AAF-McQuay, Inc. v. MJC, Inc.

AAF-McQuay, Inc. (McQuay) (plaintiff) manufactured, sold, and serviced heating and cooling units. Some of McQuay’s customers elected to purchase cooling units with condenser coils protected by an anti-corrosive coating, such as Heresite P-413. MJC, Inc. (defendant) held the exclusive license to use and apply Heresite coating, which MJC purchased through its license agreement for $26 per gallon. MJC’s marketing materials promoted MJC as a seller of “Heresite Coating for Coils,” priced per square feet of tubes. Applying the coating involved multiple steps, such as sandblasting coils, immersion in coating, and curing. Between 1995 and 1998, McQuay shipped coils to MJC along with a purchase order for Heresite coating. McQuay’s purchase orders referenced quantity, product description, and unit price. The purchase orders also contained terms and conditions relating to the seller, warranty, and shipment. MJC would receive and accept the purchase orders, apply Heresite coating to the coils, and invoice McQuay. The coating and application process were priced together. For certain oversized coils, MJC used a spraying process rather than a dipping process. In 1997, McQuay began receiving customer reports of problems with the coating, which McQuay attributed to MJC’s use of spraying rather than dipping. McQuay sued MJC alleging breach of contract. MJC moved for summary judgment on several grounds, including the statute of limitations. MJC argued that its hybrid transaction with McQuay was primarily for services—the application of coating—and that any claim for breach had to be filed within one year under the contract’s express warranty. McQuay responded that the transactions predominantly involved a sale of goods and that the Uniform Commercial Code (UCC) applied.