Thermacor Process LP v. BASF Corp

REVISED JUNE 15, 2009
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 7, 2009
No. 08-10227
Charles R. Fulbruge III
Clerk
Thermacor Process, L.P.
Plaintiff-Appellant
v.
BASF Corporation
Defendant-Appellee
Appeal from United States District Court
for the Northern District of Texas
Before GARWOOD, GARZA, and OWEN, Circuit Judges.
PER CURIAM:
Plaintiff-appellant, Thermacor Process, L.P. (Thermacor), sued defendant-
appellee, BASF Corporation (BASF), alleging negligent misrepresentation,
fraudulent inducement, and violations of the Texas Deceptive Trade Practices
Act (DTPA), Tex. Bus. & Com. Code Ann. § 17.46(b)(5) & (7). The district court
granted summary judgment for BASF on all claims and entered judgment
against Thermacor on February 7, 2008. On March 4, 2008, Thermacor filed a
Motion for Relief from Judgment pursuant to Rule 60(b)(2). On March 6, 2008,
Thermacor filed its notice of appeal from the February 7, 2008 judgment. On
March 19, 2008, the district court denied Thermacor’s Rule 60(b) motion, and on
March 20, 2008, Thermacor filed its notice of appeal from that denial.
Thermacor now challenges both the district court’s grant of summary judgment
and its denial of the Rule 60(b) motion. For the following reasons, we AFFIRM.
FACTS AND PROCEEDINGS BELOW
The summary judgment evidence reflects the following.
Thermacor manufactures pre-insulated piping systems for installation at
commercial sites. One of Thermacor’s products is steel piping that is installed
for the distribution of high-temperature steam, condensate, and heated water.
To insulate the pipe, Thermacor coats it with a foam insulation that is held in
place and protected by a polyethylene outer jacket. There are two means by
which Thermacor can insulate its piping systems: (1) an injection method, in
which foam insulation is injected between the pipe and its polyethylene jacket,
and (2) a more efficient “spray” method, in which foam insulation is sprayed on
the pipe as it moves on a rotating conveyor and a polyethylene jacket is applied
later. Thermacor initially used only the injection method, but in 2000, after
purchasing a spray foam application system, Thermacor began using the spray
method as well. The new system required a spray foam, and Thermacor was put
in touch with BASF as a potential supplier. Thermacor began using BASF’s low-
temperature spray product after John Williams, a BASF sales representative,
and Ron Patterson, a BASF process engineer, successfully tested the application
of BASF’s spray foam using Thermacor’s spray equipment.
In 2004, the EPA banned (effective in January 2005) a blowing agent
known as “HCFC 141b.” Thermacor’s high-temperature injecting foam
contained HCFC 141b; thus, Thermacor was in urgent need of a new product to
insulate its high-temperature steel piping. Thermacor hoped to replace the
banned product with a high-temperature spray foam in order to increase
efficiency; however, no such product existed at the time.
In mid-2004, Joe Keyes, Sr., Thermacor’s CEO, asked BASF to pursue the
2
development of a high-temperature spray formula that could withstand
continuous temperatures as high as 366 degrees and spikes of up to 400
degrees.1 BASF developed the Elastopor H17070R Resin product (17070
product), which it believed met Thermacor’s needs, and on June 17, 2004 sent
an email to Joe Keyes, Jr., President of Thermacor, stating:
“In my last conversation with [Keyes, Sr.], he indicated that BASF
should pursue the Hi-Temp spray. It is done, please find tech data
sheet attached. Please ask James Filer if one drum of Resin will be
enough for the trial.”
Attached to the email were data sheets pertaining to the 17070 product. The
data sheets contained the results of two heat tests, a Dynamic Mechanical
Analysis test and a Thermogravimetric Analysis test conducted by BASF’s labs.
These data sheets showed that the product softened at slightly over 390 degrees;
they did not indicate the time-interval by which the temperature was increased
during the test, and the data did not evidence end-use thermal stability. Each
page of the data sheets pertained to the 17070 product, and stated that
Thermacor “should thoroughly test any application, and independently
determine satisfactory performance before commercialization.” BASF also
provided a PowerPoint presentation explaining that the graph showed the
temperature at which the foam began to show “an onset of a softening
transition” and that the values were dependent on the density of the foam.
Williams testified that he informed Thermacor representatives on several
occasions that it was important to test the product, and Williams’s call reports
indicated he had made several attempts to schedule trial dates with Thermacor.
Thermacor acknowledges that it has tested new high-temperature foam products
in the past; however, Thermacor does not, as a general practice, test the
1
All temperature variables reflect degrees Fahrenheit unless otherwise indicated.
3
products it purchases from other manufacturers. Keyes, Sr. also testified that
Thermacor was told to test the product, and Thermacor did perform tests to
determine how well the foam would perform under certain temperatures and
whether the foam would apply properly to the pipe. Keyes, Sr. testified that
Thermacor “could have been a little more critical” of the test results pertaining
to temperature, which showed slight discoloration and charring at extreme
temperatures.
Still, even with these results and the knowledge that the tests remained
incomplete, Thermacor decided that the foam would be satisfactory for
application in its insulated pipe system. Thermacor did not purchase the 17070
product, but instead, chose to go forward with a different product, the 17071
product, which was an unblended product that Thermacor had not yet tested.2
The technical information and data sheets BASF provided to Thermacor about
the 17071 product similarly warned Thermacor that it “should thoroughly test
any application.” Each of Thermacor’s orders was accompanied by BASF’s
“Terms and Conditions,” which provided:
“ANY TECHNICAL ADVICE FURNISHED . . . IS BELIEVED
TO BE RELIABLE BUT SELLER MAKES NO WARRANTY,
EITHER EXPRESS OR IMPLIED, . . . AS TO ITS ACCURACY
OR COMPLETENESS OR OF THE RESULTS TO BE
OBTAINED. . . . BUYER ASSUMES FULL RESPONSIBILITY
FOR QUALITY CONTROL, TESTING AND
DETERMINATION OF SUITABILITY OF PRODUCT FOR ITS
INTENDED APPLICATION OR USE. . . . SELLER MAKES NO
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
OR WARRANTY OF MERCHANTABILITY.”
2
The two products are slightly different. The 17070 product is a pre-blended
product, while the 17071 product is unblended and required that Thermacor purchase a
component from a third party and blend the product itself according to BASF’s
specifications.
4
At the time of the purchase at issue, BASF and Thermacor had enjoyed a long-
lasting business relationship, and these same BASF Terms and Conditions had
been included in many past transactions between them.
Thermacor manufactured several piping systems using the BASF high-
temperature spray foam product and installed these systems in several locations.
At one location a contractor noticed a soft spot on the pipe, and an investigation
revealed that the BASF foam had deteriorated. Investigations at other sites
revealed the BASF foam product was also failing within months. And during
post-failure heat testing, Thermacor discovered that the spray foam failed at
around 290 degrees.
Thermacor filed suit against BASF, alleging claims of negligent
misrepresentation, fraudulent inducement, and violations of section 17.46(b)(5)
& (7) of the DTPA. Summary judgment was granted for BASF as to all claims.
Thermacor filed a Motion for Relief from Judgment pursuant to Rule 60(b)(2),
which the district court denied. Thermacor now appeals both the summary
judgment and the denial of the Rule 60(b) motion.
DISCUSSION
I. Summary Judgment
This court reviews a district court’s grant of summary judgment de novo.
United States v. Corpus, 491 F.3d 205, 209 (5th Cir. 2007). Summary judgment
is appropriate if the record, taken as a whole, “show[s] that there is no genuine
issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” FED. R. CIV. P. 56(c); James v. Texas Collin County, 535 F.3d 365,
373 (5th Cir. 2008). “A factual dispute is ‘genuine’ if a reasonable trier of fact
could return a verdict for the nonmoving party.” James, 535 F.3d at 373. The
nonmovant must designate specific facts that establish a genuine issue of
material fact exists on all elements of its claims. Kunin v.Feoganov, 69 F.3d 59,
5
61 (5th Cir. 1995). All facts and inferences must be viewed in the light most
favorable to the nonmovant. Corpus, 491 F.3d at 209.
Thermacor argues that the district court improperly granted BASF’s
motion for summary judgment on each of Thermacor’s claims for negligent
misrepresentation, fraudulent inducement, and violations of section 17.46(b)(5)
& (7) under the DTPA. All claims share a common element—each requires
Thermacor to prove that BASF made a false representation.3 And all of
Thermacor’s claims turn on the same alleged misrepresentation, that BASF
falsely represented it could and did develop a high-temperature spray foam
capable of meeting Thermacor’s thermal stability requirements. Thus, the
central issue in this case is whether a rational trier of fact could find that BASF
misrepresented its ability to develop such a product and/or falsely represented
that it had developed such a product.
As evidence that BASF falsely represented its competence to produce a
foam capable of meeting Thermacor’s specifications, Thermacor points to BASF’s
internal policy not to refer to foam as “high-temperature,” not to rate foam for
temperature, and not to distribute test data to customers. These policies,
however, do not evidence a misrepresentation of ability—if anything, they show
a policy not to make representations regarding temperature at all. Nor do these
policies show BASF was incapable of producing a foam that met Thermacor’s
specifications—e.g., they do not portray inexperience, lack of knowledge, or lack
of expertise in foam formulation or production; they simply reinforce BASF’s
requirement that customers independently test products for end use. Thus,
3
TEX. BUS. & COM. CODE §§ 17.46(b)(5) & (b)(7), 17.50(a)(1) (Vernon 2002); Haase v.
Glazner, 62 S.W.3d 795, 798–99 (Tex. 2001) (fraudulent inducement); Doe v. Boys Clubs of
Greater Dallas, 907 S.W.2d 472, 478 (Tex. 1995) (DTPA claims); Fed. Land Bank Ass’n of
Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991) (negligent misrepresentation).
6
Thermacor has provided no evidence that BASF falsely represented its ability
to create the high-temperature spray foam Thermacor required.
Thermacor argues that a genuine issue of fact remains as to whether
BASF falsely represented that it had successfully created such a product. To
support its claim, Thermacor points to the above mentioned June 17, 2004 email
sent by Williams (of BASF) to Keyes, Jr. along with accompanying graphs and
data sheets. The email, which referenced BASF’s creation of product 17070,
read:
“In my last conversation with [Keyes, Sr.], he indicated that [BASF]
should pursue the Hi-Temp spray. It is done, please find tech data
sheet attached. Please ask James Filer if one drum of Resin will be
enough for the trial.”
Thermacor argues that this email created a false representation that the product
met Thermacor’s temperature needs.
We find this argument unconvincing. The email makes no affirmative
representation that the product was able to withstand continuous temperatures
of 366 degrees and spikes up to 400 degrees. Instead, it indicates only that
BASF pursued development of a high-temperature foam, believed it created a
product capable of meeting Thermacor’s needs, and then offered that product to
test, as evidenced by the email’s reference to a “trial.” Moreover, even if the
email could be read as representing that BASF was “done” developing a high-
temperature foam, such representation would not be false. The only term used
to qualify the product was “hi-temp,” and deposition testimony reflects that a
foam is considered “high-temperature” if it performs at temperatures above 250
degrees. Thus, the email could only guarantee viability at temperatures above
250 degrees, and Thermacor’s post-failure heat testing confirmed that the foam
was able to withstand continuous temperatures as high as 290 degrees. Given
this information, the email alone cannot be construed as false or as an
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affirmative representation that the product met Thermacor’s exact thermal
stability requirements.
Still, Thermacor argues that the data sheets accompanying the email
created a false representation. Thermacor does not allege that the data sheets
themselves are inaccurate, but instead, that the data, when read in conjunction
with the email, caused Thermacor to draw a false inference that the product
could withstand higher temperatures than actually possible. For example, the
Dynamic Mechanical Analysis test (DMA) showed that product 17070 began to
deteriorate at approximately 390 degrees, and Thermacor argues that BASF
failed to inform Thermacor that this data was not a reliable indicator of thermal
stability. As another example, Thermacor complains that the DMA’s testing
parameters were altered, causing the product to appear more stable than it
actually was, but BASF failed to inform BASF sales personnel and Thermacor
of this change and its possible effects on the reliability of the data.
In deposition testimony, a BASF lab technician admitted that the heat
tests’ parameters were changed to raise the temperature from 1°C per minute
to 5°C per minute. The data sheets did not indicate what time interval was used
to conduct the test, and BASF admits it did not communicate the change to its
sales personnel or Thermacor. Regardless, Thermacor has provided no evidence
of what effect the changed intervals might have had on the data. Nor is there
any evidence that Thermacor had reason to believe a certain time interval was
used or that failure to tell BASF’s sales personnel resulted in any kind of
misrepresentation—BASF sales personnel were aware the results did not
represent end-use suitability regardless of the parameters used.
The record also shows that BASF repeatedly warned Thermacor that the
data sheets were not a reliable indicator of thermal stability. BASF provided
Thermacor with a PowerPoint presentation explaining that the data sheets
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showed only at what temperature the foam began to soften or transition and that
such values were dependent upon the density of the foam. Thus, the data sheets
could evidence nothing more than the temperature at which the product
certainly could not be used.
The record shows that Thermacor was continuously warned, orally and in
writing, that independent testing was necessary to ensure the foam met
Thermacor’s own individual specifications. BASF’s internal records show that
Williams (of BASF) repeatedly asked Thermacor to conduct tests; Patterson (of
BASF) told Thermacor specific temperatures at which to conduct those tests; and
the email itself references the need to conduct a “trial.” Keyes, Sr., the
Thermacor CEO, even testified that Thermacor was told to test the product for
end-use suitability, and Thermacor did test the 17070 product for temperature,
but chose to purchase the 17071 product prior to the conclusion of those tests,4
even in the midst of less than satisfactory results.5
Though BASF was aware that Thermacor required a foam capable of
withstanding a continuous 366 degrees, there is simply no evidence that BASF
ever represented that was what it had created. No deposition testimony
provides specific details as to dates, times, or content of statements made by
BASF representatives that the foam was able to withstand continuous exposure
4
Thermacor’s case is further weakened by the fact that the email, data sheets and
references regarding a high-temperature spray foam were made in relation to product
17070 and not product 17071. Product 17071 is an unblended, incomplete compound,
requiring the purchase and mixture of an additional component. BASF argues that
Thermacor purchased an inadequate and cheaper component than that contained in
product 17070 and also poorly mixed that component with the 17071 product. BASF does
not heavily rely on this argument and this court need not address it because the email and
data fail to demonstrate an affirmative false representation.
5
Keyes Sr. testified that Thermacor “could have been a little more critical” of its test
results, which showed slight discoloration and charring at extreme temperatures.
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to temperatures as high as 366 degrees—or at any temperature for that matter.
Richard Bender, the Senior Vice President of Thermacor, testified that he
believed BASF had produced a 360 degree foam after “[Williams said] we have
done it. We’ve got the high-temperature foam. Something to that effect.”
Bender further explained that the data sheets “clearly showed, in [his] opinion,
that the material would withstand 366 degrees continuous,” though he admitted
Williams had not affirmatively stated it could do so: “can I say that [Williams]
said, I have a 366-degree foam? I can’t say that.” Keyes, Sr., testified that he
believed BASF’s product met Thermacor’s specifications based upon the data
sheets and comments that BASF had a “high-temp foam.” But as mentioned
previously, the term “high-temperature” is used to identify foams capable of
withstanding temperatures as low as 250 degrees, and vague statements and
adjectives like “high” are not actionable. See, e.g., Prudential, 896 S.W.2d at
163 (explaining that vague adjectives are not specific enough to qualify as a
representation). Based upon the record, it was Thermacor’s misinterpretation
of the information, rather than any misrepresentations by BASF, that led
Thermacor to believe that BASF had created a foam capable of meeting its
requirements. In any event, the summary judgment evidence is not sufficient
to sustain a finding that BASF falsely represented its product to Thermacor.
Further weakening Thermacor’s case is the existence of a disclaimer in
BASF’s “Terms and Conditions” furnished to Thermacor. BASF alleges that this
disclaimer bars all of Thermacor’s claims. The disclaimer read in all capital
letters and bold font:
“ANY TECHNICAL ADVICE FURNISHED . . . IS BELIEVED
TO BE RELIABLE BUT SELLER MAKES NO WARRANTY,
EITHER EXPRESS OR IMPLIED, . . . AS TO ITS ACCURACY
OR COMPLETENESS OR OF THE RESULTS TO BE
OBTAINED. . . . BUYER ASSUMES FULL RESPONSIBILITY
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FOR QUALITY CONTROL, TESTING AND
DETERMINATION OF SUITABILITY OF PRODUCT FOR ITS
INTENDED APPLICATION OR USE. . . . SELLER MAKES NO
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
OR WARRANTY OF MERCHANTABILITY.”
The trial court gave effect to the above Terms and Conditions.
Under Texas law, a disclaimer of warranty can bar negligent
misrepresentation, fraud, and DTPA claims. Prudential Ins. Co. of Am. v.
Jefferson Assocs., 896 S.W.2d 156, 161 (Tex. 1995) (fraud and DTPA claims);
Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d 840, 843–44 (Tex.
App.—Houston [1st Dist.] 2004, no pet.) (negligent misrepresentation). To be
effective, the disclaimer must be conspicuous and in writing. TEX. BUS. & COM.
CODE ANN. § 2.316 (Vernon 2002). A term is conspicuous when it is written so
that “a reasonable person against whom it is to operate ought to have noticed it.”
Id. § 1.201(10). For example, language in the body of a form is conspicuous if it
is “in larger type than the surrounding text, or in contrasting type, font, or
color.” Id. A federal district court in the Northern District of Texas held that a
similar BASF disclaimer appearing in the “Terms and Conditions” accompanying
a purchase order was conspicuous and enforceable because the disclaimer was
written all in bold, capital letters and was undoubtedly written so that a
reasonable person would have noticed it. Alcan Alum. Corp. v. BASF Corp., 133
F. Supp. 2d 482, 498 (N.D. Tex. 2001).
Like the “Terms and Conditions” in Alcan, the present disclaimer was
conspicuous—written in all capital letters and in bold type. Thermacor and
BASF had a long-standing professional relationship, thus, the disclaimer not
only accompanied the purchase order for the 17071 product, but had also been
included with Thermacor’s prior purchases of BASF products. Both parties were
sophisticated and aware of the terms and conditions. Further, BASF made no
11
false representations regarding the product and made several oral requests to
Thermacor that Thermacor test the product. Based upon all of the above, this
Court sees no reason why the Terms and Conditions should not be given effect.6
Viewing the evidence in the light most favorable to Thermacor, there is no
summary judgment evidence sufficient to sustain a finding that BASF falsely
represented its product to Thermacor. The June 17, 2004 email made no
representations as to specific temperature properties, the data sheets did not
provide false information, and Thermacor was repeatedly told by BASF to test
the product for end-use suitability. Also, the disclaimer contained in the Terms
and Conditions negates causation by disclaiming reliance on any alleged
representation about the product’s end-use suitability. Thus, the district court
properly granted BASF summary judgment as to all of Thermacor’s claims.
II. Rule 60(b) Motion
Thermacor filed a Rule 60(b) motion on March 4, 2008 and perfected its
appeal from the February 7, 2008 judgment on March 6, 2008. Though a
perfected appeal divests the district court of jurisdiction, the district court may
still consider and deny a Rule 60(b) motion. Shepherd v. Int’l Paper Co., 372
F.3d 326, 329 (5th Cir. 2004) (requiring a district court to seek leave from the
appellate court if it wishes to grant the motion). The district court’s denial of
Thermacor’s request for relief under Rule 60(b)(2) for “newly discovered
6
Compare Prudential, 896 S.W.2d at 162–63 (giving force to an “as is” clause that
was not a boiler-plate provision, was a part of the basis of the bargain, was freely
negotiated by similarly sophisticated parties and after finding no evidence that the
defendant made false representations to the plaintiff regarding the property purchased)
with Kane v. Nxcess Motorcars, Inc., 2005 Tex. App. LEXIS 1692 (Tex. App.—Houston [1st
Dist.] 2005, no pet.) (unpublished)) (refusing to enforce an “as is” provision after a dealer
made knowing misrepresentations during the negotiations, the clause was neither
discussed, seen, nor read during negotiations, and the purchaser was not a sophisticated
party).
12
evidence” is reviewed under an abuse of discretion standard. Crutcher v. Aetna
Life Ins. Co., 746 F.2d 1076, 1082 (5th Cir. 1984).7
Rule 60(b)(2) provides that a court may relieve a party from final judgment
based on “newly discovered evidence that, with reasonable diligence, could not
have been discovered in time to move for a new trial under Rule 59(b).” FED. R.
CIV. P. 60(b). To obtain Rule 60(b)(2) relief, a movant must demonstrate: “(1)
that it exercised due diligence in obtaining the information; and (2) that the
evidence is material and controlling and clearly would have produced a different
result if present before the original judgment.” Hesling v. CSX Transportation,
Inc., 396 F.3d 632, 639 (5th Cir. 2005). “A judgment will not be reopened if the
evidence is merely cumulative or impeaching and would not have changed the
result.” Id. at 640.
In its Rule 60(b) motion, Thermacor offered, as new evidence, deposition
testimony by Chris LaCarte, a BASF representative with knowledge of research,
development, and marketing high-temperature foam products. LaCarte’s
deposition was taken on February 6, 2008, the day before the summary
judgment ruling. Thermacor’s deadline for filing a Rule 59(b) motion was
February 22, 2008. Thermacor argues, however, that it was unable to move for
a new trial at that time because it did not receive a transcript of the deposition
(to attach as evidence to the motion) until February 28, 2008. Thermacor has
offered no evidence that it acted with due diligence to obtain the transcript prior
to February 22nd, nor has any evidence been provided that LaCarte’s deposition
could not have been obtained prior to responding to BASF’s summary judgment
7
Thermacor argues that this court should apply a lesser standard—allowing “even a
slight abuse [to] justify reversal.” See Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 402 (5th
Cir. 1981). This court has clarified that the lesser abuse standard used in Seven Elves only
applies to judgments not rendered on the merits and does not apply to summary
judgments. Halicki v. La. Casino Cruises, Inc., 151 F.3d 465, 471 (5th Cir. 1998).
13
motion. Nor did Thermacor ever move to postpone summary judgment response
(or ruling) until after transcription of the deposition.
Moreover, LaCarte’s testimony provides nothing more than impeachment
evidence, which generally does not support relief from judgment. See Hesling,
396 F.3d at 639–40. Lacarte testified that he was not involved in formulation,
design, testing, or communication with any of BASF employees regarding the
high-temperature spray foam at issue. This testimony does nothing more than
contradict the testimony of Williams and Patterson, who testified that LaCarte
had been involved in formulating and rating the product. It provides no
evidence as to what BASF represented to Thermacor, what Thermacor relied
upon, or how Thermacor met its obligation to test end-use suitability. Based
upon LaCarte’s own testimony that he was not involved with the product or the
transaction with Thermacor, the district court did not abuse its discretion by
denying the motion after determining the evidence was immaterial.
CONCLUSION
Thermacor failed to provide evidence to create a genuine fact issue as to
whether BASF falsely represented its product, thus summary judgment was
properly granted. Thermacor was also unable to show that the evidence
offered to support its Rule 60(b) motion was material and could not have been
obtained earlier with due diligence, thus the motion was properly denied.
AFFIRMED
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