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Viking Yacht Co. v. Composites One LLC

July 26, 2007

VIKING YACHT COMPANY, A NEW JERSEY CORPORATION; AND POST MARINE CO., INC., A NEW JERSEY: CORPORATION, PLAINTIFFS,
v.
COMPOSITES ONE LLC, A FOREIGN LIMITED LIABILITY COMPANY; CURRAN COMPOSITES, INC., A MISSOURI CORPORATION; C TWO LLC, A FOREIGN LIMITED LIABILITY COMPANY; AND TOTAL COMPOSITES, INC., A DELAWARE CORPORATION JOINT D/B/A/ COOK COMPOSITES AND POLYMERS, A : FICTITIOUSLY NAMED DELAWARE PARTNERSHIP, DEFENDANTS.



The opinion of the court was delivered by: Irenas, Senior District Judge

OPINION

HONORABLE JOSEPH E. IRENAS

This case involves the sale and subsequent cracking of gel coat used in manufacturing yachts. Gel coat, the outer layer of a boat, functions as a cosmetic finish and barrier to prevent water and other materials from damaging the boat. Defendant Cook Composites and Polymers ("CCP") manufactures gel coat, which is distributed by Composites One ("C-1").*fn1 Plaintiffs are the manufacturers of recreational motor yachts who bought 953 Series gel coat ("953 Series") from C-1, made by CCP. (Compl. ¶¶ 13, 18).*fn2 Plaintiffs allege that CCP engaged in deceptive practices and breached various warranties when the 953 Series it purchased cracked when used or stored in cold climates.

Before the Court is CCP's motion for summary judgment on Counts III & IV, breach of the implied warranty of fitness for a particular purpose; Count V & VI, breach of the implied warranty of merchantability; Count VII, fraud; Counts IX & X, breach of an express warranty; and Counts XI & XII, violations of the New Jersey's Consumer Fraud Act.*fn3 Plaintiffs cross-move for summary judgment on Counts III, IV, V, VI, IX, X, and XII.

I.

The manufacturing of recreational motor yachts is a multi-step process. The hulls, decks, and flybridges of yachts are constructed by molding various materials and then layering them. (Compl. ¶ 9).*fn4 First, gel coat is sprayed onto a mold and allowed to harden. (Compl. ¶ 10). The remaining materials are then bonded together by layering them into the gel coat. (Compl. ¶ 10). The gel coat, or the "skin," of the yacht, is composed of "various polymers and other chemical compounds and is anticipated to have a life span of many years in marine use, which includes use in both salt and fresh water environments, rough seas, and all types of weather conditions." (Compl. ¶¶ 9, 11).

In 1997, Plaintiffs Post Marine Company ("Post") and Viking Yacht Company ("Viking") began purchasing and using CCP's 953 Series gel coat. Prior to that time, Plaintiffs used CCP's 952 Series and did not experience any cracking with that product. Post built 81 boats using the 953 Series gel coat, and claims that in 2002 it began seeing massive cracking in 32 boats that were built between 1998 and 2002 and used in winter climates.*fn5 Post stopped using CCP gel coat in 2002. Viking built 741 boats using Series 953, of which 32 have cracked.*fn6 In early 2004, Viking began to notice massive cracking in boats using 953 Series gel coat that were built between 1997 and 2002. Viking stopped using CCP gel coat in 2004.*fn7 Plaintiffs allege that the only commonality between the boats that experienced extensive cracking is their use or storage in cold weather.

Plaintiffs assert that CCP knew of the inherent problems in the 953 Series gel coat and failed to disclose them. (Compl. ¶ 23). CCP alleges that it had no knowledge that the gel coat was subject to cracking, and that based upon their express warranties and disclaimers, it is not liable for any cracking that has occurred. CCP further argues that gel coat can crack for various reasons, none of which are the fault of the manufacturer, including: "thick gel coat, demodling, impact, over- and under-cure, air voids, temperature swings from hot to cold, improper drilling of holes for screws, stressed introduced during a boat's life cycle, storing a boat in cold weather and then applying hot water to only the boat while it is still cold, and internal stresses from tight radiuses." (Defs R. 56.1 Stat, ¶ 35).*fn8

II.

"[S]ummary judgment is proper '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.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56(c)). In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). "'With respect to an issue on which the non-moving party bears the burden of proof, the burden on the moving party may be discharged by 'showing'-- that is, pointing out to the district court -- that there is an absence of evidence to support the nonmoving party's case.'" Conoshenti v. Public Serv. Elec. & Gas, 364 F.3d 135, 145-46 (3d Cir. 2004)

(quoting Celotex). The role of the Court is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

III.

The first issue is whether CCP is bound by the choice of law clauses in Plaintiffs' contracts with C-1 and its predecessor, RP Associates ("RP"). Each Plaintiff entered into a series of contracts with C-1 and RP for the purchase of CCP gel coat. (Compl. ¶¶ 28, 35). The contracts between Plaintiffs and C-1, governing purchases after March 31, 1999, include a Illinois choice of law clause.*fn9 Plaintiffs' purchases beginning in 1997 through March 31, 1999, are governed by their contracts with RP, which contain a Rhode Island choice of law clause.*fn10 Plaintiffs argue that New Jersey law should govern the claims against CCP because CCP was not a party to Plaintiffs' contracts with C-1 and RP.

CCP argues that because the contracts govern the purchase of the gel coat, they also govern Plaintiffs' claims against CCP. In support of this contention, CCP relies on Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190 (3d Cir. 1983). Coastal Steel involved a contract between two parties for the manufacture of a product for plaintiff. The court held that plaintiff was a third party beneficiary to that contract, and bound plaintiff, who was not a party to the contract, to the choice of law clause therein.

In distinguishing Coastal Steel, the Third Circuit in E.I. Dupont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S. stated, "if it was not the promisee's intention to confer direct benefits upon a third party, but rather such third party happens to benefit from the performance of the promise either coincidentally or indirectly, then the third party will have no enforceable rights under the contract." 269 F.3d 187, 196 (3d Cir. 2001)(holding that the parent of a company that entered a contract with a third party could not enforce the contractual arbitration clause because there was no evidence that the parent was "anything more than an incidental beneficiary"). Furthermore, the Restatement of Contracts provides this example: "B contracts with A to buy a new car manufactured by C. C is an incidental beneficiary, even though the promise can only be performed if money is paid to C." Restat. 2d of Contracts, § 302 (1981).

Like Dupont and the example in the Restatement 2d of Contracts, CCP benefitted from the Plaintiff's contracts with C-1 and RP, but there is no evidence that the contracts were made to benefit CCP. Thus, because CCP was neither a party nor a third-party beneficiary to Plaintiff's contracts with RP or C-1, CCP cannot invoke the choice of law clause for its benefit.

"Subject to constitutional limitations, a court will generally apply the statutory law of the forum[.]" Boyes v. Greenwich Boat Works, 27 F. Supp. 2d 543, 547 (D.N.J. 1998). Moreover, New Jersey is the only state with an interest in this litigation.

As a general rule New Jersey applies a governmental interest test to choice of law issues. This test parallels the most significant relationship test of the Restatement, 2d, of Conflict of Laws. Under this test, the court must first determine whether a conflict exists between the law of the interested states. This determination must be made on an issue-by-issue basis. If the court finds that a conflict does exist, it must then determine the state with the greatest interest in governing the particular issue. To do this, the court must identify the governmental policies underlying the law of each state and how those policies are affected by each state's contacts to the litigation and the parties. It is the qualitative, not the quantitative, nature of a state's contacts [that] ultimately determines whether its law should apply.

Boyes v. Greenwich Boat Works, 27 F. Supp. 2d 543, 547-548 (D.N.J. 1998)(internal citations and quotations omitted)(brackets in the original). Both Viking and Post are New Jersey corporations with their principal places of business in Burlington County and Atlantic County respectively. There is no indication that either Plaintiff manufactured yachts in any other location. The only arguments for the application of Illinois and/or Rhode Island law are that (1) C-1 is headquartered in Illinois and RP was headquartered Rhode Island and (2) C-1 and RP included choice of law clauses in their contracts with Plaintiffs. C-1, however, has been dismissed from this action, and the contracts containing the choice of law clauses do not bind CCP. Therefore, the Court will apply New Jersey law.

IV.

CCP moves for summary judgment, and Plaintiffs cross move for summary judgment, on Plaintiffs' breach of express warranty claims in Counts IX and X of the Complaint. CCP claims that it provided a limited warranty that does not cover gel coat cracking, and that all other "warranties" were expressly disclaimed. Plaintiffs argue that the disclaimer is unenforceable and that representations made in the gel coat product materials constitute express warranties.

It is undisputed that CCP gave Plaintiffs its product literature, including a description of the gel coat's characteristics and a Product Bulletin, which discusses the improvement of the 953 Series over the 952 Series. The product bulletin, PB-58, describes the "improved flexibility and weathering characteristics" of the 953 series over the 952 series. (LeConey Cert., 50).*fn11 CCP provided Plaintiffs with test data in support of this statement.*fn12 (Defs R. 56.1 Stat, ¶ 50). Defendants also gave Plaintiffs samples of the 953 Series gel coat to test prior to purchase, and advised them to test the gel coat.*fn13 Plaintiffs do not dispute the test data, but rather contend that the 953 Series lacks the improved flexibility and weathering characteristics that CCP's materials claim it has.

CCP offers an express limited warranty that the 953 Series gel coat will meet its specifications at the time of shipment. The terms of the joint warranty and disclaimer, entitled ...


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