                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


2-13-2004

SCM Grp USA v. Custom Designs & Mfg
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-2023




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Recommended Citation
"SCM Grp USA v. Custom Designs & Mfg" (2004). 2004 Decisions. Paper 1004.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/1004


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                                                                NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT


                                     No. 03-2023




                              SCM GROUP, USA, INC.,

                                               Appellant


                                          v.

               CUSTOM DESIGNS & MANUFACTURING CO., INC.




ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE M IDDLE
                  DISTRICT OF PENNSYLVANIA

                             (Dist. Court No. 01-cv-1984)
                   District Court Judge: Honorable Edwin M. Kosik


                               Argued: January 23, 2004

                  Before: ALITO AND CHERTOFF, Circuit Judges,
                     AND DEBEVOISE * , Senior District Judge.

                          (Opinion Filed: February 13, 2004 )

                                               STEPHEN W. SAUNDERS
                                               Kreder, Brookers, Hailstone & Ludwig


      *
        The Honorable Dickinson R. Debevoise, Senior District Judge, United States
District Court for the District of New Jersey, sitting by designation.
                                                 220 Penn Avenue
                                                 Suite 200
                                                 Scranton, PA 18504

                                                 D. GREGORY MITCHELL
                                                 JAMES D. MEADOWS (Argued)
                                                 MATTHEW B. AMES
                                                 Meadows, Ichter & Bowers
                                                 3535 Piedmont Road
                                                 Building 14, Suite 110
                                                 Atlanta, GA 30305

                                                 Counsel for Appellant

                                                 MICHAEL R. MEY
                                                 Wormuth, Mey & Sulla
                                                 318 Penn Avenue
                                                 Scranton, PA 18503

                                                 Counsel for Appellee




                               OPINION OF THE COURT


PER CURIAM:

              As we write only for the parties involved, we do not restate the facts of the

case. Due to an opinion issued by the Pennsylvania Superior Court after the District

Court resolved this case, we reverse and remand with an order for the District Court to

enter judgment in favor of SCM.

              Since the District Court rendered its opinion, the Pennsylvania Superior

Court has issued an opinion in which it holds that the “knockout rule” applies to contracts

governed by Article 2 of the U.C.C. See Flender Corp. v. Tippins Intern., Inc.,
830 A.2d 1279 (Pa.Super. 2003). We believe that Flender correctly states Pennsylvania

law on this matter and predict that the Pennsylvania Supreme Court would apply the

“knockout rule” in this case. See, also, Reilly Foam Corp. v. Rubbermaid Corp., 206

F.Supp.2d 643 (E.D.Pa.2002); Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569 (10th

Cir.1984). As such, we hold that neither the original terms nor the handwritten changes,

which were obviously “different” and not simply “additional” terms, control the issue of

acceptance. Instead, we look to the U.C.C. to supply the default terms of acceptance.

              Under the UCC, “[a]cceptance of goods occurs when the buyer:... (2) fails

to make an effective rejection (section 2602(a)), but such acceptance does not occur until

the buyer has had a reasonable opportunity to inspect them...” 13 Pa.C.S.A. § 2606.1 The

Code goes on to explain that, under § 2606, to avoid a default acceptance of the goods,

the buyer must make a “[r]ejection of goods ... within a reasonable time after their

delivery.” 13 Pa.C.S.A. § 2602.

              Under Pennsylvania law, a reasonable time for inspection after tender or

delivery for rejection or revocation of defective goods “is generally deemed a question of

fact to be resolved by the fact finder, and no express outside time limit is set.” Ford



       1
         “Acceptance of goods by the buyer precludes rejection of the goods accepted and
if made with knowledge of a nonconformity cannot be revoked because of it unless the
acceptance was on the reasonable assumption that the nonconformity would be
seasonably cured but acceptance does not of itself impair any other remedy provided by
this division for nonconformity.” 13 Pa.C.S.A. § 2607. It is very difficult for CDM to
argue that it has not rejected the Router because it expects SCM, who cannot fix the
problem, to seasonally fix the problem 3 years after the installation and 2 years after the
instigation of this lawsuit.
Motor Credit Co. v. Caiazzo, 564 A.2d 931, 936 (Pa.Super.,1989)(citation omitted).

Nevertheless, we find here that, as a matter of law, CDM has accepted the goods.

              First, CDM clearly had more than a reasonable opportunity to inspect and

reject the goods. The Router was delivered in December 2000. By the time of the

judgment in this case, CDM had had more than a reasonable amount of time for CDM to

determine if the Router was satisfactory. This is especially true since the problem with

the Router was not inherent to the Router itself, but rather due to CDM’s contractual

problems with another company. To top it all off, CDM’s own president stated that his

company had spent too much time and money to give the project up. See App. 424.

              Second, CDM never made an effective rejection of the Router.2 Thus, as a

matter of law, it has accepted the Router and must pay the contractual price for it plus any

damages that resulted from its breach of the contract.

              For the foregoing reasons, we REVERSE the March 25, 2003 order and

REMAND to the District Court to enter judgment in favor of SCM and determine

damages.




       2
       CDM ’s alleged “rejection” letter is nothing of the sort. App. 581-582. The letter
merely conditionalizes a future rejection of the goods upon further testing. Nowhere in
the appellate record has CDM made a true rejection of the goods.
