Appeal from the United States District Court for the Eastern District of Pennsylvania. D.C. Civil No. 89-04918
Before: Greenberg, Cowen And Seitz, Circuit Judges.
Defendant Repco, Inc. ("defendant") appeals the order of the district court, after a bench trial, granting judgment in favor of plaintiffs Altronics of Bethlehem, Inc. and Altronics of Philadelphia, Inc. [hereinafter collectively referred to as "plaintiffs"]. The jurisdiction of the district court was based on diversity of citizenship under 28 U.S.C. § 1332 (1988). This court has jurisdiction pursuant to 28 U.S.C. § 1291 (1988).
The findings of fact of the district court will not be disturbed unless clearly erroneous. Levendos v. Stern Entertainment, Inc., 909 F.2d 747, 749 (3d Cir. 1990). Conclusions of law, or alleged errors in applying the law to the facts are subject to plenary review. Id. On appeal, the evidence will be viewed in the light most favorable to plaintiffs, as the prevailing party. Rodriguez v. Brunswick Corp., 364 F.2d 282, 284 (3d Cir. 1966).
Plaintiffs are two Pennsylvania corporations engaged in the business of selling and servicing various electronic security and alarm systems to subscribing customers in Eastern Pennsylvania. Defendant manufactures and sells radio equipment and wireless security systems throughout the United States. Plaintiffs first learned of defendant's products at a trade show where negotiations began. Plaintiffs allege that they informed defendant of their specific security needs and described the locations and terrains of the sites where the second and third systems would be installed. Prior to entering into an agreement of sale, defendant's agent visited the Bethlehem site and stated his belief that the system would be effective in that location with the offset radio frequencies he suggested. Being without expertise on radio operated systems, plaintiffs allege that they relied on defendant's oral and written representations regarding the system and promises of support services, including assistance in obtaining an adequate frequency channel.
Plaintiffs purchased and paid for a total of three systems from defendant. The first was sold by plaintiffs to the Commonwealth of Pennsylvania and is operational. Plaintiffs installed the second in their Bethlehem location to provide service to two of their accounts. It allegedly did not function properly. The third was never installed.
Installation of the second system at the Bethlehem location required plaintiffs to incur additional expenses. Plaintiffs allege that the security system received substantial interference from other frequencies which prevented its use as a reliable alarm system for its subscribers. This was due to the fact that persons monitoring the systems were unable to tell if the signals they received were the result of interference with the frequencies or related to a breach of security at the subscribers' locations. Plaintiffs also received a notice of violation from the Federal Communications Commission ("FCC") due to the interference the second system was creating. Plaintiffs notified defendant of the problems. Another of defendant's agents, Bateman, arrived to examine the installation and to determine the source of the malfunctions. Bateman corrected one problem and suggested further modifications. The system still failed, however, after plaintiffs made the suggested changes.
Ultimately, plaintiffs decided not to install the third system at their Lafayette Hills location. They based their decision on their Conclusion that the system was incapable of performing as expected, that defendant was not providing the necessary support services to make the system operational and that incurring further costs was to be avoided. Plaintiffs removed the Bethlehem system and sought satisfaction from the defendant without success. Thereafter plaintiffs attempted to mitigate their damages by advertising one of the systems for sale in a trade magazine. No buyer was found.
Plaintiffs brought this action to recover the purchase price of the two systems, and all incidental and consequential damages. They obtained an Arbitrators' Award in their favor and defendant then demanded a trial de novo in the district court. At the Conclusion of a non-jury trial, the district court held that under Pennsylvania law, the application of which defendant does not challenge, defendant breached its implied warranties of merchantability and fitness for a particular purpose. 13 Pa.C.S.A. §§ 2314 & 2315 (Purdon 1984). Having decided that plaintiffs were entitled to recover for the breaches of the implied warranties, the court stated that it need not address plaintiffs' express warranty claim. It entered judgment in favor of plaintiffs for the costs of both systems and consequential damages. This appeal followed.
A. Breach of the Implied ...