GE Transportation Parts, LLC v. Central Railway Manufacturing, LLC

Background

GET and Central entered into a November 16, 2015 Supply Agreement governed by New York law. Central agreed to provide GET with GEERs, or General Electric Event Recorders. GET said the GEERs, when combined with GET’s LocoVISION digital recording product, were intended to provide railroad monitoring with data and video recording. Central disputed that account and blamed LocoVISION for unreliable video recording.

Central notified GET in October 2017 that it would discontinue producing GEERs effective January 6, 2018. The notice did not terminate the Supply Agreement, which was scheduled to expire on November 16, 2024. GET sued Central for breach of contract and indemnification, among other claims. Earlier rulings dismissed GET’s breach-of-warranty claim and part of its indemnification claim, and dismissed Central’s counterclaims for product disparagement or injurious falsehood and violations of the Florida Deceptive and Unfair Trade Practices Act. Central’s breach-of-contract counterclaim was the only counterclaim remaining.

The parties filed cross-motions for summary judgment. GET sought judgment on Central’s contract counterclaim and on Central’s second through eighth affirmative defenses. Central sought a declaration that it could sell its event recorders in the marketplace under the Supply Agreement and summary judgment on GET’s breach-of-contract and indemnification claims.

Central’s breach-of-contract counterclaim

The court granted GET summary judgment on Central’s sole remaining counterclaim. Under New York law, a breach-of-contract claim requires an agreement, the plaintiff’s adequate performance, the defendant’s breach, and damages. The court held that Central could not establish legally recoverable damages.

The Supply Agreement was predominantly for the sale of goods, so Article 2 of New York’s Uniform Commercial Code applied. Under that law, an aggrieved seller could not recover the consequential damages sought by Central. Central argued that it sought lost profits and opportunity costs as direct damages and that common law should govern. The court rejected those arguments, explaining that under Article 2 those losses were consequential damages. The court also held that the lost-profit remedy Central cited applied only to nonacceptance or repudiation of goods, neither of which Central alleged.

Affirmative defenses

The court granted GET summary judgment on Central’s second through eighth affirmative defenses. GET argued that Central had provided no evidence supporting those defenses, and Central did not respond to that part of the motion. The court treated the defenses as abandoned.

Central’s declaratory-judgment request

The court denied Central’s request for a declaration that it was authorized to sell its event recorders free from an alleged restraint on competition. A request for declaratory relief must be brought through a properly pleaded civil action. The court held that Central could not bypass the pleading and notice requirements by requesting the declaration in a summary-judgment motion.

GET’s breach-of-contract claim

The court denied Central’s cross-motion for summary judgment on GET’s breach-of-contract claim. Central argued that GET had materially breached the Supply Agreement, that GET’s damages should not include the costs of developing a replacement event recorder, and that GET’s claim depended on expert testimony that should be excluded.

The court rejected Central’s material-breach argument at the summary-judgment stage. It concluded that the contract provisions Central relied on did not support Central’s interpretation and, in any event, genuine disputes of material fact remained. The court therefore held that Central had not shown that GET was in material breach in a way that relieved Central of its obligation to offer GET a commercially reasonable license price after discontinuing the GEER.

The court also rejected Central’s argument concerning replacement-development costs. Section 21.8 of the Supply Agreement expressly allowed GET to seek damages for costs associated with developing its own event recorder, subject to a contractual limitation involving GET’s modification, updating, or access to Central’s intellectual property. The court found a genuine factual dispute about when GET began developing the replacement product, so summary judgment was inappropriate.

Finally, the court declined to dismiss GET’s contract claim for lack of expert evidence. The claim was not wholly dependent on the valuation expert’s testimony and was also supported by other evidence, including testimony from GET’s corporate representative concerning license negotiations.

GET’s indemnification claim

The court denied Central’s cross-motion for summary judgment on GET’s indemnification claim. Central argued that GET’s losses were not caused by Central. The court identified factual disputes concerning whether GET could have fixed a network problem without Central’s assistance, whether GET’s proposed corrective actions had addressed the customer’s concerns, whether the GEER had the claimed recording capability outside a laboratory setting, and whether Central had offered workable solutions or repeatedly refused to assist GET.

Because those factual disputes could affect causation, the court held that Central was not entitled to summary judgment on the indemnification claim.

Expert motions and disposition

The court denied both parties’ motions to exclude expert testimony as moot. Central’s motion to exclude GET’s valuation expert and for a hearing on that testimony was denied as moot for purposes of summary judgment, without prejudice to renewal before trial.

The court granted GET’s motion for summary judgment and denied Central’s cross-motion for summary judgment. The case remained open.