Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00605/USCOURTS-casd-3_15-cv-00605-0/pdf.json

Nature of Suit Code: 385
Nature of Suit: Property Damage - Product Liability
Cause of Action: 28:1441pl Removal- Product Liability

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA 

SAN DIEGO GAS & ELECTRIC 

COMPANY, a California corporation; 

THOSE CERTAIN UNDERWRITERS 

AT LLOYDS OF LONDON 

SUBSCRIBING TO POLICY NOS. DG 

103412 AND DG 103712, 

Plaintiffs,

v. 

ABB, INC.; and ABB POWER T&D 

COMPANY, INC., 

Defendants.

Case No.: 15cv605-MMA (KSC)

ORDER DENYING DEFENDANTS’ 

MOTION FOR PARTIAL 

SUMMARY JUDGMENT 

[Doc. No. 15]

 Plaintiffs San Diego Gas & Electric Company (“SDG&E”) and those certain 

underwriters at Lloyds of London (“Underwriters”) subscribing to policy numbers DG 

103412 and DG 103712 (collectively “Plaintiffs”), have filed a First Amended Complaint 

(“FAC”) alleging negligence, strict product liability, breach of express warranty, and 

breach of contract. See Doc. No. 4. Defendants ABB, Inc. (“ABB”) and ABB Power 

T&D Company, Inc. (“ABB Power,” collectively “Defendants”)1

 move for partial 

                                               

1

 The Court notes that ABB Power merged with ABB, and the two are no longer separate 

entities. See Doc. No. 15-1 at 1, n.1. 

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summary judgment of Plaintiffs’ claims. See Doc. No. 15. Plaintiffs filed an opposition 

to Defendants’ motion, to which Defendants replied. See Doc. Nos. 21, 25. The Court 

found the matter suitable for determination on the papers and without oral argument 

pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, the Court DENIES

Defendants’ motion for partial summary judgment. 

FACTUAL BACKGROUND2

This action arises out of an incident which occurred at Plaintiffs’ power facility 

located in Bonita, California. This facility is known as the San Miguel substation, which 

provides power to San Diego residents. On February 14, 2013, one of the facility’s 

transformers3

 (the “subject transformer”) ignited and caused substantial damage to 

Plaintiffs’ property. Plaintiffs attribute the incident to an allegedly defective transformer 

bushing (“subject bushing”) sold by ABB, and installed by ABB Power. Plaintiffs seek 

more than $7 million in damages. 

The parties are and were sophisticated commercial entities when they negotiated 

and entered into the agreements relevant to this action. The parties wanted their risks and 

liabilities to be well-defined. Therefore, in their purchase and installation agreements for 

the subject bushing (“subject agreements”), the parties included provisions addressing 

their liabilities. The subject agreements limit both the type and amount of damages 

recoverable for losses arising out of, or related to, the subject agreements. Each of 

Plaintiffs’ four causes of action outlined in the FAC seek damages arising out of, or 

related to, the subject agreements. 

                                               

2

 These material facts are taken from the parties’ separate statements of undisputed facts and 

pertinent cited exhibits (“SSUF”). See Doc. Nos. 25-1, 25-2. Where a material fact is in dispute, it will 

be so noted. Facts that are immaterial for purposes of resolving the current motion are not included in 

this recitation. 

3

 A transformer assists in the distribution of electricity by transforming voltage and current levels 

of electricity to enable distribution of power between electrical grids. Doc. No. 25-2 at 2. A bushing 

forms the terminal that connects the transformer windings from the input to the output between the 

electrical grid. Id. at 3. 

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On or about December 1, 2008, ABB entered into a Master Supply and Installation 

Agreement (“Master Agreement”) for the sale of power transmission and distribution 

equipment to Plaintiffs. The Master Agreement provides that in order to effectuate a sale, 

future purchase orders would incorporate by reference the terms and conditions of the 

Master Agreement. 

On February 1, 2011, Plaintiffs and ABB entered into an agreement for the 

purchase of twenty-seven (27) bushings (“Purchase Agreement”), including the subject 

bushing. The February 1, 2011 agreement was for the purchase of bushings only, and did 

not include any installation work. The Purchase Agreement expressly incorporates by 

reference the Master Agreement, which provides: 

In no event shall either party be liable to the other party for any incidental, 

consequential or punitive damages of any kind, however asserted, whether in 

tort, contract or otherwise. Unless otherwise specifically described in a 

Blanket Agreement or Release, Supplier’s maximum aggregate liability for 

all claims arising under or related to a particular Release issued pursuant to 

this Master Agreement shall not exceed one hundred fifty percent (150%) of 

the amounts paid or payable under the particular Release, but in no event 

shall the minimum Limit of Liability be less than $200,000. . . 

Doc. No. 4-1 at 59.4

On September 1, 2011, Plaintiffs and ABB Power entered into a standard service 

agreement (“Installation Agreement”) for removal and installation of new and 

replacement bushings at the San Miguel substation, and SDG&E’s Imperial Valley 

substation. The Installation Agreement also provides the same limitation on liability as 

outlined immediately above, barring consequential damages. See Doc. 4-2 at 29. 

Moreover, both the Purchase Agreement and the Installation Agreement warrant 

that the bushings will be free from any and all defects in design, material, and 

workmanship. Plaintiffs claim that the subject bushing was defective and was the cause 

                                               

4

 The Court refers to the CM/ECF pagination when referencing Doc. Nos. 4-1 and 4-2 (the 

Purchase and Installation Agreements). 

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of the fire. 

Plaintiffs itemize their damages in their Joint Rule 26(a)(1) Disclosures. Plaintiffs’ 

damages, totaling more than $7 million, include the following: Replacement Transformer 

Costs, Transformer Oil, Transformer Oil Heat Run, Transportation of Replacement 

Transformer, Siemens Tax, SDG&E Incurred Costs, SDG&E Material, SDG&E Material, 

SDG&E Direct Charges, and SDG&E Replacement Transformer Installation Labor. See

Doc. No. 15-9 at 4-5. 

Defendants contend that all of the damages Plaintiffs seek are consequential 

damages, barred by the parties’ agreements. Plaintiffs, however, argue their damages 

include direct damages, such as damage to the subject bushing and related replacement 

costs. Defendants request the Court hold, as a matter of law, that Plaintiffs may not 

recover any of their itemized damages.5

 Doc. No. 15-1 at 19. 

LEGAL STANDARD

“A party may move for summary judgment, identifying each claim or defense—or 

the part of each claim or defense—on which summary judgment is sought. The court 

shall grant summary judgment if the movant shows that there is no genuine dispute as to 

any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. 

P. 56(a). The party seeking summary judgment bears the initial burden of establishing 

the basis of its motion and of identifying the portions of the declarations, pleadings, and 

discovery that demonstrate absence of a genuine issue of material fact. Celotex Corp. v. 

Catrett, 477 U.S. 317, 323 (1986). A fact is material if it could affect the outcome of the 

suit under applicable law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 

(1986). A dispute about a material fact is genuine if there is sufficient evidence for a 

                                               

5

 The Court notes that in its reply brief, Defendants request an overly expansive form of relief—

that the Court grant its motion and dismiss the entire action with prejudice. Doc. No. 25 at 10. 

However, Defendants move for partial summary judgment regarding the liability limitations set forth in 

the subject agreements. As such, the Court only addresses Defendants’ initial request for determination 

that, as a matter of law, all of Plaintiffs’ damages are unrecoverable. 

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reasonable jury to return a verdict for the non-moving party. Id. at 248. 

The party opposing summary judgment cannot “rest upon the mere allegations or 

denials of [its] pleading but must instead produce evidence that sets forth specific facts 

showing that there is a genuine issue for trial.” Estate of Tucker v. Interscope Records, 

515 F.3d 1019, 1030 (9th Cir.) (internal quotation marks omitted). 

DISCUSSION

I. Defendants’ Evidentiary Objections6

As an initial matter, Defendants object to evidence submitted by Plaintiffs in 

opposition to Defendants’ motion for partial summary judgment. Doc. No. 25-3. 

Defendants raise fourteen objections to four different declarations. See id. Each 

declaration, and Defendants’ objections thereto, will be considered in turn. 

A. Declaration of Ryan Hatch 

Defendants list five objections to certain provisions of Ryan Hatch’s declaration on 

the basis of the parol evidence rule and the secondary evidence rule. The Court finds the 

objections well-taken and SUSTAINS objections numbered 1-5. See Cal. Code Civ. 

Proc. § 1856; Fed. R. Evid. 1004. 

B. Declaration of David Denton (April 4, 2016) 

Defendants object to Exhibit A, attached to the declaration of David Denton, on the 

basis of hearsay. Exhibit A is a report generated by Engineering Design & Testing Corp. 

concerning the damaged transformer at issue in this case. Defendants do not indicate 

why this Exhibit constitutes hearsay, but presumably Defendants believe the document is 

being offered to prove the truth of its contents. Plaintiffs, however, indicate the Exhibit is 

not being offered for its truth, but rather to show that the transformer costs included the 

subject bushing. Thus, the report is admissible for this purpose. Accordingly, the Court 

                                               

6

 The Court notes that Defendants’ Evidentiary Objections exceed the page limit set forth in this 

Court’s Civil Chambers Rules, which provide that “[i]f filed as a separate document, evidentiary and 

procedural objections may not exceed five (5) pages in length.” Civ. Chambers R. IV. However, in the 

interests of justice, the Court considers all of Defendants’ evidentiary objections. 

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OVERRULES Defendants’ objection number 6. 

C. Declaration of James Baker (April 4, 2016) 

Defendants list four objections to James Baker’s declaration. Defendants object to 

Exhibit A, which contains a printout of a portion of the ABB website on the basis of 

hearsay, lack of authentication, and lack of foundation. Exhibit A, however, is 

admissible as an admission of a party opponent. See Fed. R. Evid. 801(d)(2). Exhibit A 

is also admissible to impeach Defendants. Moreover, Mr. Baker provides the requisite 

authentication and foundation for Exhibit A. Accordingly, the Court OVERRULES

Defendants’ objection number 7. 

Defendants’ three other objections to Mr. Baker’s declaration seek to exclude 

various portions of the declaration on the basis of the parol evidence rule and the 

secondary evidence rule. The Court SUSTAINS objections numbered 8-10. See Cal. 

Code Civ. Proc. § 1856; Fed. R. Evid. 1004. 

D. Declaration of Robert Ganser (March 30, 2016) 

Defendants list four objections to certain excerpts of Robert Ganser’s declaration 

on the grounds of being vague, conclusory, argumentative, and that portions are unclear. 

Upon due consideration, to the extent the Court considers such evidence, Defendants’ 

objections numbered 11-14 are OVERRULED. 

II. Defendants’ Request for Judicial Notice of Exhibit E 

Defendants filed a Request for Judicial Notice, asking the Court to take judicial 

notice of Exhibit E in support of their motion for partial summary judgment pursuant to 

Federal Rule of Evidence 201(b)(2). Doc. No. 15-12. Exhibit E is a copy of SDG&E’s 

2007 Report Filed with the United States Securities and Exchange Commission. See id.; 

see also Doc. No. 15-8. Defendants rely on Exhibit E for the proposition that both the 

Purchase and Installation Agreements were “entered into by two large, sophisticated 

companies.” SSUF 32. However, Plaintiffs do not contest that both parties were 

sophisticated, or argue that the agreements were unconscionable. See Doc. No. 21 at 2 

n.1. Moreover, in light of Plaintiffs’ position, Defendants withdrew this fact in their 

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Reply Separate Statement #1. See Doc. No. 25-1 at 24. Accordingly, the Court DENIES 

AS MOOT Defendants’ request for judicial notice of Exhibit E. 

III. Defendant’s Motion for Partial Summary Judgment7

Defendants ABB and ABB Power jointly move for partial summary judgment as to 

the damages Plaintiffs seek pursuant to Plaintiffs’ breach of express warranty and breach 

of contract claims.8

 However, each defendant entered into a separate agreement with the 

Plaintiffs. Accordingly, the Court will analyze each contract, and its governing law, 

separately. 

A. The Purchase Agreement 

The Court must first determine the substantive law applicable to the Purchase 

Agreement. Defendants argue that because Plaintiffs’ claims are premised on an alleged 

product defect, the California Commercial Code (“CCC”) governs Plaintiffs’ damages. 

See Doc. No. 15-1 at 6. Plaintiffs concede that the CCC controls the Purchase Agreement 

entered into between SDG&E and ABB. See Doc. No. 21 at 16. Because Plaintiffs agree 

the CCC governs the Purchase Agreement, the Court must next determine whether the 

damages arising under the Purchase Agreement are consequential or direct in nature. 

Defendants claim that all of Plaintiffs’ damages stemming from the Purchase 

Agreement are consequential, and thus barred by the Purchase Agreement. Doc. No. 15-

1 at 5. The Purchase Agreement incorporates by reference the Master Agreement, which 

provides, “[i]n no event shall either party be liable to the other party for any incidental, 

                                               

7

 As an initial matter, the Court notes California law governs the present case. Both the Purchase 

Agreement and Installation Agreement contain California choice of law provisions. See Doc. Nos. 4-1 

at 52, 4-2 at 22. Because neither party contests application of California law, the Court will proceed by 

analyzing the parties’ dispute pursuant to California law. 

8

 Neither Defendants, nor Plaintiffs, attempt to categorize Plaintiffs’ itemized damages as either 

consequential or direct in the moving papers. Instead, Defendants argue that all of the damages 

Plaintiffs seek are consequential in nature. Plaintiffs respond by stating that some of its itemized 

damages include direct damages. Accordingly, the Court need not categorize each of Plaintiffs’ 

itemized damages as either consequential or direct to determine whether a genuine dispute exists as to 

whether all of Plaintiffs’ damages are consequential in nature. 

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consequential or punitive damages of any kind, however asserted, whether in tort, 

contract or otherwise.” 9 Doc. No. 4-1 at 59. Plaintiffs acknowledge the consequential 

damages waiver provision, but contend that their itemized damages do include direct 

damages. See Doc. No. 21 at 16-17. 

The CCC defines direct damages as “the difference between the value of goods 

accepted and the value they would have had if they had been as warranted by the seller.” 

Cal. Com. Code § 2714. Incidental and consequential damages are defined as follows: 

(1) 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 expense incident to the delay or other breach. 

(2) Consequential damages resulting from the seller’s breach include. . . (b) 

Injury to person or property proximately resulting from any breach of 

warranty. 

Cal. Com. Code § 2715. The Restatement of Contracts indicates consequential losses 

“include such items as injury to person or property resulting from defective 

performance.” Restatement (Second) of Contracts § 347 (Am. Law Inst. 1981). 

The parties do not dispute that Plaintiffs seek over $7 million in damages, 

including: Replacement Transformer Costs, Transformer Oil, Transformer Oil Heat Run, 

Transportation of Replacement Transformer, Siemens Tax, SDG&E Incurred Costs, 

                                               

9

 Section 2719(3) of the CCC permits the exclusion of recovery of consequential damages, 

unless the exclusion is unconscionable. Cal. Com. Code § 2719(3). Plaintiffs concede the consequential 

damages waiver provision is not unconscionable. See Doc. No. 21 at 2. In fact, Plaintiffs represent that: 

The parties can agree to the following: 1) Both parties were sophisticated entities; 2) 

There was a lengthy arms-length negotiation for both contracts; 3) The contracts are not 

unconscionable; 4) Plaintiffs agree there was a mutual risk transfer between the parties; 

5) Plaintiffs do not dispute the provisions entitled ‘Limitation on Liability’ in both 

contracts apply. 

Id. at n.1 (emphasis in original). Accordingly, the Court construes the subject agreements as valid 

contracts, entered into by sophisticated parties. 

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SDG&E Material, SDG&E Direct Charges, SDG&E Replacement Transformer 

Installation Labor. Doc. No. 15-9 at 4-5. Plaintiffs assert that “Replacement 

Transformer Costs” include the subject bushing, although not specifically itemized by 

Plaintiffs in its list of damages.10 Doc. No. 21 at 16-17. Plaintiffs elaborate, claiming a 

bushing is a component part of a transformer. Id. at 17. Thus, Plaintiffs argue 

“Replacement Transformer Costs” “inherently includ[e] all component parts.” Id.

(emphasis in original). California courts have held that replacement costs are an accurate 

reflection of the loss in value of a defective product, and thus are a “proper damage 

measure for breach of warranty under [CCC] Section 2714.” Cardinal Health 201, Inc. v. 

Tyco Electronics Corp., 87 Cal. Rptr. 3d 5, 32 (Cal. Ct. App. 2008). 

 Here, the main dispute centers on whether the subject bushing is considered a 

component part of the subject transformer. It is undisputed that “[a] bushing forms the 

terminal that connects the transformer windings from the input to the output between the 

electrical grid.” Doc. No. 25-2 at 3. Plaintiffs contend that by stating the transformer 

was damaged and required repair/replacement, the entire transformer, including “the very 

parts that make it a transformer” (i.e., the bushings), were damaged and/or required 

replacement. Doc. No. 21 at 17 n.14. Construing the itemized damages most favorably 

to Plaintiffs, a reasonable person could find Plaintiffs’ damages include the subject 

bushing, which would constitute direct damages if considered a replacement cost. 

As such, viewing the evidence in the light most favorable to Plaintiffs, the Court 

finds a genuine issue of material fact exists as to whether all of the damages Plaintiffs 

seek are consequential in nature. Although consequential damages are barred by the 

                                               

10 Defendants’ argument that Plaintiffs’ failure to use the term “bushing” in its list of damages 

provided as part of its Rule 26 initial disclosures is unavailing. The Complaint clearly alleges the failure 

of the subject bushing caused the fire, resulting in loss to Plaintiffs. Additionally, Defendants’ own 

website provides, “transformer components such as bushings. . . are essential parts of transformers, 

ensuring they operate reliably and safely.” Doc. No. 21-4, Exhibit A. Moreover, Plaintiffs submitted 

more than 6,000 pages of documents to Defendants which included Plaintiffs’ damages. Doc. No. 21 at 

16. 

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contract between Plaintiffs and ABB, a reasonable person could find Plaintiffs’ itemized 

list of damages include damages to the subject bushing, which could constitute direct 

damages. Accordingly, summary judgment is inappropriate on this basis. 

B. The Installation Agreement 

As noted above, the Court must first determine the substantive law applicable to 

the Installation Agreement. Defendants argue that because Plaintiffs’ claims are 

premised on an alleged product defect, the California Commercial Code (“CCC”) 

governs Plaintiffs’ damages. See Doc. No. 15-1 at 6. Plaintiffs, however, contend the 

common law controls the Installation Agreement entered into between SDG&E and ABB 

Power because the agreement is a contract for services. See Doc. No. 21 at 11. 

i. Applicable Law 

The CCC applies to “transactions in goods.” Cal. Com. Code § 2102. “Goods” are 

defined as “all things (including specially manufactured goods) which are movable at the 

time of identification to the contract for sale. . .” Id. at § 2105. The CCC does not, 

however, apply to transactions involving services. Rather, common law controls. 

“Complications arise when the transaction involves both goods and services.” TK Power, 

Inc. v. Textron, Inc., 433 F. Supp. 2d 1058, 1061 (N.D. Cal. 2006). In such an instance, 

application of the CCC turns on the essence of the agreement. Filmservice Laboratories, 

Inc. v. Harvey Bernhard Enterprises, Inc., 208 Cal. App. 3d 1297, 1305 (Cal. Ct. App. 

1989); see also RRX Industries, Inc. v. Lab-Con, Inc., 772 F.2d 543, 546 (9th Cir. 1985). 

The Court must determine the predominant character of the agreement—whether the 

contract is for the provision of a service with goods incidentally involved, or for the 

provision of goods with services incidentally involved, and must apply the law that 

governs the predominant factor. See United States ex. rel. Bartec Indus., Inc. v. United 

Pacific Co., 976 F.2d 1274, 1277 (9th Cir. 1992). 

Here, the predominant character of the agreement is a contract for services. 

Defendants argue that although the agreement contains provisions relating to services, “it 

also includes a product warranty that Plaintiffs contend covers the subject bushing,” thus 

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the CCC applies. Doc. No. 25 at 8. Defendants are incorrect for two reasons. First, the 

agreement is entitled “Standard Service Agreement for Labor and/or Services.” Doc. 4-2 

at 2. The predominant purpose of the agreement is to provide services. Although the 

agreement contains a product warranty, this provision comprises only a small portion of 

the contract. The vast majority of the agreement relates to ABB Power’s installation of 

the bushings. See Doc. No. 4-2. Moreover, there was no sale of goods in the Installation 

Agreement that would make segregation of the contract appropriate. 11 See TK Power, 

433 F. Supp. 2d at 1063. 

Second, the fact that Plaintiffs’ claims are premised on an alleged breach of 

product warranties, rather than deficient services, does not alter the character of the 

Installation Agreement. It is at the outset that a court looks to the essence of the 

agreement to determine its predominant character. See RRX Industries, Inc., 772 F.2d at 

546. Accordingly, California common law governs the Installation Agreement. The 

Court must next determine whether the damages arising under the Installation Agreement 

are consequential or direct in nature. 

ii. Nature of Plaintiffs’ Damages 

Defendants argue that Plaintiffs’ damages are consequential damages, and are 

barred by the Installation Agreement. Plaintiffs contend that their itemized damages 

include direct damages. 

The California Supreme Court has held that there are two types of damages at 

common law: “general damages (sometimes called direct damages) and special damages 

(sometimes called consequential damages).” Lewis Jorge Const. Management, Inc. v. 

                                               

11 Defendants argue the Court can segregate the Installation Agreement, and analyze that portion 

of the agreement relating to goods pursuant to the CCC. However, the case law Defendants cite where 

courts have segregated a contract all involve a contract that included the purchase of goods, and some 

related service in the same contract. See Stephenson v. Frazier, 399 N.E.2d 794 (Ind. Ct. App. 1980); 

Foster v. Colorado Radio Corp., 381 F.2d 222 (10th Cir. 1967). Here, however, the purchase of the 

subject bushing occurred in an entirely separate agreement. The only provision relating to the purchase 

is the warranty provision in the parties’ Installation Agreement. Thus, the Court is not persuaded that 

segregation is appropriate in this case. 

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Pomona Unified School Dist., 102 P.3d 257, 261 (Cal. 2004). “General damages are 

often characterized as those that flow directly and necessarily from a breach of contract, 

or that are a natural result of a breach.” Id. Because the occurrence of general damages 

is sufficiently predictable, the parties at the time of contracting are “deemed” to have 

contemplated such damages. Id. Special damages, however, “are those losses that do not 

arise directly and inevitably from any similar breach of any similar agreement.” Id. 

Thus, special damages “represent loss that ‘occurred by reason of injuries following 

from’ the breach.” Id. at 262 (quoting Mitchell v. Clarke, 71 Cal. 163, 168 (Cal. 1886)). 

Special damages are among the losses that are “foreseeable and proximately caused by 

the breach of a contract.” Id. (citing Cal. Civ. Code § 3300). 

Here, because “Replacement Transformer costs” are potentially recoverable under 

the Purchase Agreement, such costs are also potentially recoverable under the Installation 

Agreement.12 Although consequential damages are barred by the contract between 

Plaintiffs and ABB Power, a reasonable person could find Plaintiffs’ “Replacement 

Transformer Costs” include costs that flow directly from an alleged breach. See Lewis 

Jorge Const. Management, Inc., 102 P.3d at 261. Accordingly, summary judgment is not 

appropriate on this basis. 

CONCLUSION

Based on the foregoing, the Court DENIES Defendants’ motion for partial 

summary judgment in its entirety. 

IT IS SO ORDERED. 

Dated: November 14, 2016

 _____________________________ 

 HON. MICHAEL M. ANELLO 

United States District Judge 

                                               

12 The parties do not address whether any of Plaintiffs’ claimed damages are specific to either the 

Purchase Agreement, or the Installation Agreement. Accordingly, the Court assumes Plaintiffs seek to 

recover all of their itemized damages under both agreements. 

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