it in its order. Roebuck, 852 F.2d at 735. In the ease at bar, the district court did not discuss in its opinion whether it would conditionally grant or deny the new trial motion. Instead, in its order, the district court simply dismissed the new trial motion as moot.

In arguing in the alternative for a new trial before the district court, Defendant asserted two points of error. First, Defendant argued that Plaintiffs expert’s testimony concerning the defective nature of the installed glass was improperly admitted. Second, Defendant argued that the jury was improperly instructed as to its ability to find Defendant liable for defects in the glass despite the implied warranty of specification.

We note that the propriety of our disposing of this motion in the first instance is not totally free from doubt. Compare 9A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2539, at 364 (2d ed. 1995) (stating that an appellate court must remand), with 5A James Wm. Moore et al, Moore’s Federal Practice ¶ 50.14, at 50-120 (2d ed. 1996) (stating that an appellate court may dispose of the motion or remand). Based on the grounds raised in the new trial motion and our lack of any trial record or argument before this court on the issue, we conclude that prudence, militates in favor of a remand so that the district court may consider this issue.

Y.

For the foregoing reasons we will reverse the order of the district court entering judgment as a matter of law for Defendant and will remand for resolution of Defendant’s motion for a new trial.

1 . Section X of the subcontracts specifies, in pertinent part:

The Subcontractor shall ... take down all portions of the Work and remove from the premises all materials ... which the Architect or Turner [Plaintiff] shall condemn as unsound, defective or improper or as in any way failing to conform to this Agreement or the Plans, Specifications or other Contract Documents, and the Subcontractor, at its own cost and expense, shall replace the same with proper and satisfactory work and materials....

(J.A. at 266.)

2 . Section 4.5 of the general contract reads:

4.5 Warranty

4.5.1 The Contractor [Turner] warrants to the Owner and the Architect ... that all Work would be of good quality, free from faults and defects and in conformance with the Contract Documents.

(J.A. at 262.)

3 . We agree with the district court that it is uncontroverted that the glue used to attach the opacifier coating to the glass was defective, thus causing the delamination that rendered the glass defective.

4 . At least one set of commentators has opined that this implied warranty "is necessary because even the most exhaustive government contracts generally do not expressly allocate the risk of loss for defective contract specifications.” Kevin C. Golden & James W. Thomas, The Spearin Doctrine: The False Dichotomy Between Design and Performance Specifications, 25 Pub Cont. L.J. 47, 48 n. 3 (1995).

5 . No challenge- is made to our consideration of this issue, despite Defendant’s failure to allege error with the district court’s disposition of the new trial motion either in its brief or at oral argument. Cf. Scott v. Plante, 641 F.2d 117, 136 (3d Cir.1981), vacated on other grounds, 458 U.S. 1101, 102 S.Ct. 3474, 73 L.Ed.2d 1362 (1982).