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R.J. LONGO CONSTR. CO. v. TRANSIT AMERICA

April 10, 1996

R.J. LONGO CONSTRUCTION CO., INC., d/b/a EPIC, Plaintiff,
v.
TRANSIT AMERICA, INC., et al., Defendants.



The opinion of the court was delivered by: LIFLAND

 LIFLAND, District Judge

 Defendant Transit America, Inc. ("Transit America") has moved for partial summary judgment dismissing Counts One, Two and Four of R.J. Longo Construction Co., Inc., d/b/a/ EPIC's ("EPIC") Second Amended Complaint. *fn1" These counts include claims for breach of contract, breach of warranty, and consumer fraud under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. For the reasons articulated on the record on March 11, 1996, as more fully explicated below, the Court grants in part and denies in part Transit America's motion.

 Background

 This suit concerns specialized rail cars EPIC contracted to purchase from Berwick Freight Car Corporation ("Berwick"), the design for which was generated by Transit America and licensed exclusively to Berwick as manufacturer. The representations, assurances, and overall role of Transit America regarding the rail cars sold to EPIC are at issue in this litigation. It is also disputed whether Transit America should have originally designed the cars to include end of car cushioning, rather than draft gears--alternative mechanisms to absorb force exerted on the car during impact.

 The controversy had its genesis in late 1990 and early 1991, when EPIC, a joint venture between R.J. Longo Construction Co., Inc. and Virotech Systems, Inc., *fn2" entered into several written contracts to facilitate performance of a contract to haul dewatered sludge awarded to EPIC by the Passaic Valley Sewage Commission ("PVSC"). See Second Amended Complaint at 13; Def's 12(G) Statement, Ex. 1. EPIC executed contracts to buy rail cars, containers, tractor-trailers and other equipment necessary to transport the PVSC sludge by rail from Newark, New Jersey to landfills in Texas and Illinois, entered into agreements with railroads to transport the rail cars over their lines and leased railyards in Newark and Tyler, Texas. EPIC also executed written lease agreements with landfill operators in Texas and Illinois.

 EPIC's contract with Berwick, the Ultra *fn3" car manufacturer, was effective as of January 17, 1991, but not fully executed until February 19, 1991. *fn4" It is undisputed that Transit America was not formally a party to the purchase agreement. There is also no dispute that EPIC never entered into any written contract with Transit America, which agreed in a December 19, 1990 Letter of Agreement to license its design exclusively to Berwick. However, there is a dispute as to whether Transit America worked jointly with Berwick to market the cars, and made representations to EPIC upon which plaintiff relied in entering into the rail car purchase contract.

 Transit America's Role in the Marketing of the Ultra Car to EPIC

 Berwick and EPIC negotiated their rail car purchase contract in the last quarter of 1990. A November 1, 1990 letter from Robert Longo to Walter Pogue, then President of Berwick, thanked Pogue for meeting with him the week before and explained that in the next few days, after receiving relevant information from Consolidated Rail Corp. ("Conrail"), EPIC would "commit to the number of 132 ton articulated cars that we need." Def's 12(G) Statement, Ex. 2. See also id., Ex. 6. On November 7, 1990, Longo wrote a letter expressing EPIC's intent to purchase 80 rail cars from Berwick. *fn5" See id., Ex. 6.

 There is record evidence that Transit America was an active participant in the marketing of the Ultra car to EPIC. A letter from Berwick to Ellison Wefel of Conrail, written on March 5, 1992, when Berwick was trying to work out the structural problems with the car, explains that "when developing the initial proposal to EPIC, Transit America and Berwick believed that their customer best would be served by utilizing high capacity draft gears for several reasons...." Feldman Cert., Ex. B. "Their customer" is a clear reference to EPIC. See Wefel Dep. (Feldman Cert., Ex. C) at 568:15-20. Robert Longo's deposition testimony corroborates that Transit America pitched its design to Epic.

 
Q) And do you recall when that meeting occurred?
 
A) I believe there was a meeting right here in this room. And I believe Mike Pavlick (the Transit America Manager of Freight Car Products Operation) was with Walter Pogue, and they presented a schematic and set of preliminary plans.
 
Q) When was that meeting?
 
A) I don't remember the exact time.
 
Q) Can you tell me the year?
 
A) It was '90, late. It was sometime between October and I would say probably December.
 
...
 
A) Mr. Pavlick, at the first meeting I had with him, stated that he had the experience to build it. He told me about cars he had worked on and the car would meet the requirements of the AAR. It would be designed in accordance with AAR standards.
 
...
 
A) Each one of them [Pogue and Pavlick] agreed that they would have interchange approval, that they would have AAR approval, *fn6" that it would be built to standards of the--and I wanted those assurances because I was spending ยง 12 million for these rail cars.
 
Q) So as I understand it, you don't recall which man made which statement; is that correct?
 
A) I think they both made those statements at different times during the meeting.

 Longo Dep. (Pl's 12(G) Statement, Ex. C) at 104:11-22; 115:17-22; 118:23-119:7 (emphasis added).

 Walter Pogue's deposition testimony also supports the inference that Transit America made representations to EPIC in its effort, jointly with Berwick, to market the Ultra car to EPIC.

 
Q) Was there a discussion with Mr. Longo or Mr. Bernardi, or both of them, about the car being built or being designed, or both, to AAR requirements?
 
A) Yes, that was in the original Mike Pavlick description. It was a document that Mike Pavlick produced that describes the philosophy and the basis for the design. It's very clearly to meet AAR requirements.
 
...
 
Q) Can you tell me when that was produced by Transit America?
 
A) Well, it was all around December--November, December time frame, I think. I'm sure it's in the documents somewhere, but it was--I think it accompanied that specification outline, the original specification outline, if I'm not mistaken.
 
...
 
Q) At this time you didn't tell Pavlick or Transit America who your potential customer was, did you?
 
Q) He's not identified in any of your meetings with the Longo people?
 
A) I'm trying to remember what--when that first meeting was with Mike.
 
Q) It should be related in your log?
 
A) It should be, unless I missed-unless I failed to put it in there.

 Pogue Dep. (Pl's 12(G) Statement, Ex. F) 123:22-124:5; 124:12-19; 197:17-198:11.

 On January 17, 1991, before Robert Longo signed the Rail Car Sales Agreement, Mike Pavlick of Transit America faxed him a letter that represented to EPIC that "Transit America's Freight Car Products Operation currently had a letter arrangement with the Berwick Freight Car Company providing them with exclusive manufacturing rights to [their] 2 unit articulated container car design." Longo Cert., Ex. B; Longo Dep. at 131:22-132:11. *fn7" EPIC alleges that it detrimentally relied on this and other representations, including that the car would meet AAR approval and that Transit America would undertake to obtain AAR approval for the car.

 Representations Regarding AAR Approval

 Turning first to the allegation that Transit America represented to EPIC that the rail car design would garner AAR approval, there is evidence that such representations were made before and after EPIC signed the Rail Car Sales Agreement with Berwick. According to Robert Longo:

 
A) Mr. Pavlick, at the first meeting I had with him, stated that he had the experience to build it. He told me about cars he had worked on and the car would meet the requirements of the AAR. It would be designed in accordance with AAR standards.
 
...
 
A) Each one of them [Pogue and Pavlick] agreed that they would have interchange approval, that they would have AAR approval, that it would be built to standards of the--and I wanted those assurances because I was spending $ 12 million for these rail cars. (emphasis added).

 Longo Dep. at 118:23-119:7. He further testified that representations were made before and after execution of the Berwick/EPIC contract:

 
Q) Were there any discussions before or at the time that the contract was executed about the representation alleged in Paragraph 4 that the design shown in the specifications and drawings meets all requirements, laws, codes and regulations applicable to the railroad car?
 
A) Yes. They promised that the car would meet the AAR standards. There was subsequent written correspondence from Mike Pavlick saying that the car would meet AAR approval by the end of '91. At all times before, during and after, it was always my impression that the cars were going to meet AAR standards and any other code applicable.

 Id. at 193:21-194:11. See also Longo Cert., Exs. D-F. The testimony of Lawrence Fort, Transit America's Vice-President of Operations, buttresses Longo's testimony:

 
Q) Did Longo require of your company written verifications of the fact that the rail cars would meet AAR requirements?

 Fort Testimony (Pl's 12(G) Statement, Ex. I) at 54:2-7. So does Walter Pogue's testimony:

 
Q) Was there a discussion with Mr. Longo or Mr. Bernardi, or both of them, about the car being built or being designed, or both, to AAR requirements?
 
A) Yes, That was in the original Mike Pavlick description. It was a document that Mike Pavlick produced that describes the philosophy and the basis for the design. It's very clearly to meet AAR requirements.

 Pogue Dep. at 123:22-124:5.

 Representations About AAR Full Interchange Approval Process

 It is contrary to standard industry practice for the designer, rather than the manufacturer, to pursue AAR interchange approval. *fn8" Nonetheless, there is substantial evidence that Transit America represented to EPIC and Berwick that Transit America would secure the requisite approval. Robert Longo testified that Transit America made such representations and assurances to EPIC "before, during and after" execution of the Berwick/EPIC contract. Longo Dep. at 210:2. Walter Pogue's deposition testimony corroborates Longo's recollection:

 
Q) The next item says, "AAR certified", and has a star beside it, or some sort--
 
A) Yes, yes.
 
Q) --sort of a mark. What was discussed in the meeting ...

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