Petition for Writ of Certiorari — Princess Cruises, Inc. v. General Electric Co.

ne

(1) Supreme Court, US.

| FILED

98 254 a0 6

In The

Supreme Court of The United States

October Term 1997

®

PRINCESS CRUISES, INCORPORATED

Petitioner,

Vv.

GENERAL ELECTRIC COMPANY

Respondent.

*

Petition For A Writ Of Certiorari

To The United States Court of

Appeals For The Fourth Circuit

2

PETITION FOR WRIT OF CERTIORARI

°

*Benjamin T. Riddles, IT

Francis X. McCullough

Watt, Tieder, Hoffar & Fitzgerald, L.L.P.

7929 Westpark Drive, Suite 400

McLean, VA 22102

(703) 749-1000

Counsel for Petitioner

*Counsel of Record

APPELLATE ADVANTAGE

- 4264 N. Oak Trafficway@Kansas City, MO 641164816-453-2424

Are the harmony and uniformity of federal maritime

law served by prohibiting a federal court from looking to

UCC principles when interpreting a maritime services

contract, and by requiring that court to look exclusively to

state common law?

LIST OF PARTIES TO THE PROCEEDING

The parties to the proceeding before this Court are

the Petitioner, Princess Cruises, Inc., and the Respondent,

General Electric Company. The Petitioner is a wholly-

owned subsidiary of The Peninsular and Oriental Steam

Navigation Company, an English company.

TABLE OF CONTENTS

PETITION FOR WRIT OF CERTIORARI ........

IE CN a se pw ieeelv wees

REASONS FOR GRANTING

IN ot lye Se es a os phate oh

PMN rs rise t a SP a Ae hie cake

Opinion of the United States Court of Appeals

for the Fourth Circuit

II Es id oi ee ce as oe ee Sek

Opinion and Order of the United States District

Court for the Eastern District of Virginia

CASES:

ee

PERE CT OE 80 a5 5s Fae Pos owed bases oes 13

Asphalt | oe E ;

Shipping Corp.,, 667 F.2d 261 (2d Cir. 1981). ...... 8,9

Brewster of Lynchburg, Inc. v. Dial Corp. ,

FS Fae ae CO Ns eae kc bee eds 18,19

Chelentis v. Luckenbach S.S. Co. +]

OE bs SUS EAD A cok kk ew bes Ce kes 12

in Revie Bibel | p

Canal Co., 730 F.2d 186 (Sth Cir. 1984) ............ 7

Delovio v. Boit, 7 F. Cas. 418

(20D. Biaen, TBIS) le. 3.77) © oh 6 kee Ss 1]

794 F.2d 1440 (Sth Cir. 1986)... 2. ob. oo eae ee. 18

pene

ha WR RT MOR oo cs, eve us ne 10

Employers Insurance of Wausau v. Suwannee

River Spa Lines, Inc., 866 F.2d 752

CO ioe ce ic anes 4,7,8

iV

F/V Robins Nest. | is a

No. 92-3900 (JEI), 1994 WL 594592, at *2

Ci pace. CG es SS a eee as 9

S.A,, 890 F.2d 1453 (9th Cir. 1989) ............... 8

: ie

Transatlantique, 358 U.S. 625 (1959) ........... 5. te

Knickerbocker Ice Co. v. Stewart ,

eas ee BD ee ae ee. 11,13

cick iy Valet Seen

SO Aras PP RREONED 6 ola aS hes He ye eS 12

The Lottawanna, 21 Wall. 558

BE Bal I TR oo ee EON ee ks 12, 13

heed Sieben Po x3 Wai

American Corp., 528 F. Supp. 210

Rn SEE ok Ne ican ee ks wee 9

O'Brien v. Miller, 68 U.S. 287 (1897) ............. 16

Pope & Talbot, Inc. v. Hawn,

De Sis OTE ha es ee 12

Pri Surana | ae

Company, 143 F.3d 828 (4th Cir. 1998) ......... vil, 5

Vv ;

De Ut Che RO POS CIOL oi oa ss ok ev ne bes 11

k ah eee |

SID ee a sk 0 kk eo RR 13

Schoenamsgruber v. Hamburg American Line,

Se Ra ET or i ck a eee al 16

Southern Pacific Co. v. Jensen,

ee Ba EEE TS oss oh DANG OLkkaaee es 6, 12, 13

Watts v. Camors, 115 U.S. 353 (1885) ............. 16

STATUTES:

rae Rt EEO 5c 6 EN ERAS hope ea Vill

Oe CEG. DADE. 5d oC REA OR a ee 3

vi

PETITION FOR WRIT OF CERTIORARI

The Petitioner Princess Cruises, Inc., respectfully

prays that a writ of certiorari issue to review the judgment

of the United States Court of Appeals For The Fourth

Circuit, which was entered on May 8, 1998.

OPINIONS BELOW

There are two opinions/decisions from the courts

below, each of which is reproduced in the accompanying

appendices. The Opinion of the United States Court of

Appeals For The Fourth Circuit, decided on May 8, 1998

and reversing the District Court's denial of Respondent's

renewed motion for judgment as a matter of law, is

published at 143 F.3d 828 and is reproduced in Appendix A

herein. The unpublished Opinion and Order of the United

States District Court For The Eastern District of Virginia,

Norfolk Division, filed on May 13, 1997 and denying the

Respondent's renewed motion for judgment as a matter of

law, is reproduced in Appendix B.

Vil

STATEMENT OF JURISDICTION

The judgment of the Court of Appeals for the Fourth

Circuit, reversing the lower court's denial of Respondent's

post-trial renewed motion for judgment as a matter of law,

was entered on May 8, 1998. This Petition for Writ of

Certiorari has been filed within 90 days after entry of the

judgment by the Fourth Circuit, pursuant to Rule 13.1 of the

rules of the Supreme Court.

This Court has jurisdiction to review the judgment

of the Fourth Circuit by writ of certiorari under 28 U.S.C.

§ 1254(1) (1988).

CONSTITUTIONAL PROVISIONS

INVOLVED

Article III, § 2, cl.3 of the United States

Constitution provides as follows:

Section 2. The judicial Power shall extend

... to all Cases of admiralty and maritime

Jurisdiction; .. .

Vill

STATEMENT OF THE CASE

Princess Cruises, Inc., (“Princess’’) is a cruise ship

agent responsible for several luxury cruise ships both within

and without U.S. waters. In December, 1994, one of

Princess's cruise vessels, the S.S. Sky Princess, arrived for

a routine drydocking involving inspection and repairs at

Norfolk, Virginia. Months before, Princess requested that

General Electric (“GE”), the original manufacturer of the

ship's main turbines, prepare an estimate for turbine

inspection work to be accomplished and spare parts to be

installed during the scheduled drydocking.

During the period July 1994 until November 1994

Princess and GE exchanged many letters and phone calls

relating to the upcoming drydock work in December. That

correspondence included Princess's purchase order to GE of

October 19, 1994 and GE's fixed-price quotation to Princess

of October 24, 1994. Both Princess and GE included with

these documents their own respective “terms and

conditions,” which purported to govern the rights of the

parties to the contract. For example, Princess's terms

required GE to take full responsibility for its work, whereas

GE's terms disclaimed certain warranties and damages.

Other than in the declarations in their pre-printed

forms, neither Princess nor GE ever addressed the other

party's terms and conditions prior to the drydocking.

Nevertheless, both parties proceeded as though a contract

had been formed. Thus, in December 1994 GE provided

the agreed-upon engineering inspection services and spare

parts to the S.S. Sky Princess during the drydocking of the

vessel. Unfortunately, however, the inspection services

provided by GE were wholly inadequate, causing Princess

to suffer extensive losses.

One of the primary reasons that Princess engaged

GE for the 1994 drydocking was for GE's engineers to

supervise the removal of the port high pressure turbine rotor

and carefully inspect it for continued service. GE failed to

inspect the rotor with care, and it failed to align the turbine

properly upon reinstallation. These errors caused excessive

vibration in the ship's turbine and consequent damage to

various engine components, such as packings and bearings.

Because of these problems, Princess was forced to cancel

two fully-booked holiday cruises, thereby losing millions of

dollars.

In April 1996 Princess sued GE for its losses in the

U.S. District Court for the Eastern District of Virginia,

Norfolk Division, based on diversity jurisdiction conferred

by 28 U.S.C. § 1332. It was stipulated that maritime law

governed the contractual dispute. On January 24, 1997,

after a ten day trial, the jury found that GE had breached its

contract with Princess and awarded Princess $4,577,743 in

damages.

One of the central issues in the case and at trial was

whose “terms and conditions” controlled the mghts and

obligations of the parties. If Princess's terms applied, GE

would have to accept financial responsibility for the full

extent of the damages that it had inflicted on the vessel. If

GE's terms prevailed, it would be able to limit its liability to

$231,925, the price contained in its fixed-price proposal.

Thus, the trial judge and eventually the jury were forced to

resolve a maritime “battle of the forms.”

Prior to trial, the District Court, the Honorable Henry

C. Morgan, ruled that the jury would decide on the intention

of the parties in entering the cortract. To assist the Jury in

making that key factual determination, Judge Morgan

instructed them under the applicable battle-of-the-forms

provisions of the Uniform Commercial Code, § 2-207. GE

objected to the Court's use of UCC principles to help

ascertain the intentions of the parties, maintaining that the

“last shot” doctrine or “mirror image” rule of the common

law should be applied. The District Court overruled GE's

objections and ruled as follows:

[I]t is unnecessary for the Court to determine

whether the contract is primarily one for goods

or services. In either case, the UCC is regarded

as a source of federal admiralty law. [citation

omitted]. While the UCC does not expressly

es:

govern maritime service contracts, “in

construing a contract for services, courts are free

to reason by analogy to [the UCC].” Suwannee

River, 866 F.2d at 765 n.25

(App. B-9-10)

Following the adverse jury verdict and entry of

judgment, GE appealed to the Fourth Circuit, contending,

inter alia, that it was error for the District Court to refer to

UCC principles in interpreting a maritime contract, unless

the contract was predominantly for the sale of goods. On

May 8, 1998 the appeals court agreed with GE. It reversed

the lower court's decision and remanded for entry of

judgment against GE in the greatly reduced amount of

$231,925, based on the Fourth Circuit's determination that

the UCC had no application at aii in maritime services

contracts. Thus, in its published opinion, the Fourth Circuit

announced that it was “unpersuaded” by the contrary

decisions of other federal maritime circuits, and it held as

follows:

We ... hold that when the predominant purpose

of a maritime or land-based contract is the

rendering of services rather than the furnishing

of goods, the U.C.C. is inapplicable, and courts

must draw on common-law doctrines when

interpreting the contract.

(143 F.3d at 830, App. A-2-3)

It is this express prohibition to admiralty courts

against looking to the UCC to promote fair and uniform

results in maritime service contracts which is the basis for

this Petition for Writ of Certiorari. Petitioner also believes

that this Fourth Circuit ruling is in derogation of this Court's

mandate that maritime law “must be decided in the

performance of the Court's function in declaring the general

maritime law, free from inappropriate common-law

concepts.” Kermarec _v.__Compagnie _Generale

Transatlantique, 358 U.S. 625, 630 (1959).

6

REASONS FOR GRANTING

THE WRIT

I. BY PROHIBITING COURTS FROM LOOKING

TO THE UCC FOR’ GUIDANCE IN

INTERPRETING MARITIME SERVICE

CONTRACTS, THE FOURTH CIRCUIT HAS

CREATED A MAJOR CONFLICT AMONG

THE CIRCUITS ON AN_ IMPORTANT

FEDERAL ISSUE.

It is well established that uniformity and harmony are

two of the polestars of maritime law. Southern Pacific Co.

v, Jensen, 244 U.S. 205, 216 (1917). The Fourth Circuit's

holding that admiralty courts cannot use the uniformity

already built into the UCC to resolve maritime contract

disputes - unless such contracts involve predominantly the

sale of goods - will introduce disharmony and non-

uniformity on a massive scale throughout the circuits. Prior

to this decision, no federal circuit had ever deprived its

admiralty courts of the UCC's commercial expertise, when

it was needed to fashion maritime law. In fact, the Fourth

Circuit's holding conflicts sharply with decisions of the

Fifth, Ninth, and Second Circuit Courts of Appeal, each a

critically important maritime jurisdiction.

The Fifth Circuit has expressly adopted UCC

principles in interpreting maritime service contracts. In

Clem Perrin Marine Towing, Inc, v. Panama Canal Co., 730

F.2d 186 (Sth Cir. 1984), the court noted that “the U.C.C.

has been regarded as a source both for admiralty and federal

common law,” and it applied UCC section 2-609 to a

bareboat charter party, a non-sales contract. Id, at 189.

Similarly, in Employers Insurance of Wausau_v.

Suwannee River Spa Lines, Inc., 866 F.2d 752 (Sth Cir.

1989), a vessel owner sued the builder and building

supervisor to recover for losses sustained when the vessel

sank. The Fifth Circuit noted that:

The distinction between goods and services has

been widely criticized, and has been particularly

difficult to define in the context of “hybrid

contracts” -- such as construction contracts,

contracts for repairs that involve the provision

or replacement of a part, or sales contracts that

include installation.

Id. at 764 n.21. Accordingly, the Fifth Circuit specifically

approved the adoption of UCC principles in non-sales

settings: “[{I]n construing a contract for services, courts are

free to reason by analogy to U.C.C. § 2-316(1).” Id. at 765

n.25.

Likewise, the Court of Appeals for the Ninth Circuit

has turned to the UCC to interpret a maritime service

contract, the lease of cargo containers, stating, “In maritime

commercial transactions, the Uniform Commercial Code is

taken as indicative of the federal common law of

admiralty.” Interpool Ltd. v. Char Yigh Marine (Panama)

S.A., 890 F.2d 1453, 1459 (9th Cir. 1989) (invoking the

provisions of UCC § 1-201, in considering the interests of

the parties to the lease agreement).

Finally, in Asphalt International, Inc. v. Enterprise

Shipping Corp., 667 F.2d 261 (2d Cir. 1981), the Court of

Appeals for the Second Circuit also looked to the UCC for

commercial guidance, even though there was no sale of

goods involved. In that case, a chartered tanker was rammed

while loading a vessel and the charterer sued the owner,

claiming breach of the owner's duty to repair the vessel.

Acknowledging that the charter agreement was a maritime

contract, the Second Circuit looked to the UCC for

guidance on “general principles of commercial law”

regarding commercial impracticability. Id, at 265-66.’

Thus, the Fourth Circuit's holding prohibiting federal

admiralty courts from looking to the UCC when interpreting

a maritime services contract contrasts markedly with the

decisions of three other circuit courts of appeals and several

district courts.

Additionally, district courts within the Second

and Third Circuits have also locked to the UCC to interpret

maritime contracts for services and mixed contracts for goods

and services. See F/V Robins Nest, Inc. v. Atlantic Marine

Diesel, Inc., No. 92-3900 (JED), 1994 WL 594592, at *2 (D. N.J.

Oct. 24, 1994) (UCC is indicative of federal admiralty law and

applies to an admiralty claim regarding breach of contract for

repair and service of commercial fishing boats); Maru Shipping

Co. v. Burmeister & Wain American Corp.. 528 F. Supp. 210,

216 (S.D.N.Y. 1981) (UCC § 2-207 used to resolve battle of

forms).

10

il. THE FOURTH CIRCUIT HAS DEPARTED

FROM APPLICABLE DECISIONS OF THIS

COURT BY ABDICATING THE ROLE OF

FEDERAL COURTS IN FASHIONING

MARITIME LAW.

By requiring admiralty courts to look exclusively to

state common law to interpret maritime service contracts,

the Fourth Circuit has ignored the long line of cases from

this Court which have placed the responsibility for

fashioning of maritime law squarely into the hands of

federal courts. See East River S.S. Corp. v. Transamerica

Delaval, Inc., 476 U.S. 858 (1986).’

’

. The Fourth Circuit's mandate that maritime

courts utilize the common law hearkens back to the English court

system, which has been abandoned in this country.

During the Elizabethan and Stuart ages the rise of the

common law courts in England resulted in a distinct struggle

between the admiralty and common law courts over jurisdiction.

See 1 Thomas J. Schoenbaum, Admiralty and Maritime Law §

1-5, at 14 (2d Ed. 1994); Charles S. Cumming, The English High

Court of Admiralty, 17 Tul. Mar. LJ. 209, 237 (1993).

Ultimately the crown severely circumscribed the jurisdiction of

the admiralty courts. See Schoenbaum, supra, at 14-16.

The United States courts, however, in order to avoid the

1]

Furthermore, this power of federal courts to fashion

maritime law is to be zealously guarded from state law

encroachment:

Since the beginning federal courts have

recognized and applied the rules and principles

of maritime law as something distinct from laws

of the several states - not derived from or

dependent on their will.

Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, 160

(1920).

It certainly could not have been the intention to

place the rules and limits of maritime law under

the disposal and regulation of the several states,

as that would have defeated the uniformity and

consistency at which the Constitution aimed on

all subjects of a commercial character affecting

inequities and strictures of the common law and to promote

uniformity in maritime comme.ce, specifically reyected English

precedent, and instead adopted a broad and separate admiralty

jurisdiction. See The Propeller Genessee Chief v, Fitzhugh, 53

U.S. (12 How.) 443 (1851); Delovio v. Boit, 7 F. Cas. 418, 442-

43 (C.C.D. Mass. 1815) (No. 3,776) (Story, J.). See also

Schoenbaum, supra, § 3-1, at 56.

12

pt

ce fs Sa inl z .

DOO de tae

TSR ree ee

the intercourse of the states with each other or

with foreign states.

Chelenti’ v. Luckenbach S.S. Co., 247 U.S. 372, 382 (1918)

(quoting from The Lottawanna, 21 Wall. 558, 575, 22 L.

Ed. 654 (1875)).

Moreover, in interpreting and developing maritime

law, this Court has struck down state common law rules and

regulatory laws which work “material prejudice to the

characteristic features of the general maritime law,” or

interfere “with the proper harmony and uniformity of that

law in its international and interstate relations.”” Southern

Pacific Co. v. Jensen, 244 U.S. 205, 216 (1917) (holding

that the award of the New York State Workmen's

Compensation Commission to dependents of a

longshoreman killed on ocean-going steamship was

preempted by the Longshoremen's and Harbor Workers’

Compensation Act). See also Kossick v. United Fruit Co.,

365 U.S. 731, 742 (1961) (rejecting application of New

York state statute of frauds); Kermarec _v. Compagnie

Generale Transatlantique, 358 U.S. 625, 032 (1959)

(declining to apply New York common law distinction

between duty owed licensee and invitee); Pope & Talbot,

i3

Inc. v. Hawn, 346 U.S. 406, 410 (1953) (rejecting

Pennsylvania common law rule under which contributory

negligence of an injured person is a bar to recovery, because

it deprived a claimant of substantial admiralty rights);

Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, 166 (1920)

(invalidating New York Workmen's Compensation Act,

because it conflicted with maritime goal of uniformity).

This Court also considers carefully whether the state

law would defeat “the uniformity and consistency at which

the Constitution aimed on all subjects of a commercial

character affecting the intercourse of the States with each

other or with foreign states,” American Dredging Co. v.

Miller, 510 U.S. 443, 451 (1994) (quoting from The

Lottawanna, 21 Wall. 558, 575, 22 L. Ed. 654 (1875)), or

seriously hamper and impede “freedom of navigation

between the states and with foreign countries.” Southern

Pacific, 244 U.S. at 217. Although the requirement of

uniformity is not absolute, “state law must yield to the

needs of a uniform federal maritime law when this Court

finds inroads on a harmonious system.” Romero _v.

International Terminal Operating Co., 358 U.S. 354, 373-74

(1959).

14

Eee

Petitioner maintains that, should the Fourth Circuit's

abdication of this federal court power to fashion maritime

contract law to the states be left undisturbed, there will

undoubtedly be countless instances of “inroads on the

harmonious system.” Many thousands of maritime service

contracts entered into eacii year will be interpreted

differently under the nuances and vagaries of fifty versions

of the common law.

Il. THE UCC SHOULD BE A STAPLE OF

MARITIME LAW BECAUSE IT WAS

SPECIFICALLY DESIGNED TO RESOLVE

COMMERCIAL DISPUTES FAIRLY AND

UNIFORMLY.

It is illustrative of the potentially severe problems

introduced into maritime contract law by the Fourth Circuit

that the particular issue in this case, the “battle of the

forms,” could have been resolved in either of two ways: by

reasonably considering the intention of the parties under the

UCC; or by arbitrarily looking at the “last shot” mailing

under the common law. In fact, Section 2-207 of the UCC

was expressly developed to avoid the inequitable and

arbitrary results of the common law's “last shot” doctrine.

See 1 James J. White & Robert S. Summers, Uniform

Commercial Code § 1-3 (4th ed. 1995) (“The rigidity of the

common law rule ignored the realities of commerce. . . .

Section 2-207 rejects the common law mirror image rule. .

. and avoid[{s] favoritism because of timing... .”)

Nevertheless, the Fourth Circuit has chosen the common

16

law rule and applied it in the supposedly equitable domain

of admiralty.

This harsh result is contrary to one of admiralty's

primary goals, promoting equity in maritime commerce.

See Schoenamsgruber v. Hamburg American Line, 294 U.S.

454, 457 (1935) (“courts of admiralty have capacity to

apply equitable principles in order the better to attain justice

....); O'Brien v. Miller, 68 U.S. 287, 297-98 (1897)

(“[T]he whole contract must be brought into view and

interpreted with reference to the nature of the obligations

between the parties, and the intention which they have

manifested in forming them. . . [C]ourts of admiralty are not

governed by the strict rules of the common law, but act

upon enlarged principles of equity . . . and construe[]

instruments, as a court of equity does, with a large and

liberal indulgence”); Watts v. Camors, 115 U.S. 353, 361

(1885) (“{A] court of admiralty, within the scope of its

powers, acts upon equitable principles; and when the facts

before it, in a matter within its jurisdiction, are such that a

court of equity would relieve, and a court of law could not,

it is the duty of the court of admiralty to grant relief.”’)

17

It is difficult to reconcile these repeated mandates for

equity in maritime matters with the Fourth Circuit's

adoption of the unjust mirror image rule.

By contrast, adoption of UCC contract formation

principles is completely consistent with the maritime law's

promotion of equity and justice, because the UCC attempts

to achieve the true intention of the parties. See U.C.C. § 2-

207 cmts. 1-2 (1967) (“This section is intended to deal with

... the exchange of printed purchase order and acceptance

(sometimes called 'acknowledgment') forms .... Often the

seller's form contains terms different from or additional to

those set forth in the buyer's form. Nevertheless, the parties

proceed with the transaction. . . . Under this Article a

proposed deal which in commercial understanding has in

fact been closed is recognized as a contract. Therefore, any

additional matter contained in the confirmation or in the

acceptance . . . must be regarded as a proposal for an added

term... .”) See also | Thomas M. Quinn, Uniform

Commercial Code Commentary and Law Digest {| 2-

207[A][1], [10] (2d ed. 1991) (“Section 2-207(1) attempts

to shatter this ancient learning about the need for a perfect

‘match’ and takes the eminently sensible position that what

18

yj

a,

Ea

x

%

4;

passes among businessmen as an acceptance now has the

legal effect of an acceptance .... The 'knockout' rule is a

rule of presumed fairness . . . .”’)

This UCC rule of fairness has not gone unnoticed by

the courts:

Application of section 2-207(3) [of the UCC] is

more equitable than giving one party its terms

simply because it sent the last form. Further,

the terms imposed by the code are presumably

equitable and consistent with public policy

because they are statutorily imposed.

Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d

1440, 1445 (9th Cir. 1986). Ironically, even the Fourth

Circuit has recognized the fairness of applying this UCC

section:

Thus, this [UCC] section “give[s] neither party

to a contract an advantage simply because it

happened to send . . . the last form.” . .. Section

2-207 “disfavors any attempt by one party to

unilaterally impose conditions that would create

hardship on another party.”

Brewster of Lynchburg, Inc. v. Dial Corp., 33 F.3d 355, 362

(4th Cir. 1994) (citations omitted).

Since the objectives of the UCC, uniformity and

fairness in commercial transactions, are identical to those of

maritime law, the UCC should be considered to be part of

federal maritime common law in all federal circuits,

including the Fourth.

CONCLUSION

Petitioner Princess Cruises, Inc., prays that this Court

grant this Petition and issue a Writ of Certiorari to review

the Judgment of the United States Court of Appeals for the

Fourth Circuit in this matter.

Respectfully submitted,

*Benjamin T. Riddles, II

Francis X. McCullough

Watt, Tieder, Hoffar & Fitzgerald, L.L.P.

7929 Westpark Drive, Suite 400

McLean, VA 22102

(703) 749-1000

Counsel for Petitioners

*Counsel of Record

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

+

UNITED STATES COURT OF APPEALS

For The Fourth Circuit

Princess Cruises, Incorporated,

Plaintiff-Appellee,

v.

)

)

)

)

General Electric Company, )

Defendant & Third Party ) No. 97-1685

Plaintiff-Appellant, )

v. )

)

)

)

)

Norfolk Shipbuilding & Drydock

Corporation,

Third Party Defendant.

Appeal from the United States District Court

for the Eastern District of Virginia, at Norfolk,

Henry C. Morgan, Jr., District Judge.

(CA-96-391-2)

Argued: January 26, 1998

Decided: May 8, 1998

Before ERVIN and WILLIAMS, Circuit Judges, and

GOODWIN, United States District Judge

for the Southern District of West Virginia, ,

sitting by designation.

Reversed and remanded by published opinion. Judge

Goodwin wrote the opinion, in which Judge Ervin and

Judge Williams joined.

Appendix A-]

COUNSEL

ARGUED: Bruce Taylor Bishop, WILLCOX & SAVAGE,

Norfolk, Virginia, for Appellant. Francis Xavier

McCullough, WATT, TIEDER & HOFFAR, L.L.P.,

McLean, Virginia, for Appellee. ON BRIEF: John A.

Wilson, Gary A. Bryant, WILLCOX & SAVAGE, Norfolk,

Virginia, for Appellant. Benjamin T. Riddles, Heidi B.

Hering, WATT, TIEDER & HOFFAR, L.L.P., McLean,

Virginia, for Appellee.

OPINION

GOODWIN, District Judge:

This suit arises out of a maritime contract between

General Electric Company (GE) and Princess Cruises, Inc.

(Princess) for inspection and repair services relating to

Princess’s cruise ship, the SS Sky Princess. In January

1997, a jury found GE liable for breach of contract and

awarded Princess $4,577,743.00 in damages. J.A. at 1876.

On appeal, GE contends that the district court erred in

denying its renewed for judgment as a matter of law, which

requested that the court vacate the jury’s award of incidental

and consequential damages. Specifically, GE argues that

the district court erroneous!y applied Uniform Commercial

Code principles, rather than common-law principles, to a

contract primarily for services. We agree and hold that

when the predominant purpose of a maritime or land-based

contract is the rendering of services rather than the

furnishing of goods, the U.C.C. is inapplicable, and courts

must draw on common-law doctrines when interpreting the

Appendix A-2

Rati SSAC a eet eRe TRS EE ROME LE LE LERAR I OEE

ie ae ee ed Senta ad Noe La,

contract. Accordingly, we reverse the district court’s

decision denying GE’s renewed motion for judgment as a

matter of law and remand for modification of the judgment

consistent with this opinion.

I. FACTUAL BACKGROUND

Princess scheduled the SS Sky Princess for routine

inspection services and repairs in December 1994 and

requested that GE, the original manufacturer of the ship’s

main turbines, perform services and provide parts incidental

to the ship’s inspection and repair. Princess issued a

Purchase Order in October 1994. The Purchase Order

included a proposed contract price of $260,000.00 and

contained a brief description of services to be performed by

GE. The reverse side of the Purchase Order listed terms

and conditions which indicated that Princess intended the

Purchase Order to be an offer. These terms and conditions

also stated that GE could accept the Purchase Order through

acknowledgment or performance; that the terms and

conditions could not be changed unilaterally; and that GE

would provide a warranty of workmanlike quality and

fitness for the use intended. J.A. at 75-76.

On the same day that GE received the Purchase Order, GE

faxed a Fixed Price Quotation to Princess. The Fixed Price

Quotation provided a more detailed work description that

Princess’s Purchase Order and included a parts and

materials list, an offering price of $201,888.00, and GE’s

own terms and conditions. When GE reviewed Princess’s

Appendix A-3

Purchase Order, it discovered that Princess requested work

not contemplated by GE in its Fixed Price Quotation. GE

notified Princess of GE’s error. On October 28, 1994, GE

faxed a Final Price Quotation to Princess. In the Final

Price Quotation, GE offered to provide all services, labor

and materials for $231,925.00. Attached to both GE

Quotations were GE’s terms and conditions, which:

(1) rejected the terms and conditions set forth in Princess’s

Purchase Order; (2) rejected liquidated damages; (3) limited

GE’s liability to repair or replacement of any defective

goods or damaged equipment resulting from defective

service, exclusive of all written, oral, implied, or statutory

warranties; (4) limited GE’s liability on any claims to not

more than the greater of either $5000.00 or the contract

price; and (5) disclaimed any liability for consequential

damages, lost profits, or lost revenue. J.A. at 106-13.

During an October 31, 1994 telephone call, Princess gave

GE permission to proceed based on the price set forth in

GE’s Final Price Quotation. J.A. at 825, 1850.

On November 1, 1994, GE sent a confirmatory letter to

Princess acknowledging receipt of Princess’s Purchase

Order and expressing GE’s intent to perform the services.

J.A. at 115. The letter also restated GE’s $231,825.00

offering price from its Final Price Quotation and specified

that GE’s terms and conditions, attached to the letter, were

to govern the contract. Jd.

When the SS Sky Princess arrived for inspection, GE

noted surface rust on the rotor and recommended that it be

Appendix A-4

taken ashore for cleaning and balancing. The parties agree

that during the cleaning, good metal was removed from the

rotor, rendering the rotor unbalanced. Although GE

attempted to correct the imbalance, Princess canceled a ten-

day Christmas cruise as a result of delays caused by the

repair. At trial, Princess alleged that the continued

vibration and high temperatures caused damage to the ship,

forcing additional repairs and the cancellation of a ten-day

Easter cruise. It was undisputed, however, that Princess

paid GE the full amount of the contract: $231,925.00.

J.A. at 1008.

On April 22, 1996, Princess filed a four-count complaint

against GE, alleging breach of contract, breach of express

warranty, breach of implied warranty, and negligence. The

district court granted GE’s motion for summary judgment

as to the negligence claim. Following Princess’s

presentation of evidence at trial, GE made a motion for

judgment as a matter of law, which the district court denied.

At the conclusion of the defendant's presentation of

ev:dence, the district court denied GE’s second motion for

judgment as a matter of law. In instructing the jury, the

district court drew on principles set forth in U.C.C. § 2-207

and allowed the jury to imply the following terms as part of

the contract: (1) the warranty of merchantability; (2) the

warranty of fitness for a particular purpose; (3) the warranty

of workmanlike performance; (4) Princess's right to recover

damages for GE’s alleged breach of the contract; and

(5) Princess’s right to recover incidental and consequential

damages, as well as lost profits, proximately caused by

Appendix A-5

id aera eae

GE’s alleged breach. On January 24, 1997, the jury

returned a $4,577,743.00 verdict in favor of Princess. On

February 3, 1997, GE renewed its motion for judgment as

a matter of law requesting that the court vacate the jury’s

award of incidental and consequential damages. The district

court heard oral argument on May 6, 1997. Following oral

argument, the district court denied GE’s renewed motion for

judgment as a matter of law and issued an opinion

clarifying the ruling.

Il. STANDARD OF REVIEW

The Court reviews de novo the district court’s denial of

GE’s renewed motion for judgment as a matter of law. See

In re Wildewood Litig., 52 F.32 499, 502 (4th Cir. 1995).

Judgment as a matter of law is proper “when, without

weighing the credibility of the evidence, there can be but

one reasonable conclusion as to the proper judgment.”

Singer v. Dungan, 45 F.3d 823, 826 (4th Cir. 1995)

(citation omitted). In reviewing the district court’s decision,

we consider the evidence in the light most favorable to the

nonmovant to determine whether the evidence presented at

trial was sufficient to allow a reasonable jury to render a

verdict in the nonmovant’s favor. See Andrade v. Mayfair

Management, Inc., 88 F.3d 258, 261 (4th Cir. 1996).

Appendix A-6

Il. TO APPLY U.C.C. PRINCIPLES TO A

MARITIME CONTRACT FOR SERVICES WOULD

HINDER ADMIRALTY LAW’S GOALS OF

UNIFORMITY AND PREDICTABILITY

Although GE contended that the district court was

required to determine whether goods or services

predominated before applying U.C.C. principles to the Ge-

Princess contract, the district court found it “unnecessary for

the Court to determine wheiier the contract is primarily one

for goods or services. In either case, the UCC is regarded

as a source of admiralty law.” J.A. at 2024. We

respectfully disagree.

One of the primary concerns of admiralty law is

uniformity and predictability. See American Dredging Co.

v. Miller, 510 U.S. 443, 450-51 (1994) (noting the

constitutionally based principle that admiralty law should be

“a system of law coextensive with, and operating uniformly

in, the whole country”) (quote The Lottawanna, 88 U.S. (21

Wall.) 558, 575 (1875)); Coats v. Penrod Drilling Corp..,

61 F.3d 1113, 1137 (Sth Cir. 1995) (“Uniformity and

predictability are important in admiralty. ...”). To avoid

the creation of multiple and conflicting rules of decision in

admiralty, the Fourth Circuit has stated that, “Absent reason

to do otherwise, we prefer to adopt rules in admiralty that

accord with, rather than diverge from, standard commercial

practice.” Finora Co. v. Amitie Shipping, Ltd., 54 F.3d

209, 213-14 (4th Cir. 1995). As discussed in more detail

below, standard commercial practice requires that a

transaction be predominantly for the sale of good before the

Appendix A-7

U.C.C. applies. See Coakley & Williams, Inc. v.

Shatterproof Glass Corp., 706 F.2d 456, 460 (4th Cir.

1983); Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir.

1974).

In its May 13, 1997 opinion, the district court correctly

noted that U.C.C. principles inform admiralty law. See

Southworth Mach. Co. v. F/V Corey Pride, 994 F.2d 37, 40

n.3 (1st Cir. 1993); Clem Perrin Marine Towing, Inc. v.

Panama Canal Co., 730 F.2d 186, 189 (Sth Cir. 1984).

However, we are unpersuaded by cases cited to support the

district court’s legal determination that U.C.C. § 2-207

applies to maritime transactions regardless of the nature of

the transaction. See Finora, 54 F.3d at 212 (adopting

U.C.C.’s actual notice provision in case involving lien on

subcharterer’s cargo, i.e., goods); Southworth Machinery

Co., 994 F.2d at 40 & n.3 (noting that U.C.C. is a general

source of admiralty law when assessing contract for sale of

goods); Clem Perrin Marine Towing, 730 F.2d at 188-89

(analogizing to U.C.C. when assessing option to purchase

vessel). Although the Fifth Circuit has stated in a footnote

that “in construing a contract for services, courts are free to

reason by analogy to [a U.C.C. warranty section],” the court

of appeals offered no support for its statement. Employers

Ins. of Wausau v. Suwannee River Spa Lines, Inc., 866

F.2d 752, 765 n.25 (Sth Cir. 1989). Furthermore, the

outcome of the Wausau case would have been the same

regardless of whether the U.C.C. or the common law

applied. Compared id., with Asphalt Int'l, Inc. v.

Enterprise Shipping Corp., 667 F.2d 261, 266 (2d Cir.

Appendix A-8

FAAP LOLOL PALI IS EOF LE OE LIE AES ISA BN

i al i ?

1981) (applying U.C.C. principles of contract interpretation

only after traditional common-law methods of contract

interpretation failed to produce a discernible result).

Given admiralty law's goals of uniformity and

predictability, we find that mixed maritime contracts for

goods and services are subiect to the same inquiry as land-

based mixed contracts. Therefore, a court must first

determine whether the predominant purpose of the

transaction is the sale of goods. Once this initial analysis

has been performed, the court then may properly decide

whether the common law, the U.C.C., or other Statutory law

governs the transaction. Cf. Little Beaver Enters. vy.

Humphreys Rys., 719 F.3d 75, 79 n.7 (4th Cir. 1983)

(noting that maritime contract for services was not covered

by U.C.C.); In re American Export Lines, Inc., 620 F.

Supp. 490, 515 (S.D.N.Y. 1985). This method accords with

standard commercial practice and lends predictability to

maritime contracts.

IV. THE GE-PRINCESS CONTRACT WAS

PREDOMINANTLY FOR SERVICES

In its order denying GE’s renewed motion for judgment

as a matter of law, the district court addressed GE’s

contention that the district court erroneously included

U.C.C. principles in its jury instructions. J.A. at 2021].

Both by motion and at trial, GE argued that the district

court was required to find that the sale of goods

predominated in the GE-Princess contract before employing

U.C.C, principles in its instructions.

Appendix A-9

Although the U.C.C. governs the sale of goods, the

U.C.C. also applies to certain mixed contracts for goods and

services. Whether a particular transaction is governed by

the U.C.C., rather than the common law or other statutory

law, hinges on the predominant purpose of the transaction,

that is, whether the contract primarily concerns the

furnishing of goods or the rendering of services. See

Coakley & Williams, 706 F.2d at 458 (“Whether the U.C.C.

applies turns on a question as to whether the contract .. .

involved principally a sale of goods, on the one hand, or a

provision of services, on the other.”); see also Long Island

Lighting Co. v. Imo Indus. Inc., 6 F.3d 876, 888 (2d Cir.

1993); Ryan v. Wersi Elecs. GmbH & Co.,'3 F.3d 174, 181

n.3 (7th Cir. 1993). Thus, before applying the U.C.C.,

courts generally examine the transaction to determine

whether the sale of goods predominates. See Coakley &

Williams, 706 F.2d at 458. Because the facts in this case

are sufficiently developed and undisputed, it is proper for

the Court to determine on appeal whether the GE-Princess

transaction was a contract for the sale of goods within the

scope of the U.C.C. Cf. Cambridge Plating Co. v. Napco,

Inc., 991 F.2d 21, 24 (1st Cir. 1993).

In determining whether goods or services predominate in

a particular transaction, we are guided by the seminal case

of Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974). In

holding the U.C.C. applicable, the Bonebrake court stated:

The test for inclusion or exclusion is not

whether they are mixed but, granting that

Appendix A-10

they are mixed, whether their predominant

factor, their thrust, their purpose, reasonably

stated, is the rendition of service, with goods

incidentally involved (e.g., contract with

artist for painting) or is a transaction of sale,

with labor incidentally involved (e.g.,

installation of a water heater in a bathroom). -

Bonebrake, 499 F.3d at 960. The Fourth Circuit has

deemed the following factors significant in determining the

nature of the contract: (1) the language of the contract;

(2) the nature of the business of the supplier, and (3) the

intrinsic worth of the materials. See Coakley & Williams,

706 F.2d at 460 (applying Maryland law).

It is plain that the GE-Princess transaction principally

concerned the rendering of services, specifically, the routine

inspection and repair of the SS Sky Princess, with

incidental-albeit expensive-parts supplied by GE. Although

Princess's standard fine-print terms and conditions mention

the sale of goods, J.A. at 76, Princess’s actual purchase

description requests a GE “service engineer” to perform

service functions: the opening of valves for survey and the

inspection of the ship’s port main turbine. J.A. at 75.

GE’s Final Price Quotation also contemplates service

functions, stating in large print on every page that it is a

“Quotation for Services.” J.A. at 107-09. The Final Price

Quotation’s first page notes that GE is offering a quotation

for “engineering services.” J.A. at 106. GE’s Quotation

further specifies that the particular type of service offered

Appendix A-11

is “Installation/Repair/Maintenance.” J.A. at 107. The

Final Price Quotation then lists the scope of the

contemplated work-opening, checking, cleaning, inspecting,

disassembling-in short, service functions. J.A. at 110; see

also J.A. at 1862-68 (listing service tasks actually

performed by GE). Although GE’s materials list shows that

GE planned to manufacture a small number of parts for

Princess, Princess appeared to have had most of the needed

materials onboard. J.A. at 111. Thus, the language of both

the Purchase Order and the Final Price Quotation indicates

that although GE planned to supply certain parts, the parts

were incidental to the contract’s predominant purpose,

which was inspection, repair, and maintenance services.

As to the second Coakley factor-the nature of the business

of the supplier-although GE is known to manufacture

goods, GE’s correspondence and Quotations came from

GE’s Installation and Service Engineering Department J.A.

at 97, 106, 115. Evidence at trial showed that GE’s

Installation and Service Engineering division is comprised

of twenty-seven field engineers who perform service

functions, such as overhauls and repairs. J.A. at 1076.

Finally, the last Coakley factor-the intrinsic worth of the

materials supplied-cannot be determined because neither

Princess’s Purchase Order nor GE’s Final Price Quotation

separately itemized the value of the materials. Instead, both

the Purchase Order and the Final Price Quotation blend the

cost of the materials into the final price of a services

contract, thereby confirming that services rather than

materials predominated in the transaction. Although not a

Appendix A-12

Coakley factor, it is also telling that. during oral argument.

Princess’s counsel admitted that the gravamen of Princess’s

complaint did not arise out of GE’s furnishing of deficient

parts, but rather out of GE’s deficient services. See J.A. at

23-27 (Princess’s Complaint stating that Princess’s damages

arose out of “GE’s inspection, supervision

recommendation . . . reinstallation and realignment of the

turbine unit.”); cf. Wells v. 10-X Mfg. Co., 609 F.2d 248,

255 (6th Cir. 1979). Accordingly, we find as a matter of

law that services rather than goods predominated in the GE-

Princess contract.

V. UNDER COMMON LAW, GE’S FINAL PRICE

QUOTATION WAS A COUNTEROFFER

ACCEPTED BY PRINCESS

The parties do not dispute that a contract was formed by

their exchange of documents. J.A. at 2020. And there is no

dispute that the GE-Princess contract for ship inspection and

repair is maritime in nature and governed by the substantive

law of admiralty. Kossick v. United Fruit Co., 365 U.S.

731, 735 (1961) (contract to repair ship is within admiralty

jurisdiction). _ However, the issue here-whether courts

should draw on U.C.C. principles or on common-law

doctrines when assessing the formation of a maritime

services contract-is undecided. When no federal statute or

well-established rule of admirably exists, admiralty law may

look to the common law or to state law, either statutory or

decisional, to supply the rule of decision. Byrd v. Byrd, 657

F.2d 615, 617 (4th Cir. 1981) (admiralty may look to state

law to supply rule of decision); Bell v. Tug Shrike, 332

Appendix A-13

F.2d 330, 334 (4th Cir. 1964) (in absence of maritime or

clear-cut common-law rule, court may look to state law for

rule of decision). Because the majority of states refer to

common-law principles when assessing contracts

predominantly for services, we choose to do the same.

Under the common law, an acceptance that varies the

terms of the offer is a counteroffer which rejects the

original offer. RESTATEMENT (SECOND) OF

CONTRACTS § 59 (1981) (“A reply to an offer which

purports to accept it but is conditional on the offeror’s

assent to terms additional to or different from those offered

is not an acceptance but is a counter-offer.”). Virginia

follows the same rule. See Chang v. First Colonial Savs.

Bank, 410 S.E.2d 928, 932 (Va. 1991). Here, GE’s Final

Price Quotation materially altered the terms of Princess’s

Purchase Order by offering a different price, limiting

damages and liability, and excluding warranties. Thus,

GE’s Final Price Quotation was a counteroffer rejecting

Princess’s Purchase Order. Although Princess could have

rejected GE’s counteroffer, Princess accepted the Final Price

Quotation by giving GE permission to proceed with the

repair and maintenance services, by not objecting to the

confirmatory letter sent by GE, and by paying the amount

set forth in GE’s Final Price Quotation, $231,925.00, rather

than the $260,000.00 price term set forth in Princess’s

Purchase Order. At common law, an offeror who proceeds

under a contract after receiving the counteroffer can accept

the terms of the counteroffer by performance. See Diamond

Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440, 1443

Appendix A-14

:

y

;

‘

:

f

é

>

%

%

2

(9th Cir. 1986) (citing C. Itoh & Co. (America) v. Jordan

Int'l Co., 552 F.2d 1228, 1236 (7th Cir. 1977); Durhan v.

National Pool Equip. Co. of Va., 138 S.E.2d 55, 58 (Va.

1964) (“Assent may be inferred from the acts and conduct

of the parties.”) (citations omitted). Although GE and

Princess never discussed the Purchase Order’s and Final

Price Quotation’s conflicting terms and conditions, both

Princess’s actions and inaction gave GE every reason to

believe that Princess assented to the terms and conditions

set forth in GE’s Final Price Quotation. See

RESTATEMENT (SECOND) OF CONTRACTS § 191)

(1981) (“The manifestation of assent may be made wholly

or partly by written or spoken words or by other acts or by

failure to act.”); Wells v. Weston, 326 S.E.2d 672, 676 (Va.

1985) (“The mental assent of [contracting] parties is not

requisite for the formation of a contract. . . . In evaluating

a party’s intent . . . we must examine his outward

expression rather than his secret, unexpressed intention.”)

(citations omitted). Accordingly. we find that the terms and

conditions of GE’s Final Price Quotation control liability

and damages in the GE-Princess transaction.

VI. THE VERDICT DEMONSTRATES THAT THE

JURY IMPERMISSIBLY RELIED ON A CONTRACT

OTHER THAN GE’S FINAL PRICE

QUOTATION

For the reasons stated above, the jury could only have

considered one contract in awarding damages: GE’s Final

Price Quotation. The Quotation restricted damages to the

contract price, $231,925.00, and eliminated liability for

Appendix A-.5

incidental or consequential damages and lost profits or

revenue. Moreover, GE’s Final Price Quotation controlled

the warranties available to its customers. Yet the jury

awarded $4,577,743.00 in damages to Princess. This

verdict demonstrates that the jury relied on Princess's

Purchase Order or some other contract when awarding

damages. See J.A. at 2025 (district court opinion noting

that “the jury either found that Princess’[s] Purchase Order

governed or that neither parties’ document established the

complete contract”). As a matter of law, the jury could

only have awarded damages consistent with the terms and

conditions of GE’s Final Price Quotation and could not

have awarded incidental or consequential damages. By

requesting that the Court award Princess the maximum

amount available under the Final Price Quotation, see

Appellant’s Brief at 39-40; Appellant’s Reply Brief at 20,

GE conceded that is breached its contract with Princess and

that damages consistent with its Final Price Quotation are

appropriate. Accordingly, we find it unnecessary to remand

for a new trial on this issue. We reverse the district court’s

decision denying GE’s motion for judgment as a matter of

law and remand for entry of judgment against GE in the

amount of $231,925.00, interest to accumulate from the date

of the original judgment.

REVERSED AND REMANDED

Appendix A-16

APPENDIX B

UNITED STATES DISTRICT COURT

FOR THE

EASTERN DISTRICT OF VIRGINIA

NORFOLK DIVISION

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Norfolk Division

PRINCESS CRUISES, INC.,

Plaintiff,

v. CIVIL ACTION NO.

2:96cv391

GENERAL ELECTRIC

COMPANY,

Defendant,

OPINION AND ORDER

On April 22, 1996, Princess Cruises, Inc.

(“Princess”), filed a Four-Count Complaint against General

Electric Company (“GE”) alleging: (1) breach of contract;

(2) breach of express warranty; (3) breach of implied

maritime warranty; and (4) negligence. The Court granted

GE’s Motion for Summary Judgment as to Princess’

negligence claim, but denied the parties cross-motions for

partial summary judgment as to the contract claims. On

January 16, 1997, following the Plaintiff's presentation of

evidence, GE made a Motion for Judgment as a Matter of

Law. The Court heard arguments and denied the motion.

On January 23, 1997 following the conclusion of the

defendant’s presentation of evidence, the Court again denied

GE’s Motion for Judgment as a Matter of Law.

Appendix B-1

On January 24, 1997, a jury returned a judgment in

favor of Princess in the amount of four million, five

hundred seventy-seven thousand, seven hundred and forty-

three dollars ($4,577,743.00). On February 3, 1997, GE

filed a Renewed Motion for Judgment as a Matter of Law.

Both parties thoroughly briefed the issues and the Court

heard oral arguments on May 6, 1997. Following oral

arguments the Court, ruling from the bench, DENIED GE’s

Renewed Motion for Judgment as a Matter of Law. This

opinion will further explain the Court’s rationale.

I,_ Facts.

The facts derived from the evidence presented at

trial are substantially the same as those stated in the Court’s

December 23, 1996, Order denying the parties cross-

motions for partial summary judgment. Princess’ cruise

ship, the S.S. Sky Princess (the “Ship”) was scheduled for

routine inspection services and repairs in December 1994,

at Norfolk Shipbuilding & Drydock Corporation’s

(“Norshipco”), facility in Portsmouth, Virginia. Princess

requested that GE, the original manufacturer of the Ship’s

main turbines, prepare and estimate for the inspection work

to be performed. On July 13, 1994, GE prepared a Rough

Order of Magnitude (“ROM”) for the scheduled inspection

and services. The parties agree that the ROM was not a

contract, but merely an estimate for information purposes.

Around the end of September 1994, Richard Neary,

GE’s Proposal Engineer, requested that Michael Stephen-

McRae, Princess’ representative, provide some assurance

Appendix B-2

that GE would be awarded the inspection contract. In

response, Princess issued a Purchase Order which GE

received on October 24, 1994. The Purchase Order

included a proposed contract price of $260,000.00 and

contained a brief description of the work to be performed.

The reverse side of the Purchase Order contained a list of

Princess’ terms and conditions. These terms and conditions

indicated that the Purchase Order was intended to be an

offer and provided that: (1) the Purchase Order could be

accepted through either acknowledgment or performance;

(2) the terms and conditions could not be changed

unilaterally; and (3) the Seller would provide a warranty of

workmanlike quality and fitness for the use intended.

On October 24, 1994, the same day that GE received

the Purchase Order, GE telefaxed a Fixed Price Quotation

to Princess. This Quotation provided a more detailed work

description than the Princess’ Purchase Order, a parts and

materials-list, an offering price of $201,888.00, and GE’s

own terms and conditions. Later that same day, GE

reviewed Princess’ Purchase Order and discovered that it

requested work not contemplated by GE when calculating

the offering price in its Quotation. GE notified Princess of

the same, and on October 28, 1994, telefaxed a Final

Quotation to Princess, offering to provide all the requested

services for $231,925.00, approximately $30,000.00 less

than the offering price of Princess’ Purchase Order, but

approximately $30,000.00 more than GE’s original

quotation.

Appendix B-3

Attached to both of GE’s Quotations was a copy of

GE’s own terms and conditions. These terms and

conditions purported to: (1) reject any terms and conditions

set forth in a Customer's purchase order; (2) reject any

liquidated damages; (3) limit GE’s liability to the repair or

replacement of any defective goods or damaged equipment

resulting from defective service, exclusive of all written,

oral, implied or statutory warranties; (4) limit GE’s liability

on any claims to not more than the greater of either five

thousand dollars ($5,000.00) or the contract price; and

(5) disclaim any liability for consequential damages, loss

profits or lost revenue.

Neither Princess nor GE ever indicated written or

verbal acceptance of the other party’s terms and conditions.

On November 1, 1994, GE did send a letter to Princess

acknowledging receipt of its Purchase Order and expressing

GE’s interest to perform the services. However, the letter

also restated GE’s $231,925.00 offering price from its Final

Quotation, and specified that GE’s terms and conditions,

attached to the letter were to govern the contract.

In December 1994, the Ship arrived at Norshipco’s

facilities in Portsmouth, Virginia. While performing the

inspection and repairs, GE noted surface rust on the rotor

and recommended that it be taken ashore to Norshipco for

fly-ash blast cleaning and balancing. The parties agree that

during this fly-ash cleaning, Norshipco unevenly and

excessively removed good metal from the rotor and, as a

result, the rotor was no longer properly balanced.

Appendix B-4

eee

a ae ts pot Re MEN. ge CU eg Nos ee a eg Oe ae gee ge ge eee Mee ee op ee eee ee

Attempting to correct the imbalance, GE choose to supply

and reinstall new balance weights matching original factor

specifications, rather than low speed balance the rotor or

delay the ships departure while waiting for a high speed

balance to become available. Upon departing Norshipco on

December 18, 1994 the Ship experienced excessive

vibration and was forced to return to port on December 19,

1994. GE shipped the rotor to its facility in Richmond,

Virginia for inspection, blast cleaning and balancing. The

rotor was reinstalled and other services, intended to

eliminate the vibration, were completed by December 28,

1994. Nevertheless, Princess was forced to cancel a ten-day

Christmas cruise as a result of the delay. Princess presented

evidence that continued vibration and high temperatures

caused damage to the rotor shaft, bearings, and labyrinth,

forcing additional repairs and the cancellation of a ten-day

Easter cruise.

Il. Standard of Review for a Judgment as a

Matter of Law.

A court may only grant a motion for judgment as a

matter of law if, viewing the evidence in the light most

favorable to the non-moving party and drawing every

legitimate inference in that parties’ favor, the court

determines a reasonable trier of fact could only find in

favor of the moving party. Tools USA and Equip. Co. v.

Champ Frame Straightening Equip. Inc., 87 F.3d 654, 656-

657 (4th Cir. 1996) (internal quotations and citations

omitted).

Appendix B-5

lil. ANALYSIS.

Princess and GE agree that they had a contract

obligating GE to perform the services and supply the parts

rendered during the December 1994 refit. The parties

disagree as to whether Princess’ Purchase Order or GE’s

Final Quotation was the governing document. Most of the

arguments advanced by GE in its Renewed Motion for

Judgment as a Matter of Law are identical to the arguments

it advanced in the motion for partial summary judgment and

its motions for judgment as a matter of law at the close of

plaintiff's case and the close of all evidence. GE maintains

that (1) its Final Quotation and terms and conditions, not

Princess’s Purchase Order, constitute the governing contract,

and (2) that the Court erroneously included Uniform

Commercial Code (“UCC”) principles in its instructions to

the jury.

A. Did GE’s Final Quotation Govern as a Matter

of Law?

As the Court stated in its December 23, 1997, Order

denying the parties’ cross-motions for partial summary

judgment:

The parties have presented no

conclusive evidence that either party

gave written or verbal acceptance of

the other party’s offer, or their terms

and conditions. In such cases, where

the manifestations of a bargained-for

exchange must be deciphered form

Appendix B-6

ig ce WGN ge we ey Os gi tee, Rneaera naa AE a ee Reg Aes es ee Oe ee ge st eal

protracted negotiations involving an

exchange of offers, letters, telefaxes,

acts, and spoken words, the dispute is

quintessentially about the respective

parties’ state of mind. See

Charbonnages de France _v. Smith,

597 F.2d 406, 414-415 (4th Cir.

1979). These states of mind, and the

conflicting interpretations that can be

drawn from their manifestations,

present genuine disputes as to

material issues of fact that preclude

summary judgment. Id. While the

Court FINDS that summary

judgment is not appropriate, this may

not necessarily be an issue for the

jury. If, at the conclusion of the

presentation of evidence at trial, the

parties’ intentions as to the contract

terms have become so unequivocally

clear that no genuine issue of fact

remains, the Court may find these

terms as a matter of law.

The evidence produced at trial did not unequivocally reveal

the parties’ intentions as to the contract terms. Drawing

every legitimate inference in favor of Princess, the non-

moving party, the Court cannot find as a matter of law that

GE’s Final Quotation and GE’s terms and conditions

constituted the governing contract. Some of the evidence

Appendix B-7

supported GE’s position, but other evidence allowed the

trier of fact to infer that Princess’ Purchase Order, or

neither parties’ document constituted the complete contract.

B. The Applicability of UCC Principles.

GE’s other argument is that the Court erroneously

applied UCC principles to what GE characterizes as a

service contract not governed by the UCC.' GE maintains

| The Court is not persuaded by the two federal decisions relied

upon by GE which make references in footnotes or dicta to the

general proposition that service contracts are not governed by the

UCC. See, Little Beaver Enterprises v. Humphreys Railways

Inc., 719 F.2d 75 (4th Cir. 1983); Employers Ins. of Wausau v.

Suwannee River Spa Lines, Inc., 866 F.2d 752 (Sth Cir. 1989).

In Little Beaver, the Fourth Circuit affirmed a district court

judgment allowing the plaintiff to recover on its service contract

even though it failed to strictly comply with the contract’s 30-day

written notice of defect requirement. Despite the plaintiffs

failure to provide written notice, the court found that the

defendant had received actual notice of the defective

workmanship, acted upon that notice, and had a reasonable

opportunity to effect repairs. Id. at 78-79. That court

distinguished, Standard Alliance Industries, Inc. v. Black Clawson

Co., 587 F.2d 813 (6th Cir. 1978), cert. denied, 441 U.S. 923

(1979), relied upon by the defendant for the proposition that

actual notice did not relieve the plaintiff of the duty to provide

written notice. The issue in Standard Alliance was whether the

defendant received any notice of the post repair defect. The

defendant in Standard Alliance was notified of a defect, spent

five months successfully curing the defect, and received no notice

of a subsequent breach after it discontinued repair work. 587

F.2d at 824-825. On the other hand, the Little Beaver defendant

clearly received notice. The issue in that case was whether the

defendant’s actual notice and failure to act constituted a waiver

Appendix B-8

that the Mirror Image Rule and the Last Shot Doctrine,

rather than UCC § 2-207, should govern contract formation

in this case. Specifically, GE maintains that as a matter of

law, GE’s Final Quotation was a counteroffer which was

accepted when Princess allowed GE to provide the parts and

services.

In the case at hand, where a hybrid contract calls for

services involving the provision or replacement of parts, it

is difficult to label such a contract as one for goods or

services. See Employers Ins. of Wausau _v. Suwanne River

of the explicit written notice requirement in the contract. In

short, the court in Little Beaver stated the basic proposition that

the UCC only governs sales contracts while distinguishing a

factually inapplicable case. 719 F.2d at 79 n.7. The Little

Beaver opinion says nothing about the-applicability of the UCC

to Maritime contracts.

In Suwannee River, 866 F.2d 752 (Sth Cir. 1989), the

other case relied upon by GE, the Fifth Circuit held that the

economic loss rule adopted in the East River case precludes

recovery in maritime tort for purely economic loss stemming

from negligent performance of a contract for professional services

rendered as part of the construction of a vessel. Id. at 764

(referencing East River $.S. Corp. v. Transamerica Delaval, Inc.,

476 U.S. 858 (1986)). Arguing that East River should be lin:ited

to sales contracts, the plaintiff maintained that while the implied

warranties provided by the UCC may provide an adequate

replacement for the imposition of tort duties when a defective

product injures itself, no such warranties apply to service

contracts not governed by the UCC. Id. The court rejected this

argument in the commercial context where the parties are free to

bargain for express warranties. Id. In so doing, the court noted

that in construing a contract for services courts are free to reason

by analogy to the UCC. Id. at 764 n. 25.

Appendix B-9

Spa Lines, Inc., 866 F.2d 752, 764 n.25 (Sth Cir. 1989).

However, it is unnecessary for the Court to determine

whether the contract is primarily one for goods or services.

In either case, the UCC is regarded as a source of federal

admiralty law. Southworth Machinery Co., Inc. V.F/V

Corey Pride, 994 F.2d 37, 40 n.3 (Ist Cir. 1993); Clem

Perrin Marine Towing, Inc. v. Panama Canal Co., 730 F.2d

186, 189 (Sth Cir. 1984) (citations omitted). In deciding to

apply UCC principles to an admiralty case, the Fourth

Circuit has stated that “|a]bsent reasons to do otherwise, we

prefer to adopt rules in admiralty that accord with, rather

than diverge from standard commercial practices.” Finora

Company, Inc., v. Amitie Shipping, Ltd., 54 F.d. 209, 213-

214 (4th Cir. 1995). While the UCC does not expressly

govern maritime service contracts, “in construing a contract

for services, courts are free to reason by analogy to [the

UCC].” Suwannee River, 866 F.2d at 765 n.25.

In the case at hand, the Court was presented with a

classic battle of the forms. The parties agree that a contract

existed for the work performed on the Ship. The jury was

instructed that they could find form the evidence that

Princess’ Purchase Order or GE’s Quotation constituted the

governing contract, or that neither document established a

complete contract. Seeking legal standards to help guide

the jury in their task of constructing a contrac’ from the

evidence presented at trial, the Court simply applied

exchange of form principles that conformed to the UCC.

See Finora, 54 F.3d at 213-214.

Appendix B-10

Applying the Court's instructions, the jury either

found that Princess’ Purchase Order governed or that

neither parties’ document established the complete contract.

In either case, viewing the evidence in the light most

favorable to Princess, the Court cannot find as a matter of

law that the jury’s verdict is not supported by the evidence.

Accordingly, GE’s Renewed Motion for Judgment

as a Matter of Law is DENIED.

The Clerk is REQUESTED to send a copy of this

Order to counsel for both parties.

It is so ORDERED.

HENRY COKE MORGAN, JR.

UNITED STATES DISTRICT JUDGE

Norfolk, Virginia

May 12, 1997

Appendix B-11