On October 22, 2012, and after a bench trial was held in early January 2012, U.S. District Court Judge Thomas N. O’Neill, Jr. awarded QVC, Inc. almost $2 million in damages against MJC America, Ltd. d/b/a Soleus International, Inc. (“Soleus”) for supplying it with faulty space heaters that caused fires in QVC’s customer homes in 2007 and 2008. According to pleadings filed in the case, faulty crimping of wires inside some of the heaters resulted in sparking, smoking, and, in some cases, fires after more than 19,000 of the heaters were sold to QVC’s customers from December 2007 to March 2008.

In March 2008, after receiving a number of complaints about the heaters, QVC hired a third-party to evaluate them to determine whether any defects were present. In April 2008, QVC contacted the U.S. Consumer Product Safety Commission (“CPSC”) regarding a recall of the heaters through CPSC’s fast-track recall program. QVC then brought a breach of contract action against Soleus in the Eastern District of Pennsylvania, seeking damages and other relief.

QVC contended that it reasonably determined that the recalled heaters were defective, that Soleus breached its purchase order contracts with QVC, and that as a result of Soleus’ breach QVC was entitled to damages, including the costs attendant to the recall of those heaters. Soleus contended that QVC did not make a reasonable determination that the recalled heaters were defective and that QVC’s conduct during the investigation violated the covenant of good faith and fair dealing.

The Court disagreed with Soleus, finding that QVC had gone to reasonable lengths to prove that the heaters were faulty before ordering a recall of thousands of the heaters in 2008. Further, the Court found that for QVC to recover under the breach of warranty provision of the purchase orders, it was sufficient for QVC to establish that some subset of the heaters suffered from latent manufacturing defects. Further, Soleus, by supplying QVC with heaters that had defective wiring, broke its promise to QVC that all of the heaters would be free from defect.

The Court also pointed out that Soleus could not use the implied duty of good faith and fair dealing to create obligations on QVC that did not exist under the terms of its agreement with Soleus. Therefore, the question at hand was neither whether QVC could have done more to involve Soleus in its investigation and ultimate determination as to whether the heaters contained defects, nor was it whether QVC could have taken additional steps to limit the scope of the recall. The question was whether QVC was required to do so under the terms of its agreement with Soleus. The Court found that QVC was not required to do so under the terms of the agreement. Accordingly, the Court rejected Soleus’ claims that QVC failed to mitigate its damages by not isolating the recall into specific product lots, and added that Soleus had never suggested that course of action or requested any information from QVC that would have helped it narrow the number of heaters subject to the recall.