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July 20, 1977

BARNEY MACHINERY COMPANY, a corporation, Plaintiff,
CONTINENTAL M.D.M., INC., a corporation, Defendant

The opinion of the court was delivered by: MARSH

 In this diversity action the plaintiff Barney Machinery Company (Barney), a Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania, sues the defendant, Continental M.D.M., Inc. (Continental) an Indiana corporation, with its principal place of business in Aurora, Indiana (Tr. p. 3). The amount in controversy exceeds the jurisdictional amount.

 American Sterilizer Company (Amsco) is a corporate citizen of Pennsylvania located in Erie, Pennsylvania (Tr. p. 3).

 Continental is engaged in the business of designing and manufacturing conveyors and combination conveyor-stacker units for sale and resale and for use with metal shears (Tr. pp. 3-4).

 Continental advertised itself as having expertise in this field and offered its services to persons who desire to purchase conveyors or conveyor-stacker units for use in that person's business (Tr. p. 4). *fn1"

 Continental advertised itself in trade journals as a company which would design and manufacture a conveyor and/or conveyor-stacker for metal shears (Tr. p. 4).

 Mr. David Jarman purchased the assets of Continental in 1970 and became its President. Jarman then had 15 patents for automated conveyor-stacker systems and was advertising new conveyor-stacker models in 1971. Continental sent brochures and sales literature to its distributors including Barney (Def's Ex. BBB). The brochures describe how automation performed by Continental's conveyor-stacker cuts labor costs 30% and is 30% more productive (Def's Ex. A-1, Ex. 3-A).

 Amsco desired to increase its productivity and reduce labor and costs (Ex. 3A, A-1), and had purchased a Dreis & Krump (D & K) Shear Model from Barney (Tr. p. 6). It was delivered by D & K to Amsco's plant in December, 1972. After adjustments were made prior to delivery of the conveyor-stacker, this shear operated without malfunction and is still in use.

 In October, 1972, Barney inquired of Continental if it would quote the price of a conveyor-stacker unit to be resold by Barney to Amsco for use with a D & K Shear.

 Continental understood that the conveyor-stacker unit would be used for a particular purpose, i.e., for use with a D & K Model OHS-10625 Hydraulic Shear (Tr. p. 4) (Ex. 5).

 On October 10, 1972, Continental sent Barney quotation No. 70290 for Continental's Shear Conveyor, Model No. MD-10, Chains, Scrap Separator, Stacker, Remote Control Box, Electric Reset Type Counter and Paint and notified Barney that this equipment would be Continental's model as requested, not the D & K Shearmate. *fn2" The price of the stacker is quoted at $2,545. The total price of the equipment appears to amount to about $12,290 (Exs. 6 & 7).

 On October 16, 1972, Barney quoted the price of the equipment to Amsco (Ex. 8).

 Neither Barney nor Amsco had any expertise in the use of a conveyor-stacker with a D & K Shear. Consequently, Continental was requested to send a representative to Erie to meet with Barney's Erie salesman, Robert A. Wilner, and Amsco's Methods Engineer, Preston Ohrn, and its foreman, Pat Yezzie.

 Mr. Wilner, Barney's Erie salesman and Messrs. Ohrn and Yezzie, Amsco's representatives, left it to Mr. Ibbotson to recommend what Amsco should have for the particular purpose of handling the aforementioned kinds of steel without scratching, denting or marring, and to revise the quotation for Continental's conveyor-stacker, so that the equipment would work in conjunction with a D & K Model OHS Hydraulic Shear.

 The original quotation, No. 70290, was revised by Continental according to Ibbotson's recommendations which revisions were contained in Continental's letter to Barney dated November 27, 1972 (Tr. p. 4, Ex. 9).

 The revised proposal (Ex. 9) which superceded the original quotation (Exs. 6, 7) listed a Continental Shear Conveyor Model MD-10, extra wide Conveyor Chain on both sides, "Rubber Bonded Chain Tips" *fn3" to protect polished material, Scrap Separator, Stacker mounted on a hydraulic lift table equipped with proximity switch, Remote Control Box and Paint. The price of the revised stacker originally priced at $2,545, is quoted at $11,685. The total price adds up to $20,905, but the parties agreed that the total price was $21,080 (Tr. p. 4, Exs. 9, 10). The new proposal (Ex. 9) was signed for Continental by Edward Ibbotson, Eastern Regional Manager.

 The basic purchase price quoted on December 4, 1972 by Barney to Amsco was $21,080 (Tr. p. 4).

 On January 15, 1973, after the D & K Shear was delivered to Amsco, Mr. Ohrn made measurements of this shear and they were entered on a "Shear Data Sheet" (Ex. 11) sent to him by Continental. This document was forwarded to Continental and was certified by Jim ...

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