Free Response to Motion - District Court of Colorado - Colorado

Case 1:03-cv-02461-MSK-MEH

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-02461-MSK-MEH LEPRINO FOODS COMPANY, Plaintiff, v. FELDMEIER EQUIPMENT, INC., Defendant. PLAINTIFF' RESPONSE IN OPPOSITION TO DEFENDANT' MOTION IN LIMINE S S RE: TORT CLAIMS AND PAROL EVIDENCE (Document 87)

Plaintiff Leprino Foods Company (" Leprino" states as follows in opposition to ) Defendant' (" s Feldmeier" Motion in Limine Re: Tort Claims and Parol Evidence ) (" Motion" ): I. INTRODUCTION Defendant incorrectly argues that the doctrine of collateral estoppel precludes the presentation of evidence on Plaintiff's tort claims of negligence and misrepresentation. The Motion also erroneously argues that parol evidence of the parties contract negotiations should be precluded. Defendant's Motion must be denied because it is legally and factually baseless.

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II. ARGUMENT A. Defendant' Motion To Preclude The Presentation Of Evidence On s Leprino' Claims For Negligence And Misrepresentation Based On The s Doctrine Of Collateral Estoppel Is Improper And Otherwise Without Merit. Defendant attempts to blur the distinction between this lawsuit and the State Court Action. The two cases involve different silos and different contracts with different specifications. Defendant's attempt at confusing that distinction is exemplified by

Defendant claiming to attach the "contracts at issue in this action" as Exhibit B to its Motion, when in actuality the contract attached to the Motion are from the State Court Action. This lawsuit concerns only the Equipment Purchase Agreement entered into between Leprino and Defendant, whereby Defendant was to manufacture and Leprino was to purchase a vertical, insulated stainless steel silo storage tank and related equipment for use in its dairy manufacturing facility in Waverly, New York. The State Court Action involved Defendant's manufacture of vertical, insulated stainless steel silo storage tanks and related equipment for other Leprino manufacturing facilities throughout the United States. The contract for the Waverly silo contained express specifications that required the silo "to handle 1000 GPM both inward flow and outward flow simultaneously. This will include venting and external ports sized to handle the 1000 GPM flow." The contracts at issue in the State Court Action contained different specifications for the inward flow of liquid that the silo was to handle. The findings in the State Court Action (both at the trial and appellate level) have no implication on this case. Any confusion that may have been present in the State Court Action concerning

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the required fill rate is absent in this lawsuit because of the explicit specifications requiring both inward flow and outward flow of 1000 GPM (gallons per minute) simultaneously and venting and external ports sized to handle the 1000 GPM flow. The doctrine of collateral estoppel is inapplicable with regard to Leprino' tort s claims. Defendant fails to meet the first element of the doctrine of collateral estoppel, which requires "the issue previously decided [be] identical with the one presented in the action in question." B-S Steel of Kansas, Inc. v. Texas Industries, Inc., 439 F.3d 653, 662 (10th Cir. 2006). As detailed above, the agreement and design specifications, as well as the material representations in this action are entirely different than those present in the State Court Action. Since the issues are not identical between the two actions, the doctrine of collateral estoppel does not apply. Moreover, if Defendant truly believed that this action was barred by collateral estoppel or res judicata, Defendant would have brought a motion to dismiss or summary judgment motion on those issues. Since it did not, the Court should consider Defendant's Motion nothing more than a last ditch effort to attempt to avoid its clear liability in this action. 1. Leprino' s Fourth Claim for Relief entitled "Negligent Misrepresentation / Manufacturer' Liability Based on Negligence" is s proper and Leprino must be allowed to present evidence in support thereof at trial.

Defendant incorrectly contends that the economic loss doctrine precludes the presentation of evidence on Plaintiff's claim of misrepresentation. The Colorado

Supreme Court has extensively addressed the status of the economic loss rule in Colorado in Town of Alma v. Azco Construction, Inc., 10 P.3d 1256 (Colo. 2000) and Grynberg v. Agri Tech, Inc., 10 P.3d 1267 (Colo. 2000). The Colorado Supreme Court 3

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in Town of Alma, recognized the broad principle that " economic loss rule is intended the to maintain the boundary between contract law and tort law" and noted " [t]his becomes problematic when . . . a commercial buyer seeks to use a tort theory to recover damages for a defective product." Town of Alma, 10 P.3d at 1259. The Colorado Supreme Court concluded as follows: Consistent with this duty analysis, we now expressly adopt the economic loss rule. We hold that a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law. Economic loss is defined generally as damages other than physical harm to persons or property. Town of Alma, 10 P.3d at 1264 (emphasis added). One such independent duty of care under tort law, which was specifically recognized by the Colorado Supreme Court in the same decision, and which is present in the facts of this case, is negligent misrepresentation. The Colorado Supreme Court stated: [W]e have recognized that some special relationships by their nature automatically trigger an independent duty of care that supports a tort action even when the parties have entered into a contractual relationship. . . . We have also recognized that certain common law claims that sound in tort and are expressly designed to remedy economic loss may exist independent of a breach of contract claim. See . . . Keller v. A.O. Smith Harvestore Prods., Inc., 819 P.2d 69, 73 (Colo. 1991) (negligent misrepresentation is a tort claim based " on the principals of not contractual obligation but on principals of duty and reasonable conduct." ). Town of Alma, 10 P.3d at 1263. The economic loss rule exception established by the Colorado Supreme Court in Keller is particularly analogous to the case at hand. In Keller, plaintiffs brought claims against a silo manufacturer including a negligence claim sounding in tort. The Keller court stated, " is well established that in some [i]t

circumstances a claim of negligent misrepresentation based on principles of tort law, 4

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independent of any principle of contract law, may be available to a party to a contract." Keller v. A.O. Smith Harvestore Prods., Inc., 819 P.2d 69, 72 (Colo. 1991). The Keller court further stated, " [i]t is thus clear that a contracting party' negligent s misrepresentation of material facts prior to the execution of an agreement may provide the basis for an independent tort claim asserted by a party detrimentally relying on such negligent misrepresentations." Id. Just as in the Keller case, Leprino here relied on the material misrepresentations of Feldmeier prior to signing the purchase contract for the Waverly silo. Specifically, Leprino here relied on Feldmeier' material representations, which include, among other s things, that the silo would be fit for the dairy manufacturing purpose intended, would be merchantable, would be of good quality, would be free from defects, both patent and latent, would handle 1000 GPM both inward and outward flow simultaneously, and the venting and external ports would handle the 1000 GPM flow, in addition to the "Feldmeier Advantage." Further, pursuant to the strict products liability theory that underlies Leprino's Fifth Claim for Relief of Strict Product Liability for Misrepresentation, a duty is imposed upon the manufacturer of a product, outside any contractual duty, to act reasonably in the design, manufacture, and sale of the product, such that the economic loss doctrine would not apply. Loughridge v. Goodyear, 192 F. Supp. 2d 1175, 1183 (D. Colo. 2002). In conclusion, Leprino' independent tort claim for negligent misrepresentation is s recognized under Colorado law and not precluded under the economic loss doctrine. Accordingly, Defendant's Motion must be denied.

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2.

Defendant' attempt to preclude evidence on Leprino' Second s s Claim for Relief entitled "Negligence" is improper.

While the doctrine of collateral estoppel would not bar evidence on Leprino's Second Claim for Relief of negligence, Leprino voluntarily withdraws and moves to dismiss its Second Claim for Relief of negligence at this time. B. Defendant' Motion To Preclude The Presentation Of Parol Evidence In s Connection With Its Contract And Warranty Claims is Baseless. By the very nature of Leprino's claim for negligent misrepresentation, as detailed above, parol evidence concerning the parties' contract negotiations and the material representations made by Defendant are relevant and admissible. Leprino relied upon, to its detriment, the material representation by Defendant that the Waverly silo would handle 1000 GPM both inward flow and outward flow simultaneously. Part of that representation that the Waverly silo could handle that volume of liquid is based upon the "Feldmeier Advantage" by which Defendant represented that its patented internal vent and overflow system present in all Feldmeier silos, could be used in lieu of the standard external Tri-Clover vacuum breaker. In fact, the Waverly silo could never handle both inward flow and outward flow of 1000 GPM simultaneously. The "Feldmeier Advantage" was misrepresented to Leprino to induce Leprino to hire Defendant to manufacture the silo for Leprino's Waverly facility. Parol evidence regarding all of the misrepresentations made to Leprino by Defendant during the contract negotiation are relevant and admissible. Moreover, while Leprino believes the subject contract for the Waverly silo unambiguously requires the silo to handle both inward flow and outward flow of 1000

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GPM simultaneously, Leprino has reason to believe that Defendant may try to argue the 1000 GPM simultaneous inward and outward flow specification was not a material term of the agreement. While such a contention by Defendant would be absurd and contrary to the express written language of the subject contract, that assertion of ambiguity in the contract would also require the admission of parol evidence of the contract negotiations. Accordingly, Defendant's Motion must be denied. III. CONCLUSION Defendant's contention that Leprino is collaterally estopped from presenting evidence on its tort claims is incorrect. evidence is inadmissible is in error. Motion. Respectfully submitted this 28th day of April 2006. CAMPBELL BOHN KILLIN BRITTAN & RAY, LLC Likewise, Defendant's assertion that parol

Therefore, the Court must deny Defendant's

By:

s/ Bret M. Heidemann Michael G. Bohn Bret M. Heidemann 270 St. Paul Street, Suite 200 Denver, Colorado 80206 Telephone: (303) 322-3400 Facsimile: (303) 322-5800 [email protected] [email protected] ATTORNEYS FOR PLAINTIFF LEPRINO FOODS COMPANY

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CERTIFICATE OF SERVICE I hereby certify that on the 28th day of April 2006, I electronically filed the foregoing PLAINTIFF' RESPONSE IN OPPOSITION TO DEFENDANT' MOTION IN S S LIMINE RE: TORT CLAIMS AND PAROL EVIDENCE (Document 87) with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following email addresses: Catherine A. Tallerico, Esq. at [email protected] s/ Cori Atteberry Cori Atteberry, Legal Assistant

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