Ionics, Inc. v. Elmwood Sensors, Inc.

Ionics, Inc. (Ionics) (plaintiff) manufactured water dispensers. On several occasions, Ionics purchased thermostats from Elmwood Sensors, Inc. (Elmwood) (defendant) to place in the water dispensers. For each purchase, Ionics sent Elmwood a purchase order setting forth terms and conditions, including a term describing the remedies available to Ionics in the event of breach. Ionics notified Elmwood that unless Elmwood objected to Ionics’ terms in writing, Ionics would assume that Elmwood agreed to the terms. After receiving each purchase order, Elmwood sent Ionics an “acknowledgement” form setting out Elmwood’s own terms and conditions. One of Elmwood’s terms limited its liability for damages resulting from use of its thermostats and stated that the purchaser’s only remedy would be repair of defective products. Elmwood’s form stated that it constituted a “counteroffer” that would be deemed to be accepted by Ionics unless rejected in writing within 10 days. Several of Elmwood’s thermostats placed in Ionics’ water dispensers malfunctioned and caught fire. Ionics brought suit in federal district court against Elmwood, seeking to recover damages. Elmwood argued that Ionics had accepted Elmwood’s limitation of liability in the acknowledgement form. Elmwood moved for partial summary judgment, but the district court denied Elmwood’s motion. The district court certified the case to the United States Court of Appeals for the First Circuit to determine whether the court’s decision was proper under Massachusetts’s statutory version of Uniform Commercial Code (UCC) § 2-207.