Case 4:15-cv-00677-RAS Document 38 Filed 11/07/16 Page 1 of 12 PageID #: 904
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`Case No. 4:15-CV-677
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`3W POWER USA, INC. f/k/a
`AEG POWER SOLUTIONS USA, INC.,
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`Plaintiff,
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`v.
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`POWER MAX CO., LTD.,
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`Defendant.
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`MEMORANDUM OPINION AND ORDER GRANTING IN PART PLAINTIFF’S
`MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT’S
`MOTION FOR PARTIAL SUMMARY JUDGMENT
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`The following are pending before the court:
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`1.
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`2.
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`3.
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`Plaintiff’s motion for summary judgment and brief in support (docket entry #16);
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`Power Max’s opposition to motion for summary judgment (docket entry #21); and
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`Plaintiff’s reply in support of motion for summary judgment (docket entry #23).
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`___________________________
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`1.
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`2.
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`3.
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`4.
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`5.
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`Power Max’s motion for partial summary judgment (docket entry #17);
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`Notice of errata to Power Max’s motion for partial summary judgment (docket entry
`#18);
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`Plaintiff’s corrected response to Defendant’s motion for partial summary judgment
`and brief in support (docket entry #22);
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`Power Max’s reply in support of motion for partial summary judgment (docket entry
`#24); and
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`Plaintiff’s sur-reply to Defendant’s motion for partial summary judgment and brief
`in support (docket entry #25).
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`Case 4:15-cv-00677-RAS Document 38 Filed 11/07/16 Page 2 of 12 PageID #: 905
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`Having considered the pending motions and the responsive briefing thereto, the court finds that the
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`Plaintiff’s motion for summary judgment should be granted in part and the Defendant’s motion for
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`partial summary judgment should be denied.
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`FACTUAL BACKGROUND and PROCEDURAL HISTORY
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`The stipulated facts, as set forth in the parties’ Joint Final Pretrial Order (docket entry #31)
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`beginning at page 17, are as follows:
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`1.
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`2.
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`3.
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`4.
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`5.
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`6.
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`7.
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`8.
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`9.
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`Simon Britter (“Britter”) is an employee of AEG Power Solutions Sdn Bhd, a
`subsidiary of the Singapore division of AEG Power Solutions BV;
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`Sean Huang (“Huang”) was the Chief Commercial Officer for ZNShine and,
`subsequently, for Power Max1;
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`Power Max Co., Ltd. (“Power Max”) is in the business of, among things, developing
`and selling to investors solar electric power plants in Japan;
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`Power Max is an affiliate of ZNShine Solar aka ZNShine PV-Tech Co. Ltd.
`(“ZNShine”), a Chinese manufacturer of photovoltaic panels, which convert sunlight
`into electricity;
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`During 2012, Britter began interfacing with representatives of ZNShine in Japan
`regarding the possibility that AEG might provide inverters for ZNShine’s solar
`projects in Japan;
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`In early 2013, AEG proposed the use of the 45 kW MPV inverter systems for projects
`generating up to 50 kW of electricity;
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`Britter made several trips to Fukuoka, Japan during 2013 and 2014 to meet with
`representatives from ZN Shine and Power Max;
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`The 45 kW MPV inverter referenced above is a modular unit consisting of a 75 kW
`inverter cabinet and three 15 kW modules;
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`The cabinet is referred to as a 75 kW cabinet because it is capable of housing up to
`five (5) 15 kW modules [for] a total capacity of 75 kW;
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`1Although this fact was not included in the parties’ stipulated facts, it appears to be undisputed.
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`Case 4:15-cv-00677-RAS Document 38 Filed 11/07/16 Page 3 of 12 PageID #: 906
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`10.
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`11.
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`12.
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`13.
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`14.
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`15.
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`16.
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`17.
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`18.
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`19.
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`20.
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`21.
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`22.
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`23.
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`The inverter units being discussed only included three (3) 15 kW modules for a total
`capacity of 45 kW. These modular units, consisting of a 75 kW Cabinet and three (3)
`15 kW modules, will be referred to hereinafter as the 45 kW MPV Inverters;
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`Britter traveled to Fukuoka, Japan between June 3 and June 14, 2013, to meet with
`representatives from ZNShine;
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`On June 27, 2013, Britter sent Huang an email attaching the specifications for a
`transformer that he represented could be used with the 45 kW MPV Inverters along
`with a quote from one potential supplier;
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`On July 13, 2013, Huang, as “Director” of Power Max, issued a purchase order (the
`“Purchase Order”) to “AEG Power Solutions”;
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`The first page of the Purchase Order specifies a quantity of 500 “sets” of one (1) 75
`kW MPV cabinet and three (3) 15 kW MPV inverters, at a price per set of $12,000,
`for a total price of $6,000,000;
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`The second page of the Purchase Order identifies a delivery schedule that adds up to
`only 200 Inverters;
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`On July 29, 2013, Britter sent Power Max’s CEO an email requesting him to make
`the initial 20% payment on the first 80 45 kW MPV Inverters;
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`The unit price for each 45 kW MPV Inverter was $12,000;
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`The total cost for the first 80 units was, therefore, $960,000, 20% of which is
`$192,000;
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`Britter also requested that Power Max make arrangements for the letter of credit for
`the 80% balance of $768,000;
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`Power Max did not make the initial 20% deposit on the first eighty (80) units;
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`Sixteen (16) units at $12,000 per unit totals $192,000, 20% of which is $38,400;
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`On or about October 28, 2013, Power Max paid AEG Power Solutions USA, Inc.
`(“AEG USA”) $38,400;
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`AEG USA shipped sixteen (16) 45 kW MPV Inverters to Power Max in November,
`2013 which arrived in Japan in December, 2013;
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`24.
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`Power Max made a 60% payment to AEG USA, in the amount of $115,200, in
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`Case 4:15-cv-00677-RAS Document 38 Filed 11/07/16 Page 4 of 12 PageID #: 907
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`connection with the shipment;
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`25.
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`26.
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`27.
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`28.
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`29.
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`30.
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`31.
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`On January 14 and February 17, 2014, Michael Julian, general counsel for AEG
`Power Solutions BV, sent Huang “Notice Letters” on behalf of AEG USA
`demanding that Power Max complete the purchase of the remaining 484 45kW MPV
`Inverters;
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`On March 26, 2014, Britter sent Huang an email reminding him that the 20% balance
`on the delivery of the first sixteen (16) 45 kW MPV Inverters was due;
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`The 45 kW MPV Inverters were manufactured for AEG USA by Creation
`Technologies, Inc.;
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`Sixteen (16) 45 kW MPV Inverters were delivered to Power Max in Japan, together
`with 6 spare 15 kW modules for which Power Max was not charged;
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`The total purchase price for these sixteen (16) units was $192,000, of which Power
`Max paid $153,600;
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`AEG USA contracted to sell the 45 kW MPV Inverters to Power Max at a loss of
`approximately $1,450 per unit; and
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`Had AEG USA delivered five hundred (500) 45 kW MPV Inverters to Power Max
`and had Power Max paid $6,000,000 for all 500 inverters, AEG USA would have lost
`approximately $725,000.
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`On June 16, 2015, the Plaintiff filed its original petition in the 296th Judicial District Court
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`of Collin County, Texas. In its petition, the Plaintiff alleged that the July 13, 2013 purchase order
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`constituted an enforceable contract between the parties and the Defendant breached the contract. The
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`Plaintiff sued for damages for the alleged breach of contract. The Plaintiff also seeks to recover its
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`reasonable and necessary attorneys’ fees. On September 29, 2015, the Defendant filed its original
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`answer in state court, asserting the following affirmative defenses: statute of frauds; the contract was
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`illusory, invalid, or unenforceable; the Plaintiff failed to satisfy all conditions precedent; waiver;
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`ratification; estoppel; the economic loss rule; unclean hands; in pari delicto; statute of limitations;
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`and comparative responsibility. Also on September 29, 2015, the Defendant filed counterclaims in
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`Case 4:15-cv-00677-RAS Document 38 Filed 11/07/16 Page 5 of 12 PageID #: 908
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`state court, alleging breach of the implied warranty of fitness for a particular purpose and breach of
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`contract, seeking damages as well as its reasonable and necessary attorneys’ fees. Thereafter, the
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`Defendant removed this case to this court on October 2, 2015. On October 19, 2015, the Plaintiff
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`filed its answer to the Defendant’s counterclaims, asserting that the Defendant’s claims are barred
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`by the following affirmative defenses: prior breach; statute of frauds; the damage limitation
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`contained in the agreement between the parties; statute of limitations; and the doctrines of waiver
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`and/or estoppel.
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`On August 24, 2016, the Plaintiff moved for summary judgment, arguing that it is entitled
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`to judgment as a matter of law on its own breach of contract claim as well as on both of the
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`Defendant’s counterclaims. Also on August 24, 2016, the Defendant moved for partial summary
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`judgment, arguing that it is entitled to judgment as a matter of law on the issue of damages with
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`respect to the remaining 484 45kW MPV Inverters. The court will address each motion in turn.
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`SUMMARY JUDGMENT STANDARD
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`The purpose of summary judgment is to isolate and dispose of factually unsupported claims
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`or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Summary judgment is proper
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`“if the movant shows that there is no genuine dispute as to any material fact and the movant is
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`entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute about a material fact is
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`genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving
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`party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all
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`reasonable doubts in favor of the party opposing the motion for summary judgment. Casey
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`Enterprises, Inc. v. American Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981) (citations
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`omitted). The substantive law identifies which facts are material. See id. at 248.
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`Both parties have a responsibility in the summary judgment process. Celotex, 477 U.S. at
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`323–24. First, the party seeking summary judgment must show that the admissible evidentiary
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`material of record and any affidavits submitted by the nonmoving party are insufficient to permit the
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`nonmoving party to carry its burden of proof. The nonmoving party must then set forth “specific
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`facts showing that there is a genuine issue for trial” and “may not rest upon the mere allegations or
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`denials of his pleadings.” Anderson, 477 U.S. at 248. “Conclusional allegations and denials,
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`speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not
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`adequately substitute for specific facts showing a genuine issue for trial.” Roach v. Allstate
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`Indemnity Co., 2012 WL 1478745 (5th Cir. 2012), citing SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir.
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`1993).
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`DISCUSSION AND ANALYSIS
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`I.
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`BREACH OF CONTRACT CLAIMS BY THE PLAINTIFF AND THE DEFENDANT
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`Both the Plaintiff and the Defendant have asserted a cause of action for breach of contract.
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`The Plaintiff has moved for summary judgment on its own breach of contract claim as well as the
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`Defendant’s breach of contract counterclaim. In its motion for summary judgment, the Plaintiff
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`contends, and the Defendant does not contest, that this case is governed by Article II of the Uniform
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`Commercial Code, TEX. BUS. & COMM. CODE TITLE I, CHAPTER 2 (“UCC”).
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`Pertinent to both parties’ breach of contract claims is whether the July 13, 2013 purchase
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`order resulted in an enforceable contract. In response to the Plaintiff’s motion for summary
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`judgment, the Defendant argues that the purchase order did not result in an enforceable contract
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`because (1) the purchase order was not accepted in the manner specified in the purchase order2, and
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`(2) the inverters were not delivered in accordance with the schedule set forth in the purchase order.
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`As noted by the Plaintiff, however, § 2.209(a) of the UCC permits the modification of an
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`agreement for the sale of goods. Further, § 2.204(a) provides that “[a] contract for [the] sale of
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`goods may be made in any manner sufficient to show agreement, including conduct by both parties
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`which recognizes the existence of such a contract.” TEX. BUS. & COM. CODE ANN. § 2.204(a).
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`Additionally, “[e]ven though one or more terms are left open[,] a contract for sale does not fail for
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`indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis
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`for giving an appropriate remedy.” TEX. BUS. & COM. CODE ANN.§ 2.204(c).
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`While the Defendant has cited the court to considerable case law indicating that the contract
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`is not enforceable because the Plaintiff failed to accept the purchase order pursuant to its terms, the
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`case law does not pertain to the UCC. “Where the U.C.C. applies, it displaces all common law rules
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`of law regarding breach of contract and substitutes instead those rules of law and procedure set forth
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`in the U.C.C.” Glenn Thurman, Inc. v. Moore Const., Inc., 942 S.W.2d 768, 771 (Tex. App. – Tyler
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`1997, no writ). Even though the Defendant failed to provide the court with applicable case law and
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`failed to respond to the Plaintiff’s argument that the Defendant’s case law is indeed inapposite, the
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`court finds that there is a fact issue as to whether the purchase order resulted in an enforceable
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`contract under the UCC. See supra. (the court finds that a genuine dispute as to a material fact exists
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`regarding whether the Plaintiff failed to provide the on-site technical support required under the
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`2The purchase order provided that “[i]t is valid only with the advanced payment mentioned above
`and must be formally acknowledged by AEGPS within 1 week of receipt of the advanced payment and
`this purchase order. The Purchase order in total becomes valid only after design confirmation by AEG
`PS, hence signed layout as per Addendum 1.”
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`purchase order and whether the Plaintiff failed to ensure the technical functionality of the inverters).
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`Having found that a contract was formed under the UCC, the court notes that the Defendant
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`urges the court to deny the Plaintiff’s motion for summary judgment with respect to (presumably)
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`both parties’ respective breach of contract claims on the affirmative defenses of ambiguity and
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`abandonment. The Defendant argues that the contract was ambiguous because the quantity of
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`inverters noted on the front page of the purchase order was 500. However, the second page of the
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`purchase order only enumerates 200 inverters. As such, the Defendant contends that this ambiguity
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`prevents the court from granting the Plaintiff’s motion for summary judgment.
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`In response, the Plaintiff first contends that ambiguity is an affirmative defense that must be
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`pled; however, the Defendant failed to plead the same.
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`FED. R. CIV. P. 8(c) requires that a party specifically plead an affirmative
`defense. Rule 8(c) contains a nonexclusive list of affirmative defenses that does not
`include ambiguity. Under Texas law, however, ambiguity is an affirmative defense
`that must be pleaded. See Old Republic Sur. Co. v. Palmer, 5 S.W.3d 357, 360 (Tex.
`App. 1999, no pet.). Even in a diversity case, however, interpretation of a contract
`is a matter of law, and the court can conclude that a contract is ambiguous even when
`no party pleads ambiguity.
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`Vought Aircraft Indus., Inc. v. Falvey Cargo Underwriting, LTD., 729 F. Supp. 2d 814, 847 (N.D.
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`Tex. 2010) (citations omitted). Here, however, the court finds that the contract is not ambiguous.
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`Although the Defendant, in its response to the Plaintiff’s motion for summary judgment, makes
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`much of the numerical inconsistencies regarding the number of units ordered, the Defendant took
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`a different position in its own motion for partial summary judgment. In the section of the
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`Defendant’s motion for partial summary judgment entitled “Statement of Undisputed Facts,” the
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`Defendant states, “On July 13, 2013, Power Max issued the Purchase Order to AEG to purchase 500
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`Inverters at a cost of $12,000 per Inverter.” POWER MAX’S MTN. FOR PARTIAL SUMM. JUDG., p. 2,
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`§ III. Since the court does not consider motions in a vacuum, the court finds that ambiguity is a non-
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`issue since the parties agree that the contract was for 500 inverters.
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`Next, the court considers the affirmative defense of abandonment. The Defendant argues that
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`the parties abandoned the terms of the contract because the parties discussed a delivery schedule for
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`the inverters that differed from that stated in the purchase order. The Plaintiff contends that because
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`the Defendant failed to plead the affirmative defense of abandonment, the Defendant waived its
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`argument. Unlike the affirmative defense of ambiguity, which requires the court to interpret a
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`contract as a matter of law, the affirmative defense of abandonment does not require any such
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`interpretation. “Abandonment is an affirmative defense which must be pled . . ., and failure to plead
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`it results in its waiver.” Cargal v. Cargal, 750 S.W.2d 382, 384 (Tex. App. – Fort Worth 1988, no
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`writ). Since the Defendant did not plead the affirmative defense of abandonment, the Defendant
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`waived the same.
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` Next, the Defendant argues that the Plaintiff failed to perform its obligations under the
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`purchase order. In its breach of contract counterclaim, the Defendant alleges the following:
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`AEG promised “to provide Power Max Co Ltd with on-site technical
`19.
`support within Japan during the installation and commissioning for the first 50
`systems at no extra cost. This is to help Power Max Co Ltd become familiar with the
`systems and to ensure AEGPS systems are installed and working correctly.”
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`AEG breached its contract with Power Max because the systems could
`20.
`not be made to work on the Japanese power grid.
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`Power Max has been injured by AEG’s breach of contract in the
`21.
`amount of $153,600 because that is the amount that it paid AEG for the systems that
`did not work.
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`The Defendant argues that the Plaintiff failed to provide the support required under the purchase
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`order and further failed to ensure the technical functionality of the inverters. In response, the
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`Plaintiff contends that Britter was prepared to provide on-site technical support to the Defendant
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`once he was advised by the Defendant that the Defendant was ready to proceed with installation.
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`However, the Plaintiff argues that the Defendant failed to provide the Plaintiff with an installation
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`schedule. The Plaintiff further responds that the inverters were designed and manufactured to be
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`fully capable of use in connection with the power grid in Japan, if installed properly and with a
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`proper transformer.
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`The court finds that as a matter of law, a genuine issue of material fact exists regarding
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`whether the Plaintiff failed to provide the support required under the purchase order and whether the
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`Plaintiff failed to ensure the technical functionality of the inverters. The Plaintiff contends that in
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`order for the Defendant to establish that the inverters or the related transformers were not functional,
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`the Defendant would be required to offer competent expert testimony. Since the Defendant failed
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`to designate any expert witnesses, the Plaintiff argues that the Defendant will not be able to meet its
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`burden. While this might be ultimately true, that is a matter of proof to be determined at trial.
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`Finally, the Plaintiff argues that it is entitled to judgment on its breach of contract claim. In
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`its breach of contract claim, the Plaintiff alleges the following:
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`. . . Power Max issued the PO to AEG, which AEG accepted. The
`13.
`accepted PO constitutes an enforceable contract between Power Max and AEG for
`the delivery of 500 inverters. Of the 500 Inverters ordered by Power Max, it
`purchased only 16. Furthermore, not only did Power Max fail to purchase the
`additional 484 Inverters it ordered, it failed even to pay the full purchase price for the
`16 Inverters which were delivered.
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`As a result of the foregoing, Power Max is in breach of the agreement
`14.
`between the parties. As a result of such breach, AEG has been damaged in the
`amount of Five Million Eight Hundred Forty-Six Thousand Four Hundred and
`00/100 Dollars ($5,846,400).
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`The Plaintiff contends that since the Defendant breached the terms of the contract, it is entitled to
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`recover its damages. However, since a genuine dispute as to a material fact exists regarding whether
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`the Plaintiff failed to provide the support required under the purchase order and whether the Plaintiff
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`failed to ensure the technical functionality of the inverters, the court need not reach the issue of
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`damages.3
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`II.
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`BREACH OF THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
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`Although the Plaintiff moved for summary judgment on the Defendant’s counterclaim for
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`breach of the implied warranty of fitness for a particular purpose, the Defendant did not file a
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`response. Given the Defendant’s failure to brief this issue, the court finds that the Defendant has
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`abandoned this counterclaim. See Denson v. BeavEx, Inc., 612 F. App'x 754, 759 (5th Cir. 2015).
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`Accordingly, the Plaintiff’s motion for summary judgment on the Defendant’s counterclaim for
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`breach of the implied warranty of fitness for a particular purpose is GRANTED.
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`CONCLUSION
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`Based on the foregoing, it is hereby ORDERED that the Plaintiff’s motion for summary
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`judgment (docket entry #16) is GRANTED IN PART and Power Max’s motion for partial summary
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`judgment (docket entry #17) is DENIED.
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`3The Defendant’s motion for partial summary judgment concerns whether the Plaintiff is entitled
`to recover damages for the 484 Inverters. Since the issue presented concerns dam ages, the court need not
`reach this issue. However, to the extent the Defendant complains that it did not receive timely discovery
`related to purchase order 1341 between Creation Technologies and the Plaintiff for the component parts
`necessary to fill the July 13, 2013 purchase order between the Plaintiff and the Defendant, the court finds
`the Defendant’s arguments unpersuasive. The court is not inclined to consider objections to discovery
`matters that are buried in a motion for summary judgment. Further, the court presumes the Defendant
`was aware of the Plaintiff’s pretrial disclosures filed on August 19, 2016 (docket entry #15) which noted
`that the Plaintiff expects to offer “[i]nvoices from Creation Technologies, Inc. to Plaintiff Dated
`September 23, 2013 through October 8, 2014” and “Summary of Creation Technology, Inc. Invoices.”
`The Defendant did not move to strike these exhibits. While the court does not condone gamesmanship,
`the court does not have sufficient information to determine wrongdoing, if any.
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`IT IS SO ORDERED.
`IT IS SO ORDERED.
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`SIGNED this the 6th day of November, 2016.
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`UNITED STATES DISTRICT JUDGE
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