MEMORANDUM AND ORDER ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT (# 102)
I. Introduction
The plaintiff, Power Control Devices, Inc. (“Power Control” or “the plaintiff’),
On April 5, 2013, Orchid filed a motion for summary judgment (# 102) together with a memorandum of law (# 103), statement of material facts (# 104), and a declaration with exhibits (# 105) in support thereof. Power Control was thereafter ordered to reply, specifically addressing the question of why the statute of limitations did not start to run at the time the plaintiff was put on notice of the purported defect in the prototypes, i.e., not later than April 4, 2005. (Electronic Order entered 4/23/2013) Thé plaintiff, in response, submitted a memorandum of law in opposition to defendant’s summary judgment motion (# 110) with exhibits (# 112) and statement of material facts (# 111), to which Orchid then filed a reply (# 113) with a second declaration (# 114) and a response to plaintiffs statement of facts (# 115).
The primary grounds for Orchid’s motion for summary judgment is the contention that the applicable statute of limitations bars Power Control’s remaining claims.
II. Factual Background
The facts recited herein are culled from the joint pretrial memorandum (# 79), the defendant’s statement of material facts (# 104) and exhibits (# 105), the plaintiffs statement of material facts in issue (# 111), and the defendant’s response (# 115). The parties agree generally about what events occurred on which dates, but dispute the significance to ascribe to particular events.
On or about June 11, 2004, the parties entered into an agreement whereby Orchid was to design and build four prototypes of an amplifier to drive a motor. (# 79, pp. 1, 3; # 105, Ex. 1) Per the agreement, the defendant submitted prototypes to Power Control on four separate occasions, from January to March of 2005. (# 110, Ex. A; # 115, ¶ 4) Each time the plaintiff received a prototype from Orchid, Power Control tested the prototype “as soon as possible.” (# 105, Ex. 2) Those testing dates were approximately January 18, January 21, January 29, February 8, and February 23, 2005. (# 105, Ex. 2) The conclusion reached by the plaintiff every time it conducted a test was that the design, as evidenced by each prototype, failed to meet all written specifications. (# 105, Ex. 2; #111, ¶ 4)
The parties had multiple telephone conferences to discuss the discrepancies in testing methods and signals being tested. (# 115, ¶¶ 45-47) These conferences occurred on February 10, February 24, March 30, and April 14, 2005. (# 115, ¶45) Power Control asserts that during this time Orchid induced the plaintiff to continue making partial payments of the contract price under the promise that the design
On March 16, 2005, Orchid submitted to Power Control what the defendant represented to be the completed design. (# 79, p. 19; # 104, ¶ 4) This included a documentation package and four prototypes of what Orchid called the completed design. (# 104, ¶ 4) The defendant also enclosed a “formal release letter” with the final prototypes, outlining what was included in the package. (# 105, Ex. 5, Ex. 9) The formal release letter concluded in the following manner: “It has been my pleasure working with you and Richard. We look forward to working with you again in the future.” (# 105, Ex. 9) Power Control acknowledges that Orchid considered this to be the end of the Phase 1 contract, and further admits that it received all the deliverables listed in the Phase 1 contract and formal release letter. (# 105, Ex. 4, Ex. 5) The plaintiff paid its final invoice on April 4, 2005. (# 79, p. 4)
Soon after March 16, 2005, Power Control tested the defendant’s completed design package and found that the prototypes failed to meet the plaintiffs specifications. (# 105, Ex. 2; # 111, ¶ 4) On April 4, 2005, Michael Allmayer, Vice President of Power Control, alerted Orchid by email to the inconsistencies he had found in testing the final design. (# 105, Ex. 3) Mr. Allmayer stated, ‘We took measurements ... which I’ve attached. So far, we haven’t been able to verify the correct gain structure.... Have you been able to externally verify that the unit is producing a current gain of 3 for every volt input command?” (# 105, Ex. 3) The parties continued to discuss the testing issues. (# 115, ¶¶ 45-47)
At the plaintiffs request, Orchid conducted a test of the final prototypes. (# 115, ¶ 18) On April 29, 2005, the defendant produced its results in a document titled Control Discussion and Review (“report”), which Power Control contends revealed the defendant’s breach of contract. (# 111, ¶¶ 32-35) The plaintiff refers to this date in the pretrial memorandum and its complaint as the date of breach. (# 79, p. 8; # 1, ¶¶ 20-23) Orchid disputes this characterization, asserting that the report was not a contractual performance, it reflected the same testing methodology that plaintiff had employed in its own testing, and was merely intended to clarify the issues and defend its design from Power Control’s allegations. (# 113, p. 14; # 115, ¶¶ 19, 33)
The parties had further discussions in the months, following the April 29th report in an attempt to remedy the issues, including four telephone conferences in May 2005 and a visit to Kansas in August 2005 by Mr. Nickelsberg on behalf of Orchid. (# 115, ¶¶ 36-40) During this time, no further invoices were issued after the plaintiffs final payment on April 4, 2005. (# 79, p. 4; # 103, p. 4)
The parties’ contract does not include any provision stating that completion of the contract is contingent upon testing reports or acceptance of the design by Power Control. (#105, Ex. 1; #115, ¶ 29) The contract states that Phase 1 is complete upon “delivery to [plaintiff] of the prototype boards.” (# 105, Ex. 1, ¶ 1.1.3) The defendant’s “Control Discussion and Review” or report is not included in the list of required deliverables specified in the contract. (# 105, Ex. 1, ¶ 5.5)
The plaintiff filed this case against the defendant on April 25, 2011. Orchid seeks
III. Summary Judgment Standard
The purpose of summary judgment is “to pierce the boilerplate of the pleadings and assay the parties’ proof in order to determine whether trial is actually required.” Rojas-Ithier v. Sociedad Española de Auxilio Mutuo y Beneficiencia de Puerto Rico,
Once the moving party alleges the absence of all meaningful factual disputes, the non-moving party must show that a genuine issue of material fact exists. This showing requires more than the frenzied brandishing of a cardboard sword. The non-moving party must point to facts memorialized by materials of evidentiary quality and reasonable inferences therefrom to forestall the entry of summary judgment.
Certain Interested Underwriters at Lloyd’s, London v. Stolberg,
In determining whether summary judgment is proper, “a court must view the record in the light most favorable to the nonmoving party and give that party the benefit of all reasonable inferences in its favor.” Clifford v. Barnhart,
IV. Discussion
Assuming that Orchid did indeed breach the contract
If the plaintiffs cause of action accrued on April 29, 2005 upon receipt Orchid’s report, Power Control’s claim would be safely within the statutory period. However, if the breach occurred prior to that date, such as on March 16, 2005 with the final delivery of prototypes or April 4, 2005 with plaintiffs final payment and email to the defendant regarding discrepancies from its testing, the plaintiffs claims are time-barred. Power Control contends either that the contract was completed on April 29, 2005 upon receipt of the defendant’s report and thus breached on that date, or, if the contract was breached prior to that date, then the discovery rule should apply because the plaintiff was not on notice of the design inadequacy before receiving the defendant’s report on April 29, 2005. (# 110) Orchid contends the plaintiffs cause of action accrued no later than April 4, 2005 with the Power Control’s email and final payment, and that the discovery rule does not apply because Power Control was on notice of the alleged breach before the bar date. ( ## 103,113)
In Massachusetts, the general rule is that a contract action accrues at the time the contract is breached. Foisy,
a claim accrues when the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the factual basis for the cause of action. The standard is an objective one; in order to toll the statute of limitations pursuant to the discovery rule, the factual basis for the cause of action must have been inherently unknowable at the time of injury. The factual basis for a cause of action is inherently unknowable if it is incapable of detection by the wronged party through the exercise of reasonable diligence.
A. The “Discovery Rule” as Applied to Plaintiffs Contract Claims
In order for the statute of limitations to be tolled under the discovery rule, the basis for the action must have been “inherently unknowable” to the plaintiff at the time of the injury. Latson v. Plaza Home Mortgage, Inc.,
However, in the instant case, as in RTR Technologies, “warning signs abounded.” RTR Technologies, Inc.,
Power Control argues that its claims should be allowed to proceed under the discovery rule because Orchid’s breach was “inherently unknowable” to the plaintiff prior to April 29, 2005 when it received the defendant’s report, allegedly confirming the final design did not meet the contract specifications. (# 110, p. 14) Orchid responds that the claims are still time-barred under the discovery rule because the plaintiff was on notice of the alleged defects well before the bar date. (# 103, p. 10)
The plaintiff cannot convincingly argue that the design discrepancies were inherently unknowable when its own employees, doing plaintiffs own testing, were the ones to discover the discrepancies. (# 105, Ex. 2) In fact, Power Control discovered the discrepancies close on the heels of receiving the prototypes, as evidenced by the communications between the parties following the deliveries — in particular, the April 4 email from Mike Allmayer of Power Control to the defendant inquiring about the issues found in testing. (# 105, Ex. 3; # 115, If 45)
Although Power Control contends that Orchid possessed unique engineering expertise such that the plaintiff could not determine a breach on its own (# 110, p. 14), this is not a case involving unequal positions of knowledge. See Melrose Hous. Auth. v. New Hampshire Ins. Co.,
Unlike cases in which the discovery rule could be applied and the statute of limitations tolled because the plaintiff had inferior knowledge, Power Control was a sophisticated party deeply involved in the highly technical project. See Cambridge Plating Co.,
The relevant facts were not “inherently unknowable” to the plaintiff prior to April 29, 2005. See RTR Technologies, Inc.,
Moreover, it should be noted that even if the discovery rule were to be applied in this case, the statutory clock would have started ticking as of April 4, 2005, when Power Control demonstrated it had discovered by its own testing that the prototypes did not meet the contractual specifications. (See # 105, Ex. 3; # 114, Ex. 15) Thus, applying the discovery rule would not help the plaintiff avoid the statute of limitations.
B. The Plaintiff was on Notice of its Claims Prior to April 25, 2005
The statute of limitations clock begins running upon initial notice of a prob
Power Control knew that Orchid called its March 16, 2005 delivery the “completed design” and considered that delivery to be the end of the Phase 1 contract. (# 105, Ex. 4, Ex. 5) The plaintiff itself tested the final prototype “as soon as possible” and found that it failed to meet its specifications. (# 105, Ex. 2; # 111, ¶ 4) Power Control soon contacted the defendant via email (April 4th) and teleconference (April 14th) to discuss the discrepancies. (# 105, Ex. 3, Ex. 14; # 115, ¶ 45) On the same day that Power Control emailed Orchid to notify it about the testing discrepancies, the plaintiff paid the defendant’s final invoice. (# 79, p. 4) By this point, Power Control was certainly on notice that a breach had possibly occurred. See Cambridge Plating Co., Inc.,
In addition, Orchid’s April 29th report does not bear on the accrual date analysis. Nowhere does the contract state that completion was contingent upon receipt of the defendant’s Control Discussion and Review. (# 105, Ex. 1; # 115 ¶ 29) Since Power Control requested the report only after its own testing, and the report allegedly showed that the prototypes were not to the plaintiffs specifications, the report simply confirmed what Power Control already suspected, i.e., that the prototypes did not meet plaintiffs standards. See Hanson Hous. Auth.,
C. Is the Limitations Period Tolled Because of Ongoing Discussions Between the Parties or an Allegedly Ambiguous Contract Provision ?
The plaintiffs remaining arguments are insufficient to toll the accrual of
Ongoing discussions with the defendant in an attempt to remedy the issues are insufficient to toll the statute of limitations. See Bums v. Massachusetts Inst. of Tech.,
Second, the plaintiff’s allegations of ambiguous contract provisions are insufficient to toll the statute of limitations. Power Control alleges that paragraphs 1.1.3 and 5.6 of the contract are ambiguous and offers alternative meanings for these provisions. (# 110 pp. 10-12; # 111, ¶¶ 2-5; # 112, Ex. 1) “Interpretation of a contract is ordinarily a question of law for the court.... Absent an ambiguity, the court interprets a contract according to its plain terms, in a manner that gives reasonable effect to each of its provisions.” Weiss v. DHL Exp., Inc.,
A court interpreting a contract must first assess whether the contract is ambiguous____ Ambiguity is not created merely because the litigants disagree about the meaning of a contract. Rather, a contract is only ambiguous where an agreement’s terms are inconsistent on their face or where the phraseology can support reasonable differences of opinion as to the meaning of the words employed and obligations undertaken.
Farmers Ins. Exch. v. RNK, Inc.,
Paragraph 1.1.3 of the contract at hand is not ambiguous. (# 105, Ex. 1) The plain terms of paragraph 1.1.3 state:
*446 As part of the Phase 1 Hardware Development Project, Orchid shall supply four (4) BLDC1 Prototype Circuit Boards to Power Control Devices, Inc. Working with its third-party suppliers, Orchid shall have four (4) boards assembled, debugged and delivered to Power Control Devices, Inc. Per the attached schedule. The BLDC1 Phase 1 Development Program completes with delivery to PCD of the prototype boards.
# 105, Ex. 1.
Power Control contends that this paragraph was “not intended to refer to the contract being completed when Orchid simply submitted prototypes, regardless of whether those prototypes met written specifications,” but instead was “intended to refer to the contract being completed when Orchid submitted prototypes that met the written specifications.” (# 112, Ex. 1) However, nowhere in the contract does it state or imply that completion of the contract is contingent upon approval, testing reports, or satisfaction of the plaintiff. See #105, Ex. 1; #115 ¶29. Instead, according to the terms of paragraph 1.1.3, the contract was complete upon delivery of the four prototypes. (# 105, Ex. 1) The contract may have been breached if the delivered prototypes did not meet the written specifications, but under paragraph 1.1.3, it was complete. (# 105, Ex. 1) The language of paragraph 1.1.3 simply cannot “support reasonable differences of opinion as to the meaning of the words employed and obligations undertaken.” See Farmers Ins. Exch.,
In addition, Power Control’s contention that paragraph 5.6 of the contract with respect to testing is ambiguous does not affect the limitations analysis. Power Control argues that paragraph 5.6 of the contract which designates the plaintiff to “provide all testing” is ambiguous and so the statute of limitations should be tolled. (# 110, pp. 10-12) Whether the parties expected the plaintiff to conduct independent testing or merely pay for testing by the defendant is irrelevant because Power Control actually did its own testing. (# 105, Ex. 2; # 111, ¶ 4) The plaintiff cannot hide behind an allegedly ambiguous contract clause to feign ignorance of the design discrepancies. See Hanson Hous. Auth.,
In summary, the alleged breach by Orchid was either known or readily “knowable” in advance of April 25, 2005. See Catrone v. Thoroughbred Racing Associations of N. Am., Inc.,
“In most instances, the question of when a plaintiff knew or should have known of its cause of action is one of fact that will be decided by the trier of fact.” Taygeta Corp. v. Varian Associates, Inc.,
V. Conclusion and Order
For all of the reasons stated, it is ORDERED that the Defendant’s Motion for Summary Judgment (# 102) be, and the same hereby is, ALLOWED. Judgment shall enter for the defendant.
Notes
. Rule 56 was amended effective December 1, 2010. The summary judgment standard is now set forth in Rule 56(a), but "[t]he standard for granting summary judgment remains unchanged.” Ophthalmic Surgeons, Ltd. v. Paychex, Inc.,
. Although the defendant disputes that it breached the contract, for the purposes of this opinion the merits of the contract-based claims are immaterial.
. Mass. Gen. L. c. 260 § 2 ("Actions of contract ... shall, except as otherwise provided, be commenced only within six years next after the cause of action accrues.”); see Micromuse, Inc. v. Micromuse, PLC,
. This Court has previously ruled that the contract in this case was a contract for services rather than a contract for sale of goods. See Memorandum and Order on Defendants Motion to Dismiss docketed as # 20 on March 1, 2012 at pp. 7-9. Thus, the six-year statute is applicable. The ruling was made on a motion to dismiss in which all inferences were drawn in favor of the plaintiff, and it is not known whether the defendant acquiesces in that ruling. However, the issue will be moot if the Court decides that the plaintiff failed to meet the six-year statute of limitations.
. Indeed, Mike Allmayer and Mike Lawson were disclosed as plaintiff's expert witnesses
