RMS Technology, Inc. v. TDY Industries, Inc.

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

RMS TECHNOLOGY, INCORPORATED, 

Plaintiff-Appellant,

v.

TDY INDUSTRIES, INCORPORATED, t/a

Teledyne Industries, Incorporated;  No. 02-1299

TELEDYNE TECHNOLOGIES,

INCORPORATED; TELEDYNE BROWN

ENGINEERING, INCORPORATED,

Defendants-Appellees.



Appeal from the United States District Court

for the Eastern District of Virginia, at Newport News.

Raymond A. Jackson, District Judge.

(CA-01-22-4)

Argued: December 5, 2002

Decided: February 6, 2003

Before WILKINSON, Chief Judge, and LUTTIG and

MICHAEL, Circuit Judges.

Affirmed by unpublished per curiam opinion.

COUNSEL

ARGUED: William Anthony Lascara, PENDER & COWARD, P.C.,

Virginia Beach, Virginia, for Appellant. Michael Alexander Hopkins,

MCKENNA, LONG & ALDRIDGE, L.L.P., Washington, D.C., for

2 RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC.

Appellees. ON BRIEF: Raymond B. Biagini, MCKENNA, LONG &

ALDRIDGE, L.L.P., Washington, D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

OPINION

PER CURIAM:

Plaintiff RMS Technology brings this appeal alleging that the dis-

trict court improperly dismissed its complaint against defendants

Teledyne Industries, Inc., Teledyne Technologies Inc., and Teledyne

Brown Engineering, Inc. (collectively "Teledyne") on summary judg-

ment. The district court properly applied both the Uniform Commer-

cial Code and Virginia procedural law to these claims to find that the

suit was filed outside of the applicable limitations period. We thus

affirm the dismissal of RMS’s case.

I.

Lockheed Martin, which is not a party to this suit, contracted with

Teledyne on May 2, 1995, to fabricate, test, and deliver armor moving

target carrier ("AMTC") systems. The AMTC systems were part of a

Remote Target System ("RETS") requested by the U.S. government

to provide realistic combat training for the armed services. On July

7, 1995, Teledyne executed a contract ("Purchase Order 456258")

with RMS Technology under which RMS agreed to manufacture

three first article and thirty-seven subsequent AMTC systems in its

facilities in Newport News, Virginia. This assembly was to be com-

pleted between December 30, 1995, and July 30, 1996.

Contract negotiations between Teledyne and RMS consisted of an

exchange of letters regarding price estimates and each company’s

responsibility under the purchase order. In its initial response to Tele-

dyne’s request for quotes, RMS advised Teledyne that the price

RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC. 3

would vary based on what portion of the materials Teledyne supplied

for the project. RMS also informed Teledyne that RMS was currently

producing AMTC systems for the U.S. military, that RMS would con-

tinue production until December 1995, and that RMS thought any

remaining first article tests on the AMTC systems might be waived

because of its experience manufacturing such systems. Ultimately, the

parties agreed that Teledyne would supply most of the raw materials

for the first two years of production and that RMS would supply

primer, paint, cleaning chemicals, consumables and hydraulic fluid.

The contract provided that all work was to be completed in "accor-

dance with the total technical and delivery requirements and terms

and conditions as specified in the reference purchase order." It also

required RMS to represent and warrant "that the goods and services

furnished" under the contract "be merchantable and fit for the particu-

lar purpose intended [and] free of defects in design workmanship and

materials." The contract further provided that "[t]itle and risk of loss

to goods shall pass to Buyer upon receipt at Buyer’s designated desti-

nation." Lastly, the contract contained a choice of law provision, stat-

ing that "[t]he rights and obligations of the parties hereto shall be

governed by the law of the State of Alabama."

On February 22, 1996, RMS advised Teledyne that it was "com-

pelled to stop work on contract number 456258 due to a lack of

funds." RMS also informed Teledyne that it had laid off all of its

employees. Following receipt of RMS’s correspondence, Teledyne

sent a letter to RMS on February 29, 1996, alleging default by RMS

and terminating the contract.

On April 26, 1996, RMS submitted a claim for $176,435.56 to

Teledyne for out of scope work done in connection with the contract.

Teledyne responded by letter, informing RMS that it would submit all

valid and substantiated claims to Lockheed Martin as part of its settle-

ment proposal. In November, 1996, Teledyne sent this proposal to

Lockheed Martin, including only the amounts that Teledyne had actu-

ally paid to RMS. Teledyne also informed Lockheed that RMS had

claimed additional costs, but that such costs were not included in the

proposal because they were not yet substantiated. On December 20,

1996, Teledyne entered into a settlement agreement with Lockheed

4 RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC.

Martin which did not include any sums for the allegedly out of scope

work.

On February 23, 2001, RMS filed a five count complaint against

Teledyne in the United States District Court for the Eastern District

of Virginia for $282,788.78, plus pre-judgment interest and costs.

RMS alleged breach of contract (Count I), quantum meruit (Count II),

impossibility and commercial impracticality of performance of the

contract (Count III), unjust enrichment (Count IV), and constructive

trust (Count V). Teledyne filed a motion for summary judgment on

April 26, 2001, arguing that each count of RMS’s complaint had been

filed outside the applicable statute of limitations period.

Specifically, Teledyne contended that the contract was for the sale

of goods and was therefore governed by the Uniform Commercial

Code (UCC). Teledyne also argued that the equitable counts of the

complaint were barred by Virginia’s three year statute of limitations

for unwritten contracts. The district court agreed and granted Tele-

dyne’s motion for summary judgment on October 22, 2001. RMS

appeals this ruling.

II.

Summary judgment is appropriate when "the record taken as a

whole could not lead a rational trier of fact to find for the non-moving

party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 587 (1986). The district court found that there was no genuine

issue of fact in this case as to which statutes of limitations applied.

We agree.

A.

RMS first contends that the district court erred by applying the

UCC’s four year statute of limitations to Counts I and III of its com-

plaint. Whether a particular transaction is governed by the UCC

depends on the predominant purpose of the transaction, however.

Princess Cruises, Inc. v. Gen. Elec. Co., 143 F.3d 828, 832-33 (4th

Cir. 1998). Where, as here, a transaction is primarily for the sale of

goods, the terms of the UCC govern claims arising from that transac-

RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC. 5

tion. Id. RMS argues that its duty under the contract was only to pro-

vide the necessary labor, processes and facilities to fabricate the

AMTC systems with materials provided by Teledyne. The contract

price, then, was based solely on the cost of the man-hours needed to

complete the contract and not on the cost of the AMTC systems them-

selves. Therefore, RMS contends that the district court erred in find-

ing that RMS did not create a genuine issue of fact as to whether the

contract was for the rendering of services or for the sale of goods.

Three factors are helpful in determining the primary purpose of a

contract: (1) the language of the contract; (2) the nature of the busi-

ness of the supplier; and (3) the intrinsic worth of the materials

involved. Coakley and Williams, Inc. v. Shatterproof Glass Corp.,

778 F.2d 196, 197 (4th Cir. 1985). Each of these factors weighs in

favor of a finding that this contract was for the sale of goods.

Under the first factor, the district court correctly found that a num-

ber of indicia in the contract language signal that the contract was for

the sale of goods. The UCC defines goods as "all things (including

specially manufactured goods) which are movable at the time of iden-

tification to the contract for sale." Ala. Code Ann. § 7-2-105(1). It

defines the sale of goods as "the passing of title from the seller to the

buyer for a price." Ala. Code Ann. § 7-2-106(1). The contract

between Teledyne and RMS was rife with language peculiar to a

transaction for the sale of goods. The contract was titled "purchase

order" and consistently referred to the parties as "buyer" and "seller."

The contract also specifically provided that "title and risk of loss to

goods shall pass to Buyer upon receipt at Buyer’s designated destina-

tion." This language indicates both that the items in question were

moveables and that title to these items would pass from RMS to Tele-

dyne upon completion of the transaction.

Further, the contract required RMS to provide a warranty of mer-

chantability and fitness for a particular purpose. Such warranties are

seldom, if ever, found in a contract for services. The contract addi-

tionally directed RMS to provide first article units for testing, a fre-

quent requirement under government contracts for the sale of goods.

These clauses are generally used to ensure "that the contractor can

furnish a product that conforms to all contract requirements for accep-

tance." 48 C.F.R. § 9.302 (1995). This language makes clear that the

6 RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC.

purpose of the contract was to facilitate RMS’s sale of the AMTC

systems to Teledyne.

The second factor also weighs in favor of a finding that the contract

was for goods and not services. The district court found that RMS

was in the business of manufacturing and selling AMTC systems

using its own materials. This determination was correct. RMS initially

offered to manufacture the AMTC systems for Teledyne without

Teledyne supplying any of the materials. Such an offer demonstrates

that RMS was capable of producing the product for sale using its own

materials. Additionally, RMS was in the process of manufacturing

AMTC systems for the U.S. military when it entered into this contract

with Teledyne. In fact, RMS had already completed first article test-

ing on the AMTC system for the government. The record clearly sup-

ports a finding that RMS was in the business of manufacturing and

selling AMTC systems and not merely providing the services neces-

sary to assemble such systems.

Although the district court did not explicitly address the third prong

of the Coakley test, the intrinsic worth factor also weighs in favor of

a contract for goods rather than services. While a service provider

may supply some incidental materials for a project, a party that pro-

vides more than that is offering a unique finished good, not a service.

As the district court noted, RMS supplied more than an incidental

amount of material for the project. RMS was obligated under the con-

tract to supply primer, paint, cleaning chemicals, consumables and

hydraulic fluid. RMS did more than merely add value to the materials

supplied by Teledyne; it provided both materials and labor to manu-

facture a highly specialized product that it sold to Teledyne.

The fact that Teledyne supplied the majority of the raw materials

for the project does not change the underlying nature of the contract.

RMS agreed to manufacture specialized military equipment and then

pass title for that equipment to Teledyne for a price. This sort of con-

tract is necessarily one for the sale of goods and is properly governed

by the UCC.

RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC. 7

B.

RMS next argues that the court incorrectly applied the Virginia,

rather than the Alabama, statutes of limitations to all counts of the

complaint. The contract between RMS and Teledyne contained a

choice of law clause stating that "[t]he rights and obligations of the

parties hereto shall be governed by the law of the State of Alabama."

RMS argues that this clause encompasses all claims arising out of the

contract between these parties and therefore the complaint should be

governed by Alabama contract law.*

When sitting in diversity, a federal court must apply the choice of

law rules of the forum state, in this case Virginia. Klaxon Co. v. Sten-

tor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Virginia law, the

parties’ choice of law will be enforced if it is "reasonably related to

the purpose of the agreement." Hooper v. Musolino, 364 S.E.2d 207,

211 (Va. 1988). However, such clauses are only applied so far as the

question before the court is one of substantive law. Virginia courts

apply their own law "in matters that relate to procedure." Id. There-

fore, even though the contract contains a provision generally choosing

Alabama law to govern contract disputes, this choice of law provision

does not extend to procedural questions.

Statutes of limitations are considered matters of procedure in Vir-

ginia courts, unless they are so bound up with the substantive law of

a claim that the limitations period is itself considered substantive.

Jones v. R.S. Jones and Assoc., Inc., 431 S.E.2d 33, 35 (Va. 1993).

There is no reason to depart from the general rule in this case. Statutes

of limitation that apply to traditional rights of action in contract and

tort are almost always procedural. Id. And courts that have specifi-

cally examined statutes of limitations in the context of the UCC have

consistently found them to be procedural. See, e.g., Johansen v. E.I.

Du Pont De Nemours & Co., 810 F.2d 1377, 1381 (5th Cir. 1987);

Natale v. Upjohn Co., 236 F.Supp. 37, 41 (D. Del. 1964); Tammac

Corp. v. Williams, 1993 WL 330639 at 17 (W.D.N.Y. 1993). There-

*RMS argues that Ala. Code § 6-2-34, which provides a six year stat-

ute of limitations for any action arising out of a simple contract, applies

to Counts I and III. We have already determined that the UCC applies

to these counts of the complaint. Both the Virginia UCC and the Ala-

bama UCC have a four year limitations period for breach of contract

claims. Va. Code Ann. § 8.2-725(1); Ala. Code § 7-2-725(1).

8 RMS TECHNOLOGY, INC. v. TDY INDUSTRIES, INC.

fore, under Virginia’s choice of law principles, Virginia law must

govern the statutes of limitations in this case.

C.

Lastly, RMS contends that even if this court applies Virginia law,

Counts II, IV, and V of the complaint, which are matters in equity,

were timely filed and should not be dismissed. RMS argues that in

Virginia "equity follows the law" and therefore an equitable claim

arising from a written contract should be governed by Virginia’s five

year statute of limitations for written contracts. However, these claims

are based on contracts implied in law and are therefore subject to a

three year statute of limitations.

Virginia Code § 8.01-246(4) provides that actions based on unwrit-

ten contracts must be brought within three years of the cause of action

accruing. This provision applies to both express unwritten contracts

and contracts implied in law. See Harbour Gate Owners’ Ass’n v.

Berg, 348 S.E.2d 252, 257 (Va. 1986). All three of the claims in ques-

tion are based on contracts implied in law. Count II of the complaint

alleges that Teledyne promised to pay for the labor, equipment and

materials supplied by RMS in performing under the contract. RMS

asks the court to imply a contract for reasonable compensation for

these items. In Count IV, RMS alleges that Teledyne was unjustly

enriched by its settlement with Lockheed Martin and asks the court

to imply an obligation to repay RMS the amount Teledyne benefitted

in the settlement agreement for work done by RMS. Lastly, Count V

alleges constructive trust. Again, RMS asks the court to imply a con-

tract in law and find that RMS is the rightful owner of the settlement

funds. Where, as here, the plaintiff seeks to have the court imply a

contract in law, that contract is necessarily unwritten. Indeed, one

Virginia court has specifically found both unjust enrichment and con-

structive trust claims subject to the three year statute of limitations.

Tsui v. Sobral, 39 Va. Cir. 486, 488 (1996). Thus the district court

correctly held that these claims were subject to the three year statute

of limitations.

For the foregoing reasons, the claims of RMS were properly dis-

missed as untimely and the judgment of the district court is

AFFIRMED.