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Rochester-Genesee Regional Transportation Authority v. Cummins Inc.

July 28, 2010

ROCHESTER-GENESEE REGIONAL TRANSPORTATION AUTHORITY, PLAINTIFF,
v.
CUMMINS INC., CUMMINS NORTHEAST INC., AND GILLIG CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Michael A. Telesca United States District Judge

DECISION and ORDER

INTRODUCTION

Plaintiff Rochester-Genesee Regional Transit Authority ("RGRTA") brings this action under Federal diversity jurisdiction against defendants Gillig, Corp. ("Gillig"), Cummins, Inc., and Cummins, Northeast, Inc. ("Cummins")*fn1 seeking damages in excess of one million two hundred and fifty thousand dollars ($1,250,000.00). RGRTA alleges claims against Gillig under theories of breach of contract, breach of implied and express warranty, and negligence. RGRTA alleges claims against Cummins under theories of breach of contract, breach of implied and express warranty, negligence, and strict products liability. These claims all arise from a contract between RGRTA and Gillig for the purchase of fifty-nine public transit buses equipped with Cummins' engines.

Specifically, RGRTA claims that Gillig breached their contract by failing to deliver buses which met the specifications set forth in RGRTA's request for proposals ("RFP") as well as the recognized and accepted industry standards. Am. Compl. ¶ 81. Gillig allegedly breached their express warranty that the buses and engines would be free from defects by delivering to RGRTA buses and/or engines that were defective due to improper design or manufacture. Id. at ¶ 90. RGRTA further claims Gillig breached implied warranties of merchantability and fitness for a particular purpose, alleging that the buses were not merchantable and not suitable and safe for their intended purpose. Id. at ¶ 101. Finally, RGRTA claims that Gillig negligently failed to inspect, test, and discover the defective nature of the engines. Id. at ¶ 111.

RGRTA alleges that, as an intended third party beneficiary to a binding contract between Gillig and Cummins, it sustained damages as a result of Cummins' failure to design and manufacture engines in a professional and workmanlike manner in accordance with recognized industry standards. Id. at ¶¶ 85-86. Cummins allegedly expressly warranted that their engines would be free from defects and violated this warranty as the engines were defective due to improper design and manufacture. Id. at ¶¶ 94-98. The defective nature of these engines also allegedly violated implied warranties of merchantability and fitness for a particular purpose. Id. at ¶ 106. RGRTA also brings a claim of negligence, asserting that Cummins' negligently failed to inspect, test, and discover the defective nature of the engines, both prior to and following delivery. Id. at ¶ 117. Finally, under a claim of strict products liability, it is alleged that the engines designed and manufactured by Cummins were unreasonably dangerous and defective. Id. at ¶ 123.

Defendants Gillig and Cummins have both moved to dismiss these claims in their entirety, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, alleging that Plaintiff has failed to state a claim for each and every cause of action. Both parties claim that the breach of contract and implied warranty claims against them should fail as they expressly disclaimed any contractual or implied warranty obligations. See, Gillig Memorandum ("Gillig Mem.") at 1; Cummins Memorandum ("Cummins Mem.") at 1. Furthermore, Gillig denies providing any warranty coverage for the engines in question, specifically excluding engine coverage from their express warranty. Both parties claim that any relevant warranty coverage had expired prior to the Plaintiff experiencing the engine problems at issue. Cummins also denies that the allegedly defective parts fall under this Extended Warranty. Both defendants assert that the contract and warranty claims relating to the first thirty buses delivered are time barred as the buses were delivered more than four years prior to the commencement of this action.

With respect to the claims of negligence, both parties deny owing any duty to RGRTA outside of their contractual obligations. Further, Defendants assert that these claims fail because RGRTA is only seeking the cost of repairing or replacing damaged parts and economic losses are not generally recoverable in tort actions. Cummins asserts that the strict products liability claim brought against them likewise fails under the economic loss doctrine.

BACKGROUND

In September 2002, RGRTA issued a request for proposals ("RFP")for the purchase of diesel transit buses. This RFP requested a one-year warranty applicable to the buses and a two-year warranty for the engines. It was requested that these warranties provide coverage against defective materials and faulty workmanship for the relevant period, to begin on the date of delivery. Gillig submitted a proposal to provide these buses, including with the proposal its "Low Floor Transit Coach Limited Warranty Standard Coverage" ("Standard Warranty"). See Affidavit of Brian Macleod, sworn to February 18, 2010 ("Macleod Aff."), Ex. A. The terms of this proposal were accepted. On September 22, 2003, RGRTA and Gillig entered into an agreement whereby RGRTA would purchase fifty-nine transit buses and several spare component parts from Gillig. Pursuant to this agreement, Gillig would provide a one-year warranty applicable to the buses. A two-year warranty applicable to the engines would be provided by the engine manufacturer.

Prior to production, it was decided by both parties that the buses would be equipped with engines manufactured by Cummins rather than Detroit Diesel Engines as originally planned. Am. Compl. ¶ 30. The warranty information for the Cummins engines was provided to RGRTA. See Macleod Aff., Ex. A. This warranty provided by Cummins exceeded the requirements set by RGRTA; providing a two-year, unlimited mile Base Engine Warranty ("Base Warranty") along with a three-year, 300,000 mile Extended Major Components Warranty ("Extended Warranty"). See, Affidavit of David H. Tennant sworn to February 19, 2010 ("Tennant Aff."), Ex. A. RGRTA took delivery of the first thirty buses in April 2004.

The remaining twenty-nine buses were delivered in January 2006. RGRTA alleges that in September 2008, it began experiencing operational problems with an unidentified number of the buses. These problems included thick black smoke coming from the engines, oil accumulating on the engine housing, and a knocking sound coming from the engines. Am. Compl. ¶ 43. RGRTA contacted Cummins for assistance with these problems.

RGRTA alleges that Cummins had knowledge of similar defects in engines supplied to other customers. Specifically, RGRTA alleges Cummins had knowledge of the defective design or manufacture of the fuel injectors and pistons and had changed the design or manufacture of these components due to their defective nature. Am. Compl. ¶¶ 44-50. RGRTA further alleges that Cummins, despite knowledge of these defects, failed to inform RGRTA of these defects and failed to diagnose and correct its engine problems. Id. at ¶¶ 69-73. RGRTA notes that, as a result of these defects, it sustained damage to its buses, including "at least two engine blocks" which required replacement of the entire engine and damage to an unspecified number of connecting rods. See Response of Petitioner ("Response") at 5.

RGRTA now brings claims against defendants Gillig and Cummins under theories of breach of contract, breach of express warranty, breach of implied warranty, and negligence. RGRTA also brings a claim for strict products liability against defendant Cummins. RGRTA alleges damages of an amount which exceeds the sum of One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) for the repair and replacement of the defective engines, labor costs, and all incidental and consequential costs.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of all or part of a complaint for "failure to state a claim upon which relief can be granted." The complaint must contain facts sufficient "to raise the right to relief above the speculative level" and state a claim for relief "that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). While the complaint must give the defendant(s) notice of the claims and their grounds, it need not contain specific facts. Erikson v. Pardus, 551 U.S. 89, 93 (2007). However, the standard set by Twombly "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." 550 U.S. at 570. When assessing a motion to dismiss, all factual allegations in the complaint must be accepted as true. See Erikson, 551 U.S. at 93. On a motion to dismiss, the court may consider the facts alleged in the complaint, documents attached to the complaint, and "documents that the plaintiffs either possessed or knew about and upon which they relied in bringing the suit." Patane v. Clark, 508 F.3d 106, 112 (2d Cir. 2007)(quoting Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000)). "Dismissal is inappropriate unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him or her to relief." Sweet v. Sheahan, 235 F.3d 80, 83 (2d Cir. 2000).

DISCUSSION

TIME BARRED CLAIMS

Any action for breach of contract or warranty arising from the sale of goods is subject to a four-year statute of limitations. N.Y. U.C.C. § 2-275(1). This cause of action accrues at the time of delivery, regardless of whether the aggrieved party is aware of the breach. § 2-275(2). There is a narrowly construed exception under which the cause of action does not accrue until the breach is discovered, which applies where a warranty explicitly pertains to the future performance of the goods. Id. Warranties to repair or replace the product in the event that it fails to perform, without any promise of performance, do not constitute warranties of future performance. See Rosen v. Spanierman, 894 F.2d 28, 31 (2d Cir. 1990). As the warranties provided by Gillig and Cummins were to repair or replace defective parts and does not warrant future performance, this exception does not apply here. Therefore, the plaintiff's breach of contract and warranty claims are subject to a four-year statute of limitations, beginning on the date of delivery of the buses.

The first thirty buses covered by the RGRTA-Gillig contract were delivered to RGRTA in April 2004. Am. Compl. ¶ 34. As RGRTA's causes of action for breach of contract and warranties accrued at the time of delivery, the statute of limitations for claims regarding these buses expired in April 2008. Plaintiff did not experience problems with any buses until September, 2008. Am. Compl. ¶ 42. Therefore, ...


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