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ST. CHARLES CABLE TV v. EAGLE COMTRONICS, INC.
687 F.Supp. 820 (1988)
ST. CHARLES CABLE TV, INC., Alexandria Realty Corporation, Energistics, Inc., Delta Telecommunications, a limited partnership, and Robert Broz, Plaintiffs,
v.
EAGLE COMTRONICS, INC., Defendant,
v.
CABLE HOLDINGS, INC., Counterclaim Defendant.
No. 83 Civ. 7126 (LFM).
United States District Court, S.D. New York.
May 19, 1988.
Dow Lohnes & Albertson by Howard Graff and Laura J. Kahn, New York City, for plaintiffs and counterclaim defendant.
Scolaro, Shulman, Cohen, Lawler & Burstein, P.C. by Walter D. Kogut and Ted H. Williams, Syracuse, N.Y., for defendant.
OPINIONMacMAHON, District Judge. Plaintiff, St. Charles Cable TV, Inc. ("SCC"), the buyer, brings this action against the seller, defendant Eagle Comtronics, Inc. ("Eagle"), for damages for breach of warranty, fraud, and negligent misrepresentation by Eagle in the sale of allegedly defective descramblers to SCC. Alexandria Realty Corp., Energistics, Inc., Delta Telecommunications, and Robert Broz (collectively "the licensees") join SCC's action as nominal coplaintiffs whose claims must stand or fall with SCC's. Eagle asserts counterclaims against SCC and its affiliate, Cable Holdings, Inc. ("Cable Holdings"), for the balance due on the purchase price and money claimed under other provisions of the underlying agreement. Eagle also asserts a counterclaim against the licensees, alleging that as owners of the cable system they are liable on a conversion theory for receiving wrongfully obtained descramblers. The action was tried before the court, without a jury, on September 28, 29 and 30 and October 19, 20, 21, 28 and 29, 1987. The trial was bifurcated for determination of liability first, reserving the issue of damages for future resolution, if necessary. After carefully considering the exhibits, hearing and observing the witnesses, weighing all of the evidence and arguments of counsel, and bearing in mind that it is not the quantity but the quality of the evidence that is ultimately determinative, we now make the following findings of fact and conclusions of law. BACKGROUNDSCC is a Louisiana corporation with its principal place of business in Luling, Louisiana, where it constructed and now operates a cable television system pursuant to a franchise granted by the Parish of St. Charles. The licensees are citizens of Connecticut whose connection with this litigation
arises from their present ownership interests in the SCC cable system.1 Defendant Eagle, a New York corporation with its principal place of business in Syracuse, New York, manufactured and sold addressable descramblers2 to Cable Holdings for use in the SCC cable system.
1. The actual ownership of the cable system and equipment is somewhat complicated. After obtaining the franchise from the Parish of St. Charles, SCC sold licenses to operate cable systems within the Parish to Delta Telecommunications, Energistics, Inc., GPA CATV, Inc., and Robert Broz, the president of SCC. At the time they purchased the licenses, the licensees also purchased equipment to operate the systems from Alexandria Realty Corp., a construction company affiliated with SCC, and entered into a management contract with SCC to run the systems. Essentially, SCC operated the system while the assets were owned by the licensees (Transcript ("Tr. ___") 658-674; Defendant's Exhibits ("DX ___") RR-3, RR-4, VV-3, VV-4, WW-2, XX-2). SCC retained an option to repurchase the licenses (Tr. 722-23). The licensees, except for GPA CATV, Inc., were added as nominal co-plaintiffs in this action by a stipulation and order filed February 6, 1987. GPA CATV, Inc. did not sign the stipulation and was dismissed sua sponte. See St. Charles Cable TV, Inc. v. Eagle Comtronics, Inc.,664 F.Supp. 824 (S.D.N.Y.1987) (Opinion denying defendant's motion to dismiss for lack of diversity jurisdiction and for failure to join an indispensable party, and certifying decision for immediate appeal). 2. Cable television systems receive television signals from satellites and local stations at a central point, the "head end." The signals are distributed to individual subscribers' homes via the cable wiring network. Once hooked up to the cable system, subscribers may choose to purchase additional programming, such as HBO and SHOWTIME. Scrambling is used to ensure that subscribers receive only the additional programming for which they have paid.
An addressable cable system consists of a scrambler, located in the head end, which scrambles television signals for the additional programming before the signals are sent through the cable lines and into the subscribers' homes. The descrambler, located in each subscriber's home, reads the code and unscrambles the signals provided the subscriber has signed up for the additional service. The addressable aspect of the system is that the descrambler can be instructed from the head end which scrambled channels the subscriber is authorized to receive. Changes in the level of authorized service can be made without going to the subscriber's home. 3. Behrman's testimony and plaintiffs' documents describe problems with the descramblers only in vague, general, terms (Tr. 126-31; PX 37, 39). Moreover, Behrman admitted that he could identify no descrambler that had been sent to Eagle for warranty repair and returned to SCC with the same problem (Tr. 284-85). Accordingly, we reject plaintiffs' assertion that Eagle's offer to replace Type 1 descramblers with Type 2 descramblers meant that all Type 1 descramblers were defective. 4. St. Charles Cable TV, Inc. v. Eagle Comtronics, Inc., supra. 5. St. Charles Cable TV, Inc. v. Eagle Comtronics, Inc., No. 83 Civ. 7126 (S.D.N.Y. Sept. 25, 1987) (order granting defendant's motion for leave to assert counterclaims). 6. Klaxon Co. v. Stentor Elec. Mfg. Co.,313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). 7. Auten v. Auten,308 N.Y. 155, 160, 124 N.E.2d 99, 101-02 (1954); Intercontinental Planning, Ltd. v. Daystrom Inc.,24 N.Y.2d 372, 382, 300 N.Y.S.2d 817, 825, 248 N.E.2d 576, 582 (1969). 8. Auten v. Auten, supra, 308 N.Y. at 160, 124 N.E.2d at 102. 9. See American Home Assur. Co. v. Employers Mut. of Wausau,77 A.D.2d 421, 425, 434 N.Y.S.2d 7, 9 (1980), aff'd,54 N.Y.2d 874, 444 N.Y.S.2d 917, 429 N.E.2d 424 (1981) (although no longer determinative, place of contracting is significant contact). 10. See generally 19 N.Y.Jur.2d Conflict of Laws § 35 at 614-15 (1982) (one goal of grouping of contacts approach to conflicts problems is to give effect to probable intent of the parties). 11. See Davenport, How to Handle Sales of Goods: The Problem of Conflicting Purchase Orders and Acceptance and New Concepts in Contract Law, in Uniform Commercial Code Handbook 72-73 (1964). 12. CBS, Inc. v. Auburn Plastics, Inc.,67 A.D.2d 811, 413 N.Y.S.2d 50 (1979); 2 R. Anderson, Uniform Commercial Code § 2-207:11 at 277 (3d ed. 1982). 13. See Luedtke Engineering Co. v. Indiana Limestone Co.,740 F.2d 598, 600 (7th Cir.1984); John Thallon & Co. v. M & N Meat Co.,396 F.Supp. 1239, 1243 (E.D.N.Y.1975). 14. See 2 R. Anderson, Uniform Commercial Code, supra, § 2-207:39 at 297. 15. See Bausch & Lomb v. Monaco Electronics, Inc.,103 Misc.2d 966, 427 N.Y.S.2d 357 (1980), aff'd,109 Misc.2d 365, 445 N.Y.S.2d 415 (App. Div.1981); UCC § 2-207 Official Comment 5. 18. Id. at 500. 19. See Dorton v. Collins & Aikman Corp.,453 F.2d 1161, 1168 & n. 5 (6th Cir.1972); Leonard Pevar Co. v. Evans Pdts. Co.,524 F.Supp. 546, 551-52 (D.Del.1981); Ebasco Services, Inc. v. Pennsylvania Power & Light Co.,402 F.Supp. 421, 436-38 (E.D.Pa.1973); see also Murray, Intention over Terms: An Exploration of UCC 2-207 & New Section 60, Restatement of Contracts, 37 Fordham L.Rev. 317, 329 (1969) ("The Roto-Lith case has been extensively noted in the law reviews and the consensus is clear that the case is not a reliable precedent.") (footnotes omitted). 21. Id. 22. Section 2-201 (1) and (2) provide:
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten days after it is received. 23. 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239 (1978). See also UCC § 2-201 Official Comment 3. 24. Cf. Stewart-Decatur Security Systems, Inc. v. Von Weise Gear Co.,517 F.2d 1136 (8th Cir. 1975) (rejection of equipment wrongful when buyer had previously approved prototype). See generally Special Project, Article Two Warranties in Commercial Transactions, 64 Cornell L.Rev. 30, 65, 172 (1978) (express warranties implicitly contradict agreement that seller provide experimental equipment and should not be enforced). 25. Cable Holdings sued at least one other manufacturer of cable equipment, alleging that equipment supplied to SCC was defective (Tr. 270-74, 728-33; DX CCC). SCC also returned converters to Standard Components, claiming that they were defective (Tr. 276-80; DX EE-1, EE-2, EE-3). 26. See Mallis v. Bankers Trust Co.,615 F.2d 68, 80 (2d Cir.1980), cert. denied, 449 U.S. 1123, 101 S.Ct. 938, 67 L.Ed.2d 109 (1981). 27. See White v. Guarente,43 N.Y.2d 356, 362-63, 401 N.Y.S.2d 474, 478, 372 N.E.2d 315, 319 (1977). 28. UCC § 2-313(2) provides, in pertinent part, that "an affirmation of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create warranty." Under the circumstances, particularly the experimental nature of the descramblers, we find that SCC would have understood the statement to be mere puffing. 29. See Propstra v. Dyer,189 F.2d 810, 812 (2d Cir.1951); Rothschild Sunsystems, Inc. v. Pawlus,129 A.D.2d 933, 514 N.Y.S.2d 572 (1987); Shoenthal v. Bernstein,276 A.D. 200, 93 N.Y.S.2d 187, appeal dismissed,276 A.D. 831, 93 N.Y.S.2d 908 (1949). 30. An agent must disclose the agency and the identity of the principal at the time of contracting to assert agency as a defense. See Rothschild Sunsystems, Inc. v. Pawlus, supra; Tarolli Lumber Co. v. Andreassi,59 A.D.2d 1011, 399 N.Y.S.2d 739 (1977); Van Rossem v. Penney Travel Service, Inc.,128 Misc.2d 50, 488 N.Y.S.2d 595 (1985). 31. 3 N.Y.Jur.2d Agency & Independent Contractors § 303 (1980). 32. Fraser v. Doubleday & Co.,587 F.Supp. 1284, 1288 (S.D.N.Y.1984) (quoting Peters Griffin Woodward, Inc. v. WCSC, Inc.,88 A.D.2d 883, 452 N.Y.S.2d 599, 600 (1982)).
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