-: SJC13108
Ofer Nemirovsky v. Daikin North America, LLC.
Justice: Okay, Attorney Fleming.
-: Good morning, and may it please the court.
Mark Fleming together with Felicia Ellsworth
on behalf of the appellant, Daikin North America.
A component's seller warrants
that its products are merchantable.
It does not warrant that they are immune from damage
caused by a defect in another product
over which the seller has no control.
If a component is placed into a larger system
that has a defect,
the component's seller does not become
liable for the whole system.
Justice Lowy: How could a component pop?
The coils were supposed to go into one system
and if they don't work in that one system,
they don't work at all.
-: Justice Lowy, the components,
the replacement coils, in this case,
that Daikin North America supplied did work.
Many of them are still working in the system today.
The only evidence-
-: They don't work with the system and the styrofoam pans
and the issue is whether or not the system's going to work.
They don't work in the only system
they were intended to be used in.
-: That that's not what the evidence shows, Justice Lowy.
Justice Cypher: But does the evidence show that?
Because that's how I read it.
-: So the evidence shows, your Honor,
that the replacement coils
that Daikin North America provided,
only three of them corroded.
They corroded years after they were supplied.
-: Yeah, but that's not the point, right?
Your legal argument, go back to your legal argument
and tell me,
explain what the record evidence was
as to why it wasn't intended for that system.
-: Well, they are intended for use in that system
and the implied warranty of merchantability asks
were they merchantable at the time
that they left the seller's hands?
These components were installed-
-: Well, they have to leave the seller's hands
and still work in the unit.
-: And they did your Honor.
The majority of the ones that were provided did work.
And as of the time of trial, were still working.
-: Okay, but this is issue must've been argued a lot
in front of the jury, correct?
That there were only a couple of coils
that went bad and that's not your fault.
-: Absolutely, but the point is, the reason,
the question is the reason why they failed.
Did they fail because there was something
at the time that they were sold
that made them not merchantable
or did they fail for another reason
that was outside of the control of the components seller?
-: And so if the component seller
sells a product
to put into another, say, it's an automobile,
and I'm going to sell you a tire and it fits your car,
and it's the only tire that fits this particular car,
but there's a defect in the way the wheels work in the car
and I've targeted that particular car,
shouldn't I know that?
-: Well, the question is,
even if one does know
that it is going into a particular car,
does the component maker,
the tire maker in your hypothetical,
have a responsibility to become not a tire expert,
but also a wheel or a car expert?
And no court has suggested
that that is the responsibility of the component maker.
In fact, every court to have addressed this,
as the briefing pointed out in detail
and as the Davis court
and the Supreme Court of Tennessee says,
no court has suggested that there's a responsibility.
-: But this defendant was on notice, correct?
Wasn't there evidence in the record that
there had been another complaint in the area?
-: Not, at the time of the sale of the replacement coils,
but even if there was
in the Cipollone case in the first circuit,
which applied this same rule,
the seller of the dock lift
knew what FedEx was going to do with the dock lift,
but it wasn't responsible for the fact
that what happened then was problematic
and caused injury because of the interaction
of a different component with the dock lift.
-: You can use a dock lift
like that maybe for Amazon too.
You know, that dock lift wasn't built for FedEx.
-: It was your honor.
-: I don't mean in this particular instance.
I mean that it's not just a dock lift that's used for FedEx.
That dock lift has application beyond one industry,
beyond one circumstance.
Here, the coils serve one function.
And with the type of drain pan that you have,
the one function that it exists for, it doesn't work.
-: Well, there are two answers to that justice Lowy.
Even in situations where the replacement part
was for a specific machine, like the Crossfield case
out of the eighth circuit,
where there was a replacement chain for use
specifically in Strickler DeMoss pork processing machines.
The fact that the chain in itself had no defect
meant that the chain maker had no liability,
even though it was the chain that failed
when it was installed in the pork processing machine.
Justice: Assuming the component part,
I'm right here.
-: Yes your honor.
-: Assuming that theory is applicable here
why isn't it waived in this case?
-: Oh, it's certainly, most certainly preserved
because I mean, if for no other reason,
then the superior court decided it twice.
Once in the pre-judgment 93-A decision,
and then once again, in the JNOV decision.
-: And so what did the judge in the trial court,
or the motion practice,
say about your particular argument
about, it's the machine not the coils?
-: Well, that was not disputed at all,
the judge in the JNOV decision.
-: So what'd she say to your component parts argument?
-: Well, so the judge made two exceptions to the argument,
to the doctrine, neither of which is supported
in the 93-A decision.
The judge said that the rule didn't apply to components
that don't function on their own
and are not standalone products.
We explained in our brief that we think
that's based on a misreading of the Cipollone case.
And there are numerous cases refuting that view,
and neither the plaintiff, nor the superior court
cites one going the other way.
Numerous cases, where there are products that were made
like the tire in your honor's example,
where just because the tire fails
doesn't mean that the tire maker becomes responsible
for the rest of the device or the integrated product,
simply because the tire is not a standalone product.
-: Wait wait wait.
Your second point.
-: The second exception was that the replacement coils
were designed specifically to work with the larger system,
but there, the rule applies perfectly well in that case,
like I was discussing with justice Lowey,
the Crossfield case says that,
the estate of Thompson vs Kawasaki case says that
it was a steering damper designed
for a specific Kawasaki motorcycle.
The Childris case in the sixth circuit
involved a hydraulic valve
created for a specific log splitter.
The fact that the component seller knows
what the destiny of the component is,
does not create a responsibility for the components seller
to figure out whether there's something wrong
with the overall system.
-: This was a defense raised in your answer?
-: Well, this was an argument made
in the directed verdict motion,
in the post-trial 93-A motion,
and in the JNOV motion after judgment
and the superior court ruled on it
and did not find any waivers.
-: I'm sorry,
but was it something that,
was this part of the answer to the complaint?
-: Well, I mean, the answer is certainly what was the,
I don't know that we used the words
component parts doctrine specifically,
but we certainly would have said,
and it was not disputed
that the coils themselves had nothing wrong with them.
The entire trial,
the entire theory of the case from the plaintiff's expert,
Dr. Eger, was not that there was some way
that Daikin North America should have designed
the replacement coils differently,
that there was some manufacturing defect in them,
there was no suggestion whatsoever
that the replacement coils had anything
specifically wrong with them.
The theory of liability here was,
as the colloquy has been indicating,
based on these styrofoam drain pans,
which in north Daikin North America did not make,
did not sell, they were sold to Mr. Nemirovsky in 2008,
when Daikin north America did not even exist.
-: Then it was Daikin Americas, right?
It was, it was DACA,
Daikin AC Americas that sold the original system in 2008,
there was a claim brought against them,
it was dismissed under the statute of limitations.
-: Do you use the words, component part doctrine,
and the directed verdict motion.
Cause I can see you not using it at the answer stage.
Was it in the directed verdict motion?
-: Well, not in those words,
but we're not required to use those words
in HighQ Verba to raise the point.
-: [Justice Wendlandt] How was that theory articulated
in other words?
-: If I may,
it was in the motion,
so this is volume one of the appendix,
page 471, footnote one,
plaintiff presented no evidence
that the replacement coils are themselves defective.
It was then argued orally,
volume three of the appendix, page 106,
and then the Supreme court ruled on the merits,
I'll be it, cursorily, volume three, page 112.
It was then repeated at the directed verdict motion
at the close of all evidence.
So what I just gave you was the directed verdict motion
at the close of the plaintiff's case.
At the close of all evidence,
we renewed it orally, volume three, page 141.
The court recognizes we renewed all our points orally.
Our 93, A brief again, before judgment.
-: You reviewed the,
you basically argued your product wasn't effective,
but you didn't make the second part of the argument,
you didn't make the express argument
based on component parts.
If the component part works and the system fails,
you're protected, right?
You didn't go to the next stage.
You just argued consistently
that your product wasn't defective, right?
-: Well, we argued that consistently, certainly.
And by the time we got to 93, A motion,
we were citing Cipollone, and freight us and Mitchell,
I don't think we are.
-: Can I turn you for a second to comment E,
do both sides agree that the third restatement
is the best guide for this?
Or is there a debate on that, too?
Because the third restatement expressly addresses this issue
about integration, right?
But it doesn't do it quite as simply as you do it.
It says when the component seller is substantially involved
in the integration of the component,
into the design of the integrated product,
the components though are subject to liability,
and then it goes on,
substantial participation can take various forms.
The manufacturer or assembler of the integrated product
may invite the component seller to design a component
that will perform specifically
as part of the integrated product.
Did that happen here?
-: No, well, there's no evidence of that.
-: You're a subsidiary of this other company, right?
Do we fit within comment E?
-: No.
Well, I think we fit within the general rule of comment E
which has been applied by numerous cases.
I mean, to be clear with regard to this affiliates points.
I mean, let's assume that.
-: I'm just saying if, I mean,
a lot of thought goes into these things, these restatements,
they're focused on this component part argument,
which is guiding the case law here,
but it's kind of a fuzzy standard in here,
and I'm just trying to figure out,
do you win if we apply comment E,
or do you lose if we apply comment E?
-: I certainly don't think we lose Justice Kafker,
cause I think, even if it were the same company
that sold the original system in 2008.
-: But is there a back and forth between the two,
are the groups talking about how the coils work
in the system?
Are they, are they working together on this point?
I'm just trying to understand that.
Because you're both adopting,
kind of an all or nothing thing.
If our component part works, we're off the hook.
They're arguing, nah, it doesn't work that way,
but it seems like the restatement is much subtler.
It basically will take you off the hook if you weren't
involved in the overall design, but it won't if you were.
-: Well.
So, let's be clear.
Daikin North America did not sell
the components directly to Mr. Nemirovsky, right?
It sells them to wholesalers and retailers,
like Daikin Applied and Daikin Applied
is the company that was serving the actual product
and the verdict against them was significantly lower.
Just limited to the value of the actual coils,
which is another problem with this judgment.
But I'd like to,
I think if I may, answer the question
by pointing out that the,
even if you had the same company
that had sold the system originally in 2008
and then sold replacement coils in 2014,
the sale of replacement coils
does not somehow reactivate
the statute of limitations on a claim against,
for the original system.
That doesn't mean the manufacturer
escapes liability altogether.
It just means that the implied warranty, at that point,
has lapsed, that the claim created by the legislature
is no longer valid.
So that I think is aforciority of the case
when you're talking about two different.
-: It's the statute of limitations driving this thing,
because it doesn't sound like anyone thinks
the styrofoam, whatever it is, worked.
The claim can't be based on the styrofoam
because it's, the statute of limitations.
Is that why we're focused on the coils?
-: I mean, to be clear,
we think the styrofoam pans work just fine.
And in fact, most of the providers knew that.
-: That one you lose on.
-: No, for purposes of this appeal,
we accept that the jury could have believed
Dr. Eager on that.
-: So I guess is the styrofoam out of the case
because of the statute of limitations?
Is that why it's, I mean,
it just seems like there's something artificial
about all of this, which is that the coils work pretty well,
but not with the styrofoam, which works pretty poorly,
but, is it's the statute of limitations
driving the fact that we're not focused on the styrofoam?
That's out of the case, is that?
-: I mean, to be clear, once again,
only three of out of the 17 replacement coils have failed
at the time of trial and were replaced again.
So many of them, in fact, most of them
do work with the styrofoam
to the extent there was any problem with the styrofoam,
yes, that claim was thrown out by the superior court judge
on the statute of limitations.
And we think that that's the subject of the cross appeal,
which I'm happy to discuss,
but I think that judgment was completely correct
because no claim.
-: If we were arguing about the styrofoam,
you'd have a really bad case,
because the styrofoam,
there's evidence from an expert that it's defective.
And when you've got this defective part,
but again, I'm taking you off track.
-: Well, I,
I don't want to concede I'd have a bad case
if we we're arguing about the styrofoam,
I think we'd just have a different argument.
And when we'd be attacking the expert's testimony
as completely unsupported by any scientific theory
that's reasonable.
We are not making that argument
because this case was never about the styrofoam,
at least the case against Daikin North America,
because Daikin north America, didn't choose the styrofoam
didn't make it, didn't install it,
It was there and on the scene
long before Daikin North America even existed
as a corporate entity.
So that cannot be a basis
for a breach of the implied warranty.
I'm sorry, someone was speaking.
-: That was me, I'm sorry.
And the reason I was jumping in is because,
in response to Justice Kafkers question
about why we're not here about the styrofoam pan,
and you had said the following,
and I'll get this wrong somehow.
But you had said, you know,
the subsequent sale of the coils
does not somehow reinvigorate the statute of limitations,
which has lapsed, right?
Something to that effect is what you said.
Fleming: I'm happy to agree with that, yes.
-: I understand that footnote in your directed verdict motion
to be saying exactly what you just articulated
at oral argument,
how is that the same as the components parts doctrine?
-: I think the component parts factor
or component part doctrine,
or the rule limiting components seller liability
is simply shorthand for the principle
that you can't hold someone liable
for selling a part that was not defective.
-: Which is a different point
than re upping the statute of limitations,
this footnote is attached to a section
in you're directed verdict motion
about the lapse of the statute of limitations.
Cause there's only economic harm.
-: That's a policy argument explaining why
the requirement of proving a defect in the components sold,
or the components seller doctrine,
whatever you want to call it
is the correct approach to the law,
including in this circumstance.
Because, a different approach,
the approach the superior court took
and the approach that the plaintiff is recommending here
would have the effect of lengthening
the statute of limitations or reviving it
potentially indefinitely.
That's not a different argument.
That's not a different point.
-: I have a part that I sold,
I have a system I sold yesterday,
the statute of limitations is still live.
And then party B has a component in that system.
I mean, those are two separate arguments.
The component parts doctrine might save party B,
but my statute of limitations
for selling the whole system is still live.
I understand your argument in footnote one
of the directed verdict motion to be saying
you can't revive this dead statute of limitations
because I happen to sell a non defective coil later on,
that's a different argument
than the components parts document.
It may be that the Judge went ahead
and didn't conclude that you waived it,
but that's not the argument you're making
in the directed verdict motion.
-: Well, I think it's the same argument,
but what I think does not matter,
because as your honor points out the superior court,
even in the face of a waiver argument,
belatedly by the plaintiff did decide this issue.
And I think it's sufficiently preserved for appeal
as long as it is pressed or passed upon in the trial court.
-: And what's your best case for that legal proposition?
-: I don't have one as I stand here, your honor,
but I'd be happy to provide one.
-: Is it in your reply?
-: I don't think it is in the reply.
We certainly point out that the superior court
decided this issue and that, notably it wasn't.
-: I can do the legal research.
I was just wondering if you had pointed it out
since it's so important.
-: Speaking of looking for things,
can you just before,
I don't want to interrupt you, Justice Wendlandt,
but before your time is up,
can you either send me a letter,
or tell me where I can find volume 3, 141
in the record, appendix, because I'm not finding it.
So, but I'll, you don't have to take time now.
You can send me a letter.
Fleming: Volume three page, 141.
-: That's what you cited about the, what do you call it?
-: Volume three, page 141,
it has menu script transcript on it,
on the top left on page 2194 of the transcript,
beginning at line 16.
-: Of the transcript, but the transcript
is not the entire record of the floor, right?
-: Well, the entire transcript is before you.
Justice Cypher: It is before us
as part of the record, appendix?
-: Yes, it is your honor, volume three, page 2194,
beginning at line 16 is renewal.
Now to be clear,
we renew all of our points at the close of all evidence,
as we were required to,
isn't a specific discussion of this point.
The specific discussion came
at the directed verdict argument at the close
of the plaintiff's case.
And that is on volume three, page 106,
page 2073 of the transcript.
And there's the discussion, again,
of the fact that the coils themselves are not defective.
-: Before we lose you, can I ask you to address
the misrepresentation
and I'm focused on the damages point in that.
If we find misrepresentation is established,
what damages are properly calculated based on that
and what are not?
-: I think it depends on which statements you find
are the misrepresentation.
And this is important because of the timing,
because they're problems as to each one.
For some of them,
there is no proof of reliance,
reasonable reliance, and for those,
there should be no damages at all.
-: Put those aside for a moment.
What about, all the way back in January, 2014,
when the defendant knows that the situation
is not environmental, and doesn't tell the plaintiff?
-: I think, Justice Lowy, you mean January, 2015,
and that is important.
That's when Mr. Hastings site visit
comes back with that notation on it.
That's January of 2015 and that timing is critical,
because the only statements that are asserted to be wrong,
where Daikin North America said,
we think these are environmental causes,
were in May and June of 2014,
months before that a statement was made.
And there is no evidence,
the superior court didn't cite any,
and the plaintiff doesn't cite any,
that at the time those statements were made,
May and June, 2014,
that Daikin North America had no basis to know
that that was an accurate statement.
-: How about knowing, based on information they received
from Vaughna or whomever,
that the problem here is not environmental,
it's not specific to this particular home,
and there's no proactive effort to get back
and let the plaintiff know that.
-: Well, the information from Mr. Vaughna did not suggest,
and certainly didn't rule out the possibility
of it being environmental.
When these coils fail, they tend to fail in clusters.
And so the fact that Mr. Vaughna was having trouble
and Mr. Nemirovsky was having trouble
didn't rule out the possibility of them being environmental
and the plaintiff doesn't argue otherwise.
What the plaintiff argued as to Mr. Vaughna's statements
was that Mr. Nemirovsky specifically asked,
are there any other problems in new England?
And there were statements made
that Daikin North America didn't know
of any other problems in new England.
Let's assume, arguendo, that that was incorrect.
There is no proof of reasonable reliance by Mr. Nemirovsky
on those statements.
On the contrary, he admitted on the stand
that his only supposed reliance on it
was when he installed ball valves
on the system to make it easier to fix.
He did that in 2016,
and he knew by then about Mr. Vaughna,
he sent an email about Mr. Vaughna on October 19th, 2015,
that's on volume three, page 429.
-: Can I get the second part of the question answered though,
before we lose you, cause you're way over.
Fleming: I'm sorry, Justice Kafker.
-: Could I get the second part of the question,
cause I think you've got an uphill battle
on misrepresentation,
but it may be a limited damage recovery.
I'd like to understand what the damages that flow,
if your client misled him,
I just want to get a sense of what,
I take it the verdict is not,
whatever these multimillion dollars is,
but tell me how you calculate damages in this context,
based on misrepresentation.
-: The only damages claimed, Justice Kafker,
for the statements about, you know,
is this environmental or not
was based on the fact that Mr. Nemirovsky
hired experts to investigate.
This is on page 26 of the read brief.
He hired a lab that charged him, I believe $14,000,
that's on page 214 of volume, two of the appendix,
any hired Boston Environmental to do some testing,
they charged him $8,000, that's page 214
of volume two of the appendix.
So we're talking to $22,000 for that.
-: The big money is the replacement though, right?
-: The big money is the tear out costs,
tearing out the entire system.
-: It's supposed to be out,
and to replace, you've gotta tear out.
-: Okay, back to the implied,
I wasn't trying to answer Justice Kafker's question
about misrepresentation.
-: Yeah, I'm just trying to get a sense.
Do you just subtract the whole replacement costs?
If, again, say you win,
I'm giving you the possibility you win
on your component part thing,
but you'll lose on misrepresentation and he suffered a lot.
Yeah, he's misled by you guys,
I'm trying to understand,
does he get emotional distress damages?
You're saying he only gets the cost of investigation.
-: I only got part way through it.
For the statements about it being environmental,
the only reliance interest stated were the hiring of the lab
and the experts.
For the statements about
there not being other issues in Massachusetts,
the claim, what he said
was that he was looking for
the cost of putting in the ball valves.
We don't think he's entitled to that
because there couldn't have been any reasonable reliance
by that point,
he knew about Mr. Vaughna, the cost of that
was approximately 235,000.
I believe that's what that's, what was claimed.
-: And because he knows about Mr. Vaughna,
who was having lots of problems out there and is angry,
he can't replace the system
because of your misrepresentation.
-: There was no suggestion,
and even the superior court found this,
that the entire tear out cost for replacing the whole system
would be justifiable by misrepresentation.
-: I saw Justice Callen subtract that,
I'm just trying to get a sense of the total damages
in your cases, minimal
if we only have a misrepresentation case,
even though it's strung him along for a couple of years,
not figuring out what the real problem was.
-: Well, I think that the damages,
you would certainly have to take out the tear out costs
because there is no claim,
and I don't think this is disputed,
that the tear out costs
could be justified by misrepresentations,
even assuming that there they would ground liability,
that were made six years and longer
after the initial system was put in,
even had there been no misrepresentations,
he would still have the same system
with the same styrofoam pans.
So if there's no liability on the implied warranty,
which of course there shouldn't have been,
he would be in exactly the same situation
with respect to the system.
So the only possible further damages from misrepresentations
would be based on what reasonable reliance was taken
based on that, and even the superior court.
-: Can I ask you one last question?
One last question on that,
if he had learned earlier
that there was a problem with the system,
could he have brought suit
within the statute of limitations
to challenge the styrofoam?
Or is there no connection between the misrepresentations
and losing the chance to sue over the styrofoam?
-: No, I don't think there's any connection there.
There's no accusation that there's a connection there.
There isn't any sense that anything that DACA
or Stebbins Duffy,
which are the two defendants accused
based on the original purchase,
there's no suggestion that they made any representations
or that they engage in any kind of inequitable conduct
that would have told the statute of limitations,
the only accusation of misrepresentations
against Daikin North America, which again,
had no role in the choice of styrofoam
or the installation of the original system.
-: Okay, thank you.
Fleming: I thank the court for its attention.
-: Okay, attorney Messenger.
-: May it please the court, Jim Messenger,
representing the plaintiffs Ofer Nemirovsky.
Mr. Moran is with me
and the plaintiff is in the courtroom today.
I'd like to go a little bit out of order
in my outline to address one point,
which I think is critical.
There was a lot of statements in the brief
and in argument that everything is caused
by the styrofoam pan.
And I'd like to address that briefly.
It is a claim of implied warranty
for fitness for ordinary purpose.
The jury was charged, and it was about the coils.
It wasn't about the pans,
the case against Daikin NA was about the coils.
The jury was charged that in order to find
implied warranty of merchantability,
it had to find that the coils were defective
when they left Daikin NA'S possession.
And that's at appendix 3, 174,
the jury came back and found
breach of implied warranty of merchantability
implying that, necessarily,
that the coils were defective.
-: [Justice Wendlandt] What is the evidence
that the coils are defective?
-: The evidence is this, your honor,
in three occasions,
plaintiff's expert testified that the reason the coils
did not perform as intended
for the ordinary purpose
was because of galvanic corrosion.
And those three sites are appendix 2, 230, 324,
appendix 2, 331, appendix 2, 334.
The evidence further established that the,
and what galvanic corrosion means
is that, because there's two metals.
-: She did go to MIT, she probably understands it,
but maybe the rest of us don't.
-: Yeah, the rest of us don't understand it.
-: The metal combination caused the coils to pit
and then leak.
And they wouldn't work,
when the coils didn't work the system couldn't work.
The expert did testify
that there was a separate problem with the pan.
And that if the pan worked,
that could have helped alleviate the problem.
-: Can I ask a very basic question?
On the coils, for a second,
are they some kind of very standardized product?
I mean, again, I didn't go to MIT,
but the coils here seem to be,
you know, these particular coils
are designed for this particular system,
I take it, because of the size and other things,
but are coils just basic building blocks
of this kind of machinery out there
and clearly work normally.
I mean, I understand that they're
integrated into the system,
but is there anything
unusual or defective about these coils?
Are these just standard, you know,
machine parts that work?
-: Yes, they were defective as the expert found,
because of the bi-metal composition.
To answer your question,
coils are a standard part of an air conditioning
or HVA system.
There was evidence that some coils
are not comprised of two metals,
and I'll find that in a second.
Should've worn my reading glasses,
but there was evidence in the record of that.
And I just wanted to clarify that right away,
because I think it's important for the to know.
-: I want to make sure that I understand it though,
because I thought that the bi-metal composition
was a problem because you had
a drain pan that's styrofoam instead of metal.
So my question, I guess, is,
well, if you had
the right type of pan,
would there ever been a bi-metal composition problem
with the court?
-: The evidence was that if you had a proper pan,
the corrosion would not have been accelerated
to the point that it was.
-: I know, but that's too,
that's sort of like a meet the press answer,
or as the clerk used to say all the time,
this isn't meet the press.
If there was not a styrofoam pan,
but the appropriate type of pan,
would the bi-metal composition problem exist.
-: Well, I'm just going to refer to what the experts said.
He said it did accelerate the problem.
And he said that if there was a different type of pan,
it could have grounded,
which would have greatly relieved the corrosion,
but it's core,
at it's core the coils were corroding
and they were not fit for the work.
-: I got that.
You got to have,
it's in this system and it's built to work in this system,
I get that,
but I'm still not sure what the answer is
to that question.
-: Well,
my response to that would be that
the jury was presented with expert testimony
that pointed to problems with the coil.
It also pointed to problems
that the drain pan could have, if differently designed,
relieved that.
The jury was instructed to determine
whether there was a defect in the coils
when it left the manufacturer's possession,
it came back and found there was.
That went back to the trial judge,
who twice, she denied a directed verdict in JNOV.
She basically upheld the jury's view.
And with respect to this motion,
respectfully, what they're doing
is kind of interpreting the evidence as they want.
And both sides could cherry pick the experts testimony,
it's possible to do,
but the job I, respectfully I would submit,
the job here is for the jury.
After listening to a two and a half week trial,
both sides of the experts,
they were instructed to make a finding
whether there was a defect or not,
or instructed that that had to be an element of the claim.
And they came back and found
that there was a breach of implied warranty
of merchantability.
And whether you can pick at the evidence and say,
it could have been clearer or whatever,
the jury heard it all, they evaluated,
they observed the demeanor, and they determined
that there was a breach
of implied warranty of merchantability
and that they were instructed to find that
they had to find a defect with the coil, not the pan.
The second point I'd like to make.
-: I'm sorry,
can I just have those record appendix sites again?
So you're saying it three appendix 2, 330, 331 and 334
is where I'm going to find testimony
that the coils themselves were defective.
-: A2 324, A2 331 and A2 334, that's correct.
-: [Justice Wendlandt] Thank you.
-: There was also testimony that,
in terms of the fitness for its ordinary purpose.
-: But just, before you switch to your second point,
and I don't mean to cut you.
-: That's alright.
-: But the jury is because,
and I think your waiver argument is in part,
based on the fact that the jury isn't keyed into this point,
that one, something in an integrated system can fail
that it's fine because some other part of the system
is putting too much pressure on it.
I'm over simplifying.
This issue is enjoined for the jury, right?
The jury knows the coils fail,
but the jury isn't,
and the jury has also been presented by your expert,
who basically says the styrofoam
puts this additional on the science, I don't understand,
Justice Wendlandt going to have to explain it to us,
but, puts additional pressure on the coils
and then they fail.
But the jury isn't told, because no one brings it
to their attention, this whole point about component parts.
It's not a focal point of any instructions or anything
because no one's really figured this out until later.
Is that right?
-: Yeah, so, to address the waiver issue.
-: Is that correct?
Is that basically, am I accurately,
cause I haven't read this trial transcript yet,
or this whole enormous record.
-: As I believe it was pointed out,
it was not raised,
and the answer was not raised during trial.
It wasn't raised.
-: No one goes to the judge,
judge, you got to explain,
you know restatement third this whole back and forth here
so that the jury understands this issue.
That's not really presented, right?
-: Well, so rather than me characterizing,
we quoted in our brief,
the argument made, which,
and I'm not sure I'm going to quote it exactly,
but effectively was there wasn't proof.
It was a proof issue.
I would submit a component's part doctrine
is a legal doctrine and that
it's not the same thing to raise
that there wasn't proof of a defect in the coil
as in raising the component parts doctrine.
And I agree with you,
it could have had all sorts of impacts
on how a jury was charged.
-: Cause the jury is presented with a simple choice.
Is it the coils or is it the styrofoam?
Right?
-: Against Daikin NA they were presented with the choice
where the coils not fit for the ordinary purpose, period.
And there was a case against the DACA
and Stephan stuffy, which was directed.
-: And it was directed on the statute of limitations.
-: On the statute of limitations.
So the only question that went to the jury on Daikin NA
was, were the coils defective,
or not really the cost defective,
were the coils not fit for their ordinary purpose.
-: That's cause the styrofoam was out of,
you couldn't win against anybody on the styrofoam
because the statute of limitations.
-: The way I view the record is that the issue was the coils.
I'd like to briefly touch on two other points
with the time running out.
You know, we make the point
that in a breach of contract UCC case,
there is no requirement.
You have to show the goods are not fit
for their ordinary purpose.
And that was conceded here.
You know, their own expert admitted
that a leaking coil is not fit for its intended purpose.
More over, page 23 of their brief,
they admit they were corroding prematurely.
It's not disputed that when they corrode
the system doesn't work.
But you know,
their argument is you have to prove the defect
that caused the coil not to be fit
for it's ordinary purpose, we did that.
But I think preliminarily the court should
at least understand,
one of the arguments we're making
is that in a contract case,
there's no requirement to prove the defect
that caused the good not to be fit
for their ordinary purpose.
And we've cited in pages 35 and 36 of our read brief
several cases where courts have specifically held
that in a contract implied warranty case,
you don't have to prove a manufacturing defect
that caused the good not to be fit for its ordinary purpose.
And there's no dispute here,
these goods were not fit for their ordinary purpose.
On the waiver point very quickly,
the council made the argument.
-: Is that true?
I mean, so I sell a coil, it leaves my warehouse,
it's perfectly fine, not defective at all.
And then the mechanic who installs it, drills holes in it
so now leaks, am I on the hook for that?
-: The plaintiff would not prevail on that circumstance.
-: Because why, how is that different?
-: Because it has to be, you know, unchanged.
It has to be defective when it left the seller's possession.
-: Right? And isn't that Daikin NA's point?
Is that when it left them, it was fine.
It was only when you put it in
with the styrofoam pan that the holes were drilled in it,
effectively.
-: No, I don't believe that's their position.
And it's not the fact.
I mean, the system was manufactured by the parent company.
They included the pans and the coils,
they were designed to work with one another.
-: But that claim is, is gone, right?
The statute of limitations left on that one.
-: But our expert testified and established
that the problem, the defect was in manufacturing,
it was the bi-metal composition.
There's no claim in this case
that Mr. Nemirovsky, you know,
changed the coil or reconfigured
the composition of the metals or drilled holes in it.
-: My analogy is the pan is drilling the holes
in the coil.
-: I don't believe that it would be supported
by the evidence in the case
or the expert testimony from either expert.
There's no claim that the pan caused the damage
in the coil.
-: Oh, I thought there was.
I thought that was the whole thing about the expert.
-: That's one of the thing I want to point out
in the testimony that's clear,
what the expert said was that if the pan worked properly,
the other electrons could have been grounded,
but he didn't claim that this somehow changed the coil
after it was sold.
I think it's abundantly clear in the record,
and the jury found and was instructed
that the coil was defective when it left Daikin NA's
possession, and we put on evidence, we didn't have to,
that the problem was the bimetallic composition of it,
it wasn't like the plaintiff did anything
in the installation, the plaintiff even install it.
But I mean, there wasn't like.
-: I'm not saying the plaintiff did anything.
And I'll have to look at the record,
my understanding based on just the briefing
was that the styrofoam pan
caused a moisture filled environment that was not grounded
that then caused the bimetallic coils to leak.
-: That is perhaps with the expert said.
-: And you're saying instead, you said your expert said,
it's the fact that it's composed of two metals
that is the
cause of the leak.
-: I hope I'm answering you directly.
What I'm saying is that it is true that
if the plaintiff changes a component after it's sold,
and it is not fit for its ordinary purpose,
the plaintiff can't bring a claim.
In this case there's no evidence
that the part wasn't defective when it was sold.
-: Yeah, I guess I'm trying to ask a different question.
My question is, what is causing the failure of the coil?
What is the evidence of what's causing
the failure of the coil?
And it sounds like they're saying it's the styrofoam pan
and your saying it's the two metals.
-: Yes.
We're saying that the cause of the problem
is a galvanic corrosion, which causes pits in the coil,
which causes leaking.
-: Which would have happened with any pan, right?
Cause you said if it was a metal pan,
it would've just happened more slowly.
-: Expert testimony was it accelerated the process.
And the expert testimony is a little bit all over the place.
You know, obviously jury is going to view it as it did,
but I think the important point is the jury heard
both experts and made the,
and was instructed that
they had to find it was defective.
The experts explained why it was defective,
it was the bimetallic composition.
There was definitely testimony about the pan
could have, properly constructed,
allowed the electrons to go to ground
and avoided the problem or greatly alleviated.
There was also testimony that the pan
accelerated the corrosion,
but I don't believe there was any argument,
and there is not any evidence.
-: But these are mechanical parts, right?
Eventually they will fail.
The acceleration is the problem, right?
They don't guarantee them for life.
They guarantee them for, you know, X number of years,
what is causing the acceleration is critical.
-: Well,
I'm going by what the experts say.
The experts say it's caused by galvanic corrosion.
They identified the sites.
That's the core problem,
that's the instant problem.
If I could briefly, and I know my time is running out.
-: Before you leave, I would like you,
I understand you have a sufficiency, I'm over here,
a sufficiency argument that you may win,
that your, the part is defective,
but I'm curious, can you address comment E and explain,
say we disagree with you,
and we find that the coils are fine
and the problem was the styrofoam.
Do you still win,
because there was this substantial participation
in the integration of the design here from this record.
-: We did not brief that point,
but you're correct that here,
unlike a lot of the cases cited by the defendant,
the parent company manufactured the coils and the pans,
what was sold by the marketing arm of the company
was just a replacement part.
So, you know,
clearly the pans and the coils that were sold
and the replacements were all, you know,
they're all designed together to work together.
And that's what the trial court judge found.
-: But you're not arguing, piercing the corporate veil.
-: I'm not arguing piercing the corporate veil.
-: This record, which is again huge,
are we gonna learn about how they built this AC,
how they design this company
and how they put together the coils and the styrofoam,
is that in this record or where?
-: There was some evidence in the record.
It's not extensive or expansive,
but there is evidence of the relationship
that the manufacturer has affiliates.
You know, they could have chosen just to sell it themselves.
They, they formed an affiliate to sell replacement parts.
They formed another affiliate
to do the the maintenance of the, of the unit.
-: Do they have some umbrella that coordinated all of this?
-: I don't know that I can answer that question.
I just don't want to give incorrect information.
-: If I could just ask you one last question
about getting from $9,000 to 6 million,
why is the,
the answer rip up the system and put in a new one?
-: In this case, in the context of this, you have a,
there were actually 17 coils that failed.
Three of them were sold, or four,
I believe the judge said by Daikin NA,
you have the history for, you know,
five or six years where the system is consistently down,
number one, but number two,
you have a series of misrepresentations,
a series where they're basically telling the homeowner,
it's your fault,
your house as unique environmental factors
and their solution in their brief
and today is,
well, you should just wait
and every time a coil fails prematurely,
once a coil fails,
you don't have heat in the winter
and you don't have air conditioning in the summer
until it's replaced.
And there's their solution of, okay,
just kind of handle that, you know,
be without heat for a couple of days,
be without air conditioning a couple of days,
and just keep replacing them as they fail.
That's not the benefit of the bargain.
It was foreseeable in these circumstances.
And these are unusual circumstances.
But when you have a series of misrepresentations
blaming the homeowner, a series of coils failing,
significant frustration about not having heat or
air conditioning,
and there's no other solution anybody's provided,
except every time a coil fails, be without heat
or air conditioning way for us to come in.
And first of all, locate which coil it is and replace it.
That's the only solution they're offering.
In those circumstances, the cost of removal and replaceal
was foreseeable.
And it was also, and a jury was instructed.
There was no challenge to the jury's charge on damages.
It was instructed that you can award foreseeable damages
and you can award damages
to give the plaintiff the benefit of the bargain.
And those two charges,
given the circumstances in this case, which are egregious,
I mean, 93A, was awarded because of the circumstance.
-: Can I ask one last question on the record,
was the new system put in?
Is that in the record?
-: It's not in the record.
-: So we don't know whether this new system
has been built or not.
This is the damages awarded,
but we don't know whether this house is operating
under the old system or a new system.
-: There's no evidence in the record
that a replacement system has been put in,
we did brief the issue that the courts have consistently
held that you do not have to do.
-: I get it, I understand that.
-: There's no evidence in the record that
the system was replaced at this point
and the award hasn't been paid.
And we haven't gotten the $10 million either.
-: Thank you. Thank you, counsel.
-: Okay, thank you.
Fleming: Chief Justice, Budd,
May I request leave to file a letter,
both to address justice ciphers question,
and also some new assertions about the record
that I think warrant a response
and might be useful to the court.
-: What was Justice Cyphers question?
-: I have a question about the record,
a reference to volume three, page 141.
-: Oh, you didn't answer that?
-: Is that what you mean?
-: I tried to answer it,
but to the extent your honor would like something further.
I that's why I'm asking leave to file a letter.
-: I thought you did,
my question is really,
if the transcripts are part of the record, I'm fine,
but often they're not.
And your transcript for 3, 141 is in your record, appendix.
-: Yes.
The transcript is in the record
in that event because there were new assertions made
about the record that we haven't had a chance to respond to.
I'd request the leave to file a letter, addressing those.
-: You can go ahead and do that.
And then if you want to respond to it,
you have the right to do that as well, okay?
Fleming: Thank you your honor.