APPEAL FROM THE UNITED STATE DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA -- PITTSBURGH.
Adams, Hunter and Becker, Circuit Judges.
1. Joy Manufacturing Company ("Joy") brought this diversity action against Sola Basic Industries, Inc., Lindberg Division of Sola Basic Industries, Inc., and General Signal Corporation*fn1 to recover damages resulting from the failure of two heat treating furnaces purchased by Joy from the Lindberg Division of Sola Basic Industries.*fn2 The case was tried on the theories of breach of warranty and misrepresentation, and the jury returned a verdict in the amount of $7,968.31. Both parties filed timely appeals claiming various errors in the trial below. Because we find the district court erred in excluding certain evidence and in not allowing defendants to amend their pretrial statement, we will vacate the judgment and remand for a new trial.
2. In the mid-1970's Joy purchased two new heat treating furnaces from Lindberg for use in its Chain Plant Operation in Reno, Pennsylvania. The first was delivered on March 24, 1975 and, after assembly, was ready for normal operation in late May, 1975. The second was installed and ready for operation in July, 1976.
3. Both furnaces experienced operational difficulties*fn3 shortly after installation. These operational problems reoccured at approximately six to eight week intervals, resulting in substantial downtime for both furnaces. From 1975 to 1977, both Joy and Lindberg made various efforts to correct the furnace problems with little success. Finally in 1977 the hearths in both furnaces were replaced and, with minor exceptions, the furnaces have since operated properly. App. at 22a, 23a.
4. On March 23, 1979, Joy filed the instant action in the District Court for the Western District of Pennsylvania alleging breach of express and implied warranties, strict liability, negligence, and misrepresentation on the part of Lindberg. Joy sought damages in excess of $800,000.
5. In a pretrial notice dated April 23, 1979, the district court directed counsel for both parties to comply with the provisions of the Rule 5-II Pre-Trial Procedures of the District Court for the Western District of Pennsylvania. Under that rule each party is required to submit a "brief narrative statement of the material facts [to be offered] at trial." Plaintiffs must include "all damages claimed, the method of calculation, and how damages will be proven," and defendants must include all "defense[s] to the damage claims." W.D. Pa. R. 5-II(D). In its pretrial narrative, Joy discussed the factual background leading up to its filing of this action and repeated its claims of strict liability, breach of express and implied warranties, negligence, and misrepresentation. App. at 17a. Joy claimed specific damages for lost commercial heat treating, down-time, overtime, repair costs, and various other losses allegedly the result of Lindberg's actions. In their pretrial narrative, defendants disputed Joy's recitation of the facts and claimed that the furnaces were properly designed and manufactured, that no express warranties concerning quality of workmanship had been made, and that all implied warranties had been fulfilled.*fn4 App. at 186a.
6. The case proceeded to trial. During their cross-examination of Steven Baldwin, one of plaintiff's liability witnesses, defendants attempted to ask questions about a proposal form for Lindberg equipment sent by Lindberg to Joy. Joy's counsel objected on the ground that, if defendants were using that line of questioning to establish that there were terms in the contract different from those that plaintiff had "put in,"*fn5 defendants were advancing a theory which they had not raised in their pretrial narrative. App. at 200a-01a. Defendants claimed that questions about the proposal form were proper because the document contained a disclaimer of all warranties, including any warranties implied by law. App. at 205a.*fn6 After extended discussion at side bar, app. at 200a-09a, the court held that defendants could not address the subject of the disclaimer "because [they had] not listed it in [their] pretrial statement." App. at 205a. Defendants then requested permission to amend their pretrial statement prior to presentation of their case in chief in order to be able to raise the issue of disclaimer. The court denied the request. App. at 209a.
7. In its presentation of evidence on damages plaintiff recalled Steven Baldwin. He had earlier testified on direct about his familiarity with Joy's heat treating operation, app. 42a-45a, his familiarity with the purchase of two furnaces from Lindberg, app. at 46a, and his familiarity with problems Joy had experienced with the furnaces, app. at 47a, 50a-57a.*fn7 In the course of plaintiff's questioning, counsel for Joy asked Baldwin for his estimation of the percentage of losses incurred by Joy that were attributable to the hearth failures. Over objection, Baldwin testified that 90% of the general labor expenses,*fn8 90% of the labor costs related to downtime,*fn9 90% of the labor variance,*fn10 and all of the overtime costs,*fn11 were attributable to the hearth problems of the Lindberg furnaces.*fn12
8. On cross-examination, defendants' counsel questioned Baldwin about the source of his estimates. He first testified that he received the information needed to complete those calculations " from the records of Joy Manufacturing and my personal knowledge." App. at 101a. Upon further questioning, however, Baldwin testified that he had only received a summary of the records, app. at 135a, and that he was not sure what records had been used in preparation of that summary, app. at 136a. He further testified that, to his knowledge, Joy ...