QVC, Inc. v. MJC America, Ltd. (904 F. Supp. 2d 466, 2012)

MEMORANDUM

O’NEILL, District Judge.

Plaintiff and counterclaim-defendant QVC, Inc. brings an action for breach of contract seeking declaratory relief, equitable relief and damages against its vendor, defendant and counterclaim-plaintiff MJC America, Ltd., d/b/a Soleus International, Inc. Soleus has asserted a counterclaim for breach of contract against QVC. The parties’ claims against each other arise out of QVC’s purchase from Soleus of electric space heaters and other items in 2007 and early 2008 and QVC’s subsequent recall of certain of those space heaters. QVC contends that it reasonably determined that the recalled heaters were defective, that Soleus breached its purchase order eon-tracts with QVC and that as a result of Soleus’s breach QVC is entitled to damages from Soleus, including the costs attendant to the recall of the heaters. Soleus contends that QVC did not make a reasonable determination that the recalled heaters were defective and that “QVC’s conduct during the investigation and recall violated QVC’s duties of good faith and fair dealing under the contract.” Dkt. No. 93 at 2.

A bench trial was held from January 9 to January 13, 2012. The parties submitted their post-trial briefs including proposed findings of fact and conclusions of law on March 12, 2012. Pursuant to Federal Rule of Civil Procedure 52(a) and after review of the evidence presented and applicable law, I make the following findings of fact and conclusions of law.

FINDINGS OF FACT

I. The Parties

QVC, a retailer, markets and sells merchandise directly to consumers through various media including direct response television programming and the internet. Jt. Stip. ¶ 1. “Soleus is in the business of promoting, marketing, distributing and selling home comfort products, including portable air conditioners, heaters, air purifiers, fans and coolers under the trade names of ‘Soleus,’ ‘SoleusAir’ and variations thereof.” Id. ¶ 2. QVC sold Soleus products to its retail customers. Id. ¶ 6.

II. The Heaters

Purchase Order 550957, issued by QVC to Soleus on or about August 31, 2007 and subsequently revised on September 13, 2007 and October 9, 2007, required Soleus to provide QVC with 27,000 units of a SoleusAir 360-Degree Micathermic Heater with Three-Heat Settings further identified as QVC SKN V24882 (the “Heater”). Id. ¶ 3. Purchase Order 567520, issued on or about January 4, 2008 and subsequently revised on January 7, January 8, and January 10, required Soleus to provide QVC with 1,056 additional Heaters. Id. ¶ 4.

The Heaters were manufactured in China by Ningbo Bole Electric Appliance Co., Ltd. Id. ¶ 7. They were cylindrical, portable electric space heaters designed and intended to stand on the floor. See P-154 at 5. The Heaters were equipped with manual, not digital, control panels and the manual version was sold exclusively in the United States by and through QVC. Jt. Stip. ¶ 8. They had an interior metal wall housing a micathermic heating element. Each Heater’s electric wiring, circuit board and thermostat were mounted on a combination of metal and plastic surfaces in a compartment outside of the interior wall. See P-154.

QVC promoted and marketed the Heaters for sale to its customers beginning on December 31, 2007, when they were featured as a Today’s Special Value® on QVC’s live television programming and on QVC’s related website. Jt. Stip. ¶ 18; Tr. Day 1 at 106:4-8 (McGrath). QVC sold more than 19,100 Heaters to its retail customers between December 31, 2007 and March 11, 2008. Jt. Stip. ¶ 19. Most of the Heaters were sold on December 31, 2007 and in January 2008. Tr. Day 2 at 13:18-19 (Fitzgerald).

III. Customer Complaints and the Parties’ Responses to the Complaints

On January 5, 2008, a customer contacted QVC claiming that the Heater he or she had purchased “has a gas odor to it and [is] very hot to touch.” P-62 at QVC-01-00073. On January 8, a customer claimed that the “Heater went up in sparks out of top.” Id. Another customer reported a “burning smell.” Id. at QVC-01-00074. On January 9, QVC received a complaint of “smoking smelled bad/tried again and blew fuse in home 2x.” Id. at QVC-01-00077. On January 10, a customer reported that their Heater “had a nocious order [sic] and set off their smoke detector.” Id-at QVC-01-00073. Subsequent customer calls recorded by QVC included a January 28 report that a Heater was “smoking and flames shot out top of unit,” id. at QVC-01-0076, and a January 29 report that a Heater “caught on fire, around knob— wires all melted.” Id. at QVC-01-0073. By late January, QVC had received 80-100 similar complaints regarding fire, sparks, odor or smoke from the Heaters. Tr, Day 1 at 19:2-9 (McDermott); see also P-62 (customer contact log). “[0]f particular note were a number of customer complaints in which they indicated that they had seen flames in the unit and that the unit had melted around the control panel, that the plastic facing of the cover of the control panel was warped or melted.” Tr. Day 1 at 93:17-24 (McGrath). Due to the number of Health and Safety related complaints pertaining to the Heaters, the complaints became a concern of QVC’s Office of the President (“OOP”). Tr. Day 1 at 24:16-25:12 (McDermott); P-57. The OOP reviews and investigates health and safety concerns raised by QVC customers. Tr. Day 1 at 17:3-18:21 (McDermott).

Soleus’s designated contact for the Heaters was Gary Mickles, “an intermediary between [QVC] and Soleus.” Tr. Day 1 at 63:24-64:12 (Fitzgerald). Mickles was an independent contractor for Coleman and Hirshman, a sales organization that represented Soleus’s products through Epic International, an independent contractor sales representative for Soleus. Mickles Dep. at 8:20-9:15.

On February 1, Tom Kluxen, identified as a QVC “Buyer” for “Home Improvement, Household, Cleaning and Storage” forwarded to Mickles a January 31 email from Shawn Fitzgerald, a Senior Engineer for Quality Assurance at QVC. P-27. Fitzgerald was charged with investigating the Heaters and the customer complaints. Tr. Day 1 at 52:14-20 (Fitzgerald), id. at 93:25-94:3 (McGrath). Fitzgerald’s email noted that “QVC’s call rate [for the Heaters] is climbing high with several claims of ‘fire.’ ” P-27. Kluxen asked Mickles to “[p]lease alert Soleus about this concern about this and let us know if they have had any calls/concerns.” Id. Kluxen noted that QVC’s quality assurance “department [wa]s going to evaluate a few of these customer returns.” Id.

Fitzgerald asked the OOP if he could get some Heaters back for evaluation. Tr. Day 1 at 55:17-56:1 (Fitzgerald); P-27. On January 31, the manager of the OOP responded to Fitzgerald’s request by email, stating that “1 came back today and Dolores is shipping it over to you.” P-25; Tr. Day 1 at 75:23-24 (Fitzgerald). When Fitzgerald visually inspected the first customer-returned Heaters he received from the OOP he observed

signs of soot, which indicates ... something either burned or charred and let smoke out the vents, melting of the control panel, warping of the plastic in the immediate area around the control panel, and then once [he] began to disassemble — the unit, there were [sic] — one wire in particular, in various stages of failure. And by failure, it appeared to be an over-temperature condition where the wire was burning the wire sleeving, which is the rubber insulation on the outside of the wire, was blistered off or completely charred off, and in one case, the wire was severed, you know, from over-temperature.

Tr. Day 1 at 58:3-13 (Fitzgerald).

By February 8, Fitzgerald had inspected and photographed three customer return Heaters. P-30. That day, Fitzgerald emailed Mickles “word documents with photos included for the three customer return units,” noting that “[t]he failure mode seems to be common among the three units. The same wire is at various stages of failure in the [sic] each of the three units.” P-30. The attached photographs included photographs of the serial numbers for each of the referenced Heaters. Id. Fitzgerald asked Mickles to “[p]lease advise what the next steps should be” and noted that “there have been 100 calls reporting some nature of “Health and Safety incidence.” Id.

Later that day, Kluxen emailed Mickles, stating that

Shawn from [Quality Assurance] will likely be contacting you shortly if he hasn’t already to discuss the findings of the heater returns. I did see a few today that did have small electrical fires in them. Pis [sic] have the production units put on hold for the black until you get confirmation from qvc. To ship. I hope this isn’t a recall issue.

P-32. Mickles responded to Kluxen by email, noting that he had “informed Soleus of a potential problem, and of course stopped production for the units you wanted.” P-33. Mickles added, “I think everyone out there is heading into Chinese New Year, and they will be on top of this when they get back.” Id.

On February 11, Mickles visited Fitzgerald at QVC to discuss and inspect certain of the damaged Heaters. Tr. Day 1 at 72:6-11 (Fitzgerald). At the end of their meeting, Fitzgerald gave Mickles two of the customer-returned Heaters and asked him to send them to Soleus for examination. Id. at 73:20-22; Mickles Dep. at 53:23-54:3. Mickles “sent them right to Soleus.” Mickles Dep. at 54:17-18. Also on February 11, Gino Aiello sent an email to Charley Loh, Soleus’s Chief Executive Officer, C. Loh. Dep. at 6:18-23, explaining that “Gary met with QVC quality control today on a serious issue with [the Heaters]. It appears that they have received several back that have either caught fire or got hot enough to melt the wires inside.” P-36. Aiello went on to say that “[w]e need to inspect these and come up with a reason for this issue, or we could face the real possibility of QVC issuing a recall on these.” Id. Charley Loh responded that day explaining, “[t]his is the first time I hear [sic] it catch on fire on this item.... I have read all the reviews 10 days ago for QVC and there is to [sic] one case mentioned catching on fire.” Id.

On February 12, QVC offered to send Mickles or Soleus another customer-returned Heater “with the same wire burnt behind the control panel.” P-37. Responding by email on February 13, Mickles told Fitzgerald that the other Heaters had arrived at Soleus and asked QVC to keep the additional unit QVC had until Mickles knew more. P-40.

On February 14, Mickles sent Fitzgerald a document regarding ithe “Burnt wires factory evaluation.” P-42. It included an initial evaluation of the Heaters based on photo images of two Heaters with melted wires from the Ningbo Bole factory in China. Citing “oxidation (rusting) on a surrounding metal trim” on one unit “which can only be caused from contact with water or sodium” and, on the other unit, “grease or oil content found near the burnt wires which would suggest foreign debris entering the circuitry,” the document concluded that “the factory suspects that these units were either used under non-residential environment [sic] or advertently tempered [sic] by foreign substance.” P-41.

Fitzgerald responded to the factory’s conclusions in a February 14 email to Mickles noting that he had “a hard time believing the conclusions for the burnt wires giving [sic] they are not isolated incidents. It seems more epidemic than random foreign material getting into the control panel since there are a large quantity of failures.” P^43. Mickles forwarded Fitzgerald’s response to Soleus and asked whether Soleus “would like me to have QVC send the additional burned units to you.” P^14. There is no immediate response from Soleus to Mickles’ inquiry in the record.

On February 22, Mickles emailed Tyler Scott with a copy to Aiello noting that “if we don’t do something soon, the QVC Legal Department will be breathing down yours and Charl[ey Loh’s] throat.” P-45. He added, “[p]lease let me know if you have heard anything back from China since you sent the two fire damaged Heaters back. They need answers now.” Id.

On February 25, Scott sent Mickles an email with a copy to Aiello with Soleus’s “initial findings regarding QVC’s melting issue of the HM5” after its initial inspection of the returned units received from QVC. P-46 at 5. Soleus’s conclusion was that “the melting problem appears to be in this rare incident and only on product that was used improperly. Most importantly, it does not appear to be a fire hazard.” P-47 at 2. Scott explained that “[t]he melting is still considered very serious by us, thus we have shipped [the samples that were returned to QVC and then to Soleus] to China for a thorough evaluation.” Id. Mickles responded to Scott’s email that day, explaining that “QVC has many more units with the same problem, and they want me to pick them up this week.” P-48. Further, QVC “seem[s] to feel that this was not an isolated incident, rather an Epidemic in regard to the units overheating and melting wires inside. The return rate for this product is approaching 20%.” Id.

Also on February 25, in response to Scott’s email, Mickles sent an email to Aiello asking whether anyone had seen “what Shawn [Fitzgerald] wrote back to us when we gave him that bullshit about water and grease getting into the units I sent back?” P-47. Mickles noted his concern that Soleus would be “forced into a 100% recall of this item.” Id. He also asked whether “Soleus ha[d] Lot numbers for product manufactured,” noting that “[i]f they do, we can talk about a small amount produced in a lot, and therefor convince them that it can be isolated.” Id.

Although Mickles’ emailed question about lot numbers raised the issue with Soleus of whether a potential recall could be limited in scope, neither Mickles nor anyone else connected to Soleus ever “raise[d] the question or the issue of whether the defect or potential defect could be segregated to a particular manufacturing lot” with QVC during QVC’s investigation of the Heaters and the cause of the customer complaints. Tr. Day 1 at 104:25-105:9 (McGrath); see also id. at 149:22-150:1 (Fitzgerald) (“Q. Did Soleus ever ask you in the period of time, February 2008, whether there were lot numbers for the product manufactured? A. They never, regardless of the month or year, asked us for lot series or a serial number. Q. Did Soleus ever suggest to you in the period of time, February 2008, that there was a potential to talk about a small amount produced in a particular lot of these heaters? A. No.”); Tr. Day 3 at 43:18-23 (Scott) (“Q. Did you ever tell QVC — suggest to QVC, QVC, that there were lots which could be identified for a particular wiring problem so that the problem could be isolated or limited? ... A. I did not pass that information, no.”).

On February 27, at a meeting with QVC, Mickles gave QVC Soleus’s initial findings. P-53; Tr. Day 1 at 85:14-22, 87:16-19 (Fitzgerald). Fitzgerald was dissatisfied with the initial findings, noting at trial that “given the volume of complaints that we had and the failures that we were seeing, to state that the product had been used in the rain, or someone repeatedly poured water onto it, causing it to catch on fire, was beyond comprehension for me.” Tr. Day 1 at 89:4-9 (Fitzgerald). At their meeting, QVC told Mickles that QVC had received “more complaints and under [United States Consumer Product Safety Commission] guidelines they [were] required to report a certain amount of complaints.” Mickles Dep. at 80:15-24.

On February 28, Aiello emailed Scott, explaining that during Mickles’s meeting with QVC, QVC was looking for a reason from Soleus “for the wires melting.” P-52; D-10. Aiello explained that the CPSC would require a retailer “receiv[ing] significant complaints on an item that could be a hazard to a consumer” to report the complaints to the CPSC. Id. Aiello also noted that “QVC wants to avoid this and they have empathy for our position, which is why they want us to come up with an explanation, so they can avoid having to report[ ] this to CPSC.” Id. Scott forwarded Aiello’s email to Charley Loh, explaining that

QVC is getting scared ■ that they are going to have to call CPSC and file a recall on [the Heaters]. They need an official response from us on why the wire are [sic] melting. They have more complaints than just the 2 so we have to come up with a better explanation.

Need ASAP so they don’t file a recall on our product with CPSC.

Id.

On February 29, Scott emailed Fitzgerald a one page “Factory Evaluation of HM5s with melting damage.” P-55. The document purported to be Soleus’s “final report” conducted after the Ningbo Bole factory reviewed and tested the two damaged customer-returned Heaters that Fitzgerald had given to Mickles. The document concluded that:

There was oxidation (rusting) on a surrounding metal trim on one damaged unit. It could be caused by water directly drop [sic] on the wire connectors, causing short in circuit. The wiring was melt [sic] as a result.

The other damaged HM5’s wire remains intact. The insulation melted off. Upon closer inspection, there was grease or oil content found near the burnt wires. It could be caused by the ignition of grease or oil which resulted [sic] melting down the insulation of wire. The factory conducted extensive testing trying to simulate possible causes of melting. Under the following circumstances the heater case could be damaged with melting:

1. The top of heater is covered by a wet towel or other material.

2. Foreign substances such as water or oil enter into the control box.

3. The wire connectors got damaged (could be caused by high vibration or units being dropped)[.]

The test affirmed that even for the unit exhibits melting [sic], it will not catch fire as 1) Anti-Flaming material is used and 2) Auto shut off devise [sic] will activate to cut off the power supply when excessive heat is detected.

Id. In forwarding the Factory Evaluation to QVC, Scott explained that “[t]he good news is that the factory confirmed what our initial findings were, that this is not a fire hazard.” Id. (emphasis in original). He also noted that it was “reasonable to assume that this small percentage of customers may have used this heater improperly.” Id.

Fitzgerald forwarded Soleus’s report to Tom Long, id., who was QVC’s Director of Quality Assurance. Tr. Day 1 at 64:20-21 (Fitzgerald). Fitzgerald reacted to the conclusions in the Final Factory Evaluation by explaining that he was “skeptical that two different cases of customer misuse result in the exact same wire catching fire.” P-55. McGrath, who was QVC’s Vice President of Quality Assurance and Quality Control at the time, Tr. Day 1 at 90:20-25 (McGrath), explained that the report “led me to think that Soleus was not viewing this with the same gravity as we were in terms of the potential impact that this could have to a customer in a household use.” Id. at 100:20-23.

IV. QVC Sends Heaters to Intertek for Evaluation

Sometime in or around the second week of March, QVC had an internal meeting to discuss the Heaters. Tr. Day 1 at 26:19-27:8 (McDermott). QVC decided it would make the Heaters unavailable for purchase so that it “could take a further investigation.” Id. at 26:24-27:15. Because QVC “didn’t have confidence in Soleus’s testing and the thoroughness of the review that would be done on the evaluation of the Heaters,” Tr. Day 1 at 101:5-13 (McGrath), it felt that it “needed to take a more robust physical analysis of the units” and decided to engage Intertek, an independent testing company to look at the Heaters. Id. at 128:20-21. On March 14, Intertek sent a proposal to QVC for a “constructional review of 2 damaged [Heaters] and a review of a new unit.” P-65. Intertek proposed to “perform basic tests to characterize the unit and try some actual failure modes test to determine if the product fails or results in a hazardous condition.” Id.

Scott testified that as a result of conversations directly with QVC and dialogue about the Heaters, he knew that QVC planned to send two units to Intertek for testing. Tr. Day 4 at 10:15-25 (Scott). From the record at trial, it appears that although the sales middlemen for the Heaters may have known about QVC’s plans to have Intertek examine certain Heaters, Soleus was not made aware of QVC’s arrangements with Intertek.

QVC ultimately supplied Intertek with four customer-returned damaged Heaters and four new Heaters. P-168, ¶26. On March 18, Fitzgerald emailed Steven Hartquist, Intertek’s general manager for retail/home appliances and electronics, with details about the history of the four used Heaters. P-94. The following day Fitzgeraid emailed Hartquist again and asked whether there was “any chance that [QVC] can get a verbal update on Thursday?” Id. He posed a number of questions to Hartquist and explained that his “management [was] pressing [him] for some clarity since [QVC] was deciding a recall based on [Intertek’s] findings.” Id.

On March 31, Intertek provided to QVC a draft report on the Heaters. Id. The draft report concluded that with respect to any burning or melting of plastic it “seemed to occur from an overheating condition on conductors or terminal connectors,” and “a possible cause would be increased amperage and resulting temperatures from a poor quality crimp connection.” Id. at QVC-03-00212. Also on March 31, Hartquist sent an email to Fitzgerald responding to Fitzgerald’s questions. P-96. Hartquist explained that “[t]here is clearly a breakdown of insulation on electrical components which make the units non-compliant with safety standards, and from inspection of the damaged units; there is clearly shorting of live parts to ground, ignition of plastic which may or may not have left the enclosure.” Id.

On April 1, Intertek sent QVC a finalized version of the report regarding the Heaters. Jt. Stip. ¶ 32; P-98. In the report, Intertek explained that it “was not able to reproduce similar failures on any of the new samples provided.” D-22 at 15. However, its examination of the four customer-returned units demonstrated:

a breakdown of insulation on electrical components. From inspection of the damaged units, there is clearly shorting of live parts to ground and ignition of plastic which may or may not have caused flames to leave the enclosure.... There is evidence of combustion from the burned plastic, although it did not completely consume the plastic control enclosure panel.... From an electric shock point of view, there was breakdown of electrical insulation in high voltage circuits which could lead to a risk of electric shock.

Id. Intertek noted that the overheating apparently originated near metal connectors that were “crimped” to the end of affected wires and observed that poor quality crimp connections could be a cause of overheating. Id. at 14. The report concluded that “it is possible that the cause of the failures is quality of construction related and thus an intermittent problem.” Id. at 15.

Although Jimmy Loh, Soleus’s chief financial officer, Tr. Day 4 at 60:23-24 (J. Loh), testified that he did not see the Intertek report until after this action had been filed, id. at 89:8-10, Scott testified that he remembered viewing the results of the Intertek testing. Tr. Day 4 at 12:7-13:12 (Scott).

V. Events Leading to the Heater Recall

At QVC’s meeting in early March, before QVC retained Intertek, in addition to discussing the need for further investigation of the Heaters, QVC also discussed the possibility that the Heaters might be subject to a recall. Tr. Day 1 at 27:16-18 (McDermott). On March 10, QVC put all Soleus items “on hold” pending resolution of QVC’s concerns about the Heaters. P-58.

Also on March 10, having learned of the hold, Mickles informed Aiello that QVC would not accept any additional products from Soleus. P-59. Aiello asked Mickles, “[w]hat is it that they want for a resolution? We have not found any significant manufacturing defect.” Id. Mickles emailed Long at QVC and asked him to let Soleus know what QVC needed in order to resolve the issue with the Heaters. Id. Long replied by asking for the results of factory run testing performed on the Heaters at Ningbo Bole. Id. - Soleus did not provide QVC with factory run test results. P-169, J. Loh Dep. at 107:23-107:25; Tr. Day 1 at 156:19-21 (Fitzgerald); Tr. Day 2 at 5:19-21 (Fitzgerald).

On March 12, Dan Feiner, in-house counsel for QVC forwarded a copy of QVC’s customer contact log for the Heaters to Soleus and asked Soleus to “contact [him] as soon as [Soleus] ha[d] had a chance to review it.” P-61. Feiner sent a second report of “customer contacts regarding fire, smoke, burning, melting, etc.” to Soleus on March 13. P-63. Also on March 13, Feiner wrote a letter to Charley Loh to “provide [Soleus] with formal written notice in connection with any liability QVC may have in connection with the sale and use” of any Heaters for which it had received a customer report “involving fire, smoke, burning and/or melting plastic controls.” P-64. QVC asked Soleus to provide adequate assurances and “confirm in writing that [it would] honor its indemnification obligation set forth in the Purchase Order(s).” Id.

On March 14, Soleus acknowledged receipt of the customer-complaint logs through an attorney, Ryutaro Hirota, and requested “a copy of the proposed initial report QVC would like to make to the [CPSC].” P-66. On March 15, Charley Loh wrote to Feiner to “confirm that Soleus International Inc[. would] indemnify QVC for any claims associated with the products that Soleus International Inc[.] sold to QVC, as detailed in QVC purchased [sic] order(s).” P-68. Loh’s letter did not make any reference to a potential recall or the CPSC. Id.

Before receiving the results of Intertek’s testing, QVC continued to prepare for a possible recall of the Heaters. On March 17, Feiner sent Hirota “a draft of an Initial Report that we intend to file [with the CPSC] by the close of business today.” P-69. In the draft letter, QVC included a statement that it “intended] to work expeditiously with the vendor to determine whether corrective action is necessary.” Id. Feiner also provided Hirota with contact information for Michael Gidding, QVC’s outside counsel who was assisting QVC in its interactions with the CPSC. Id. Soleus did not respond immediately to Feiner’s letter. Notwithstanding the absence of a response from Soleus, Gidding, on behalf of QVC, submitted a letter regarding the Heaters to the CPSC on March 17. P-70.

The letter Gidding submitted to the CPSC was edited to remove a reference to QVC’s intent to work with its vendor to determine the necessity of corrective action — a reference that had been included in the draft sent to Hirota. Id. Instead, the letter stated that “QVC is expeditiously investigating this matter to determine whether a recall is appropriate.” Id. QVC noted a “possible problem” with the Heaters. Id. QVC explained that it had “received multiple customer reports of the [Heater] smoking, sparking and overheating, and ha[d] also received reports of fire or flames coming from units” and that “QVC has received over 70 reports of heaters smoking, overheating, sparking, melting, and/or emitting odors of burning. Nine additional customers have reported observing flames or fire coming out of or inside the heaters.” Id. QVC reported that the “[n]ature and extent of possible risk” associated with the Heaters was “burns or house fires.” Id. The letter informed the CPSC that, if QVC determined that a recall were appropriate, “QVC intend[ed] to participate in the Commission’s Fast Track recall program.” Id.

On March 19, Hirota wrote a letter to Feiner “[t]o follow up on their earlier teleconference” of that same day. P-71. He explained that

based on the reports from the technical and engineering staff of the manufacturer, MJC America does not believe at this time that any alleged defects in the Soleus Air 360 Degree Micathermic Heater rise to a level which would require a recall of the product. MJC America is in the process of conducting further investigation into the product including additional testing and the hiring of experts to analyze the product. We will keep you appraised [sic] of the results of MJC’s investigation.

Id.

On March 20, Scott sent an email to Charley Loh about a conversation that Scott had with Dennis D’Angelo, a merchandiser from QVC. D-18; Tr. Day 4 at 5:4-19 (Scott). D’Angelo had “mentioned [that QVC] may want to do a recall of their own.” D-18. Scott wrote that “I told him whatever they do, we want to do with them” and that D’Angelo “was very positive and wants to work together.” Id. Scott noted, however, that D’Angelo knew less about “what was going on” with the Heaters than Scott did and that D’Angelo “did not know something was sent to CPSC.” Id.

By March 20, QVC had decided “to notify the customers that we had received complaints and to provide them with information on the nature of those complaints and to advise them to stop using the product temporarily. But [QVC] did not — [it] had not decided to recall the product at that time.” Tr. Day 1 at 103:12-16 (McGrath). McGrath testified that

while the Intertek testing was underway, we were continuing to receive samples — not samples, but complaints, and probably samples as well, from customers. And we felt at that point that it was appropriate to send a notification to customers to temporarily discontinue using the product, that we had received some complaints and that we were investigating them, but in the meantime that we wanted to inform those customers to discontinue using the product and that we would provide them with subsequent information at a later date.

Tr. Day 1 at 102:5-14 (McGrath).

Accordingly, on March 20, with the approval of the CPSC, QVC sent a letter to customers who had purchased a Heater stating that QVC

has received some customer reports of smoke or flames appearing within the area of the front control panel while the heater is in use. This could present a risk of fire or injury. However, no injuries have been reported. Please stop using this product immediately AND unplug it, even if it has been used without incident.

P-75. At trial Dan McDermott, who was Senior Vice President of Customer Service at all relevant times, Tr. Day 1 at 15:11-15 (McDermott), explained that “[t]he letter indicates that we would get back to the customers within three weeks, and that’s something that we normally do, is just ask the customers to take the product out of use to allow our investigation to -continue so there is no additional damage — property damage or personal damage risk, but at this time, the decision — we did not make the decision for the recall” prior to sending the letter. Id., 29:24-30:5.

Also on March 20, QVC sent a prerecorded telephone message containing similar information to customers who had purchased a Heater. P-74. The telephone messages prompted a March 21 email from Hirota to Feiner in which Hirota said that Soleus had been receiving calls from QVC customers who had purchased Heaters because they had received phone calls from QVC “instructing them to unplug the product and do not operate because QVC has received reports of sparking.” P-77. Hirota noted that Soleus was “surprised at QVC’s actions even though [Soleus] informed QVC of its efforts to investigate the alleged problems with the Soleus Heater” and expressed concern that “by instructing the purchasers not to use the product [QVC was] inducing the purchasers to return the product to QVC even if there are no problems with the product.” Id.

Feiner responded to Hirota that his message came “as quite a surprise to [QVC]. For it is the first real substantive response that we have received from your client in the nearly three weeks since it has been put on notice of this potential safety issue.” P-78. Feiner continued:

QVC has no obligation to consult with your client regarding the defective Soleus heaters that it sold to QVC. However, QVC has made many, many efforts over the past several weeks to contact Soleus in an attempt to involve it in all aspects of decision-making regarding this matter. Our Quality Assurance personnel have made several calls to Soleus’- technical personnel, which calls went unreturned. Our Merchandising team made several attempts to reach Soleus’ decision-makers to discuss this issue in depth. The only response they received was a message that Soleus does not even believe that the numerous fires, smoking, melting, etc. of a significant number of heaters even warrants a thorough discussion with QVC at this time. Also, as you know, you and I have spoken several times and I indicated to you that QVC wanted to involve Soleus in the decision-making process. Nearly a week passed before Soleus even responded through you to my inquiries, and even then, the answer was simply that Soleus did not believe that any action needed to be taken at this time, and that its “investigation” is ongoing. In fact, I specifically mentioned that QVC would need to start to make important decisions that would have a financial impact on your client. QVC still has not been told by Soleus the name of counsel that it has retained with respect to the CPSC issues____We cannot understand why Soleus claims to be surprised by the steps that we have taken so far in the absence of any type of communication from iti

Id. Feiner explained that QVC had reported the customer complaints regarding the Heaters to the CPSC on the advice of its CPSC counsel. Id. He concluded by noting that “QVC [was] dismayed to learn that [Soleus] does not believe that customers should at least be told not to use the product until further investigation is completed, in light of the evidence gathered to date.” Id.

One week later, on March 28, Hirota sent an email to Feiner in which he wrote that “[c]ontrary to your claim, Soleus has been closely working with QVC to investigate the complaints.” P-93. He added that “Soleus is taking very seriously the reported complaints” and noted that “[f]urther investigation of the complaints is necessary for reported hazard [sic].” Id. Hi~ rota explained that Soleus’s

general position is that sparks, odor, and even smoke are not necessarily considered fire hazards unless an examination reveals otherwise. If heating elements are burned out, a bright light similar to a conventional light bulb burning off can be seen (sometimes consumers will say it is fire). An odor and smoke can be caused by foreign objects entering the heating element. Overheating could be dangerous, but the product is equipped with three over current protectors. Further investigation of the complaints is also necessary to determine if there is a design flaw. Based on all information available, it is our opinion and position that our product does not create a substantial product hazard that requires a report to CPSC.

Id. Hirota said that Soleus would “fully cooperate with the CPSC in its inquiry and investigation while [it] continued its] own investigation.” However, Soleus disputed “QVC’s position that it was necessary to submit a voluntary report to CPSC” and claimed that “QVC’s warning to all its customers advising them to stop using and unplug the heater was premature and unwarranted,” noting that it was “in effect a recall action which could result in substantial financial damage to Soleus.” Id.

VI. QVC Decides to Recall the Heaters

On April 2, after QVC received the finalized report from Intertek, QVC notified the CPSC that it “intend[ed] to participate in the Commission’s Fast Track recall program to recall all of the heaters QVC distributed” to its customers P-99. QVC informed the CPSC that it had “received over 70 reports of heaters smoking, overheating, sparking, melting and/or emitting odors of burning. Nine additional customers [had] reported observing flames or fire coming out of or inside the heaters.” Id. at 3. QVC provided the CPSC with a proposed letter to affected customers and advised the CPSC that once the CPSC approved the letter QVC would “immediately send the letter to its customers advising them to cut off the attachment cords on the heaters and to return the cords to QVC.” Id. at 1.

Soleus contends that “QVC never allowed Soleus to participate in any fashion with respect to the scope or conduct of the recall.” Dkt. No. 93 at 15. Soleus did not, however, produce any evidence (aside from its generalized assertions that it would cooperate with the CPSC) that it asked to participate in decisionmaking about the recall process.

On April 8, QVC’s outside counsel sent a letter to Charley Loh in which QVC advised Soleus that, under the terms of the Purchase Orders, QVC was rejecting or revoking acceptance of 28,056 units of the Heaters. P-103. The letter explained that “QVC has received multiple customer reports that units of the [Heaters], when used for the purpose, and in the manner intended, emitted smoke and sparks and/or overheated.” Id. The letter noted that QVC had “received reports of fire or flames coming from units of the” Heaters. Id. It explained that the Heaters did “not comply with applicable safety standards” because “of unacceptable breakdown of insulation on electrical components of the [Heaters] when used in the ordinary course.” Id. Further, “QVC ha[d] been compelled to cease all sales of the” Heaters. Id. QVC asked Soleus to provide QVC with return authorization information to facilitate the return of unsold and customer-returned Heaters. Id. The letter also notified Soleus that

as [Soleus] previously [had] been made aware, the nature of the defect in the [Heaters] compelled QVC to bring this matter to the attention of the United States Consumer Product Safety Commission (“CPSC”). In addition, as a result of the above described condition of the [Heaters], QVC is commencing a “Fast Track” recall program pursuant to CPSC procedures. QVC will hold Soleus responsible for all “costs, liabilities, damages and expenses (including, but not limited to, all direct, special, incidental, exemplary and consequential damages of any kind ... and reasonable attorneys’ fees)” incurred by QVC in connection with and arising from such recall of the Merchandise.

Id.

QVC’s outside counsel sent a second letter to Soleus on April 10. In the April 10 letter, QVC estimated that “its damages and costs in connection with the recall of the [Heaters] may exceed $2,500,000.” P-104. QVC explained that by Feiner’s letter of March 12, it had requested “that Soleus provide adequate assurances of both its intention and ability to indemnify and hold QVC harmless” for damages and costs resulting from a recall of the Heaters. Id. In the letter, QVC contended that in Soleus’s response, Soleus had stated only that it would honor its obligations “with respect to third party claims.” Id. QVC asserted that “the response of Soleus falls short of assuring compliance by Soleus of its obligations arising from QVC’s rejection of the [Heaters] and its damages and costs in connection with the recall of the [Heaters].” Id. QVC wrote that it “ha[d] reasonable ground for insecurity with respect to the ability or intention of Soleus to perform its obligations under the Purchase Orders” and demanded “adequate assurances that [Soleus could and would] indemnify and hold QVC harmless” for all costs and damages “arising from the defective [Heaters] and all actions (including, without limitation, the recall actions) required to be taken by QVC as a result thereof.” Id.

CPSC approved QVC’s proposed recall letter and notice, P-100, and on April 12, QVC notified its customers that it was conducting a voluntary recall of the Heater. QVC’s letter stated, in relevant part,

I am writing to you today as a follow up to our recent efforts to contact you concerning the Soleus Air 360 Degree Micathermic Heater with 3 Heat Settings, item V24882, which you previously purchased from QVC. In cooperation with the U.S. Consumer Product Safety Commission (CPSC), QVC is recalling this product because it has received customer reports that some of the heaters have smoked, sparked, overheated, or caught fire. Although there have been no reports of injuries, we again remind you to stop using this product immediately AND unplug it, even if it has been used without incident.

Id. Customers were instructed to cut the electrical cord off at the point at which it attaches to the appliance and to return the cord and an order barcode to QVC in order to obtain a full refund of the original purchase price, applicable taxes and shipping and handling charges. Id. Customers were instructed to dispose of the Heaters. Id. QVC instructed customers to return only the cords because “the unit itself would be difficult to return intact.” Tr. Day 1 at 113:16-114:5 (McGrath). QVC wanted to make it easy for its customers to disable the Heaters and take them out of use. Id. at 114:6-23. QVC also believed that by requiring its customers to return only the cords, it would reduce the overall cost of the recall effort. Id.

Also on April 12, counsel for QVC forwarded to counsel for Soleus “a copy of the form of recall letter being sent to QVC’s customers regarding the subject heater and a copy of the recall poster being placed in QVC retail stores.” P-108.

VII. Reaction to the Heater Recall

In spite of all of the previous communications about the Heaters between Soleus, its representatives and QVC, Soleus expressed surprise at QVC’s decision to recall the Heaters. On April 14, counsel for Soleus sent an email to counsel for QVC and asked “Did U.S. Consumer Product Safety Commission recommend or request a recall of the heater? ... I was under the impression that a testing company was appointed, it tested the heater, and recommended only future modifications, not a recall.” P-109. In a second email on April 14, counsel for Soleus informed counsel for QVC that Soleus had provided a return authorization to QVC for “9000 + ” unsold units of the Heaters and a return authorization for approximately 1300 units of unsold HM1 heaters. P-111; Jt. Stip. ¶ 36.

Also on April 14, outside counsel for QVC sent copies of the Purchase Orders for the Heaters to counsel for Soleus. P-116. In the accompanying letter, QVC noted that it continued to await a response to its request that Soleus would “indemnify and hold QVC harmless for all costs and damages arising from the ongoing recall” of the Heaters. Id.

On April 18, counsel for Soleus wrote to QVC’s outside counsel. Soleus’s counsel explained that “[biased on reports and testing of the heater, it was not reasonable for QVC to recall the heater.” P-117. He noted that on March 15, 2008, Charley Loh had “confirmed that [Soleus] would honor its indemnification obligation.” Id. He also explained that “based [on] the parties’ prior course of dealing, Soleus has always accepted return merchandise, provided appropriate credit, and provided return merchandise authorizations.” Id.

QVC filed the instant action against Soleus on August 12, 2008.

VIII. Post-Recall Analysis of the Heaters

Ultimately, QVC, the Ningbo Bole factory and experts for QVC and Soleus concluded that there was a problem with the wiring in certain of the Heaters. Randy Bills, testifying as an expert on behalf of QVC, examined forty-six customer returned-Heaters. Tr. Day 3 at 9:19-10:18 (Bills). Bills observed that thirty-six of the Heaters he inspected displayed damage to the salmon colored wire connecting the Heater’s manual selector switch to its thermostat. Tr. Day 3 at 17:9-18:2 (Bills); P-161. The damage appeared to be caused by overheating of the salmon colored wire. Id. Daryl Ebersole, Soleus’s expert, explained “that the failures of the heaters that [he] observed [were] the result of overheating from a crimp connection” and that the crimp connection was “a manufacturing defect”____ Tr. Day 5 at 13:6-11 (Ebersole). Huang Hui, a general director for Ningbo Bole, Tr. Day 3 at 79:24-80:2 (Huang), testified that “there’s a problem inside the wire.” Id. at 99:11. When asked for further detail, Huang, responding through a translator, explained:

A: The molding lose the — may cause the problem....

Q: The molding may cause the problem? ...

A: Loose. If loose for some reason....

Q: You mean the soldering—

A: Yeah, soldering. Yeah, soldering.

Q: —or the connection?

A: Soldering, yeah.

Id. at 101:21-102:14. Both Bills and Ebersole agreed that the problems with the Heaters were not the result of customer misuse. Tr. Day 8 at 11:22-12:3 (Bills); Tr. Day 5 at 14:25-15:16 (Ebersole).

The manufacturing defect was a latent defect because, as the experts for QVC and Soleus agreed, the crimping defect in the salmon colored wires did not affect all of the Heaters manufactured for QVC. Tr. Day 3 at 65:18-22 (Bills); P-154 at 1; Tr. Day 5 at 13:12-14:1 (Ebersole). Jimmy Loh testified that “[w]ith what I know today, it appeared to be like we have a quality problem with a batch of crimp which caused the problem.” Tr. Day 4 at 90:20-22 (J. Loh). QVC’s customers could not have known from a visual inspection of their Heater whether or not they had purchased a Heater with a defective crimp connection. Tr. Day 513:20-14:1 (Ebersole).

The defective crimp connection caused overheating and, in some cases, combustion within the Heaters’ wiring compartments. Tr. Day 3 at 23:7-15; 35:22-36:2; 36:25-37:9 (Bills); Tr. Day 5 at 33:9-24 (Ebersole). Heat damage from the loose connections could cause insulation on the wires to burn away, Tr. Day 3 at 21:10-14 (Bills), and in some instances, “[w]hen the wire severs, there will be a[n] electrical arc event, either by the wire separating in line, or shorting to the metal case or another wire, and that arc will ignite the vapors that are being given off by the loose connection, vapors from the charring of the blue terminal connectors, the insulation of the wiring, or the heating up of the plastic.” Id. at 35:22-36:2.

The Heaters were equipped with four mechanisms designed to prevent fire: (1) a thermostat designed to measure ambient temperatures and cause the unit to cycle when ambient temperatures exceeded the human comfort setting; (2) a thermal switch on the inside wall facing the heating element; (3) a “one-time” thermal switch located on the base of the wiring compartment; and (4) a tip-over switch. Id. at 14:10-15:25; Tr. Day 5 at 30:17-31:4 (Ebersole). Further, certain components of the Heaters were made of “a hard formed type of plastic that typically don’t support combustion.” Tr. Day 3 at 58:18-22 (Bills). The safety devices, however, did not prevent bad crimp connections from causing overheating or fire. Id. at 35:1-11; Tr. Day 5 at 21:16-24 (Ebersole). Nor did the flame retardant plastics. Id. at 33:17-34:17.

IX. QVC’s Standards for Customer Satisfaction

Under QVC’s return policy, its customers may return products for a refund within thirty to forty-five days for any reason. Jt. Stip. ¶ 39. QVC has “very high” standards for customer satisfaction. Tr. Day 1 at 15:20-16:1 (McDermott). The “Q” in QVC sands for “quality,” it is a factor that is important to QVC from a product differentiation standpoint, and “it was very, very important for [QVC] just because of the nature of the business ... that the customer had a sense of trust in the product, that the product they were going to receive would conform to how it was described on [television].” Tr. Day 1 at 92:10-21 (McGrath). McGrath testified that QVC was “vigilant in building a quality assurance infrastructure to make sure that those customer expectations were met.” Id. at 92:21-23. QVC “goe[es] through an enormous quality inspection of an item to begin with to sell an item.” Tr. Day 1 at 32:9-10 (McDermott).

QVC has an “incredibly low” tolerance for health or safety issues. Tr. Day 1 at 31:24-32:3 (McDermott). When QVC customers raise complaints about purchased products that implicate “Health & Safety” issues — problems that could lead to personal injury or property damage — it takes only three to five similar complaints before the issue receives additional attention from QVC’s OOP. Tr. Day 1 at 18:22-19:1; 31:19-32:3 (McDermott).

QVC considers carefully decisions to recall products because “[w]hen you recall an item, there is a level of customer remorse. They’ve trusted us to buy the item, that it is as described on-air or online, and there is a negative customer impact to recall. It is something that we wish we never had to do.” Id. at 32:10-14.

X. Relevant Contract Provisions

Each of the Purchase Orders constitutes a complete contract between QVC and Soleus. Jt. Stip. ¶ 10. Soleus accepted the terms of the Purchase Orders without modification by, among other things, delivery of some or all of the Heaters and other Soleus products under each of the Purchase Orders to QVC. Jt. Stip. ¶ 11.

Section 3 of the relevant Purchase Orders includes a representation, warranty and covenant by Soleus that, inter alia, the Heaters shall be “free from all defects (including latent defects) in workmanship, material and design.” Jt. Stip. ¶ 13; P-9. Relevant here, Section 3 provides that:

3. In addition to and without prejudice to any and all other warranties, express or implied by law, [Soleus] represents, warrants and covenants to [QVC] that: ... (c) all Merchandise furnished hereunder, including the production, sale, packaging, labeling, safety, testing, importation and transportation thereof, and all representations, advertising, prices and allowances, discounts or other benefits made, offered or authorized by ' [Soleus] in connection therewith, shall at all times comply with all applicable federal, state, local, industry and foreign statutes, laws, rules, regulations and orders, standards and guidelines (collectively, “Laws”) ... (f) all Merchandise furnished hereunder: shall be new, first quality merchandise; shall conform to all representations and/or specifications made by Vendor; shall conform to all instructions intended for customers; shall conform to the Vendor samples given to Buyer; shall be free from all defects (including latent defects) in workmanship, material and design and; shall not be reworked, rebuilt or refurbished merchandise[.]

Jt. Stip. ¶ 13; P-9.

Section 7 of the Purchase Orders provides QVC with a mechanism for obtaining a refund for certain merchandise, including merchandise that was returned by QVC’s customers and any other merchandise, including unsold merchandise, that failed to satisfy warranties under Pennsylvania law, the express warranties, representations and covenants set forth in Section 3 of the Purchase Orders and/or QVC’s quality standards. Jt. Stip. ¶ 16 and P-9.

Merchandise furnished hereunder which is not in compliance with the Laws this Order [sic], the Regulations or the Standards, which is returned by any of Buyer’s customers for any reason, which fails to meet Buyer’s quality control tests, which fails to meet Buyer’s carrier’s quality, drop or other tests, or which is or may be used in conjunction with merchandise furnished and rejected (or acceptance thereof revoked) under this Order or another order, may be rejected (or acceptance thereof revoked) at Buyer’s option and returned to Vendor. All expense of unpacking, examining, repacking, storing, returning and reshipping any Merchandise rejected (or acceptance of which has been revoked) as aforesaid shall be at Vendor’s expense and risk. With respect to such returned Merchandise or identical merchandise purchased under a separate purchase order, Buyer shall, at its option, receive a credit or refund equal to the average cost of amounts paid by Buyer for each item of such Merchandise, or other identical merchandise, including, without limitation, in-bound freight charges (notwithstanding contrary Freight Terms, if any, set forth on the face hereof). In the event that Buyer shall opt to receive a refund, Vendor shall pay Buyer in immediately available funds within fifteen (15) days of Buyer’s request. Buyer reserves the right to require full refund prior to the return of Merchandise. In the event that Buyer shall opt to receive a credit, Buyer may apply such credit toward any amounts due or which may become due to Vendor. Vendor agrees that Merchandise rejected or returned for any reason pursuant to the terms of this Order, whether or not such rejection is disputed by Vendor, will not be resold or otherwise distributed by Vendor unless all labels or other characteristics identifying Buyer and or displaying any trade name or trademark of Buyer have been first removed. Authorization is expressly granted to Buyer to return Merchandise without additional authorization, and Vendor hereby agrees to accept such returns even without Buyer’s request for return authorization labels. Merchandise returned or rejected by Buyer is not to be replaced by Vendor without the prior written approval of Vendor. Vendor acknowledges that Buyer does not inspect each item at receipt of Merchandise and that defects, imperfections or nonconformity with any representations, warranties or covenants set forth herein may not be discovered by Buyer until Merchandise shall have been purchased by its customers and returned to Buyer. Buyer’s inspection, discovery of a breach of warranty, failure to make an inspection or failure to discover a breach of warranty shall not constitute a waiver of any of Buyer’s rights or remedies whatsoever.

Id.

Section 5 of the relevant Purchase Orders provides, in part:

5. In the event QVC reasonably determines that any Merchandise sold by QVC to its customers contains any defect, QVC may, in its sole discretion (taking into account QVC’s standards for customer satisfaction), subject to applicable law, determine the necessity of a voluntary recall or other action (including the determination as to whether QVC’s customers will be offered a replacement item of Merchandise or a refund of their purchase price and shipping and handling charges). The rights of QVC in the foregoing sentence shall be in addition to any and all rights of QVC contained in this Order.

Jt. Stip. ¶ 15; P-9. QVC contends that it reasonably determined that the Heaters contained a defect and that it properly exercised its discretion to recall the Heaters.

In Section 4 of the Purchase Orders, Soleus agreed, inter alia, to hold harmless and indemnify QVC from and against any “direct, special, incidental, exemplary, and consequential damages and losses of any kind,” specifically including lost profits and reasonable attorneys’ fees “based upon or resulting from ... any alleged or actual defect” in the Heaters. Jt. Stip. ¶ 14; P-9. Section 4 provides, in relevant part:

4. Vendor hereby agrees to protect, defend, hold harmless and indemnify Buyer ... from and against any and all claims, actions, suits, costs, liabilities, damages and expenses (including but not limited to, all direct, special, incidental, exemplary and consequential damages and losses of any kind [including, without limitation, present and prospective lost profits and lost business] and reasonable attorneys’ fees) based upon or resulting from ... (b) any alleged or actual defect in any of the Merchandise ... [and] (d) breach by Vendor of any representations, warranties or eovenants[.]

Id.

XI. QVC’s Claimed Damages for the Heaters

At trial, Alan Kujawa, QVC’s Vice President of Inventory Accounting testified as to QVC’s claimed damages. Exclusive of prejudgment interest and attorneys’ fees, QVC seeks a total of $1,838,855.59 in damages related to the Heaters. QVC seeks damages for the cost price of the Heaters in addition to lost profits, refunded outbound customer shipping costs, shipping costs for the return of Heater Cords to QVC, refunded customer shipping costs for Heaters returned to QVC, return-to-vendor shipping costs, returns center processing costs and other costs associated with the recall.

A. Cost Price Damages

Each Heater had a cost price to QVC of $41.07 — $36.00 to Soleus and $5.07 to third parties for landed costs. Jt. Stip. ¶40. As set out below, QVC’s claimed cost price damages for all of the Heaters at issue in this action is $1,046,176.11. P-159 at 1.

On July 18, 2011, the Court granted summary judgment in favor of QVC and against Soleus with respect to Soleus’s liability to refund QVC for 4,284 customer returned Heaters that QVC shipped to Soleus in February and March 2008 (the “Shipped Customer Return Heaters”). Dkt. No. 50 at 11. QVC’s claimed cost price damages for the Shipped Customer Return Heaters total $175,943.88 — or the cost price of $41.07 multiplied by 4,284. P-159 at 1; Tr. Day 2 at 102:1-3 (Kujawa).

Summary judgment was also granted in favor of QVC and against Soleus with respect to QVC’s right to payment by Soleus for customer returned Heaters still in its possession (the “Unshipped Customer Return Heaters”). Dkt. No. 50 at 13. As of January 8, 2012, QVC had in its inventory 1,824 Unshipped Customer Return Heaters. P-165. QVC’s claimed cost price damages for the Unshipped Customer Return Heaters are $74,911.68. P-159 at 1.

As of January 8, 2012, QVC had in its inventory 8,752 Heaters that had never been sold to its retail customers (the “Unsold Heaters.”). P-165. QVC’s claimed cost price damages for the Unsold Heaters are $359,444.64. P-159 at 1.

Also as of January 8, 2012, QVC had received 10,613 customer returned cords as a result of the recall (the “Heater Cords”). Tr. Day 2 at 102:5-18 (Kujawa). QVC’s claimed cost price damages for the Heater Cords are $435,875.91. P-159 at 1.

B. Lost Profit

Upon receipt of a Customer Return Heater or a Heater Cord, QVC refunded to its customer the full value that the customer paid to QVC for the Heater. Tr. Day 2 at 104:19-22 (Kujawa). The Today’s Special Value® price for the Heaters was $67.86, the lowest per unit price at which QVC offered the Heaters for sale. Id. at 105:5-16. QVC claims that $26.49 constituted its profit on the sale of each Heater — profit that QVC would have realized had it not refunded the sales price to its customers. Id. at 104:23-105:4; P-159 at 2. QVC’s total claimed lost profit damages for the Heaters or Heater Cords that were returned to QVC are $442,939.29. Id. at 105:17-18; P-159 at 2.

C. Refunded Outbound Customer Shipping Costs

In addition to refunding customers with the full value that they paid for Heaters, all QVC customers who purchased Heaters from QVC were refunded the full value of the cost they paid to have the Heater shipped to them when they purchased it from QVC. Tr. Day 2 at 105:19-106:14 (Kujawa). QVC’s customers paid $8.04 for delivery of Heaters purchased as a Today’s Special Value®. Id. at 106:2-7. As damages for refunded outbound customer shipping costs, QVC seeks $8.04 for each of the Heaters it sold, as represented by 4,284 Shipped Customer Return Heaters, 1,824 Unshipped Customer Return Heaters and 10,613 Heater Cords, for a total of $134,436.84. P-159 at 2.

D. Costs for Heater Cord Returns

Pursuant to the recall, QVC instructed customers to cut the Heater Cords off of their Heaters and to send them back to QVC. P-102. QVC provided its customers with packaging and prepaid postage for the Heater Cords at a cost of $2.00 per Heater Cord. QVC seeks $21,226.00 in damages — $2.00 multiplied by 10,613 Heater Cords — for the shipping costs to return the Heater Cords to QVC. Tr. Day 2 at 108:5-21 (Kujawa); P-159 at 3; P-165.

E. Refunded Customer Shipping Costs for Heaters Returned to QVC

QVC customers who returned intact Heaters to QVC (as opposed to just Heater Cords), were refunded the full value of their cost to ship their Heater back to QVC. Tr. Day 2 at 107:13-108:1 (Kujawa). As damages for refunded customer shipping costs for Heaters returned to QVC, QVC seeks $8.04 for each of 4,284 Shipped Customer Return Heaters and 1,824 Unshipped Customer Return Heaters, for a total of $49,108.32. Id. at 107:24-108:1; P-159 at 3.

F. Return-to-Vendor Shipping Costs

Return-to-vendor shipping costs are the estimated shipping costs to return goods back to a vendor. QVC calculates this cost on