Distributor of wood-coating products supplies defective furniture stain: Breach of warranty: Lost sales: Settlement

Law Reporter, Jun 2003

A. G. Layne, Inc. v. Accent Furniture, Inc., Cal, Los Angeles County Super. Ct., No. BC226434, Jan. 17, 2003.

A.G. Layne, Inc. (Layne), is a distributor of stains, sealants, and other wood-coating products. Accent Furniture, Inc. (Accent), is a furniture manufacturer specializing in wooden bedroom furniture. After approving a sample stain, Accent entered into a requirements contract with Layne, under which Accent would purchase wood stain manufactured by Lilly Industries, Inc. (Lilly).

Accent manufactured furniture valued at $1 million and coated it with the stain. The stain allegedly was chemically unstable and turned the furniture from a golden oak shade to red or pink. Accent customers returned shipments, and many stopped purchasing their furniture from Accent. Accent suffered approximately $8.1 million in lost profits, loss of goodwill, and damage to its inventory.

Accent ceased purchasing stain from Layne and returned to its previous supplier. Accent refused to make payment on a Layne invoice of approximately $20,300.

Layne sued Accent for payment of the invoice. Accent counterclaimed against Layne and Lilly, alleging breach of warranty. Counterclaimant alleged claimant had failed to conduct basic tests to determine whether the stain was stable. Counterclaimant also alleged spoliation of evidence. Claimants denied any defect in the stain, and contended that counterclaimant's business losses were due to its own poor business practices.

The parties reached a settlement during trial. Layne dismissed its claim for the unpaid invoice, with prejudice. Layne and Lilly will pay $3 million. Layne's insurer will contribute $250,000, Lilly will contribute $375,000, and Lilly's insurers will contribute the remainder.

Counterclaimant's experts were Thomas M. Neches, economics, Los Angeles, Cal.; Mario E. Bauer, chemistry, Los Angeles, Cal.; Roger R Benvenuti, standards and practices, Corona, Cal.; and V. C. Bud Jenkins, coatings science, Riverside, Cal.

Claimants' experts were David Weiner, economics, Los Angeles, Cal.; Wallace W. Epperson Jr., furniture industry trends, Richmond, Va.; N. Sherwood Robertson, furniture manufacturing customs and practices, Highpoint, N.C.; Arthur G. Raymond Jr., wooden furniture manufacturing, Raleigh, N.C.; and Harold Zeliger, chemistry, West Charlton, N.Y.

Counterclaimant's Counsel

*Roger W. Clark, Santa Monica, Cal.

Steven M. Cohen, Santa Monica, Cal.