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H. Hirschmann, Ltd. v. Green Mountain Glass, LLC

United States District Court, D. Vermont

July 6, 2016

H. HIRSCHMANN, LTD., Plaintiff,
v.
GREEN MOUNTAIN GLASS, LLC, and ADCO PRODUCTS, LLC, Defendants.

          OPINION AND ORDER RE: MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM AND MOTION TO CERTIFY QUESTION TO VERMONT SUPREME COURT (DOCS. 38, 48)

          Geoffrey W. Crawford, Judge United States District Court

         This warranty claim arises out of the sale of a sealant used in the production of insulated windows. Defendant ADCO Products, LLC ("ADCO") is the manufacturer. Defendant Green Mountain Glass, LLC ("GMG") is the purchaser. GMG used the sealant in fabricating windows for its customer Plaintiff H. Hirschmann, Ltd. ("Hirschmann"). Pending before the court is Defendant ADCO's Motion to Dismiss for Failure to State a Claim (Doc. 38) and Plantiff s Motion to Certify Question to Vermont Supreme Court (Doc. 48). The court heard argument on April 25, 2016. Counsel was allowed to file supplemental briefing and the motions were taken under advisement on May 2, 2016. For the reasons discussed below, Defendant's Motion to Dismiss is DENIED, and the Motion to Certify Question is DENIED as moot.

         Background

         The court accepts as true the allegations of the First Amended Complaint. (Doc. 37.)

         Hirschmann is a Vermont corporation engaged in the design and manufacture of high-end custom wood windows and doors. (Doc. 37 at ¶ 2.) On February 1, 2010, Hirschmann contracted with Bulley & Andrews, LLC to supply 2, 000 custom-made insulated windows, doors, and related products for a construction project in Chicago, Illinois ("the project"). (Id. at f 13-14.)

         Hirschmann subcontracted with GMG to make insulated glass units for the project. GMG is a New Hampshire corporation with a principal place of business in Charlestown, New Hampshire.

         In building the insulated glass units, GMG ordered and used a sealant manufactured by ADCO. (Id. at ¶ 24.) ADCO is a Delaware corporation with its principal place of business in Michigan. (Id. at ¶ 6.)

         Some of the windows failed after installation due to problems with the sealant. (Id. at ¶ 23.)

         Hirschmann filed suit against GMG. GMG then filed a third-party action for indemnity against ADCO. On February 16, 2016, the court granted Hirschmann's motion to amend the complaint to add its own claim against ADCO. ADCO now moves to dismiss this claim on the grounds that Hirschmann's claim against it fails for lack of contractual privity.

         Analysis

         The parties disagree about which state's substantive law governs the privity issue.[1] Hirschmann seeks to apply the law of Michigan or New Hampshire. These states permit implied warranty claims in cases involving economic loss, even in the absence of contractual privity. ADCO seeks to apply the law of Vermont because privity remains a requirement for implied warranty cases not involving personal injury. See Long Trail House Condo. Ass 'n v. Engelberth Constr., Inc., 2012 VT 80, ¶¶ 30-35, 192 Vt. 322, 59 A.3d 752 (holding that implied warranties of habitability and good workmanship do not extend to subsequent purchaser of real property who lacked contractual relationship with contractor).

         In a diversity case, the federal court applies the conflict of law rules of the forum state. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). The sale of the sealant by ADCO to GMG is governed by the Vermont Uniform Commercial Code ("UCC") which applies to "transactions in goods." 9A V.S A. § 2-102. The UCC's choice of law provision provides: "In the absence of [a contractual choice of law provision], this title applies to transactions bearing an appropriate relation to this state." 9A V.S.A. § 1-301(b). "A law bears a reasonable relation to a transaction when a significant portion of the making or performance of the contract occurs in that jurisdiction." 1 White, Summers, & Hillman, Uniform Commercial Code § 1.19 n.4 (6th ed. 2015).

         In determining whether Vermont substantive law concerning the requirement of privity of contract has a sufficient relation to this transaction to require its application, the court turns to the Restatement (Second) of Conflicts (the "Restatement").[2] See Elhannon LLC v. The F.A. Bartlett Tree Expert Co., No. 2:14-cv-262, 2015 WL 5097244, at *4 (D. Vt. Aug. 28, 2015) ("When contractual parties have not specified the state law to be applied in a given case, Vermont uses the test laid out in Restatement (Second) Conflict of Laws ... to determine which state has the most significant relationship to the transaction and the parties." (citations omitted)). The court begins with the Restatement's most general provision and ends with its most specific.

         I. Section 6 of the Restatement

         Section 6 of the Restatement provides an analytical framework for conflict issues of any description. In the absence of a specific statute, § 6 sets out seven policy factors to guide courts in choosing the law of one forum over another. See Restatement (Second) of Conflicts § 6; see also Id. at § 188 ("The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6."). The court considers each § 6 factor in turn.

         A. The Needs of the Interstate and International System

         This factor does not apply to this case. The sale of goods can occur with or without the application of a privity requirement. As this case demonstrates, states differ in their policies on this issue, and products and commerce continue to move under either regime. New Hampshire and Michigan have eliminated privity as a defense; Vermont has retained it. All three states continue to participate in the national economy. There is no systemic demand for one rule over another.

         B. The Relevant ...


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