                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-24-2005

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Precedential or Non-Precedential: Non-Precedential

Docket No. 04-3628




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"SCM Grp USA v. Custom Designs & Mfg" (2005). 2005 Decisions. Paper 363.
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                                                                 NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT


                                      No. 04-3628


                                 SCM Group USA, Inc.

                                           v.

                       Custom Design & Manufacturing Co., Inc.,
                                                     Appellant
                                    ___________

            APPEAL FROM THE UNITED STATES DISTRICT COURT
              FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
                          (D.C. Civ. No. 01-cv-01984)
                  District Judge: Honorable Edwin M. Kosik
                                 ____________

                    Submitted Under Third Circuit L.A.R. 34.1(a)
                                September 30, 2005
              Before: RENDELL, FUENTES and WEIS, Circuit Judges.
                             (Filed: October 24, 2005)


                                       OPINION


WEIS, Circuit Judge.

             In a previous appeal, docketed at 03-2023, a panel of this Court held that

the buyer, Custom Design and Manufacturing Company, Inc., had accepted a machine

manufactured by the seller, SCM Group USA, Inc. The Court therefore held that Custom



                                            1
Design must pay SCM the contractual price plus any damages that resulted from the

breach of contract. The case was remanded to the District Court to “determine damages.”

              The District Court then entered judgement in favor of SCM in the amount

of $179,637.19, the outstanding balance of the contract price plus interest and costs.

Custom Design has appealed, asserting that the District Court erred in failing to setoff

damages for SCM’s inadequate performance. The District Court ruled that Custom

Design waived its right to setoff damages because it failed to assert a “counterclaim or

any comparable claim” prior to a pretrial memorandum filed on the eve of trial.

Therefore, the District Court held that although 13 Pa.C.S.A. § 2714 allows a buyer to

claim damages for accepted goods that are nonconforming, the buyer may obtain this

remedy only by filing a separate action or a counterclaim. Here, according to the District

Court, the buyer did neither.

              We note that in its Answer to the plaintiff’s Complaint, Custom Design did

assert “affirmative defenses” describing some areas of dissatisfaction with SCM’s

performance. However, this pleading was not designated as a “counterclaim.”

              Fed. R. Civ. P. 8(c) provides that “[w]hen a party has mistakenly designated

a defense as a counterclaim or a counterclaim as a defense, the court on terms, if justice

so requires, shall treat the pleading as if there had been a proper designation.” See also

Reiter v. Cooper, 507 U.S. 258, 263 (1993); Schulman v. J.P. Morgan Inv. Mgmt., Inc.,

35 F.3d 799, 805 (3d Cir. 1994). In this case, however, neither party directed the District



                                              2
Court’s attention to Rule 8, nor have they cited it in their briefs in this appeal. The

District Court might have taken a different approach as to the existence of a counterclaim

had Rule 8 been brought to its attention. We will not second guess the District Court,

however, in the light of the parties’ inaction.

              Moreover, Custom Design’s argument is foreclosed by our previous court

order and opinion in which we found Custom Design to be liable for the entire contract

price, plus damages resulting from the breach, and remanded for entry of judgment in

favor of SCM Group and determination of damages.

              Although Custom Design’s appeal is not successful, it also is not “wholly

without merit.” Huck on Behalf of Sea Air Shuttle Corp. v. Dawson, 106 F.3d 45, 52 (3d

Cir. 1997) (quoting Nagle v. Alspach, 8 F.3d 141, 145 (3d Cir. 1993)).

              Accordingly, we will affirm the Judgment of the District Court.

              The motion for sanctions will be denied.




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