Disgruntled Yacht Buyer Denied Relief for Failure to Present Evidence Concerning Cost to Repair Boat

A manufacturer of yachts was sued by a disgruntled buyer for breach of contract after the yacht he ordered was not usable in waters in the European Union as he originally specified. The buyer lost in court, however, because he argued that the yacht was a total loss, and the company presented evidence that the conversion to allow the yacht to operate in Europe would cost less than $2,000, and that it had repaired other small defects for free.

Porter, Inc. is an Indiana company that manufactures boats under the Formula and Thunderbird trade names. In September 2012, Erich Schwaiger attended a boat show in Friedrichshafen, Germany, and met Alfred Zurhausen, the owner of Poker-Run-Boats, one of Porter’s international dealers of Formula boats. Schwaiger expressed interest in ordering a Formula yacht with supercharged engines and high-end accessories and furnishings. Zurhausen later met Schwaiger in Munich to discuss the options and pricing in more detail. Schwaiger later, through one of his companies, SelectSun, executed a contract with Poker-Run-Boats in October 2012. The yacht and custom-built lift cost Schwaiger approximately $1 million.

The contract required that the boat be CE certified, so that it would be authorized for operation in the European Union. Porter did not, however, manufacture the boat to meet that specification due to a miscommunication during the ordering process that Porter had with one of its domestic dealers, International Nautic. Schwaiger took delivery of the yacht in Germany in May 2013. He used the boat throughout much of the 2013 season in Europe. During the first few months, Porter covered a series of minor warranty repairs at no charge to Schwaiger. By the end of August, however, Schwaiger was fed up with the yacht, complaining to Poker-Run-Boats of problems with the boat’s engines, steering column, exterior gel coating, and interior furnishings. Schwaiger then returned the yacht to Poker-Run-Boats with instructions to sell it. When the boat did not immediately sell, Schwaiger sued.

SelectSun’s suit named Porter, International Nautic, and Poker-Run-Boats as defendants. During the course of litigation, both International Nautic and Poker-Run-Boats ceased operations, leading to default judgments. At summary judgment, the district court ruled in part in Porter’s favor and SelectSun proceeded to trial on three claims. Noting that Porter was not a party to the contract, SelectSun pursued a theory of apparent authority and unjust enrichment. The district court ultimately ruled for Porter, finding that it was not a party to the contract and could not be bound to its terms through a theory of apparent authority. SelectSun then appealed.

The appellate panel began by finding that it need not address the question of apparent authority because regardless of the answers it would come to on that question, the evidence presented by SelectSun at trial fell short of its burden in proving damages on either its breach of warranty or breach of contract claims. The panel stated that, under Indiana law, SelectSun was required to present evidence of damages as to the cost of repairing the boat, replacing it, or proving its fair market value. The panel noted, however, that SelectSun approached damages as an all-or-nothing proposition, taking the position that the only appropriate award was not to recover specific necessary repairs to the yacht, but instead to return the vessel’s purchase price as well as the financing costs and the cost of the lift. The panel concluded by finding that a failure of proof also plagued Select Sun’s claim of unjust enrichment, as SelectSun had failed to show that it conferred a benefit upon Porter, expected payment in return, and received none. The panel, therefore, affirmed the decision of the district court.

You can view the full opinion here.

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