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American Water Heater Co. v. The Taylor Winfield Corp.

United States District Court, E.D. Tennessee, Greeneville

July 23, 2019

AMERICAN WATER HEATER CO., and A.O. SMITH CORP., Plaintiffs,
v.
THE TAYLOR WINFIELD CORP., d/b/a TAYLOR-WINFIELD TECHNOLOGIES, Defendant.

          Corker, Magistrate Judge.

          MEMORANDUM

          CURTIS L. COLLIER, UNITED STATES DISTRICT JUDGE.

         Before the Court is a motion for partial summary judgment by Defendant, The Taylor Winfield Corporation (“Taylor-Winfield”). (Doc. 91.) Because of a subsequently filed stipulation of dismissal (Doc. 97), the parties agree that the motion is no longer for partial judgment, but addresses all of the remaining claims in this action. (See Docs. 98 at 1 n.1; 100 at 2 n.2.) Plaintiffs, A.O. Smith Corporation (“A.O. Smith”) and American Water Heater Company (“AWH”), have responded in opposition (Doc. 98), and Defendant has replied (Doc. 100).

         For the reasons stated below, the Court will GRANT IN PART and DENY IN PART Defendant's motion for summary judgment (Doc. 91). The Court will DENY the motion as to Plaintiffs' breach of contract claims. The Court will GRANT the motion as to Plaintiffs' breach of warranty claims.

         I. BACKGROUND

         This diversity action concerns an order for two long-seam welding machines capable of welding rolled sheets of steel into cylinders, or “shells, ” which can later be capped at both ends in order to form water heater tanks. (Doc. 6 ¶ 7.) Plaintiffs, A.O. Smith and AWH, were the intended purchasers of the long seam welding machines (the “machines”). A.O. Smith is the parent corporation of AWH, which operates a water heater manufacturing facility in Johnson City, Tennessee. (Doc. 98 at 5.)

         On January 27, 2014, A.O. Smith issued two written purchase orders for the machines to Defendant Taylor-Winfield, an Ohio corporation offering welding products. (Id.; Doc. 92-1.) The purchase orders incorporated a written proposal by Taylor-Winfield for the design and build of the machines. (See Doc. 92-1.) Taylor-Winfield's proposal, in turn, incorporated A.O. Smith's initial written specifications for its planned use of the machines. (See Doc. 92-3 at 1.) The documents specified that Taylor-Winfield would design the machines so that they would automatically load, roll, size, TWINLAP seam weld, trim, and unload steel sheets. (See Doc. 92-3 at 1.) The TWINLAP technology would use two sets of wheels during a single pass of the equipment to weld the steel. (Doc. 98 at 2 n.4.) Plaintiffs contracted to pay $2, 204, 124.00 for the first long seam welding machine (the “first machine”), and $1, 928, 206.00 for the second long seam welding machine (the “second machine”). (Doc. 92-1.) Taylor-Winfield's proposal estimated a delivery date of twelve months for the first machine and fourteen months for the second machine. (Doc. 92-3 at 26.)

         The documents also required Taylor-Winfield to conduct a trial run, or “factory run-off, ” of the welding machines at Taylor-Winfield's factory in Ohio once the machines were completely operational. (Docs. 98 at 6; 92-3 at 2, 92-4 at 5 ¶ 10.1.) Taylor-Winfield was to notify the A.O. Smith project manager “of the date of the scheduled Trial Run at the supplier's site at least two (2) weeks prior to the scheduled test.” (Doc. 92-4 at 5 ¶ 10.1.) The documents required A.O. Smith to issue an “Acceptance to Ship” after a successful “factory run-off test before Taylor-Winfield would be authorized to ship the machines from Ohio to Tennessee. (Doc. 98 at 6.)

         Upon issuance of the purchase orders, Taylor-Winfield commenced work on the machines, and A.O. Smith commenced payment of installments under the contract. (Id.) There were numerous discussions between Taylor-Winfield and A.O. Smith related to the scheduling of runoff testing in 2015. (Docs. 18 at 3-4; 98 at 7; 98-2 at 4, 7-9.) However, the machines could not consistently meet the requirements in A.O. Smith's specification. (Docs. 18 at 3-4; 98 at 7.) By spring of 2015, Taylor-Winfield abandoned the TWINLAP design, instead moving to a design which utilized a single set of wheels and induction heating. (Doc. 98 at 7.) A.O. Smith allowed Taylor-Winfield time to implement and test the replacement design. (Doc. 98 at 3.) The parties planned that run-off testing could occur in late 2015, but a significant failure in a water heater shell occurred in November 2015, which prevented the run-off from being scheduled. (Docs. 98 at 7.)

         On February 2, 2016, senior leadership from both sides met at Taylor-Winfield to discuss the status of the machines and the plan for performance of the contract going forward. (Id.) The meeting included A.O. Smith's Plant Manager, Carol Peters, and Taylor-Winfield President, Alex Benyo. (Id.) The result of the meeting was a handwritten note signed by Benyo and other Taylor-Winfield personnel. (Doc. 6-5.) The note stated,

Agreement to ship Machine 1 to A.O. Smith on 03/14/16
• Runoff based on 14”, 16”, and 18” Diameter shells listed in runoff sheet provided by A.O. Smith
• 20” & 24” Diameter shells will have mechanical alignment completed on Machine 1
• A.O. Smith will provide resources to help
• Weekly calls will be setup with Taylor Winfield and A.O. Smith senior management
• Ship Machine 2 to A.O. Smith on 06/01/16
• Weld schedule development will be done @ Taylor Winfield on ...

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