Stone Transport, Inc. v. Volvo Trucks North America Inc.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 05a0287n.06
Filed: April 18, 2005

Case No. 03-1886

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

STONE TRANSPORT, INC. et al., )
)
Plaintiffs-Appellees, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE WESTERN
VOLVO TRUCKS NORTH AMERICA ) DISTRICT OF MICHIGAN
INC., a Delaware Corporation. )
)
Defendant-Appellant. )
)
_______________________________________

BEFORE: MARTIN and BATCHELDER, Circuit Judges; O’MEARA,* District Judge.

ALICE M. BATCHELDER, Circuit Judge. Stone Transport, Amazon Transportation,

Lady Hawk, and Kathleen Eddy [“plaintiffs”], all purchasers of Volvo Tractor Trucks between the

years 1994 and 1998, filed suit in the United States District Court for the Western District of

Michigan, against Volvo Trucks North America, Inc. [“Volvo”] alleging breach of express

warranties made in connection with the sale of numerous tractors and numerous other claims not

pertinent to this appeal. Because the record supports the jury finding that the limitations contained

in the express warranties in the truck purchase agreements failed of their essential purpose, and

because even without plaintiffs’ flawed expert testimony, the evidence supported the damages

*
The Honorable John Corbett O’Meara, District Judge for the Eastern District of Michigan, sitting by
designation.
awarded, we AFFIRM the district court’s denial of Volvo’s motions for judgment as a matter of law

and motion to alter or amend judgment, and therefore affirm the jury award of damages.

I.

The plaintiffs purchased numerous Volvo trucks from the defendant over a period of several

years. For each truck, the defendant provided an express warranty with a limitation of the buyer’s

remedy to repair or replacement of defective parts or components. The trucks required very frequent

repairs because of defective parts, and although Volvo made those repairs, they often took an

unreasonable amount of time. Contrary to defendant’s representations when plaintiffs purchased

the trucks, plaintiffs were not able to have warranty work or other service performed on the trucks

away from their home dealership because other Volvo dealers did not have adequate parts

inventories or training. There were also instances in which particular trucks experienced frequent

recurrence of particular problems because Volvo was unable to repair the defects.

Under Michigan law, a limited warranty fails of its essential purpose

[w]hen a seller does not repair or replace in order to cure a nonconformity…the
limited remedy stated in terms of repair or replacement has failed of its essential
purpose. Such remedy also fails of its essential purpose when a seller is simply
unable to cure the nonconformity notwithstanding that the seller’s failure to cure was
neither willful nor negligent. Moreover, the nonconformity must be removed within
a reasonable time. The buyer is not bound to permit the warrantor to tinker with the
goods indefinitely in the hope that it ultimately may be made to conform.

Forster v. Navistar Int’l Transp. Corp., 2002 WL 1998571, *4-5 (Mich. App., Aug. 27, 2002) (citing

67A AM. JUR. 2D, Sales, §§921-925, pp 325-330); see also Tibco Software, Inc. v. Gordon Food

Service, Inc., 2003 WL 21683850, *6 (W.D. Mich. July 3, 2003). We conclude that the facts

developed at trial are sufficient to support the jury’s finding that Volvo’s repair/replace limitation

failed of its essential purpose.

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 “Where circumstances cause . . . [the] limited remedy to fail of its essential purpose,” the

non-breaching party may seek any remedy provided under the Uniform Commercial Code as

incorporated into Michigan law. M.C.L. § 440.2719(b)(2). Because Michigan law allows for

incidental and consequential damages, M.C.L. §§ 440.2714 and 2715, plaintiffs are able to recover

consequential damages.

The jury awarded consequential damages for each of four categories of loss: downtime,

towing and driver-related expenses, lost profits, and loss of business value. The district court

reduced the damage award by the amount of the damages for loss of business value. We hold that

the district court did not err in reducing the award of consequential damages. The record

demonstrates that in order to prevent a double recovery, the plaintiffs had clearly agreed that they

would claim consequential damages either under the first three categories or solely under the

category of loss of business value.

II.

The Supreme Court has held that Federal Rule of Evidence 702 requires district courts to

ascertain whether a party proffering expert testimony has laid an adequate foundation demonstrating

that the testimony is relevant and reliable. Daubert v. Merrell Dow Pharms., 509 U.S. 579, 594-97

(1993); Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999). During that preliminary

assessment the district court must assess whether the methodology underlying the testimony is valid

and whether the methodology can properly be applied to the facts in issue. Daubert, 509 U.S. at

592-93. In this case, the district court expressly found that there is “literally no basis whatsoever”

for Greydanus’s methodology. Regardless of whether the defendant made a timely objection to the

methodology used by Greydanus, the district court plainly erred in failing to exercise its gate-

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keeping function by admitting an expert’s testimony when the methodology underlying that

testimony had “no basis whatsoever.”

Nevertheless, the flawed testimony of Greydanus does not prevent plaintiffs from recovering

consequential damages because his testimony went only to the issue of loss of business value, the

damages which the district court subtracted from the award.

III.

Because the record supports the jury’s finding that the express warranties’ limitations on

damages failed of their essential purpose, and because the evidence supported the damages awarded

as reduced by the district court, we AFFIRM the district court’s denial of Volvo’s motions for

judgment as a matter of law and motion to alter or amend judgment, and therefore affirm the jury

award of damages.

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