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Pierce v. Catalina Yachts, Inc. (5/19/00) sp-5277
Pierce v. Catalina Yachts, Inc. (5/19/00) sp-5277
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
JIM PIERCE and KAREN PIERCE, )
) Supreme Court Nos. S-8394/8403
Appellants and )
Cross-Appellees, ) Superior Court No.
) 1JU-94-2213 CI
v. )
)
CATALINA YACHTS, INC., ) O P I N I O N
)
Appellee and ) [No. 5277 - May 19, 2000]
Cross-Appellant. )
)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Juneau,
Walter L. Carpeneti, Judge.
Appearances: Patrick W. Conheady, Juneau, for
Appellants/Cross-Appellees. Eric A. Kueffner, Faulkner Banfield,
P.C., Juneau, for Appellee/Cross-Appellant.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, and Bryner, Justices. [Carpeneti, Justice, not
participating.]
BRYNER, Justice.
I. INTRODUCTION
After finding that Catalina Yachts, a sailboat
manufacturer, breached its limited warranty to repair a defect in
a boat that it sold to Jim and Karen Pierce, a jury awarded the
Pierces monetary damages for the reasonable cost of repair. Before
submitting the case to the jury, the trial court dismissed the
Pierces' claim for consequential damages, finding it barred by an
express provision in the warranty. On appeal, the Pierces contend
that they were entitled to consequential damages despite this
provision. We agree, holding that because Catalina acted in bad
faith when it breached the warranty, the company cannot
conscionably enforce the warranty's provision barring consequential
damages. Accordingly, we remand for a trial to determine
consequential damages.
II. FACTS AND PROCEEDINGS
In June 1992 Jim and Karen Pierce purchased a forty-two-
foot sailboat newly built by Catalina Yachts. Catalina gave the
Pierces a limited warranty, promising to repair or pay for repair
of any below-waterline blisters that might appear in the gel coat
-- a smooth outer layer of resin on the boat's hull. [Fn. 1] The
warranty expressly disclaimed Catalina's responsibility for
consequential damages.
In June 1994 the Pierces hauled the boat out of the water
to perform maintenance and discovered gel-coat blisters on its hull
and rudder. They promptly notified Catalina of the problem and
submitted a repair estimate of $10,645, which included the cost of
removing and replacing the gel coat below the waterline. Catalina
refused to accept this estimate, insisting that the hull only
needed minor patching. Six months later, after their repeated
efforts failed to convince Catalina that the gel coat needed to be
replaced, the Pierces sued the company, claiming tort and contract
damages. They later amended their complaint to allege a separate
claim for unfair trade practices.
Before trial, the superior court ruled that the limited
warranty's provision barring consequential damages was not
unconscionable. Based on this ruling, the court later precluded
the Pierces from submitting their consequential damages claim to
the jury, restricting the Pierces' recovery on their claim of
breach of contract to their cost of repair, as specified in the
limited warranty. The jury awarded the Pierces $12,445 as the
reasonable cost of repair, specifically finding that the Pierces
had given Catalina timely notice of the blister problem, that
Catalina breached its gel-coat warranty, that it acted in bad faith
in failing to honor its warranty obligations, and that the Pierces
could not have avoided any of their losses.
The Pierces appeal, contending that the trial court erred
in striking their claim for consequential damages, in excluding
evidence supporting their unfair trade practices claim, and in
calculating the attorney's fee award. Catalina cross-appeals, also
contesting the attorney's fee order.
III. DISCUSSION
A. The Pierces Are Entitled to Consequential Damages.
The Pierces' consequential damages argument requires us
to consider a question of first impression concerning how a
warranty provision that creates a limited remedy interacts with
another provision that excludes consequential damages: if the
limited remedy fails, should the exclusion of consequential damages
survive? [Fn. 2]
Alaska's commercial code addresses these issues in
AS 45.02.719. [Fn. 3] The first paragraph of this provision,
subsection .719(a), authorizes limited warranties, allowing parties
entering into commercial transactions to "limit or alter the
measure of damages recoverable under [chapter 7 of the U.C.C.], as
by limiting the buyer's remedies to . . . repair and replacement of
nonconforming goods or parts" and to agree that the limited remedy
is "exclusive, in which case it is the sole remedy." [Fn. 4] But
when a limited remedy fails, the second paragraph of AS 45.02.719,
subsection .719(b), nullifies the warranty's limitation, restoring
the buyer's right to rely on any authorized remedy: "If
circumstances cause an exclusive or limited remedy to fail of its
essential purpose, remedy may be had as provided in the code." [Fn.
5]
Courts construing U.C.C. subsection 719(b) agree that a
limited warranty to repair "fails of its essential purpose," "when
the seller is either unwilling or unable to conform the goods to
the contract." [Fn. 6]
The policy behind the failure of
essential purpose rule is to insure that the buyer has "at least
minimum adequate remedies." Typically, a limited repair/replacement
remedy fails of its essential purpose where (1) the "[s]eller is
unsuccessful in repairing or replacing the defective part,
regardless of good or bad faith; or (2) [t]here is unreasonable
delay in repairing or replacing defective components.[ [Fn. 7]]
Here, by specifically finding that the Pierces' boat
experienced gel-coat blisters, that the Pierces gave Catalina
timely notice of the problem, that Catalina thereafter breached its
obligations under the limited gel-coat warranty, and that the
Pierces could not have avoided their damages, the jury effectively
determined that the gel-coat warranty had failed of its essential
purpose. Under subsection .719(b), then, the Pierces seemingly can
pursue any remedy available under the commercial code, including
consequential damages. [Fn. 8]
But the Pierces' right to consequential damages under
subsection .719(b) is not as certain as it seems. The last
paragraph of AS 45.02.719, subsection .719(c), separately provides
that consequential damages may be limited or excluded "unless the
limitation or exclusion is unconscionable." [Fn. 9] By validating
consequential damages exclusions subject only to unconscionability,
subsection .719(c) casts doubt upon subsection .719(b)'s implied
promise that, when a limited remedy fails, the buyer may claim
consequential damages because they are a "remedy . . . provided in
the code." [Fn. 10]
The commercial code does not directly resolve this
tension between subsections .719(b) and .719(c). [Fn. 11] When, as
here, a limited repair remedy fails, and a separate provision of
the warranty bars consequential damages, the code fails to say
whether a court should apply subsection .719(b) by restoring the
buyer's right to seek consequential damages, or whether it should
instead apply subsection .719(c) by enforcing the bar against
consequential damages "unless . . . unconscionable." [Fn. 12]
Courts addressing this dilemma in other jurisdictions
have come to differing conclusions. [Fn. 13] Some have found the
two subsections to be dependent, ruling that when a warranty fails,
subsection .719(b)'s command to restore all available remedies
trumps subsection .719(c)'s approval of a specific clause that bars
consequential damages, regardless of whether that clause might
itself be unconscionable. [Fn. 14] Other courts have applied a
case-by-case analysis. [Fn. 15] But the majority of jurisdictions
view these subsections to be independent, ruling that when a
warranty fails, a separate provision barring consequential damages
will survive under subsection .719(c) as long as the bar itself is
not unconscionable. [Fn. 16]
We believe that the majority approach best serves the
Uniform Commercial Code's underlying purposes "to simplify, clarify
and modernize the law governing commercial transactions; to permit
the continued expansion of commercial practices through custom,
usage and agreement of the parties; [and] to make uniform the law
among the various jurisdictions." [Fn. 17] Moreover, this approach
balances the purposes of subsections .719(b) and (c) by allowing
parties latitude to contract around consequential damages, while
protecting buyers from unconscionable results. [Fn. 18] We
therefore adopt the independent approach as the most sensible rule
in light of precedent, reason, and policy. [Fn. 19]
Courts applying this approach recognize that contractual
provisions limiting remedies and excluding consequential damages
shift the risk of a limited remedy's failure from the seller to the
buyer; they examine the totality of the circumstances at issue --
including those surrounding the limited remedy's failure -- to
determine whether there is anything "in the formation of the
contract or the circumstances resulting in failure of performance
that makes it unconscionable to enforce the parties' allocation of
risk." [Fn. 20]
In determining whether an exclusion is unconscionable,
courts examine the circumstances existing when the contract was
signed, asking whether "there was . . . reason to conclude that the
parties could not competently agree upon the allocation of risk."
[Fn. 21] Courts are more likely to find unconscionability when a
consumer is involved, when there is a disparity in bargaining
power, and when the consequential damages clause is on a pre-
printed form; [Fn. 22] conversely, they are unlikely to find
unconscionability when "such a limitation is freely negotiated
between sophisticated parties, which will most likely occur in a
commercial setting . . . ." [Fn. 23]
In addition to inquiring into the circumstances at the
time of the sale, courts examine the case "[f]rom the perspective
of later events," inquiring whether "it appears that the type of
damage claimed . . . came within the realm of expectable losses."
[Fn. 24] The reason for the limited warranty's failure affects
this analysis:
Whether the preclusion of consequential
damages should be effective in this case depends upon the
circumstances involved. The repair remedy's failure of essential
purpose, while a discrete question, is not completely irrelevant to
the issue of the conscionability of enforcing the consequential
damages exclusion. The latter term is "merely an allocation of
unknown or undeterminable risks." Recognizing this, the question
. . . narrows to the unconscionability of the buyer retaining the
risk of consequential damages upon the failure of the essential
purpose of the exclusive repair remedy.[ [Fn. 25]]
And in examining why a limited remedy failed of its essential
purpose, courts consider it significant if the seller acted
unreasonably or in bad faith. [Fn. 26]
In the present case, the nature of the Pierces' warranty
and the circumstances surrounding Catalina's breach weigh heavily
against enforcing the consequential damages bar. The contract at
issue was a consumer sale, not a commercial transaction between
sophisticated businesses with equivalent bargaining power.
Catalina unilaterally drafted the damages bar and evidently
included it in a preprinted standard limited warranty. Moreover,
the jury's sizable award for the reasonable cost of repairing the
boat's gel coat establishes that Catalina's breach deprived the
Pierces of a substantial benefit of their bargain. Though some
gel-coat blistering might have been foreseeable, a defect of this
magnitude does not fit neatly "within the realm of expectable
losses." [Fn. 27]
But the decisive factor in this case is the nature of
Catalina's breach, which caused the limited remedy to fail of its
essential purpose. The jury specifically found that Catalina acted
in bad faith in failing to honor its warranty. This finding
virtually establishes a "circumstance[] resulting in failure of
performance that makes it unconscionable to enforce the parties'
allocation of risk." [Fn. 28] Because the jury found that Catalina
consciously deprived the Pierces of their rights under the
warranty, the company cannot conscionably demand to enforce its own
warranty rights against the Pierces:
This Court would be in an untenable
position if it allowed the defendant to shelter itself behind one
segment of the warranty when it has allegedly repudiated and
ignored its very limited obligations under another segment of the
same warranty, which alleged repudiation has caused the very need
for relief which the defendant is attempting to avoid.[ [Fn. 29]]
Moreover, in light of Catalina's bad faith, allowing the
company to enforce the consequential damages bar would conflict
with the commercial code's imperative that "[e]very contract or
duty in the code imposes an obligation of good faith in its
performance or enforcement." [Fn. 30] Finally, because it is self-
evident that the Pierces did not bargain to assume the risk of a
bad faith breach by Catalina, enforcing the bar against
consequential damages would thwart AS 45.02.719's basic goal of
implementing the parties' agreement.
For these reasons, we hold the superior court erred in
ruling that it would be conscionable to enforce the warranty's bar
against consequential damages and in declining to allow the Pierces
to present their consequential damages claim to the jury. [Fn. 31]
We further hold that this error requires us to remand the case for
a trial to determine the extent of these damages.
B. The Trial Court Did Not Abuse Its Discretion in Refusing
to Admit as Evidence Letters and Notes from Other Boat Owners.
The Pierces' amended complaint set forth a claim of
deceptive practices under Alaska's Unfair Trade Practices Act,
alleging that Catalina had long been aware of a problem with gel-
coat yellowing and blistering but had failed to modify its warranty
to disclose the gel coat's failure to meet specifications. [Fn. 32]
Prior to trial, the Pierces submitted as proposed
exhibits letters of complaint that Catalina received from other
purchasers of its boats. Catalina objected to this evidence as
irrelevant, hearsay, and lacking foundation. The trial court
declined to accept the exhibits, finding that they were marginally
relevant but that their relevance was greatly outweighed by their
potential to cause prejudice and confusion. At the conclusion of
trial, the court refused to allow the Pierces' requested
instruction regarding their unfair trade practices claim, finding
insufficient evidence to support it.
The Pierces contend that the excluded exhibits formed the
heart of their deceptive practices claim since the exhibits showed
that Catalina had notice that its gel-coat process was defective.
They argue that the court arbitrarily excluded this evidence, and
then threw out their cause of action for want of the very evidence
that it excluded.
These arguments are unpersuasive. The trial court had
broad discretion in ruling on the admission of this evidence. [Fn.
33] Neither below nor on appeal have the Pierces convincingly
explained how the excluded evidence could have established their
claim or why the trial court should have admitted it. They
maintain -- and the trial court implicitly acknowledged -- that
their exhibits were potentially relevant to show that Catalina was
aware of a longstanding gel-coat defect. But to prevail on their
deceptive practices cause of action, the Pierces had to prove not
just that Catalina had longstanding notice of potential defects but
also that these defects actually existed. Because the Pierces
contend only that the excluded evidence tended to prove notice, and
since they offered no other evidence to prove that Catalina's boats
were actually defective, they have failed to demonstrate an abuse
of discretion.
In any event, we note that the trial court did not
categorically exclude the proffered evidence. It expressly noted
that its ruling was not absolute and that it might later accept the
letters if Catalina opened the door to their admission. In light
of this ruling, we find no merit in the Pierces' complaint that the
pretrial ruling denied them "the opportunity to confront foundation
or hearsay objections as they arose in the course of the case."
[Fn. 34]. C. The Magnuson-Moss Act Will Govern the Pierces'
Award of Attorney's Fees on Remand.
Before trial, Catalina made an offer of judgment for
$38,000. The Pierces rejected the offer. After trial, the court
determined that Catalina's offer exceeded the value of the jury's
verdict. Relying on the Magnuson-Moss Warranty-Federal Trade
Commission Improvement Act, [Fn. 35] the court awarded the Pierces
full reasonable attorney's fees to the time of the offer of
judgment; applying Alaska Civil Rules 68 and 82, it awarded post-
offer attorney's fees to Catalina. Subtracting Catalina's fee
award from the Pierces', the court calculated a net fee award of
$510 for the Pierces.
Both parties challenge various aspects of the superior
court's award of fees. But our decision that the Pierces are
entitled to recover consequential damages on remand moots all but
one of the parties' arguments. Catalina contends that the superior
court erred in ruling that the Magnuson-Moss Act's attorney's fee
provision governs the Pierces' award of fees; we address this issue
because it is likely to arise again on remand.
Catalina asserts that the Magnuson-Moss Act's fee
provisions do not apply to this case because the warranty at issue
was a limited rather than a full warranty. But this assertion
conflates two separate provisions of the Act.
Section 2310(d) of the Magnuson-Moss Act authorizes
private actions for breaches of written consumer warranties,
providing that "a consumer who is damaged by the failure of a . . .
warrantor . . . to comply with any obligation under this chapter,
or under a written warranty . . . may bring suit for damages and
other legal and equitable relief." [Fn. 36] It also authorizes
consumers who prevail on a suit brought under its provisions to
recover costs and expenses, including attorney's fees. [Fn. 37] A
separate section of the Act, section 2304, establishes minimum
federal standards that warrantors of consumer products are
obligated to meet. [Fn. 38]
In arguing the Magnuson-Moss Act does not apply to the
Pierces' action, Catalina points out that most courts have
concluded that the minimum standards set out in section 2304 of the
Act apply only to full warranties. [Fn. 39] Contending that
section 2310's provision allowing consumers to sue for violations
of "any obligation under this chapter" refers to the obligations
set out in section 2304, Catalina reasons that section 2310 does
not allow consumers to sue for breaches of limited warranties.
Because the warranty at issue here is a limited warranty, Catalina
concludes that the Magnuson-Moss Act does not govern the Pierces'
right to attorney's fees.
But Catalina reads section 2310 too narrowly; its
language authorizes consumer suits for non-compliance with two
types of obligations: "the failure of a . . . warrantor . . . to
comply with any obligation under this chapter, or under a written
warranty." [Fn. 40] Courts and commentators have generally
recognized that this provision confers a private right of action to
consumers who suffer a breach of a limited warranty. [Fn. 41]
These courts rely on state law to provide the proper measure of
damages for the breach, but they rely on section 2310 in awarding
attorney's fees. [Fn. 42] This court has taken the same approach
on at least one prior occasion, although the limited nature of the
warranty in that case was not at issue. [Fn. 43]
Thus, the precise question here is not whether Catalina
failed to comply with an obligation imposed under section 2304 but
whether the company failed to comply with an obligation "under a
written warranty," [Fn. 44] as allowed in section 2310. Under
section 2301(6)(B) of the Magnuson-Moss Act, the term "written
warranty" encompasses "any undertaking in writing in connection
with the sale by a supplier of a consumer product to refund,
repair, replace, or take other remedial action with respect to such
product in the event that such product fails to meet the
specifications set forth in the undertaking." [Fn. 45] Because
Catalina's limited warranty to the Pierces falls within this
definition, we conclude that on remand they will be entitled to an
award of attorney's fees under the Magnuson-Moss Act.
IV. CONCLUSION
For these reasons, we VACATE the judgment and REMAND for
a trial to determine the amount of the Pierces' consequential
damages.
FOOTNOTES
Footnote 1:
This limited warranty provided, in relevant part: "Catalina
will repair or, at its option, pay for 100% of the labor and
material costs necessary to repair any below-the-waterline gel coat
blisters that occur within the first year after the boat is placed
in the water."
Footnote 2:
Catalina argues that we should review this point only for
plain error because the Pierces failed to object to the final jury
instructions' omission of their consequential damages claim. But
the trial court announced its decision to omit this claim from the
instructions after the parties had extensively argued the issue.
Thus, by announcing the instructions, the court effectively decided
the argument. Since a party has no duty to take exception when the
trial court rules on a disputed issue, we conclude that the Pierces
have adequately preserved their right to argue this point on
appeal.
Footnote 3:
AS 45.02.719 mirrors U.C.C. sec. 2-719, providing:
(a) Subject to (b) and (c) of this
section and AS 45.02.718 on liquidation and limitation of damages,
(1) the agreement may provide
for remedies in addition to or in substitution for those provided
in this chapter and may limit or alter the measure of damages
recoverable under this chapter, as by limiting the buyer's remedies
to return of the goods and repayment of the price or to repair and
replacement of nonconforming goods or parts; and
(2) resort to a remedy as
provided is optional unless the remedy is expressly agreed to be
exclusive, in which case it is the sole remedy.
(b) If circumstances cause an exclusive
or limited remedy to fail of its essential purpose, remedy may be
had as provided in the code.
(c) Consequential damages may be limited
or excluded unless the limitation or exclusion is unconscionable.
Limitation of consequential damages for injury to the person in the
case of consumer goods is prima facie unconscionable, but limita
tion of damages where the loss is commercial is not.
Footnote 4:
AS 45.02.719(a).
Footnote 5:
AS 45.02.719(b); see also U.C.C. sec. 2-719.
Footnote 6:
Chatlos Sys., Inc. v. National Cash Register Corp., 635 F.2d
1081, 1085 (3d Cir. 1980).
Footnote 7:
McDermott, Inc. v. Clyde Iron, 979 F.2d 1068, 1073 (5th Cir.
1993) (internal citations omitted), rev'd on other grounds,
McDermott, Inc. v. AmClyde, 511 U.S. 202 (1994). See also S.M.
Wilson & Co. v. Smith Int'l, Inc., 587 F.2d 1363, 1375 (9th Cir.
1978); Liberty Truck Sales, Inc. v. Kimbrel, 548 So. 2d 1379, 1384
(Ala. 1989). See generally Daniel C. Hagen, Sections 2-719(2) & 2-
719(3) of the Uniform Commercial Code: The Limited Warranty Package
& Consequential Damages, 31 Val. U. L. Rev. 111, 115 (1996).
Footnote 8:
See AS 45.02.714; AS 45.02.715(b)(2). See also Hartzell v.
Justus Co., 693 F.2d 770, 774 (8th Cir. 1982); S.M. Wilson & Co.,
587 F.2d at 1375.
Footnote 9:
AS 45.02.719(c); see also AS 45.02.715(b).
Footnote 10:
See AS 45.02.719(b).
Footnote 11:
See S.M. Wilson & Co., 587 F.2d at 1375 ("The failure of the
limited repair warranty to achieve its essential purpose makes
available . . . the remedies 'as may be had as provided in this
code.' This does not mean, however, that the bar to recovery of
consequential damages should be eliminated.").
Footnote 12:
This ambiguity has been the subject of extensive comment.
See, e.g., Hagen, supra note 7, at 137 (citing numerous articles
proposing clarification).
Footnote 13:
See Hagen, supra note 7, at 116-18.
Footnote 14:
See, e.g., Ragen Corp. v. Kearney & Trecker Corp., 912 F.2d
619, 624 (3d Cir. 1990); R.W. Murray Co. v. Shatterproof Glass Co.,
758 F.2d 266, 272 (8th Cir. 1985); Matco Machine & Tool Co. v.
Cincinnati Milacron Co., 727 F.2d 777, 780 (8th Cir. 1984);
Hartzell v. Justus Co., 693 F.2d 770, 773-74 (8th Cir. 1982);
Select Pork, Inc. v. Babcock Swine, Inc., 640 F.2d 147, 149 (8th
Cir. 1981); Soo Line R.R. Co. v. Fruehauf Corp., 547 F.2d 1365,
1373 (8th Cir. 1977); Riley v. Ford Motor Co., 442 F.2d 670, 673
(5th Cir. 1971); Adams v. J.I. Case Co., 261 N.E.2d 1, 8 (Ill. App.
1970); Givan v. Mack Truck, Inc., 569 S.W.2d 243, 249 (Mo. App.
1978). See also Hagen, supra note 7, at 116-17, 128-29.
Footnote 15:
See Milgard Tempering, Inc. v. Selas Corp. of Am., 902 F.2d
703, 708 (9th Cir. 1990); Waters v. Massey-Ferguson, Inc., 775 F.2d
587, 591-92 (4th Cir. 1985); Fiorito Bros. v. Fruehauf Corp., 747
F.2d 1309, 1314 (9th Cir. 1984); AES Tech. Sys., Inc. v. Coherent
Radiation, 583 F.2d 933, 941 (7th Cir. 1978); S.M. Wilson & Co. v.
Smith Int'l, Inc., 587 F.2d 1363, 1375-76 (9th Cir. 1978); V-M
Corp. v. Bernard Distrib. Co., 447 F.2d 864, 868 (7th Cir. 1971);
see also Hagen, supra note 7, at 117-18, 131-34.
Footnote 16:
See, e.g., McNally Wellman Co. v. New York State Elec. & Gas
Corp., 63 F.3d 1188, 1197 (2d Cir. 1995); Riegel Power Corp. v.
Voith Hydro, 888 F.2d 1043, 1047 (4th Cir. 1989); Kaplan v. RCA
Corp., 783 F.2d 463, 466 (4th Cir. 1986); Lewis Refrigeration Co.
v. Sawyer Fruit, Vegetable & Cold Storage, 709 F.2d 427, 434 (6th
Cir. 1983); Chatlos Sys. Inc. v. National Cash Register Corp., 635
F.2d 1081, 1086 (3d Cir. 1980); Coastal Modular Corp. v.
Laminators, Inc., 635 F.2d 1102, 1107 (4th Cir. 1980); Aquascene,
Inc. v. Noritsu Am. Corp., 831 F. Supp. 602, 604 (M.D. Tenn. 1993);
Providence & Worcester R.R. Co. v. Sargent & Greenleaf, Inc., 802
F. Supp. 680, 691 (D.R.I. 1992); McKernan v. United Tech. Co., 717
F. Supp. 60, 73 (D. Conn. 1989); Computerized Radiological Servs.,
Inc. v. Syntex Corp., 595 F. Supp. 1495, 1510 (E.D.N.Y. 1984),
rev'd on other grounds, 786 F.2d 72 (2d Cir. 1996); Office Supply
Co. v. Basic/Four Corp., 538 F. Supp. 776, 787-88 (E.D. Wis. 1982);
Polycon Indus., Inc. v. Hercules Inc., 471 F. Supp. 1316, 1325
(E.D. Wis. 1979); American Elec. Power Co. v. Westinghouse Elec.
Corp., 418 F. Supp. 435, 457-58 (S.D.N.Y. 1976); Potomac Elec.
Power Co. v. Westinghouse Elec. Corp., 385 F. Supp. 572, 579
(D.D.C. 1974); County Asphalt, Inc. v. Lewis Welding & Eng'g Corp.,
323 F. Supp. 1300, 1309 (S.D.N.Y. 1970) (interpreting Ohio law);
Canal Elec. Co. v. Westinghouse Elec. Corp., 548 N.E.2d 182, 184
(Mass. 1990); Kearney & Trecker Corp. v. Master Engraving Co., 527
A.2d 429, 437 (N.J. 1987); Johnson v. John Deere, 306 N.W.2d 231,
236-38 (S.D. 1981); Schurtz v. BMW of N. Am., Inc., 814 P.2d 1108,
1112-13 (Utah 1991); Envirotech Corp. v. Halco Eng'g, Inc., 364
S.E.2d 215, 220 (Va. 1988). See also Hagen, supra note 7, at 129-
30.
Footnote 17:
U.C.C. sec. 1-102(2)(1996).
Footnote 18:
See McKernan v. United Tech. Corp., 717 F. Supp. 60, 71 (D.
Conn. 1989). The comments to U.C.C. sec. 2-719 provide that, while
"minimum adequate remedies must be available" to the buyer when a
contract fails, "parties are left free to shape their remedies to
their particular requirements and reasonable agreements limiting or
modifying remedies are to be given effect." U.C.C. sec. 2-719 cmt.
1.
In discussing subsection 2-719(3), the U.C.C. comments also
recognize that clauses limiting consequential damages are "merely
an allocation of unknown or undeterminable risks." U.C.C. sec. 2-
719
cmt. 3.
Footnote 19:
See Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
Footnote 20:
Chatlos, 635 F.2d at 1087.
Footnote 21:
Id. at 1087.
Footnote 22:
See Schurtz v. BMW of N. Am., Inc., 814 P.2d 1108, 1113-14
(Utah 1991). See also Eric Eissenstat, Commercial Transactions:
U.C.C. sec. 2-719: Remedy Limitations & Consequential Damage
Exclusions, 36 Okla. L. Rev. 669, 680 (1983).
Footnote 23:
Schurtz, 814 P.2d at 1114; see also Associated Press v.
Southern Ark. Radio Co., 809 S.W.2d 695, 697 (Ark. App. 1991);
Construction Assocs. v. Fargo Water Equip. Co., 446 N.W.2d 237, 242
(N.D. 1989).
Footnote 24:
Chatlos, 635 F.2d at 1087.
Footnote 25:
Id. at 1086-87 (internal citation omitted; emphasis added).
Footnote 26:
See id. at 1087 ("This is not a case where the seller acted
unreasonably or in bad faith.").
Footnote 27:
Id.
Footnote 28:
Id. In holding that the jury's finding of bad faith estab
lishes unconscionability, we do not suggest that unconscionability
is ordinarily a question of fact; we merely recognize bad faith and
breach to be predicate facts that will ordinarily preclude an
ultimate finding of conscionability. We agree with Catalina that
unconscionability under AS 45.02.719(c) ultimately presents an
issue of law for the court, rather than one of fact for the jury.
See Potomac Plaza Terraces, Inc. v. QSC Prods., Inc., 868 F. Supp.
346, 353 (D.D.C. 1994). But as we have pointed out, under the
independent analysis articulated in Chatlos, the legal issue of
unconscionability hinges on the totality of the circumstances,
including the circumstances surrounding a limited remedy's failure.
Chatlos, 635 F.2d at 1086-87; see also Schurtz, 814 P.2d at 1114
("An analysis that takes a case-by-case approach to the question of
unconscionability . . . provides the courts with a flexible tool
for determining the validity of limitations on incidental and
consequential damages that serves well the different policies
appropriate to consumer and commercial settings."). Because
questions concerning breach of a warranty and the parties' good
faith involve issues of fact, when disputed evidence requires the
trial court to submit these factual issues to the jury, the court's
decision on the ultimate question of unconscionability should
ordinarily await the jury's factual determinations.
Footnote 29:
Jones and McKnight Corp. v. Birdsboro Corp., 320 F. Supp. 39,
43-44 (N.D. Ill. 1970).
Footnote 30:
See AS 47.01.203; U.C.C. sec. 1-203.
Footnote 31:
We need not decide whether the trial court correctly decided
that Catalina's inclusion of the consequential damages waiver in
its standard limited warranty was not, in itself, unconscionable.
Since the Pierces do not challenge this finding, we assume for
purposes of this decision that the waiver, standing alone, was
conscionable. We hold only that, given Catalina's bad faith breach
of the limited warranty, enforcement of the waiver would be
unconscionable.
Footnote 32:
See AS 45.50.471(b), AS 45.50.531.
Footnote 33:
See Hutchins v. Schwartz, 724 P.2d 1194, 1197 (Alaska 1986).
Footnote 34:
Cf. Bliss v. Bobich, 971 P.2d 141, 145 (Alaska 1998). ("In
arguing that the trial court erroneously excluded their proposed
evidence, the Blisses focus primarily on the pretrial order itself.
But they are mistaken in claiming that the order excluded evidence.
It excluded nothing categorically. Rather, it temporized: it
protected against jury prejudice by precluding mention of the
evidence to the jury until its admissibility was determined; but
at the same time it allowed the Blisses to make specific offers of
proof on an issue-by-issue basis when they actually sought to admit
their evidence. This approach seems eminently sensible. We find
no abuse of discretion.").
Footnote 35:
Magnuson-Moss Warranty-Federal Trade Commission Improvement
Act, 15 U.S.C. sec.sec. 2301-2312 (1994).
Footnote 36:
15 U.S.C. sec. 2310(d)(1).
Footnote 37:
See 15 U.S.C. sec. 2310(d)(2).
Footnote 38:
See 15 U.S.C. sec. 2304.
Footnote 39:
See, e.g., MacKenzie v. Chrysler Corp., 607 F.2d 1162, 1167
n.7 (5th Cir. 1979).
Footnote 40:
15 U.S.C. sec. 2310(d)(1) (emphasis added).
Footnote 41:
See, e.g., Guerdon Indus. v. Gentry, 531 So. 2d 1202, 1209-10
(Miss. 1988) (awarding attorney's fees under section 2310(d) for
breach of express limited warranty); Ventura v. Ford Motor Corp.,
433 A.2d 801, 808-09 (N.J. Super. 1981) (holding that a limited
warranty for repair or replacement fell within the Magnuson-Moss
Act's definition of "written warranty" which is covered by section
2310(d)'s provision for suit by a consumer who has suffered from a
breach of a written warranty); Gochey v. Bombardier, Inc., 572 A.2d
921, 924 (Vt. 1990) (refund of the purchase price for breach of
limited warranty is not mandated by the Magnuson-Moss Act but is
consistent with it); see also Christopher Smith, Private Rights of
Action Under the Magnuson-Moss Warranty Act, 346 PLI/Comm 223, 225
(Apr. 1, 1985) ("Magnuson-Moss . . . creates a private right of
action for breach of warranty where there is a breach of a promise
to make repairs.").
A few courts appear to have concluded that the
Magnuson-Moss Act does not provide for the enforcement of limited
warranties. See, e.g., Bush v. American Motors Sales Corp., 575
F. Supp. 1581, 1583 (D. Colo. 1984) (plaintiffs must allege
specific violations of the standards set forth in the Magnuson-Moss
Act in order to state a proper claim). But their discussion of the
point is conclusory and unpersuasive.
Footnote 42:
See, e.g., Ventura, 433 A.2d at 810, 812.
Footnote 43:
See Universal Motors v. Waldock, 719 P.2d 254, 260 (Alaska
1986) (upholding attorney's fees awarded under Magnuson-Moss Act
for breach of a limited warranty).
Footnote 44:
Id.
Footnote 45:
15 U.S.C. sec. 2301(6)(B).
