Cole Energy Development Co. v. Ingersoll-Rand Co.

845 F. Supp. 632, 1994 U.S. Dist. LEXIS 1414, 1994 WL 38959
CourtDistrict Court, C.D. Illinois
DecidedFebruary 10, 1994
DocketNo. 86-3303
StatusPublished

This text of 845 F. Supp. 632 (Cole Energy Development Co. v. Ingersoll-Rand Co.) is published on Counsel Stack Legal Research, covering District Court, C.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cole Energy Development Co. v. Ingersoll-Rand Co., 845 F. Supp. 632, 1994 U.S. Dist. LEXIS 1414, 1994 WL 38959 (C.D. Ill. 1994).

Opinion

OPINION

RICHARD MILLS, District Judge:

This cause is before the Court on remand for further proceedings before another district judge. Cole Energy Development Co. v. Ingersoll-Rand Co., 8 F.3d 607, 611 (7th Cir.1993). In order to assist the judge who will hear the case, the Court believes that a background summary is in order.

I.

This is the third time this case has been before this Court. The ease involves a breach of contract suit against the lessor of compressors used by Cole Energy to extract natural gas from its Fishhook gas field in Illinois. Cole is a one-fourth owner of the Fishhook Field. None of the other shareholders of the gas field were named as par[633]*633ties to the complaint. On December 5, 1983, Cole and Ingersoll-Rand entered into two written contracts for the lease of two gas compressors to be used by Cole and its co-shareholders for the extraction of natural gas from the Fishhook Field. Cole was the sole signatory to the leases. Paragraph 17 of each contract specifies that the only warranties made by Ingersoll-Rand are those contained in the factory warranty delivered to the lessee. Ingersoll-Rand expressly disclaimed any other representations or implied warranties and specifically disclaimed the Illinois implied warranties of merchantability and fitness for a particular purpose.

The Ingersoll-Rand factory warranty provides that the equipment manufactured and delivered for lease will be free of defects in material or workmanship for a period of 12 months from the date of placing the equipment in operation or 18 months from the date of shipment, whichever comes first, and that the only performance warranties made a part of the express factory warranty are those contained in the proposal presented to the lessee. The performance warranty provided to Cole guarantees a capacity, or flow, of 2.16 million cubic feet of gas from the field to the end of the compressor if there is a certain inlet and outlet pressure, if there is a sufficient field of natural gas, and if certain other requisite conditions on the proposal sheet are satisfied.

However, shortly after the leased compressors were put into operation by Cole, they began to malfunction, and after more than 15 service calls, the compressors could not be restored to adequate working condition and never produced the guaranteed flow of natural gas. Consequently, on August 9, 1985, Cole exercised its right to cancel the two leases, thereby effecting a revocation of acceptance of the leased equipment under § 2-608 of the Uniform Commercial Code (U.C.C.).1 Following Cole’s revocation of acceptance of the compressors, it replaced the equipment with a three-stage Cormar compressor in order to extract the natural gas from the Fishhook Field. The rental cost of the Cormar compressor was less than that of the Ingersoll-Rand compressors.

Cole brought suit against Ingersoll-Rand asserting fraud and breach of express and implied warranties, seeking over $2 million in damages. However, Paragraph 18 of the lease agreements limits the total liability for breach of the factory warranty to the amount of lease payments made by the lessee and excludes recovery of any consequential damages. Initially, in ruling on Ingersoll-Rand’s motion for partial summary judgment, this Court found the limitation on total damages and the exclusion of consequential damages to be enforceable under § 2-719 of the U.C.C. due to lack of unconscionability. Cole Energy Development Co. v. Ingersoll-Rand Co., 678 F.Supp. 208, 210-12 (C.D.Ill.1988). This Court also dismissed Cole’s claim for breach of implied warranty, finding the disclaimer in the leases to be sufficiently conspicuous under Illinois law. Id. at 212.

On May 24, 1988, this Court began a nine-day bench trial on Cole’s claims of fraud and breach of express warranty. After the conclusion of the bench trial on June 8,1988, the Court issued its findings. The Court found that Cole had failed to establish fraud by a preponderance of the evidence, but the Court found in favor of Cole on the breach of warranty claim. Additionally, this Court held that the provision against recovery of consequential damages in Paragraph 18 of the leases was unenforceable due to the willfulness and dilatoriness of Ingersoll-Rand in failing to effectuate its limited express warranty.

The parties were then asked to submit summaries with supporting affidavits on the issue of damages. The parties did not object to this request. Following submission of briefs, the Court, in a detailed order, awarded Cole $17,192.25 in damages for IngersollRand’s breach of its express warranty. The Court denied Cole’s request for over $1.6 million in lost revenue, finding that there were no lost profits, but only delayed profits, as Cole was eventually able to recover and sell at the same price all of the gas that [634]*634would have been retrieved by the IngersollRand compressors. The Court denied Cole recovery of foregone interest on the delayed profits, on the basis that prejudgment interest was prohibited under Illinois law.

The $17,192.95 in damages awarded was based on $68,769 in repair expenses, miscellaneous expenses, and extra labor costs incurred by the Fishhook Field as a consequence of Ingersoll-Rand’s failure to remedy the defects in the compressors pursuant to the warranty. The $68,769 total was reduced by 75% because Cole, as a 25% shareholder of the Fishhook Field, was only responsible for 25% of the expenses incurred by the field in its operations. The Court held that Cole was not entitled to recovery for losses it was not forced to bear.

The Court indicated that the determination of damages was extremely difficult in view of the poor quality of Cole’s submissions. Rather than present specific proof of the amount of loss it had sustained as a result of Ingersoll-Rand’s breach of warranty, Cole simply demanded the more than $2 million that it had originally requested and buried the Court in a sea of documents. As a result, the Court was “left to its own devices” to determine the amount of damages, with the damages analysis becoming “a cottage industry,” despite the Court’s admonition at the close of trial for the parties to submit proof of damages “as concisely as possible.”

II.

Cole appealed this Court’s award of damages. The Court of Appeals held, however, that it could not ascertain from the rulings of this Court exactly what type of warranty Ingersoll-Rand had allegedly breached. Cole Energy Development Co. v. Ingersoll-Rand Co., 913 F.2d 1194, 1201 (1990). Consequently, the appellate court vacated this Court’s award of damages and remanded the case for this Court to “make explicit its findings about the nature and scope of the warranty and Ingersoll’s liability” under the warranty, and for this Court to then make a new determination of damages. Id.

III.

Upon remand, this Court directed the parties to submit proposed findings of fact with respect to the warranty at issue and Ingersoll-Rand’s performance thereunder. After more than a year of delay by Cole in filing its proposed findings, the Court was finally able to address the nature and scope of the Ingersoll-Rand warranty.

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Related

Cole Energy Development Co. v. Ingersoll-Rand Co.
678 F. Supp. 208 (C.D. Illinois, 1988)
National Wrecking Co. v. Coleman
487 N.E.2d 1164 (Appellate Court of Illinois, 1985)

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Bluebook (online)
845 F. Supp. 632, 1994 U.S. Dist. LEXIS 1414, 1994 WL 38959, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cole-energy-development-co-v-ingersoll-rand-co-ilcd-1994.