KSW Mechanical Services v. Johnson Controls, Inc., 992 F. Supp. 2d 135

KSW and JCI dispute payment and performance under a Purchase Order for air handling units (AHUs) for a Mount Sinai project.
Purchase Order price was $3.4 million; JCI was to provide AHUs complete with testing, supervision, and installation support.
AHUs were delivered in crates between January and May 2011; some units were not pre-assembled as specified.
KSW notified JCI of alleged nonconformities and requested repairs/revisions, with accompanying communications in June 2011.
KSW filed a New York state breach of contract action; the case was removed to federal court based on diversity; JCI moved for summary judgment on UCC and contract claims; the court denied the motion.
The court left unresolved issues for trial, including the measurement of direct vs. consequential damages and the validity of certain liquidating agreements between KSW and its subcontractors.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Purchase Order falls under the UCC.	KSW argues the contract is not governed by the UCC.	JCI contends the UCC applies because the transaction primarily concerned the sale of goods with incidental services.	UCC applies to the Purchase Order.
Whether KSW can recover under UCC 2-714/2-717 despite acceptance of goods.	KSW can recover direct damages and offset through 2-717.	Acceptance bars some remedies; damages are limited to 2-714/2-717 categories and may be offset.	There are triable issues as to direct vs. consequential damages; not entitled to summary judgment on this issue.
Whether KSW’s breach-of-contract claim is precluded by privity or liquidating agreements.	KSW may recover via pass-through liquidating agreements and independent claims.	JCI argues lack of privity and invalidity of liquidating agreements.	Issues of fact remain; summary judgment denied on contract claim.

City of New York v. Pullman Inc., 662 F.2d 910 (2d Cir. 1981) (direct damages under UCC § 2-714 measured by cost to cure; value of performance)
Schonfeld v. Hilliard, 218 F.3d 164 (2d Cir. 2000) (damages for lost profits; direct vs. consequential distinction nuanced)
American Electric Power Co. v. Westinghouse Elec. Corp., 418 F.Supp.435 (S.D.N.Y. 1976) (discussion of direct vs. consequential damages under UCC 2-714/2-715)
Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d Cir. 2007) (lost profits context in determining direct vs. consequential damages)
Emerald Painting, Inc. v. PPG Indus., Inc., 99 A.D.2d 891 (3d Dep’t 1984) (labor and material costs discussed in context of consequential damages)