FabMetals, Inc. v. Stratacache, Inc.

2024 Ohio 2006, 246 N.E.3d 36

• Court: Ohio Court of Appeals
• Decided: May 24, 2024
• Docket: 29666
• Status: Published

Opinion

[Cite as FabMetals, Inc. v. Stratacache, Inc., 2024-Ohio-2006.]

IN THE COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT MONTGOMERY COUNTY

FABMETALS, INC. : : Appellant : C.A. No. 29666 : v. : Trial Court Case No. 2018 CV 01339 : STRATACACHE INC. : (Civil Appeal from Common Pleas : Court) Appellee : :

...........

OPINION

Rendered on May 24, 2024

JONATHAN R. SECREST & DAVID A. LOCKSHAW, JR., Attorneys for Appellee

PATRICIA J. FRIESINGER & DANIEL J. GENTRY, Attorneys for Appellant

.............

LEWIS, J.

{¶ 1} Plaintiff-Appellant FabMetals, Inc. (“FabMetals”) appeals from a judgment of

the Montgomery County Court of Common Pleas, which awarded $3,575,059 to

Defendant-Appellee Stratacache Inc. (“Stratacache”). For the following reasons, we will

affirm the judgment in part, reverse it in part, and remand for a new trial solely to

determine the amount of damages that Stratacache (1) already incurred to replace -2-

defective menu boards; (2) will actually incur by September 2027 to replace defective

menu boards; and (3) already incurred to investigate the cause of defective menu boards.

I. Facts and Course of Proceedings

{¶ 2} FabMetals is a metal fabricator and painter of metal parts. Stratacache is a

company that offers digital signage solutions for various industries. This appeal involves

purchase orders that Stratacache sent to FabMetals in August and September 2017 for

FabMetals to create and paint parts that would be used to assemble outdoor display menu

boards intended for installation in the drive-thru lanes for quick-service restaurants like

McDonald’s. Due to FabMetals’ ability to both fabricate the parts and apply the requisite

powder coating, Stratacache ordered several million dollars’ worth of product from

FabMetals in a relatively short amount of time.

{¶ 3} Powder coating uses a technology in which the coating is applied in powder

form but ultimately looks similar to liquid coating. When the powder coating is applied

properly, a chemical reaction takes place leaving behind a hardened coating. After a

metal part is pre-treated to ensure that the part is clean, the powder coating is applied

with electrostatic guns, which cause the powder to stick to the applied surface. The

surface is then exposed to heat in various forms to melt the particles into a coating that

looks like paint. The purpose of powder coating is to improve the appearance and delay

corrosion of the item that was powder coated. As such, powder coating is useful in

protecting parts that will be subjected to arduous, outdoor environments. Tr. 553-555.

{¶ 4} In September 2017, Stratacache was alerted by one of its menu board -3-

assemblers that FabMetals had sent a few parts from which the powder coating was

peeling off. After being informed of this, FabMetals assured Stratacache that appropriate

steps would be taken to prevent this from happening again. Things then continued

relatively smoothly between the parties for the next few months.

{¶ 5} In February 2018, however, a McDonald’s location submitted a complaint to

Stratacache that paint had peeled from the menu board it had purchased from

Stratacache. After an investigation, Stratacache determined that 330 menu boards

ordered from FabMetals likely had the same defect in the paint adhesion due to mistakes

made in the cleaning and painting process at FabMetals.

{¶ 6} On March 23, 2018, FabMetals commenced an action against Stratacache

in the Montgomery County Common Pleas Court seeking damages in the amount of

$3,261,564.70 and alleging that Stratacache had failed to pay for parts and components

that Stratacache had ordered from FabMetals. Stratacache filed an answer and

counterclaim against FabMetals, alleging that defective work by FabMetals had caused

Stratacache significant damages and that FabMetals had breached its contract and its

implied warranty of fitness for a particular purpose.1 Stratacache sought damages that

were estimated to exceed five million dollars.

{¶ 7} On May 12, 2021, the parties entered into a stipulation regarding

documentation of Stratacache’s alleged damages. The parties stipulated that there would

be no objection to the use of summary evidence under Evid.R. 1006 in lieu of submitting

voluminous documents relating to the information contained in Trial Exhibits TTTT and

1 At the beginning of the bench trial, Stratacache dismissed its claim for breach of the

implied warranty of fitness for a particular purpose. Tr. 30. -4-

UUUU. However, FabMetals reserved the right to object to the accuracy of the

information, Stratacache’s entitlement to damages, and any lack of foundation laid by

Stratacache’s witnesses at trial as to how the damages were calculated.

{¶ 8} On May 14, 2021, the parties also stipulated to the authenticity of documents

and the amount and dates of Stratacache’s payments to FabMetals on invoices for the

outdoor display menu board project. The parties stipulated that Stratacache had paid

$5,520,442.26 on invoices submitted to it between June 20, 2017 and February 2, 2018.

The parties then stipulated to the authenticity of Stratacache purchase orders totaling

$8,806,283.77. The stipulation also noted that “FabMetals shipped parts to Stratacache

in the amount of $2,072,053.37 for which Stratacache has not paid FabMetals.

FabMetals has in storage parts fabricated for Stratacache in the amount of $1,213,788.33

that it fabricated under Stratacache Purchase Orders.”

{¶ 9} A bench trial was held from May 17-21, 2021. Several witnesses testified at

the trial. Victor David Fritsch, the purchasing production manager at Stratacache, testified

first. Tr. 31-230, 459-521, 684-703. Fritsch’s job duties included purchasing products to

include in the outdoor menu boards, purchasing tools to help build the boards, and

forecasting how many units would be deployed to Stratacache’s customers.

{¶ 10} Fritsch was hired in February 2017 to work on Stratacache’s outdoor menu

board project for quick-service restaurants like McDonald’s. Fritsch coordinated with

suppliers to make sure they could provide single and double menu boards to McDonald’s

for use in their outdoor drive-thru lanes. Fritsch described the project as follows:

The project was for outdoor signage or outdoor menu boards that -5-

you would see in drive-thru lanes, many quick service restaurants. We were

planning, deploying across the United States and eventually globally. They

are the signs that are going to replace all the old fluorescent signs that you

would see that you would order from. So they have a digital display inside

of them so they can be changed month-to-month, or whatever specials you

may have, easily through content rather than having to change out a plastic

sheet that goes in front of the bulbs.

Id. at 32-33.

{¶ 11} Fritsch told all the potential suppliers for the project that the menu boards

were for outdoor use. Representatives of FabMetals were unable to attend the bidding

day at Stratacache, but two representatives of Stratacache went to FabMetals to explain

what needed to be built. FabMetals had a good reputation and appeared to do high

quality work. Mark Hensley, an employee of FabMetals, then visited Stratacache’s

facility. He lauded his company’s success with a previous powder coating project for

outdoor products. One of Stratacache’s subsidiaries also recommended FabMetals to

Stratacache.

{¶ 12} Stratacache chose FabMetals to provide the necessary fabricated and

powder coated parts for the outdoor menu boards. Although Stratacache had another

supplier, Armor, FabMetals quickly took over as the sole supplier for the outdoor menu

board project due to FabMetals’ willingness to deliver the necessary parts so promptly.

FabMetals supplied both powder coated and non-powder coated parts for Stratacache to

use on the menu board project. All the back panels for the boards were powder coated -6-

parts. Such parts were more expensive than ones that were not powder coated. The

powder coating protected the metal from the weather.

{¶ 13} Although there was no formalized written contract between the two parties,

Stratacache sent purchase orders to FabMetals, which then submitted invoices for

payment to Stratacache after the parts were delivered. This process repeated itself over

several months without any incident. Over the first few months of the relationship,

Stratacache considered FabMetals to be a good supplier with high quality, good prices,

and prompt delivery. Stratacache continued to order more products, which caused

FabMetals to hire additional workers and work longer hours to keep up with the demand.

{¶ 14} This outdoor menu board project started by Stratacache in 2017 was called

the V10 project. It was a start-up line and was created by Ralph Idems, with whom Fritsch

interacted a few times per week. By December 2017, Stratacache had decided to end

the V10 product line and began producing a newer model. The V11 model of menu board

had an outer shell made out of ABS plastic material rather than steel. The V12 is the

current model of menu board, and it uses aluminum instead of steel.

{¶ 15} Stratacache used Civiq, a Canadian company, to assemble the outdoor

menu boards after receiving the parts from FabMetals. In September 2017, Civiq alerted

Stratacache that it had received some parts from FabMetals with paint peeling off them.

Stratacache reached out to FabMetals to determine what had caused this “catastrophic”

paint failure. Mark Hensley explained to Fritsch that the metal parts had not been washed

properly and that oil in the water had prevented proper paint adhesion. An email from an

employee at FabMetals explained that the contamination most likely had been caused by -7-

excessive oil in the production line and keeping the production line running longer than

normal to meet customer demand. FabMetals assured Stratacache that it would address

the problem by cleaning the tanks and providing more quality control documentation on

a regular basis. Stratacache accepted replacement parts from FabMetals to replace the

defective parts identified by Civiq.

{¶ 16} Fritsch testified that, in February 2018, the first catastrophic paint failure in

the field was reported by a McDonald’s location. Stratacache shut down its operations in

order to determine what had caused the failure. After a significant investigation,

Stratacache discovered that all of the back panels on the menu boards had been made

by FabMetals, and the cause of the paint failures was FabMetals’ processes. Stratacache

determined that it would need to replace all the menu boards that FabMetals had made

for Stratacache from August 23, 2017 to September 15, 2017 (the “hot zone”). Because

of how the menu boards were designed, the entire menu board had to be replaced even

if the only failure was in the back panel. Stratacache determined that FabMetals had built

and provided 330 menu boards to Stratacache during the 23-day hot zone.

{¶ 17} Once Stratacache determined that the paint failures were caused by

FabMetals, Stratacache stopped paying invoices that it had received from FabMetals. A

few dozen complaints from additional McDonald’s locations were made to Stratacache

over the next few years. Stratacache incurred significant expense in removing and

replacing the defective menu boards.

{¶ 18} Fritsch testified regarding Stratacache’s damages. He divided them up

generally into five categories: 1) tooling costs for six teams; 2) field checks and -8-

preparation; 3) retrieval costs; 4) cost to replace the metal; and 5) cost of downtime at

Stratacache during the investigation into the cause of the catastrophic paint failure. He

presented his damage estimates in spreadsheet form. Fritsch testified that he had done

the calculations personally and he had personal knowledge of how the travel department

produced its numbers. Fritsch believed that the accounting department had the receipts

for freight and installation costs to replace the defective menu boards and testified that

there should be check stubs evidencing payments.

{¶ 19} Fritsch also testified that he had investigated “a little” the option of stripping

off the defective paint and trying to repaint the product as it was. Stratacache decided

this was not a viable option because of the cost of stripping this type of paint, purchasing

new paint, and the labor hours to apply the new paint.

{¶ 20} Ralph Idems testified next. Tr. 230-250. He was a self-employed

consultant who had prior experience with powder coated products from as early as 1989

through 1995, when the company he worked for at that time was powder coating

advertisement boxes on bus shelters. He explained that if the powder coating process

was not performed properly, the powder may not adhere to the metal. Idems opined that

the powder coating on the outdoor menu boards should have had at least a ten-year

design life. He described a catastrophic paint failure as one in which the coating

completely delaminates from the parent material. Idems visited FabMetals in September

2017 as a result of complaints raised by Civiq about catastrophic paint failures on some

parts received from FabMetals. He discovered that FabMetals did not have good process

control and did not appear to have any titration logbooks. Idems also stated that the cross -9-

hatch testing was not as rigid and tightly controlled as he had expected it to be. Cross

hatch testing was used to determine the quality of adhesion of a coating. According to

Idems, FabMetals’ process control was substandard compared to the powder coating

industry’s standards. Idems discovered that another customer of FabMetals had parts

with a coating of oil on them. It alarmed Idems that very oily parts had been processed

on the same production line as Stratacache’s parts. Idems opined that FabMetals’ failure

to titrate their tanks resulted in excessive oil in the Stratacache production line.

{¶ 21} Hensley, a sales engineer at FabMetals, testified next. Id. at 253-364, 705-

716. His job duties included quoting projects, overseeing the parts flow through the shop,

creating and drawing some of the parts, and staying in contact with the customer.

Hensley explained that FabMetals is a metal fabricator and a painter of metal parts. The

pre-treatment production line at FabMetals consisted of five tanks: Tank 1 was an alkaline

tank, Tank 2 was a wash tank using city water, Tank 3 was a tank with phosphate, Tank

4 was a rinse tank, and Tank 5 was a rinse and a sealer tank. The purpose of these tanks

in the pre-treatment process was to clean metal products before they entered the dryer

and the paint booth. Hensley testified that there would be paint adhesion issues if the

metal parts were not thoroughly cleaned prior to painting. One of FabMetals’ customers,

Kreider, had oily parts that were being painted by FabMetals in September 2017 at the

same time as it painted the parts for Stratacache.

{¶ 22} Hensley toured the Stratacache facility. He observed a poor assembly line

in which the assembly personnel were clearly untrained and there were painted parts

being slid across the floor. Hensley knew that the menu boards were going to be used -10-

outdoors but did not understand that the finish specification was a requirement. He

testified that, prior to the fulfilment of any purchase orders, he had told Stratacache that

FabMetals did not use zinc phosphate. Before receiving the large Stratacache orders,

FabMetals only painted about once per day. He stated that FabMetals did cross hatch

quality testing, but the records reflecting these tests could not be located. FabMetals did

not produce records regarding thickness checks and did not produce documents related

to Tanks 2 and 4.

{¶ 23} One of the quality checks at FabMetals involved checking for a sheen after

the metal was removed from Tank 5. Temporary employees sometimes conducted this

visual testing. There were inspections and additional paint was added by paint guns as

the metal parts passed through the painting process. Sometimes only one quality test

was performed during an 11.5-hour period. Approximately 10-15% of the parts sent by

FabMetals to Stratacache were powder coated.

{¶ 24} Hensley testified that the parts with adhesion problems that were delivered

to Civiq in September 2017 were parts that never should have been included in the

shipment to Stratacache. Rather, these were parts that had been quarantined and should

not have been loaded onto the delivery truck.

{¶ 25} According to Hensley, it was industry practice for customers to pay for parts

and materials when orders were canceled prior to delivery. Hensley testified that

FabMetals was seeking the following damages from Stratacache in addition to the

amounts on the unpaid invoices: $6,375 for labor to load parts for which Stratacache had

not accepted delivery, $1,800 per month for the building in which parts were stored, $140 -11-

or $150 per month for each trailer that was rented, and prejudgment interest.

{¶ 26} Hensley believed that Stratacache was lying about its damages and had

inflated its costs. He stated that FabMetals could get the same replacement parts for less

than what Stratacache estimated. During his testimony, Hensley identified a few

replacement parts in Stratacache’s damages calculation that he believed reflected prices

well above the market price.

{¶ 27} George Hurd, a quality consultant at Stratacache, testified next. Tr. 365-

458. His first day working at Stratacache was May 1, 2017. He had spent the 3.5 years

before trial analyzing the menu board problems involving FabMetals. He had visited

FabMetals with Fritsch in September 2017. They met with Mark Hensley and Darrin Fultz.

He also visited FabMetals in October 2017 and in February 2018. Stratacache expected

FabMetals to do the corrective action items that were laid out by Stratacache.

{¶ 28} The first field complaint received by Stratacache involving paint adhesion

issues occurred in February 2018. The subsequent replacement efforts were

cumbersome. FabMetals was the only paint provider for Stratacache that provided parts

with catastrophic paint peeling. There were 330 units made during the hot zone from

August 23 through September 15, 2017, which included 176 single menu boards and 154

double menu boards. The hot zone dates were determined by using the information

received from customer complaints. According to Hurd, Stratacache’s customers that

were in possession of rusted menu boards wanted the menu boards replaced.

{¶ 29} Kevin McGree, the Chief Financial Officer of Stratacache, also testified. Tr.

523-543. He testified regarding Stratacache’s damages as reflected in Trial Exhibit -12-

UUUU. He noted that Exhibit UUUU set forth $2,751,174 reflecting payments to

FabMetals for all painted parts through September 2017. This number was derived from

Stratacache’s accounting records. McGree further testified that the remainder of the

dollar amounts shown in Exhibit UUUU were taken from Fritsch’s spreadsheet on

damages, which was Exhibit TTTT. McGree explained that there was a double counting

of $865,157 that needed to be removed from the original version of Trial Exhibit TTTT.

Fritsch discovered this duplication. Once that duplication was removed, Stratacache’s

total damages were $5,647,112.

{¶ 30} Nicholas Liberto, a powder coating consultant, also testified at the trial. Tr.

545-609. He had considerable experience in the powder coating industry. The bulk of

his business involved helping companies improve their powder coating or fixing problems

with the powder coating. He authored an expert report and opined that all the parts

painted by FabMetals were unreliable and subject to adhesion failure. He expressed mid-

90% confidence in his opinion. Liberto explained at trial that “[i]f they haven’t failed

already, they’re going to fail sooner or later.” His examination of the situation was based

on his review of photographs of the defective painting rather than investigations in the

field.

{¶ 31} Liberto noted that the Stratacache specifications called for the use of zinc

phosphate rather than iron phosphate. There was a 50% difference between these two

in terms of corrosion performance. The primary purposes of using powder coating were

to make the finished product look better and to delay corrosion.

{¶ 32} One of the reasons Liberto knew something went wrong in FabMetals’ -13-

processes was there was wholesale adhesion failure rather than a smaller, blister failure.

According to Liberto, either the substrate was not properly cleaned, the conversion

coating was not properly applied, or the powder coating was not properly cured. Liberto

noted that Derek St. Cyr, FabMetals’ lead painter, had not received formal training related

to the pre-treatment process for powder coating.

{¶ 33} Based on his review of the evidence, Liberto believed that FabMetals had

engaged in haphazard dumping of the water tanks and had failed to conduct chemical

checks three times per day. He opined that the failures in the paint adhesion were not

due to Stratacache’s assembly, because powder coating has remarkable flexibility, and

this was not a failure due to cracking. Rather, the paint coating never firmly bonded to

the surface.

{¶ 34} John Darrin Fultz testified next. Tr. 622-675. He was the quality manager

at FabMetals from approximately 2013 until 2019. He testified that he received an email

from George Hurd, a representative of Stratacache, who wanted to know why FabMetals

had sent him five pieces with defective paint in September 2017. Trial Exhibit F was a

September 14, 2017 “Corrective and Preventive Action Request” completed by Fultz. In

that document, Fultz stated that the root cause of the adhesion issues in the powder

coated parts sent to Stratacache was “excessive oil in line. Tried to keep line running

longer than we should have to meet customer demand.” Under the section of the request

entitled “Action Taken To Prevent Recurrence,” Fultz stated that “[w]e told our customer

that was bringing oily parts for us to powder coat to find a different supplier. Also, will use

data sheet to monitor cleaner/phosphate/sealer three times a day.” During cross- -14-

examination by opposing counsel and then questioning from the trial judge, Fultz

contradicted his prior deposition testimony. The trial judge subsequently stated that he

believed Fultz had committed perjury.

{¶ 35} Terry Weese also testified at trial. Tr. 676-683. He was the director of

purchasing with Stratacache and reported to Dave Fritsch. He testified that Ralph Idems

visited FabMetals with Josh Hellstrom before Stratacache issued any purchase orders to

FabMetals.

{¶ 36} Derek St. Cyr, a painter at FabMetals, also testified at trial. Id. at 731-770.

He was the supervisor of painting for FabMetals in 2017. He became the supervisor of

painting after receiving on-the-job training and attending a two-day painting class.

However, the painting class did not involve the pre-treatment process for powder coating.

{¶ 37} St. Cyr checked the five tanks on the pre-treatment line after arriving at work

each morning. St. Cyr conducted a visible check of Tank 2 and dumped it when needed.

St. Cyr did not fill out the chemical test forms until Stratacache began requiring them in

September 2017. Pursuant to Stratacache’s request, Fultz told St. Cyr that he needed to

keep better records relating to the wash system. St. Cyr recalled that Kreider was a

customer of FabMetals that had stamped, oily parts.

{¶ 38} After September 2017, St. Cyr tried to keep better records of tests done on

the tanks unless he got sidetracked. He testified that Scott Coate, a salesperson and

formulating chemist employed by Solutions Plus, Inc., which provided FabMetals with its

chemicals, visited FabMetals a few times per month. Solutions Plus provided pre-printed

forms on which the results could be recorded. St. Cyr stated that he sometimes -15-

conducted tests without recording the information on the forms.

{¶ 39} Coate also testified at trial. Tr. 774-801. He stated that he visited

FabMetals one or two times per month. He recalled that FabMetals processed a number

of oily parts. He explained that how often Tank 1 at FabMetals should be dumped

depended on the amount of usage and the contamination levels. Coate opined that Tank

2 should have been dumped at least every other day or more often depending on the

amount of contamination. Coate had not set up FabMetals’ pre-treatment process

specifically for Stratacache’s parts.

{¶ 40} Following the bench trial, the parties submitted briefs in lieu of closing

arguments. On July 13, 2021, the trial court issued its decision. The court noted that

Liberto, an expert in powder coating who testified on behalf of Stratacache, concluded

that the lack of an adequate process control method at FabMetals, along with a failure to

execute the finishing process, had led to the adhesion failures at issue in the lawsuit.

Decision (July 13, 2021), p. 3. The court explained that Liberto had examined several

damaged units and had concluded that all 330 units fabricated and painted by FabMetals

between August and September 15, 2017, would eventually have similar catastrophic

paint failure and would have to be replaced. The trial court then stated that no testimony

rebutted Liberto’s opinion regarding future losses. Id. While the trial court acknowledged

that Derek St. Cyr, Mark Hensley, and John Darrin Fultz had all testified that FabMetals’

powder coating and cleaning processes were appropriate, the court pointed out that all

records that could have verified these processes had “vanished” and that “Fultz perjured

himself on the witness stand and his testimony, and that of the other two witnesses on -16-

the subject, had no credibility.” Id. at 3-4.

{¶ 41} Based on the evidence presented at trial, the court concluded:

The evidence is clear and unambiguous; from a period in August and

September 2017 (up to September 15) FabMetals, Inc. was the sole painter

of Stratacache’s 330 digital signs. The paint on the digital signs failed, or

will fail, because of a failure of FabMetals to paint the signs in a workmanlike

manner, causing economic damages to Stratacache. As previously found,

the direct evidence of the sign’s failure is the signs themselves (Ex KKK),

the testimony of Nicholas Liberto and the admission of FabMetals that it

caused the defect (Ex F). The circumstantial evidence leading to the

conclusion of a failure of the workmanlike duty is the evidence of the failure

of the product that was exclusively handled and painted by FabMetals

between August and September 2017. There is no other possible cause of

the paint failures than FabMetals’ lack of an appropriate paint process

control.

Id. at 5.

{¶ 42} The trial court then analyzed the appropriate amount of damages to award.

The court found that the information contained in Trial Exhibit XXXX relating to the

defective signs was supported by credible evidence and previous stipulations and that

Trial Exhibit TTTT was a credible spreadsheet depicting Stratacache’s damages divided

into five categories with a cutoff date of September 15, 2017. Decision, p. 6. Based on

this evidence, the court found that the damages proximately caused by FabMetals’ failure -17-

to paint 330 units in a workmanlike manner was $5,647,112. However, the trial court

noted that Stratacache had not paid $3,285,841.70 in invoices billed by FabMetals. The

court stated that “If there are non-defective units on the unpaid invoices, they should be

paid by Stratacache and deducted from the total damages owed to Stratacache.” The

court then instructed the parties “to do the calculations and report back by stipulation

within two weeks of this decision.” Id.

{¶ 43} Finally, the trial court noted its concern with Stratacache receiving a

possible windfall if not all 330 units were replaced. The court suggested a procedure

whereby FabMetals would pay the entire damage amount into a fund and Stratacache

would withdraw only those amounts going to replacements that actually occurred. And

“[i]f, after five years (or such other time agreed) not all 330 units need to be replaced, any

money left over in the fund will be returned to FabMetals.” Id. at 6-7. However, the trial

court stated that it did not have the power to order such a procedure and noted that it was

only a suggestion. Id. at 7. The parties did not adopt such a procedure.

{¶ 44} On September 10, 2021, the parties filed a stipulation with the court that

provided, in relevant part: “The invoices totaling $3,285,841.70 are for individual parts

(as opposed to units themselves); however, with that noted the invoices making up the

$3,285,841.70 do not include parts fabricated and painted from August to September 15,

2017 that were used to assemble the 330 defective units.” Both parties noted that they

were not waiving any of their rights to contest whether either party was entitled to

damages.

{¶ 45} On September 17, 2021, FabMetals filed a petition for bankruptcy in the -18-

United States District Court for the Southern District of Ohio, which triggered an automatic

stay. On October 25, 2021, the bankruptcy court modified the automatic stay in order to

allow the Montgomery County Common Pleas Court to issue a final, appealable judgment

in this action between Stratacache and FabMetals.

{¶ 46} On January 21, 2022, FabMetals filed a motion to supplement its post-trial

brief to address damages issues. On July 12, 2022, the trial court issued a “Supplemental

Decision and Ruling on Motions.” The court noted that FabMetals, after hiring new

counsel, was attempting to re-litigate the issue of damages. The trial court explained that

it would consider the stipulation entered by the parties that the court had specifically

requested in its July 13, 2021 Decision. The trial court then concluded that Stratacache

“has proved by a preponderance of the evidence that it has been damaged in the amount

of $5,647,112 as a proximate cause [sic] of [FabMetals’] failure to perform its contract in

a workmanlike manner. [FabMetals] has proved that it delivered non-defective products

to [Stratacache] in the amount of $2,072,053 for which it has not been paid. The net

amount due [Stratacache] is $3,575,059.” The court then requested that the parties file

a proposed judgment entry reflecting this decision.

{¶ 47} Pursuant to the trial court’s instructions, Stratacache filed a proposed final

judgment entry. FabMetals then filed a motion for clarification and notice of objection to

the proposed final judgment entry. On August 24, 2022, the trial court overruled the

motion for clarification.

{¶ 48} The trial court entered a final judgment on November 18, 2022, awarding

$3,575,059 to Stratacache and ordering FabMetals to pay the costs of the action. -19-

FabMetals filed a timely notice of appeal from that judgment.

II. A Portion of the Trial Court’s Award of Damages to Stratacache Was Against

the Manifest Weight of the Evidence

{¶ 49} FabMetals’ first assignment of error involves the trial court’s calculation of

damages that were incurred by Stratacache. FabMetals states:

THE TRIAL COURT ERRED BY AWARDING ALL THE DAMAGES

DEFENDANT-APPELLEE STRATACACHE SOUGHT.

{¶ 50} “The appropriate standard of review when reviewing a determination of

damages is manifest weight of the evidence” Langenfeld v. Hard Working Young Men,

LLC, 5th Dist. Stark No. 2019CA00030, 2019-Ohio-4567, ¶ 9, citing Oldendick v. Crocker,

2016-Ohio-5621, 70 N.E.3d 1033, ¶ 56 (8th Dist.). “Weight of the evidence concerns ‘the

inclination of the greater amount of credible evidence, offered in a trial, to support one

side of the issue rather than the other.’ ” (Emphasis sic.) Eastley v. Volkman, 132 Ohio

St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 12, quoting State v. Thompkins, 78 Ohio

St.3d 380, 387, 678 N.E.2d 541 (1997). “Weight is not a question of mathematics, but

depends on its effect in inducing belief.” Id. In determining whether a verdict is against

the manifest weight of the evidence, an appellate court reviews the entire record, weighs

the evidence and all reasonable inferences, considers the credibility of witnesses, and

determines whether, in resolving conflicts in the evidence, the fact-finder clearly lost its

way and created such a manifest miscarriage of justice that the conviction must be

reversed and a new trial ordered. Id. at ¶ 20. When a court of appeals determines that -20-

a verdict is against the weight of the evidence, it should remand the cause for a new trial.

Id. at ¶ 22, citing Hanna v. Wagner, 39 Ohio St.2d 64, 66, 313 N.E.2d 842 (1974). “App.R.

12(D), in conjunction with Civ.R. 42(B), authorizes a Court of Appeals to order the retrial

of only those issues, claims or defenses the original trial of which resulted in prejudicial

error, and to allow issues tried free from error to stand.” Mast v. Doctor's Hosp. N., 46

Ohio St.2d 539, 541, 350 N.E.2d 429 (1976).

{¶ 51} The discretionary power of an appellate court to grant a new trial is to be

exercised only in the exceptional case in which the evidence weighs heavily against the

judgment. State v. Lang, 129 Ohio St.3d 512, 2011-Ohio-4215, 954 N.E.2d 596, ¶ 220,

citing Thompkins at 387. We make every reasonable presumption in favor of the

judgment and any finding of facts; if the evidence is susceptible of more than one

construction, we are bound to interpret it in favor of the fact-finder's ruling. Eastley at ¶

21, citing Seasons Coal Co. Inc. v. Cleveland, 10 Ohio St.3d 77, 80, 461 N.E.2d 1273

(1984), fn. 3.

{¶ 52} “Contract damages are intended to place the injured party in the same

position it would have been had the contract not been breached.” (Citation omitted.)

Eckel v. Bowling Green State Univ., 2012-Ohio-3164, 974 N.E.2d 754, ¶ 59 (10th Dist.).

The party seeking damages bears the burden of proving damages. Broadvue Motors,

Inc. v. Maple Hts. Chief of Police, 135 Ohio App.3d 405, 410, 743 N.E.2d 417 (8th

Dist.1999). “Damages cannot be awarded if the [party] fails to meet this burden by

presenting adequate proof.” Id., citing Henderson v. Spring Run Allotment, 99 Ohio

App.3d 633, 641, 651 N.E.2d 489 (9th Dist.1994). “Evidence of damages must be shown -21-

with a reasonable degree of certainty,” and a party “may not recover speculative

damages.” (Citation omitted.) Id. The party “must prove the extent of his damages to be

entitled to compensation.” Id., citing Akro-Plastics v. Drake Industries, 115 Ohio App.3d

221, 226, 685 N.E.2d 246 (11th Dist.1996).

{¶ 53} The parties and the trial court addressed Stratacache’s breach of contract

claim as a breach by FabMetals of its duty to perform in a workmanlike manner. “Ohio

common law imposes upon builders and contractors a duty to perform their services in a

workmanlike manner.” (Citations omitted.) Jarupan v. Hanna, 173 Ohio App.3d 284,

2007-Ohio-5081, 878 N.E.2d 66, ¶ 19 (10th Dist.). “This implied duty ‘requires a

construction professional to act reasonably and to exercise that degree of care which a

member of the construction trade in good standing in that community would exercise

under the same or similar circumstances.’ ” Id., quoting Seff v. Davis, 10th Dist. Franklin

No. 03AP-159, 2003-Ohio-7029, ¶ 19. “When a builder or contractor breaches its implied

duty to perform in a workmanlike manner, the cost of repair is the proper measure of

damages.” (Citations omitted.) Id. “ ‘[T]he repair of deficient work may involve both

additional activities necessitated by the deficient work, and activities previously omitted,

but necessary, to proper performance in a workmanlike manner.’ ” Id., quoting Barton v.

Ellis, 34 Ohio App.3d 251, 254, 518 N.E.2d 18 (10th Dist.1986).

{¶ 54} Based on the purchase orders submitted by Stratacache to FabMetals and

the nature of what was ordered, the contractual relationship between FabMetals and

Stratacache appeared to be a contract for the sale of goods, which is governed by Ohio’s

version of the Uniform Commercial Code, R.C. 1302.01, et seq. “For a sale of goods, if -22-

the goods or the tender of delivery fail in any respect to conform to the contract, the buyer

may reject the whole, accept the whole, or accept any commercial unit or units and reject

the rest.” Anixter, Inc. v. Rohr Corp., 1st Dist. Hamilton No. C-030690, 2004-Ohio-3623,

¶ 9, citing R.C. 1302.60. “If the goods do not conform to the contract, the buyer can

recover the difference between the contract price and the cover price, plus incidental

damages and consequential damages, less expenses saved in consequence of the

seller's breach.” Id. at ¶ 10, citing Freitag v. Bill Swad Datsun, 3 Ohio App.3d 83, 443

N.E.2d 988 (10th Dist.1981). “Incidental damages resulting from the seller's breach

include expenses reasonably incurred in inspection, receipt, transportation, and care and

custody of goods rightfully rejected, any commercially reasonable charges, expenses, or

commissions in connection with effecting cover, and any other reasonable expenses

incident to the delay or other breach.” Id., citing R.C. 1302.89(A). “Incidental and

consequential damages only involve curing or replacing defective goods” and “do not

involve replacing other functioning products.” Id. at ¶ 13, citing R.C. 1302.89.

{¶ 55} Regardless of whether the trial court should have analyzed damages under

a breach of an implied duty to perform a service in a workmanlike manner or as a breach

of a contract for the sale of goods, the focus of contract damages is on placing the injured

party in the position it would have been if the breaching party had performed its duty. The

trial court awarded $3,575,059 in damages to Stratacache as the amount that was

required to place Stratacache in the position it would have been if FabMetals had

delivered non-defective parts.

{¶ 56} In making its determination, the trial court credited all of the damages that -23-

Stratacache identified in Trial Exhibits OOOOO.5 and TTTT and then subtracted the

amount of the invoices related to the parts FabMetals delivered for which Stratacache

had refused to pay. Trial Exhibits OOOOO.5 and TTTT showed total damages of

$5,647,112.00. This total was made up of the following: 1) $3,065,242 consisting of

FabMetals Purchased Products ($2,751,174), Retrieval Costs of Freight ($22,386) and

Installers ($27,662), and Lost Revenue from Retrievals ($264,020); and 2) $2,581,870

consisting of tooling costs for 6 teams ($20,063.58), total cost for field checks and prep

($154,956.23), retrieval cost for labor and freight ($632,295.30), total cost to replace

painted parts ($909,398.38), and cost of down time at the Stratacache facility

($865,157.00).

{¶ 57} FabMetals contends that the trial court erred in several ways in awarding all

of the damages that Stratacache sought. We will address each of these arguments in

turn. But before we do so, it is necessary for us to address Stratacache’s argument made

throughout its appellate brief that FabMetals waived many of the issues it raises in this

assignment of error by not objecting to evidence introduced at trial and by stipulating to

the use of summary evidence pursuant to Evid.R. 1006.

{¶ 58} The fact that FabMetals may or may not have objected to the introduction

of exhibits and testimony at trial does not function as a complete waiver of all arguments

relating to whether Stratacache adequately supported its claims for damages. Rather, a

failure to object at trial to the admission of evidence would just limit FabMetals’ ability to

question on appeal whether that particular evidence should have been excluded from

evidence at trial. Further, any failure by FabMetals to adequately cross-examine -24-

Stratacache’s witnesses who testified relating to damages, while constituting a lost

opportunity to explore potential weaknesses in Stratacache’s evidence of damages, does

not preclude FabMetals on appeal from challenging whether Stratacache carried its

burden of proof on damages. Along these same lines, the stipulation entered into by the

parties allowing for the use of summary evidence under Evid.R. 1006 precludes

FabMetals from challenging on appeal whether the use of summary evidence was proper

under Evid.R. 1006. However, the stipulation does not preclude FabMetals from arguing

on appeal that Stratacache’s damages calculations were inaccurate, Stratacache was not

entitled to some of those damages, or that Stratacache failed to lay the proper foundation

for the witness testifying regarding those damages. With that in mind, we will now

consider FabMetals’ arguments that the trial court should not have awarded some of the

damages Stratacache requested.

{¶ 59} First, FabMetals contends that the trial court erred in awarding a refund for

all of the painted parts provided by FabMetals during the hot zone despite the fact that

only two of the 21 parts provided by FabMetals for the outdoor boards were defective.

According to FabMetals, “there is no basis in the record for refunding more than the back

panels’ purchase price: $125,875.95.” Appellant’s Brief, p. 16, citing Trial Exhibit TTTT,

Tab 11. Stratacache responds that its expert witness, Liberto, testified that all FabMetals

painted parts were unreliable and subject to adhesion failure and that Fritsch testified that

Stratacache was unable to use any FabMetals parts following its discovery of the

reliability issues. Appellee’s Brief, p. 9-10, citing Tr. 118, 595.

{¶ 60} Fritsch testified at trial that he had investigated the option of stripping off the -25-

defective paint and trying to repaint the product. Stratacache decided this was not a

viable option because of the cost of stripping this type of paint, purchasing new paint, and

the labor hours to apply the new paint. Further, Fritsch testified that the removal of certain

parts from the assembled menu boards was a destructive process that would not allow

just the defective parts to be replaced while allowing the non-defective parts to be used.

In particular, Fritsch testified that:

[Y]ou can’t really replace, even in-house, just the back panel. The

way that we put it together and it’s riveted together and everything is glued

together on the seams to make it watertight for outdoor use, when you take

the back panel off, the way it - - the top comes over, you have to un - - you

have to actually drill out the rivets. You have to undo - - a lot of the

components are wrapped around it, and since it destroys the side panels,

when you are drilling everything out and pulling those off, you - - you then

a lot of times will have to wrap around to the front to pull the side panels off.

In most cases, when you’re going to repair one of those, you’re replacing

pretty much the entire outside shell of that.

Tr. 103-104.

{¶ 61} George Hurd also testified that the whole unit had to be replaced due to

FabMetals’ defective work. Id. at 451-452. Therefore, the trial court’s decision to not limit

damages to just the cost of replacing the two defective powder coated parts on each

defective menu board was not against the manifest weight of the evidence.

{¶ 62} Next, we will address FabMetals’ second and sixth issues together because -26-

they both concern the idea that the trial court awarded duplicative damages to

Stratacache. In its second issue, FabMetals contends that the trial court improperly

awarded a double recovery to Stratacache by ordering the refund of the purchase price

while also awarding replacement costs. According to FabMetals, the trial court’s award

allows Stratacache to pay nothing, not even the contract price, for the parts, because the

award gave Stratacache both the purchase price and cover costs. Appellant’s Brief, p.

16; Reply Brief, p. 4.

{¶ 63} Stratacache responds that FabMetals misunderstands the calculation of

damages. Stratacache states that the $909,398.38 for “Total Cost to Replace” were the

costs that Stratacache must incur in addition to the $2,751,174 refund amount in order

for Stratacache to rebuild and replace the 330 defective outdoor display menu boards.

Appellee’s Brief, p. 10, citing Tr. 497, 502. As Stratacache argues, “[i]t defies logic that

$909,398.38 would be enough to compensate Stratacache for the replacement of over

$2.5 million in defective parts, the cost of which has increased in the intervening years.”

Id. at 10-11.

{¶ 64} In its sixth issue, FabMetals argues the trial court erred in awarding

$154,956.23 in inspection costs when it had already been decided that all of the displays

would be replaced. In other words, “no one needs to inspect displays for signs of failure.”

Appellant’s Brief, p. 21. Stratacache responds that “[e]ven though Stratacache will be

replacing each faulty ODMB, it must send inspection teams to each site to perform quality

checks, assess damage, coordinate removal requirements and logistics, and evaluate

environmental concerns — all of which requires time, expertise, and money.” Appellee’s -27-

Brief, p. 17.

{¶ 65} As we noted above, in determining the proper amount of damages, the goal

is to place the injured party in the position it would have been if the breaching party had

fully performed under the contract. Given that guideline, we do not agree with FabMetals

that the trial court necessarily awarded a double recovery or put Stratacache in a better

position than it would have been by awarding both the damages labeled “Fab Metal

Purchased Products” and “Total Cost to Replace” in Exhibits OOOOO.5 and TTTT. The

$2,751,174 identified as “Fab Metal Purchased Products” represented the amount

FabMetals had paid for the defective menu boards. Therefore, this amount was the

refund of the purchase price. However, the trial court also awarded an additional

$909,398.38, which allegedly constituted the money in addition to the refund amount that

Stratacache would need in order to buy the replacement powder coated parts to assemble

the replacement menu boards for its customers. This was based on Fritsch’s testimony

that Stratacache needed an additional $909,398.38 due to the increase in costs for parts

that occurred between the time of breach and the time the replacement costs were

calculated. Presumably, Stratacache would then use this money to purchase the

replacement menu boards for its customers. Therefore, Stratacache would not be

keeping the “refunded” amount. Rather, Stratacache would be paying the total of

$3,660,572.80 to a third party to make and provide the replacement, non-defective parts

that FabMetals had been contractually obligated to provide but did not. This idea is

referred to as the cover cost. As such, we cannot conclude that the trial court necessarily

provided a double recovery to Stratacache. However, that does not end our analysis of -28-

these two issues.

{¶ 66} Fritsch also testified about the alleged need to send inspection teams to

customer sites in addition to the teams that were going to remove the defective menu

boards and install the replacement menu boards. Tr. 513-518. According to Fritsch, the

inspection teams would go through a quality checklist provided by George Hurd, which

would include cross hatch testing to determine whether the menu board “was potentially

going to catastrophically fail due to a failed adhesion test.” Id. at 517. He stated the

following when asked about units that did not need to be removed:

Q. And if units don’t need to be removed, what do they do?

A. There’s still going to - - I mean, they’re still going to check all the units

on the site. If it doesn’t need to be removed, it doesn’t. But in most cases,

I can tell you there’s - - from what we’ve seen, at least one of them on site,

and we’ve already had some of the customers tell us they want all of them

removed.

Id. at 515.

{¶ 67} Fritsch’s testimony was direct evidence that Stratacache was not

automatically replacing all 330 of the defective menu boards in the field. Rather,

Stratacache appeared to be only replacing those menu boards that showed clear visible

signs of adhesion failure, failed the cross hatch test, or the customer affirmatively stated

it wanted replaced. This testimony by Fritsch supported the concern the trial court noted

in its July 13, 2021 decision that Stratacache would receive a windfall if it ultimately does

not replace some of the 330 menu boards at issue in this lawsuit. At the time of trial, -29-

Stratacache had only replaced 14 menu boards in a little over three years since

discovering the powder coating defects in early 2018. Presumably, the over 300 menu

boards that had not yet been replaced at the time of trial were still operating in the field at

several quick-service restaurant locations. As such, Stratacache (and its quick-service

restaurant customers) continued to receive value from the parts, even the defective ones,

supplied by FabMetals. No testimony was presented that the defective menu boards did

not work for their intended purpose of providing information to the customers in the drive-

thru lanes at McDonald’s. To the contrary, George Hurd testified on behalf of Stratacache

that the paint issue was a “strictly cosmetic” issue because the peeling of the paint did

not affect the operation of the unit itself. Tr. 409.

{¶ 68} We note that FabMetals did not submit any expert testimony in response to

Liberto’s testimony that the powder coating would fail eventually or any testimony in

response to Stratacache’s evidence that corrosion would eventually result from the

powder coating failures. Therefore, it is clear that Stratacache suffered some damages

due to the defective parts provided by FabMetals. But Liberto’s expert testimony did not

resolve the issue of whether Stratacache proved that it was entitled to the refund of the

entire amount paid to FabMetals plus the additional $909,398.38 for the price of

replacement parts that allegedly exceeded the original contract price with FabMetals.

Stratacache was only entitled to the amount of damages that it could prove to a

reasonable degree of certainty. Any damages already incurred to replace defective menu

boards and any damages that will actually be incurred to replace defective menu boards

should be awarded to Stratacache. But the record does not support the trial court’s award -30-

of damages based on the assumption that all of the menu boards will actually be replaced.

At this point, over six years have passed since the first complaint was reported by a

McDonald’s location. The testimony of record established that a non-defective menu

board has a design life of at least ten years. Ten years from the date the parts were made

and painted would be September 2027. If only a minority of menu boards have been

replaced to this point, then Stratacache and a majority of its quick-service restaurant

customers have received working menu boards for over one-half of the expected design

life of the menu boards. Further, if any of the remaining quick-service customers decide

not to replace the menu boards or choose to switch to and pay for a newer menu board

offered by Stratacache, then Stratacache would receive a windfall if we were to affirm the

trial court’s judgment. Although Fritsch testified that Stratacache planned to replace all

the menu boards made during the hot zone, his testimony also made it clear that not all

the menu boards made during the hot zone were being replaced. Upon this record, we

must conclude that the trial court’s award of damages based on the premises that all the

defective menu boards will be replaced and that Stratacache received no value from the

defective menu boards was against the manifest weight of the evidence.

{¶ 69} Regarding the claims by Stratacache that replacement parts cost more now

than at the time Stratacache paid FabMetals for the original parts, Fritsch testified that he

sought multiple quotes on what it would cost to have another supplier make the identical

powder coated parts that FabMetals failed to properly make. Hensley reviewed the

estimates provided by Fritsch and testified on behalf of FabMetals that these additional

amounts Stratacache sought were excessive and that he could call several providers that -31-

would quote much lower costs. While Hensley admitted that costs of certain parts had

risen since 2017, he believed Stratacache’s numbers were unnecessarily inflated. We

note that the trial court found Hensley was not credible on the issue of liability. While this

does not necessarily mean Hensley also lacked credibility on the issue of damages, we

conclude the trial court’s finding that the cost of the parts necessary to replace the menu

boards will exceed the original contract price for the parts was not against the manifest

weight of the evidence. Fritsch laid out the actual estimates he received to replace the

menu boards at issue. Hensley, on the other hand, just testified generally that he believed

some of the estimates were inflated and that he could find lower estimates. We agree

with the trial court that Stratacache should be entitled to the additional cost to replace the

defective menu boards that resulted from the fact that the prices of the necessary parts

have increased since 2017.

{¶ 70} Further, while we agree with FabMetals’ basic premise that the award of

damages for the use of inspection teams does not make sense if all the menu boards are

eventually going to be replaced anyway, we believe the testimony provided by

Stratacache explaining the reason for using the inspection teams makes sense,

especially if inspections have alleviated the need to replace a number of the outdoor menu

boards at issue. Therefore, we conclude that the trial court’s award of $154,956.23 in

inspection costs to Stratacache was not against the manifest weight of the evidence.

{¶ 71} Having found that the amount of damages awarded to Stratacache to

replace the defective menu boards was against the manifest weight of the evidence, the

issue becomes how the trial court should proceed on remand. As noted above, a new -32-

trial is the relief typically granted when a verdict is against the manifest weight of the

evidence. In Akron & Barberton Belt RR. Co. v. Horvath, 9th Dist. Summit No. 12203,

1986 WL 4878 (Apr. 23, 1986), the court of appeals concluded there was “not a total lack

of evidence with respect to the claimed damages,” but that the evidence on damages fell

“short of the requirements of Ohio law.” Id. at *2. In this regard, the court stated:

There is present in the trial transcript testimony on behalf of the

appellee relating to his profits and to his expenses. However, in the opinion

of this court, the detailed specification of labor costs, material and

equipment costs, and an estimate as to the time required to complete the

Fairlawn Branch project are not clearly presented. These should be

supported by evidence, based on a reasonable certainty, in a manner which

would allow the jury to render an intelligent, logical, and rational assessment

of damages which would reasonably compensate appellee for the

appellant's failure to allow appellee to work on the Fairlawn Branch project

under the terms of their agreement.

We hold, therefore, that the amount of the damages which resulted

from the appellant's breach of contract are uncertain, but that the fact that

they are uncertain does not invalidate the judgment in favor of appellee. We

further hold that in returning a verdict on the liability issues in favor of

appellee, substantial justice has been rendered.

Id. The court, therefore, vacated the jury’s damage award and remanded the case for a

new trial on damages, the only issue as to which there was prejudicial error. Id. at *3. -33-

{¶ 72} Similarly, in this case, Stratacache has proven that FabMetals is liable and

that Stratacache suffered damages resulting from FabMetals’ provision of defective parts,

but it did not establish with a reasonable degree of certainty the extent of its damages.

Therefore, we will remand the cause to the trial court to conduct a new trial to determine

the amount of damages Stratacache (1) has incurred with respect to defective menu

boards that have already been replaced; and (2) will incur with respect to defective menu

boards that will actually be replaced by September 2027, the month in which the menu

boards finish the tenth year of their design life.

{¶ 73} In its third issue within this assignment of error, FabMetals argues that the

trial court erred in awarding $264,020 in lost revenue because there was no testimony as

to how this number was calculated and no proof offered of expenses and profit margin.

According to FabMetals, no witness identified the prices customers paid Stratacache for

the displays, no witness testified that Stratacache would have sold more displays but for

having to retrieve the 14 displays at issue, and no witness accounted for expenses and

profit margin. Appellant’s Brief, p. 17. Further, FabMetals points out that the outdoor

menu board project at issue in this case was a new business line for Stratacache and

such new or speculative business pursuits generally require greater proof in order to

award damages. Id.

{¶ 74} Stratacache responds that the $264,020 the trial court awarded it for lost

revenue damages represented damages already incurred by Stratacache at the time of

the trial due to the fact Stratacache was forced to provide two outdoor menu boards to

certain customers for the price of one. According to Stratacache, FabMetals’ failure to -34-

object or raise an issue at trial over McGree’s testimony about lost revenue waived the

argument on appeal.

{¶ 75} We agree with FabMetals that the trial court’s award of $264,020 for lost

revenue damages was against the manifest weight of the evidence. There was no

testimony as to how this number was calculated and no proof offered of expenses and

profit margin. Stratacache did not identify the prices that customers paid Stratacache for

the outdoor menu board displays, and no witness accounted for expenses and profit

margin. “Although lost profits need not be proven with mathematical precision, they must

be capable of measurement based upon known reliable factors without undue

speculation.” (Citation omitted.) Telxon Corp. v. Smart Media of Delaware, Inc., 9th Dist.

Nos. 22098, 22099, 2005-Ohio-4931, ¶ 108. Further, the trial court awarded damages

for the replacement of all parts necessary to replace the 330 menu boards made during

the hot zone. Presumably, the location at issue in this $264,020 award was one of the

95 locations identified at trial that was affected by the defective parts made during the hot

zone, and therefore Stratacache had already been awarded damages to cover the

replacement of the defective menu board at that particular location. During the new trial

on damages related to the cost to replace the defective menu boards, however,

Stratacache should be permitted to introduce evidence related to lost revenue damages.

Similarly, FabMetals should be permitted to introduce evidence related to revenue

Stratacache received from the defective menu boards.

{¶ 76} In its fourth and fifth issues, FabMetals takes issue with the labor rates

claimed by Stratacache. In its fourth issue, FabMetals states that the trial court erred in -35-

awarding $100 per hour for labor without any testimony from anyone with personal

knowledge of the labor rates and why the rates jumped from just over $50 per hour to

$100 per hour. According to FabMetals, Stratacache failed to meet its burden of proof by

offering inconsistent labor rates and not offering a witness with personal knowledge to

explain how the labor rate was calculated.

{¶ 77} Stratacache responds that FabMetals is essentially arguing that all the

underlying evidence of the labor calculation needed to be introduced into evidence “even

though FabMetals stipulated that Stratacache did not have to do that that and could rely

upon only summary evidence.” Appellee’s Brief, p. 12. Further, Stratacache argues that

the primary summary spreadsheet (Exhibit TTTT) contained plain and unambiguous

calculations of Stratacache’s labor rates, and that Fritsch testified on both direct and

cross-examination regarding exactly how Stratacache calculated the amount of labor

hours to rework defective outdoor display menu boards.

{¶ 78} In its fifth issue, FabMetals argues that the trial court erred in awarding

$865,157 in damages for downtime when Stratacache continued to assemble displays

during the alleged downtime and no one testified regarding the $100 per hour labor rate

associated with this downtime. Stratacache responds that it was not required to present

the documentation underlying its labor calculations when it was stipulated that

Stratacache could rely upon and present only summary evidence. Appellee’s Brief, p. 14.

Further, Stratacache points out that Fritsch provided testimony explaining the summary

evidence and establishing that an extensive shutdown and investigation at Stratacache

had occurred. Id. at 14-15. -36-

{¶ 79} “Among the items for which a buyer aggrieved by the seller's breach of

contract may recover from the seller, as consequential damages, provided that it is proven

that they were caused by the seller's breach, are expenses for idle or down time, such as

overhead expenses incurred while production is shut down because of defects in the

goods, or while the buyer is attempting to repair the goods, or because of delay due to

the seller's failure to deliver the goods on time.” (Citations omitted.) 24 Lord, Williston

on Contracts, Section 66:70 (4th Ed.2023). “Consequential damages for idle or down

time are generally deemed to have been within the contemplation of the parties at the

time of contracting. Such damages have been allowed for the variable costs involved for

labor, rental expenses for equipment or facilities, lost plant time, or lost production

capacity, and for loss of income.” Id.

{¶ 80} Although Fritsch testified that a major investigation began at Stratacache in

February 2018 over the cause of the catastrophic paint failure at a McDonald’s location,

no witness explained what orders or work Stratacache was unable to perform during this

investigation. If Stratacache ultimately did not lose out on any orders during the

investigation, then Stratacache did not suffer any additional damages as a result of this

“downtime.” It is reasonable to conclude from the evidence presented at trial, however,

that a number of Stratacache’s employees were diverted from their normal work in order

to assist in the investigation of the adhesion failures in the field. It would be proper to

compensate Stratacache for the amount it actually paid the employees who were

assisting in this investigation, since they were unable to do their normal work during this

time. -37-

{¶ 81} Fritsch did not testify that Stratacache actually paid its investigating

employees $100 per hour during the investigation process. Rather, this $100 hourly rate

appears to have built into it more than just the hourly rate paid to the employees who

were investigating the cause and extent of the paint failures in the field. According to Tab

2 to Exhibit TTTT, Stratacache spent 8,651.57 hours of employee time from February

through May 2018 investigating the cause and extent of catastrophic paint failures on the

outdoor menu boards. This exhibit, however, did not lay out the actual hourly rate paid

to the employees.

{¶ 82} George Hurd also testified about the lengthy investigation Stratacache

performed once it began learning of adhesion failures in the field. During his testimony,

Hurd referred to payroll records contained in Trial Exhibit CCC. These records showed

a normal hourly rate of up to $18 an hour and some slightly higher overtime rates.

{¶ 83} Based on our review of the testimony and the exhibits introduced at trial, we

must conclude that the trial court’s finding that Stratacache suffered $865,157 in damages

for downtime was against the manifest weight of the evidence. While Stratacache

established that it suffered some downtime and some amount of resulting damages from

this downtime, it failed to support its use of $100 as the proper hourly rate to be applied

to the lost hours due to the downtime. Therefore, we must reverse the trial court’s award

of $865,157 in damages due to downtime. On remand, the trial court shall hold a new

trial to determine the proper amount of damages to award Stratacache for the downtime

that occurred when the cause of the defective parts was being investigated.

{¶ 84} In its seventh and final issue within this assignment of error, FabMetals -38-

contends that it was not reasonably foreseeable that delivering one defective part like the

back panel would require replacement of the entire product. According to FabMetals,

while it was foreseeable that peeling paint could cause damages and require corrections,

FabMetals did not know and had no reason to know that metal parts could not be

repainted or replaced in the field on a fully functioning outdoor display menu board. In

short, “[h]aving contracted only to provide metal parts, FabMetals did not know and had

no reason to know that the displays would need to be removed and destructively

disassembled to fix peeling exterior paint on a single metal part.” Appellant’s Brief, p. 22.

{¶ 85} Stratacache responds that FabMetals did not contest the foreseeability of

Stratacache’s damages whatsoever at trial and the argument is waived on appeal.

Appellee’s Brief, p. 17. Further, Stratacache argues that its damages were foreseeable

because they were the natural and probable consequence of FabMetals’ breach.

According to Stratacache, the outdoor display menu boards were “constructed in such

fashion that they cannot be repaired by only replacing back panels.” Id. at 18.

{¶ 86} We do not find FabMetals’ argument on this issue persuasive.

Representatives of FabMetals and Stratacache met before Stratacache decided to send

purchase orders to FabMetals. Stratacache explained that the parts made by FabMetals

would be used for an outdoor menu board that would be assembled by another company.

Given that information, it was reasonably foreseeable that the provision of defective parts

with catastrophic paint failures could result in the need to replace the entire assembled

menu board, especially when the increased likelihood of corrosion was involved.

{¶ 87} In summary, we will reverse the following awards of damages as against -39-

the manifest weight of the evidence: $2,751,174 for “FabMetals Purchased Products,”

$909,398.38 for “Total Cost to Replace,” $264,020 for “lost revenue,” and $865,157.00

for “downtime.” On remand, a new trial shall be held to determine the appropriate amount

of damages for these categories. The other categories of damages awarded to

Stratacache will be affirmed.

{¶ 88} The first assignment of error is sustained in part and overruled in part.

III. The Trial Court Should Have Ordered Stratacache to Pay for All Non-Defective

Goods It Had Ordered from FabMetals

{¶ 89} FabMetals’ second assignment of error states;

THE TRIAL COURT ERRED BY FAILING TO AWARD DAMAGES

TO PLAINTIFF-APPELLANT FABMETALS FOR COSTS IT INCURRED

AND PARTS IT FABRICATED BUT WAS PREVENTED FROM

DELIVERING.

{¶ 90} This assignment of error involves FabMetals’ action on account relating to

non-defective goods that were ordered by Stratacache but for which Stratacache never

provided payment. The trial court found that the total amount Stratacache had ordered

but failed to pay for was $3,285,841.70. After the parties submitted a stipulation, the trial

court found that Stratacache was required to pay FabMetals for the $2,072,053 portion of

these parts that FabMetals had delivered to Stratacache. The trial court did not order

Stratacache to pay the remaining $1,213,788.70 for parts that were ordered and made

but never delivered to Stratacache. -40-

{¶ 91} FabMetals contends that the trial court erred in failing to award damages to

it for parts it had produced for Stratacache pursuant to a purchase order but for which

Stratacache had refused to accept delivery and to pay. It argues that, because

Stratacache cancelled its purchase orders on December 9, 2017, before learning of

adhesion failures occurring at its customers’ locations, Stratacache should be responsible

for both delivered and undelivered parts. Appellant’s Brief, p. 23. FabMetals argues that,

because the trial court awarded damages to FabMetals for the parts it delivered for which

Stratacache did not pay, it also should have awarded damages for the parts that

FabMetals had to store after Stratacache cancelled the contract. According to FabMetals,

“There is no distinction. None of those parts (delivered or not) had anything to do with

the ‘hot zone,’ and Stratacache had no reason — other than its own convenience — for

rejecting them.” Id. at 24.

{¶ 92} Stratacache responds that “FabMetals did not put on a case at trial for the

additional damages it claims on appeal.” Appellee’s Brief, p. 19. Further, Stratacache

contends that there is “a distinction between delivered parts and undelivered parts that

FabMetals fails to acknowledge. For parts delivered to Stratacache, it arguably received

some value even though they were not used. For parts that were never delivered,

Stratacache received no value.” Id. at 21. Stratacache also argues that FabMetals failed

to mitigate its alleged damages related to the undelivered parts. According to

Stratacache, “FabMetals could have mitigated its alleged damages, for instance, by

disposing of the parts for at least scrap value, at any time, but it did not.” Id. at 22.

{¶ 93} As we noted above, the parties filed a stipulation that the total unpaid -41-

invoices totaling $3,285,841.70 did not include any parts fabricated and painted from

August to September 15, 2017, that were used to assemble the 330 defective outdoor

menu boards. We agree with FabMetals that Stratacache was responsible for paying for

non-defective parts it had ordered but subsequently refused to accept or pay for. R.C.

1302.82.

{¶ 94} Stratacache raised failure to mitigate damages as an affirmative defense to

FabMetals’ claims. “ ‘It is a cardinal rule of contracts that an injured party is under a duty

to mitigate its damages and may not recover those damages which it could have

reasonably avoided.’ ” Lucky Discount Lumber Co., Inc. v. Machine Tools of Am., 181

Ohio App.3d 64, 2009-Ohio-534, 907 N.E.2d 1222 (2d Dist.), ¶ 11, quoting S & D

Mechanical Contrs., Inc. v. Enting Water Conditioning Sys., Inc., 71 Ohio App.3d 228,

238, 593 N.E.2d 354 (2d Dist.1991). However, “[t]he rule requiring one injured by a

wrongful act or omission of another to minimize the damages resulting does not require

a party to make extraordinary efforts, or to do what is unreasonable or impracticable.

Ordinary and reasonable care, diligence and prudence are the measure of the duty. * * *

The efforts of the injured party to prevent or lessen [its] damages include a reasonable

expenditure of money as part of [its] damages.” (Citations omitted.) Foust v. Valleybrook

Realty Co., 4 Ohio App.3d 164, 168, 446 N.E.2d 1122 (6th Dist.1981). “[T]he obligation

to mitigate does not require the party to incur extraordinary expense and risk.” Chicago

Title Ins. Co. v. Huntington Natl. Bank, 87 Ohio St.3d 270, 276, 719 N.E.2d 955 (1999),

citing S & D Mechanical Contrs., Inc. “[A] risk is extraordinary if the hazard it presents is

substantially greater than would otherwise exist, due to some particular and unusual -42-

circumstance.” Lucky Discount at ¶ 16.

{¶ 95} Stratacache did not introduce any evidence regarding the scrap value of the

parts manufactured and stored by FabMetals or what efforts or costs would have been

necessary to sell the parts for scrap. Therefore, we cannot conclude that FabMetals failed

to mitigate its damages. Further, we note that FabMetals also raised an affirmative

defense of failure to mitigate damages. The argument raised by Stratacache that

FabMetals should have sold the undelivered parts for scrap would equally apply to

Stratacache with regard to the defective menu boards that it removed from its customers.

But, on the record before us, we must conclude that neither party established that the

other failed to mitigate its damages by not selling the parts in their possession for scrap.

{¶ 96} The second assignment of error is sustained. FabMetals is entitled to an

award of an additional $1,213,788.70 for the non-defective parts made by FabMetals for

which Stratacache did not pay.

IV. Conclusion

{¶ 97} Based on our resolution of the two assignments of error, we will affirm the

judgment of the trial court in part, reverse the judgment in part, and remand the cause for

a new trial on damages. As explained above, the trial court will need to hold a new trial

to determine the proper amount of damages to award Stratacache relating to (1) the costs

already incurred to replace defective menu boards; (2) the additional costs that will

actually be incurred by September 2027 to replace defective menu boards; and (3) the

damages resulting from the downtime at Stratacache that occurred during its investigation -43-

over the cause of the defective menu boards. Further, the trial court shall award

FabMetals an additional $1,213,788.70 for the non-defective parts made by FabMetals

for which Stratacache did not pay. In all other respects, the judgment of the trial court will

be affirmed.

WELBAUM, J. and HUFFMAN, J., concur.