Court Opinion

ID: 2963837
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:15:56.147721+00
Date Added: 2024-06-11T11:42:43.437450
License: Public Domain

USCA1 Opinion

	

          January 11, 1996  UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ____________________

          No. 95-1220

                                  KNAPP SHOES, INC.

                                Plaintiff, Appellant,

                                          v.

                       SYLVANIA SHOE MANUFACTURING CORPORATION,

                                 Defendant, Appellee.

                                 ____________________

                                     ERRATA SHEET

               The opinion of this  court, issued on December 20,  1995, is
          amended as follows:

               On  page   36,  line   four,   replace  "$233,626.47"   with
          "$223,626.47".

               On  page   36,   line  five,   replace  "$243,911.62"   with
          "$253,911.62".

               On  page 36, line five, add to  the end of the paragraph the
          following sentence:   "In addition, the  magistrate judge's order
          terminating the  injunction against  Sylvania, as entered  on May
          31, 1991 and amended on June 10, 1991, is vacated; the magistrate
          judge  is free  to reduce the  amount embargoed to  the net award
          plus anticipated costs and interest."

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 95-1220

                                  KNAPP SHOES, INC.

                                Plaintiff, Appellant,

                                          v.

                       SYLVANIA SHOE MANUFACTURING CORPORATION,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Lawrence P. Cohen, U.S. Magistrate Judge]
                                            _____________________

                                 ____________________

                                        Before

                                Cyr, Boudin and Lynch,

                                   Circuit Judges.
                                   ______________

                                 ____________________

            Bernard  J. Bonn III with  whom Timothy C. Blank,  Kara W. Swanson
            ____________________            ________________   _______________
        and Dechert Price & Rhoads were on briefs for appellant.
            ______________________
            Joseph B.  Green with  whom Steven L.  Katz and Kotin,  Crabtree &
            ________________            _______________     __________________
        Strong were on brief for appellee.
        ______

                                 ____________________

                                  December 20, 1995
                                 ____________________

                 BOUDIN, Circuit Judge.  Over the  course of three years,
                         _____________

            beginning   in  early  1987,   Knapp  Shoes,  Inc.  ("Knapp")

            purchased nearly  300,000 pairs  of shoes from  Sylvania Shoe

            Manufacturing Corp. ("Sylvania").   The relationship  between

            the two  companies underwent  strains during its  final year,

            and broke off early in 1990.   Knapp filed suit in April 1990

            claiming  that Sylvania  had  manufactured  defective  shoes;

            Sylvania counterclaimed for unpaid bills.  In March 1995, the

            magistrate judge  awarded net damages of less than $65,000 in

            favor  of Sylvania.    Knapp appeals.    We affirm  in  part,

            reverse in part,  and remand for the entry of  a new judgment

            as specified in this opinion.

                               I.  THE UNDERLYING FACTS
                               I.  THE UNDERLYING FACTS

                 Knapp,  a  Massachusetts  corporation, manufactures  and

            distributes  work   shoes.    In  addition   to  selling  and

            distributing shoes that it manufactures, Knapp also sells and

            distributes shoes manufactured by other shoe companies  under

            the Knapp  logo.   Sylvania, a Pennsylvania  corporation, was

            one such supplier to Knapp.

                 In late  1986, Jack  Esser, then Knapp's  vice president

            for merchandising and manufacturing,  told Knapp personnel to

            contact  Sylvania to  arrange  for the  manufacture of  shoes

            Knapp  was selling  to  the U.S.  Postal  Service.   Sylvania

            delivered over  10,000 pairs  of two styles  of shoes--models

            1249 and 1250--by  mid-February 1987.  By all accounts, there

                                         -2-
                                         -2-

            were few problems with  these shoes, nor were  there problems

            with over  5,000 pairs  of 1249s delivered  between September

            1987 and May 1988.

                 Thus  encouraged,  Sylvania  and  Knapp  expanded  their

            collaboration, and  by early  1988 Sylvania  had made  or was

            making over two dozen models of shoes for Knapp.  These later

            models all differed in construction from the 1249s and 1250s.

            While  the latter in each  case consisted of  a leather upper

            cemented  to  a  polyurethane   sole,  the  new  models  were

            constructed of three parts:  a rubber outsole, an ethyl vinyl

            acetate  (EVA) midsole, and  a leather upper.   Among Knapp's

            various  problems  with  Sylvania  shoes,  the  most  serious

            complaint was  that the  leather  upper and  the EVA  midsole

            tended to fall apart.  

                 The bulk of Knapp's  purchases were in three categories.

            The  first, style  1251, accounted  for nearly  25,000 pairs.

            These  shoes were  athletic-style postal  shoes.   The second

            category  was  the  2600  series, which  accounted  for  over

            140,000 pairs.   These shoes were  steel-toed shoes, intended

            for  use  in  industrial   settings  where  OSHA  regulations

            required  protective footwear.   The  final category  was the

            2800 and 2900 series of non-steel-toe shoes, of which perhaps

            70,000 pairs were  sold.   A number of  models that  Sylvania

            produced for Knapp are not implicated in this litigation.

                 Quality control problems with shoes in these three lines

                                         -3-
                                         -3-

            appeared  almost immediately  and  continued  throughout  the

            history  of the  two companies'  relationship.   In mid-1987,

            Knapp  found  that  the  toe   bumpers  of  style  2600  were

            improperly  bonded to the shoe and could be peeled off; these

            shoes  were  returned to  Sylvania  for  repair before  being

            shipped to  Knapp's customers.  A  further problem--this time

            with sole adhesion--appeared soon afterwards, affecting white

            shoes in the 2600 and 2800 lines.  Sylvania, on the advice of

            its cement company, had  in late 1987 added white  pigment to

            the cement for  cosmetic reasons, and  this seemed to  affect

            the bond.  This difficulty led  to the recall of thousands of

            shoes in early 1988.

                 By summer 1988, the  sole separation problems had spread

            to  black shoes.    In a  letter sent  by  John Sprague,  the

            individual at Knapp charged  with quality control and product

            development, to  Colin Elliot, a vice  president at Sylvania,

            Sprague wrote that the problems reported with the black shoes

            "scare[s]  the hell  out  of us"  and  reported also  that  a

            "[r]ash   of  telephone   calls"  had   complained   of  sole

            separations  on style  1251.   Following these  complaints, a

            number  of  shoes were  sent  to  the Footwear  Institute  of

            America for  pull testing.1  These tests  indicated that some

                                
            ____________________

                 1Pull  tests,   standard  in  the  industry,  allow  for
            measurement  of  the  strength  of  shoe  construction.    In
            addition  to measuring  the  pounds of  pressure that  can be
            applied to a particular area of the shoe before it will fail,
            the tests indicate whether the failure was caused by material

                                         -4-
                                         -4-

            sole adhesion problems were caused by improper manufacture.

                 Esser later testified that he concluded at the time that

            the  problems  were  minimal  and  he  authorized   continued

            purchases  from Sylvania.   However,  both Sprague  and Esser

            remained  in almost daily contact with Elliot in an effort to

            correct the defects.   In  addition, Knapp began  to place  a

            legend on the bottom  of some of its purchase  orders, "ORDER

            PENDING CORRECTION OF SOLE SEPARATION PROBLEM."  

                 Throughout  this  period,  the evidence  indicates  that

            Sylvania and Knapp  worked together to  attempt to solve  the

            problems  that  were affecting  the  shoes.   Various  design

            changes  were suggested  by Knapp,  and  Sylvania implemented

            many of them.  The suggestions included adding toe bumpers to

            models  that  lacked  them and  substituting  a  polyurethane

            midsole  for the EVA midsole in certain models.  In addition,

            Sylvania changed cement companies in mid-1988.  

                 In 1989,  the relations between the  two companies began

            to  deteriorate.    Sylvania  blames  this  deterioration  on

            Knapp's then-parlous  financial state.   Knapp established  a

            cash  committee in February 1989  (of which John  Esser was a

            member); Richard  Nedder, Knapp's president, was  replaced by

            Joel Murray in April.  Knapp  fell behind on its account with

            Sylvania,  prompting Sylvania president  Robert Pearlstein to

                                
            ____________________

            failure--a  tearing of the upper or of the sole--or by a bond
            failure.  

                                         -5-
                                         -5-

            send letters of complaint in the summer of 1989.

                 Knapp  insists  that  defects  in  Sylvania  shoes  were

            jeopardizing  some  of its  most  important  accounts and  it

            offered evidence  that failures in models 2810  and 2930 were

            of particular concern.  In the summer of 1989 Knapp attempted

            to  return 1000 pairs of  2810's that were  produced with the

            EVA  midsole; Sylvania  refused to  accept the  returns.   At

            trial, Sylvania offered evidence, credited  by the magistrate

            judge,  that many  of  these 2810  and  2930 shoes  were  not

            manufactured by Sylvania, but  were instead imported by Knapp

            from  Taiwan.   There was  also  evidence that  sole adhesion

            problems  affected some  models that  were never  produced by

            Sylvania.

                  In an effort to work out a payment schedule, Pearlstein

            met with  Murray and others at Knapp  twice in the summer and

            fall of  1989.   At the latter  meeting on October  17, Knapp

            sought to  demonstrate that there were  quality problems with

            Sylvania  shoes  by  twisting  the  soles  and  uppers  apart

            manually.  This was done, but the ease, and the significance,

            of the demonstration  were disputed.  At that  meeting, Knapp

            agreed  to pay $40,000 for  every $35,000 of  product sent by

            Sylvania, the  extra $5,000 being part of  Knapp's attempt to

            repay earlier amounts owned to Sylvania.

                 Records of both companies show that shipments  continued

            in October and  November 1989.   Payments were  also made  by

                                         -6-
                                         -6-

            Knapp against its outstanding balance in January 1990.  O   n

            December 1,  1989, Dick  Sebastiao joined Knapp  as executive

            vice president  with the  understanding that he  would become

            president in February 1990.  By the end of 1989,  Sprague had

            been fired and  Esser, who had been on the board of directors

            of the company, also had left.  

                 A  final shipment  of  Sylvania shoes  was delivered  in

            February  1990, after Knapp  made an advance  payment.  James

            Crabtree,  a Knapp  employee, testified  that when  the shoes

            were  inspected, he was able to pull them apart with his bare

            hands;   he  alerted  Sebastiao,  who  called  Pearlstein  at

            Sylvania.   Pearlstein  asked for  a sample  to inspect,  and

            disputed  Crabtree's findings.   The  magistrate judge  later

            found   Crabtree's   testimony   incredible    and   credited

            Pearlstein's assertion  that the  shoes in the  February 1990

            shipment were not defective, although two Sylvania employees-

            -Elliot   and   John  Cartwright   (Sylvania's  manufacturing

            supervisor)--admitted that  they had  been  able manually  to

            separate the soles on some of the shoes.  

                 Crabtree further  testified that  he then began  to test

            Knapp's existing  inventory of Sylvania shoes  and found that

            it  was "95%  defective."    Again,  this testimony  was  not

            credited  by  the magistrate  judge.    Knapp also  performed

            various  tests on the shoes from the February shipment and on

            shoes  in  inventory  after  the  start  of  litigation;  its

                                         -7-
                                         -7-

            evidence  at trial  was that  these tests  consistently found

            problems  with the bonding of  the shoes.   This evidence was

            also not credited by the magistrate judge. 

                                         -8-
                                         -8-

                                II.  PRIOR PROCEEDINGS
                                II.  PRIOR PROCEEDINGS

                 On  April 10,  1990, Knapp  filed this  diversity action

            against  Sylvania  under  Massachusetts  law  for  breach  of

            contract (count  1), breach  of express warranty  and implied

            warranties of  merchantability and  fitness for a  particular

            purpose  (counts 2-4), breach of  the duty of  good faith and

            fair dealing (count 5), fraud and negligent misrepresentation

            (counts 6  and 7),  and violation  of Mass.  Gen. L. ch.  93A

            (count  8).2  Sylvania  also counterclaimed, seeking $277,000

            for unpaid  bills, plus multiple damages  and attorney's fees

            under Chapter 93A.  

                 Both parties  consented to  proceed before a  magistrate

            judge without a jury, and the magistrate judge bifurcated the

            trial into a liability  phase and a damages phase.   Evidence

            in the  liability phase was  completed on  January 31,  1991,

            after  nine days of testimony.  That same day, the magistrate

            judge entered  a four-page memorandum and  order that devoted

            one paragraph each to  five of Knapp's eight counts,  without

            discussing Sylvania's counterclaims.  

                 In  this  decision,  the  magistrate  judge  ruled  that

            Sylvania had  breached its  warranties only insofar  as Knapp

            had shown, or  could show,  that shoes delivered  to it  were

                                
            ____________________

                 2Chapter  93A outlaws  "[u]nfair methods  of competition
            and unfair or deceptive  acts or practices in the  conduct of
            any  trade  or  commerce,"  and permits  awards  of  multiple
            damages and attorneys' fees.

                                         -9-
                                         -9-

            defective.  The  magistrate judge also  found that Knapp  had

            failed  to  prove  fraud,  negligent  misrepresentation  or--

            "except to the extent that plaintiff has shown, or can show,"

            a refusal  by Sylvania  to credit returned  defective shoes--

            breach of  the duty of good  faith and fair dealing.   As for

            Knapp's chapter  93A claim,  the decision said  that Sylvania

            had  not been shown to  have engaged in unscrupulous conduct;

            it noted,  but  did not  decide,  the question  whether  some

            payments  might still be due Knapp under chapter 93A based on

            a regulation of the state's attorney general.

                 In  May 1991, prior to  the damages phase  of the trial,

            Knapp learned  that Sylvania  was going  out of  business and

            liquidating its assets.  Fearful that Sylvania would soon  be

            judgment-proof, Knapp obtained a temporary  restraining order

            precluding Sylvania from dissipating  assets in the amount of

            $3,775,657.22--the amount  of  damages that  Knapp  hoped  to

            prove in the damage phase of the trial.  The magistrate judge

            modified  this order on June  10, 1991, converting  it into a

            preliminary injunction  and amending it to  allow Sylvania to

            make limited payments to its creditors and lawyers.

                 The damages phase of the trial took place over five days

            in June  1991; at  Sylvania's  behest, an  additional day  of

            evidence was heard  on November 25, 1991.   Proposed findings

            of fact and conclusions of  law were filed by the  parties in

            March 1992.  Then, in March 1993, the magistrate judge issued

                                         -10-
                                         -10-

            an  order  proposing  to  certify certain  questions  to  the

            Massachusetts Supreme  Judicial  Court.   Both sides  opposed

            certification,  but on  April 8,  1993, the  magistrate judge

            certified  two  questions,  both  relating  to  the  possible

            application of Chapter 93A to  "a simple breach of warranty."

                 The  magistrate judge  prefaced the  certified questions

            with  a ten-page  statement.   In it,  he first  repeated the

            rulings on the five counts contained in the January 31, 1991,

            order.    Then, he  determined for  the  first time  that the

            parties  had   agreed   by  express   negotiations,   express

            understandings  and express  course of  dealings that  in the

            event of defects, "Knapp's remedy, and sole remedy, would  be
                                                   ____

            the  replacement of [or credit  for] those shoes  shown to be

            defective  and  returned--nothing  more,  and  nothing  less"

            (footnote  omitted;   brackets   in  the   original).     The

            certification also said, in a footnote, that  less than three

            percent  of  the  Sylvania  shoes  delivered  to  Knapp  were

            defective.

                 On Sylvania's motion, the magistrate judge dissolved the

            preliminary injunction on May  5, 1993, concluding that Knapp

            now  had little hope of  a substantial recovery.   On Knapp's

            appeal,  this  court  stayed   and  then  vacated  the  order

            dissolving the preliminary injunction.   Knapp Shoes, Inc. v.
                                                     _________________

            Sylvania  Shoe Manufacturing  Corp., 15  F.3d 1222  (1st Cir.
            ___________________________________

                                         -11-
                                         -11-

            1994).    We held  that Sylvania  had waived  the affirmative

            defense of limitation of remedies by failing to raise it in a

            timely fashion.   Since the  issue of limitation  of remedies

            had never been litigated by the parties, the waiver could not

            be avoided by amending the pleadings to conform to the proof.

            Cf. Fed. R.  Civ. P. 15(b).   Accordingly, we said that  "the
            ___

            limitation  of remedies defense is out of the case and cannot

            support the order vacating the injunction."  Id. at 1227. 
                                                         ___

                 We  also rejected  Sylvania's alternative  argument that

            the termination of the  injunction could be supported  by the

            magistrate  judge's footnote  finding, in  the certification,

            that the percentage of  defects was very small.   Our opinion

            pointed  out  that the  magistrate  judge had  not  set forth

            findings or  analysis to  support this  conclusion as  to the

            quantity  of defects, so we  were "unable to  make a reasoned

            judgment  whether, on  this  critical issue  of defects,  the

            magistrate   judge's  finding   was   or  was   not  `clearly

            erroneous'" under Fed. R. Civ. P. 52(a).  Id. at 1228-29.
                                                      ___

                 On October 13, 1994, the Supreme Judicial Court answered

            the  certified  questions  that  had been  submitted  by  the

            magistrate  judge.    Knapp  Shoes,  Inc.  v.  Sylvania  Shoe
                                  ___________________      ______________

            Manufacturing Corp., 640 N.E.2d 1101 (Mass. 1994).  The Court
            ___________________

            held that 940 Code Mass. Regs.   3.08, which provides in part

            that "[i]t shall be  an unfair and deceptive act  or practice

            to fail  to perform  or fulfill  any promises or  obligations

                                         -12-
                                         -12-

            arising  under  a warranty,"  was not  meant "to  encompass a

            contract dispute between businessmen based on a breach of the

            implied warranty of merchantability."  Id. at 1105.
                                                   ___

                 Thus informed,  the magistrate  judge  issued his  final

            decision on  March 1, 1995.   With respect to counts  3 and 4

            (breach  of warranties  of merchantability  and fitness),  he

            again  held that Sylvania had  breached its warranties to the

            extent  that  particular shoes  were  defective  for whatever

            reason.   On count  1 (breach  of  contract), the  magistrate

            judge  said  again that  there  was no  violation  beyond the

            breaches of  warranty covered  by counts  3 and  4.   He also

            reaffirmed that Knapp  had failed to establish  its claims in

            count 2 (breach of express warranties), count 5 (duty of good

            faith  and fair dealing), count 6 (common law fraud), count 7

            (common law negligent  misrepresentation) and count 8  (Mass.

            Gen. L. ch. 93A violation).  

                 On Sylvania's counterclaims, the magistrate  judge found

            that  Knapp was  liable for  the outstanding balance  due for

            shoes that Sylvania had  delivered to Knapp.   The magistrate

            judge found  that Sylvania  was not entitled  to recover  the

            contract price  of additional  shoes it had  manufactured for

            Knapp but not yet delivered; the reason was that Sylvania had

            failed  to make a reasonable effort  to resell the shoes.  He

            also rejected Sylvania's own chapter 93A claim against Knapp.

            Sylvania does not challenge these rulings on appeal.

                                         -13-
                                         -13-

                 In  computing  damages, the  magistrate judge  held that

            Knapp should receive credit only for defective shoes still in

            its  inventory--which he  determined to  be between  3 and  4

            percent of the  total--and for specified  incidental damages.

            He ruled that  Knapp had no right to revoke acceptance of any

            non-defective  goods in  inventory, nor  to reject  the final

            shipment of shoes sent  in February 1990, nor to  recover for

            lost  profits.  In the final tally, Knapp was awarded damages

            of   $160,062.74,  and  Sylvania   was  awarded   damages  of

            $223,626.47.    Finally,   the  preliminary  injunction   was

            dissolved.   We  stayed the  judgment pending  disposition of

            this appeal.

                     III.  LAW OF THE CASE AND STANDARD OF REVIEW
                     III.  LAW OF THE CASE AND STANDARD OF REVIEW

                 Our  review of  the facts  found by  the trial  judge is

            normally deferential; findings are not to be set aside unless

            clearly  erroneous, with  "due  regard .  .  . given  to  the

            opportunity of the trial court to judge of the credibility of

            the  witnesses."   Fed.  R. Civ.  P.  52(a); see  Williams v.
                                                         ___  ________

            Poulos, 11 F.3d 271,  278 (1st Cir. 1993).  Knapp argues that
            ______

            our review should  be less deferential in this  case, drawing

            attention to paragraph 49  of the magistrate judge's findings

            of fact and its accompanying footnote.

                      [Paragraph 49]   With respect to  all lines of
                 shoes  which Knapp  requested  be  manufactured  by
                 Sylvania,  one  finding  is   unmistakenably  [sic]
                 clear:   By  their express  negotiations, by  their
                 express   understandings,  by   their  demonstrated
                 conduct, and by  their express course of  dealings,

                                         -14-
                                         -14-

                 Sylvania  promised  Knapp that,  in the  event that
                 shoes   were   defectively  manufactured,   Knapp's
                 remedy,  and sole remedy,  would be the replacement
                              ____
                 of  [or  credit  for]   those  shoes  shown  to  be
                 defective and returned--nothing  more, and  nothing
                 less.

                      [Footnote]    This  finding  is not  made  and
                 reported to  suggest that  Knapp waived its  rights
                 under  Sections  2-601,  2-608,  and  2-609 of  the
                 Uniform Commercial Code (M.G.L., ch. 106,    2-601,
                 2-608  and 2-609).  Although it was and is clear to
                 this court--then  and now--that  that was  the sole
                 understanding of the  parties in terms  of remedies
                 and relief, and that it was clear (then and now) to
                 all  parties that  the  defense  of  waiver  loomed
                 throughout, and  that plaintiff could  not--then or
                 now--establish  any  legal   prejudice  (that   is,
                                      _____
                 plaintiff  could not--then or now--make any showing
                 that the  case would have been  tried differently),
                 our  Court  of  Appeals,   in  the  context  of  an
                 interlocutory appeal relating to the dissolution of
                 an injunction, has concluded otherwise.

                      Nevertheless, this finding and conclusion bear
                 heavily on the credibility of the witnesses  called
                 by Knapp, and other issues to be determined herein.

                 Knapp argues  that this  discussion violates the  law of

            the case by  contradicting our holding in Knapp that Sylvania
                                                      _____

            had waived any such limitation of remedies  defense, that the

            issue  of limitation  of remedies  had not been  litigated at

            trial, and that  it was now  "out of the case."   15 F.3d  at

            1227.     Knapp  further  insists  that  this  error  by  the

            magistrate   judge  tainted   his  other   factual  findings,

            requiring  us  to   subject  these  findings  to   heightened

            scrutiny.  Paragraph 49  has certainly complicated matters on

            this  appeal,  but  we   conclude  that  Knapp  has  somewhat

            exaggerated its import and consequences.

                                         -15-
                                         -15-

                 The law of the case doctrine has more than one dimension

            and  certain  complexities, but  as  applied  to the  problem

            before us, the doctrine provides that when a court of appeals

            makes a ruling of law, whether on appeal of a  final judgment

            or in an interlocutory appeal, that ruling becomes the law of

            the case  in any subsequent  proceedings in the  trial court.

            Elias v. Ford Motor Co., 734 F.2d 463 (1st Cir.  1984).  Such
            _____    ______________

            a ruling is "[a] mandate [that] is  completely controlling as

            to  all matters before the appellate court and disposed of by

            its decree."  Id. at 465.    
                          ___

                 We agree with Sylvania that the magistrate judge did not

            contradict  our legal  ruling in  Knapp that  the defense  of
                                              _____

            limitation  of remedies was waived  and now out  of the case.

            He  did  not  rest  any  of his  own  legal  rulings  on  the

            proposition that  Knapp had limited its  remedies by contract

            to  credit  for  returned  shoes; indeed,  he  awarded  Knapp

            damages for defective shoes still in its possession (although

            he found the number of such shoes to be very small).  To that

            extent,  Knapp's law-of-the-case  claim  is  something  of  a

            diversion.

                 At the same time, on an intermediate proposition of fact

            a direct conflict exists between our earlier opinion and  the

            most recent decision of the magistrate judge.  The magistrate

            judge  repeats in the footnote to  paragraph 49, quoted above

            in  text, his earlier conclusion  that Knapp and Sylvania did

                                         -16-
                                         -16-

            agree in fact  to limit Knapp's  remedies; and he  recognizes

            that this  court on  the prior appeal  "concluded otherwise."

            Our actual conclusion was slightly narrower--we said that the

            parties  had not purported to litigate the issue and we could

            find no evidence  of such an agreement--but  the fact remains

            that  the magistrate judge has reasserted  his view that such

            agreement has been proved.

                 All this  might matter little if  the magistrate judge's

            disagreement with us played  no role in his decision,  but he

            goes  on  to  say that  "this  finding  and conclusion  bears

            heavily  on the credibility of the witnesses called by Knapp,

            and other issues to be determined herein."  No  resort to law

            of the case doctrine is required for us to determine that his

            "finding  and  conclusion"  that such  an  agreement  existed

            limiting  remedies  is  clearly  erroneous.   The  very  same

            defect--the  lack of  evidence  to show  such an  agreement--

            identified  in   our   earlier  decision   remains,   utterly

            unaltered.

                 We  explained  in our  earlier opinion  why we  were not

            persuaded  of such  an  agreement by  the magistrate  judge's

            reliance on Esser's testimony  that a return remedy existed--

            testimony  that   did  not   even  purport  to   address  the

            exclusivity of the remedy--and  also why we saw no  course of

            dealing by  the parties that  could prove such  a limitation.

            15  F.3d at 1226-27.  No new  evidence was taken on remand to

                                         -17-
                                         -17-

            prove  this  limitation;  no  additional support  for  it  is

            mustered  by the  magistrate  judge out  of the  pre-existing

            record.  

                 About the best we can do in this disturbing situation is

            to  defer to  the usual  extent as  to those findings  of the

            magistrate judge that we are confident have not been infected

            by his  belief in  the supposed agreement  limiting remedies;

            and, on all other findings, to consider them in the knowledge

            that the magistrate judge has credited or discredited certain

            witnesses  based (at least in part) on a premise that we have

            already  held to be mistaken.   Sorting out  findings in this

            way,  and  deciding  how   to  treat  infected  findings,  is

            something of a task but better than an outright remand on all

            issues to a new judge.

                                  IV.  THE MERITS  
                                  IV.  THE MERITS

                 Our analysis of  the merits is  divided in three  parts.

            Knapp  raises  some  rather  half-hearted  objections  to the

            magistrate judge's rulings that reject most of its counts; we

            find  that  these rulings  are  sustainable  on this  record.

            Knapp's  next  objections  concern  the   magistrate  judge's

            rulings on remedies; here we find that the magistrate judge's

            analysis of the  remedies available to  Knapp was correct  on

            one issue (Knapp's purported  revocation of acceptance of all

            shipments) but  flawed on  another (Knapp's rejection  of the

            first  February  1990  shipment).    Finally,  we  find  that

                                         -18-
                                         -18-

            elements of the magistrate judge's  determinations on damages

            were clearly erroneous but that the necessary corrections can

            be made on the existing record.

                                    A.  Liability
                                        _________

                 Knapp's complaint  alleged eight causes of  action.  The

            magistrate  judge ruled that Knapp had  failed to persuade on

            all except for counts 3 and 4, breaches of implied warranties

            of merchantability and fitness; these warranties were held to

            be  breached  only  with respect  to  those  shoes  that were

            actually defective.   Sylvania  does not appeal  that limited

            finding   of  liability;  Knapp  appeals  from  the  decision

            rejecting  its other  counts, but  its arguments  are without

            merit.

                 Breach  of Contract.  With respect to count 1, breach of
                 ___________________

            contract,  Knapp  objects   that  the  magistrate  judge   in

            rejecting this count relied upon his footnote 49 finding that

            the  parties had previously  agreed to  limit remedies.   But

            Knapp's own  count 1  alleged only  that  Sylvania failed  to

            deliver shoes of promised  quality; and it has not  shown how

            this claim  exceeds the  breach of warranty  claims that  the

            magistrate  judge allowed under counts 3 and 4.  We therefore

            affirm the magistrate judge's disposition of count 1.

                 Breach of Express Warranty.   On count 2, the  breach of
                 __________________________

            express warranty,  Knapp argues that  Sylvania warranted that

            it  would produce a defect-free shoe and that the high defect

                                         -19-
                                         -19-

            rate  caused  each  entire  shipment  to   be  in  breach  of

            Sylvania's  express warranty.   Knapp  points to  two letters

            sent  to  Knapp  by  Sylvania in  mid-1988,  when  sole  bond

            problems  were  affecting shoes  in the  2600  line.   In the

            first, Elliot  wrote, "We know the  industrial consumer wants

            this product  and it is  up to us  to give it  to him  or her

            without  defect."  In the second, Elliot wrote "As always, we

            stand  behind  our  product  and fully  warrant  the  product

            against manufacturing defect." 

                 If Knapp  means to  suggest that Sylvania  had warranted

            that each and every shoe in a given shipment would be free of

            defects  and that a shipment  could be rejected  based on any

            such  defect, that  suggestion is not  reasonable.   At trial

            witnesses for both  parties agreed  that no one  in the  shoe

            industry expects that any shipment of shoes will  be entirely

            free of defects.  Sylvania's quoted statements can at most be

            read to mean that it was capable  of producing shoes that met

            industry standards as to the percentage of defects.

                 Of  course, to  the  extent that  Sylvania breached  its

            various commitments, it may  as remedial measures be liable--

            under certain  circumstances--to rejection  of more  than the

            particular shoes  shown to be defective  and to consequential

            damages  that  exceed  the  price  paid  for  the  particular

            defective shoes.   See IV(B) and  (C), below.  But  so far as
                               ___

            Knapp's claim depends on the notion that Sylvania promised no

                                         -20-
                                         -20-

            defects at all, we think no such warranty was made.  

                 Breach of  Duty of Good Faith and Fair Dealing.  Count 5
                 ______________________________________________

            alleged that  Sylvania breached  its duty  of good  faith and

            fair dealing.3   In  his  January 31,  1991, memorandum,  the

            magistrate judge  found that  Knapp had  failed to  carry its

            burden on this claim, ruling that "the defendant acted in the

            utmost  good faith  in an  attempt to  correct a  problem not

            reasonably   foreseen  by   any   of  the   parties  to   the

            relationship."   Knapp  insists that  Sylvania's  failure  to

            correct its manufacturing  processes, despite its  assurances

            to Knapp  that  the  quality  of  its  shoes  would  improve,

            breached its duty.  

                 Whether conduct violates the duty of good faith and fair

            dealing is necessarily a  fact-specific inquiry, see E. Allan
                                                             ___

            Farnsworth,  Contracts      7.17  (2d  ed.   1990),  and  the
                         _________

            magistrate judge's  finding  here is  not clearly  erroneous.

            There  was  ample  untainted  record  evidence  that Sylvania

            strove to improve the  quality of the shoes it  delivered; it

            changed its cement suppliers  and implemented various  design

            changes  suggested  by Knapp.    There  is  no evidence  that

            Sylvania's failure  to improve its manufacturing  process was

                                
            ____________________

                 3In Massachusetts, "[e]very  contract implies good faith
            and fair dealing between the parties to it."  Warner Ins. Co.
                                                          _______________
            v. Commissioner of Ins., 548 N.E.2d 188, 193 n.9 (Mass. 1990)
               ____________________
            (quoting  Kerrigan  v. Boston,  278  N.E.2d  387, 393  (Mass.
                      ________     ______
            1972).   Similarly,  Mass. Gen.  L. ch.  106 ("UCC")    1-203
            imposes an "obligation of good faith."

                                         -21-
                                         -21-

            motivated by bad  faith rather  than by a  simple failure  to

            root out and remedy all of the problems.

                 Fraud and  Negligent Misrepresentation.  Counts  6 and 7
                 ______________________________________

            charged  fraudulent  and negligent  misrepresentation, claims

            that  in Massachusetts  require a  false representation  of a

            material fact,  knowledge of  falsity or carelessness  on the

            part  of  the  defendant,  and  reasonable  reliance  by  the

            plaintiff.4

                 The magistrate judge found, in his memorandum of January

            31,   1991,  that  Knapp's  misrepresentation  claims  failed

            because Sylvania had done  what it said it would  do--use its

            best  efforts to produce shoes  free of defects.   On appeal,

            Knapp  insists  that  Sylvania  had  repeatedly  and  falsely

            assured Knapp  that it  would correct  any problems  with the

            shoes,   and   that   Knapp   reasonably  relied   on   these

            representations in continuing its purchases.

                 We  need  not  decide  whether such  reliance  would  be

            reasonable,  but cf.  IV(C) below,  because we agree  that no
                         _______

            false representation has been  shown.  The evidence  at trial

            indicated that Knapp and Sylvania remained in regular contact

            regarding  proposed  design  and manufacturing  changes,  and

            Sylvania  never  misrepresented the  changes  it  proposed to

            carry out.  In this context, Sylvania's conclusory statements

                                
            ____________________

                 4VMark Software, Inc. v. EMC Corp., 642 N.E.2d  587, 593
                  ____________________    _________
            n.8  (Mass. App. Ct. 1994); Zimmerman v. Kent, 575 N.E.2d 70,
                                        _________    ____
            77 (Mass. App. Ct. 1991).

                                         -22-
                                         -22-

            that its quality would improve--and Knapp calls our attention

            to no more specific alleged misstatement--are no more than an

            "expectation, estimate, opinion, or judgment."  See Powell v.
                                                            ___ ______

            Rasmussen, 243 N.E.2d 167, 168 (Mass. 1969).
            _________

                 Chapter  93A.   On  count 8--Knapp's  ch. 93A  claim--we
                 ____________

            again  affirm the magistrate judge.  For Knapp to prevail, it

            must  prove that  Sylvania's conduct  included an  "unfair or

            deceptive act,"  a phrase that the  Massachusetts courts read

            as  requiring  a  showing  of  "rascality;"  the  showing  is

            especially  difficult  where the  case  involves arm's-length

            transactions   between   sophisticated   business   entities.

            Anthony's Pier Four, Inc. v. HBC Assocs., 583 N.E.2d 806, 821
            _________________________    ___________

            (Mass. 1991).

                 The crux of Knapp's argument  is that Sylvania was aware

            that there  were problems with its  manufacturing process and

            failed to make  the needed  changes.  But  as the  magistrate

            judge  held, there was  no evidence at  trial that Sylvania's

            failure to improve the quality of its shoes was deliberate or

            willful; on the contrary, it made repeated efforts on its own

            and in consultation with Knapp to correct perceived problems.

            Knapp's claim  for multiple  damages and attorney's  fees was

            therefore properly denied.

                        B.  Revocation and Rejection Remedies 
                            _________________________________

                 Even if liability is based only on counts 3 and 4, Knapp

            argues on appeal that the magistrate judge nevertheless erred

                                         -23-
                                         -23-

            in determining the remedies available to it.  It says that he

            improperly  denied  to  Knapp  remedies  of   "revocation  of

            acceptance"  (with  respect  to  all  prior  shipments)   and

            "rejection" (with  respect to the shipment  of February 1990)

            and that these errors  led him into a further  error, namely,

            to direct his damage assessment only to those  shoes actually

            shown to be defective.

                 Revocation of Acceptance as to  All Shoes.  Knapp  first
                 _________________________________________

            argues  that  it  is entitled  to  revoke  acceptance  of all

            inventory  purchased  from Sylvania--including  non-defective

            shoes--because the rate of defects was  so high as to make it

            impossible  for Knapp to sell shoes from that inventory.  The

            magistrate judge rejected this remedy because he found a very

            low rate of defects.  Although this finding is not adequately

            supported, see IV(C) below, we agree with the  result because
                       ___

            Knapp  failed   to  make  an  effective   revocation  of  its

            acceptance under UCC   2-608.

                 When a buyer "accepts" goods, as defined in UCC   2-606,

            the  buyer forfeits the right to "reject"  the tender.  UCC  

            2-607.  However, a  buyer may be able to  "revoke acceptance"

            under UCC   2-608 as follows:

                 (1)  The buyer  may revoke his acceptance of  a lot
                 or    commercial    unit    whose    non-conformity
                 substantially impairs  its value  to him if  he has
                 accepted it
                      (a) on the reasonable assumption that its non-
                 conformity  would  be cured  and  it  has not  been
                 seasonably cured; or
                      (b) without discovery  of such  non-conformity

                                         -24-
                                         -24-

                 if his acceptance was reasonably  induced either by
                 the difficulty of discovery before acceptance or by
                 the seller's assurances.
                 (2)   Revocation of acceptance must  occur within a
                 reasonable time after the buyer discovers or should
                 have discovered  the ground  for it and  before any
                 substantial  change in condition of the goods which
                 is  not caused  by their  own defects.   It  is not
                 effective until  the buyer  notifies the seller  of
                 it.

            The buyer  who revokes has  the same rights and  duties as if

            the buyer had rejected the goods.  UCC   2-608.

                 Knapp  argues  that  this  case  falls  squarely  within

            section 2-608  (1)(b).  It  says that the  sole-bond problems

            were hard to discover  because they could not be  detected by

            visible  inspection  and  that  it   reasonably  relied  upon

            Sylvania's assurances that it had corrected the bond problem.

             Knapp  cites  to  S &  R  Metals,  Inc.  v.  C. Itoh  &  Co.
                               _____________________      _______________

            (America), 859 F.2d 814 (9th Cir. 1988), as authority for the
            _________

            view  that  a buyer  can  revoke  acceptance  when the  prior

            acceptance was made  without knowledge of the  defect and the

            defect was "latent and difficult to discover."

                 The difficulty with Knapp's position is that by mid-1988

            it had ample knowledge  that customers were complaining about

            separation, and  its own experience  confirmed that  Sylvania

            was not successfully solving  the underlying problems.  Knapp

            itself points  to pull-tests done  in 1988 which,  it argues,

            prove that Sylvania's manufacturing  process was flawed.  Yet

            not  until spring  1990--the  precise  date is  disputed--did

            Knapp purport to revoke acceptance for all shoes delivered to

                                         -25-
                                         -25-

            it over the entire period.

                 This is not a  revocation occurring within "a reasonable

            time" after  the buyer  discovered the ground  for rejection,

            and the contrast between the present facts and those of S & R
                                                                    _____

            Metals underscores the point.  In that case, the buyer had no
            ______

            reason to  doubt the quality  of the  steel until  complaints

            were received; advance testing  would have been expensive and

            destroyed the valuable product  tested; and the revocation of

            acceptance  was made  within nine  days after the  defect had
                                         __________

            been discovered  and confirmed.   S & R  Metals, 859 F.2d  at
                                              _____________

            817.    Nothing  in this  decision,  or  any  other cited  by

            Knapp,5  suggests that  a buyer  can accept  deliveries of  a

            vast number of  items over a period of a year  and a half and

            then suddenly revoke the  acceptance of all of them  based on

            defects  whose presence  was  known or  suspected during  the

            entire period.

                 Rejection  of  the  February  1990  Shipment.    A  much
                 ____________________________________________

            narrower and  stronger claim  by Knapp  is  that it  properly

            rejected the  single shipment  of shoes received  in February

            1990.   Section 2-601  of the UCC  provides that  if goods or

                                
            ____________________

                 5In Fortin  v.  Ox Bow  Marina,  Inc., 557  N.E.2d  1157
                     ______      _____________________
            (Mass. 1977),  also cited  by  Knapp, the  court allowed  the
            buyer to  revoke acceptance of  a boat delivered  four months
            earlier when the seller had provided repeated assurances that
            it would cure the identified  defects in the boat.  The  case
            involved a different problem--a  promise to repair a specific
            item  already  delivered--and  is  governed  by  a  different
            provision (section 2-608(1)(a)).

                                         -26-
                                         -26-

            tender fail to "conform" to the  parties' contract, the buyer

            may  reject the whole  delivery;6 but this  rejection must be

            within  a  reasonable time,  and  the  buyer must  seasonably

            notify the seller  of the rejection.   UCC    2-602(1).   The

            magistrate judge  found that Knapp  failed to prove  that the

            February shipment  was nonconforming, and further  found that

            Knapp's rejection was untimely.

                 Knapp  insists  that  the  shipment   was  nonconforming

            because  all of  the  shoes in  the  shipment were  defective

            inasmuch as they could  be pulled apart manually.   Crabtree,

            Knapp's key  witness on  this issue, so  testified at  trial.

            The  magistrate  judge made  clear  that  he did  not  accept

            Crabtree's testimony,  but this appraisal may  well have been

            affected  by  the  magistrate  judge's  mistaken  finding  on

            limitation of remedies:  Crabtree also testified to  the fact

            that  the  procedure  of   return  of  customer  defects  was

            established  only  in  mid-1988  and that  before  that  time

            customer returns  were discarded, a fact  that the magistrate

            judge found  surprising in  view of the  "clear understanding

            between the parties."

                 Knapp did  carry out  a prompt  inspection of  the shoes

                                
            ____________________

                 6To  permit  rejection   of  the  entire  shipment   for
            nonconformity, Knapp  had to  show not  just that  there were
            defective  shoes  but that  the defect  rate was  higher than
            agreed upon or, lacking specific agreement, than the standard
            in the industry.   See  Agoos Kid. Co.  v. Blumenthal  Import
                               ___  ______________     __________________
            Corp., 184 N.E. 279, 281 (Mass. 1932).
            _____

                                         -27-
                                         -27-

            that  arrived  in  the  February  1990  shipment,  complained

            immediately  to Pearlstein  that the  shoes were  100 percent

            defective, and sent him a case  for his own inspection.  When

            the formal "rejection"  occurred is disputed--the  magistrate

            judge  found that  it did  not occur  until May--but  Knapp's

            actions  were   certainly  consistent   with  its   claim  of

            substantial defects and  represented steps toward  rejection.

            It immediately placed the seller  on notice that the  defects

            were pervasive and began to negotiate the seller's response.

                 The magistrate judge chose to credit fully the testimony

            of Pearlstein,  Sylvania's president,  to the effect  that no

            shoes from the sample case sent by Knapp to Sylvania from the

            February  shipment separated.    But quite  apart from  other

            Knapp  witnesses  who  supported  Crabtree,   other  Sylvania
                                                                 ________

            employees--Elliott and Cartwright--both  agreed that at least

            some of the  shoes could be  pulled apart by  hand.  Thus  we

            find  it hard to  accept the magistrate  judge's finding that

            "plaintiff has  failed to establish by a preponderance of the

            evidence  that any of the  shoes--much less the  whole of the

            lot--failed to conform."7

                 This court finds  clear error only where,  "on the whole

                                
            ____________________

                 7The  magistrate  judge suggested  that the  "hand" pull
            test is not standard  in the industry and that  evidence that
            shoes could be pulled apart by hand did not necessarily prove
            them defective.   Common sense, buttressed  by ample evidence
            at  trial, confirms that an industrial work shoe is defective
            where it can readily be pulled apart by hand.

                                         -28-
                                         -28-

            of  the record,  we form  a strong  unyielding belief  that a

            mistake  has been made."   Cumpiano v.  Banco Santander P.R.,
                                       ________     ____________________

            902  F.2d 148, 152 (1st  Cir. 1990) (citations  omitted).  In

            this  instance, we  conclude  that the  magistrate judge  was

            clearly in error  in finding that the  February 1990 shipment

            was  free of defects and conformed to industry standard.  The

            question whether Knapp gave  prompt notice is more difficult,

            but we  need  not resolve  the  issue because  whether  Knapp

            rightfully  rejected   the  nonconforming  shipment   has  no

            practical  impact  on the  damages to  which it  is entitled.

            With the  magistrate judge's  finding on defects  set to  one

            side, Knapp's  ordinary damages  as to the  February shipment

            produce essentially the same amount as it would receive under

            the "rejection" remedy.  See IV(C) below.
                                     ___

                                     C.  Damages
                                         _______

                 Knapp's damage  claims  were based  upon its  allegation

            that Sylvania shoes suffered from a very  substantial rate of

            defects.   In his  final damages calculation,  the magistrate

            judge found that the  rate of defects in the  inventory shoes

            involved  in  this litigation  was  less  than four  percent.

            Knapp argues  on appeal  that the magistrate  judge's defect-

            rate  finding was  clearly  erroneous, and  insists that  the

            evidence established a defect rate of at least 40 percent for

            the shoes remaining in inventory at Knapp.  We think that the

            magistrate judge's  finding is clearly erroneous  and that on

                                         -29-
                                         -29-

            this record the  40 percent  figure is  the only  alternative

            choice.

                 Knapp's allegations  of substantial defect  rates in the

            shoes remaining  in  inventory  were  supported  by  detailed

            testimony by  Crabtree; by  corroborating testimony of  other

            Knapp personnel; by evidence of substantial customer returns,

            dissatisfaction  and cancelled  relationships  to  which  the

            customers  testified;  by   testimony  that  the  number   of

            defective  shoes  held  by Knapp  plus  the  number  of prior

            returns  acknowledged  by  Sylvania  was  nearly  twice   the

            magistrate's  3-to-4 percent  finding; by evidence  that both

            Knapp and  customers threw  away additional defective  shoes;

            and,  finally,  by  a  fairly detailed  sampling  study  that

            appearedto establish a defect rate of at least 41.7 percent.8

                 In adopting  the 3-to-4 percent defect  rate figure, the

            magistrate judge accepted the  testimony of Esser and Sprague

            (both  disaffected former  Knapp  employees) and  of Sylvania

            personnel, to the effect  that there was never a  substantial

            problem with Sylvania  shoes.  He  disregarded Crabtree as  a

            liar; and he dismissed  customer testimony as not necessarily

                                
            ____________________

                 8A  biostatistician analyzed  the results  of pull-tests
            performed  on  randomly selected  pairs  of  unused shoes  in
            inventory.   Using a 20-pound  figure for the  pull-tests, 60
            percent  of the shoes failed.   Given the  sample size tested
            and the number  of shoes in  inventory, the expert  concluded
            that  "we  have a  95 percent  level  of confidence  that the
            actual proportion of defective  pairs in the inventory .  . .
            is at least 41.7 percent."

                                         -30-
                                         -30-

            relating to  Sylvania shoes but rather  to shoes manufactured

            in Taiwan.   He found the pull tests  inconclusive, insisting

            that Knapp  had failed to  present evidence that  a pull-test

            failure  at under 20 pounds showed that a shoe was defective.

            He refused  to believe  Knapp's accounting  of the  number of

            defective shoes in inventory.

                 Under  the  Cumpiano  standard,  we  reject  as  clearly
                             ________

            erroneous the magistrate judge's assessment of the percentage

            of  defects in the Sylvania shoes.  We have already explained

            why his  related appraisal of testimony  regarding quality of

            the February  1990 shipment  is unpersuasive, see  IV(B), and
                                                          ___

            this is equally so  on the broader question of  the remaining

            inventory.   Knapp's claims  of  defects came  not only  from

            Knapp  but from  customers disinterested  in the  litigation,

            from the  presence in  inventory of defective  shoes actually

            returned  to  Knapp, and  from  the  pull-tests conducted  by

            independent  experts--the last  of  which sampled  the entire

            remaining Knapp inventory in the contested models.

                 The notion that any  of these defective shoes  came from
                                 ___

            foreign sources  rests on  doubtful evidence; but,  given the

            poor quality  of the  February 1990 shipment  admittedly from

            Sylvania, it  is obvious that foreign sources  do not explain

            away  the problem.    From the  testimony  on pull-tests,  it

            appears that the 20-pound figure that Knapp asked  the expert

            to  employ was not only  plausible but conservative.  Knapp's

                                         -31-
                                         -31-

            accounting of the number of defective  shoes in its inventory

            was  essentially uncontradicted.    In sum,  the evidence  is

            overwhelming  that the  defect  rate was  considerably higher

            than the rate adopted by the magistrate judge.

                 Each side had its chance to present evidence and neither

            side is entitled to introduce further evidence on this issue.

            On the present  record the stark choice is between Sylvania's

            claim  that defects were  no greater than  normal and Knapp's

            evidence to the contrary.  The Knapp evidence was that it had

            6,045 known  defective pairs in  inventory, comprising  shoes

            returned by  customers, the  1,422 pairs torn-apart  from the

            February 1990  shipment and  other shoes pulled  apart during

            inspection  of inventory,  and--in addition--that  it had  in

            inventory 21,010  new shoes  of the  models involved  in this

            litigation, at  least 41.7  percent of which  the statistical

            sampling showed to be defective.  

                 The  evidence  as  to   raw  numbers  in  inventory  was

            essentially uncontradicted  even though the  magistrate judge

            declined  to  accept the  numbers.   As  for  the statistical

            study,  the  20-pound  pull-test  was (as  already  noted)  a

            conservative  standard based  on the  evidence; and  the 41.7

            percent  figure even  more so.   Sylvania  has chosen  not to

            contest its liability for defective  shoes no matter how long

            in inventory.   "Where, as  here, the record  is sufficiently

            developed that we can apply the law to the facts before us  .

                                         -32-
                                         -32-

            .  . that route is available to  us."  Lipsett v. Blanco, 975
                                                   _______    ______

            F.2d 934, 943 (1st Cir. 1992).  We take it here and find that

            Knapp  has  proved  the  raw figures  and  defect  rate  just

            discussed, any other conclusion  on this record being clearly

            erroneous.

                 As  for the  cost  of  the  shoes,  we  agree  with  the

            magistrate judge that the most accurate figure is the average

            price  of the shoes  purchased by Knapp,  rather than Knapp's

            "Fifo  average cost."9   Using  the magistrate  judge's price

            figures  for each model and applying that price to the larger

            number of defective shoes that we have found to be present in

            Knapp's  inventory  (14,806),   we  have  calculated  Knapp's

            damages   for   defective   shoes  as   $338,138.31.      The

            calculations, by model number, are set forth in Appendix A.  

                 Knapp argues that  regardless of the precise  percentage

            of defective shoes  in its  inventory, all of  the shoes  are

            useless to it  because the number of  defects is too high  to

            allow Knapp  to deliver the  shoes to customers  without fear

            that   they  will  fall  apart  on  their  feet.    Knapp  is

            essentially attempting  to invoke  through the back  door the

            revocation of  acceptance remedy that Knapp  failed to invoke

                                
            ____________________

                 9Even  if we were to accept (as the magistrate judge did
            not) that Knapp maintained a strict Fifo inventory procedure,
            some  of  the new  shoes in  Knapp's Brockton  warehouse were
            returned from field warehouses; some may have been from early
            shipments, and the average  price figure therefore appears to
            us to be the better measure.

                                         -33-
                                         -33-

            in  a timely manner.  Whatever decrease Knapp has suffered in

            value  of  the  non-defective  shoes,  Knapp  inflicted  this

            decrease on itself when it accepted the deliveries and failed

            to revoke that acceptance within a reasonable time.

                 Knapp  also   claimed  a  detailed  list  of  incidental

            damages,  some of which were granted  by the magistrate judge

            and  are not challenged by Sylvania on appeal.  Knapp insists

            that it is  also entitled  to reimbursement for  a credit  it

            issued to  Federal Express and for storage costs beyond those

            granted by the magistrate judge.   The magistrate judge found

            that  Knapp  had failed  to prove  that  it had  not received

            credit from Sylvania or  replacements for the defective shoes

            for which Federal Express demanded and received credit.

                 We agree  that Knapp  failed to  prove that  this credit

            represented  actual damages.10   As  to the  storage charges,

            Knapp will be  credited only for  the amount attributable  to

            the actually  defective shoes, as the  magistrate judge held,

            but that amount  is increased  to $4,146 to  account for  the

            enlarged number of defective shoes determined on this appeal.

            The  result is achieved  by using the  magistrate judge's own

                                
            ____________________

                 10It is apparently undisputed  that Knapp gave credit to
            its  customer Federal  Express  to  resolve complaints  about
            defective  shoes.     Nevertheless,  the  evidence   left  it
            uncertain whether  some of the shoes reflected in this figure
            had  already been returned by Knapp to Sylvania or were among
            shoes  in Knapp's  inventory, damages  for which  are already
            reflected  in the calculations in Appendix A.  The burden was
            on  Knapp to show actual damages without double counting, and
            it failed to do so.  

                                         -34-
                                         -34-

            formula set forth in his March 1, 1995, decision.  

                 Knapp further claims that it is entitled to lost profits

            from the  shoes in inventory it  could not sell.   To recover

            lost profits,  the plaintiff must show by  a preponderance of

            the evidence that  the actionable breach caused  the loss and

            that the loss was  foreseeable and calculable with reasonable

            certainty.   Matsushita  Electric Corp.  v. Sonus  Corp., 284
                         __________________________     ____________

            N.E.2d 880,  890  (Mass. 1972).   For  the pre-February  1990

            shipments,  Knapp's claim  is hopeless.   Knapp did  not show

            that it  had an urgent  need for any  of that inventory,  nor

            justify its  failure to obtain alternative  sources given its

            knowledge  of persisting  problems.   See  UCC    2-715(2)(a)
                                                  ___

            (consequential damages include only those losses "which could

            not reasonably be prevented by cover or otherwise").

                 With respect to the February 1990 shipment, the issue is

            closer, because  Knapp established  at trial  that it had  an

            urgent need for that inventory; the quality  of that shipment

            was  even  lower   than  earlier  shipments;   and  Sebastiao

            testified that Knapp lost orders because it could not deliver

            these  shoes.  On  the other hand,  Knapp was  on notice that

            Sylvania shoes suffered from  a high rate of defects,  so its

            failure  to switch  to other, more  reliable suppliers  at an

            earlier  date is hard to justify.   Knapp knew or should have

            known  that it might well get defective shoes in the February

            shipment, and  it chose  to take  that risk.   We  affirm the

                                         -35-
                                         -35-

            magistrate  judge's  finding   that  lost  profits  are   not

            appropriately awarded.

                 Knapp  also  presses on  appeal  its  broader claim  for

            consequential  damages.     It  presented  at   trial  expert

            testimony  that because  of  the defective  shoes Knapp  lost

            future profits  of $2,895,326 that  it would have  enjoyed on

            other   sales   to   customers   who  left   Knapp   out   of
            _____

            dissatisfaction  with  its product.   Its  evidence certainly

            showed  that its relationships  with important customers were

            irretrievably damaged.   But it is  equally clear that  Knapp

            could  have minimized the damage through reasonable diligence

            by  increasing its  inspections  and, to  the extent  needed,

            finding alternative suppliers.

                 Although Sylvania  was at fault for  supplying defective

            goods and must reimburse  Knapp for those goods proved  to be

            defective,  Knapp cannot recover for  any larger harm done to

            its  own  reputation and  customer  relations.   The  general

            principle  is well  settled that  a party cannot  recover for

            harms that its own reasonable precautions would have avoided.

            Columbia  Novelty Co.  v. Leslie  Dawn,  Inc., 6  U.C.C. Rep.
            _____________________     ___________________

            Serv.  (Callaghan) 679, 679 (N.Y.  App. Term 1969);  UCC   2-

            715(2)(a).   To permit such  a recovery on  this record would

            simply  reward Knapp  for  its own  lack  of attention,  poor

            quality  control,  and  bad   judgment.    In  addition,  the

            magistrate judge's order  terminating the injunction  against

                                         -36-
                                         -36-

            Sylvania, as entered on May 31, 1991 and amended  on June 10,

            1991,  is vacated; the magistrate judge is free to reduce the

            amount embargoed to the net  award plus anticipated costs and

            interest.

                                         -37-
                                         -37-

                                      CONCLUSION

                 In summary, Knapp is entitled to damages as follows:

                 Cost of Defective Inventory:           $338,138.31
                 Storage Costs:                           $4.146.00
                 Unpaid Credits:                         $92,472.97 
                 Credit to Miami Hilton:                  $9,250.00 
                 Refund to Marriott:                      $3,194.54
                 Price concessions to Federal Express:   $11,096.25
                 Replacement shoes supplied to Hilton:    $6,401.20 
                 Increased inspection costs:              $4,167.30
                 Freight charges:                         $6,877.60
                 Travel expenses:                         $1,793.92

                 Total                                  $477,538.09

                 The  first  two  entries  are adjusted  to  reflect  the

            corrections  explained  in the  opinion;  the  others are  as

            determined by  the magistrate judge in  rulings that Sylvania

            has  not appealed.    The award  against  Knapp in  favor  of

            Sylvania  for unpaid bills, in the amount of $223,626.47, has

            also  not  been  challenged  on   appeal  and  so  stands  as

            previously entered.  

                 On  remand, the  judgment  should be  modified to  award

            $477,538.09 to Knapp and $223,626.47 to Sylvania, so that the

            net   award  is  now  in  Knapp's  favor  in  the  amount  of

            $253,911.62.   It is so ordered.
                           ________________

                                         -38-
                                         -38-

                                      Appendix A

            Style  Defects New  x41.7%  Total    Ave Cost      Cost
            1244   150     199     83     233    18.20     4,240.60
            1245    63     189     79     142    23.75     3,372.50
            1251   493     509    212     705    21.65    15,263.25
            1257   111     402    168     279    26.25     7,323.75
            2600   914     765    319   1,233    24.25    29,900.25
            2601    47      60     25      72    25.75     1,854.00
            2605   578   2,034    848   1,426    26.75    38,145.50
            2660   485   1,926    803   1,288    23.25    29,946.00
            2665   654     955    398   1,052    22.00    23,144.00
            2670   464     599    250     714    27.90    19,920.60
            2675   566     404    168     734    27.90    20,478.60
            2810   514   2,438  1,017   1,531    21.91    33,544.21
            2814    53   1,474    615     668    18.75    12,525.00
            2815    51   1,311    547     598    22.10    13,215.80
            2816    26      87     36      62    22.10     1,370.20
            2840   125     548    229     354    27.40     9,699.60
            2845   136   1,538    641     777    27.30    21,212.10
            2916    39     264    110     149    18.75     2,793.75
            2930   339   3,968  1,655   1,994    17.25    34,396.50
            2935   211   1,302    543     754    19.90    15,004.60
            2950     1      38     16      17    18.75       318.75
            2955    25       0     25      25    18.75       468.75
            ____    __       _     __      __    _____       ______

            Total 6,045  21,010  8,761 14,806            338,138.31

            The first column refers  to the Knapp shoe style  number; the
            second  column sets out  the number of  customer returns plus
            shoes pulled  apart by Knapp personnel  in Knapp's inventory;
            the  third column  sets  out  the  number  of  new  shoes  in
            inventory; the  fourth column  gives the number  of defective
            shoes among  the new shoes, based on  the statistical survey;
            the fifth column gives the total number of defective shoes in
            Knapp's inventory;  the sixth column gives  the average price
            for each style; the last column gives the price paid by Knapp
            for defective shoes still in inventory.
                                 

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                                         -39-