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Atlantic Health Systems, Inc v. Cummins Inc

December 17, 2010

ATLANTIC HEALTH SYSTEMS, INC.,
PLAINTIFF,
v.
CUMMINS INC., DEFENDANT.



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

NOT FOR PUBLICATION

OPINION :

Plaintiff Atlantic Health Systems, Inc. ("Atlantic") has filed breach of express and implied warranty, breach of contract, strict products liability, negligence and res ipsa loquitur claims against defendant Cummins Inc. ("Cummins"). Cummins moves for summary judgment on all claims. Pursuant to Rule 78 of the Federal Rules of Civil Procedure, the motions are decided without oral argument. Defendant's motion for summary judgment is granted in part and denied in part.

FACTUAL AND PROCEDURAL BACKGROUND

This case arises out of a power failure that occurred at the Overlook Hospital in Summit, New Jersey on May 7, 2006. The Overlook Hospital is owned and operated by plaintiff Atlantic. (Compl. ¶ 1.) The hospital's emergency back-up power system was comprised of four diesel generators. The system's purpose was to provide the hospital with electrical power in the event that electrical service from the local public utility was interrupted or lost. One of these generators was manufactured by Caterpillar and is not involved in this litigation. (Pl. Ex. 5, Glover Dep.) The other three were designed and manufactured by defendant Cummins. (Liebesfeld Aff. at ¶ 5.) The parties refer to these generators as generator number one, generator number two and generator number three. The generators also contained component parts manufactured by other companies, including speed governors manufactured by Bosch and electrical components manufactured by Russell Electric. (Liebesfeld Aff. at ¶ 10; Glover Aff. at ¶ 7.)

The generators were sold to Atlantic by Cummins Metropower, Inc. ("Cummins Metropower"), a Cummins distributor. (Pl. Ex. 4, Sadtler Report). They were installed at the hospital by Cummins Metropower in 1983. (Id.) Cummins issued a warranty for each generator installed. The express warranty included a Base Warranty and an Extended Major Components Warranty (the terms of the warranty are discussed infra). Cummins disclaimed all other express and implied warranties. (Pl. Ex. 11, Cummins Warranty.)

On May 7, 2006, there was a loss of normal utility power at the Overlook Hospital, followed by the failure of the emergency backup power system. (Compl. ¶ 7.) Generator number two was out of service for repairs on the date of the power failure. (Pl. Ex. 4, Sadtler Report at 3.) The system was designed to provide sufficient power to the hospital so long as two of the three Cummins generators were functional. Generators one and three should have been able to provide the hospital with sufficient power, but shortly after those generators started running they malfunctioned and failed. (Id.) The parties' experts have different theories as to why this occurred. Atlantic states that the hospital was left without power for a significant period of time on May 7, 2006, and sustained substantial property and business interruption damages. (Compl. ¶ 10.)

Atlantic had a series of Planned Maintenance Agreements with Cummins Metropower, under which Cummins Metropower was responsible for servicing and maintaining all of the hospital's power generators. (Pl. Ex. 4, Sadtler Report.) The repair service histories in the record date back to 1998. (Id.) A renewal of the agreement was entered into on December 19, 2005, to cover the 2006 calendar year, and was in effect on the day of the power failure. (Id.) Under this agreement, Atlantic paid an annual rate of $11,900 for maintenance services, which included $6,500 for one annual preventive maintenance service and $5,400 for four quarterly service inspections. (Df. Ex. 2, Planned Maintenance Agreement.)

On May 6, 2008, plaintiff filed the present complaint. Cummins, Inc. is the only defendant. Atlantic did not sue Bosch, Russell Electric, or Cummins Metropower. Cummins moved for summary judgment on September 10, 2010. (ECF No. 33.) The plaintiff filed opposition to the defendant's motion on October 18, 2010. (ECF No. 41.)

STANDARD OF REVIEW

Summary judgment is appropriate where the moving party establishes that "there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(a). A factual dispute between the parties will not defeat a motion for summary judgment unless it is both genuine and material. See Scott v. Harris, 550 U.S. 372, 380 (2007); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for the non-movant and it is material if, under the substantive law, it would affect the outcome of the suit. See Anderson, 477 U.S. at 248. The moving party must show that the non-moving party has failed to "set forth," by affidavits or otherwise, "specific facts showing that there is a genuine issue for trial." See Beard v. Banks, 548 U.S. 521, 529 (2006) (citing Fed. R. Civ. P. 56(e)).

Once the moving party has carried its burden under Rule 56, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts" in question. Scott, 550 U.S. at 380 (citing Matsushita Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)). At the summary judgment stage, the court's function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue of fact for trial. See Anderson, 477 U.S. at 249. In so doing, the court must construe the facts and inferences in the light most favorable to the non-moving party. Curley v. Klem, 298 F.3d 271, 277 (3d Cir. 2002). To survive a motion for summary judgment, a non-movant must present more than a mere "scintilla of evidence" in his favor. Woloszyn v. Cnty. of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005). The opposing party must set forth specific facts showing a genuine issue for trial. Shields v. Zuccarini, 254 F.3d 476, 481 (3d Cir. 2001).

DISCUSSION

I.Cummins Inc. and Cummins Metropower, Inc.

The plaintiff and defendant largely talk past one another in their motion papers, because they take very different positions on the relationship between Cummins, Inc. and Cummins Metropower, Inc. Cummins Metropower, as noted, was not sued by the plaintiff. Cummins insists that Cummins Metropower is an independent distributor and a completely separate entity. Cummins argues, in effect, that it is simply the wrong party being sued on many of Atlantic's claims. Atlantic acknowledges that Cummins Metropower is a Cummins distributor, but takes issue with the word "independent."

Neither party marshals much evidence to support its position. Cummins submits a Certificate of Incorporation from the State of New York for Cummins Metropower. (Df. Ex. 3, Cert. of Incorporation.) Atlantic submits an additional page from the Cummins Warranty booklet, which states the following under the heading "Single Source Responsibility:"

Cummins Engine Company*fn1 and its distributors are responsible for the Cummins generator set system from assisting in the selection of the proper unit and its associated controls to the design, manufacture, testing, installation, and service of the complete system. (Pl. Ex. 11, Cummins Warranty.) Atlantic relies on the conjunctive phrase "Cummins Engine Company and its distributors" to argue that Cummins and Cummins Metropower shared joint responsibility for the generators, from installation through maintenance. Additionally, the Cummins logo, which appears on the warranty information, also appears on the Planned Maintenance Agreements between Cummins Metropower and Atlantic. The Court finds that a material dispute of fact exists as to the relationship between Cummins and Cummins Metropower, and their respective responsibilities and liability. The evidence provided is insufficient for the Court to conclude as a matter of law that Cummins and Cummins Metropower are, or are not, legally independent entities. The Court will view the facts in the light most favorable to the plaintiff, and leaves Atlantic to its proofs at trial.

II.Breach of Express and Implied Warranty Claims

The power outage occurred on May 7, 2006. The backup power generation system was purchased and installed in 1983. Cummins issued express warranties for each generator installed at the Overlook Hospital, including a Base Warranty and an Extended Major Components Warranty. (Pl. Ex. 11, Cummins Warranty.) The Base Warranty covered:

[A]ny failures of the Product which result, under normal use and service, from defects in workmanship or material. This coverage extends for one year from the date of delivery of the Product to the first year.

The Extended Major Components Warranty covered:

[F]ailures of the engine cylinder block, camshafts, crankshafts and connecting rods which result under normal use and service, from defects in workmanship or material in these parts. Bushing and bearing failures are not covered. This coverage begins with the expiration of the Base Warranty and ends three years or 10,800 ...


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