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Packaging Engineering, LLC v. Werzalit of America

August 12, 2011


The opinion of the court was delivered by: United States Magistrate Judge Susan Paradise Baxter

Magistrate Judge Baxter


A.Relevant Factual and Procedural History

This dispute arises from an abortive business arrangement between Plaintiff Packaging Engineering, LLC ("PELLC") and Defendant Werzalit of America, Inc. ("Werzalit"). PELLC claims that Werzalit breached a contract by failing to produce a "Machine Tool Set," and Werzalit counterclaims for breach of the same contract. Presently pending before the Court is Defendant‟s Motion in Limine [ECF No. 51].*fn2 The motion has been thoroughly briefed and is ripe for disposition. For the reasons that follow, the motion will be granted.

According to the Complaint, PELLC designed a novel packaging crate intended for transportation of automobile windshields. (ECF No. 1, Complaint, ¶¶ 6, 9). Pursuant to a Container Development and Supply Agreement dated June 9, 2005, PELLC agreed to supply 150,000 of these new crates to Pilkington North America, Inc. ("Pilkington") and, according to the Complaint, expected to realize $1 million in profits from this contract. (Id., ¶¶ 10, 20).

Around August 30, 2005, PELLC initiated negotiations with Werzalit concerning the crate project. (ECF No. 11, Counterclaim, ¶ 2). Specifically, PELLC solicited Werzalit to produce the "Machine Tool Set" needed to manufacture the crates after another company was unable to produce the tool design. (ECF No. 1, Exhibit A). After negotiations, Werzalit produced a written price quote for the tool set. Id. Exhibit A. And on February 22, 2006, PELLC verbally accepted the quote. Id. ¶ 13. Werzalit soon produced an "Order Acknowledgement" to memorialize the contract. Id. Exhibit B. The acknowledgement notes that PELLC was required to pay Werzalit $300,000 in four installments of $75,000. Id. Exhibit B. The acknowledgement further notes that the tool set would be completed on a "best efforts" basis. Id. Exhibit B.

Less clear is how the crates were to be assembled. In the Complaint, PELLC does not explicitly allege it had a contract with Werzalit to manufacture the crates. Instead, in its brief, PELLC suggests that there was an understanding that Werzalit would manufacture the crates after finishing the tool set:

Mr. Russ Hall, the President of PELLC, will testify at trial that representatives of Werzalit were fully informed of the details concerning the contract between PELLC and Pilkington. In fact, Werzalit was given a copy of the Pilkington contract. Further, he will testify that he had direct discussions with the President of Werzalit, Alan Ramsey, concerning the cost for manufacturing the containers by Werzalit.

In deposition testimony, Alan Ramsey, the President of Werzalit, testified that he advised PELLC that Werzalit was prepared to manufacture the containers at cost for the Pilkington contract (the minimum 150,000 units) because there existed the opportunity to manufacture and sell containers to a variety of other automotive windshield manufacturers.

ECF No. 52, page 2 (emphasis added). PELLC also points to a notation in Werzalit‟s Order Acknowledgment: "Due to the proprietary process design, the die tools will always remain at [Werzalit‟s] Strandwood of America, LLC facility." ECF No. 58, page 1. PELLC infers from this notation that Werzalit expected to manufacture the crates. Id.

Arrangements between PELLC and Werzalit broke down. Werzalit never produced the tool set and PELLC was unable to fulfill its obligation to produce 150,000 crates for the Pilkington contract. In this action, PELLC claims that Werzalit breached the contract and, as a result, PELLC could not fulfill its obligations to Pilkington. Among other things, PELLC seeks lost profits "in an amount in excess of $1,000,000.00," which it expected to realize from the failed Pilkington contract. ECF No. 1, ¶ 20.

B.Defendant's Motion in Limine

On January 6, 2011, Defendant Werzalit has filed a Motion in Limine that seeks to exclude from trial all evidence of PELLC‟s lost profits. ECF No. 51. Werzalit argues that PELLC‟s claim for lost profits is impermissibly "speculative, vague or contingent." ECF No. 51, ¶ 25. PELLC counters that there is a reasonable basis for estimating its lost profits.

In Pennsylvania, "a buyer can recover consequential damages resulting from a seller‟s breach of contract." Glenn Distributors Corp. v. Carlisle Plastics, Inc., 297 F.3d 294, 301 (3d Cir. 2002). See also 13 Penn. Cons. Stat.Ann. § 2714(c). "Lost profits are recoverable as consequential damages in a proper case, such as where a seller knows or has reason to know that a buyer is purchasing a good for resale." National Controls Corp. v. National Semiconductor Corp., 833 F.2d 491, 495 (3d Cir. 1987). Such lost profits are recoverable "if there is (1) evidence to establish the damages with reasonable certainty; (2) they were the proximate consequence of the wrong; (3) they were reasonably foreseeable." Advent Systems Ltd. v. Unisys Corp., 925 F.2d 670, 680 (3d Cir. 1991) quoting Delahanty v. First Pennsylvania Bank N.A., 318 Pa.Super. 90, 120 (1983). There is a heightened burden of proof when profits were lost in pursuit of a "new and untried business venture." National Controls Corp., 297 F.3d at 495. A survey of Pennsylvania decisional law has uncovered only a ...

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