UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

REPUBLIC INDUSTRIES, INCORPORATED,

Plaintiff-Appellant,

v. No. 97-2236

ATLANTIC VENEER CORPORATION,

Defendant-Appellee.

Appeal from the United States District Court

for the Eastern District of North Carolina, at Greenville.

Malcolm J. Howard, District Judge.

(CA-96-164-4-H)

Argued: October 30, 1998

Decided: January 11, 1999

Before MURNAGHAN, HAMILTON, and MICHAEL,

Circuit Judges.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Don Stokes, STOKES LAW OFFICE, Marshall, Texas,

for Appellant. L. Patten Mason, MASON & MASON, P.A., Morehead City, North Carolina, for Appellee. ON BRIEF: P. Wayne Robbins, ROBBINS, MAY & RICH, L.L.P., Pinehurst, North Carolina,

for Appellant.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Appellant, Republic Industries (Republic), is a Texas cabinet manufacturer who contracted to purchase maple-veneer plywood from

Appellee, Atlantic Veneer Corporation (AVC) of North Carolina. The

parties' contract contained a choice of law clause dictating that disputes arising out of the parties' agreement would be governed by the

laws of North Carolina.

After Republic used a shipment of AVC's plywood to manufacture

kitchen cabinets, the plywood warped, causing economic damage to

Republic. As a result, Republic brought suit in the United States District Court for the Eastern District of Texas, pursuant to the Texas

Deceptive Trade Practices Act, Tex. Bus. & Com. Code§ 17.41 et

seq., seeking monetary damages for a breach of the implied warranties of merchantability and fitness for a particular purpose. The case

was transferred to the United States District Court for the Eastern District of North Carolina. Thereafter, the district court determined that

the parties' choice of law agreement was controlling and, applying

North Carolina law, granted AVC's motion for summary judgment.

Republic now appeals.

I.

Since approximately 1990, Republic purchased plywood in truckload lots from AVC. To place its orders, Republic would telephone

AVC, who would then prepare and send Republic an order acknowledgment and an invoice, both of which contained the following language on the front side of the form: "THIS SALE IS SUBJECT TO

ALL TERMS AND CONDITIONS CONTAINED ON THE

REVERSE SIDE." The conditions of sale on the reverse side of the

forms contained language which disclaimed all warranties except

those specifically reserved by the parties' contract and a provision

naming North Carolina as the applicable choice of forum and law.

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Republic used a shipment of plywood it received from AVC to

build kitchen cabinets for customers in New York. Shortly after

installation, the plywood warped, causing economic damage to

Republic. As a result, Republic commenced this suit against AVC in

the United States District Court for the Eastern District of Texas,

alleging a breach of the implied warranties of merchantability and fitness for a particular purpose. The district court found that the choice

of forum provisions were valid and transferred the case from Texas

to the Eastern District of North Carolina. The North Carolina court

concluded that the choice of law provisions were valid and, applying

North Carolina law, granted summary judgment to AVC on the

ground that the disclaimer of warranties in the contract precluded

Republic from recovering. This appeal followed.

II.

Republic contends that the district court erred in granting summary

judgment to AVC. According to Republic, the court incorrectly concluded that AVC's choice of law agreement, which provided that

North Carolina law would apply to disputes under the contract, was

controlling. We review the district court's decision to grant summary

judgment de novo. See M&M Med. Supplies & Servs. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 163 (4th Cir. 1992) (en banc). Pursuant

to Fed. R. Civ. P. 56(c), summary judgment is proper if there is no

genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See M&M Med. Supplies & Servs., 981 F.2d

at 162-63. With that standard in mind, we now consider the merits of

Republic's contention.

A federal court exercising diversity jurisdiction, as in the present

case, must apply the substantive law of the state in which it sits, see

Erie R.R. v. Tompkins, 304 U.S. 64, 78-79 (1938), which includes

applying the forum state's choice of law rules, see Klaxon Co. v. Stentor Elec. Mfg. Co, Inc., 313 U.S. 487, 496 (1941). In the present case,

Republic does not challenge, on appeal, the transfer of its case from

the Eastern District of Texas to the Eastern District of North Carolina.

Therefore, as a threshold matter, it is undisputed that North Carolina

is the forum state for purposes of determining the applicable law.

In North Carolina, as in most other states, parties to a contract may

agree in advance as to the choice of law that will govern any disputes

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that arise between them. See Perkins v. CCH Computax, Inc., 333

N.C. 140, 145 n.1, 146 (1992) (noting that the state Supreme Court

has held choice of law provisions to be valid and enforceable in North

Carolina); see also Allen v. Lloyd's of London , 94 F.3d 923, 928 (4th

Cir. 1996) (noting that "the [United States] Supreme Court has consistently accorded choice of forum and choice of law provisions presumptive validity"). Section 105 of the North Carolina Commercial

Code provides in pertinent part that "... when a transaction bears a

reasonable relation to this State and also to another state or nation the

parties may agree that the law either of this State or of such other state

or nation shall govern their rights and duties ...." N.C. Gen. Stat.

§ 25-1-105 (1995). Thus, as a general matter, choice of law clauses

are enforceable in North Carolina.

In the case at bar, the parties' contract contained a clause delineating the choice of applicable law and forum. The relevant clause provides:

GOVERNING LAW AND VENUE. The provisions of the

Uniform Commercial Code in effect in the State of North

Carolina as of the date of this order shall govern all aspects

of this agreement except where in conflict with the terms

and conditions contained herein, in which event these conditions shall control. This agreement, including its validity,

interpretation, performance, operation and enforcement shall

be governed by the laws of the State of North Carolina.

Buyer submits to the jurisdiction of the state and federal

courts of the State of North Carolina for the resolution of

any legal action arising out of this agreement and agrees that

venue for such legal action shall be exclusively in ... the

Eastern District of North Carolina for any action instituted

within the Federal Court system.

Although the language of the parties' contract would ordinarily leave

little doubt as to the appropriate choice of law, the issue is complicated by the fact that Republic's suit against AVC was brought pursuant to the Texas Deceptive Trade Practices Act (DTPA). See Tex.

Bus. & Comm. Code § 17.41 et seq. The DTPA creates a cause of

action for damages on behalf of consumers who, inter alia, suffer

economic damage or emotional anguish as a result of a "breach of an

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express or implied warranty." See Tex. Bus. & Comm. Code

§ 17.5(a)(2). It is therefore necessary to determine whether the nature

of a claim under the DTPA has any effect on the parties' choice of

law agreement.

In ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42 (4th Cir. 1983),

we held that a contractual choice of law clause designating New York

law as governing was inapplicable to a claim for damages arising

under North Carolina's Unfair Trade Practice Act (UTPA), N.C. Gen.

Stat. § 75-1.1. The UTPA, which is closely analogous to Texas'

DTPA, provides consumers with a private cause of action for damages arising from any "[u]nfair methods of competition ..., and unfair

or deceptive acts or practices in or affecting commerce ...." ITCO, 722

F.2d at 47. Because the plaintiff's suit in ITCO was brought pursuant

to the UTPA, we were left to determine whether the suit would be

governed by the parties' contractual choice of law provision. We concluded that because "[t]he nature of the liability ... imposed by the

statute is ex delicto, not ex contractu , ... [n]o issue of contractual construction, interpretation, or enforceability is raised ...." Id. at 49 n.11.

We, therefore, held that "North Carolina's courts would apply N.C.

Gen. Stat. § 75-1.1 to the facts presented ... without regard to the presence of the contractual choice of law provision." Id.; see also United

Dominion Industries, Inc. v. Overhead Door Corp., 762 F.Supp. 126,

128 (W.D.N.C. 1991) (citing ITCO, the court noted that "[t]he contractual provision here may govern the choice of laws as to the interpretation and construction of the contract; however it does not provide

the applicable law for a claim based on unfair and deceptive acts.").

Unlike ITCO and its progeny, however, in the instant case, Republic contractually and expressly waived any action for breach of

express or implied warranties beyond those contained in the agreement under the "conditions of sale." The waiver reads:

All implied warranties of merchantability and all implied

warranties of fitness for a particular purpose or use are specifically excluded. There are no warranties, expressed or

implied, which extend beyond the written warranties contained herein.

Since the Court must determine the validity and enforceability of the

contractual waiver, the nature of liability is ex contractu and, thus,

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subject to the parties' choice of law agreement. The fact that the claim

is brought under the DTPA has no effect on the parties' choice of law.

In accordance with the terms of the agreement, the law of North Carolina should apply.

North Carolina law allows the type of waiver contained in the

agreement. Under state law, implied warranties of merchantability

and fitness may be excluded or modified, if done in accordance with

the provisions of N.C. Gen. Stat. § 25-2-316. See Angola Farm Supply and Equipment Co. v. FMC Corp., 59 N.C. App. 272, 277 (1982).

Section 25-2-316(2) of the General Statutes of North Carolina states

in pertinent part:

(2) Subject to subsection (3), to exclude or modify the

implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing

must be conspicuous, and to exclude or modify any implied

warranty of fitness the exclusion must be by a writing and

conspicuous. Language to exclude all implied warranties of

fitness is sufficient if it states, for example, that "There are

no warranties which extend beyond the description on the

face hereof." N.C. Gen. Stat. § 25-2-316(2) (1995).

Section § 25-1-201(10) defines "conspicuous" as follows:

A term or clause is conspicuous when it is so written that

a reasonable person against whom it is to operate ought to

have noticed it. A printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING) is conspicuous. Language

in the body of a form is "conspicuous" if it is larger or other

contrasting type or color. But in a telegram any stated term

is "conspicuous." Whether a term or clause is"conspicuous"

or not is for decision by the court. N.C. Gen. Stat.

§ 25-1-201(10) (1995).

So, as long as the waiver satisfies the requirements of § 25-2-316 and

§ 25-1-201(10), it is permissible.

As further support, the North Carolina Supreme Court has held that

parties may, by contract, exclude implied warranties of merchanta-

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bility and fitness for a particular purpose. In Billings v. Joseph Harris

Co., Inc., the state Supreme Court, addressing a claim of breach of

warranty against a seed dealer, upheld a disclaimer of warranties

clause contained in the parties' contract. 290 N.C. 502, 508-509

(1976). The contract of sale in Billings provided: "It makes no warranties, express or implied, of merchantability, fitness for purpose, or

otherwise which would extend beyond such descriptions, and in any

event its liability for breach of any warranty or contract with respect

to such seeds or plants is limited to the purchase price of such seeds

or plants." 290 N.C. at 504. Citing § 25-2-316, the court stated: "[The

disclaimer language] clearly permits a seller of seed, just as a seller

of other merchandise, to incorporate in his contract a disclaimer of

any warranty of merchantability or of fitness for purpose provided he

complies with the conditions stated in subsection (2) [of § 25-2-316]."

290 N.C. at 508-509.

Similarly, in Angola Farm Supply and Equipment Co. v. FMC

Corp., the North Carolina Court of Appeals held that language in the

parties' contract was sufficient to exclude the implied warranties of

merchantability and fitness for a particular purpose. 59 N.C. App. at

277-278. In Angola Farm, the contract provided that its products

would be "free from defects in material and workmanship for a period

of six (6) months from the date placed in service or twelve (12)

months from the date of factory shipment, whichever occurs first." 59

N.C. App. at 273. The warranty further provided:"This warranty is

in lieu of all other warranties, express or implied, including those of

merchantability and fitness of any product for a particular purpose not

expressly set forth herein." 59 N.C. App. at 273. The court concluded

that the disclaimer of warranty, written in bold and capitalized print,

satisfied the requirements of § 25-2-316(2). Angola Farm, 59 N.C.

App. at 506; see also Ace, Inc. v. Maynard, 108 N.C. App. 241,

248-249 (1992) (enforcing agreement that contained a disclaimer of

warranties clause), review denied, 333 N.C. 574 (1993).

We, therefore, conclude that the waiver language contained in the

contract between Republic and AVC is permissible under North Carolina law. On the face of the invoice, there is plainly visible, capitalized print indicating that the sale was subject to the terms and

conditions contained on the reverse side. The disclaimer on the

reverse side of the invoice is in capitalized type and is larger than the

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surrounding text, clearly satisfying the definition of "conspicuous"

provided above. See generally Tyson v. Ciba-Geigy Corp., 82 N.C.

App. 626, 631 (1986) (determining that text in darker and larger type

than other language on label was "conspicuous").

Republic had ample opportunity to read the back of the invoice and

object to any terms it found unconscionable or unfair. Republic never

objected, however. Rather, over the course of nearly six years, Republic continued to order plywood from AVC and received, with each

shipment, an invoice containing the same terms and conditions outlined above. See generally N.C. Gen. Stat.§ 25-2-207(1) (1995) ("...

a written confirmation which is sent within a reasonable time operates

as an acceptance even though it states terms additional to or different

from those offered or agreed upon, unless acceptance is expressly

made conditional on assent to the additional or different terms."). If

a self-described, "illiterate" farmer is obliged to comply with a disclaimer of warranties, as was the case in Billings, 290 N.C. at 507,

surely a sophisticated business enterprise like Republic must be prevented from avoiding the terms of its agreement with AVC. Barring

fraud, of which there is no evidence here,* we are obliged to enforce

the contractual provisions agreed upon by the parties.

III.

Accordingly, we conclude that the district court's grant of summary judgment in favor of Appellee-Defendant was proper. AVC is

entitled to judgment as a matter of law. We affirm.

AFFIRMED

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*Under North Carolina law, substantial evidence of fraud consists of

(1) false representation or concealment of a material fact, (2) reasonably

calculated to deceive, (3) made with intent to deceive, (4) which does

in fact deceive, (5) resulting in damage to the injured party. Ace, 108

N.C. App. at 249.

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