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Entergy Louisiana LLC v. Hico American Sales & Technology Co., Inc.

United States District Court, E.D. Louisiana

June 22, 2015

ENTERGY LOUISIANA LLC
v.
HICO AMERICAN SALES & TECHNOLOGY CO., INC. SECTION

ORDER & REASONS

ELDON E. FALLON, District Judge.

Before the Court are three motions: (1) Defendant HICO American Sales & Technology Co., Inc.'s ("HICO") Motion for Partial Summary Judgment (Rec. Doc. 29); (2) Plaintiff Entergy Louisiana LLC's ("Entergy") Motion in limine to Exclude Expert Testimony Regarding Custom and Items of Damage Beyond the Provisions in the Purchase Order (Rec. Doc. 28); and (3) HICO's Motion to Strike the Declaration of Scott McCann (Rec. Doc. 36). The Court has reviewed the parties' briefs and applicable law, and having heard oral argument, now issues this Order & Reasons.

I. UNDISPUTED FACTS

This case arises from an alleged breach of contract on a 2010 Purchase Order between Plaintiff Entergy and Defendant HICO. On November 22, 2010, Entergy entered into Purchase Order Agreement No. 10299147 ("Purchase Order") with HICO that provided HICO would manufacture and supply a 900 MVA shell power transformer for installation at Entergy's Ninemile Plant in Westwego, Louisiana at a sale price of $3, 967, 384, 39. (Rec. Doc. 30-2 at 2). The Purchase Order specifies that "[a]cceptance means the transformer has been delivered to the ship to location, placed on the transformer pad, review of impact recorder has been reviewed/acceptable, and passes inspection by Entergy's technical team." (Rec. Doc. 29-4 at 1). Section 5 of the Purchase Order's Terms and Conditions states:

Purchaser has the right to inspect and test fully any products purchased hereunder. This right shall extend to the inspection of products during manufacture, at no cost to the purchaser, upon reasonable notice to the Seller. Purchaser also has the right to inspect any service operations hereunder, at no cost to the Purchaser, upon reasonable notice. Purchaser may reject any products that it finds to be defective or at variance with the Order specifications, regardless of the time or place of discovery of the defect or variance and, in the case of no apparent defects or variances, regardless of any prior acceptance of the products. Regardless of anything stated herein, the Seller remains responsible for delivery of products in accordance with the Order....Rejected products shall, at the Purchaser's option, be returned to Seller at the Seller's cost, or be retained at a renegotiated price. Defective products shall be replaced at the Seller's cost unless Purchaser elects not to accept replacement. In the event of the latter, Seller may replace, including repairing, remedying, removing or correcting any non-conformity or unsatisfactory component of the product(s), or employ another to do so, at Seller's expense.

(Rec. Doc. 29-4 at 4). The Purchase Order further states that "Time is an essential element of this Order...Purchaser has the right to cancel Orders as to all or part of an Order, without obligation of any kind to Seller, should delivery of any shipment not be made on schedule." (Rec. Doc. 29-4 at 4). Section 26 contains an integration clause which states:

The Order constitutes the entire agreement between the parties and supersedes all other representations or agreements....Should any provision of any document provided by Seller and attached to this Order be in conflict with any of the provisions in the main body of this Order, such provision of such Seller-provided document will be null and void.

(Rec. Doc. 29-4 at 8). Section 10 of the Terms and Conditions, entitled "Warranty, " states that the "5 Year HICO warranty applies...[and] [s]hould any provision in the HICO 5 Year Warranty conflict with any of the provisions in this section, the provisions in this section shall govern." (Rec. Doc. 29-4 at 5). The Warranty states:

Seller [HICO] warrants [that]... the equipment will be free from defects in material and workmanship for a period of five years from delivery. If within such period the delivered equipment is proved to Seller's satisfaction to be defective, such equipment shall be repaired or replaced, at the Seller's option, F.O.B. its factory or designated repair facility... Seller's obligation hereunder shall be limited to repair or replacement and shall be conditioned upon Seller's receiving written notice of any alleged defect within seven (7) days after its discovery.
This warranty is exclusive and is in lieu of all other express or implied warranties, including, but not limited to, any implied warranty of merchantability or fitness for purpose, and states Seller's entire and exclusive liability and Buyer's exclusive remedy. Seller shall not be liable for consequential, or incidental damages whatsoever.

(Rec. Doc. 29-4 at 9). Following execution of the Purchase Order, HICO designed and manufactured the transformer to Entergy's unique specifications. (Rec. Doc. 29-2 at 2).

HICO delivered the 850, 000 pound transformer to Entergy in September 2011. (Rec. Doc. 29-2 at 2). On October 14-15, 2011, the transformer's on-line DGA (dissolved gas analysis) monitor detected elevated gas levels during the acceptance and commissioning testing of the transformer. (Rec. Doc. 29-2 at 3). Onsite inspections and tests were unsuccessful in revealing the root cause of the gassing. On November 2, 2011, Scott McCann sent a letter on behalf of Entergy to Jason Neal of HICO that stated, "[a]s you know, the HICO transformer (serial no. TB803261.01) experienced gassing issues during two attempted acceptance tests. Pursuant to Section 5 of Purchase Order No. 10299147, please be advised that Entergy Louisiana, LLC hereby rejects the transformer." (Rec. Doc. 30-7 at 1).

On November 9, 2011, Salina Dillie, a HICO project manager, emailed a proposed repair schedule for the transformer to Scott McCann. (Rec. Doc. 30-8 at 5). Mr. McCann responded and said:

At this time, none of the scenarios are acceptable to Entergy Louisiana. To fully consider all options, we are planning to test the market to determine what other manufacturers can offer, both in terms of price and delivery schedule. In the meantime, we will continue to gather all of the information regarding Entergy Louisiana's costs associated with HICO America's defective transformer, including the two recent failed transformer acceptance tests.

(Rec. Doc. 30-8 at 4). On November 18, 2011, Mr. McCann sent another email to HICO and stated that Entergy planned to "issue an RFP to determine how quickly other manufacturers can provide a new unit to us and at what price. We are doing this to mitigate the operational risk to Entergy. We will weigh this against any and all options you propose to us to make a final decision." (Rec. Doc. 30-8 at 3). Mr. Neal later emailed Mr. McCann on December 1, 2011, and indicated that HICO had found a way to expedite shipping but would require significant expense. Mr. Neal went on to state that "[n]ormally that investment would be made by HICO immediately and without needing guidance from Entergy....In the current situation, where Entergy may not commit to receive this unit that was contracted with HICO, once it is remediated and shipped back to the site, we need to get guidance from Entergy on your intentions." (Rec. Doc. 30-8 at 2). Mr. McCann responded and said that "[Entergy] simply does not have enough information to provide a definitive response. As previously ...


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