CMI Roadbuilding Inc v. Specsys Inc
5:18-cv-01245
| W.D. Okla. | Jul 1, 2021Background
- CMI Roadbuilding, Inc. and CMI Roadbuilding Ltd. sued SpecSys, Inc. over performance of a series of purchase orders (POs) and alleged breaches (suit filed Dec. 20, 2018); SpecSys counterclaimed for unpaid invoices and quantum meruit.
- Central disputed legal questions: whether SpecSys’ written Proposals were incorporated into certain POs; whether particular POs are governed by Article 2 of the UCC (sale of goods) or by ordinary contract law (services); and whether provisions of the parties’ NDA are ambiguous.
- The court held that seven POs (17580, 18643, 18644, 18645, 20501, 22015, 22016) consist of the PO together with the Proposal affixed thereto (incorporation by reference).
- The court applied the UCC to POs predominantly for goods (PO 17580 for TR-4 machines and PO 21234 for wiring harnesses) and non-UCC contract law to POs that are predominantly services or transfer informational/intellectual deliverables (POs 18643, 18644, 18645, 22015, 22016, and 20501).
- The NDA’s terms “agents” and “advisors” are ambiguous as applied to third-party vendors, so extrinsic evidence on those terms may be admitted and the jury will decide their meaning; by contrast the NDA’s provision assigning “Developments” to CMI is construed by the court as creating an immediate assignment conditioned on payment (i.e., CMI’s ownership is tied to SpecSys being paid), and extrinsic evidence on that point is excluded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SpecSys’ Proposals attached to certain POs are incorporated into the parties’ agreements | Proposals merely describe what CMI was buying; POs (with Terms & Conditions) govern | Proposals affixed to and repeatedly referenced by the POs are part of the offers accepted by SpecSys | Court: Proposals affixed to POs 17580, 18643, 18644, 18645, 20501, 22015, 22016 are incorporated by reference; jury so instructed |
| Whether Article 2 (UCC) governs specific POs (goods vs. services) | Many POs labeled "Purchase Order" are sales of goods and thus governed by UCC | Several POs are predominantly for services, intellectual deliverables, or information, so non-UCC law applies | Court: UCC governs PO 17580 and PO 21234 (manufacture/delivery of machines and wiring harnesses); non-UCC law governs POs 18643, 18644, 18645, 22015, 22016, and 20501 |
| Whether the NDA’s terms “agents” and “advisors” permit disclosure to third-party vendors | Plaintiffs: ordinary meaning excludes third-party vendors; such disclosures would violate the NDA | SpecSys: third-party vendors can qualify as agents or advisors and thus may receive Confidential Information under the NDA exception | Court: terms are ambiguous as to third-party vendors; extrinsic evidence admissible; jury to decide meaning |
| Whether NDA assigns "Developments" to CMI immediately regardless of payment (possession/ownership) | Plaintiffs: provision entitles CMI to immediate and unqualified possession of Developments | SpecSys: CMI’s ownership/possession is subject to Statutory seller remedies/possessory liens and right to withhold until paid | Court: ambiguous language is resolvable by the court in context; construction adopted: assignment to CMI is subject to an implied condition of payment by CMI for work performed; no extrinsic evidence on this point |
Key Cases Cited
- Walker v. Builddirect.Com Techs. Inc., 349 P.3d 549 (Okla. 2015) (three-part test for incorporation by reference)
- Eureka Water Co. v. Nestle Waters N. Am., Inc., 690 F.3d 1139 (10th Cir.) (substance of agreement controls whether transaction is for goods or services)
- Specialty Beverages, L.L.C. v. Pabst Brewing Co., 537 F.3d 1165 (10th Cir.) (predominant factor test for mixed goods/services contracts)
- Mecanique C.N.C., Inc. v. Durr Env’t, Inc., 304 F. Supp. 2d 971 (S.D. Ohio 2004) (manufacturer’s design/assembly efforts do not convert a sale of goods into a services contract)
- Propulsion Techs., Inc. v. Attwood Corp., 369 F.3d 896 (5th Cir.) (custom manufacturing contract is a transaction in goods)
- BMC Indus., Inc. v. Barth Indus., Inc., 160 F.3d 1322 (11th Cir.) (design and manufacture of equipment is a sale of goods)
- Harvell v. Goodyear Tire & Rubber Co., 164 P.3d 1028 (Okla. 2006) (when transaction is primarily services, incidental goods do not bring it under the UCC)
- Rock Island Imp. Co. v. Helmerich & Payne, Inc., 698 F.2d 1075 (10th Cir.) (extrinsic evidence of intent may warrant submitting contract term meaning to the jury)
- Okla. Oncology & Hematology P.C. v. US Oncology, Inc., 160 P.3d 936 (Okla. 2007) (court decides contract ambiguity as a matter of law; interpret where ambiguity can be cleared by reference to the agreement)
- Whitehorse v. Johnson, 156 P.3d 41 (Okla. 2007) (implied contract provisions necessary to effectuate parties’ intent are recognized)
- Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359 (Fed. Cir.) (distinguishing automatic assignment of IP by operation of law from promises to grant rights later)