Far East Aluminium Works Co. v. Viracon, Inc.
27f4th1361
| 8th Cir. | 2022Background
- Far East Aluminium contracted with Viracon for specialty color-changing glass "lites" for the Wynn Palace in Macau.
- The contract disclaimed implied warranties and stated in caps that Viracon would not be liable for indirect, incidental, consequential, special, or punitive damages; exclusive remedies were refund of purchase price or replacement at no charge.
- Over time many lites failed; Far East alleges >$8 million in losses (contractor claims >$5.2M; removal and replacement costs >$2.8M).
- Far East sued Viracon; the district court dismissed under Fed. R. Civ. P. 12(b)(6) holding the consequential-damages exclusion barred recovery.
- The Eighth Circuit reviewed de novo under Minnesota law and affirmed the dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Far East seeks consequential damages | Damages for removal/replacement and contractor demands are direct losses from breach | Those losses are indirect/consequential because Viracon never agreed to remove/replace or pay contractor claims | Held consequential — Minnesota UCC defines such losses as consequential; exclusion applies |
| Whether the consequential-damages exclusion is unconscionable | Contract is one-sided and allocates nearly all risk to Far East, so exclusion is unconscionable | Parties are sophisticated merchants; allocation of risk is enforceable between equals | Held exclusion is conscionable and enforceable between merchants as a matter of law |
| Whether exclusion is unenforceable if exclusive remedy "fails of its essential purpose" | Refund-or-replace remedy is inadequate given high replacement costs, so exclusion should be void | Under Minnesota law in merchant-to-merchant, validity of exclusion is independent of remedy sufficiency | Held exclusion remains valid even if exclusive remedy fails of its essential purpose (Franz controlling) |
| Indemnity claim — whether contract creates express obligation to reimburse third-party claims | Far East seeks indemnity for contractor's demand | Contract contains no express reimbursement undertaking; only purchase-price refund or replacement expressly allowed | Held indemnity fails — no express contractual obligation to reimburse; claim waived where not argued properly |
Key Cases Cited
- Cox v. Mortg. Elec. Registration Sys., Inc., 685 F.3d 663 (8th Cir. 2012) (standard of de novo review for Rule 12(b)(6) dismissal)
- Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009) (pleading plausibility standard under Iqbal/Twombly)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleadings)
- Kleven v. Geigy Agric. Chems., 227 N.W.2d 566 (Minn. 1975) (definition/distinction of consequential vs direct damages)
- Despatch Oven Co. v. Rauenhorst, 40 N.W.2d 73 (Minn. 1949) (direct damages arise in the usual course from breach)
- N. States Power Co. v. ITT Meyer Indus., 777 F.2d 405 (8th Cir. 1985) (replacement and removal costs are consequential under Minnesota law)
- Int’l Fin. Servs., Inc. v. Franz, 534 N.W.2d 261 (Minn. 1995) (in merchant-to-merchant sales of complex goods, consequential-damages exclusion is independent of whether exclusive remedy fails)
- Hendrickson v. Minn. Power & Light Co., 104 N.W.2d 843 (Minn. 1960) (express contract language required to create indemnity obligation)