Opinion ID: 703395
Heading Depth: 3
Heading Rank: 6

Heading: Five lines with ten ports for looping.

Text: 18 Based on these items being corrected by May 31, 1990, ISN, Inc. agrees to make payment no later than June 4, 1990 for the above stated invoice in full. 19 (J.A. 1056). It is uncontested that, after this meeting, BellSouth and ISN attempted to fix the problems delineated in the letter. 20 ISN believed, however, and the district court found, that BellSouth failed to correct all six of the deficiencies by May 31, 1990. Therefore, ISN did not pay BellSouth for the M & CS. On June 6, 1990, BellSouth sued ISN for the contract price in the United States District Court for the District of Maryland. The Navy then cancelled ISN's contract for the four security systems on June 22, 1990. ISN filed a counterclaim for compensatory damages based on its time lost trying to repair the deficient M & CS and for incidental damages from the Navy's cancellation of its contract. Subsequently, BellSouth filed a third-party complaint against SMF, alleging that if the district court were to find ISN not liable to BellSouth, then SMF should be liable to BellSouth for the price paid on their contract. In turn, SMF filed its own third-party complaint against Cardkey. 21 On November 13, 1990, ISN sent BellSouth a letter to provide formal notification to [BellSouth] that ISN is preparing to ship all equipment in its possession provided by [BellSouth] back to [BellSouth]. (J.A. 926). This notice further informed BellSouth that ISN was returning the goods because of their failure to comply with applicable [Navy] specifications. Id. ISN returned the goods shortly thereafter. 22 After denying BellSouth's motion for summary judgment, the district court conducted a bench trial on September 22-25, 1992. During the course of trial, the district court also denied BellSouth's motion to amend its complaint pursuant to Fed.R.Civ.P. 15(b) to include SMF along with ISN as a direct defendant in the action, rather than as a contingent third-party defendant. At the conclusion of the trial, the district court ruled that neither BellSouth nor ISN was liable to the other, thereby necessarily ruling in favor of SMF and Cardkey. Specifically, it found that although BellSouth and ISN had entered into an agreement for the M & CS, ISN had timely revoked its acceptance of the M & CS because of its failure to conform to the Navy specifications. Additionally, the court found that BellSouth was not liable to ISN for damages resulting from the time spent developing the system or from the loss of the Navy contract. Because ISN did not recover from BellSouth, neither SMF or Cardkey was found liable. The court held that BellSouth and ISN should bear their own costs; however, it ordered BellSouth to pay costs to SMF and Cardkey. 23 Although both BellSouth and ISN filed notices of appeal, only BellSouth has pursued its appeal. Primarily, BellSouth argues that the district court erroneously found (1) that ISN satisfied the procedural requirements of U.C.C. section 2-608 and (2) that the nonconformities in the M & CS substantially impaired the contract between BellSouth and ISN. BellSouth also argues that (3) ISN waived revocation of acceptance as a defense by failing to plead it expressly; (4) the district court erroneously shifted the burden of proof to BellSouth on the issue of whether the contract was substantially impaired; and (5) the district court erred by not requiring ISN to present expert testimony on the issue of substantial impairment and by excluding testimony on ISN's motives for revoking its acceptance. Finally, BellSouth appeals the district court's award of costs to a third-party defendant and the court's denial of its summary judgment motion. We address these issues seriatim.