353 F. Supp. 3d 631
W.D. Ky.2018Background
- Dippin' Dots contracted with CIMCO to design, construct, and install a CO2/ammonia refrigeration system (installed early 2014) that required redundant compressors controlled by a PLC.
- In November 2016, a compressor breaker tripped; the PLC allegedly failed to start the redundant compressor, causing temperature rise and spoilage of frozen product (approx. $750,000 claimed).
- Dippin' Dots previously litigated a related heat-exchanger failure and settled that action in December 2016; Travelers (insurer) paid limited spoilage coverage and investigated the November 5, 2016 event.
- Dippin' Dots sued CIMCO for breach of contract, negligence, breach of implied warranties, and breach of express warranty (added by amended complaint).
- CIMCO moved for summary judgment, arguing contract terms limit remedies (one-year repair/replacement warranty and an exclusion of consequential damages), settlement bars claims, and warranty/express warranty claims fail as a matter of law.
- The court applied Kentucky law, held the contract excluded consequential damages and limited remedies to one-year repair/replacement, found no genuine dispute that the limited remedy did not fail its essential purpose, and granted summary judgment for CIMCO; other arguments were not decided as unnecessary.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contract bars recovery of consequential damages | Dippin' Dots: §7 exclusion should not bar recovery of consequential damages; seeks repair/replacement or damages if remedy fails | CIMCO: §7 plainly excludes direct/indirect/special/consequential damages; valid under UCC §2-719 | Court: §7 excludes consequential damages; exclusion enforceable under Kentucky law |
| Whether one-year repair/replacement warranty fails of its essential purpose | Dippin' Dots: latent defect made the one-year remedy inadequate; at least a fact question exists | CIMCO: no evidence of latent defect or that repair/replacement would be ineffective; warranty governs | Court: No genuine dispute shown; the one-year limited remedy did not fail of its essential purpose |
| Whether contractual limitation bars negligence-based consequential damages | Dippin' Dots: exclusion does not expressly reference negligence and thus doesn't bar consequential damages for tort | CIMCO: limitation bars consequential damages arising from same facts; plaintiff must elect contract or tort | Court: Contract bars consequential damages for negligence claims arising from same facts |
| Whether other contract/warranty defenses require adjudication | Dippin' Dots: asserts express/implied warranty and other defenses; settlement arguments | CIMCO: also argued claims barred by prior settlement and warranty law | Court: Because contract limitations dispose of all claims, court declined to decide remaining arguments |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (party opposing summary judgment must present specific facts showing genuine issue)
- Gooch v. E.I. Du Pont De Nemours & Co., 40 F.3d 863 (W.D. Ky. decision discussing failure-of-essential-purpose and enforceability of consequential-damages exclusions)
- Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99 (Ky. 2003) (contract interpretation and ambiguity are questions of law)
- Wallace Hardware Co. Inc. v. Abrams, 223 F.3d 382 (choice-of-law principles noting Kentucky preference)