Tyco Electronics Corp. v. Illinois Tool Works, Inc.

895 N.E.2d 976, 384 Ill. App. 3d 830, 324 Ill. Dec. 261, 2008 Ill. App. LEXIS 870
CourtAppellate Court of Illinois
DecidedSeptember 2, 2008
Docket1-07-3539
StatusPublished
Cited by1 cases

This text of 895 N.E.2d 976 (Tyco Electronics Corp. v. Illinois Tool Works, Inc.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tyco Electronics Corp. v. Illinois Tool Works, Inc., 895 N.E.2d 976, 384 Ill. App. 3d 830, 324 Ill. Dec. 261, 2008 Ill. App. LEXIS 870 (Ill. Ct. App. 2008).

Opinion

JUSTICE SOUTH

delivered the opinion of the court:

Tyco Electronics Corporation purchased surge protection components which failed to perform as expected. Consequently, Tyco filed an action against the manufacturer, Illinois Tool Works, for breaches of contract and warranty and presented to a jury evidence of more than $9 million in damages. The jury returned a verdict in the amount of $2 million, and Tyco now appeals the denial of its motion for a retrial limited to the issue of damages. We affirm.

Tyco’s customer, Motorola, made cable access units which provided Internet, telephone and cable television service through a single cable. Tyco produced the cable connection for Motorola’s access units. The connection, called the “Superblock,” contained a gas-filled tube which provided surge protection. After another vendor’s gas tubes proved to be unsatisfactory, Tyco contracted to purchase the surge protection tubes from Illinois Tool Works (ITW). ITW assembled Superblocks which included its gas tubes and shipped them to Motorola on Tyco’s behalf.

Soon after their installation in residences located in Australia, the Superblocks’ surge protection components began to short-circuit prematurely. Motorola tested the ITW gas tubes, compared them to tubes which were made by other vendors, and hired surge protection experts to conduct further tests. The test results suggested that the ITW tubes and related backup assembly caused the premature Superblock short-circuits in the Australian installations. Motorola decided to replace the Superblocks containing ITW tubes with units that used another vendor’s tubes. Motorola then demanded that Tyco reimburse it for those replacement costs. Tyco settled Motorola’s potential claims for $7.7 million, which included a cash payment of more than $4.8 million and a credit against future product purchases of more than $2.8 million. Tyco then filed suit against ITW, alleging that ITW breached the contract, as well as the express performance warranties and implied warranties of fitness and merchantability.

At trial, Tyco presented evidence that the surge protection units provided by ITW did not meet ITW’s own specifications, were not suitable for use in the Superblock, and were not properly designed and manufactured. ITW asserted that any failure of the unit to meet its own specifications related to the long-term life of the units, and any breach of warranty regarding those specifications did not cause the short-term failures in the Superblock installations.

ITW also asserted that the surge protector failures were caused by the hot and humid conditions in the locations where the Superblocks were installed, that Motorola and Tyco established the specifications for the surge protection units, and the two companies could have demanded that the units pass industry-recognized tests for performance in those conditions. ITW claimed that Motorola did not ask for units which would have passed more stringent tests because it did not want to reveal details of the workings of its cable access hardware and the Superblock, and it wanted to avoid the delay and expense of purchasing a unit that had passed the extra tests.

ITW argued that its surge protectors met the only industry standards Tyco had required, that Tyco and Motorola had approved the ITW units, and Motorola was responsible for the failure to communicate any requirement for higher standards. ITW also argued that Motorola’s responsibility would have shielded both Tyco and ITW from liability for the Superblock failures in Australia, and Tyco agreed to the cash settlement to preserve larger and more lucrative business relationships with Motorola. Accordingly, ITW denied liability for Ty-co’s losses in settling Motorola’s potential claims.

Tyco presented expert testimony asserting that its payments to Motorola and other costs associated with the Superblock failures caused approximately $9.1 million in damages. ITW’s damages expert, Glenn Sheets, testified that his examination of the costs of the incident led him to conclude that Tyco’s damages were approximately $4.7 million. Sheets did not include Tyco’s payments and credits to Motorola as an element of damages; instead, he attempted to calculate the cost of producing and installing the actual number of new Superblocks needed to replace those that had been deployed with the ITW surge protectors. Neither party suggested the measure of damages that would have been the proper compensation for the surge protectors’ failure to meet ITW’s own long-term performance specifications.

The jury returned a verdict of $2 million for Tyco. It completed special verdict forms which indicated that it found ITW had breached its contract with Tyco and breached express warranties under the contract and Tyco had proven that it had sustained damages. Tyco moved for a new trial limited to the issue of damages; it did not alternatively seek a retrial of all of the issues. The trial court denied Tyco’s motion, and this appeal followed.

Tyco contends that ITW’s damages expert, Glenn Sheets, testified in violation of Supreme Court Rule 213(f)(3), which requires a party to reveal the opinions and conclusions of its retained experts. 210 Ill. 2d R. 213(f)(3). Tyco claims that in his written report, which was produced prior to trial and in his discovery deposition, Sheets testified that he estimated Tyco’s damages to be $3.94 million, and his trial testimony of $4.7 million in damages was an undisclosed change from his earlier position. However, the record contradicts Tyco’s claim.

Sheets’ opinion, as disclosed in both his written report and in his discovery deposition, was that Tyco’s damages consisted of two elements: Tyco’s cost of producing new Superblocks to replace the defective units; and the shipping and labor costs incurred by Motorola to remove the original Superblocks and install new units. In his report, in his testimony during his deposition, and in his testimony at trial, Sheets consistently asserted that the Tyco production cost element amounted to approximately $1.3 million. Sheets’ written report, in its introductory summary, asserted that Motorola’s “substantiated” shipping and labor costs were not more than $2.6 million. But in the detail which followed the introductory summary, Sheets’ report explained that he reached the total of “substantiated” shipping and labor costs by excluding from his calculation all Superblocks shipped to Motorola after July 15, 1999. This date was based on ITW’s contention that Tyco and Motorola had failed to mitigate their damages by continuing to produce and deploy the original Superblocks after deciding in mid-July that they were not performing properly. Sheets’ disclosed opinion clearly identified the possible alternative formulations of the shipping and labor cost component of his damage calculation: reduced by the exclusion of costs incurred after July 15, the shipping and labor component was $2.6 million and unreduced by the cutoff date, $3.48 million. Sheets’ use of the latter calculation at trial, adding it to the $1.3 million production cost component and concluding that Tyco’s damages were approximately $4.7 million, was consistent with his previously disclosed opinion and, therefore, not a violation of Rule 213.

Tyco also contends that it was denied a fair trial on the issue of damages and should be granted a retrial on that issue because Sheets’ testimony violated the collateral source rule.

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895 N.E.2d 976, 384 Ill. App. 3d 830, 324 Ill. Dec. 261, 2008 Ill. App. LEXIS 870, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tyco-electronics-corp-v-illinois-tool-works-inc-illappct-2008.