Appendix — BMC Industries, Inc. v. Barth Industries, Inc.

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APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE ELEVENTH

CIRCUIT DATED NOVEMBER 18, 1998

BMC INDUSTRIES, INC., Plaintiff-Appellee,

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BARTH INDUSTRIES, INC., Nesco, Inc., f.k.a.

Nesco Management, Inc., Barth

Industries Co. Limited Partnership, BIC

Corporation, Nesco Holdings, Inc.,

f.k.a. Nesco, Inc., Defendants-Appellants.

Nos. 95-5137, 95-5338.

United States Court of Appeals,

Eleventh Circuit.

Nov. 18, 1998.

* cd *

Before TJOFLAT and BARKETT, Circuit Judges, and

GODBOLD, Senior Circuit Judge.

TJOFLAT, Circuit Judge:

This appeal arises from a contract entered into between

BMC Industries, Inc., and Barth Industries, Inc., for the

design, manufacture, and installation of equipment to

automate BMC’s production line for unfinished eyeglass

lenses. Eighteen months after the delivery date set out in the

contract had passed, BMC filed suit against Barth for breach

of contract.' Barth, in turn, counterclaimed for breach of

1. As indicated in the text, infra, in addition to suing for breach

of contract, BMC sought judgment against Barth on a variety of legal

theories. All stemmed from the parties’ contractual relationship.

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contract. BMC’s suit also included a claim against Barth’s

parent company, Nesco, Inc.* According to BMC, Nesco had

orally promised to ensure Barth’s completion of the contract,

and therefore was liable under the theory of promissory

estoppel for Barth’s nonperformance.

A jury resolved the breach of contract and promissory

estoppel issues in favor of BMC, and returned a verdict of

$3 million against Barth and $2.1 million against Nesco. After

denying Barth’s and Nesco’s alternative motions for judgment

as a matter of law and for a new trial, the district court

rendered judgment in accordance with the jury’s verdicts,

and Barth and Nesco appealed. We affirm the district court’s

decision denying Barth judgment as a matter of law. We

conclude, however, that the court erroneously instructed the

2. After BMC and Barth entered into the contract in question

here, Barth reorganized its corporate structure. Barth Industries, LP,

a limited partnership, was formed and received all of the assets and

liabilities of Barth Industries, Inc. Barth Industries, Inc., then

dissolved. Additionally, Nesco, Inc., which was the sole shareholder

of Barth Industries, Inc., changed its name to Nesco Holdings, Inc.,

and became a limited partner of Barth Industries, LP, holding a 99%

interest in the partnership. The remaining one percent interest was

acquired by BIC Corporation, the limited partnership’s general

partner.

In its suit against Barth Industries, Inc., and Nesco, Inc., BMC

named seven other parties, including Barth Industries, LP, and BIC

Corporation, as defendants. By the time of trial, BMC had dismissed

five of the seven from the case. The final judgment in this case was

entered against Barth Industries, Inc. and Nesco Holdings, Inc. For

ease of discussion, we refer to the Barth entities collectively as

“Barth,” and the Nesco entities collectively as “Nesco.”

pause HSS

Appendix A

jury on the contract issues, and therefore vacate the judgment

against Barth and remand the case for a new trial on these

issues. As for Nesco, we conclude that the court should have

granted Nesco judgment as a matter of law, and thus direct

the district court to dismiss Nesco from this case.

BMC, through its Vision-Ease division, manufactures

semi-finished polymer opthalmic lenses that are used in the

production of eyeglasses. These lenses are created by an

assembly-line process. First, an employee fills a mold

assembly with a monomer fluid, and places the mold assembly

on a conveyor. Next, the assembly is inspected and then

heated and cured until the monomer solidifies into a plastic

lens. Finally, the lens is removed from the mold assembly

through a process called “de-clipping and de-gasketing”; an

employee removes the spring clip holding the mold assembly

together and slices open the rubber gasket that holds the lens.

The lens is then packaged and sold to a finished eyeglass

retailer.

In order to decrease labor costs, and thereby remain

competitive with other lens manufacturers who were utilizing

cheaper foreign labor, BMC decided to become the first

company to automate portions of its lens manufacturing

process. Consequently, in early 1986, BMC commissioned

Barth to complete a preliminary design and feasibility study.

Barth’s subcontractor, Komech, finished the study in June

1986. Based on this study, Barth and BMC entered into a

contract (the “Contract”) which provided that Barth would

Appendix A

“design, fabricate, debug/test and supervise field installation

and start up of equipment to automate the operations of mold

assembly declipping, clip transport, mold assembly clipping,

and mold filling.” The Contract, which stated that it was

governed by Florida law, listed a price of $515,200 and

provided for delivery of four automated production lines by

June 1987. The Contract also stated that time was of the

essence.

On November 4, 1986, Barth and BMC executed a written

amendment to the Contract, extending the delivery date by

one month. In February 1987, Barth terminated Komech as

design subcontractor, and hired another engineering company,

Belcan, in its place. Belcan subsequently redesigned the

automation equipment, which delayed Barth’s progress and

led the parties to execute the second (and last) written

amendment, which extended the delivery date to “October

1987.”

After this second amendment, Barth continued to

experience technical problems and design difficulties that

caused repeated delays. The parties did not extend the delivery

date beyond October 1987 to accommodate these delays,

however. Instead, Barth and BMC each demonstrated a

willingness to continue performance under the Contract.

One such delay, for example, occurred in June 1987,

when Belcan decided that the equipment design posed a risk

of explosion because of the proximity of certain chemicals

to electrical components. Although BMC perceived no such

risk, it told Barth and Belcan to “go ahead” and redesign the

equipment. Barth revised its estimated delivery schedule to

Appendix A

account for the resulting delay, listing December 1987 as the

new delivery deadline. It sent this schedule to BMC with a

cover letter that stated: “Please look over the attached & let

me know what you think.” BMC’s response, if any, is not

contained in the record.

This design problem was only one of many technical

difficulties that developed; other problems arose with the

filling nozzles and mold assembly springs, among other

components. Consequently, by October 1987, the amended

Contract’s delivery deadline, Barth estimated that it could

not deliver the equipment until April 1988. BMC executives

were still anxious, however, to continue the automation

project. Thus, during the spring of 1988, although they

protested Barth’s failure to deliver the equipment on time,

these executives encouraged Barth to continue working on

the project.

In June 1988, Barth completed the four automated de-

clip/de-gasket machines and delivered them to BMC. Without

the entire automated system, however, BMC could not fully

test these machines; the whole production line had to be in

place.

By August 1988, BMC’s mounting apprehension about

Barth’s ability to perform led it to seek assurance that Barth

would be able to complete performance under the Contract.

In an effort to obtain such assurance, BMC executives met

with Robert Tomsich, a Barth officer (and director) who also

served as Nesco’s president.’ According to these executives,

3. In addition, Tomsich was the chairman and sole shareholder

of Nesco.

Appendix A

Tomsich ensured them that Barth would perform the Contract,

that Nesco’s resources were committed to the project, and

that, in the future, BMC should deal directly with Nesco.

Although BMC had considered terminating the Contract

and suing Barth for breach, BMC took neither step.* Instead,

it continued to lead Barth and Nesco to believe that it was

determined to finish the project; BMC collaborated with

Barth’s engineers to overcome difficulties, suggested design

changes, and asked Barth whether more money (presumably

provided by BMC) would help it complete the equipment in

less time.

By January 1989, Barth still had not produced a

functioning automation system. Due to time and cost

overruns, Barth had invested over $1 million of its own money

in the project. BMC previously had agreed to compensate

Barth for these additional expenses; consequently, during that

month, Tomsich asked BMC for $250,000 to cover some of

Barth’s cost overruns. One month later, BMC responded with

a $100,000 payment, along with a letter stating that BMC

was “insisting on Barth’s adherence to the projected

schedule,” and was “not waiving any rights or remedies” for

any breach, including “Barth’s failure to meet the delivery

dates specified in the contract.” Barth’s latest schedule called

for delivery in June 1989.

4. At trial, BMC offered the deposition testimony of its

corporate general counsel, who stated that BMC was unwilling to

continue the project unless Nesco ensured that the project would be

completed.

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Appendix A

Barth’s delays and setbacks continued throughout the

spring of 1989; but while BMC encouraged Barth to carry

on, and continued to cooperate with Barth’s engineers to solve

problems, BMC also became increasingly impatient. In

March, and again in April 1989, BMC pointed out Barth’s

unacceptable failure to meet deadlines.

Near the end of May 1989, Barth notified BMC that it

had finally completed the mold assembly filling machine and

that it would deliver the equipment F.O.B. Barth’s dock in

accordance with the Contract. BMC refused delivery of the

mold assembly filler, and instead filed this lawsuit on June

5, 1989.

BMC’s complaint’ contained fourteen counts.* Seven of

the counts were based on representations made by Barth and

5. Throughout this opinion, our references to BMC’s complaint

indicate BMC’s Second Amended Complaint.

6. Our description of BMC’s claims is hindered by the manner

in which it pled its complaint. The complaint contains 154 paragraphs,

the first 60 of which narrate the representations made by the parties

prior to the formation of the Contract and what transpired between

BMC and Barth, and BMC and Nesco, thereafter. Each of the 14

counts incorporates by reference these 60 paragraphs, regardless of

whether the allegations thereof have any bearing on the legal theory

(or theories) of recovery on which the count purports to be based.

Moreover, each successive count incorporates by reference all of

the allegations of the previous count; thus, count XIV incorporates

verbatim counts I through XIII. Among the theories of recovery BMC

(Cont’d)

Appendix A

Nesco both prior to the formation of the Contract and during

its performance, six of the counts sought to impose liability

on Barth’s and Nesco’s successors in interest,’ and one count

sought recovery against Barth’s directors under the Delaware

Corporate Code. By the time of the final pretrial conference,

BMC’s complaint had been reduced to three claims:

breach of contract against Barth (count I), fraudulent

(Cont'd)

advanced in its case against Barth were breach of contract (count I);

fraudulent misrepresentation (which induced BMC to enter into the

Contract) (count II); false advertising, in violation of Fla. Stat. ch.

817.41 (count III); violation of Florida’s Deceptive and Unfair Trade

Practices Act, Fla. Stat. ch. 501.204 (count IV); and “Revocation of

Acceptance” (count V). Although BMC’s case against Nesco based

on its involvement in Barth’s performance of the Contract (count

VIIL) was labeled “Equitable and Promissory Estoppel,” we conclude

that BMC’s assertion is legally equivalent to a claim that in August

1988 Nesco guaranteed Barth’s performance of the Contract after

Barth breached the Contract by failing to meet its October 1987

deadline (according to BMC’s breach of contract claim in count 1).

BMC’s complaint is a quintessential example of what we and

other courts have characterized as “shotgun pleading.” See, e.g.,

Cramer v. Florida, 117 F.3d 1258, 1263 (11th Cir.1997); Mason v.

Allen (In re Allen), 150 B.R. 21, 22 (Bankr.E.D.Va.1993). Barth

and Nesco responded in kind, rather than seeking a more definite

statement or moving the district court to strike the immaterial

allegations of the complaint. Given the defendants’ willingness to

answer the complaint as pled, the district court should have intervened

on its Own initiative and required the plaintiff to replead its case.

7. The counts that BMC lodged against Barth’s and Nesco’s

suCCeSssors in interest were premature in that they assumed that BMC

had recovered money judgments against Barth (on one or more

theories of liability asserted against Barth) and Nesco, and that these

successors, having acquired Barth’s and Nesco’s assets, had rendered

Barth and Nesco incapable of satisfying its judgment.

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Appendix A

misrepresentation against Barth (count II), and promissory

estoppel against Nesco (count VIII).

BMC’s breach of contract count alleged that the second

written amendment to the Contract established October 1987

as the deadline for Barth’s performance. Because Barth failed

to deliver the automated equipment by that date, Barth was

in default of its contractual obligations. BMC sought damages

for Barth’s breach in the sum of $6.4 million. Two separate

injuries suffered by BMC comprised this measure of damages.

First, BMC sought to recover the labor costs that it would

have saved had it been able to use the automated equipment

rather than pay employees to produce the lenses manually.

Because BMC executives predicted that the automated

equipment would have a useful life of ten years, BMC sought

these lost labor savings for the ten year period from October

1987 until October 1997. Second, BMC sought compensation

for what it termed the “working capital effect.” This effect is

an estimate of the money BMC lost because its capital was

tied up paying higher labor costs rather than being used for

investment or being used to pay off the company’s debt (and

thus reducing the interest BMC paid to its creditors).

As an affirmative defense to BMC’s breach of contract

claim, Barth asserted that BMC’s conduct after the October

1987 delivery date had passed amounted to a waiver of the

delivery date under Article 2 of the Uniform Commercial!

Code (“UCC”).* Although Barth failed to deliver the

8. Florida has adopted its own version of the UCC. See Fla.

Stat. chs. 670.101-680.111 (1997). For purposes of this opinion,

“UCC” refers to Florida’s version of the code. Florida’s version of

UCC’s Article 2 is enacted as Fla. Stat. ch. 672.101-724 (1997).

This opinion refers to the UCC and Article 2 interchangeably.

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Appendix A

machines by October 1987, Barth argued, BMC executives

urged Barth to keep working, BMC engineers continued to

assist Barth in overcoming technical problems, and BMC

executives agreed to increase the purchase price. Therefore,

Barth claimed, BMC waived its entitlement to delivery of

the machines in October 1987.

Additionally, Barth counterclaimed against BMC for

breach of contract. Barth repeated its argument that BMC’s

conduct amounted to a waiver of the October 1987 delivery

date, and asserted that the delivery deadline therefore became

indefinite. Because Barth tendered the machines within a

reasonable amount of time, Barth substantially performed its

contractual obligations. Consequently, Barth claimed, BMC’s

refusal to accept delivery of the machines in May 1989

constituted breach of the Contract. Barth sought damages

totaling $1.13 million, which consisted of the original

purchase price of $515,200 specified in the Contract, plus

Barth’s cost overruns that BMC had agreed to reimburse.

BMC’s fraudulent misrepresentation count alleged that

Barth induced BMC into signing the Contract by making

several false representations. Among them were Barth’s

statements that it had experience in designing and

manufacturing custom machinery similar to the automated

equipment BMC sought to purchase, that it had the ability to

design and manufacture the automated equipment, and that

the equipment would function according to the specifications

in the Contract. BMC sought judgment on this claim for

compensatory damages in the sum of $6.4 million, as well as

punitive damages.

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As an affirmative defense, Barth responded that BMC

fraudulently failed to inform Barth of problems BMC was

unable to solve in its manual lens production process, and

that BMC misrepresented that problems experienced by the

automated equipment did not occur when BMC produced

lenses manually. Barth claimed that it would not have

entered into the Contract had BMC not made these

misrepresentations; BMC’s own fraud, therefore, barred BMC

from recovery on its claims against Barth. Barth also

counterclaimed against BMC for fraud, and sought both

compensatory and punitive damages.

BMC’s promissory estoppel count against Nesco alleged

that in August 1988 (after Barth was already in breach for

failure to deliver the equipment by the October 1987 delivery

date), Nesco promised to commit its resources to the project

and become jointly responsible with Barth for its completion.

BMC alleged that it was prepared to terminate the contract

and sue Barth for breach, but Nesco’s promise induced BMC

to delay from taking either step in order to allow Barth and

Nesco additional time to perform. Consequently, BMC

claimed, Nesco was liable for Barth’s breach of the Contract.

In response, Nesco argued that BMC’s promissory

estoppel claim was barred by Florida’s statute of frauds.

Nesco asserted that BMC’s claim was equivalent to a claim

that Nesco orally guaranteed Barth’s performance after that

performance was already past due. Because a guarantee of a

past-due debt is unenforceable unless it is reduced to writing,

Nesco claimed, the statute of frauds barred BMC’s claim.

At the pretrial conference, the district court concluded

that the Contract was predominantly a transaction in services

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Appendix A

rather than goods, and therefore held that Article 2 of the

UCC did not apply. Instead, Florida common law would

govern the Contract. That law does not recognize a waiver of

a contract term unless the waiver is supported by detrimental

reliance or consideration. Consequently, in order to establish

a waiver of the October 1987 delivery date, Barth would have

to show that it detrimentally relied on, or gave consideration

for, BMC’s waiver of the delivery date.

The case proceeded to trial on the breach of contract,

fraudulent misrepresentation, and promissory estoppel issues.

At the close of evidence, the district court concluded

that there was insufficient evidence of fraudulent

misrepresentation by either BMC or Barth, and therefore

dismissed each side’s fraud claims.

The court submitted the remaining issues to the jury using

a special verdict form that contained eight interrogatories. In

response to the first interrogatory, which asked, “Did Barth

breach its contract with BMC?” the jury answered

affirmatively, and awarded BMC $3,001,879 in damages. The

jury also answered “Yes” to the third interrogatory, which

asked, “Is Nesco liable to BMC on the basis of promissory

estoppel?” and awarded BMC an additional $2,137,453 in

damages. The jury responded “No” to the remaining

interrogatories, which asked whether BMC was liable on

Barth’s counterclaims.

On appeal, Barth contends that the district court erred

when it concluded that the UCC did not apply to the Contract,

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and thus did not govern the waiver issue. Had the court

applied the UCC, Barth argues, it would have concluded that

BMC waived the October 1987 delivery date, and therefore

breached the Contract by refusing to accept delivery in May

1989.° Having reached that conclusion, the court would have

granted Barth’s motion for judgment as a matter of law on

the breach of contract issues, and awarded Barth damages in

the sum of $1.13 million. Assuming a dispute of material

fact on the waiver issue, Barth contends alternatively that

BMC’s judgment on the breach of contract count should be

vacated, and the case remanded for a new trial on that count

and its breach of contract counterclaim.

Nesco contends that BMC’s promissory estoppel claim

is nothing more than a suit on an oral guarantee of a past-due

obligation and, as such, is barred by the statute of frauds.

Accordingly, the district court erred in denying its motion

for judgment as a matter of law, and the case should be

remanded with instruction that the court dismiss it from the

case.'°

In part II.A of this opinion, we consider whether the

Contract was predominantly a transaction in goods (and thus

9. Barth argues that BMC’s rejection of the machines constitutes

a breach because BMC failed to provide reasonable notice of

termination as required by the UCC.

10. Nesco also claims that: (1) the evidence was insufficient to

support BMC’s claim against Nesco, and (2) even if Nesco is liable,

its liability can only be joint and several with Barth’s because of a

pre-verdict stipulation entered into by the parties, as well as

statements by BMC that it sought only joint and several liability.

Given our disposition, it is unnecessary to discuss these points.

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governed by the UCC) or in services (and thus governed by

the common law), and conclude that it was a transaction in

goods. In part I].B we examine whether BMC waived the

October 1987 delivery date through its conduct after the

delivery date had passed. We conclude that BMC waived the

delivery date as a matter of law, but that a triable issue of

fact remains as to whether Barth tendered the equipment

(which BMC rejected) within a reasonable time under the

circumstances. We therefore vacate the judgment entered

against Barth, and remand the case for a new trial on the

reasonableness issue.'' Finally, in part II] we determine

whether BMC’s promissory estoppel claim against Nesco is

barred by the statute of frauds. We conclude that it is barred,

and therefore direct the district court to grant judgment for

Nesco.

I].

The district court held that the Contract was

predominantly for services rather than goods, and that the

UCC was therefore inapplicable. We disagree.

The UCC’s Article 2 only applies to “transactions in

goods.” Fla. Stat. ch. 672-102 (1997). Goods are defined as

“all things (including specially manufactured goods) which

are movable at the time of identification to the contract for

sale other than the money in which the price is to be paid,

investment securities (chapter 678) and things in action.” Fla.

11. In remanding the case for a new trial, we necessarily affirm

the district court’s denial of Barth’s motion fur judgment as a matter

of law on the breach of contract claims (brought by BMC and Barth).

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Stat. ch. 672.105(1) (1997)."* A contract that is exclusively

for services, therefore, is not governed by Article 2. Courts

are frequently faced, however, with contracts involving both

goods and services — so-called “hybrid” contracts. Most

courts follow the “predominant factor” test to determine

whether such hybrid contracts are transactions in goods, and

therefore covered by the UCC, or transactions in services,

and therefore excluded.'? See Bonebrake v. Cox, 499 F.2d

951, 960 (8th Cir.1974). Under this test, the court determines

“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).”"* Id.

(footnotes omitted). At least one Florida court has implicitly

12. “Identification to the contract” occurs “when goods are

shipped, marked or otherwise designated by the seller as goods to

which the contract refers.” Fla. Stat. ch. 672.501(1)(b) (1997)

(discussing identification in the context of receiving an insurable

interest in goods).

13. A few courts do not categorize hybrid contracts as either

transactions in goods or services, but rather apply the UCC only to

the sale of goods elements of the contract. See, e.g., Foster v.

Colorado Radio Corp., 381 F.2d 222, 226 (10th Cir.1967).

14. We note that at least some courts believe the trend is to

apply Article 2 to hybrid contracts. See Cambridge Plating Co. v.

Napco, Inc., 991 F.2d 21, 24 (1st Cir.1993) (“[T]he general trend

[is] to view such mixed contracts as governed by the UCC.”); United

States ex rel. Union Bldg. Materials Corp. v. Haas & Haynie Corp.,

577 F.2d 568, 572 n. 2 (9th Cir.1978) (“The modern trend is to apply

Article 2 to such mixed sales/services contracts.”).

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adopted the predominant factor test. See United States

Fidelity & Guar. Co. v. North Am. Steel Corp., 335 So.2d

18, 21 (Fla. 2d DCA 1976) (“Since the predominate nature

of the transaction was the furnishing of a product rather than

services, we believe that the fabricated pipe could properly

be characterized as goods.”’).

Although courts generally have not found any single

factor determinative in classifying a hybrid contract as one

for goods or services, courts find several aspects of a contract

particularly significant. First, the language of the contract

itself provides insight into whether the parties believed the

goods or services were the more important element of their

agreement. Contractual language that refers to the transaction

as a “purchase,” for example, or identifies the parties as the

“buyer” and “seller,” indicates that the transaction is for goods

rather than services. See Bonebrake, 499 F.2d at 958 (stating

that language referring to “equipment” is peculiar to goods

rather than services); Bailey v. Montgomery Ward & Co.,

690 P.2d 1280, 1282 (Colo.Ct.App.1984) (holding that a

contract that identifies the transaction as a “purchase” and

one of the parties as the “customer” signals a transaction in

goods); Meeker v. Hamilton Grain Elevator Co., 442 N.E.2d

921, 923 (Ill. App.Ct.1982) (stating that a contract that calls

the parties “seller” and “purchaser” indicates a contract for

goods).

Courts also examine the manner in which the transaction

was billed; when the contract price does not include the cost

of services, or the charge for goods exceeds that for services,

the contract is more likely to be for goods. See Triangle

Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 743 (2d

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Cir.1979) (stating that a bill that does not include services

indicates a contract for goods); Lincoln Pulp & Paper Co. v.

Dravo Corp., 436 F.Supp. 262, 275 & n. 15 (D.Me.1977)

(holding that the contract at issue was for services after noting

that the bill did not allocate costs between services and goods,

and the evidence showed that the cost of the goods was less

than half of the contract price).

Movable goods is another hallmark of a contract for

goods rather than services. The UCC’s definition of goods

makes clear the importance of mobility in determining

whether a contract is for goods; the UCC states that goods

are “all things (including specially manufactured goods)

which are movable at the time of identification to the contract

for sale.” Fla. Stat. ch. 672.105(1) (1997). Noting the

importance of mobility, one Florida court held that a contract

to edit and publish printed materials was a contract for goods

after stating that “[t]he items allegedly furnished by the

appellant were specially produced or manufactured and were

movable.”'* Lake Wales Publ’g Co. v. Florida Visitor, Inc..,

15. Mobility is measured as of the time the goods are identified

to the contract rather than after the contract is completed.

Consequently, equipment or materials that were movable, but were

installed and became immobile fixtures as part of the contract, are

still “movable” within the UCC’s meaning. See Bonebrake, 499 F.2d

at 959 n. 12. Thus, for example, contracts for the sale and installation

of equipment are frequently (but not always) held to be transactions

in goods. Construction contracts, however, such as those for

construction of a swimming pool or house, are usually held to be

transactions in services. Although construction contracts typically

involve materials that qualify as goods (such as concrete or roofing

tiles, for example), the services element of such contracts is usually

held to be dominant. See 1 James J. White & Robert S. Summers,

Uniform Commercial Code § 9-2 (4th ed. 1995).

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335 So.2d 335, 336 (Fla. 2d DCA 1976); see also Smith v.

Union Supply Co., 675 P.2d 333, 334 (Colo.Ct.App.1983)

(holding that a contract to provide the materials and labor

for installation of a new roof was a contract for goods because

“(t]he materials to be installed . . . were ‘movable at the time

of identification to the contract for sale’ ” (quoting Colorado’s

version of the UCC)).

In this case, the district court relied primarily on Lincoln

Pulp & Paper for its conclusion that the contract was for

services rather than goods. The contract at issue in Lincoln

Pulp & Paper involved the design and construction of a heat

and chemical recovery unit in a pulp mill. The district court

noted that, similar to Lincoln Pulp & Paper, the Contract

obligated Barth to design, manufacture, test, and construct

equipment, and also that the Contract’s price did not allocate

expenses between services and materials. The district court

concluded that this case was sufficiently analogous to Lincoln

Pulp & Paper to warrant the same result: a determination that

the Contract was for services rather than goods.

The question whether a contract is predominantly for

goods or services is generally one of fact. See Allmand

Assocs., Inc. v. Hercules Inc., 960 F.Supp. 1216, 1223

(E.D.Mich.1997). When there is no genuine issue of material

fact concerning the contract’s provisions, however, a court

may determine the issue as a matter of law. See id. Concluding

that there are no material issues of fact as to the terms of the

contract, the district court decided as a matter of law that the

contract was for services. We review questions of law de

novo. See Preserve Endangered Areas of Cobb’s History, Inc.

v. United States Army Corps of Eng’rs, 87 F.3d 1242, 1246

(11th Cir.1996).

19a

Appendix A

Applying the “predominant factor” test to the Contract,

we conclude that it was predominantly a transaction in goods.

We reach this conclusion based on the contractual language,

the circumstances surrounding the Contract, and the nature

of the goods at issue.

Our starting point is the language of the Contract itself,

which provides a number of indicia that the parties intended

a contract for goods rather than services. First, the Contract

is titled “PURCHASE ORDER,” a reference that is used

repeatedly throughout the document. This title is most

instructive, as the parties have chosen to identify their

agreement with a name that is almost exclusively used for

transactions in goods. Second, the parties refer to themselves

in the Contract as the “Buyer” and “Seller.” Third, the

Contract states that it is a purchase order “for the fabrication

and installation of automated equipment.” (emphasis added).

All of this contractual language is “peculiar to goods, not

services,” Bonebrake, 499 F.2d at 958, and indicates that the

parties had a contract for goods in mind.

Additionally, the Contract involves movable goods. Barth

designed and fabricated the automated equipment in its own

facilities, and planned to move the equipment to BMC’’s plant

only once it was completed. Barth’s original offer, which was

incorporated into the Contract, included the term “F.O.B.

Barth dock,” meaning that the equipment was tendered to

BMC once it was delivered to Barth’s loading dock.

Consequently, although Barth was still obligated to install

and debug the equipment, it was clearly movable at the time

it was identified to the Contract."

16. BMC correctly points out that the mere involvement of

movable goods in a contract does not mean it is a transaction in

(Cont'd)

20a

Appendix A

Lincoln Pulp & Paper is distinguishable from this case.

The district court stated that the Contract price, similar to

Lincoln Pulp & Paper, does not allocate costs between

services and goods. The district court failed to note, however,

that the Contract allocates payments according to delivery

of automated equipment; the Contract’s payment schedule

calls for the delivery and acceptance of each automated

equipment line to be met by a $70,050 payment from BMC.

If the Contract price were being paid predominantly for

Barth’s design and engineering services as BMC claims, then

the parties would have pegged payments to completion of

the engineering and design services, not to the delivery of

equipment. Furthermore, while the cost of services made up

over half of the contract price in Lincoln Pulp & Paper, the

opposite appears to be true in this case. A total of $280,200,

which is over half of the contract price, is pegged to the

delivery of equipment.

Finally, we note that the court in Lincoln Pulp & Paper

stated that “[a] sale of equipment is not removed from the

scope of Article 2 merely because the equipment was specially

(Cont'd)

goods rather than services. See Whitmer v. Bell Telephone Co., 361

Pa.Super. 282, 522 A.2d 584, 587 (1987). In fact some movable goods

must be involved in order for the contract to be labeled a “hybrid”;

otherwise, the contract would clearly be a transaction in services,

and the UCC would not apply. What is significant, however, is that

the goods at issue here were movable when completed, unlike some

contracts that only involve movable materials, which are subsequently

used to construct an immovable fixture (such as a house or swimming

pool). While the mobility of the completed goods is not dispositive,

it is one factor to be considered.

2la

Appendix A

designed and manufactured before delivery or installed by

the supplier.” 436 F.Supp. at 276 n. 16. In fact, it is not

surprising that the Barth-BMC Contract included such a

significant services element (i.e., design and manufacturing).

Because no other company had successfully automated its

eyeglass lens production, Barth had to spend considerable

time designing this first-of-its-kind machinery. This necessary

services element, however, does not remove the Contract from

the category of agreements for specially designed and

manufactured equipment to which Article 2 applies.

The other two cases on which BMC relies are also

inapposite. Both cases involved parties that clearly

contemplated a contract for services. The first case, Wells v.

10-X Mfg. Co., 609 F.2d 248 (6th Cir.1979), involved the

production of cloth hunting shirts. In that case, however, the

buyer provided all of the materials (except thread) that the

manufacturer used to produce the clothing. Id. at 225.

Consequently, the manufacturer did not sell goods, only the

service of turning the materials into a finished product.

The other case BMC cites, Inhabitants of the City of Saco

v. General Elec. Co., 779 F.Supp. 186 (D.Me.1991 ), involved

a contract for the design and construction of a solid waste

disposal facility. That case is also distinguishable because it

involved a typical construction contract for a non-movable

product — the disposal facility. The only movable goods were

the materials that were used to construct the immobile

structure. Even more significantly, the contractual language

in that case clearly identified the contract as a transaction in

services. The contract stated that its purpose was “for the

22a

Appendix A

furnishing of services in Phase I of the project, and ‘to

establish the conditions on which Contractor [GE] will

propose to furnish services under Phase II’.” Id. at 197 (first

and second emphases added). Not only did the language state

that the contract was for services, it also referred to one of

the parties as the “Contractor,” a term typically used in

services transactions.

Having determined that the UCC governs this case, we

must next apply Article 2’s waiver provision to the Contract.

The UCC waiver provision states in relevant part:

(2) A signed agreement which excludes

modification or recission except by a signed

writing cannot be otherwise modified or

rescinded. ...

(4) Although an attempt at modification or

recission does not satisfy the requirements of

subsection (2) or (3) [regarding the statute of

frauds] it can operate as a waiver.

(5) A party who has made a waiver affecting an

executory portion of the contract may retract the

waiver by reasonable notification received by the

other party that strict performance will be required

of any term waived, unless the retraction would

[EO ee ne ee

oN ithe 8 aaa Se AAT Panay Sk Ne deal gait Bet al oahed Seba

23a

Appendix A

be unjust in view of a material change of position

in reliance on the waiver.

Fla. Stat. ch. 672.209 (1997) (emphasis added).'”

Although the UCC does not specifically lay out the

elements of waiver, we have stated that waiver requires “(1)

the existence at the time of the waiver a right, privilege,

advantage, or benefit which may be waived; (2) the actual

constructive knowledge thereof; and (3) an intention to

relinquish such right, privilege, advantage, or benefit.”

Dooley v. Weil (In re Garfinkle), 672 F.2d 1340, 1347 (11th

Cir.1982). Conduct may constitute waiver of a contract term,

but such an implied waiver must be demonstrated by clear

evidence. See American Somax Ventures v. Touma, 547

So.2d 1266, 1268 (Fla. 4th DCA 1989). Waiver may be

implied when a party’s actions are inconsistent with continued

retention of the right. See First Pa. Bank, N.A. v. Oreck, 357

So.2d 743, 744 (Fla. 4th DCA 1978).

As an initial matter, we must determine whether, under

the UCC, waiver must be accompanied by detrimental

reliance. Although it is settled that waiver under Florida

common law must be supported by valid consideration or

17. The Contract included a provision requiring all

modifications to be in writing. Although the parties therefore did

not successfully modify the Contract, we apply chapter 672.209 to

determine whether BMC’s conduct constituted a waiver of the

October 1987 delivery date.

24a

Appendix A

detrimental reliance, see Masser v. London Operating Co.,

106 Fla. 474, 145 So. 79, 83 (1932), courts disagree on

whether the UCC retains this requirement. We conclude,

however, that the UCC does not require consideration or

detrimental reliance for waiver of a contract term.

Our conclusion follows from the plain language of

subsections 672.209(4) and (5). While subsection (4) states

that an attempted modification that fails may still constitute

a waiver, subsection (5) provides that the waiver may be

retracted unless the non-waiving party relies on the waiver.

Consequently, the statute recognizes that waivers may exist

in the absence of detrimental reliance — these are the

retractable waivers referred to in subsection (5). Only this

interpretation renders meaning to subsection (5), because

reading subsection (4) to require detrimental reliance for all

waivers means that waivers would never be retractable. See

Wisconsin Knife Works v. National Metal Crafters, 781 F.2d

1280, 1291 (7th Cir.1986) (Easterbrook, J., dissenting)

(noting that reading a detrimental reliance requirement into

the UCC would eliminate the distinction between subsections

(4) and (5)). Subsection (5) would therefore be meaningless.

At least one Florida court implicitly agrees with this

conclusion; in Linear Corp. v. Standard Hardware Co., 423

So.2d 966 (Fla. Ist DCA 1982), the court held that a contract

term had been waived despite the absence of any facts

showing detrimental reliance. The court in Linear addressed

a contract between a manufacturer and a retailer for the sale

of electronic security devices. The contract included a

provision stating that the manufacturer would not repurchase

any devices the retailer was unable to sell, and another term

isthe eh AL ae nk bea RES

25a

Appendix A

providing that contract modifications must be in writing.

Despite this contractual language, the retailer filed suit

claiming that the manufacturer subsequently made an oral

agreement to repurchase unsold devices, but failed to adhere

to this oral agreement.

Citing chapter 672.209(4), the court concluded that the

parties’ conduct demonstrated that they had waived the

requirement that modifications be in writing, and therefore

gave effect to the oral modification. See id. at 968. The court

recognized this waiver despite the apparent absence of any

detrimental reliance by the retailer'* — in fact the court never

even mentioned any reliance requirement for waiver under

the UCC. Consequently, the court implicitly held that a

contract term could be waived without the existence of

detrimental reliance by the non-waiving party.

Although other courts have held that waiver requires

reliance under the UCC, those courts have ignored the UCC’s

plain language. The leading case espousing this view of

waiver is Wisconsin Knife Works v. National Metal Crafters,

781 F.2d 1280 (7th Cir.1986) (addressing section 2-209 of

18. The retailer also claimed that the manufacturer orally agreed

to repurchase unsold units contemporaneous with signing the

contract. Thus it may appear that the manufacturer’s oral agreement

lulled the retailer into signing the written contract, and therefore that

the waiver was supported by detrimental reliance. The court,

however, held that evidence of this contemporaneous oral agreement

was barred by the parol evidence rule. See Linear Corp., 423 So.2d

at 968. Consequently, the court could not have used this

contemporaneous oral agreement to satisfy any reliance requirement

for waiver.

26a

Appendix A

the model version of the UCC, from which Florida adopted

section 672.209 verbatim), in which a panel of the Seventh

Circuit addressed a contract that included a term prohibiting

oral modifications, and considered whether an attempted oral

modification could instead constitute a waiver. Writing for

the majority, Judge Posner concluded that the UCC’s

subsection (2), which gives effect to “no oral modification”

provisions, would become superfluous if contract terms could

be waived without detrimental reliance. Judge Posner

reasoned that if attempted oral modifications that were

unenforceable because of subsection (2) were nevertheless

enforced as waivers under subsection (4), then subsection

(2) is “very nearly a dead letter.” Id. at 1286. According to

Judge Posner, there must be some difference between

modification and waiver in order for both subsections (2) and

(4) to have meaning. This difference is waiver’s detrimental

reliance requirement.'®

19. Contrary to our reasoning above, Judge Posner claims that

reading a reliance requirement into waiver under subsection (4) is

not inconsistent with subsection (5). According to Judge Posner,

subsection (5) is broader than subsection (4), covering waivers other

than mere attempts at oral modification. Judge Posner argues as an

example that subsection (5) covers express waivers that are written

and signed. See id. at 1287. In dissent, however, Judge Easterbrook

convincingly dissects this argument. As Judge Easterbrook explains,

subsection (5) is narrower than subsection (4) — limiting the effect

of waivers that are not detrimentally relied upon — not the reverse

as Judge Posner claims. Furthermore, Judge Easterbrook

demonstrates that subsection (5) cannot cover express written and

signed waivers because such writings are not waivers, but rather

effective written modifications under subsection (2). See id. at 1291

(Easterbrook, J., dissenting).

27a

Appendix A

Judge Posner, however, ignores a fundamental difference

between modifications and waivers: while a party that has

agreed to a contract modification cannot cancel the

modification without giving consideration for the

cancellation, a party may unilaterally retract its waiver of a

contract term provided it gives reasonable notice. The fact

that waivers may unilaterally be retracted provides the

difference between subsections (2) and (4) that allows both

to have meaning. We therefore conclude that waiver under

the UCC does not require detrimental reliance. Consequently,

without reaching the issue of detrimental reliance, we consider

whether BMC waived the Contract’s October 1987 delivery

date.

Applying the elements of waiver to the facts before us,

we hold as a matter of law that BMC waived the October

1987 delivery date. The October 1987 delivery date was a

waivable contract right, of which BMC had actual knowledge.

We also conclude that BMC’s conduct impliedly

demonstrated an intent to relinquish that right.

The most cogent evidence of this waiver is BMC’s own

representation of its relationship with Nesco. Throughout this

litigation, BMC has maintained that Nesco, beginning in

August 1988, “stepped in and promised to complete the

project. In doing so, Nesco expressly represented that all of

its resources were committed to the project, and instructed

BMC to deal solely with Nesco.” According to BMC,

therefore, Nesco voluntarily became liable, in the fall of 1 988,

for Barth’s completion of the project. By that time, however,

28a

Appendix A

the October 1987 delivery date had already passed. If, as BMC

claims, the contract was already breached, then Nesco could

never have performed its obligations; Nesco was in breach

of its promise as soon as that promise was made, and could

have been sued by BMC the next day. For Nesco’s promise

to have meaning,*”” BMC must have given Barth and Nesco

additional time to perform — in other words, BMC must have

waived the October 1987 delivery date.

BMC argues, however, that while it agreed to delay

enforcing its rights against Barth in return for Nesco’s

promise, it did not waive those rights. BMC’s argument defies

logic. According to this theory, BMC could sue Barth and

Nesco at its whim. Consequently, Nesco miraculously could

have completed the project the day after its promise, and still

have been fully liable to BMC for Barth’s breach of contract.

Nesco had nothing to gain and everything to lose from such

an agreement.

BMC’s own complaint buttresses our conclusion that

BMC waived the October 1987 delivery date. According to

BMC’s complaint, Nesco promised “that Barth would meet

dates, performance and reliability criteria under the

agreement, as amended,” and that Nesco “ensure[d] that the

equipment was timely completed and delivered to BMC in

Florida.” (emphasis added). Because the October 1987

delivery date had already passed, however, Barth could not

“meet dates” or “timely” complete the equipment unless the

delivery date had been extended.

20. We address Nesco’s promise in part III, infra.

29a

Appendix A

Furthermore, BMC’s course of dealing with Barth

evidenced BMC’s waiver of the October 1987 delivery date,

because BMC failed timely to demand compliance with that

contract term or terminate the Contract and file suit. When a

delivery date passes without the seller’s delivery, the buyer

must object within a reasonable time and warn the seller that

it is in breach. See KLT Indus., Inc. v. Eaton Corp., 505

F.Supp. 1072, 1079 (E.D.Mich.1981); see also Harrison v.

City of Tampa, 247 F. 569, 572 (S.D.Fla.1918) (“I do not

recognize any principle by which one party to a contract, after

a breach by the other party, may continue acting under such

contract to some future time, and then abrogate the contract

by reason of such former breach.”).”!

Although BMC maintained at trial that Barth breached

the contract as of October 1987, BMC did not tell Barth it

intended to terminate the contract and hold Barth liable for

the breach until May 1989. In fact, the earliest indication

from BMC that it was considering termination was August

1988, when BMC executives met with Tomsich to seek

assurance that Barth would perform. As we have already

stated, however, the result of that meeting was a waiver of

the October 1987 delivery date, not a timely exercise of

BMC’s right to terminate the Contract. BMC did not warn

Barth in earnest of its intent to terminate until F ebruary 1989,

when BMC sent Barth a letter along with $100,000 of the

$250,000 payment Tomsich had requested at the August 1988

21. Cf. Green Constr. Co. v. First Indem. of Am. Ins. Co., 735

F.Supp. 1254, 1262 (D.N.J.1990) (holding that the delivery date was

not waived because the buyer warned the seller to comply with the

delivery schedule immediately after the first delivery date had passed,

and therefore indicated an intent to hold seller to the contract terms).

30a

Appendix A

meeting. This letter warned Barth that BMC was not waiving

its rights and remedies for Barth’s failure to meet contractual

delivery dates. BMC warned Barth again in March when it

sent a letter advising of its intent to “hold [Barth] responsible,

both for the initial breach and for all failures to meet

subsequently promised dates.”

Until 1989, however, BMC continued to act as though

both parties were bound by the Contract and that Barth was

not in default of its obligations: the October 1987 delivery

date passed without comment from BMC; engineers from

BMC frequently provided advice or assistance to help Barth

personnel overcome technical problems; BMC executives

frequently visited Barth’s production facilities and

encouraged Barth to continue working to complete the

equipment; BMC even continued to spend money on the

project — in December 1987, over one month after the

October 1987 delivery date had passed, BMC purchased an

additional $71,075 worth of springs and tooling for the

machines. In sum, rather than terminating the Contract, or at

least warning Barth that it was in breach after the October

1987 delivery date had passed, BMC continued to act as

though the Contract remained in effect.

This is not to say that BMC never complained that Barth

had missed deadlines; BMC executives frequently expressed

their concern and disappointment that the project was so far

behind schedule. On April 5, 1988, for example, the

Chairman, President, and CEO of BMC sent a letter to Barth

in which he stated: “[T]he project is well behind schedule,

and each day of delay represents lost savings for Vision-Ease.

I hope that Barth will exert every effort to ensure the speedy

3la

Appendix A

completion and installation of the equipment and avoid any

further delay.” But while BMC complained of delays, it never

declared Barth in default or terminated the contract — instead,

BMC told Barth to keep working. After Barth had spent an

additional eighteen months of time and money and, according

to Barth, was prepared to deliver the machines, however,

BMC suddenly decided to terminate the Contract. This BMC

could not do.”

The UCC states that when a contractual delivery date is

waived, delivery must be made within a reasonable time. See

Fla. Stat. ch. 672.309(1) (1997); KLT Indus., Inc. v. Eaton

Corp., 505 F.Supp. 1072, 1079 (E.D.Mich.1981),

Consequently, because BMC waived the October 1987

delivery date, Barth was only obligated to deliver the

machines within a reasonable time period. We remand this

case to the district court for a new trial on the question of

whether Barth tendered the machines within a reasonable time

period.”

22. Although Barth contends on appeal that several district court

jury instructions were erroneous and prejudicial, we need not reach

this question given our holding that BMC waived the October 1987

delivery date and our consequent remand for retrial.

23. On remand, if the jury concludes that Barth did not deliver

the machines within a reasonable time period, then BMC will prevail

on its breach of contract claim against Barth. BMC’s damages should

then be calculated according to Fla. Stat. ch. 672.713 (1997). If

instead, however, the jury finds that BMC terminated the contract

before a reasonable time had passed, then Barth will prevail on its

counterclaim. BMC has stipulated that Barth is entitled to recover

$1.13 million if it prevails.

32a

Appendix A

Ill.

BMC’s promissory estoppel claim against Nesco is based

on Tomsich’s representation to BMC executives, in August

1988, that Nesco would commit its own resources to the

project and that Barth would complete its performance under

the Contract.* Tomsich made this representation in response

24. In addition to Tomsich’s August 1988 representation,

BMC’s claim is based on a promise allegedly made by Nesco in

1986, before the Contract was signed. According to BMC, Nesco

promised in 1986 to support Barth’s work on the project in order to

induce BMC to sign the Contract. To support this assertion, BMC

offered promotional materials about Nesco that Barth gave to BMC

before the Contract was signed. These brochures emphasized Nesco’s

engineering abilities and experience and discussed each of Nesco’s

subsidiaries, including Barth. Along with these brochures, BMC

claimed, Barth personnel assured BMC that “Barth was not a stand

alone, it was backed up by the Nesco group.” BMC contended at

trial that it relied on Barth’s affiliation with Nesco, as presented in

these brochures and by Barth personnel, when it signed the Contract.

Without explanation, the district court ignored this aspect of

BMC’s promissory estoppel claim, and focused only on Tomsich’s

August 1988 representation when it presented that claim to the jury.

We conclude, however, that the court rightly excluded Nesco’s

alleged 1986 promise from its presentation of BMC’s claim to the

jury, because the evidence of any Nesco promise made before the

Contract was signed is insufficient as a matter of law. As for the

statement by Barth personnel that Nesco was supporting Barth, this

evidence reveals no promise actually made by Nesco. It was Barth,

not Nesco, that promised Nesco’s support for the project before the

Contract was signed. Nesco cannot be held liable for failing to deliver

on a promise that it did not make.

(Cont’d)

33a

Appendix A

to the executives’ statement that BMC was prepared to

terminate the Contract and sue Barth for breach.’ BMC

accepted Tomsich’s assurance, and decided to withhold suit.

(Cont’d)

Nor do the Nesco brochures contain any promise made by Nesco.

At trial, BMC presented language from the brochures to demonstrate

a promise, such as the following: “All together, these [Nesco-owned]

companies offer a full spectrum of services required by all industries,

large and small: Engineering and product design.” BMC contends

that such language constituted a promise that Nesco would back up

the projects undertaken by its subsidiaries. BMC’s contention is

frivolous; the brochures were merely pamphlets designed to provide

information about the services offered by Nesco’s subsidiaries,

Furthermore, it was Barth, not Nesco, that provided these brochures

to BMC.

BMC also pointed out that, among other subsidiaries (including

Barth) presented in the brochures, the pamphlets discussed the Nesco

Design Group, Inc. BMC contended at trial that its executives

interpreted the brochures to mean that while Barth would manufacture

the machines, Nesco would assist Barth in creating the machines’

design. The brochures, however, draw no connection between Barth

and Nesco Design Group, or any other Nesco company, aside from

the fact that they are all owned by Nesco. We fail to understand how

a brochure that describes the abilities of a corporation’s subsidiaries

could lead anyone to believe that the subsidiaries would pool their

resources and experience on every contract. In sum, the evidence

was insufficient to establish any representation, much less a promise,

by Nesco to BMC prior to the execution of the Contract.

25. Attrial, BMC introduced Tomsich’s representation through

the deposition testimony of BMC’s corporate general counsel, who

stated that Robert Tomsich assured BMC, in August 1988, that “all

of Nesco’s resources were committed to this project in seeing it go,

that all of the engineering talents in the Nesco organization were

available as necessary to help Barth.”

34a

Appendix A

Nesco contends that this claim is barred by the statute of

frauds. A guarantee of a past-due debt is void under the statute

of frauds in the absence of a writing; according to Nesco,

BMC’s claim, while labeled “promissory estoppel,” is legally

equivalent to a claim that Nesco guaranteed Barth’s

performance after Barth was already in default. BMC cannot

deny this fact, Nesco argues, because (1) the evidence showed

that Tomsich’s promise was made nine months after Barth

had breached the Contract, and (2) BMC’s legal position

throughout this litigation has been that Tomsich’s promise

was made after Barth had breached the Contract. By taking

the legal position that Barth breached the Contract when it

failed to deliver the equipment in October 1987 and that BMC

never waived that breach, BMC impliedly adopted the

position that Nesco’s August 1988 promise amounted to a

guarantee. We agree.

In light of the jury’s verdict on the promissory estoppel

claim, we must assume that, in August 1988, Tomsich

promised BMC that Nesco would ensure Barth’s performance

of the Contract, and that, relying on this promise, BMC

postponed its suit against Barth for breach of contract.

Because Tomsich wore two hats — as an officer of Barth

and of Nesco — when he met with BMC’s executives and

made the promise, this scenario yields three legal possibilities:

(1) a new three-party agreement replaced the original

Contract, with BMC on one side and Barth and Nesco jointly

on the other; (2) a novation occurred, whereby Nesco replaced

Barth (and assumed Barth’s liability) under the original

Contract; or (3) Nesco guaranteed Barth’s past-due

35a

Appendix A

performance.” Under the first two possibilities, Barth would

have been released from liability for its breach of the

Contract.?” BMC eschewed these possibilities, however, when

it sued Barth for breach. Although BMC disavows that

Nesco’s promise constituted a guarantee, that is the only

remaining legal possibility. In short, we adhere to the time-

26. Although we concluded in part 11.B.2, supra, that BMC

waived the October 1987 delivery date, we treat the delivery date as

if it were in effect in analyzing BMC’s claim against Nesco. BMC’s

legal position was, and continues to be, that Barth was in default

when Tomsich made the August 1988 promise. BMC is therefore

bound by that characterization in its suit against Nesco.

27. If the parties created a new three-way contract, then Barth

would have been released from liability for its breach because the

parties would have intended the new contract to replace the original

Contract. Although BMC would therefore be voluntarily

relinquishing its claim against Barth, BMC might agree to do so as

consideration for Nesco’s assumption of liability under the second

contract.

The parties could have created a new three-way contract without

replacing the original Contract, and therefore without releasing Barth

from liability. This option, however, is too implausible to be credible.

Under this option, Barth would remain liable for its breach of the

original Contract, but would still be obligated (together with Nesco

this time) to complete the project under the new three-way contract.

Particularly in light of the incessant technical problems that Barth

experienced while trying to perform under the original Contract, it

is highly unlikely that Barth and Nesco would assume the risk of

becoming liable under a second contract, while Barth remained liable

under the first. Barth and Nesco would have had nothing to gain

from entering into a new contract unless BMC released Barth from

liability under the original Contract.

36a

Appendix A

tested adage: if it walks like a duck, quacks like a duck, and

looks like a duck, then it’s a duck.”

Because a guarantee to answer for the debt of another

(including a debt past due) is void under Florida law unless

in writing, Nesco’s oral guarantee is unenforceable.”’

Consequently, BMC’s claim against Nesco is barred.*°

28. The “duck test” has received wide support from the courts.

See, e.g., Hurston v. Director, Office of Workers Compensation

Programs, 989 F.2d 1547, 1549 (9th Cir.1993); Psarianos v. Kikis,

941 F.Supp. 79, 80 (E.D.Tex.1996); Loudermilk v. Loudermilk, 183

W.Va. 616, 397 S.E.2d 905, 907 (W.Va.1990).

29. Florida’s statute of frauds provides:

No action shall be brought ... whereby to charge the

defendant upon any special promise to answer for the

debt, default or miscarriage of another person. . . unless

the agreement or promise upon which such action shall

be brought, or some note or memorandum thereof shall

be in writing and signed by the party to be charged

therewith. ...

Fla. Stat. ch. 725.01 (1997).

30. We are not converting BMC’s promissory estoppel claim

into a contractual guarantee claim. Instead, we note that the essence

of BMC’s claim — regardless of the label affixed to it — is that

Nesco promised to become liable for the debt of another (Barth),

after that debt had already become due. If there had been adequate

consideration, BMC would have labeled its claim a contractual

“guarantee.” In the absence of consideration, however, BMC has

called its claim “promissory estoppel.” Our point is this: a promise

(Cont'd)

PE Wn gee ae

Re NA SE LRT ABODE S SB

37a

Appendix A

(Cont'd)

to become liable for the past-due debt of another is invalid unless in

writing. The likelihood that someone would assume liability for an

obligation that was already in default is too minute to permit such a

promise to be enforced absent a writing to prove its existence.

Although we discuss Nesco’s promise as if BMC labeled it a

guarantee, our conclusion is equally sound if we instead apply

promissory estoppel rules to BMC’s claim. Promissory estoppel

requires “a promise which the promisor should reasonably expect to

induce action or forbearance on the part of the promisee or a third

person and which does induce such action or forbearance”; such a

promise is “binding if injustice can be avoided only by enforcement

of the promise.” W.R. Grace & Co. v. Geodata Servs., Inc., 547 So.2d

919, 924 (Fla.1989). The promisee must also show that such reliance

was to its detriment. See Crown Life Ins. Co. v. McBride, 517 So.2d

660, 662 (Fla.1987).

BMC’s claim fails under promissory estoppel rules because it

was unreasonable for BMC to rely on Nesco’s promise absent a

writing. BMC claimed at trial that it suffered $6.4 million in damages

because of Barth’s default on its performance, and that Nesco

assumed full liability for that performance after the default. Again,

it is so unlikely that someone would assume liability for a past-due

debt that it is unreasonable to rely on such a promise if it is not

reduced to a writing; this principle is particularly true when the

liability totals $6.4 million.

Alternatively, BMC’s claim fails under promissory estoppel

rules because BMC did not detrimentally rely on Nesco’s promise.

Although BMC delayed filing suit for nine months and payed Barth

an additional $100,000 in reliance on Tomsich’s promise, BMC has

the right to collect these additional costs from Barth (in fact, BMC

included these costs in its calculation of damages against Barth at

trial). Consequently, BMC did not incur any detriment because of

Nesco’s promise.

38a

Appendix A

BMC attempts to escape from the grasp of the statute of

frauds by claiming that Nesco’s promise was “direct” rather

than “collateral.” Under the statute of frauds, where the main

purpose of the guarantor is to obtain some benefit or serve

some interest of its own rather than to gain some advantage

for the beneficiary, that promise is considered “direct,” and

remains beyond the reach of the statute. See Al Booth’s, Inc.

v. Boyd-Scarp Enters., Inc., 518 So.2d 422, 423-24 (Fla. 5th

DCA 1988) (referring to this principle as the “leading object”

rule). Consequently, if Nesco’s main purpose in making the

guarantee was to achieve some benefit for itself rather than

for Barth, the statute of frauds would not apply, and BMC’s

claim would not be barred.

BMC’s argument, however, ignores the fact that Nesco

could not reasonably hope to gain any benefit for itself by

guaranteeing Barth’s overdue performance; because

(according to BMC’s legal position) Barth was already in

default, and BMC never waived that default, BMC could have

sued Barth and Nesco for breach immediately after Nesco

made the guarantee. Nesco’s only incentive to guarantee

Barth’s defaulted performance was the mere hope that BMC

would refrain from filing suit if the equipment was delivered

; in the near future. This hope, however, does not constitute

any reasonable expectation of benefit. Consequently, Nesco’s

guarantee was not “direct,” and is governed by the statute of

frauds.

Because the statute of frauds applies to Nesco’s promise,

BMC’s claim against Nesco fails in the absence of a writing

evidencing the guarantee. Consequently, we vacate the

judgment against Nesco and remand the case to the district

court with the instruction that it enter judgment for Nesco.

a aaa es

39a

Appendix A

IV.

For the foregoing reasons, we hold that the district court

erred in concluding that the UCC did not apply to the

Contract. Furthermore, we conclude that BMC waived the

October 1987 delivery date. We therefore VACATE the

district court’s judgment against Barth and REMAND the

case to the district court for retrial of BMC’s claims against

Barth as well as Barth’s counterclaims in accordance with

the UCC. Furthermore, we hold that BMC’s claim that Nesco

guaranteed Barth’s performance is void in the absence of any

writing, because (according to BMC’s legal position) Barth’s

obligation was already in default when the purported

guarantee was made. Consequently, we VACATE the district

court’s judgment against Nesco and REMAND the case to

the district court and instruct it to enter judgment for Nesco.

SO ORDERED.

40a

APPENDIX B — OMNIBUS ORDER OF THE UNITED

STATES DISTRICT COURT FOR THE SOUTHERN

DISTRICT OF FLORIDA, MIAMI DIVISION

DATED AND FILED JULY 21, 1994

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No. 89-6443-CIV-MOORE

BMC INDUSTRIES, INC.,

Plaintiff

VS.

BARTH INDUSTRIES, INC., et al.,

Defendants.

OMNIBUS ORDER

THIS CAUSE came before the Court upon Defendant

Barth’s Motion for Summary Judgment as to Count |

(liability), Defendant Barth’s Motion for Summary Judgment

1. The Court notes that Barth’s Motion for Summary Judgment

on Count I (liability) of the Counterclaim was filed on May 13, 1994

and is docketed as number 389. Barth’s Motion for Summary

Judgment of Count I of the Second Amended Complaint was filed

the same day and is in the court file, but was not assigned a docket

number. Both motions address the same essential principles regarding

the breach of contract allegations in Count I of the Second Amended

Complaint and Count I of the Counterclaim.

4la

Appendix B

as to Count I (liability) of Counterclaim (DE #389), Defendant

Barth’s Motion for Summary Judgment as to Count II (DE

#296), Defendant Nesco’s Motion for Summary Judgment

as to Count VIII (DE #328), Plaintiff BMC’s Motion for

Summary Judgment as to the Counterclaim (DE #363),

Defendant Barth’s Motion for Partial Summary Judgment as

to Count I (damages) (DR #386), and Defendant BIC’s

Motion for Summary Judgment as to Counts VI, VII and VIII

(DE #392).

THE COURT has considered the Motions, responses,

supplements, and the pertinent portions of the record, and

being otherwise fully advised in the premises, it enters the

following Order.

BACKGROUND

In October 1986, Plaintiff BMC Industries, Inc.

(“BMC”) contracted with Defendant Barth Industries, Inc.

(“Barth”) to design, construct and install equipment which

would automatically produce plastic eyeglass lenses at

BMC’s Vision-Ease facility. A written agreement for

$515,200 was consummated on October 29, 1986 calling for

Barth to “design, fabricate, debugg/test and supervise field

installation and start up of equipment to automate the

2. In December 1988, Barth reorganized and became Barth

Industries Co. Limited Partnership (“Barth LP”). Prior to the

organization, Barth was a corporate entity existing as a wholly-owned

subsidiary of Defendant Nesco Holdings, Inc. (“Nesco”). After the

reorganization Barth LP was owned by Nesco, a limited partner with

a 99 percent interest, and Defendant BIC Corporation, a general

partner with a one percent interest.

42a

Appendix B

operations of mold assembly declipping, clip transport, mold

assembly clipping and mold filling.” The delivery of the first

unit was scheduled for February 1987 and the fourth unit

was due for delivery in June 1987. A “Revised Agreement”

and then an “Amended Revised Agreement” pushed final

delivery date of all four units back to October 1987.

Subsequent to the Amended Revised Agreement, there

were various oral communications and representations

between the parties. Although the Court will discuss the

particular evidence when discussing each motion, the record

demonstrates significant disagreement as to what promises

were made. In sum, the relationship between the parties

deteriorated and BMC filed the instant lawsuit in June 1989.

Plaintiff's Second Amended Complaint alleges several causes

of action, but on May 23, 1994 this Court granted Plaintiff's

Motion for Voluntary Dismissal as to Counts III, IV, V, VI,

VII, [X, X, XI, XII, XII] and XIV. Accordingly, only Counts

I, If and VIII remain. Count I of the Second Amended

Complaint states a claim for breach of contract, Count II

alleges fraudulent misrepresentation, and Count VIII states

claims for promissory and equitable estoppel against Nesco.

Defendant Barth filed a counterclaim alleging breach of

contract, anticipatory repudiation, quantum meruit, fraud,

breach of good faith and promissory estoppel.

3. The contract is in the form of a “Purchase Order” attached

to the Second Amended Complaint as Exhibit A.

43a

Appendix B

DISCUSSION

Standard on Motion for Summary Judgment

The standard to be applied in reviewing a summary

judgment motion is stated unambiguously in Rule 56(c) of

the Federal Rules of Civil Procedure:

The judgment sought shall be rendered forthwith

if the pleadings, depositions, answers to

interrogatories and admissions on file, together

with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter

of law.

It may be entered only where there is no genuine issue of

material fact. Moreover, the moving party has the burden of

meeting this exacting standard. Adickes v. S.H. Kress & Co.,

398 U.S. 144, 157, 90 S. Ct. 1598, 1608 (1970).

In applying this standard, the district court must view

the evidence and all factual inferences therefrom in the light

most favorable to the party opposing the motion. Adickes,

398 U.S. at 157, 90 S. Ct. at 1608.

All reasonable doubts about the facts should be

resolved in favor of the non-movant. Casey

Enterprises Inc. v. Am. Hardware Mutual Ins. Cai:

655 F.2d 598, 602 (Sth Cir. 1981). If the record

presents factual issues, the court must not decide

them; it must deny the motion and proceed to trial.

44a

Appendix B

[Environmental Defense Fund v. Marsh, 651 F.2d

983, 991 (Sth Cir. 1981)); Lighting Fixture & Elec.

Supply Co. v. Continental Ins. Co., 420 F.2d 1211,

1213 (Sth Cir. 1969). Summary judgment may be

inappropriate even where the parties agree on the

basic facts, but disagree about the inferences that

should be drawn from these facts. Lighting Fixture

& Elec. Supply Co., 420 F.2d at 1213. If reasonable

minds might differ on the inferences arising from

undisputed facts, then the court should deny

summary judgment. [/mpossible Electronics

Techniques, Inc. v. Wackenhut Protective Sys.,

Inc., 669 F.2d 1026,1031 (Sth Cir. 1982)]; Croley

v. Matson Navigation Co., 434 F.2d 73, 75 (Sth

Cir. 1970).

Moreover, the party opposing a motion for

summary judgment need not respond to it with any

affidavits or other evidence unless and until the

movant has properly supported the motion with

sufficient evidence. Adickes v. S.H. Kress & Co.,

398 U.S. at 160, 90S. Ct. at 1609-10; Marsh, 651

F.2d at 991. The moving party must demonstrate

that the facts underlying all the relevant legal

questions raised by the pleadings or otherwise are

not in dispute, or else summary judgment will be

denied notwithstanding that the non-moving party

has introduced no evidence whatsoever. Brunswick

Corp. v. Vineberg, 370 F.2d 605, 611-12 (Sth Cir.

1967). See Dalke v. Upjohn Co., 555 F.2d 245,

248-49 (9th Cir. 1977).

45a

Appendix B

Clemons v. Dougherty County, 684 F.2d 1365, 1369 (11th

Cir. 1982); see Amey, Inc. v. Gulf Abstract & Title, Inc., 758

F.2d 1486, 1502 (11th Cir. 1985), cert. denied, 475 U.S. 1107

(1986).

The non-moving party, however:

[m]ay not rest upon the mere allegations and

denials of the adverse party’s pleading, but the

adverse party’s response, by affidavits or as

otherwise provided in this rule, must set forth

specific facts showing that there is a genuine issue

for trial.

Fed.R.Civ.P. 56(e). “The mere existence of a scintilla of

evidence in support of the [non-movant’s] position will be

insufficient; there must be evidence on which the jury could

reasonably find for the [non-movant].” Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512, 91

L. Ed. 2d 202 (1986). The party Opposing summary judgment

“must do more than simply show that there is some

metaphysical doubt as to the material facts.” Matsushita Elec.

Indus. Co. v. Zenith Radio, 475 U.S. 574, 586, 106 S. Ct.

1348, 1356, 89 L. Ed. 2d 538 (1986). In determining whether

this evidentiary threshold has been met, the trial court “must

view the evidence presented through the prism of the

substantive evidentiary burden” applicable to the particular

cause of action before it. Anderson, 477 U.S. at 254, 106

S. Ct. at 2513. If the non-movant in a summary judgment

action fails to adduce evidence which would be sufficient,

when viewed in a light most favorable to the non-movant, to

support a jury finding for the non-movant, summary judgment

may be granted. Jd. at 254-55.

46a

Appendix B

Additionally, the non-moving party must “make a

showing sufficient to establish the existence of an element

essential to that party’s case, and on which that party will

bear the burden of proof at trial.” Celotex Corp. v. Catrett,

477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d

265 (1986). The failure of proof concerning an essential

element of the non-moving party’s case necessarily renders

all other facts immaterial and requires the court to grant the

motion for summary judgment. Jd.

Defendant Barth’s Motion for Summary Judgment as to

Count I of Counterclaim (liability) (DE #389) and

Defendant Barth’s Motion for Summary Judgment as to

Count I (liability)

A recurring issue raised by the parties is whether Article

2 of the Uniform Commercial Code (“UCC”) applies to this

case. In its Motion for Summary Judgment as to Count I

(liability) of the Second Amended Complaint and Motion for

Summary Judgment as to Count I of the Counterclaim

(liability), Barth argues that the UCC applies to this case

because it involves the sale of goods. As support, Barth relies

largely on KLT Industries, Inc. v. Eaton Corp., 505 F. Supp.

1072 (E.D. Mich. 1981) which applied the UCC to a similar

factual situation. However, the Court notes that the ALT

decision summarily states that the UCC applies but provides

no rationale for such a conclusion. KLT, 505 F. Supp. at 1078.

In response, BMC claims that the UCC does not apply.

BMC argues that although the contract at issue is a “hybrid”

between goods and services, the Court should look to see

whether the “predominant factor” is the rendition of services

47a

Appendix B

or a transaction of sale with labor incidentally involved. See,

e.g., Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974); Advent

Systems Ltd. v. Unisys Corp., 925 F.2d 670 (3d Cir. 1991).

In applying the predominant factor test, BMC relies largely

on Lincoln Pulp & Paper Co. v. Dravo Corp., 436 F. Supp.

262 (D. Me. 1977) in which the court examined a contract

for the engineering, design and construction of machinery

for use in a mill. The court in Lincoln Pulp found that the

UCC did not apply and stated as follows:

A contract which is predominantly for the

rendition of services, even though it involves the

furnishing of equipment, is not a “transaction in

goods” and is therefore not governed by Article

2. The Lincoln-Dravo contract covers the

“engineering and construction of a heat and

chemical recovery unit.” Dravo agreed “to

furnish project management, process and

design engineering, procurement, construction

management, start-up assistance and materials as

well as auxiliary equipment including evaporators

and precipitators and construction of a chemical

recovery boiler... .” The contract was for a fixed

fee of $5.2 million, without any allocation of price

breakdown between engineering or other services

and material costs. The contract is a typical

engineering-construction contract involving

predominantly the rendition of services, not the

sale of goods. As such, it falls outside the scope

of Article 2.

Lincoln Paper, 436 F. Supp. at 275 (c'tations omitted). BMC

correctly points out the similarities between the facts

48a

Appendix B

described in Lincoln Paper and the facts of the instant case.

The contract at issue here was initially for a fixed fee with

no allocation between the costs of services and materials.

The contract also called for design, manufacturing, testing

and construction of equipment. This Court finds that there is

no genuine issue of material facts concerning the predominant

factor of this contract. The agreement primarily called for

Barth to provide services rather than goods. As a result, the

contract is not governed by Article 2 of the UCC. See, e.g.,

Lincoln Paper, 436 F. Supp. at 275; Allied Industrial Serv.

Corp. v. Kasle Iron & Metals, Inc., 405 N.E.2d 307 (Ohio

6th Ct. App. 1977); Mingledorf’s Inc. v. Hicks, 209 S.E.2d

661 (Ga. App. 1974).

Because these Motions were predicated on the UCC,

which does not apply, the Court denies these Motions for

Summary Judgment.

Defendants’ Motion for Summary Judgment as to Count

Il (DE #296)*

1. Economic Loss Rule

Defendant Barth claims that it is entitled to Summary

Judgment as to Count II of the Second Amended Complaint,

a claim for fraudulent misrepresentation. Barth first claims

that Florida’s economic loss rule bars Count II. In AFM Corp.

v. Southern Bell Tel. & Tel., 535 So.2d 180 (Fla. 1987) and

Florida Power and Light Co. v. Westinghouse Electric Corp.,

4. This Motion is directed to Counts II and III, but as stated

previously Plaintiff voluntarily dismissed Count III.

49a

Appendix B

510 So.2d 899 (Fla. 1987), the Florida Supreme Court held

that a party to a contract may not pursue a claim in tort for

purely economic losses, absent a claim for personal injury or

damage to property other than the defective property itself.

See Interstate Sec. Corp. v. Hayes Corp., 920 F.2d 769, 773

(11th Cir.), reh'g denied, 929 F.2d 704 (11th Cir. 1991) (en

banc). Under this rule, an action in tort is inappropriate where

the claim is based on breach of contract. See Interfase

Marketing, Inc. v. Pioneer T, echnologies Group, Inc., 774

F. Supp. 1355, 1358 (M.D. Fla. 1991). The “economic loss”

doctrine has been invoked to preclude actions based on fraud

and breach of fiduciary duty where there is a failure to allege

or prove personal injury or property damage in litigation

arising out of contractual relationships. See, e.g., Hayes, 920

F.2d at 776-77; Kee v. Nat'l Reserve Life Ins. Co., 918 F.2d

1538, 1543-44 (11th Cir. 1990).

However, when an alleged fraud is completed prior to

the formation of the contract, it can be characterized as

“independent” of the contract and an action for the fraudulent

inducement is not barred by the economic loss rule. Brass v.

NCR Corp., 826 F. Supp. 1427, 1428 (S.D. Fla. 1993);

Williams Elec. Co. v. Honeywell, Inc., 772 F. Supp. 1225,

1238 (N.D. Fla. 1991) (finding that the economic loss rule

applies to “fraud in the performance” claims, but

distinguishing fraud in the inducement). A permissible

fraudulent inducement action exists when “one party tricked

the other into contracting.” Leisure Founders, Inc. v. CUC

Int'l, Inc., 833 F. Supp. 1562, 1572 (S.D. Fla. 1993); Williams,

772 F. Supp. at 1238.

In essence, Plaintiff BMC is alleging that it was tricked

into contracting with Barth due to various misrepresentations.

50a

Appendix B

The January 14, 1994 affidavit of Joseph Peralta, senior

designer at Vision-Ease, states that he recommended that

BMC enter into the contract with Barth based on the

statements of Frank Bailey and other Barth representatives

who described Barth as an experienced designer,

manufacturer and installer of automation equipment.’ The

exhibits attached to the Peralta affidavit, which consist of

Barth brochures and presentations, also contain references

to the design ability of Barth. In reply, Barth points to portions

of the exhibits which indicate that Barth did not engage in

design. Barth also directs the Court to Peralta’s deposition

in which he was asked if he could say that there was “anything

inaccurate in the sales literature” supplied by Barth

employees; he answered that he could not.

Because BMC has stated a claim for fraudulent

inducement, and because there remain issue of fact as to what

representations were made, this Court cannot dismiss Count

II based on the economic loss doctrine.

2. Justifiable Reliance

Defendant Barth also claims that it is entitled to summary

judgment on Count II, arguing that BMC did not justifiably

rely on a misrepresentation.® A claim of fraud in the

inducement requires that Plaintiff establish the following

elements: 1) that the Defendants misrepresented a material

5. See Affidavit of Joseph Peralta 4] 6-8, 12.

6. For the purpose of this Motion, Barth assumes that it made

some statement which misrepresented a material fact.

Sla

Appendix B

fact; 2) that the Defendants knew or should have known that

the statement was false; 3) that the Defendants intended that

the representation would induce the Plaintiff to act; and

4) that the Plaintiff was injured by acting in justifiable reliance

on the misrepresentations. Golden v. Mobil Oil Corp., 882

F.2d 490, 494 (11th Cir. 1989); Royal T ypewriter Co. y.

Xerographic Supplies Corp., 719 F.2d 1092, 1103 (11th Cir,

1983); Johnson v. Davis, 480 So.2d 625, 627 (Fla. 1985).

Barth requests summary judgment on Count II and argues

that even if there were misrepresentations during negotiations,

BMC did not justifiably rely on them because there was a

subsequent written agreement. Defendant argues that any oral

representations made by parties during negotiations are

immune because it is the written agreement that will govern

the parties’ rights and responsibilities. Defendant relies on

Schubot v. McDonalds Corp., 757 F. Supp. 1351 (S.D. Fla.

1990), aff'd without op., 963 F.2d 385 (11th Cir. 1992). In

response, Plaintiff correctly points out that in Schubot the

district court relied on a disclaimer contained in the contract

that specifically precluded reliance on additional oral or

written agreements. See Schubot, 757 F. Supp. at 1354-56.

In addition, the Court notes that parol evidence may be used

to prove fraudulent inducement. See Gregg v. United States

Industries, Inc., 715 F.2d 1522 (11th Cir.), reh'g granted, in

part, clarified on other grounds, 721 F.2d 345 (11th Cir.

1983), cert. denied, 466 U.S. 960, 104 S. Ct. 2173, 80 L. Ed.

2d 556 (1984).

Barth also alleges that any future promises or “puffing”

cannot be the basis for a fraud action. Barth cites various

cases and the Restatement (Second) of Torts for the

52a

Appendix B

proposition that an action for fraud cannot exist if the party

intends to carry out the promise when made but later changes

his mind.

In response, BMC alleges that Barth made

misrepresentations as to Barth’s prior experience and

capabilities.’ BMC states that these representations go beyond

a promise of future action and can be the basis for a fraud

action:

Trade talk or puffing relates to matters of opinion,

whereas a representation regarding experience

consists of a statement of past or existing fact. A

misrepresentation as to extent of past experience

can be a foundation for an action for fraud,

especially as there is no duty to investigate its truth

or falsity unless the recipient knows of its falsity

See Eastern Cement v. Halliburton Co., 600 So.2d 469, 471

(Fla. 4th Dist. Ct. App.), rev. denied, 613 So.2d 4 (Fla. 1992).

Because there is a genuine issue of material fact as to whether

BMC relied on various representations in selecting Barth to

provide the services at issue in this case, the Court cannot

grant summary judgment on Count II.

7. See Second Amended Complaint; Affidavit of Joseph Peralta

{| 14, BMC’s Response to Barth’s Motion for Summary Judgment

(DE #324), Exhibit A; Deposition of Carl Bergmann, at 225-28,

BMC’s Response to Barth’s Motion for Summary Judgment (DE

#324), Exhibit B.

53a

Appendix B

Defendant Nesco’s Motion for Summary Judgment as to

Count VIII (DE #328)

By way of summary, some of the facts surrounding Count

VIII of the Second Amended Complaint, a claim for equitable

and promissory estoppel against Nesco, can be found in

paragraph 43 of the Second Amended Complaint where

Plaintiff BMC alleges the following:

From January 1989 and continuing thereafter,

Robert J. Tomsich (“Tomsich”), personally

and in his capacity as President of Nesco

Holdings/Old Nesco, made representations and

commitments to BMC that Nesco Holdings/Old

Nesco would supervise completion of the project

and would ensure that performance would occur

according to schedule.

Count VIII then alleges that BMC relied on these

representations and incurred additional obligations, including

paying an additional $100,000 that was not yet due.* BMC

claims that it delayed declaring Barth in default of the

agreement based on Nesco’s representations and promises to

supervise the completion of the project. BMC alleges that

Nesco should be estopped from denying liability for Barth’s

actions because Barth, as a subsidiary of Nesco, retained the

benefits of the $100,000.

In its Motion for Summary Judgment on Count VII,

Nesco raises five arguments. First, Nesco alleges that under

8. See Second Amended Complaint 9 113-19.

54a

Appendix B

agency theory, Tomsich was speaking for Barth and no one

else. Second, Nesco argues the Florida statute of frauds bars

Count VIII. Third, Nesco argues that promissory estoppel

cannot overcome Nesco’s statute of frauds defense. Fourth,

Nesco argues that any alleged oral promises it made are not

sufficiently definite to warrant the invocation of promissory

estoppel. Finally, Nesco argues that if BMC’s argument is

correct, then a novation has taken place substituting Nesco

for Barth.

a. Agency

Nesco argues that Tomsich and Nesco acted as agents of

Barth, rather than as an agent for itself, during the time period

relevant to this case. Accordingly, Nesco argues that it was

an agent acting for a disclosed principal and is not liable for

the debts of the principal. In response, BMC points to several

portions of the record which create an issue of fact as to

whether Nesco was acting for itself or others. For example,

Peter H. Trembath, who was BMC’s vice-president, secretary

and general counsel, testified that Tomsich introduced himself

as the CEO of Nesco in August 1988 and assured the parties

that Nesco would take an active role in the project.’ Joseph

Mandia, a Nesco employee, testified that in December 1988

Tomsich designated Mandia as the new “project manager”

and made him responsible for “[o]verall coordination of the

project.”’'° Due to the disputed issues of fact, the Court cannot

enter summary judgment on this ground.

9. See June 17, 1991 Deposition of Peter H. Trembath, at

134-39.

10. See January 18, 1991 Deposition of Joseph L. Mandia, at

113-14.

55a

Appendix B

b. Statute of Frauds

Nesco also argues that BMC’s claim is barred by

Florida’s statute of frauds because it is based on an alleged

oral agreement. Florida law provides, in pertinent part, as

follows:

No action shall be brought ... to charge the

defendant upon any special promise to answer for

the debt, default or miscarriage of another ...

unless the agreement or promise upon which such

action shall be brought, or some note or

memorandum thereof shall be in writing and

signed by the party to be charged....

Fla. Stat. § 725.01. Nesco argues that under the statute of

frauds, any purported promise that it made to undertake

performance or liability for Barth cannot be the basis of a

cause of action.

In response, Plaintiff BMC argues that the promise at

issue is a “direct” promise to perform not barred by the statute

of frauds, as opposed to a “collateral” promise that may not

be enforced unless in a writing. Plaintiff cites two cases:

Polera y. General Window Corp., 132 So.2d 778 (Fla. 2d

Dist. Ct. App. 1961) and Sanders y. Hodges, 147 So. 571

(Fla. 1933). These cases support the proposition that a direct

promise to perform is not within the statute of frauds while a

collateral promise to perform only in the event of a default

by another must be in writing. In addition, the question of

whether a promise is direct or collateral is a question of fact

to be determined by the jury. Sanders, 147 So. at 572: see

56a

Appendix B

Hilkmeyer v. Latin American Air Cargo Expediters, Inc. 94

So.2d 821, 826 (Fla. 1957).

Plaintiff also cites Section 366 of Corbin on Contracts

which states that “when the leading object of the promisor is

to subserve some interest or purpose of his own,

notwithstanding the effect is to pay or discharge the debt of

another, his promise is not within the statute [of frauds].” In

addition, the 1993 Supplement states as follows: “When one

who is allegedly an oral guarantor of an obligation may

reasonably be seen to possess a collateral interest involving

pecuniary or other gain from the underlying transaction out

of which the guaranteed obligation arose, the guaranty is

enforceable without reference to the applicable statute of

frauds.” Plaintiff cites A/ Booth’s, Inc. v. Boyd-Scarp Enters.,

Inc., 518 So.2d 422 (Fla. 5th Dist. Ct. App. 1988) for the

proposition that under Corbin’s “leading object” rule and the

Restatement (Second) of Contracts, an oral promise is not

subject to the statute of frauds when the promisor’s main

purpose in making the promise was to advance his own

interests and when the promisor received a substantial benefit

as a result. BMC adds that the benefit need not go directly to

the promisor as long as the consideration is paid to an entity

in which the promisor has a financial interest. See Jn re Alchar

Hardware Co., 764 F.2d 1530 (11th Cir. 1985).

The Court finds that a determination of whether Nesco’s

promise was “direct” or “collateral” is an issue for resolution

by the jury and denies the motion for summary judgment on

this ground.

57a

Appendix B

c. Promissory Estoppel

Defendant Nesco then argues that promissory estoppel

does not support an agreement which violates the statute of

frauds. However, as stated above, the Court finds that there

remains an issue of fact as to whether the Statute of frauds

applies to the promises alleged in this case. Promissory

estoppel can be applied to enforce oral promises which are

not covered by the statute of frauds when it is necessary to

prevent injustice, if the promisor makes affirmative

representations which he reasonably should expect would

induce the promisee into substantial action or forbearance

and if there was detrimental reliance. W.R. Grace & Co. y.

Geodata Servs., Inc., 547 So.24 919 (Fla. 1989). Accordingly,

the issue of promissory estoppel need not be addressed until

a determination is first made as to whether the promise at

issue violates the statute of frauds.

d. Definiteness

Nesco then argues that BMC has failed to demonstrate

any “definite” promise that can justify the invocation of

promissory estoppel. However, the Court finds that there is

ample evidence to support the existence of a definite

promise.'' Accordingly, the Court denies the Motion for

Summary Judgment based on definiteness.

11. See, e.g., BMC’s Response to Nesco’s Motion for Summary

Judgment, Exhibit D; Deposition of Joseph Mandia, at 176-77.

58a

Appendix B

e. Novation

Nesco’s final argument is that if BMC’s argument is

correct, then a novation has taken place substituting Nesco

for Barth — i.e., “if Nesco is in, Barth is out.” In support of

its argument, Nesco provides no caselaw and cites only

Sections 278 and 279 of the Restatement (Second) of

Contracts. Section 278 states, in part, that “[i]f an obligee

accepts in satisfaction of the obligor’s duty a performance

offer by a third party, the duty is discharged.” Section 279

states, in pertinent part, that “[a] substituted contract is a

contract that itself is accepted by the obligee in satisfaction

of the obligor’s existing duty” and that such a contract

“discharges the original duty.”

However, there is nothing in the record to support

Nesco’s argument that any alleged promise to perform by

Nesco was accepted “in satisfaction” of performance by

Barth. Accordingly, the Motion for Summary Judgment on

this ground is denied.

Plaintiff BMC’s Motion for Summary Judgment as to

Defendant’s Counterclaim (DE #363)

As stated earlier, Barth has brought a counterclaim

alleging breach of contract, anticipatory repudiation, quantum

meruit, fraud, breach of good faith and promissory estoppel.

In sum, Barth claims that there were a series of modifications

to the parties’ original agreement that essentially rewrote the

initial agreement. In addition, Barth argues that BMC

misrepresented its ability to produce the lenses by the

non-automated procedure it had been using. Barth also claims

59a

Appendix B

that BMC has repudiated the modified agreement between

the parties. BMC moves for summary judgment for each of

the counterclaims.

a. Breach of Contract

BMC claims that Barth’s counterclaim for breach of

contract must fail because it is based on oral modifications

of the written purchase order. BMC argues that any alleged

oral modifications of the parties written agreement were not

valid because the purchase order agreement provided that “no

modification of this order or of these conditions shall be

binding an the Buyer [BMC] unless made in writing and

signed by its duly authorized representative.” When a contract

requires an additions or changes to be in writing, oral

modifications are not enforceable. See Acquisition Corp. of

America v. American Cast Iron Pipe Co., 543 So.2d 878 (Fla.

4th Dist. Ct. App. 1989).

In response, Barth relies almost entirely on the Uniform

Commercial Code. However, as discussed above the UCC

does not apply to this contract. Accordingly, BMC’s Motion

for Summary Judgment on Count I of the Counterclaim is

granted.

b. Anticipatory Repudiation

BMC claims Barth’s counterclaim for anticipatory

repudiation cannot remain because such a cause of action

requires an absolute refusal to perform by one party during

the performance by another party. See Pallardy-Watrous Ins.

Agency, Inc. v. M. Tucker, Inc., 163 So. 284 (Fla. 1935). In

60a

Appendix B

addition, BMC argues that Barth is barred from asserting the

counterclaim because Barth was not capable of performing

its own obligations under the contract. BMC cites Hospital

Mortgage Group vy. First Prudential Dev. Corp., 411 So.2d

181 (Fla. 1982) and Restatement (Second) of Contracts § 254,

for the proposition that a party claiming anticipatory

repudiation must itself be able to perform.

In response, Barth argues that Hospital Mortgage does

not apply because it is a non-UCC case. However, as stated

above, the UCC does not apply. In the alternative, Barth

argues that it met the requirement that it tender its own

performance when Barth wrote a May 21, 1989 letter which

offered delivery of part of the automated system. There

appears to be a genuine issue of material fact at to whether

there was an anticipatory repudiation and whether Barth was

able to perform at the time. Accordingly, summary judgment

on this Counterclaim must be denied.

c. Quantum Meruit

BMC requests summary judgment on the counterclaim

for quantum meruit and argues that such an action cannot be

brought when an express contract exists. Curiously, one of

the cases Barth cites is Quayside Assocs., Ltd. v. Triefler,

506 So.2d 6 (Fla. 3d Dist. Ct. App. 1987). In Quayside, the

court found that the law does not apply to an implied contract

when an express contract exists. However, the court did find

that a jury may consider both an express and implied contract,

finding that one of the two exists. Such a result is consistent

with the rule that a party may plead inconsistent claims and

theories. Brookhaven Landscape & Grading Co. v. J.F.

——

6la

Appendix B

Barton Contracting Co., 676 F.2d $16, 523 (11th Cir. 1982);

Fredonia Broadcasting Corp. v. RCA Corp., 481 F.2d 781.

790 (Sth Cir. 1973). In addition, the Court has granted

summary judgment to BMC on the breach of contract

counterclaim which therefore leaves open the possibility for

recovery based on quantum meruit. Accordingly, summary

judgment is inappropriate on this counterclaim.

d. Fraud

BMC first argues that the counterclaim for fraud is barred

by Florida’s economic loss rule. However, as discussed above,

fraudulent inducement claims are not barred. Brass v. NCR

Corp., 826 F. Supp. 1427, 1428 (S.D. Fla. 1993); Williams

Elec. Co. v. Honeywell, Inc., 772 F. Supp. 1225, 1237-38

(N.D. Fla. 1991); Leisure Founders, Inc. vy. CUC Int'l Inc.,

833 F. Supp. 1562, 1572 (S.D. Fla. 1993); Williams Elec.

Co. v. Honeywell, Inc., 772 F. Supp. 1225, 1238 (N_D. Fla.

1991). Barth correctly points to paragraph 224 of the

counterclaim which states that Barth was “induced by those

several false representation” and that it “entered into an

agreement which it would either not have entered into or

would have demanded different terms, had it known the

truth.” Barth supports this counterclaim with the deposition

testimony of former BMC employee Errol Hunger.

Accordingly, Barth has demonstrated a genuine issue of

material fact on its claim for fraudulent inducement and the

court cannot grant summary judgment based on the economic

loss rule.

BMC also argues that it is entitled to judgment on Barth’s

fraud counterclaim because Barth has failed to meet the

I een

62a

Appendix B

elements of fraud. As stated above, fraud requires 1) a false

statement concerning a material fact, 2) the representor’s

knowledge that the statement was false, 3) intent to induce

another to act and 4) injury caused by justified reliance.

Golden v. Mobil Oil Corp., 882 F.2d 490, 494 (11th Cir.

1989); Royal Typewriter Co. v. Xerographic Supplies Corp.,

719 F.2d 1092, 1103 (11th Cir. 1983); Johnson v. Davis, 480

So.2d 625, 627 (Fla. 1985). BMC claims there is no evidence

of a false statement or justifiable reliance. However, the Court

finds there is a genuine issue of material fact as to whether

BMC engaged in fraud. For example, Barth has presented

the Hunger deposition which alleges that BMC withheld

certain information about the complexity of the manufacturing

process at issue and the number of molds to be processed by

the equipment. Barth alleges that they relied on the

representations of BMC when entering into this contract and

later discovered that it was far more complicated than had

been represented. Accordingly, the Court cannot grant

summary judgment on the fraud counterclaim.

e. Breach of Good Faith

BMC argues that the counterclaim for breach of good

faith cannot remain because such a claim is not a separate

theory of recovery when there is also an action for breach of

a contract. BMC relies on Burger King Corp. v. Austin, 805

F. Supp. 1007 (S.D. Fla. 1992). However, that case indicates

that an action for breach of good faith may stand as a separate

theory depending on whether there is an allegation that a party

exercised its discretion under the contract reasonably and not

arbitrarily or capriciously. Compare id. at 1014 (allowing an

action for breach of good faith) with id. at 1015 (finding that

63a

Appendix B

action for breach of good faith was part of breach of contract

claim). Because an action for breach of good faith can remain

as a separate count, and also because the Court has found

that summary judgment in BMC’s favor is appropriate on

Barth’s breach of contract counterclaim, BMC’s motion for

summary judgment is denied as to the breach of good faith

counterclaim.

J. Estoppel

BMC claims that it is entitled to summary judgment on

Barth’s estoppel counterclaim.'? This counterclaim alleges

that Robert Carlson, President of BMC “promised that BMC

would compensate Barth for its commitment of resources and

money in excess of the contract price, in an amount to be

fairly negotiated, when a working module was operational.”

BMC claims that the requirements for promissory

estoppel are lacking. First, BMC claims that there was no

injustice to Barth. Second, BMC argues that there was no

definite promise. Finally, BMC alleges that Barth has

“unclean hands” and is barred from asserting an equitable

estoppel claim.

Barth’s entire response states as follows:

BMC’s promissory estoppel argument borrows the

authorities urged by Barth in its pending Motion

12. The claim for estoppel is labeled as Count VII, but this

appears to be a typographical error because it is the sixth

counterclaim.

13. See Counterclaim 4 233.

64a

Appendix B

for Summary Judgment as to Count VIII, BMC’s

claim for promissory estoppel. Due to space

limitations, Barth respectfully asks the Court to

note Barth’s legal argument on the promissory

estoppel issue, as set forth in its earlier Motion.

Responding to the factual assertions, BMC claims

that “... Carlson’s alleged promise [to pay more

money to Barth], even if made, was indefinite. . .”

(emphasis supplied; BMC Mem. at 19). Therefore,

says BMC, there was no “definite” promise. This

argument is tantamount to saying that equity

provides no remedy when a promisor says, in

essence, “Keep working and I will pay you what

you are worth, later on, if I feel like it” (see

discussion supra, regarding open price term under

UCC.) The “injustice” of allowing Carlson and

BMC to get away with this bad faith ploy is that

Barth is “suckered” into relying on a man’s word,

only to discover that he had his fingers crossed.

Barth contributed far more time and money to this

project than anticipated at the outset, and

succeeded (apparently) even beyond BMC’s

wildest dreams. It is the clearest form of injustice

for BMC now to say, “Tough — I didn’t mean it.”

Barth’s Response to BMC’s Motion for Summary Judgment

as to Barth’s Counterclaim, at 19-20. The Court notes that

Barth’s response makes no references to caselaw or the record.

In addition, the “earlier Motion” regarding Count VIII

mentioned in the response was not filed by Defendant Barth

but was filed by the same attorneys on behalf of Defendant

Nesco. Based on an independent review of the record, the

65a

Appendix B

Court finds that there are issues of fact as to the possible

injustice to Barth because there is evidence that both parties

continued their business relationship based on various

representations. However, BMC correctly relies on W.R.

Grace & Co. v. Geodata Servs., Inc., 547 So.2d 919 (Fla.

1989), a case discussed above. Under W.R. Grace, BMC’s

promise that it “would compensate Barth for its commitment

of resources and money in excess of the contrary price, in an

amount to be fairly negotiated, when a working module was

operational” is not sufficiently definite to support a claim

for promissory estoppel. Accordingly, summary judgment is

granted on that counterclaim.

Barth’s Motion for Partial Summary Judgment as to

Count I (damages) (DE #386)

Barth moves for summary judgment on the issue of

damages and argues that BMC’s claim for $16,711,942 is

not proper because the original contract was only for

$515,200. According to the deposition of William O’Connell,

BMC’s damages expert, Plaintiff is seeking to recover

damages for lost profits, lost labor savings, and the effect of

the alleged breach on BMC’s working capital."

Barth first argues that the lost profits demand suffers from

two flaws: that it is based on the production of six machines

14. The Court notes that Barth relies on the UCC. As stated

previously, the Court finds that the UCC does not apply to the contract

at issue in this case. However, BMC correctly states that the recovery

under Florida contract law and the UCC appear to be “materially the

same.” See BMC’s Memorandum of Law in Opposition to Barth

Industries, Inc.’s Motion for Partial Summary Judgment (Damages)

on Count I, at 6 n.10.

66a

Appendix B

although the contract only called for the production of four

and that BMC’s claim for the potential sales from the potential

production from two additional machines is too speculative

and uncertain. Barth then argues that the claim for lost labor

savings must fail because BMC had no plans to terminate

any of the employees whose jobs would be handled by the

automation equipment. Barth next argues that working capital

is not a recoverable element of damages. Finally, Barth argues

that the delivery date was modified, and that damages never

accrued because they do not begin running until a reasonable

notice of defauit.

a. General Standard

Under basic contract law, an injured party has a right to

recover all consequential damages caused by a breach —

damages which were reasonably within the contemplation of

the parties at the time of the making of the contract. Hobbley

v. Sears, Roebuck & Co., 450 So.2d 332 (Fla. Ist Dist. Ct.

App. 1984); Life Investors Ins. Co. of America v. Johnson,

422 So.2d 32 (Fla. 4th Dist. Ct. App. 1982). Damages are

recoverable only if they were actually in the contemplation

of the parties or if the parties had reason to foresee them.

Beefy Trail, Inc. v. Beefy King Int'l, Inc., 267 So.2d 853 (Fla.

4th Dist. Ct. App. 1972); Hobbley, 450 So.2d at 333;

Restatement (Second) of Contracts § 351 (stating that test is

an objective one by which looks to whether a reasonable

person would have foreseen the damages caused by the

breach).

67a

Appendix B

b. Lost Profits

Barth raises arguments about two aspects of the lost

profits claim: the number of units and the calculation of

potential sales. The original contract at issue called for the

production of four machines, but BMC’s damage witness has

calculated the amount based on the production of six

machines. In response, BMC claims that Barth knew about

BMC’s plans to add two more machines in the future. The

Court is also mindful of the Florida Supreme Court’s decision

in W.W. Gay Mechanical Contractor, Inc. v. Wharfside Two,

Ltd., 545 So.2d 1348, 1351 (Fla. 1989) which states that lost

profits are recoverable if there is “some standard by which

the amount of damages may be adequately determined.”

However, it is undisputed that there was no contract to

manufacture the additional machines. There can be no

recovery for lost profit when there is no contractual obligation

to supply the items at issue. See Navistar Int'l Corp. v. Hagie

Manufacturing Co., 662 F. Supp. 1207, 1214 (N.D. Ill. 1987);

Nissho-Iwai Co. v. Occidental Crude Sales, Inc., 729 F.2d

1530, 1546-48 (Sth Cir. 1984). Therefore, any damage

calculations must be limited to those caused by failure to

provide four machines and not six machines. However,

summary judgment cannot be entered because there remain

issues of fact for the jury as to the amount of such damages.

Similarly, BMC may not recover damages for potential sales

resulting from six machines, but may demonstrate entitlement

to damages from the four machines described in the contract.

Determination of these damages is also appropriate for the

jury.

68a

Appendix B

c. Lost Labor Savings

Barth argues that the lost labor savings are not

recoverable because BMC was not going to fire the employees

whose work would be automated. Barth points to the

testimony and notes of O’Connell, David Schwantes

(Vision-Ease’s president at the time), and Joseph Zaborny

(vice-president of manufacturing and Vision-Ease plant

manager). BMC argues that damages for lost labor savings

are recoverable because Barth had reason to foresee and had

actual knowledge of such damages. BMC points to the first

page of the contract itself which states that automation process

would “result[] in replacement of manual labor.” BMC also

directs the Court to the notes of its representative and the

deposition testimony of O’Connell who stated that any

employees displaced by the automation would either leave

the company or be placed in already existing positions.

Based on this conflicting evidence, the Court finds that

there is a genuine issue of material fact as to the recoverability

of lost labor savings. Such a finding precludes an entry of

summary judgment on this point.

d. Working Capital

Part of BMC’s damage claim is for the effect of the

alleged breach of contract on BMC’s working capital.

Plaintiff's damage expert, describes this request for recovery

as follows:

The working capital component is a calculation

which measures the damages associated with

69a

Appendix B |

either the loss of working capital measured by the

investment and the assets which were not utilized,

the loss of working capital for not being able to

achieve labor savings or the damage caused by the

loss of working capital due to lost sales, which is

principally measured as the resulting cash flow

from those three calculations times an interest

rate.'®

O’Connell also described it another way:

[T]he working capital component is in fact

measured by the incremental borrowing measured

by the short-term interest borrowing rate, those

amounts having been paid out of pocket....

Because the lost labor savings were not

materialized, and the amounts were in fact actually

paid to the employees, that cash outlay was

financed through short-term lending, and the

incremental cost associated with short-term

lending to pay those employees was an out of

pocket expense which is a component of the

damage calculation.’®

Barth argues that this is not recoverable as a matter of law

and is really an attempt at double recovery of the prejudgment

interest. Based on the written pleadings it is not entirely clear

whether BMC is merely seeking prejudgment interest or

15. See O’Connell Deposition, at 43-44.

16. See O’Connell Deposition, at 199-201.

70a

Appendix B

something else. In addition, there appears to be no relevant

caselaw in Florida or from the Eleventh Circuit. Moreover,

the parties direct the Court to conflicting precedent from other

jurisdictions. Compare Atlas Concrete Pipe, Inc. v. Roger J.

Au. & Son, Inc., 467 F. Supp. 830 (E.D. Mich. 1979), rev'd

on other grounds, 668 F.2d 905 (6th Cir. 1982) and Minpeco,

S.A. v. Hunt, 686 F. Supp. 427 (S.D.N.Y. 1988) with Lewis

v. Mobil Oil Corp., 438 F.2d 500 (8th Cir. 1971) and Parmet

Homes, Inc. v. Republic Ins. Co., 314 N.W.2d 453, 457-58

(Mich. 1981). Because of the uncertainty as to what comprises

this aspect of the requested damages, there remain issues of

fact precluding an entry of summary judgment. However, this

denial is without prejudice and the parties are free to reargue

this issue prior to trial.

e. Delivery Date

Finally, Barth argues that the delivery date “starts the

ticking of the damage clock” and that the delivery date in

this case was modified to a “reasonable” time. Barth relies

on the UCC for this argument. However, as stated above, the

UCC does not apply to this contract. Therefore, the motion

for summary judgment is denied on this point.

Defendant BIC’s Motion for Summary Judgment as to

Count VIII (DE #392)"

As stated above, Barth Industries underwent a

reorganization in December 1988. After the restructuring,

17. This Motion was directed at Counts VI, VII and VIII, but

as stated above only Count VIII remains.

Tila

Appendix B

Barth LP became a limited partnership. Nesco, Inc. (which

later changed its name to Nesco Holdings) became the limited

partner of Barth LP. In addition, BIC Corporation was formed

and became the general partner of Barth LP. As a general

partner, BIC can be liable for certain partnership liabilities.

BIC claims that under Section 1515 of the Uniform

Partnership Act, partners are jointly and severally liable for

tort claims but only jointly liable for other obligations such

as breach of contract judgments. As a result, BIC argues that

it is liable for the fraud claim but that BMC will not be able

to execute against BIC until all of the partnership assets are

gone. In addition, if BMC obtains judgment only on the

contract claim, BIC claims it would be entitled to dismissal.

BIC argues that BMC could seek to collect from BIC only if

collection from Barth LP were not successful. BIC moves

for summary judgment.

In response, BMC concedes that BIC is named in the ad

damnum clause in Count VIII but that no cause of action is

stated against BIC in Count VIII. Because BMC agrees to

strike BIC from the ad damnum clause, the Motion for

Summary Judgment is denied as moot as to Count VIII."*

The motion at issue does not move for judgment on

Counts | and II, but both BMC and BIC engage in a discussion

as to whether BIC should remain a party to this action. The

parties agree that if BMC obtains a judgment, it must first

look to Barth LP before seeking the assets of BIC. Although

18. See BMC Industries, Inc..s Memorandum of Law In

Opposition to BIC Corp.’s Motion for Summary Judgment as to

Counts VI, VII and VIII, at 3 n.1.

72a

Appendix B

BIC is not named in Counts I and II, it remains a defendant.

Because the issue of the availability of collection against BIC

is premature and need not be determined unless and until

BMC obtains a judgment against Barth LP, the Court declines

to dismiss BIC as a party in this action at this time.

CONCLUSION

In accordance with the above, it is

ORDERED AND ADJUDGED that Defendant Barth’s

Motion for Summary Judgment as to Count I (liability) and

Defendant Barth’s Motion for Summary Judgment as to Count

I (liability) of Counterclaim (DE #389) are DENIED.

FURTHER ORDERED that Defendant’s Motion for

Summary Judgment as to Count II (DE #296) is DENIED.

FURTHER ORDERED that Defendant Nesco’s Motion

for Summary Judgment as to Count VIII (DE #328) is

DENIED.

FURTHER ORDERED that Plaintiff BMC’s Motion for

Summary Judgment as to the Counterclaim (DE #363) is

GRANTED IN PART AND DENIED IN PART. The Motion

is DENIED as to the quantum meruit, anticipatory

repudiation, fraud, and breach of good faith counterclaims

and GRANTED as to the breach of contract and promissory

estoppel counterclaims.

FURTHER ORDERED that Defendant Barth’s Motion

for Partial Summary Judgment as to Count I (damages) (DE

#386) is DENIED.

73a

Appendix B

FURTHER ORDERED that Defendant BIC’s Motion for

Summary Judgment as to Count VIII (DE #392) is DENIED.

DONE AND ORDERED in Chambers at Miami, Florida,

this 21st day of July, 1994.

s/ K.M. Moore

K. MICHAEL MOORE

UNITED STATES DISTRICT JUDGE

74a

APPENDIX C — VERDICT FORM DATED AND

FILED JANUARY 31, 1995

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No. 89-6443-CIV-MOORE

BMC INDUSTRIES, INC.,

Plaintiff,

vs.

BARTH INDUSTRIES, INC., et al.,

Defendants.

VERDICT FORM

We, the Jury, return the following verdict:

BMC’S CLAIMS AGAINST BARTH AND NESCO

Question | is closely related to question 5: you must

answer “yes” to only one of questions 1 and 5 and must

answer “no” to the other of these two questions.

1. Did Barth breach its contract with BMC?

Ya +

75a

Appendix C

If your answer to question | is “no,” skip questions 2

through 4 and proceed directly to question 5. If your answer

to question | is “yes,” proceed to answer question 2.

2. What is the total amount of damages suffered by BMC as

a result of Barth’s conduct?

$ 3,001,879.00

Proceed to answer question 3.

3. Is Nesco liable to BMC on the basis of promissory

estoppel?

If your answer to question 3 is “no,” then skip question

4 and proceed directly to question 5. If your answer ta

question 3 is “yes,” then proceed to answer question 4.

4. What is the total amount of damages suffered by BMC as

a result of Nesco’s conduct?

$ 2,137,453.00

Proceed to answer question 5. If your answer to question

1 is “yes,” then you must answer question 5 “no.” If your

answer to question | is “no,” then you must answer question

5 “yes.”

76a

Appendix C

BARTH’S CLAIMS AGAINST BMC

5. Did BMC commit an anticipatory repudiation of its

contract with Barth?

sete Aa

Proceed to answer question 6.

6. Is BMC liable to Barth for guantum meruit?

Proceed to answer question 7.

7. Did BMC violate its duty to Barth to act in good faith and

with fair dealing?

No ¥

If your answer to al/ of questions 5, 6 and 7 is “no,” skip

question 8 and proceed to the end of this verdict form. If you

answered any of questions 5, 6 and 7 “yes,” then proceed to

answer question 8.

77a

Appendix C

You have completed the jury verdict form. Please sign

and date the form and do not answer any additional

questions.

SO SAY WE ALL THIS 31 DAY OF January, 1995.

s/ Flavio J. Escobar

FOREPERSON

Flavio J. Escobar

1/31/95 =—-1:40 pm

We the Jury in explaining the damages suffered by BMC

would like to clarify and state that question #2 and #4 are

seperate amounts. The total amount of damages suffered by

BMC as a result of Barth's conduct is respectively

$3,001,879.00 and the total amount of damages suffered by

BMC as a result of Nesco’s conduct is respectively

$2,137,453.00.

s/ Flavio J. Escobar

Foreperson

78a

APPENDIX D — AMENDED FINAL JUDGMENT OF

THE UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF FLORIDA, MIAMI

DIVISION DATED AND FILED MARCH 239, 1995

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No. 89-6443-CIV-MOORE

BMC INDUSTRIES, INC.,

Plaintiff,

vs.

BARTH INDUSTRIES, INC., et al.,

Defendants.

AMENDED FINAL JUDGMENT'

THIS CAUSE cane before this Court for jury trial. The

issues having been tried and the jury having returned its

verdict, the Court

ORDERS AND ADJUDGES that Final Judgment is

entered in favor of Plaintiff and against Defendant Barth

Industries, Inc. in the amount of $3,001,879.00, and against

Defendant Nesco Holdings, in the separate amount of

1. This Amended Final Judgment supersedes the prior final

judgment entered in this proceeding.

79a

Appendix D

$2,137,453.00. This Court shall retain jurisdiction to consider

any motions for costs or attorneys’ fees, to the extent that

such are recoverable.

Let execution issue.

DONE AND ORDERED in Chambers in Miami, Florida

on the 29th day of March, 1995.

s/ K.M. Moore

K. MICHAEL MOORE

UNITED STATES DISTRICT JUDGE

80a

APPENDIX E — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE ELEVENTH

CIRCUIT DENYING PETITION FOR REHEARING

DATED AND FILED DECEMBER 30, 1998

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 95-5137, 95-5338

BMC INDUSTRIES, INC.,

Plaintiff-Appellee,

versus

BARTH INDUSTIES, INC.,NESCO, INC.,

f.k.a. Nesco Management, Inc., et al.,

Defendants-Appellants.

On Appeal from the United States District Court for the

Southern District of Florida

ON PETITION(S) FOR REHEARING AND PETITION(S)

FOR REHEARING EN BANC

(Opinion tith Cie, 19. F.2d).

Before: TJOFLAT and BARKETT, Circuit Judges, and

GODBOLD, Senior Circuit Judge.

PER CURIAM:

The Petition(s) for Rehearing are DENIED and no member

of this panel nor other Judge in regular active service on the

8la

Appendix E

Court having requested that the Court be polled on rehearing

en banc (Rule 35, Federal Rules of Appellate Procedure;

Eleventh Circuit Rule 35-5), the Petition(s) for Rehearing

En Banc are DENIED.

ENTERED FOR THE COURT:

s/ [illegible]

UNITED STATES CIRCUIT JUDGE

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