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Duro Corp. v. Canadian Standards Assoc.

United States District Court, N.D. Ohio, Eastern Division

June 25, 2018

DURO CORPORATION. Plaintiff,
v.
CANADIAN STANDARDS ASSOC. Defendant.

          MEMORANDUM OPINION AND ORDER

          DONALD C. NUGENT UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Plaintiff. Duro Corporation's Motion to Dismiss Canadian Standards Association's Counterclaim. (ECF #30). Canadian Standards Association ("CSA") filed an Opposition to the motion, and Duro Corporation ("Duro") filed a Reply in support. (ECF #31, 32). Having reviewed the parties' submissions, the Product Service Agreement, and all relevant law, the Court finds that Plaintiffs Motion should be GRANTED.

         BACKGROUND

         The parties agree that the Defendant's Counterclaim asserts a breach of the Product Service Agreement ("PSA") entered into between Duro and CSA on or about July 12. 2006. According to CSA, the PSA is a non-exclusive license allowing Duro to display CSA's Certification Mark on its products. (ECF #31 at 5). The Certification Mark indicates that Duro complies with certain industry standards. (Id.) The alleged breach is based on Duro's failure to notify CSA that the United States Department of Energy ("DOE") initiated an enforcement action against Duro for its failure to comply with federal regulations, in connection with a CSA-certified product.[1] CSA argues that this failure to notify violated the terms of Paragraph 5(c) of the PSA.[2] On July 15. 2014, the DOE "initiated an action to assess a civil penalty for failing to certify compliance and submit a certification report" for certain basic Duro cooking product models, required to ensure compliance with standards promulgated by the DOE to promote their energy conservation requirements. (ECF #27-2 at 2-3). There is no indication anywhere in the record that the DOE alleged a violation of the energy conservation requirements, only that Duro failed to provide a certification report showing compliance. Duro paid a fine, provided certifications, and the DOE dismissed the charge with prejudice on August 21. 2014. approximately five weeks after the action was initiated. (ECF #27-2).

         Section 5 of the PSA (Notification and Corrective Action) memorializes the following agreement between the parties:

Section 5.1 Notification to CSA: The Client agrees to notify CSA immediately of any reports of any incidents of significant injury' or property damage it receives, or knowledge of potential hazards that may result in same, that involve the Certified Product.
The Client agrees to:
(a) keep records of all complaints received or incident reports as described in Section 5.1 that relate to compliance of the Product with the Requirements, including the Certification Report and related corrective action and make such records available to CSA upon request:
(b) take appropriate corrective action with respect to such complaints or reports as described in Section 5.land notify CSA immediately of related pending and actual recalls or corrective action; and
(c) notify CSA promptly upon notifying any regulator)' authority of reports of significant injury or property damage or any action taken by such governmental entity with respect to Client's Certified Products. Without limiting the foregoing, this obligation shall arise upon notification made to the United States Consumer Product Safety Commission (CPSC) of any matter with respect to any Certified Product covered by the Agreement required to be reported under the U.S. Consumer Product Safety Act or promptly upon receiving notice that the CPSC has been informed of such situation, together with the affected model designations and nature of the defect or failure.
Section 5.2 Corrective Action: The Client agrees to cooperate with CSA and to undertake corrective actions as required by CSA. at the Client's expense, to ensure that Product bearing the Certification Mark is brought into compliance with the applicable Requirement. If corrective action is not taken. CSA reserves the right to take whatever legal recourse is needed to address the removal of the Certification Mark from the Product and/or advise appropriate parties.
Section 5.3 Restrictions: In the event of the Client's default in respect of any terms of the Agreement or as part of corrective actions referred to in Section 5.2. CSA may. at its option: (i) institute restrictions on the Client's right to represent its Product as Certified. Such restrictions may include but are not limited to cancellation or immediate suspension, of the right of the Client to represent one or more, of its Products as Certified, subject to terms as determined by CSA; and/or (ii) conduct technical investigations, inspections or audits as necessary, at the Client's expense, which may be over and above the fees referenced in Sections 7.3 and 7.4. and which will be billed to the Client at CSA's actual cost.

(ECF #27-2). CSA generally alleges that Duro's failure to notify it of the DOE enforcement action caused it to suffer damages, but does not specify how it was ...


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