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FACTORY MKT. v. SCHULLER INT'L INC.

August 31, 1997

FACTORY MARKET, INC., Plaintiff,
v.
SCHULLER INTERNATIONAL INC., Defendant.



The opinion of the court was delivered by: NEWCOMER

 Presently before this Court are defendant's Motion for Partial Summary Judgment, and the plaintiff's response thereto. For the reasons that follow, this Court will grant in part and deny in part defendant's Motion.

 I. Background

 This action arises out of an ongoing and contentious dispute between the parties over a roofing system which defendant Schuller International, Inc. ("Schuller") *fn1" designed and constructed over a building in which plaintiff Factory Market, Inc. ("FMI") possesses a leasehold interest. In order to properly understand the current dispute between these parties, the Court must set forth the history behind the parties' instant dispute.

 The building at issue in this case was originally leased by The Budd Company ("Budd"). Budd approached United States Roofing Corp. ("USR") and issued a quotation request seeking a new roof with a guarantee that had a duration of at least ten years and was non-prorated. USR contacted Mr. Budd Flynn, the local representative for Schuller. After consulting with USR, Mr. Flynn selected the EDPM system that was eventually used on the roof of the building. USR then incorporated the EDPM system into its proposal, which it submitted to Budd.

 The guidelines for receiving a guarantee from Schuller required USR to submit certain documents to Schuller at the time the roofing contract was awarded. Schuller specifically required "a report from the representative of the owner stating that the structure is capable of supporting the completed SPM roofing system." (Manville Roofing Handbook Ex. 6 at SI00008). No such report was ever allegedly issued by Budd, accepted by USR, or forwarded by Schuller. Despite the non-existence of this report, Schuller issued the guarantee on the roofing system.

 During the installation of the EDPM roofing system on the building, USR allegedly became concerned about applying the EDPM membrane directly over the building's tectum deck. *fn2" Tectum planks are held together with metal clips, and USR became concerned that the clips on the planks could penetrate the EDPM (rubber) membrane that was installed over the deck. Mr. Flynn allegedly assured USR that the installation was proper. USR requested a change in the specification to include a slip sheet; however, Mr. Flynn allegedly stated that no slip sheet was required. *fn3" However, due to its own concern, and at its own expense, USR installed a slip sheet over a portion of the roof.

 Once the installation of the roofing system was complete, Mr. Flynn inspected the roof. Mr. Flynn communicated to USR that Schuller would not issue any guarantees on the roof until additional drainage was added. As per Schuller's request, and consistent with Schuller's own specifications, USR installed the additional drains. After the drains were installed, Schuller issued Manville Signature Series Watertite Roofing System Guarantee ("Guarantee") on the roofing system on the building. Under this guarantee, Schuller agreed to pay for all material and labor necessary to repair the roofing system and maintain it in a watertight condition in the event of leak, defect or failure. In addition, the Guarantee specified that any required repairs could be made only by Schuller-certified roofing contractors upon Schuller's approval, or the guarantee would be void.

 From the outset, the roofing system was plagued with leaking problems. For the first two years of the term of the Guarantee, USR had responsibility for making repairs to the roof of the building without cost to the owner or Schuller. During this period, USR's records reflect many different service calls on the roof of the building. The vast majority of those leaking problems were caused by metal tectum deck clips penetrating the roofing system's rubber membrane, just as USR had predicted when it originally installed the roofing system. Some of these punctures even occurred where USR had installed the slip sheet. Even Schuller's own representatives later agreed that the metal tectum deck clips were the primary cause of the roofing system's problems. Both H. Blum Contracting Corp. ("Blum") and Saling Roofing stated that most of the leaks were caused by penetration of the roofing membrane caused by tectum clips.

 FMI assumed the leasehold interest in the building, and consequently desired to have the Guarantee on the roofing system transferred to its name in accordance with Budd's representations to FMI. USR's original proposal to Budd clearly stated that the ten-year Guarantee was transferable at no extra charge. However, when FMI attempted to have the Guarantee transferred to itself, Schuller, seeing a possible opportunity to get out from under its obligations, refused to transfer the Guarantee.

 Because of continued leaking and Schuller's refusal to transfer the Guarantee to FMI, FMI initiated a law suit against Schuller in the Superior Court of New Jersey, Union County. See Factory Market, Inc. v. Manville Sales Corporation and United States Roofing Corporation, Civil Action No. UNN-L-2582-91. FMI and Schuller eventually negotiated a settlement of this law suit. As part of the Settlement Agreement, it was agreed that Blum, one of Schuller's designated and approved roofing contractors, would conduct repairs on the building pursuant to a repair proposal that he had submitted to Schuller, at Schuller's request, over eight months before the Settlement Agreement was signed. In addition to these repairs, Schuller agreed to extend the expiration date on the Guarantee for certain portions of the roof. In this regard, Schuller issued three new guarantees ("Guarantees"), which each covered a different portion of the roof for different periods of time.

 FMI alleges that during the settlement negotiations, Schuller's representatives repeatedly assured FMI that Blum's repairs would render the building watertight and alleviate any need for constant repairs. FMI contends that Schuller's representatives stated that their technical staff had investigated the roof of the building, and Schuller's technical staff was certain that Blum's proposal would render the roof watertight. Indeed, had Schuller not made these representations, FMI states that they would not have signed the Settlement Agreement.

 FMI submits that Blum's proposal, as anyone with knowledge of the roofing industry would know, could not and did not render the roofing system watertight. FMI also argues that any person reasonably knowledgeable about the EDPM roofing system installed at 375 Commerce Drive would have known that Blum's proposal could not have rendered and did not render the roofing system watertight.

 FMI contends that the inadequacy of Blum's repairs is demonstrated by the roof's continuing leaking even after the Settlement Agreement was signed and the repairs had been performed. In the three years between the signing of the Settlement Agreement and Schuller's decision in 1996 not to service the roof, FMI and/or its tenants reported dozens of leaks to Schuller, and Schuller's designated and approved roofing contractors visited the building on dozens of occasions. Although space limitations prevent a full description of each leak and Schuller's response thereto, the Court sets forth the following examples to highlight the problems that FMI was having with the roofing system on the building.

 The first leak in the newly replaced roofing area occurred less than three weeks after Blum completed the repairs required by the Settlement Agreement. FMI reported leaks to Schuller on September 8, 1993, and subsequently followed up this report with a letter dated September 21, 1993. A meeting was held on October 14, 1993, at which Schuller allegedly agreed that its designated roofing contractor, Blum, would conduct certain additional repairs, which are the same repairs that were supposedly addressed in Blum's original proposal which was incorporated into the Settlement Agreement.

 Through the following months of November and December, Schuller did not complete the repairs as agreed between the parties at the October 14, 1993 meeting. FMI contacted Schuller on November 2 and December 1 and 6, 1993 to inquire into the status of the repairs and to report additional leaks. On December 15, 1993, Schuller sent a new roofing contractor, Saling Roofing, to repair the roof.

 A log, kept by Saling Roofing, shows that Saling visited FMI's building on repair calls no less than 17 times in just over a year and a half, from November 1994 to July 1996. *fn4" A note produced by Schuller states that in December 1995 Schuller told its designated roofing contractor, Saling Roofing, not to service the roof of the building unless water was removed. Schuller, however, allegedly did not inform FMI that Saling would not service the roof unless the water was removed.

 FMI contends that by 1996, Schuller's response had become so inadequate that Schuller's Guarantee Services Unit, in block letters, told Schuller' local representatives to "DO SOMETHING." FMI alleges that Schuller, despite the request from its Guarantee Services Unit, chose to do nothing. Indeed, FMI contends that Saling Roofing informed it that Saling Roofing could no longer repair the roof of the building at 375 Commerce Drive. Apparently, Schuller did not inform FMI of this fact directly.

 FMI responded to this letter from Schuller by filing suit in the Court of Common Pleas of Philadelphia County, Pennsylvania. This action was then removed to this Court on January 21, 1997 by plaintiff.

 In the complaint, plaintiff alleges four causes of action against defendants: (1) breach of contract - the Settlement Agreement; (2) breach of contract - the Guarantee; (3) negligence; and (4) fraud. In addition to these claims, plaintiff sets forth six alternative causes of action: (1) breach of contract; (2) breach of explicit warranty; (3) breach of implied warranty; (4) negligent design, (5) breach of warranty for a particular purpose; and (6) strict liability. These alternative causes of action were initially brought by FMI against Schuller in the 1993 state action. FMI argues that it is entitled to reinstate these claims against Schuller because of Schuller's breach and repudiation of the Settlement Agreement.

 Schuller presently moves for partial summary judgment against FMI. In its motion, Schuller argues that FMI's negligence claim in Count III should be dismissed because (1) this claim is properly a breach of contract claim, (2) the economic-loss doctrine bars recovery in tort, and (3) the statute of limitations bars FMI's negligence claim. Schuller also argues that summary judgment should be entered in its favor on Count I because it did not breach the Settlement Agreement. Schuller further contends that summary judgment should be entered in its favor on Count IV, plaintiff's fraud count, because (1) plaintiff has failed to state a claim for fraud, (2) the fraud claim is barred by the statute of limitations, and (3) plaintiff has failed to plead its fraud claim with sufficient specificity.

 Schuller also contends that this Court should dismiss plaintiff's Alternative Counts because these causes of action should be pursued in the court in which the Settlement Agreement was reached. If the Court does not dismiss plaintiff's Alternative Counts, Schuller asks the Court to enter summary judgment in its favor on Alternative Counts III and IV because these implied warranty claims are barred by the terms of the Guarantees. Schuller also argues that plaintiff's claim for punitive damages must be dismissed because such damages are not available in a breach of contract case, and that plaintiff's claim for consequential damages are barred by the terms of the Guarantees. Finally, Schuller argues that summary judgment should be entered in its favor on Alternative Counts IV and VI because these claims, sounding in negligent design and strict liability, are also barred by the economic-loss doctrine. In response, plaintiff generally argues that all of defendant's arguments are without merit. The Court will address the issues raised seriatim.

 II. Summary Judgment Standard

 A reviewing court may enter summary judgment where there are no genuine issues as to any material fact and one party is entitled to judgment as a matter of law. White v. Westinghouse Electric Co., 862 F.2d 56, 59 (3d Cir. 1988). "The inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one sided that one party must, as a matter of law, prevail over the other." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The evidence presented must be viewed in the light most favorable to the non-moving party. 862 F.2d at 59.

 Summary judgment must be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." White, 862 F.2d at 59 (quoting Celotex, 477 U.S. 317 at 322). The non-movant must specifically identify evidence of record, as opposed to general averments, which supports his claim and upon which a reasonable jury could base a verdict in his favor. Celotex, 477 U.S. at 322. The non-movant cannot avoid summary judgment by substituting "conclusory allegations of the complaint . . . with conclusory allegations of an affidavit." Lujan v. National Wildlife Found., 497 U.S. 871, 888, 111 L. ...


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