Golden Spread Coop., Inc. v. Emerson Process Mgmt. (360 F. Supp. 3d 494, 2019)

United States District Court for the Northern District of Texas 2019-01-31

Citations

Full opinion text

SIDNEY A. FITZWATER, SENIOR JUDGE

On November 19, 2018 the United States Magistrate Judge entered his findings, conclusions, and recommendation on the following motions: (1) defendant Emerson Process Management Power & Water Solutions, Inc.'s ("Emerson's") April 16, 2018 motion for summary judgment, and (2) Emerson's September 10, 2018 motion in limine and motion to exclude expert testimony. The magistrate judge recommends that the summary judgment motion be granted and the two pending evidentiary motions be denied as moot. Plaintiff Golden Spread Cooperative, Inc. ("Golden Spread") filed objections to the findings, conclusions, and recommendation on December 3, 2018, which intervenor Westport Insurance Company ("Westport") joined the same day.

After making an independent review of the pleadings, files, and records in this case, the findings, conclusions, and recommendation of the magistrate judge, the objections of Golden Spread and Westport, and Emerson's December 17, 2018 response to the objections, the court concludes that the conclusions and recommendation are correct. It is therefore ordered that the objections are overruled, the conclusions and recommendation of the magistrate judge are adopted, and Emerson's April 16, 2018 motion for summary judgment against Golden Spread and Westport is granted. The motion in limine and motion to exclude expert testimony are denied without prejudice as moot. The court enters judgment in favor of Emerson by judgment filed today.

SO ORDERED .

FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

D. GORDON BRYANT, JR., UNITED STATES MAGISTRATE JUDGE

Pursuant to a Standing Order of Reference, this case has been referred to the undersigned United States Magistrate Judge for pretrial management, including decisions as to non-dispositive matters and making findings and recommendations as to dispositive matters. ECF No. 74. This case, removed from state court on diversity jurisdiction, arises out of a contract in which Defendant Emerson Process Management Power & Water Solutions, Inc. (Emerson) agreed to replace the distributed control system (DCS) for a steam turbine at Plaintiff Golden Spread Electric Cooperative, Inc.'s (GSEC) power station. Emerson now moves for summary judgment on GSEC's contract (breach of contract and express warranty) and tort (negligence and strict liability) claims for damages allegedly sustained by the steam turbine as a result of defects in the DCS. See Def. Emerson Process Management Power & Water Solutions, Inc.'s Mot. for Summ. J. (ECF No. 71) [hereinafter Def.'s Mot. Summ. J.]. For the reasons that follow, the undersigned recommends that the District Judge GRANT Emerson's motion.

I. Background

GSEC operates Mustang Station Power Plant (Mustang Station), a consumer-owned power plant located near Denver City, Texas. Mustang Station became operational in 2000, and has multiple generators capable of producing a combined 958 megawatts of power. App. to Pl.'s Resp. to Def.'s Mot. Summ. J., at 1 (ECF No. 78) [hereinafter Pl. App.]. This litigation centers on one of those generators-an Alstom steam-turbine generator known as Unit 3-and a control system designed by Emerson. GSEC purchased Unit 3 from Alstom and installed it in the Mustang Station during 1999-2000. Id. at 2.

In 2013, GSEC solicited proposals to replace Unit 3's DCS, and Emerson submitted the winning bid. Def. Emerson's Br. in Supp. of its Mot. Summ. J., at 8 (ECF No. 72) [hereinafter Def.'s Br.]; Pl.'s Br. in Opp'n to Def.'s Mot. Summ. J., at 6-7 (ECF No. 77) [hereinafter Pl.'s Resp.]. GSEC and Emerson subsequently negotiated and executed a contract that required Emerson to design, develop, program, and install the new DCS for Unit 3. Pl. App., at 2. The DCS is "the necessary means for operation and control of the steam turbine's integrated subsystems" and includes "computer hardware, software and associated equipment." App. to Def. Mot. Summ. J., at 2 (Decl. of Glen Wagner) (ECF No. 73) [hereinafter Def. App.]. Specifically, the executed contract requires, in part, that Emerson provide "control solutions that will target and analyze specific processes in Golden Spread's Mustang Station, determining optimal operating conditions and offering tremendous cost savings to Golden Spread's Mustang Station facility." Pl.'s First Am. Compl., at 3 (ECF No. 36). The contract encompassing the parties' agreement consists of four parts, numbered in their "order of precedence" for interpretation: (1) Cover Letter; (2) Proposal; (3) License Agreement; and (4) Terms and Conditions. Def. App., at 290.

During Emerson's testing and commissioning of the new DCS, Mustang Station lost power and Unit 3 tripped offline. Pl. App., at 2; Def.'s Br., at 9; Pl.'s Br., at 7. As Unit 3 coasted to a stop, the lube-oil system failed to remain engaged, causing the turbine to overheat and suffer extensive friction damage. Def.'s Br., at 9; Pl.'s Br., at 7. Investigation after the incident revealed that the new DCS created and installed by Emerson for Unit 3 contained a logic error in the software that caused the lube-oil system to prematurely shut off during the turbine roll-down. Def.'s Br., at 9; Pl.'s Br., at 7.

Following the incident, and pursuant to the parties' agreement, GSEC submitted a warranty claim to Emerson. Def.'s Br., at 9-10. Emerson completed modifications to the DCS software, which GSEC subsequently approved, and GSEC returned Unit 3 to service. Def. App., at 2-3 ¶ 11 (Decl. of Glen Wagner). Emerson performed this warranty work at no charge to GSEC. Joint Stipulation of Facts, at 1 (ECF No. 98).

GSEC and Westport Insurance Company filed this suit in an attempt to recover for the damages sustained by Unit 3 due to Emerson's alleged improper design, development, programming, and installation of the replacement DCS. Pl.'s First Am. Compl., at 4-12. They seek $ 8,352,996.94 in damages for steam turbine repair costs caused by the lack of lubrication following the power failure. GSEC's Amended Complaint alleges claims for breach of contract, breach of express warranty, negligence, and strict product liability. Id. Emerson moves for summary judgment as to all claims. Def.'s Br., at 10-22.

Emerson contends that GSEC's breach of contract and warranty claims fail as a matter of law because the parties' negotiated contract unambiguously provides that GSEC's sole and exclusive remedy is for Emerson to either correct any nonconformity or defect or, if impracticable, to refund the purchase price. Def.'s Br., at 11-13; Def. Emerson's Reply Br. in Supp. M. Summ. J., at 5-10 (ECF No. 83) [hereinafter Def.'s Reply]. Emerson further asserts that Texas's economic loss doctrine bars GSEC's tort claims as a matter of law. Def.'s Br., at 13-19; Def.'s Reply, at 10-15. Emerson also proffers alternative theories for granting partial or full summary judgment, arguing the parties contracted for a disclaimer of consequential or incidental damages arising from either contract or tort claims, and a total damage cap equal to the greater of the defective item's purchase price or $ 2.5 million. Def.'s Br., at 19-22; Def.'s Reply, at 15.

In response, GSEC argues that Emerson misinterprets the terms of the contract, and that the Limited Warranty provisions cited by Emerson are not the sole and exclusive contractual remedies available. Pl.'s Br., at 10-13. In addition, GSEC contends the economic loss doctrine does not preclude recovery in this case because it bargained for the new DCS separately from the original turbine. Id. at 14-22. GSEC further asserts that the damage to Unit 3 was not consequential, but instead direct and foreseeable damage not limited by the contract. Id. at 22-24. Lastly, GSEC claims that the damages cap in the contract does not cover or apply to their claim for attorney's fees. Id. at 24-27.

II. Summary Judgment Standard

"Summary judgment is required when 'the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.' " Trent v. Wade , 776 F.3d 368, 376 (5th Cir. 2015) (quoting Fed. R. Civ. P. 56(a) ). A fact is "material" when it "might affect the outcome of the suit under the governing law," and a dispute is "genuine" when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Tagore v. United States , 735 F.3d 324, 328 (5th Cir. 2013) (quoting Anderson v. Liberty Lobby , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). In determining whether a dispute is "genuine," courts "consider all facts and evidence in the light most favorable to the nonmoving party[,] ... draw all reasonable inferences in favor of the nonmoving party[,] ... [and] disregard all evidence favorable to the moving party that the jury is not required to believe." Haverda v. Hays Cty. , 723 F.3d 586, 591 (5th Cir. 2013) (quotations and internal citations omitted).

The movant "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When the nonmovant bears the burden of proving such material facts at trial, movants may satisfy their burden by either affirmatively showing the nonmovant's inability to establish such material facts or "merely demonstrat[ing] an absence of evidentiary support in the record for the non-movant's case." Wesley v. Gen. Drivers, Warehousemen & Helpers Local 745 , 660 F.3d 211, 213 (5th Cir. 2011) (quoting Bayle v. Allstate Ins. Co. , 615 F.3d 350, 355 (5th Cir. 2010) ). While the party moving for summary judgment must demonstrate the absence of a genuine issue of material fact, it need not negate the elements of the nonmovant's case. Coastal Agric. Supply, Inc. v. JP Morgan Chase Bank, N.A. , 759 F.3d 498, 505 (5th Cir. 2014). Once a movant fulfills its initial burdens, the nonmovant must go beyond the pleadings and designate specific facts demonstrating that there is a genuine issue for trial. See Celotex Corp. , 477 U.S. at 325, 106 S.Ct. 2548.

If the movant will have the burden of proof on a claim or defense at trial, it "must establish 'beyond peradventure all of the essential elements of the claim or defense.' " Bank One, Tex., N.A. v. Prudential Ins. Co. of Am. , 878 F.Supp. 943, 962 (N.D. Tex. 1995) (quoting Fontenot v. Upjohn Co. , 780 F.2d 1190, 1194 (5th Cir. 1986) ). "The court has noted that the 'beyond peradventure' standard is 'heavy.' " Carolina Cas. Ins. Co. v. Sowell , 603 F.Supp.2d 914, 923-24 (N.D. Tex. 2009) (quoting Cont'l Cas. Co. v. St. Paul Fire & Marine Ins. Co. , No. 3:04-CV-1866-D, 2007 WL 2403656, at *10 (N.D. Tex. Aug. 23, 2007) ).

III. Analysis

A. Emerson's Motion

This court's local rules require that a party seeking summary judgment must "on the first page [of its motion], under the heading 'summary,' state concisely the elements of each claim or defense as to which summary judgment is sought ...." N.D. Tex. Local Civil Rule 56.3(a) (emphasis added). The rule further provides that the party may satisfy this requirement "by stating in its motion that each of the required matters will be set forth in the party's brief." Local Rule 56.3(b). Emerson followed the latter course, referring the court to its brief for a summary of the grounds upon which it seeks summary judgment. See Def.'s Mot. Summ. J., at 1;

Def.'s Br., at 11-21. While not a model of clarity, and certainly not "stat[ing] concisely the elements of each claim or defense as to which summary judgment is sought," the court gleans the following from Emerson's motion and brief. Because neither the motion nor brief identifies, much less examines, any summary judgment proof concerning the essential elements of GSEC's claim for breach of express warranty, the court presumes Emerson does not seek judgment by either affirmatively showing the nonmovant's inability to establish such material facts or "merely demonstrat[ing] an absence of evidentiary support in the record" as to the warranty claim. See Wesley , 660 F.3d at 213.

It does appear, however, that Emerson seeks summary judgment as to GSEC's contract, express warranty, negligence, and strict product liability claims as follows:

1. GSEC's breach of contract claim, as a general proposition, is subsumed within its express warranty claim by operation of Texas law;

2. Warranty and remedy limitations negotiated by the parties in the written contract bar GSEC's breach of express warranty claim;

3. The economic loss rule bars tort claims for damage to the steam turbine because the DCS is an "integrated component" and the turbine therefore does not constitute "other property"; and

4. Even if the turbine qualifies as "other property" under the economic loss rule, its repair costs would be unrecoverable "consequential damages" or, if recoverable, subject to the contract's damage cap.

See Def.'s Br., at 6-8, 12 n.3. The court examines each claim as follows.

B. The Summary Judgment Record Before the Court

Although GSEC asserts four separate causes of action, i.e., breach of contract, breach of express warranty, negligence, and product liability, its claims boil down to two common issues: did the DCS provided by Emerson contain a defect that caused damage to the Unit 3 turbine and, if so, what remedies, if any, does the parties' contract provide for such defect and the resulting damages? Before the court can properly evaluate Emerson's motion, it must first identify the summary judgment evidence in the record concerning these two questions.

As to the parties' negotiated agreement, both parties have submitted verified copies of the final version of the contract. See Def. App., at 289-382; Pl.'s First Am. Compl., Ex. A, at 1-94 (ECF No. 37-1). While the parties clearly have differing interpretations of the contract, there appears to be no dispute over what documents actually make up the contract or the relevant language contained therein.

Regarding the incident itself, from the court's review of the parties' summary judgment filings (including the motion and supporting brief, response, and reply, all exhibits and appendices attached thereto, and the parties' joint stipulation), the parties agree factually as to what occurred-they simply disagree as to the resulting legal consequence. Apparently due to this lack of factual dispute, however, neither GSEC nor Emerson offers much in the way of traditional Rule 56 summary judgment proof-affidavits, deposition testimony, etc.-specifically identifying the cause of the injury alleged. Identifying the defect causing the damages sought by GSEC is significant because the contract contains different language for defects related to Goods and Services and those associated with Software and, as argued by GSEC, potentially provides differing remedies for each. Because few, if any, of either party's factual recitations in the motion for summary judgment (MSJ) briefing concerning the specific cause of the DCS's failure and the resulting damage are submitted as sworn testimony, the court must consider the legal impact, if any, of the parties' unsworn factual statements contained in their MSJ briefs, as well as GSEC's factual allegations set forth in its First Amended Complaint (FAC), in determining whether to grant or deny Emerson's motion for summary judgment. For the reasons set forth below, the court believes it can consider the following as admissible summary judgment evidence for the purpose of evaluating Emerson's motion.

First, a court may rely on judicial admissions contained in an opponent's response to a motion for summary judgment in deciding whether disputed fact issues exist. See City Nat'l Bank v. United States , 907 F.2d 536, 544 (5th Cir. 1990) (refusing to treat as a "binding judicial admission" a misstatement in appellate brief addressing whether substantial evidence supports a jury verdict, noting that such a circumstance "is unlike admissions of fact in a summary judgment brief used to determine whether or not there is a genuine issue of material fact"); 10A Charles Alan Wright, et al., Federal Practice and Procedure § 2723 (4th ed. supp. 2018) ("[A]dmissions in the brief of the party opposing the motion may be used in determining that there is no genuine dispute as to any material fact, since they are functionally equivalent to 'admissions,' which are expressly mentioned in Rule 56(c)(1)(A)...."); see also Fed. R. Civ. P. 56(c)(1)(A) ("A party asserting that a fact cannot be ... genuinely disputed must support the assertion by ... citing to particular parts of materials in the record, including ... admissions ...."). Second, following the same rationale, the Fifth Circuit has also stated that it "see[s] no reason why, for purposes of resolution of [a] motion for summary judgment," courts "cannot treat the factual allegations of the complaint as admissions or stipulations." Isquith ex rel. Isquith v. Middle S. Utils., Inc. , 847 F.2d 186, 195 (5th Cir. 1988). As a result, the court will examine both the parties' MSJ briefs and GSEC's FAC to determine whether any disputed material fact issues exist.

Based on the record before the court, it is abundantly clear the parties do not dispute that a "logic error" in the software of the DCS caused the alleged damages in this case. The court need look no further than GSEC's response to Emerson's motion to confirm this. See, e.g. , Pl.'s Br., at 7 ("Investigation ... revealed the newly-purchased and installed DCS contained a logic error"), 11 ("[T]he instant dispute resulted from a defect in the DCS software."), 23 ("This list has no connection to direct property damage to the turbine occurring as a result of Emerson's faulty DCS logic ." (emphasis added) ). Emerson, at least for purposes of its motion, concurs in GSEC's assessment. See, e.g. , Def.'s Br., at 9 ("[T]he lube oil system failed to remain engaged because of a flaw in the programming of the steam turbine DCS"); Def.'s Reply, at 9 ("Golden Spread even acknowledges that its claims are for a defect in the control logic software...."). Further examination of GSEC's live complaint removes any doubt as to what GSEC contends caused the damages it seeks to recover herein. See, e.g. , Pl.'s Am. Compl., at 8 ¶ 20 ("The DCS logic implemented by Emerson and controlling the lube oil system was defective in that it caused the lube oil system to fail to engage, resulting in overheating and friction damage to the steam turbine."), 9 ¶ 25 ("The DCS control logic programmed by Emerson was defective. A detailed review of the logic that Emerson installed in the DCS at the time of the event reveals an incorrect logic loop."), 11 ¶ 29 ("The DCS logic implemented by Emerson and controlling the lube oil system was defective in that it caused the lube oil system to fail to engage, resulting in overheating and friction damage to the steam turbine."). GSEC also provides testimony that meets the requirements of Rule 56(c)(4) through an affidavit from an engineering expert, attached to its FAC as Exhibit A, wherein he opines that "a detail review of the logic that Emerson had installed, in their DCS, at the time of the event shows incorrect control logic existed," which "directly contributed to the Mustang Station Steam Turbine damage." Pl.'s Am. Compl., Ex. A, at 2-3 ¶¶ 8, 12. In sum, the court finds that the summary judgment record firmly establishes that a "logic error" in the software of the DCS caused the alleged damages in this case.

Considering the foregoing, the summary judgment evidence also clearly proves GSEC accepted the DCS unit upon delivery, incorporating it into the Unit 3 turbine and then seeking repair or modification to the DCS unit when defects in the software surfaced (as opposed to returning it or revoking the acceptance). The undisputed evidence also demonstrates, as a general proposition, that once notified of the software issue, Emerson remedied the defect to GSEC's apparent satisfaction and at no cost to GSEC. Specifically, GSEC submitted a written "warranty demand for the failure of the control system installed by Emerson at Mustang Station pursuant to the Software License Agreement and Paragraph 5(e) of the Terms and Conditions of Sale ...." Def. App., at 5-6 (email from GSEC Chief Operating Officer (COO) J. Jolly Hayden, dated Apr. 14, 2015); Joint Stipulation of Facts, at 1. In response, Emerson worked with GSEC to remedy the defect by modifying the software, with no charge to GSEC. See Def. App., at 2-3 ¶ 11; see Pl.'s Am. Compl., Ex. A, at 3 ¶ 11 ("Following the March 25th event Emerson and the plant conducted a detail review of all of the logics in the Emerson DCS. Many changes were made including the removal of the faulty Auto Stopping Logic for the EM DC Pump."); Joint Stipulation of Facts, at 1. GSEC approved the modifications, then put Unit 3 back into service. Def. App., at 3. The court finds no evidence in the record showing GSEC disputes that Emerson remedied the DCS's defective software in accordance with the contract; instead, it contends that the contract, rather than providing an exclusive repair remedy, also authorizes recovery by GSEC for damage caused to the turbine as a result of the software defect. Pl.'s Resp., at 11-13.

The court will examine the parties' contractual bargain within the foregoing factual framework and determine the legal effect of the agreement as to GSEC's various claims against Emerson.

C. Contract-Based Claims

Emerson moves for summary judgment on GSEC's contract-based claims, i.e., breach of contract and breach of warranty. Emerson claims that it provided GSEC with its exclusive remedy for any breach of warranty when it made modifications to the DCS, thus enabling GSEC to ultimately return Unit 3 to service. The contract expressly provides that it is "formed and shall be construed, performed, and enforced under the laws of the State of Texas." Def. App., at 295 ¶ 15(d); see Tel-Phonic Servs., Inc. v. TBS Int'l, Inc. , 975 F.2d 1134, 1142 (5th Cir. 1992) (citing Duncan v. Cessna Aircraft Co. , 665 S.W.2d 414, 421 (Tex. 1984) ) ("Texas recognizes the right of contracting parties to agree to choice of law."). Further, the parties do not dispute that Texas law controls in this diversity action. Def.'s Br., at 11, n.2; Pl.'s First Am. Compl., at 2 ¶ 5.

1. As a matter of law, GSEC has no breach of contract claim because it accepted the DCS.

Emerson asserts in its motion for summary judgment that GSEC's contract claims "are properly characterized as breach of warranty claims." Def.'s Br., at 12, n.3 (alleging that GSEC's contract claim is "properly characterized as [a] breach of warranty claim[ ]" based on the Texas Supreme Court's distinction between such claims based on buyer's acceptance of defective goods). GSEC does not address this argument in its brief.

The court initially observes that as a matter of law, breach of contract and breach of warranty are distinct claims with different remedies. See A.O. Smith Corp. v. Elbi S.p.A. , 123 F. App'x 617, 619 (5th Cir. 2005) ("Texas law forbids conflating breach of warranty and breach of contract[.]"); Orthoflex, Inc. v. ThermoTek, Inc. , Nos. 3:11-CV-0870-D, 3:10-CV-2618-D, 2013 WL 4045206, at *8 (N.D. Tex. Aug. 9, 2013) (noting Texas law distinguishes between breach of contract and breach of warranty claims based on whether or not the buyer has accepted the goods). "[T]he critical factor in whether the buyer has a breach of contract or a breach of warranty claim is whether the buyer has finally accepted the goods."

Selectouch Corp. v. Perfect Starch, Inc. , 111 S.W.3d 830, 834 (Tex. App.-Dallas 2003, no pet.). A buyer who justifiably rejects goods or revokes his acceptance may recover remedies for breach of contract. Emerson Elec. Co. v. Am. Permanent Ware Co. , 201 S.W.3d 301, 310 (Tex. App.-Dallas 2006, no pet.). Conversely, "[t]he remedies for breach of warranty ... are available to a buyer who has finally accepted goods, but discovers that the goods are defective in some manner." Sw. Bell. Tel. Co. v. FDP Corp. , 811 S.W.2d 572, 576 (Tex. 1991) (citing Tex. Bus. & Com. Code Ann. §§ 2.714, 2.711 (comment 1) ).

Here, the evidence shows, and GSEC alleges nothing to the contrary, that GSEC did not reject or revoke acceptance of the DCS. Instead, GSEC asserts that (1) Emerson supplied and installed the defective DCS into its preexisting steam turbine (Pl.'s Resp., at 7, 10-13) and (2) after accepting the DCS, GSEC subsequently discovered defects in the DCS during testing and commissioning. Id. at 7. Rather than rejecting the DCS or revoking its acceptance, GSEC submitted a warranty claim to Emerson, and Emerson repaired the defect in the DCS. The undisputed summary judgment evidence before the court establishes that the basis of GSECs contract claim is the allegedly defective DCS it accepted and had installed on Unit 3. Because GSEC accepted the DCS, it cannot maintain a breach of contract action and is limited to only a warranty claim. As a result, the undersigned recommends that the district judge grant summary judgment in favor of Emerson for GSEC's breach of contract claims. See Orthoflex, Inc. , 2013 WL 4045206, at *8 (granting summary judgment dismissing plaintiffs breach of contract action where it had accepted the products).

2. The summary judgment evidence demonstrates Emerson has fulfilled its warranty contractual obligations and that Emerson is entitled to entry of judgment on GSEC's breach of warranty claims.

a. Under Texas law, Emerson has complied with its contractual obligations in regard to GSEC's warranty claim.

Emerson asserts that GSEC's express warranty claim fails because Emerson provided GSEC with its exclusive remedy for any breach caused by DCS software errors when it corrected the defects under the contract's exclusive remedy provisions. Def.'s Br., at 6, 12; Def.'s Reply, at 6-8 (contained in both the License Agreement and the Terms and Conditions of Sale). In response, GSEC alleges that the remedies provided in the warranty sections of the License Agreement and Terms and Conditions are not the sole remedies available under the contract for claims based on defective software, and it has "not agreed to waive damage claims if Emerson damages our property or ... breaches its confidentiality obligation." Pl.'s Resp., at 10. While GSEC bears the burden of proof on its warranty claims, limitations of remedies in a warranty are affirmative defenses, not elements of GSEC's cause of action; as such, Emerson must establish "beyond peradventure all of the essential elements of the ... defense." Orthoflex, Inc. , 2013 WL 4045206, at *2 ; see Centex Homes v. Lexington Ins. Co. , No. 3:13-cv-719-BN, 2014 WL 2718805, at *9 (N.D. Tex. June 16, 2014), vacated in part on other grounds , No. 3:13-cv-719-BN, 2014 WL 11515383 (N.D. Tex. Sept. 11, 2014) (citations omitted) (recognizing that party asserting affirmative defense "must establish beyond peradventure all of the essential elements of the ... defense to warrant judgment in his favor," and noting that such standard imposes a "heavy" burden).

In interpreting the contract under Texas law, and specifically its warranty provisions, the court's primary objective "is to ascertain the true intentions of the parties as expressed in the instrument." J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 229 (Tex. 2003) ; see also Med. City Dall., Ltd. v. Carlisle Corp. , 251 S.W.3d 55, 61 (Tex. 2008) (citing Rodriguez v. W.O.W. Life Ins. Soc'y , 136 Tex. 43, 145 S.W.2d 1077, 1080 (1941) ) ("When we ascertain the parties' intentions in a warranty, we look to well-established rules for interpretation and construction of contracts."). To accomplish this objective, courts examine the contract as a whole "in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless." J.M. Davidson, Inc. , 128 S.W.3d at 229 (citing Universal C.I.T. Credit Corp. v. Daniel , 150 Tex. 513, 243 S.W.2d 154, 158 (1951) ); see also Tex. Bus. & Com. Code Ann. § 2.316(a) ("Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other."). Moreover, under the "Four Corners Rule," the parties' intent must be "ascertained from the instrument as a whole and not from isolated parts thereof." Calpine Producer Servs., L.P. v. Wiser Oil Co. , 169 S.W.3d 783, 787 (Tex. App.-Dallas 2005, no pet.).

When considering whether a contract is ambiguous, "[o]bjective manifestations of intent control, not 'what one side or the other alleges they intended to say but did not.' " URI, Inc. v. Kleberg Cty. , 543 S.W.3d 755, 763-64 (Tex. 2018) (quoting Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London , 327 S.W.3d 118, 127 (Tex. 2010) ). The court therefore presumes "parties intend what the words of their contract say and interpret contract language according to its plain, ordinary, and generally accepted meaning unless the instrument directs otherwise." Id. at 764 (internal quotations and footnotes omitted). "A contract is not ambiguous merely because the parties disagree about its meaning ..." ( id. at 763 ); instead, it is ambiguous only if it is "reasonably susceptible to more than one meaning." Lopez v. Munoz, Hockema & Reed, L.L.P. , 22 S.W.3d 857, 861 (Tex. 2000). The presence of ambiguity and interpretation of an unambiguous contract are questions of law. See URI, Inc. , 543 S.W.3d at 763 ; J.M. Davidson, Inc. , 128 S.W.3d at 229 ("Deciding whether a contract is ambiguous is a question of law for the court.").

Although Emerson and GSEC urge the court to adopt differing interpretations of the contract, particularly in regard to available remedies, neither party asserts that the contract is ambiguous. See Def.'s Br., at 11-13; Def.'s Reply, at 5-10; Pl.'s Resp., at 10-11. The contract at issue is comprised of four different documents that "are to be complementary and interpreted in harmony so as to avoid conflict ...." Def. App., at 290 (Offer). The contract also sets out a specific "order of precedence in interpretation" to be used "[i]n the event of any inconsistency, conflict, or ambiguity ... (i) Cover Letter, (ii) the Proposal, (iii) License Agreement, and (iv) Terms and Conditions." Id.

Interpreting the contract as a whole and giving meaning to all its provisions, the court finds that the exclusive remedy provision for warranty claims based on defective software is not reasonably susceptible to more than one interpretation and is therefore not ambiguous. See Project Dev. Grp., Inc. v. Metro. Transit Auth. of Harris Cty. , No. 07-96-0350-CV, 1998 WL 416131, at *4 (Tex. App.-Amarillo July 24, 1998, pet. denied) (finding contract unambiguous because it was only susceptible to one reasonable interpretation). Thus, entry of summary judgment may be appropriate. See Weaver v. Metro. Life Ins. Co. , 287 F.Supp.3d 645, 649-50 (N.D. Tex. 2017) (quoting Tex. Instruments, Inc. v. Hyundai Elecs. Indus. Co., Ltd. , 42 F.Supp.2d 660, 669-70 (E.D. Tex. 1999) ) ("Summary judgment is particularly appropriate in cases where the language of a contract is unambiguous and only the interpretation of the contract in light of state substantive law is in dispute.").

The contract's Terms and Conditions of Sale provide the following in regard to any defects found in goods or services provided by Emerson:

If Buyer discovers any warranty defects with respect to the Goods manufactured by Seller (other than the firmware, which shall be subject to warranty claims under the Software License Agreement) or Services and notifies Seller thereof in writing during the applicable warranty period (as set forth in this Section 5), Seller shall (i) correct any defects and errors in the Services by re-performing the same, and (ii) at Seller's option, either repair or replace that portion of the defective Good(s) manufactured by Seller. If despite Seller's reasonable efforts, a defective Good manufactured by Seller cannot be repaired or replaced, or a nonconforming Service cannot be re-performed, Seller will refund to Buyer the purchase price of such defective Goods/Services.

Def. App., at 293 ¶ 5(e) (Terms and Conditions of Sale). Because the undisputed summary judgment evidence shows that a "logic error" in the software of the DCS caused the alleged damages in this case, the court will first examine, as required by the express terms of the contract, the Software License Agreement (License Agreement) to determine the bargain struck by the parties as to applicable warranties and the remedy provided for any breach thereof. The express warranty in the License Agreement provides that "the Software shall comply, in all material respects, with the technical specifications in the Documentation, [and] will be free from defects which materially affect its utility with respect to the intended purpose...." Def. App., at 297. The License Agreement further specifies that:

In the case of a nonconformity to the foregoing warranty and if EMERSON is notified in writing of such nonconformity ... EMERSON shall be promptly remedied [sic] such non-conformity (at its expense), by correction in the medium originally supplied, or provision of a procedure to correct material errors. If such remedies are impracticable, EMERSON shall promptly refund to LICENSEE the purchase price for nonconforming Software....

Id. In addition, the License Agreement also contains a clause entitled "LIMITATIONS OF REMEDIES," which provides as follows:

The warranties set forth above are the exclusive remedies with respect to any warranty claim relating to the Software and shall be in lieu of all other warranties with respect thereto, whether statutory, express or implied (including all warranties of merchantability and fitness for purpose and all warranties arising from course of dealing or usage of trade). This License Agreement and the rights and obligations of the Parties hereunder shall be subject to the limitations set forth in Section 6 of the Terms and Conditions.

Id. (emphasis added). To complete the loop, Section 6 of the Terms and Conditions provides in relevant part:

In no event, regardless of the form of the claim or cause of action (whether based in contract, infringement, negligence, strict liability, other tort or otherwise), shall either party's liability to the other party and/or its customers with respect to any claim arising in connection with this Agreement exceed the greater of (i) price to buyer of the specific goods manufactured or services provided by seller giving rise to the claim or cause of action, or (ii) $ 2.5 million.

Def. App., at 293 ¶ 6(B) (Terms and Conditions) (emphasis added).

Emerson maintains that because it complied with the express terms of the License Agreement for remedying the DCS defect, GSEC has received all relief to which it is entitled under the contract. Def.'s Br., at 12. GSEC argues in response that while Emerson did repair or reprogram the DCS software, other language in the contract reflects the parties' intent to not limit GSEC to that sole remedy for a breach of the express warranty. Pl.'s Resp., at 10-13. The court agrees that Emerson fulfilled its obligation under the specific provision cited for remedying defects in the DCS unit's software. As previously outlined, the undisputed summary judgment evidence establishes that GSEC submitted a written "warranty demand for the failure of the control system installed by Emerson at Mustang Station pursuant to the Software License Agreement and Paragraph 5(e) of the Terms and Conditions of Sale...." Def. App., at 5-6 (email from GSEC COO J. Jolly Hayden, dated April 14, 2015); Joint Stipulation of Parties, at 1. In response, Emerson worked with GSEC to remedy the defect by modifying the software at Emerson's expense; GSEC approved the modifications and put Unit 3 back into service. Def. App., at 2-3 ¶ 11; see Pl.'s Am. Compl., Ex. A, at 3 ¶ 11. It is therefore clear that no disputed issue of material fact exists as to whether Emerson complied with the contractual remedy for a breach of express warranty claim based on defects in the software. Because the summary judgment proof shows, and GSEC does not dispute, that Emerson remedied the DCS's defective software in accordance with the warranty's terms, the record requires entry of judgment in Emerson's favor on GSEC's express warranty claim, absent the contract providing some additional remedy. See, e.g., Purcel v. Advanced Bionics Corp. , Civil Action No. 3:07-CV-1777-M, 2010 WL 2679988, at *10 (N.D. Tex. June 30, 2010) (granting summary judgment on express warranty claim where written warranty provided that its replacement policy was "in lieu of any other warranty," expressed or implied, and defendant proved fulfillment of policy by offering to replace the defective device under warranty).

b. The parties' contract provides no other remedies for breach of warranty.

Having found that Emerson fulfilled the terms of the License Agreement by repairing the DCS to GSEC's satisfaction, the court must now determine whether as a matter of law the contract limits GSEC to this sole remedy for breach of express warranty, or whether the contract provides additional remedies, e.g., the recovery of monetary damages for injury to the turbine. The court finds that the parties' contract provides no other remedy.

With some exceptions not applicable here, parties may modify or disclaim warranties under the Texas Uniform Commercial Code (UCC). See Tex. Bus. & Com. Code Ann. § 2.316(d) (stating remedies for breach of warranty "can be limited ... on liquidation or limitation of damages and on contractual modification of remedy"); Nobility Homes of Tex., Inc. v. Shivers , 557 S.W.2d 77, 82 (Tex. 1977) (recognizing that the UCC "allows manufacturers to restrict their liability by the exclusion or modification of both implied and express warranties"). As noted earlier, a warranty disclaimer is an affirmative defense ( Great Am. Prods. , 94 S.W.3d at 683 ), and the party invoking it must establish all essential elements. Orthoflex, Inc. , 2013 WL 4045206, at *2. Parties may also "limit or alter the measure of damages recoverable" under the UCC "by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts," and such remedy "is the sole remedy" if it "is expressly agreed to be exclusive ...." Tex. Bus. & Com. Code § 2.719(a) ; see Calloway v. Manion , 572 F.2d 1033, 1038 (5th Cir. 1978) (examining Texas law, court upheld jury finding enforcing parties' agreement that if horse was not suitable, plaintiff's sole remedy would be return of the horse and credit of purchase money toward another); Fredonia Broad. Corp., Inc. v. RCA Corp. , 481 F.2d 781, 798-99 (5th Cir. 1973) (recognizing under Texas law seller's ability to "limit the buyer's warranty to repair and replacement and thus limit liability"). Construction of a contract, however, in a manner "which renders [a] specified remedy exclusive should not be made unless the intent of the parties that it be exclusive is clearly indicated or declared." Bifano v. Young , 665 S.W.2d 536, 539 (Tex. App.-Corpus Christi 1983, writ ref'd n.r.e.) (emphasis in original) (citations omitted); see also McCarty v. Montgomery , 290 S.W.3d 525, 534 (Tex. App.-Eastland 2009, pet. denied) (holding that in order for a termination provision to be construed as the exclusive remedy, it must contain language either making termination the "sole" or "exclusive" remedy or expressly limiting remedies to a discrete number of choices).

Initially, the court notes that a plain reading of the contract supports the conclusion that the remedy already provided by Emerson constitutes GSEC's sole relief as to a breach of warranty. See, e.g., URI, Inc. , 543 S.W.3d at 764 (internal quotations and footnotes omitted) (holding that courts presume "parties intend what the words of their contract say and interpret contract language according to its plain, ordinary, and generally accepted meaning unless the instrument directs otherwise"). The language in the Limitation of Remedies clause expressly states that "[t]he warranties set forth above [repair or refund] are exclusive remedies with respect to any warranty claim relating to the Software and shall be in lieu of all other warranties with respect thereto ...." See Def. App., at 297 (License Agreement) (emphasis added). The use of the term "exclusive" in the clause expresses the parties' intent to make either repair of the software defect or refund of the purchase price the sole remedy available for any warranty claim based on a defect in the software. See, e.g., Crow-Billingsley Stover Creek, Ltd. v. SLC McKinney Partners, L.P. , No. 05-09-00962-CV, 2011 WL 3278520, at *7-8 (Tex. App.-Dallas Aug. 2, 2011, no pet.) (holding that by using the terms "sole and exclusive remedy," the parties intended that recovery of earnest money be the only remedy, thus precluding a breach-of-contract action).

To combat what appears to be the contract's rather straightforward language on this issue, GSEC relies on comments made by the parties during contract negotiations, as well as specific clauses or provisions found elsewhere in the final version of the executed contract. GSEC cites to extrinsic evidence concerning the Limitation of Remedy clause (section 6(A) ) negotiated by the parties, arguing that commentary to the edits demonstrates GSEC did not agree to waive damage claims "if Emerson damages our property or ... breaches its confidentiality obligation." Pl.'s Resp., at 10. Even accepting its explanation as true, i.e., that GSEC requested an edit to Section 6 of the Terms and Conditions to allow for property damage claims against Emerson, GSEC's expressed rationale behind the edit cannot inform the court's decision as to the contract's scope and meaning. Because the contract is unambiguous on its face (and the parties do not contend otherwise), "extrinsic evidence of subjective intent is inadmissible and has no effect." Shaver v. Schuster , 815 S.W.2d 818, 824 (Tex. App.-Amarillo 1991, no writ) (citing Lewis v. E. Tex. Fin. Co. , 136 Tex. 149, 146 S.W.2d 977, 980 (1941) ); see Friendswood Dev. Co. v. McDade & Co. , 926 S.W.2d 280, 283 (Tex. 1996) (affirming summary judgment on contract claim and finding that extrinsic evidence of parties' subjective intent is immaterial); Noble Drilling Corp. v. Fulton , No. 14-98-01063-CV, 2001 WL 224739, at *5 (Tex. App.-Houston [14 Dist.] Mar. 8, 2001, pet. denied) (stating that "[a]n unambiguous contract renders immaterial any extrinsic evidence of the parties' subjective understanding and intent regarding the meaning of the contract"); Corman v. Lifecare Acquisitions Corp. , No. Civ. A. 3:96-CV-0755-D, 1998 WL 75908, at *2 (N.D. Tex. Feb. 10, 1998) (citing Friendswood Dev. Co. , 926 S.W.2d at 283 ) ("An unambiguous contract renders extrinsic evidence of the parties' subjective understanding and intent inadmissible."). Interpretation of the parties' intent as expressed in the Limitation of Remedies' exclusivity clause therefore stands or falls solely on the language contained therein, as construed in conjunction with the entirety of the contract. As a result, the court will next examine GSEC's arguments in regard to language of the contract itself.

GSEC contends initially that (1) the Limited Warranty section (Section 5) of the Terms and Conditions (goods and services), specifically 5(h), operates only as a disclaimer of additional warranties for goods and services, not as a proscription against all claims for property damage and, apparently in the alternative, (2) Section 5's limited warranty language has no bearing on GSEC's claim because it specifically excludes claims based on defective software. Pl.'s Resp., at 11. GSEC also makes a related argument concerning language in the License Agreement, asserting that its terms pertaining to software only waive additional warranties of fitness and merchantability and do not constitute a disclaimer of any other claim or cause of action GSEC may have related to defective software. Id. at 13. In support of this construction, GSEC refers to the License Agreement's language specifying that "the rights and obligations of the Parties hereunder shall be subject to the limitations set forth in Section 6 of the Terms and Conditions," and that Section 6's damages cap (limiting each party's liability to the greater of the price to buyer of the good or service provided or $ 2.5 million) would be superfluous if it did not apply to other property damage claims arising out of defective software. Id. at 12. Finally, GSEC claims that language in the Cover Letter, which holds the highest priority in the documents forming the contract, contains another express warranty from Emerson concerning the DCS, and that this warranty "contains no limitations and was breached by [Emerson's] conduct." Id. at 13.

GSEC's foregoing arguments focus primarily on two sections of the contract, both of which are contained in the Terms and Conditions. Essentially, GSEC seems to allege first that Section 5's language providing that the warranties and remedies contained therein "are exclusive remedies for all claims based on defective goods (other than software ... which is covered by the Software Licensee [sic] Agreement) ... and there are no other representations or warranties of any kind," in no way bars its express warranty claim for damage to the turbine because the language: (1) only operates as a disclaimer of additional warranties for goods and services, not for claims of property damage; or (2) by its express terms specifically excludes from its coverage claims based on defective software.

Regardless of whether the court has accurately articulated GSEC's argument in regard to Section 5's language, the court nonetheless finds that the cited provision in no way alters the outcome in this case. The contract undisputedly provides identical warranty waivers and remedy limitations for goods and services or software in the Terms and Conditions and the License Agreement, and such remedies are exclusive. Compare Def. App., at 293 (Terms and Conditions ¶ 5(e) ) ("If Buyer discovers any warranty defects with respect to the Goods manufactured by Seller (other than the firmware, which shall be subject to warranty claims under the Software License Agreement) or Services and notifies Seller thereof in writing during the applicable warranty period ... Seller shall (i) correct any defects ... and (ii) at Seller's option, either repair or replace that portion of the defective Good(s). If ... a defective Good manufactured by seller cannot be repaired or replaced ... Seller will refund to Buyer the purchase price ...."), and Def. App., at 293 (Terms and Conditions ¶ 6(A) ) ( ("The remedies of Buyer set forth in Section 5 of this Agreement are exclusive remedies for all claims based on defective Goods (other than software, including firmware, which is covered by the Software License Agreement) or Services."), with Def. App., at 297 (Software License Agreement) ("[I]f Emerson is notified in writing of such nonconformity during the applicable warranty period, Emerson shall be promptly remedied [sic] such non-conformity (at its expense), by correction .... If such remedies are impracticable, Emerson shall promptly refund to [GSEC] the purchase price ...."), and Def. App., at 297 ("The warranties set forth above are the exclusive remedies with respect to any warranty claim relating to the Software and shall be in lieu of all other warranties with respect thereto ...."). The court finds the summary judgment evidence establishes that defective software caused damage to the turbine, and such damages are necessarily covered by the License Agreement; however, even assuming coverage by the Terms and Conditions (as a good or service), the applicable language and remedy are the same: repair or refund of purchase price. Both contract sections expressly state that such remedies are exclusive for all claims based on alleged defects, and GSEC is bound by the express terms of the agreement it negotiated.

In an attempt to avoid this construction, GSEC points to the language contained in Section 6 of the Terms and Conditions, which provides as follows:

In no event, regardless of the form of the claim or cause of action (whether based in contract, infringement, negligence, strict liability, other tort or otherwise), shall either party's liability to the other party and/or its customers with respect to any claim arising in connection with this Agreement exceed the greater of (i) price to buyer of the specific goods manufactured or services provided by Seller giving rise to the claim or cause of action, or (ii) $ 2.5 Million.

Def App., at 293 ¶ 6(B) (Terms and Conditions) (emphasis added). GSEC submits that this provision reflects the parties' intent that the language contained in both the License Agreement (software) and the Terms and Conditions (goods and services), disclaiming any additional warranties and limiting remedies to simply repair or refund, is not exclusive and that the parties contemplated other causes of action or methods of recovery. Pl.'s Resp., at 12. In essence, GSEC argues this interpretation is required so as to "harmonize and give effect to all provisions of the contract so that none will be rendered meaningless." See J.M. Davidson, Inc. , 128 S.W.3d at 229. Stated alternatively, GSEC contends that if the contract's exclusivity provisions truly limit it to only repair or refund for defects in the DCS, such a construction renders the cap language superfluous and therefore does not give meaning to all provisions of the contract. GSEC correctly states the legal principle, but the court disagrees with its application and conclusion.

As previously noted, the court must give effect to the parties' intent as expressed in the plain language of the contract taken as a whole. Here, the court has found that the summary judgment proof establishes a defect in the DCS software, and that the terms of the License Agreement provide an exclusive remedy of repair or refund of the purchase money, which Emerson has fulfilled.

The License Agreement's language stating that "the rights and obligations of the Parties hereunder shall be subject to the limitations set forth in Section 6 of the Terms and Conditions" (which obviously include the language of 6(B) ) requires no different result. GSEC's argument presumes the only conceivable legal dispute that could arise in connection with the parties' contract is one involving defective DCS software; if true, such a scenario would admittedly render the damage cap language superfluous. This interpretation, however, assumes too much. If claims or disputes could arise "in connection with [the] Agreement" separate and apart from alleged defects in the DCS software , the damage or cap limit of Section 6(B) can still be given legal effect in harmony with the contract's exclusive remedy provisions related to the software. Emerson cites three examples in its Reply where Section 6(B)'s limits would otherwise come into play: (1) breach of contract in the event Emerson failed to deliver the control system; (2) damage caused by Emerson personnel while on GSEC's property during installation of the control system; and (3) Emerson's breach of the contract's confidentiality clause. Def.'s Reply, at 6. The court does not believe this list to be exhaustive, but it is sufficient to make the point-the contract's general damage cap or limit can still have legal effect and import while being construed in harmony with the parties' expressed intent to exclusively limit available remedies for defects in the DCS software.

This conclusion also aligns with the "fundamental axiom of contract interpretation that specific provisions control general provisions." Baton Rouge Oil & Chem. Workers Union v. ExxonMobil Corp. , 289 F.3d 373, 377 (5th Cir. 2002) (citing Restatement (Second) of Contracts § 203(c) ); see Claimant ID 100218776 v. BP Expl. & Prod., Inc. , 712 F. App'x 372, 375 (5th Cir. 2017) (citations omitted) ("It is likewise well-settled that where a general provision and a narrow, specific provision overlap and the specific provision fits the facts at hand, the specific provision controls. This prevents the general provision from swallowing the specific, and it gives effect to every clause in a contract."); C.A.U.S.E. v. Vill. Green Homeowners Ass'n, Inc. , 531 S.W.3d 268, 275 (Tex. App.-San Antonio 2017, no pet.) (recognizing that under Texas law "more specific provisions in a contract prevail over general mandates"). Here, the parties addressed, with very specific and exclusive language, the issue of warranties and remedies available for breach of an express warranty, i.e., a defect in the software. Texas law does not allow the court to read the contract's general clause capping damages for all other claims or causes of action as altering or expanding the contract's specific provisions limiting remedies for express warranty claims. See, e.g., Aerus LLC v. Pro Team, Inc. , No. Civ.A. 304CV1985M, 2005 WL 1131093, at *5 (N.D. Tex. May 9, 2005) (applying foregoing principle, court found that forum selection clause in contract, which specifically addressed the cause of action asserted by plaintiff, controlled over another contractual forum clause that governed "an array of other conflicts"); C.A.U.S.E. , 531 S.W.3d at 275 (holding that in dispute over whether homeowners association could force home owners to use particular waste and recycling provider, specific provision in agreement requiring homeowners to collect or dispose of garbage at their expense controlled over general clause authorizing homeowners association to "operate, maintain, and manage the common areas of the subdivision" (including streets), thus entitling homeowners to judgment as a matter of law).

Finally, GSEC's argument in regard to the significance of the Cover Letter similarly fails to alter the court's conclusion. GSEC asserts that in the Cover Letter, which holds the highest precedence in the documents forming the contract, Emerson expressly warrants that through the DCS replacement project it will be "determining optimal operating controls and offering tremendous cost savings," and providing "industry-specific applications, unmatched experience, and a highly skilled team of engineers." Pl.'s Resp., at 13 (quoting Def App., at 289 (Krecek Decl. Ex. C) ). GSEC posits that this alleged warranty "contains no limitations and was breached by [Emerson's] conduct." Id. Emerson counters by asserting that to the extent the Cover Letter creates an express warranty, it is still subject to the exclusive remedies provided in the License Agreement. Def.'s Reply, at 8-9. The court does not find GSEC's argument persuasive. Even if the Cover Letter did create an express warranty independent of the warranties in the License Agreement, the License Agreement's "Limitations and Remedies" section nevertheless unambiguously states that the warranties or remedies set forth therein "are the exclusive remedies with respect to any warranty claim relating to the Software and shall be in lieu of all other warranties ... whether statutory, express or implied ...." Def. App., at 297. Thus, regardless of where the warranty arises in the document, GSEC's only remedies for breach of warranty would be either to have the defect repaired or to have the purchase money refunded.

In summary, Emerson is entitled to summary judgment as to GSEC's breach of contract claim because GSEC accepted the DCS rather than revoking its acceptance or returning the DCS. The parties' contract also requires entry of summary judgment as to GSEC's breach of warranty claim because the undisputed evidence shows Emerson fulfilled its warranty and remedial obligations under the express terms of the contract: it corrected, at Emerson's expense and to GSEC's satisfaction, the software defect in the DCS. As a result, the undersigned recommends that the district judge GRANT Emerson's motion as to GSEC's contract-based claims.

D. Tort Claims and the Economic Loss Doctrine

1. The parties' positions.

Emerson next argues that the economic loss rule bars GSEC's tort claims (i.e., negligence and strict liability) for damage to the Unit 3 turbine. Def.'s Br., at 13-18. The application of the economic loss rule is a question of law for the court to decide. U.S. Steel Corp. v. John H. Young, Inc. , No. 03-16-00206-cv, 2018 WL 911861, at *1 n.2 (Tex. App.-Austin Feb. 16, 2018, no pet.) (citing James J. Flanagan Shipping Corp. v. Del Monte Fresh Produce N.A., Inc. , 403 S.W.3d 360, 365 (Tex. App.-Houston [1st Dist.] 2013, no pet.) ) (recognizing that "application of the economic-loss rule is a question of law" to be determined by the court); see Petroleum Helicopters, Inc. v. Avco Corp. , 930 F.2d 389, 393 n.9 (5th Cir. 1991) (noting that the question of what constitutes "other property" in economic loss rule analysis is a legal question because such a determination rests upon the court's "contractual interpretation" of the agreement between the parties).

Emerson contends the economic loss rule bars GSEC's tort claims because once the DCS was installed into the Unit 3 turbine, the DCS became an integrated, component part of Unit 3 itself (i.e., the finished product). Thus, Emerson asserts that the damage to Unit 3 constitutes damage to the product, not damage to other property. Def.'s Br., at 13-18; Def.'s Reply, at 14-15. Moreover, Emerson argues that "it was entirely foreseeable that the steam turbine could be damaged if the DCS supplied by Emerson did not perform as warranted" and GSEC "should not be permitted to evade the allocation of risk set forth in the contract." Def.'s Br., at 19; see Def.'s Reply, at 11-13.

In response, GSEC asserts that the economic loss rule does not bar its tort claims because the damage to Unit 3's turbine constitutes "other property." Pl.'s Resp., at 14-21. GSEC contends that it contracted with Emerson for the new DCS-not the entire steam turbine (i.e., Unit 3); therefore, the "product" in this case and the "object of contract ... that governs the rights of the parties" is the DCS itself. Id. at 14. In other words, the preexisting parts of the steam turbine constitute "other property." Id. GSEC argues that the "relevant contract sets out the requirements and responsibilities of the parties with regard to the purchase of the DCS only " because they bargained for Unit 3 separately, i.e., with a different company approximately fourteen years prior to the Emerson contract. Id. at 18 (emphasis added). In addition, GSEC suggests that Emerson had a duty, independent of any obligation undertaken in the contract, not to damage the preexisting turbine. Id. at 16-17.

2. The economic loss doctrine or rule.

a. Applicable law.

Before examining the economic loss rule and its application herein, the court must first determine what law governs. When sitting in diversity jurisdiction, a federal court applies the law of the state in which it sits. Blase Indus. Corp. v. Anorad Corp. , 442 F.3d 235, 238 (5th Cir. 2006) (citing Erie R.R. Co. v. Tompkins , 304 U.S. 64, 79-80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ). To resolve an issue of state law, this court must "apply the law as interpreted by the state's highest court." Shaken v. ADT Sec. Servs., Inc. , 816 F.3d 283, 290 (5th Cir. 2016) (quoting Barfield v. Madison Cty. , 212 F.3d 269, 271-72 (5th Cir. 2000) ). Where no final disposition is directly on point, federal courts "must make an ' Erie -guess' , predicting how that court would rule." Id. at 291 (quoting