Construction Resources Group, LLC v. Element Financial Corp.
2017 WL 2266894 (2017)
Rule of Law:
Summary judgment on breach of warranty claims is improper when genuine issues of material fact exist as to whether a product was ever truly repaired and whether the buyer received the written warranty containing disclaimers. Claims for equitable indemnity, contribution, and subrogation against a manufacturer are improper when the plaintiff's liability arises from a separate contractual obligation to a third party, not from a shared liability or special relationship with the manufacturer.
Facts:
- Construction Resources Group, LLC ("CRG") ordered a Doosan DL 420-3 Wheel Loader (the "Loader") from H&E Equipment Services, Inc. ("H&E"), an authorized dealer for the manufacturer, Clark Equipment Company d/b/a Doosan Infracore Construction Equipment America ("DICEA").
- The Loader was sold to Element Financial Corp. ("Element"), which then leased the Loader to CRG through a finance lease agreement.
- DICEA's standard written warranty purported to be in lieu of all other warranties and expressly excluded liability for incidental or consequential damages.
- CRG alleges it never received a copy of DICEA's written warranty statement.
- After being put into service, the Loader was allegedly inoperable on fourteen occasions due to engine/emission system issues and experienced five other mechanical issues.
- Each time the Loader became inoperable or had mechanical issues, either the engine manufacturer (Scania) or the dealer (H&E) attempted to perform repairs.
- Despite the repair attempts, the Loader would work for a period of time and then experience problems again.
Procedural Posture:
- Construction Resources Group, LLC, Mark Livingston, and Max Muller ('plaintiffs') filed suit against Element Financial Corp. and Clark Equipment Company ('DICEA') in the U.S. District Court for the Western District of Oklahoma, a federal trial court.
- Element Financial Corp. filed a third-party complaint against Thomas Maxwell.
- Thomas Maxwell then asserted claims against DICEA.
- DICEA filed a Motion for Partial Summary Judgment seeking dismissal of the plaintiffs' claims for breach of express warranty, breach of implied warranty of merchantability, and indemnity, contribution, and equitable subrogation.
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Issue:
Are there genuine issues of material fact regarding (1) whether a manufacturer breached its express and implied warranties for a piece of equipment that repeatedly failed despite multiple repair attempts, where the buyer disputes receiving the written warranty, and (2) whether the equipment lessee can seek equitable indemnity, contribution, or subrogation from the manufacturer for its own contractual lease obligations to a finance company?
Opinions:
Majority - Judge Vicki Miles-LaGrange
Yes, as to part (1); No, as to part (2). A genuine issue of material fact exists regarding the breach of warranty claims, precluding summary judgment, but the claims for equitable relief fail as a matter of law. For the express warranty claim, there is a factual dispute as to whether the Loader was ever actually repaired, which raises the question of whether the limited warranty failed of its essential purpose. For the implied warranty of merchantability claim, a genuine issue of material fact exists as to whether CRG was ever provided a copy of DICEA’s warranty, which contained the disclaimer. For the same reasons, summary judgment on the exclusion of consequential damages is improper. However, summary judgment is granted to DICEA on the indemnity, contribution, and subrogation claims because CRG's liability to Element arises from its own lease agreement, not from a special relationship, shared obligation, or imputed fault involving DICEA.
Analysis:
This case illustrates how factual disputes can prevent a manufacturer from dismissing breach of warranty claims at the summary judgment stage. The court's decision highlights that a 'repair or replace' warranty may be deemed to have 'failed of its essential purpose' under the UCC if the manufacturer's repeated repair attempts do not actually fix the underlying defect, thus potentially allowing the buyer to recover other damages. Furthermore, the ruling reinforces the principle that warranty disclaimers are only effective if communicated to the buyer, making the question of receipt a critical issue of fact. The opinion also provides a clear distinction between warranty law and equitable remedies, clarifying that a manufacturer's breach does not automatically make it liable for a buyer's independent financing obligations.
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