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Softub, Inc. v. Mundial, Inc.

United States District Court, D. Massachusetts

September 30, 2014

SOFTUB, INC., Plaintiff,
v.
MUNDIAL, INC., Defendant

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For SOFTUB, INC., Plaintiff, Counter Defendant: Christopher Little, LEAD ATTORNEY, Pierce Atwood, Providence, RI; Katharine E. Kohm, LEAD ATTORNEY, Little, Medeiros Kinder Bulman & Whitney, P.C., Providence, RI; Scott K. Pomeroy, LEAD ATTORNEY, Pierce Atwood LLP, Providence, RI.

For Mundial, Inc., Defendant: Jack J. Mikels, LEAD ATTORNEY, Tiffany L. Higgins, Jack Mickels & Associates, Quincy, MA; Joanne D'Alcomo, Jager Smith P.C., Boston, MA; Michael A. Wirtz, Jack Mikels & Associates LLP, Quincy, MA.

For Mundial, Inc., Counter Claimant: Jack J. Mikels, LEAD ATTORNEY, Jack Mickels & Associates, Quincy, MA; Joanne D'Alcomo, Jager Smith P.C., Boston, MA; Michael A. Wirtz, Jack Mikels & Associates LLP, Quincy, MA.

For Mundial, Inc., Counter Claimant: Jack J. Mikels, LEAD ATTORNEY, Jack Mickels & Associates, Quincy, MA; Michael A. Wirtz, Jack Mikels & Associates LLP, Quincy, MA.

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MEMORANDUM AND ORDER

DOUGLAS P. WOODLOCK, UNITED STATES DISTRICT JUDGE

Plaintiff Softub, Inc. brought this action against Defendant Mundial, Inc. to recover damages allegedly caused by Mundial's sale of defective pumps to Softub for use in portable spa tubs it manufactured. The gravamen of Softub's complaint is that Mundial marketed and sold to it a product that Mundial knew or should have known was not suitable for use in spa tubs like those manufactured by Softub, and in doing so breached various contractual obligations including warranties express and implied, in addition to making actionable misrepresentations.

In its defense, Mundial argues both that it has already satisfied all of its warranty obligations to Softub, and moreover, that as a sophisticated business entity with knowledge of spa design and manufacture, Softub bore sole responsibility for determining the fitness of Mundial's product for its purposes. Mundial alternatively argues that Softub should have abandoned use of the pump far sooner than it did, and by continuing to purchase and use the pump despite knowledge of its high failure rate, Softub failed to mitigate its damages.

In its eleven-count amended complaint, Softub asserts claims for intentional and negligent misrepresentation (Counts I-II), breach of contract (Counts III and VIII), breach of the implied covenant of good faith and fair dealing (Counts IV and IX), breach of warranties both express (Count V) and implied (Count VI), and violation of Mass. Gen. Laws ch. 93A, § 11 (Counts VII and X).[1] Softub seeks as damages actual and consequential damages, lost profits, and " all other financial and economic losses caused by Mundial's breaches of express and implied warranties." Mundial has asserted counterclaims against Softub alleging that Softub itself violated Chapter 93A (Counterclaim One) and improperly withheld payment for pumps which it received from Mundial (Counterclaim Two).

Following a bitterly contentious discovery period during which each party accused the other of myriad discovery violations and moved to strike much of the relevant evidence in this case on that basis, Mundial has now moved for summary judgment on all of Softub's claims. Mundial additionally seeks to preclude a Softub expert from testifying at trial. Softub opposes Mundial's motion for summary judgment and moves for partial summary judgment on Count One of Mundial's counterclaims. I will address all outstanding motions in this memorandum.

I. BACKGROUND

The following facts are presented in the light most favorable to Softub, reserving certain details for discussion in connection with specific issues.[2]

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Softub is a California-based manufacturer and retailer of soft-sided portable hot tubs and spas. Since 2008, all of its manufacturing and shipping operations have been located at a facility in New Bedford, Massachusetts. Mundial, Inc., based in Walpole, Massachusetts, is the United States distributor and sales and marketing arm for its Brazilian parent corporation, Mundial, S.A.

At the outset, it is necessary to distinguish between two related but distinct products implicated in this litigation: spas and whirlpool baths. Although the names are sometime used interchangeably, a spa (or hot tub) differs from a whirlpool bath substantially. Whirlpool baths are usually installed indoors, and the water used is typically drained after each use. As a result, a whirlpool bath's pump operates only when the whirlpool is filled with water and in use. In contrast, the water in a spa (or hot tub) is not drained and replaced between each use. This means that a spa's pump must operate for longer durations than a whirlpool's pump, and also must be able to withstand exposure to chemicals that are used to keep the water clean. Compared to a whirlpool, spa components must contend with a greater amount of debris in the water, including sand, dirt, lint, fibers, and organic materials such as leaves, grass and pine needles.

A. Softub's Introduction to Mundial

In July 2005, David Hall, a sales representative for Mundial, cold-called Jeffrey Collins, Softub's Director of Operations, to introduce Softub to Mundial's " Syllent" [3] brand pump. As Hall described it, the Syllent pump was an " ultra quiet . . . integrated pump and motor" that used heat exchange to cool the motor and maintain water temperature. Collins, along with Softub's President and Chief Operating Officer, Edward McGarry, met Hall in July 2005 at Softub's headquarters in Valencia, California. McGarry and Collins showed Hall the various spas manufactured by Softub, a complete " power pack," consisting of the pump then being used and the controls for the spa. After the meeting, Hall represented in an email to Collins that " I truly believe we have [a] product that is a perfect fit for you."

The Syllent pump operated differently from the pumps that Softub had previously employed; instead of utilizing a separate heat-exchange coil wrapped around the motor to capture heat, its design allowed water to flow directly through the motor components. Softub, which was interested in the prospect of a quieter pump, agreed to test samples of the Syllent pump to determine if they performed adequately in Softub's application.

Between 2005 and 2007, Hall provided several versions of the Syllent pump to Softub for testing purposes. During this period, Hall made numerous representations regarding the Syllent's pump fitness for Softub's spa application. In a September 6, 2005 letter communicating a per-unit offer price, Hall indicated that the pumps would carry a five-year warranty in Softub's application. In an email dated November 1, 2005, Hall represented to McGarry and Collins that " no other pump can provide you the ability to guarantee against leaks and seal failures - our product is proven to operate in conditions of like use with your product. We are backing this up with a five year performance warranty." Hall provided Softub with a specification sheet indicating that the Syllent pump was designed to operate in water temperatures of up to forty-five degrees Celsius, and was therefore appropriate for use in Softub spas, which typically

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operate at between forty and forty-two degrees Celsius. Hall also represented to Collins that the Syllent pump was approved for safe operation by Underwriters Laboratory (" UL" ) and provided Softub a copy of the UL report. In November 2005, in response to concerns raised by Collins about the Syllent pump's ability to handle debris in the water, Hall stated that the pump " can handle small amounts of small debris" and that he had tested the pump himself with " handfuls of dirt and various sized grained sand used for brick mortar mix" and found " no problem with particles that got through the inlet cover jamming the pump."

By July of 2006, Softub's Collins had prepared a written report summarizing the results of Softub's performance testing of the Syllent pump. Although he found the Syllent pump to be " very quiet" and capable of heating water quickly enough for Softub's application, he identified a number of concerns with the pump based on pump failures experienced during testing. As summarized by Collins in an email to Hall, Softub experienced " issues with the rotor / impeller, potting, leaking into the electronics and the units heating up, [drawing] more power and shutting off."

Mundial responded by arranging for Ricardo DeFacci, the pump's inventor and an employee of Mundial's Brazilian parent corporation, Mundial, S.A., to meet with Collins and address his concerns. In written correspondence with Softub, DeFacci blamed most of the issues on Softub's testing process and indicated that the issues either should not arise under conditions of normal use or were simply indicative of normal wear and tear and should not be cause for concern. DeFacci further indicated that Mundial, S.A. had made a number of improvements to the pump, and specifically the rotor assembly, since Softub had completed its testing. For example, DeFacci stated that " [t]he design of the rotor has changed: In the end of 2005, based in our tests with the hot water circulation pump, we started to produce rotors covered with a specially [sic] powder epoxi coating, more resistant for this new conditions."

Following DeFacci's review, Mundial's vice president of sales, Rich Zirpolo, indicated that he would " also make available prototypes (at least) that incorporate all the changes we're making to accommodate the needs of the U.S. market." In separate correspondence, Zirpolo represented that " [b]ased on input from Softub, other U.S. accounts, our on-going Brazilian experience and our own product development people -- the pump that rolls off the line in Brazil today is a notably different, more powerful product than the samples we sent to Softub last August."

In October 2006, DeFacci traveled to Softub's facility in Valencia, California in an effort to assuage any remaining concerns Softub had with the Syllent pump. Over two days, DeFacci toured the Softub facility, inspected power pack assemblies, and examined the spa application for which Softub sought to use the Syllent pump. At that time, DeFacci reiterated that recent enhancements to the pump should correct problems experienced by Softub, particularly with respect to rotor corrosion. DeFacci then indicated in a November 2006 follow-up email to Collins that since his visit to Softub, " we have been worked 100% on the rotor issue . . . [and] have found very good results and now we are preparing 10 samples . . . for your field tests."

Upon receiving the samples of the new version of the pump incorporating the new polyester electrostatic powder coated rotors, Collins tested them " simply to confirm that the performance matched that of the earlier versions [he] had previously

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tested." Collins " did not undertake to independently test whether the 'new' pump's various modifications, not all of which were even known to Softub, were sufficient to resolve all the concerns that the modifications were intended to address." Nevertheless, by May of 2007, Collins was satisfied that the new version of the pump addressed the previously identified issues. In an email to Zirpolo dated June 4, 2007, Collins indicated that the rotor corrosion issue had been resolved to his satisfaction, and that DeFacci's handling of the situation gave Softub " the necessary confidence in the ability to solve issues as they arise in the future."

B. Softub Begins Using Syllent Pump in Spa Manufacture

By letter dated October 15, 2007, Zirpolo provided Softub with updated pricing information for the Syllent pump, and indicated that under new terms and conditions, all Syllent pumps would carry a three year warranty from the date of installation. On November 6, 2007, McGarry and Karen Dilley, Softub's vice president of manufacturing, met with Zirpolo at Mundial's Walpole offices to discuss the terms contained in Zirpolo's October 15 letter and establish a plan for moving forward. At the meeting, McGarry requested that the pump's warranty be extended to five years to meet Softub's expectation that the pumps would operate for the lifetime of a typical Softub spa. Zirpolo acceded, and wrote in a follow-up email memorializing the terms agreed upon at the November 6 meeting that " [w]arranty on all items will be 5 years to agree with Softub's existing product warranties." Satisfied with the five-year warranty, Softub committed to purchase a specified minimum quantity of Syllent pumps for delivery beginning in the first quarter of 2008.

On November 27, 2007, Dilley sent Zirpolo Softub's initial purchase order for 1050 pumps for the domestic market and 1050 pumps for the export market.[4] The reverse side of the purchase order contained boilerplate terms and conditions, including Softub's terms for acceptance by Mundial, an indemnity provision, and a warranty provision. Zirpolo acknowledged in his deposition that he personally received this initial Softub purchase order and subsequent purchase orders, and that all such orders contained the same boilerplate terms and conditions.

After receiving a purchase order from Softub, Mundial would ship the pumps from its Walpole facility to Softub's New Bedford facility along with a packing slip. Contemporaneously to its shipment of the pumps, Mundial would separately send invoices to Softub's Valencia offices, which the Softub accounting department would cross-check against receipt confirmations sent from New Bedford before making payment to Mundial. ...


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