## Facts

- True North Composites, LLC (TNC) and Trinity Industries, Inc. (Trinity) entered a “Carbodies Supply Agreement” (CSA) as part of a joint effort to develop and build composite railcars.
- Under the CSA, TNC was to produce composite railcar “carbodies,” Trinity was to manufacture steel undercarriages (with wheels and a platform), and TNC would mount the carbodies onto Trinity’s undercarriages.
- The CSA stated that it set out the parties’ rights and obligations regarding the production and sale of carbodies.
- The CSA’s pricing and invoicing provisions, delivery and release schedules, and allocation of overhead were stated on a per-carbody basis.
- The CSA’s termination provisions were framed around carbody-related failures, such as failures to deliver carbodies or to pay for them.
- The relationship deteriorated after cost overruns and disputes about final specifications and performance expectations for the composite railcars.
- TNC sued Trinity in the District of Delaware, alleging Trinity breached the CSA by refusing to negotiate final carbody specifications, refusing to purchase carbodies on the required terms, and directing TNC to stop producing carbodies; TNC also pursued a claim that Trinity breached the implied covenant of good faith and fair dealing.
- The case proceeded to a jury trial on the contract-based claims, and the jury found for TNC, finding Trinity liable for breach of the CSA and breach of the implied covenant and awarding TNC approximately $14.8 million in damages.
- Trinity moved post-trial for judgment as a matter of law (JMOL) and for a new trial (or other relief), arguing in part that the CSA was predominantly a contract for the sale of goods and thus governed by Delaware’s version of UCC Article 2, which Trinity contended would restrict available damages.
- The district court denied Trinity’s post-trial motions and concluded, among other things, that the CSA was predominantly a services contract outside UCC Article 2.
- Trinity appealed to the United States Court of Appeals for the Federal Circuit, which had jurisdiction because the case originally included patent-related claims.

## Issues

1. Whether the Carbodies Supply Agreement was predominantly a contract for services rather than a contract for the sale of goods, such that Delaware UCC Article 2 did not apply.
2. Whether the district court erred in denying Trinity’s JMOL/new-trial requests premised on UCC coverage and UCC-based limits on damages.

## Decision

- The Federal Circuit affirmed the district court’s judgment for TNC.
- The court agreed that the CSA was predominantly a services contract, so Delaware UCC Article 2 did not govern.
- Because Article 2 did not apply, Trinity’s arguments seeking JMOL or a new trial based on UCC coverage and UCC-based damages limits did not warrant reversal.

## Legal Principles

- When an agreement involves both goods and services, Delaware courts use a “predominant purpose” (or “predominant factor”) test to determine whether UCC Article 2 applies.
- Article 2 applies only if the transaction’s main thrust is the sale of goods; if services are the main thrust and goods are incidental to the performance promised, Article 2 does not apply.
- Contract wording and structure (including per-unit pricing, delivery schedules, and sale-oriented terminology) may be considered, but they do not control if the overall performance is better characterized as service-based work.
- If a contract is classified as outside Article 2, common-law contract rules—not the UCC’s remedial framework—govern the measure and availability of damages.
- A party may be liable not only for breach of express contract terms but also for breach of the implied covenant of good faith and fair dealing when its conduct wrongfully frustrates the other party’s expected benefits under the agreement.

## Conclusion

In True North Composites, LLC v. Trinity Industries, Inc., the Federal Circuit affirmed a jury verdict for True North and upheld the district court’s determination that the Carbodies Supply Agreement, despite its “supply” label and carbody-based pricing and scheduling, was predominantly a services arrangement tied to developing and producing composite railcar components, so Delaware UCC Article 2 did not apply and Trinity was not entitled to JMOL or a new trial on UCC-based grounds.


True North Composites, LLC v. Trinity Industries, Inc., 65 Fed. Appx. 266 (2003)