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JASKEY FIN. & LEASING v. DISPLAY DATA CORP.

April 27, 1983

JASKEY FINANCE AND LEASING AND SAMRUS CORP.
v.
DISPLAY DATA CORP.



The opinion of the court was delivered by: BRODERICK

 BRODERICK, J.

 In this diversity action, defendant, Display Data Corporation ("Display Data"), a Maryland corporation with its principal place of business in Maryland, moves to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) the claims of plaintiffs, Jaskey Finance and Leasing ("Jaskey") and Samrus Corporation ("Samrus"), both Pennsylvania corporations with their principal places of business in Pennsylvania, for breach of express warranties, warranties of fitness and for negligent design of a computer system. For the reasons set forth in this memorandum, the Court will grant the defendant's motion to dismiss the express warranty claims, the implied warranty of fitness claims, and the negligent design claim.

 The subject of this suit is a 32K computer purchased by Jaskey and Samrus from Display Data in October, 1977. The parties entered into two contracts, one for the sale of the equipment, programming and installation services and another for maintenance of the computer system. Plaintiffs, who were dissatisfied with the operation of the computer, sued alleging that the computer and its component parts failed to operate properly, resulting in damages and the further economic loss of obtaining alternate computer time. In their lawsuit, plaintiffs allege that defendant's conduct amounted to a breach of contract, a breach of express warranties, a breach of implied warranties, misrepresentation and negligence.

 Two contracts are concerned: (a) an Equipment, Programming and Installation Services Contract, and (b) a Maintenance Contract. Each of these contracts is comprised of a single sheet of paper printed on both sides. The front side of the contracts contains blank spaces on which the name of the parties, the quantity, model number and the price of the goods were filled in. The bottom of the front side of the contracts states in bold type "Terms and Conditions on Reverse Side Are Part of This Contract." Immediately under this phrase the signatures of the parties appear. The reverse side of the Equipment, Programming and Installation Services Contract is titled "Terms and Conditions" and contains six separately numbered and titled paragraphs. Two of the paragraphs are relevant to the present case. The first is paragraph 5 which is titled "Warranties" and within it is the following warranty and disclaimer:

 
(a) Seller warrants that it will provide maintenance service for Purchaser according to the terms and conditions of the separate maintenance contract executed by and between the parties.
 
(b) For a period of one (1) year after the program is delivered, Seller will make every reasonable effort to remedy or correct any errors in the program which are brought to the attention of the Seller.
 
(c) EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE OR REVERSE SIDE HEREOF.
 
(d) IN NO EVENT SHALL SELLER BE LIABLE TO PURCHASER FOR LOSS OF PROFITS OR OTHER ECONOMIC LOSS, INCLUDING SPECIAL, CONSEQUENTIAL OR OTHER SIMILAR DAMAGES ARISING OUT OF ANY CLAIMED BREACH BY SELLER OF ITS OBLIGATIONS THEREUNDER.

 The other relevant provision in the Equipment, Programming and Installation Services Contract is under paragraph 6 which is entitled "Miscellaneous" and reads "This contract contains the entire agreement between the parties, and shall be binding upon both parties and their respective heirs, successors and/or assigns." The Maintenance Contract in paragraph 7 contains a similar disclaimer clause which reads "EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THE DESCRIPTION CONTAINED HEREIN." The contracts between the parties contain provisions that Maryland law governs the agreement. Since this is a diversity case, the Court must look to the choice of law rules of Pennsylvania, the forum, to decide what law is to be applied. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Pennsylvania courts honor contractual choice of law provisions where, as here, the parties have sufficient contacts with the chosen state. 13 Pa. C.S.A. § 1105(1). See Aluminum Co. of America v. Essex Group, Inc., 499 F. Supp. 53, 59 (W.D. Pa. 1980).

  In evaluating the defendant's motion to dismiss, the Court must construe the allegations in the complaint, along with the attached contracts, in the light most favorable to the plaintiffs. See Rogin v. Bensalem Tp., 616 F.2d 680, 695 (3rd Cir. 1980), cert. denied, 450 U.S. 1029, 101 S. Ct. 1737, 68 L. Ed. 2d 223 (1981). Motions to dismiss are only granted if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). Nonetheless, the claim may be resolved in a motion to dismiss, if the claims under which the plaintiff seeks relief are barred by the unambiguous terms of a contract attached to the pleading, because the interpretation of an unambiguous contract is a matter of law for the court. See Haskins v. Point Towing Co., 421 F.2d 532, 536 (3d Cir.), cert. denied, 400 U.S. 834, 27 L. Ed. 2d 66, 91 S. Ct. 68 (1970); Royal Business Machines, Inc., v. Copi-Quik, Inc., No. 81-4679, slip op. 4 (E.D. Pa. January 17, 1983).

 As to the plaintiff's express warranty claim, it is clear that the words employed in the disclaimer clause in the Equipment Contract, along with the integration clause, are sufficient to preclude express warranties. Plaintiff alleges that Display Data expressly warranted that the computer and programs which it was selling and leasing constituted a "turnkey" system that required plaintiff to perform only routine maintenance; was a system which was particularly suitable for use by an automobile dealership; was a system which was adaptable to businesses other than automobile dealerships and was a system in which all errors and malfunctions would be eliminated within a specified time period thereby resulting in an error-free system. The written contractual agreements described previously do not contain any of these alleged express warranties. The Equipment Contract warrants that the seller will provide maintenance service for the purchaser subject to the terms in the Maintenance Contract and that for a period of one year after the program is delivered, seller will make every reasonable effort to correct any errors in the program. These are the only express warranties that are created by the contracts. Moreover, the contracts expressly exclude any other express warranties. Paragraph 5(c) of the Equipment Contract reads "EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE OR THE REVERSE SIDE HEREOF." Paragraph 7 of the Maintenance Contract contains almost identical language. Although the parties have not brought to the Court's attention any Maryland cases which are dispositive of the express warranty issue, Maryland has adopted the Uniform Commercial Code and cases in other states applying the Uniform Commercial Code are almost unanimous in holding that provisions disclaiming express warranties by the use of language similar to that in this case are effective disclaimers of express warranties. See S.M. Wilson & Co. v. Smith International, Inc., 587 F.2d 1363, 1371 (9th Cir. 1978) (applying California law); Bruffey Contracting Co. v. Burroughs Corp., 522 F. Supp. 769, 772 (D.Md. 1981) (applying Michigan law), aff'd 681 F.2d 812 (4th Cir. 1982); Aplications, Inc. v. Hewlett Packard Co., 501 F. Supp. 129, 132 (S.D. N.Y. 1980) (applying California law), aff'd 672 F.2d 1076 (2d Cir. 1982) (per curiam); Investors Premium Corp. v. Burroughs Corp., 389 F. Supp. 39, 44-45 (D. S.C. 1974) (applying South Carolina law); Rudy's Glass Construction Co. v. E.F. Johnson Co., 404 So.2d 1087, 1089 (Fla. Dist. Ct. App. 1981); Zugarek v. Walck, 54 A.D.2d 1074, 1075, 388 N.Y.S.2d 756, 757-58 (App. Div. 1976); Bakal v. Burroughs Corp., 74 Misc.2d 202, 204-05, 343 N.Y.S.2d 541, 543-44 (Sup. Ct. 1972).

 The Equipment Contract contains an integration provision which reads in relevant part, "this contract contains the entire agreement between the parties." Thus, the contract plainly states that it constitutes the entire understanding between the parties. Courts applying the Uniform Commercial Code's provisions to similar integration provisions have found that such language is sufficient to render the contract the final and exclusive agreement of the parties, thereby preventing the introduction of parol evidence to vary the contract's terms. See, e.g., Earman Oil Co. v. Burroughs Corp., 625 F.2d 1291, 1294, n. 8, 1298 (5th Cir. 1980) (applying Florida law); Bruffey Contracting Co., 522 F. Supp. at 772 (applying Michigan law); Aplications, Inc., 501 F. Supp. at 132-33 (applying California law); Investors Premium Corp., 389 F. Supp. at 44 (applying South Carolina law); Zugarek v. Walck, 54 A.D.2d at 1075, 388 N.Y.S.2d at 757-58. In reaching the same conclusion, this Court has considered that the parties involved are merchants who had equal bargaining power with respect to the subject matter of their transaction. There is no suggestion that the plaintiffs were unaware of the significance of the disclaimer and integration clauses which were part of the contracts. See Price Brothers Co. v. Philadelphia Gear Corp., 649 F.2d 416, 423 (3d Cir.), cert. denied, 454 U.S. 1099, 70 L. Ed. 2d 641, 102 S. Ct. 674 (1981); Aplications, ...


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