## Facts

- QVC bought tens of thousands of Soleus-branded portable electric space heaters from MJC America, Ltd. (doing business as Soleus International, Inc.) and sold about 16,721 units to customers.
- After sales began, QVC received numerous customer complaints alleging the heaters emitted smoke and sparks, overheated, and in some instances caught fire during intended use.
- QVC recorded complaints through a customer-service process that verified purchase history and logged product identifiers and complaint details; QVC identified 96 complaint records tied to the heaters.
- The parties’ purchase orders included express warranty representations that the goods would conform to specifications and be free from defects, a recall clause allowing QVC (in its sole discretion, subject to law and its customer-satisfaction standards) to conduct a voluntary recall if it reasonably determined merchandise sold to customers contained any defect, and an indemnity clause covering losses, including consequential damages, from defective merchandise.
- QVC inspected returned units, concluded the heaters presented a safety risk, and conducted a voluntary recall of all units, offering refunds and incurring shipping, handling, return-processing, and administrative costs.
- QVC sought damages including the purchase price of recalled heaters, recall-related logistics and processing expenses, and lost profits.
- MJC denied defect, challenged the reliability of complaints, and asserted QVC’s recall was unreasonable and excessive; MJC counterclaimed for wrongful recall and failure to mitigate.
- After partial summary judgment, the court held a bench trial on defect, recall authorization, damages, and remaining counterclaims; the evidence centered on heater wiring and manufacturing condition.

## Issues

1. Whether MJC breached the parties’ purchase orders and warranties by supplying heaters with a manufacturing defect creating an overheating/fire hazard.
2. Whether QVC reasonably determined the heaters contained a defect, triggering contractual authority to conduct a voluntary recall and provide refunds.
3. Whether QVC’s claimed recall-related costs and lost profits were recoverable under the indemnity and warranty provisions, and whether mitigation required a narrower recall.
4. Whether MJC could prevail on counterclaims alleging QVC breached the contract by conducting an unjustified or overly broad recall.

## Decision

- The court found MJC breached the contract by supplying heaters with a manufacturing defect involving improper wire crimping that could overheat and create a fire risk.
- The court held QVC reasonably determined the heaters contained a defect and acted within its contractual recall rights in recalling all units.
- The court awarded QVC recall-related damages, including costs tied to refunds and logistics and consequential damages such as lost profits, as supported by business records and the contract’s indemnity language.
- The court rejected MJC’s mitigation and wrongful-recall theories and denied MJC’s remaining counterclaims.

## Legal Principles

- A contractual recall clause triggered by a buyer’s “reasonable determination” of “any defect” permits a retailer to act on credible complaint data and internal investigation, especially where customer safety is implicated.
- Manufacturing defects that create unreasonable safety risks can constitute breach of express warranties and support contract remedies for resulting losses.
- Broad indemnity provisions covering losses from defective merchandise can allow recovery of recall costs and other consequential damages, including lost profits, when proven with reliable records and non-speculative margins.
- A buyer is not required to pursue a narrower recall or segregate allegedly defective units where the evidence supports concern about a defect that cannot be reliably isolated without increasing safety risk.

## Conclusion

The court held that defective heaters supplied by MJC justified QVC’s full-product recall under the parties’ recall clause and that MJC owed indemnity for QVC’s resulting losses, including recall expenses and lost profits; MJC’s counterclaims failed because the recall was reasonable and contractually authorized.


QVC, Inc. v. MJC Am., Ltd., 904 F. Supp. 2d 466 (E.D. Pa. 2012)