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Seacon Corp. v. Cellect

August 12, 2009

SEACON CORPORATION, PLAINTIFF,
v.
CELLECT, LLC, DEFENDANT.



The opinion of the court was delivered by: David N. Hurd United States District Judge

MEMORANDUM-DECISION and ORDER

I. INTRODUCTION

Plaintiff Seacon Corporation ("Seacon") brought this action in diversity alleging breach of contract, unjust enrichment, and account stated. Defendant Cellect, LLC ("Cellect") brought counterclaims sounding in strict liability for delivery of a defective product, breach of warranty of fitness for a particular purpose, breach of warranty of merchantability, breach of express warranty, and breach of contract. Seacon moves for partial summary judgment for liability on its breach of contract and account stated claims. Seacon also moves to dismiss Cellect's counterclaims for lost sales. Cellect cross moves to dismiss the account stated cause of action and damages for failure to purchase of additional material. Oral argument was heard on October 10, 2008, in Utica, New York. Decision was reserved.

II. FACTS

Seacon markets and sells specialized industrial chemicals to customers in the rubber and foam production industries. Cellect is a manufacturer of specialty foam products. Cellect manufactures, among other things, polyolefin bun foam which is used in medical and automobile applications. The bun foam is manufactured using a blowing agent, in this case azodicarbonamide ("ADC-DN12").

On January 25, 2005, Cellect contracted with Seacon to sell it 4000 pounds of ADC-DN12 in order for Cellect to determine if the ADC-DN12 worked in its processes. Representatives from the companies discussed specifications and analysis of a blowing agent then in use by Cellect.

On February 2, 2005, Cellect issued a purchase order to Seacon placing a "blanket order for two containers per month for twelve months" of ADC-DN12. Thereafter monthly shipments were sent by Seacon and received by Cellect without incident until November 2005.

Cellect contends that it required the ADC-DN12 purchased from Seacon to meet the requirements of its technical data sheet. For example, according to Cellect the specification for ADC-DN12 required the particle size distribution to be 10 to 12 microns.

However, the purchase order did not mention any technical specifications or requirements for certification of analyses done on each lot shipped.*fn1

Cellect did not perform any type of test on any of the shipments of ADC-DN12. In fact, Cellect did not have the capability to perform tests at its production facility. Seacon provided certificates of analysis for the shipments. However, Cellect only checked to be sure a lot number was on the certificate and then it was filed.

Seacon made a shipment of ADC-DN12 to Cellect on November 7, 2005. Cellect used the blowing agent from the November 7 shipment in manufacturing on or about November 10 to 15, 2005. On November 14 Cellect notified Seacon that it was having production problems with the ADC-DN12 used over the weekend. Seacon made a pallet of ADC-DN12 from a different lot available to Cellect to pick up on that day. Cellect picked up the ADC-DN12 late in the day on November 15.

Cellect remained in possession of approximately 343 drums of ADC-DN12 from the November 7 shipment. On December 1, 2005, Cellect notified Seacon that it wanted to return the remaining 343 drums of ADC-DN12 from the November 7 shipment, and requested that Seacon send replacement ADC-DN12. Seacon never sent replacement material.

According to Seacon, on December 7, 2005, it asked Cellect to send one drum from the November 7 shipment to a large customer for analysis and to return the 343 drums to Seacon's warehouse. Cellect denies that it was asked to send a drum of the ADC-DN12 for testing. However, Cellect acknowledges that it kept the remaining 343 drums.

Cellect used the 343 drums of ADC-DN12 from the November 7 shipment to produce bun foam. According to Cellect, its scrap rates were very high using the ADC-DN12 blowing agent from the November 7 shipment but the alternative was to shut down the plant as it had no other blowing agent supplier. Cellect also contends that the non-conforming shipment of ADC-DN12 resulted in the loss of business from two of its customers, MH Stallman and Creative Foam.

Seacon also made shipments to Cellect on Nov. 15, Dec. 6, Dec. 9, and Dec. 27, 2005, and Jan. 6, 2006. The only correspondence regarding these shipments pertained to Cellect's failure to pay. Cellect has not paid invoices dated August 29, 2005; October 7, 2005; November 7, 2005 (2); November 15, 2005; November 23, 2005; December 6, 2005; ...


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