Phoenix Color Corp. v. Krause America, Inc.

Phoenix Color Corp. (Phoenix) (plaintiff), a producer of books and book components, contracted with Krause America, Inc. (Krause) (defendant) for the purchase of eight computer-to-plate (CTP) industrial printing machines. The parties negotiated for eight separate purchases to be delivered to Phoenix’s various locations. Each purchase consisted of a separate set of documents. Krause offered Phoenix price discounts because Phoenix was buying exclusively from Krause. The delivery schedule was set out in advance. The specifications for each machine were different but similar. Phoenix and Krause would modify the agreement if Phoenix’s needs changed. The first three CTP machines experienced malfunctions and chronic failures. Krause refused to take back the machines. Phoenix attempted to back out of the agreements, and it refused to accept delivery of the other CTP printers. Phoenix filed suit, asserting breach of warranty and breach of contract. Krause filed counterclaims for anticipatory breach of contract based on its expectation that Phoenix would not pay the bill due. A district court granted partial summary judgment to Phoenix, finding that the first three CTP printers were defective, which resulted in a breach of the implied warranty of merchantability. Furthermore, the trial court concluded that Phoenix and Krause had entered into an installment contract, and that a jury had to determine whether the problems were severe enough to impair the whole contract. A jury determined that the defects were in fact severe enough to impair the value of the entire contract. In consideration of the pretrial orders and jury verdict, damages were awarded in the amount of $1,899,257. Krause appealed the verdict and pretrial orders, arguing that each purchase was a separate contract.