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Winters Performance Products, Inc. v. Grupos Diferenciales S.A.

August 21, 2007

WINTERS PERFORMANCE PRODUCTS, INC., PLAINTIFF
v.
GRUPOS DIFERENCIALES S.A., ET AL., DEFENDANTS



The opinion of the court was delivered by: Judge Conner

MEMORANDUM

Presently before the court is the motion of defendants Grupos Diferenciales S.A. ("Grupos") and Resource International, Inc. ("RI") to dismiss the products liability claim asserted by plaintiff Winters Performance Products, Inc. ("Winters"). For the reasons that follow, the motion will be granted.

I. Statement of Facts*fn1

Winters manufactures and supplies "high performance components used throughout . . . the domestic automobile racing industry," including "rear-end assemblies." (Doc. 1 ¶¶ 7-8.) Winters' rear-end assemblies are "comprised of various parts, including a ring and pinion set," which is a "critical piece of equipment in the automotive powertrain." (Id. ¶¶ 9, 12.) According to Winters, a ring and pinion set "rotates at high speed," and "failures tend to be spectacular, spewing steel shrapnel," which frequently causes "significant damage within the larger rear-end assembly." (Id. ¶¶ 13-14.)

Beginning in 2002, Winters began purchasing ring and pinion sets that were manufactured by Grupos and that "consistently yielded satisfactory results." (Id. ¶ 18.) Winters alleges that the Grupos-manufactured ring and pinion sets were "imported by, delivered by, and invoiced through defendant RI." (Id. ¶ 17.)In May 2004, Winters allegedly placed a purchase order with Grupos for "one-thousand 51412 ring and pinion sets."*fn2 (Id. ¶ 19.) According to Winters, Grupos was "late in delivering the 51412 ring and pinion sets," which forced Winters "to deplete its then-existing inventory of 51412 ring and pinion sets." (Id. ¶ 22.) Consequently, in March 2005, Winters placed another purchase order with Grupos for an additional five-thousand 51412 ring and pinion sets, allegedly "to guarantee it would have required future inventory on hand." (Id. ¶ 23.) According to Winters, all parties understood that the "51412 ring and pinion sets were to be used in rear-end assemblies manufactured for racing applications" and that the "failure of a ring and pinion set . . . could be catastrophic not only in terms of damage to property, but also in terms of the risk to human life, both on the racetrack and among spectators." (Id. ¶ 20.)

Winters allegedly began selling custom rear-end assemblies containing the "Grupos-manufactured 51412 ring and pinion sets" in "late 2005 for use in the 2006 racing season." (Id. ¶ 24.) According to Winters, ring and pinion sets that comply with their specifications "have typically endured for fifty or more separate races," often without any evidence of pitting. (Id. ¶¶ 15, 26.) However, Winters alleges that the Grupos 51412 ring and pinion sets experienced "catastrophic failures (i.e. broken and shorn teeth)" after just "one race or less, i.e., after a paltry 2% of expected life." (Id. ¶¶ 25-26 (emphasis in original)). Winters further alleges that "the gears have also suffered substantial and premature pitting . . . after as little as five miles of use." (Id. ¶ 26 (emphasis in original)). Winters determined that "all of the Grupos-manufactured 51412 ring and pinion sets . . . displayed identical problems." (Id. ¶ 27.)

According to Winters, the 51412 ring and pinion sets "were delivered to Winters in a defective condition." (Id. ¶ 60.) Winters alleges that "Grupos' own internal design analysis testing of the 51412 ring and pinion sets at issue indicate that the sets were sub-standard inasmuch as the sets scored a 'Safety Factor' of less than 1 when Grupos subjected the sets to a Gleason Stress Test." (Id. ¶ 37.)

Winters further alleges that the ring and pinion sets were not properly subjected to cryo-processing, "a standard post-process" that "improves the hardness of steel."*fn3 (Id. ¶ 34.) According to Winters, "[o]nce steel has been properly cryo-processed . . . further cryo-processing will have . . . no effect on hardness." (Id.) Although Grupos "indicated that the 51412 ring and pinion gears had been subjected to cryo-processing," Winters alleges that independent cryo-processing of the Grupos-manufactured 51412 ring and pinion sets "resulted in a marked increase in the hardness of the . . . sets," implying that "Grupos either did not subject the . . . sets to cryo-processing, or its processing was sub-standard." (Id. ¶¶ 33, 35-36).

On October 17, 2006, Winters commenced the above-captioned action. (See id.) Winters claims that Grupos and RI are strictly liable for delivering the 51412 ring and pinion sets in an unsafe, defective condition. (Id. at 14-16.) Winters also claims that Grupos and RI breached their contract with Winters. (Id. at 12-14.) Grupos and RI now move to dismiss the products liability claim, contending that the claim is barred by the "economic loss" doctrine and the "gist of the action" doctrine.*fn4 (Doc. 6.) The motion to dismiss has been fully briefed and is ripe for disposition.

II. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of claims that fail to assert a basis upon which relief can be granted. FED. R. CIV. P. 12(b)(6).

In the context of a motion to dismiss under Rule 12(b)(6), the court must accept as true all of the factual allegations in the complaint and all reasonable inferences that can be drawn therefrom. Langford v. City of Atlantic City, 235 F.3d 845, 847 (3d Cir. 2000) (citing Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996)). Although the court is generally limited in its review to the face of the complaint, it "may also consider matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.2 (3d Cir. 1994); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

Federal notice pleading rules do not require plaintiffs to allege affirmatively every aspect of their claims, but only to present sufficient facts to allow the opposing party to conduct discovery and prepare a defense. See FED. R. CIV. P. 8(a) (stating that the complaint should include "a short and plain statement of the claim showing that the pleader is entitled to relief"); see also Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Thus, courts should not dismiss a complaint for failure to state a claim unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id.; see Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). Under this liberal pleading policy, courts should generally grant plaintiffs leave ...


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