United States Court of Appeals For the First Circuit

Nos. 18-1088, 18-1121

ACBEL POLYTECH, INC., individually and as assignee of EMC CORPORATION,

Plaintiff-Appellant/Cross-Appellee,

v.

FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC., FAIRCHILD SEMICONDUCTOR CORPORATION,

Defendants-Third Party Plaintiffs-Appellees/Cross-Appellants,

SYNNEX ELECTRONICS HONG KONG LTD., SYNNEX TECHNOLOGY INTERNATIONAL CORP.,

Third Party Defendants.

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Denise J. Casper, U.S. District Judge]

Before

Torruella, Kayatta, and Barron, Circuit Judges.

Zeb Landsman, with whom Richard Chassin, Jesse Travis Conan, and Becker Glynn Muffly Chassin & Hosinski LLP were on brief, for appellant/cross-appellee. Matthew Iverson, with whom Daniel E. Rosenfeld, Stephen W. Hassink, Yasmin Ghassab, DLA Piper LLP, Jeffrey A. Rosenfeld, and Alston & Bird LLP were on brief, for defendants-third party appellees/cross-appellants. June 20, 2019

-2- TORRUELLA, Circuit Judge. We often fail to notice the

complex interplay between the numerous components that make up

electronic equipment. This is a case about one of these components

-- a miniscule microcircuit that serves as a voltage regulator,

the KA7805ERTM ("KA7805").

Defendant-Appellee Fairchild Semiconductor

Corporation's ("Fairchild US") subsidiaries manufactured the

KA7805. Plaintiff-Appellant AcBel Polytech, Inc. ("AcBel")

purchased KA7805s from Fairchild's agent and installed them into

power supply units ("PSUs") it then sold to EMC Corporation

("EMC"). EMC used the PSUs for its data storage devices. In 2010,

one of Fairchild US's subsidiaries began to manufacture a new

"shrunk-die"1 version of the KA7805 ("shrunk-die KA7805"). After

Fairchild transitioned to the shrunk-die KA7805, EMC began to

experience problems with AcBel's PSUs. The shrunk-die KA7805s

were failing.

AcBel attributed EMC's problems with its PSUs to the

design of Fairchild's shrunk-die K8705. As a result, it filed a

diversity suit against Fairchild US and its holding company,

Fairchild Semiconductor International, Inc. ("Fairchild

1 A die is a miniaturized electronic circuit manufactured in, and on, the surface of a thin substrate of semiconducting material (e.g., silicone). The components of voltage regulators, like the KA7805, are installed on a die.

-3- International") (collectively, "Fairchild"), asserting claims of

breach of warranty (Counts I, II, XII and XIII); fraud and

negligent misrepresentation (Counts III, IV and V); "design defect

-- implied warranty/strict liability" (Counts VI and XIV); "design

defect -- negligence" (Counts VII and XV); "failure to warn --

implied warranty/strict liability" (Counts VIII and XVI); "failure

to warn -- negligence" (Counts IX and XVII); and violation of Mass.

Gen. Laws ch. 93A (Counts X and XVIII).2 AcBel asserted all claims

on its own behalf and on behalf of EMC, as its assignee, except

for its fraud and misrepresentation claims (Counts III, IV, and

V).

At the summary judgment stage, the district court

dismissed all claims except those involving breach of implied

warranty (Counts I, II, XII, and XIII). After a nine-day bench

trial, the district court dismissed AcBel's remaining breach of

implied warranty claims. AcBel appeals from the dismissal of its

implied warranty of merchantability (Count I), fraud (Counts III

and IV) and negligent misrepresentation (Count V) claims.

Fairchild cross-appeals, contending that, even if the district

2 In its complaint, AcBel also presented two claims for punitive damages (Counts XI and XIX), but these were dismissed by the district court at the early stages of litigation pursuant to a motion to dismiss filed by Fairchild and are not subject to the present appeal.

-4- court's grounds for dismissal were improper, it is still not liable

to AcBel because the district court erred in determining that

Fairchild's subsidiaries were its agents for liability purposes.

Additionally, Fairchild avers in its cross-appeal that, in the

event of reversal, this court should order discovery regarding

certain documents produced by AcBel after discovery had closed

(the "late-produced documents").

After careful review, we affirm the district court's

finding of Fairchild's liability for the actions of its

subsidiaries, vacate the district court's judgment dismissing

AcBel's implied warranty of merchantability, fraud, fraud by

omission, and negligent misrepresentation claims, and remand for

further proceedings consistent with this opinion. Because it will

likely help develop the record for trial on the remanded claims,

we also grant Fairchild's request for additional discovery in

relation to the late-produced documents.

I. BACKGROUND

AcBel is a Taiwanese company that manufactures and sells

PSUs, including Katina, a second-generation PSU used by its

customer, EMC, in its data storage devices. The Katina PSU was

custom-made for EMC and specifically required the KA7805 voltage

regulator, which was designed to emit a constant output of voltage,

as one of its approximately 400 components.

-5- Fairchild US is a Delaware corporation. Its wholly-

owned international subsidiaries (the "Asian subsidiaries")

manufactured, assembled, and distributed the KA7805s.

Specifically, the KA7805s were manufactured by Fairchild Korea

Semiconductor Ltd. ("FSC Korea"), assembled by Fairchild

Semiconductor Shuzhou Company, Ltd. ("FSC Shuzhou"), and

distributed by Fairchild Semiconductor PTE, Ltd. ("FSC Singapore")

and Fairchild Semiconductor Hong Kong Ltd. ("FSC Hong Kong").

Although the KA7805 voltage regulators were ultimately utilized in

the Katina PSU, Fairchild did not manufacture them specifically

for AcBel.

In 2008, AcBel received a process change notice ("PCN")

from Synnex,3 a company that had apparent authority to act as

Fairchild's agent, notifying it that the KA7805 voltage regulator

would be redesigned. The new version required that some internal

components be moved to accommodate the smaller die, including a

part known as the zener diode. In January 2010, FSC Korea began

to manufacture the new shrunk-die version of the KA7805. At the

end of the design process, FSC Korea performed industry-standard

testing on the shrunk-die KA7805, and there were zero failures

3 "Synnex" refers to Synnex Technology International and Synnex Electronics Hong Kong Ltd., third-party defendants that are not parties to this appeal. Synnex distributed Fairchild's KA7805 voltage regulators.

-6- reported.4 Fairchild did not assign a new part number to the

redesigned shrunk-die KA7805.

Despite the shrunk-die KA7805's entry into the market in

early 2010, its manufacture and shipment was halted sometime in

July 2010 when FSC Korea reported a quality incident involving a

product that used the same shrunk die. The root cause of the

reported quality incident was not immediately known. Fairchild

US recommended that FSC Korea permanently cease production of the

shrunk-die version KA7805 and revert to the larger die, which was

done by week 35 of 2010. No notification of the switch from the

shrunk-die KA7805 model back to the large-die model was provided

to AcBel and Fairchild's other customers.

Meanwhile, AcBel had purchased 195,000 shrunk-die

KA7805s, all of which ended up in the second-generation Katina

PSUs it manufactured for EMC. On or about December 3, 2010, while

FSC Korea was still investigating the quality issue reported in

July of that year, AcBel received notice from EMC that thousands

of shrunk-die KA7805s had failed, causing the Katina PSUs in its

data storage devices to fail as well. Eventually, it was

4 FSC Korea tested the shrunk-die KA7805 in accordance with the standards set by the Joint Electron Device Engineering Council ("JEDEC"), a body that establishes industry-accepted qualification standards for testing semiconductor reliability.

-7- determined that 26,000 PSUs needed to be replaced for EMC

customers.

No terms and conditions limiting liability in connection

with the KA7805 sales were provided to AcBel prior to December

2010. At AcBel's request, a representative from FSC Hong Kong

formed a task force to address the shrunk-die KA7805's failure

issue. On December 22, 2010, Fairchild executed a letter

guaranteeing AcBel that it would revert to the non-shrunk or large-

die design of the KA7805.

The dispute over the cause of shrunk-die KA7805's

failures eventually led to the current litigation. AcBel

attributed the part's failures to the shrunk-die model's design,

which it claimed made the product defective. During trial,

Fairchild's expert testified that a certain sequence of events

must occur to trigger the shrunk-die KA7805's failure: (1) moisture

penetration; (2) a mechanism for the generation of hydrogen from

moisture on the die surface; (3) a way for the hydrogen to get

underneath the silicon nitride at the edge of the die and find its

way to the zener diode; (4) a trigger for the molecular hydrogen

to form atomic hydrogen; and (5) that all of these occurrences

happen at relatively low temperatures. Evidence demonstrated that

the failure symptoms could only be duplicated by creating extreme

conditions designed to make devices fail, such as a Highly

-8- Accelerated Stress Test ("HAST"), with bias, followed by a Low

Temperature Operating Life test ("LTOL"). HAST and LTOL testing

are not part of the JEDEC standards, so standard industry testing

would not uncover the shrunk-die KA7805's failure systems.

Additionally, evidence presented at trial suggested that EMC's

problems with the KA7805s may have resulted from the extreme heat

produced by AcBel's soldering of the microcircuits to the PSU

circuit boards.

AcBel's expert, on the other hand, concluded the KA7805s

had a defective design, and claimed AcBel's soldering process was

within industry standards. AcBel's expert believed the new

placement of the zener diode in the shrunk-die KA7805 made it

susceptible to moisture exposure, thereby impairing the voltage

regulator's electrical function. The expert, however, could not

identify the specific mechanism that caused the KA7805s to fail

and did not perform independent testing.

II. DISCUSSION

A. AcBel's Implied Warranty of Merchantability Claim (Count I)

The district court held that Fairchild did not breach

the KA7805's implied warranty of merchantability. It based its

holding on AcBel's failure to establish that the design defect of

Fairchild's shrunk-die KA7805 was foreseeable. AcBel contends

that the district court's analysis was legally flawed, inasmuch as

-9- it held that AcBel was required to establish that the design defect

of Fairchild's shrunk-die KA7805 was foreseeable in order to

prevail in its implied warranty of merchantability claim. Because

AcBel challenges a legal determination made by the district court

during the course of the bench trial, our review is de novo.

United States v. 15 Bosworth St.,

(1st Cir. 2001).

Under Massachusetts law, with certain exceptions not

applicable here, "a warranty that the goods shall be merchantable

is implied in a contract for their sale if the seller is a merchant

with respect to goods of that kind." Mass. Gen. Laws ch. 106,

§ 2–314(1) (adopted by Massachusetts from the Uniform Commercial

Code ("UCC") § 2–314(1)). Thus, manufacturers impliedly warrant

that their products will be "fit for the ordinary purposes for

which such goods are used." Back v. Wickes Corp.,

(Mass. 1978) (quoting Mass. Gen. Laws ch. 106, § 2–314(2)(C)).

The cornerstone of the duty of warranty of merchantability "is the

anticipation of foreseeable uses." Cigna Ins. Co. v. Oy Saunatec,

Ltd.,

(1st Cir. 2001).

In its complaint, AcBel alleged that Fairchild breached

the implied warranty of merchantability by selling to AcBel

defective shrunk-die KA7805s that were unfit for their ordinary

purpose. As correctly noted by the district court, for AcBel to

succeed on its breach of the implied warranty of merchantability

-10- claim presented on its behalf and on behalf of EMC, it must have

demonstrated at trial that: (1) Fairchild manufactured or sold the

shrunk-die KA7805s; (2) a defect or unreasonably dangerous

condition existed that rendered the shrunk-die KA7805s not

suitable for the ordinary uses for which voltage regulators were

sold; (3) AcBel and EMC were using the shrunk-die KA7805s in a

manner that Fairchild intended or could have reasonably foreseen;

and (4) the defect or unreasonably dangerous condition was a legal

cause of AcBel's and EMC's injuries. See Provanzano v. MTD Prods.

Co.,

(D. Mass. 2016) (citing Lally v.

Volkswagen Aktiengesellschaft,

(Mass. App. Ct.

1998)).

As to the first prong, Fairchild challenges on appeal

the district court's determination that it is liable for the acts

of its subsidiaries. Specifically, the district court found that,

because Fairchild was so intermingled with the conduct of its

subsidiaries, they were its agents for liability purposes.5 This

is relevant for our implied warranty of merchantability analysis

5 Given that the district court correctly decided this issue, and persuasively explained its reasoning in detailed fashion, see AcBel Polytech, Inc. v. Fairchild Semiconductor Int'l, Inc., No. CV 13-13046-DJC,

, at *9-10 (D. Mass. Dec. 27, 2017), we see no reason to write at length to place our seal of approval on its decision. See In re Fin. Oversight & Mgmt. Bd. for P.R., No. 18-1165,

, at *3 n.6 (1st Cir. Mar. 26, 2019).

-11- because the shrunk-die KA7805s were manufactured by FSC Korea and

sold to AcBel by Synnex, which acted as FSC Hong Kong's agent.6

Thus, if Fairchild is not liable for its subsidiaries' actions,

AcBel is unable to meet the first element of this implied warranty

of merchantability inquiry. See Provanzano,

.

Fairchild accepts the district court's factual findings

regarding its relationship with its Asian subsidiaries, but on

appeal makes three strictly legal arguments in support of its

contention that the district court improperly held it liable for

its subsidiaries' conduct.

First, Fairchild sustains that the district court based

its agency determination on the "pervasive control" theory but did

not make the requisite finding that Fairchild also used the

corporate form to engage in improper conduct. Fairchild contends

that the absence of improper conduct is dispositive because

"control, even pervasive control, without more, is not a sufficient

basis for a court to ignore corporate formalities . . . without a

showing of improper conduct." (quoting Scott v. NG U.S. 1, Inc.,

(Mass. 2008)).

Second, Fairchild argues that, even in the absence of

6 Fairchild does not challenge the FSC Hong Kong-Synnex agency relationship.

-12- improper conduct, the district court's agency determination was

erroneous because the facts it found do not establish its pervasive

control over its subsidiaries, as required to create liability.

And third, Fairchild asserts it would not be liable for

the Asian subsidiaries' conduct under the apparent manufacturer

doctrine, as suggested by the district court in dicta, because for

the doctrine to apply, Fairchild must have "participate[d]

substantially in the design, manufacture, or distribution of the

[KA7805s]" and the district court made no finding to such effect.

(quoting Lou v. Otis Elevator Co.,

(Mass. App.

Ct. 2010)).

We are not persuaded. A simple reading of the district

court's judgment reveals that its decision was made on the basis

of an agency theory, not a pervasive control theory, despite its

citing of cases addressing the piercing of the corporate veil in

support of its agency conclusion. See AcBel Polytech,

, at *9-10. The district court cited those cases to

highlight the level of control FSC had over its subsidiaries.

Fairchild's level of control over its subsidiaries is not exclusive

of agency but rather supportive of the district court's finding

that such relationship exists.

(citing RFF Family P'ship, LP

v. Link Dev., LLC,

(D. Mass. 2012) ("An

agency relationship is created when there is mutual consent,

-13- express or implied, that the agent is authorized to act on behalf

and for the benefit of the principal, subject to the principal's

control." (emphasis added))).

Moreover, the intermingling between two entities can

also provide an independent basis for the conclusion that an agency

relationship existed. To this point, in My Bread Baking Co. v.

Cumberland Farms, Inc., the Supreme Judicial Court of

Massachusetts ("SJC") held that:

Although common ownership of the stock of two or more corporations together with common management, standing alone, will not give rise to liability on the part of one corporation for the acts of another corporation or its employees, additional facts may be such as to permit the conclusion that an agency or similar relationship exists between the entities. Particularly is this true (a) when there is active and direct participation by the representatives of one corporation, apparently exercising some form of pervasive control, in the activities of another and there is some fraudulent or injurious consequence of the intercorporate relationship, or (b) when there is a confused intermingling of activity of two or more corporations engaged in a common enterprise with substantial disregard of the separate nature of the corporate entities . . . .

(Mass. 1968) (emphasis added).

Based on the foregoing and the fact that Fairchild

accepts the district court's factual findings, which reveal the

high degree of control Fairchild actually exercised over its

subsidiaries, we cannot find any error in the district court's

determination that an agency relationship existed between

-14- Fairchild and its Asian subsidiaries. The district court was not

required to make any additional findings, as Fairchild contends,

to impose liability. Accordingly, we conclude that AcBel met the

first element of the implied warranty of merchantability test by

establishing that, for purposes of liability, Fairchild

manufactured and sold the shrunk-die KA7805s.

The second element of the test required AcBel to show

that the shrunk-die KA7805 had a defect or unreasonably dangerous

condition7 that made it unsuitable for its ordinary use, while the

third element required AcBel to show it was, along with EMC, using

the shrunk-die KA7805s in a manner that Fairchild intended or could

have reasonably foreseen. Here, things start to get complicated.

The district court conflated its analysis of these two elements.

Thus, the specific basis for its conclusion that Fairchild did not

violate the shrunk-die KA7805's implied warranty of

merchantability is not completely clear. What is clear, however,

7 In the context of the present case, where no person was physically injured, we interpret "dangerous condition" to mean a condition that presents a danger of injury to the product itself -- the shrunk-die KA7805 -- and thus to its fitness for its ordinary purposes. See generally East River Steamship Corp. v. Transamerica Delaval, Inc.,

(1986) (explaining, in the context of interpreting UCC § 2-314, that "[d]amage to a product itself is most naturally understood as a warranty claim"); see also

(adopting UCC § 2-314 for purposes of Massachusetts implied warranty claims).

-15- is that the district court relied on a tort-based design defect

theory and, in doing so, erroneously added an inapplicable

"foreseeability by reasonable testing requirement" to AcBel's

contract-based implied warranty of merchantability claim.

After recounting the correct four-element test for an

implied warranty of merchantability claim, the district court

cited to Town of Westport v. Monsanto Co., a tort case involving

a dangerous product,8 in support of its conclusion that Fairchild

did not breach the implied warranty of merchantability. AcBel

Polytech,

, at *12 (citing Town of Westport,

No. 14 -cv-12041,

, at *4 (D. Mass. Apr. 7, 2017),

aff'd,

(1st Cir. 2017)). Specifically, the district

court held that "[a] manufacturer may only be held liable for a

defective design if it fails to design against the reasonably

foreseeable risks attending the product's use in that setting."

(quoting Town of Westport,

, at *4 (internal

citations and quotations omitted)). The court explained that

"[t]he expert testimony and other evidence concerning the design

and testing of the shrunk-die KA7805 shows that, to the extent

8 Specifically, in Town of Westport, plaintiffs filed suit alleging tort liability against the manufacturer of a dangerous product, polychlorinated biphenyls ("PCBs") -- chemicals that are hazardous above certain concentrations. See Town of Westport v. Monsanto Co.,

(1st Cir. 2017).

-16- moving the zener diode was a risk, there was no reasonably

foreseeable risk in its design" and, furthermore, that "[d]espite

the shrunk-die KA7805's rate of failure . . . AcBel failed to show

that any reasonable testing regimen would have revealed any such

defect." Id.9

The district court also seems to have focused on the

shrunk-die KA7805's testing for purposes of its analysis of the

second element of the implied warranty of merchantability test.

After noting that Fairchild and its subsidiaries tested the shrunk-

die KA7805 in accordance with industry standards10 but could only

recreate its failure by running non-industry standard consecutive

HAST and LTOL tests, the court held that "even with the benefit of

expert testimony, AcBel did not show that the shrunk-die [KA7805]

was defective or had an unreasonably dangerous condition."

Doubling down on its focus on testing, the district court finalized

its implied warranty of merchantability analysis relying on

Vassallo v. Baxter Healthcare Corp.,

(Mass. 1998),

9 Because these expressions address foreseeability, albeit incorrectly, we read them to be related to the district court's analysis of the third element of the implied warranty of merchantability test, which will be discussed in turn. 10 As mentioned above, supra n.4, JEDEC establishes industry- accepted standards for assessing reliability in the semiconductor component industry.

-17- another tort case involving a dangerous product. 11 The court

concluded that "[a]pplying 'the standard of knowledge of an expert

in the appropriate field,' [Fairchild] 'could not have []

discovered by way of reasonable testing' [the shrunk-die KA7805's]

risk of failure under the[] extreme circumstances" created by

consecutively running the HAST and LTOL tests. AcBel Polytech,

, at *12 (quoting Vassallo, 696 N.E.2d at 923) (some

alterations in the original).

The link between a reasonable testing regime, which

generally goes towards foreseeability, see Vassallo, 696 N.E.2d at

923 (applying the reasonable testing standard in the context of a

failure to warn or provide instructions about risks context), and

the district court's conclusion that the KA7805 was not defective

or had an unreasonably dangerous condition is not totally clear.

Notwithstanding, because this conclusion was only supported by an

inapplicable tort-based theory, we need not unravel this mystery

to conclude that the district court erred.

By considering foreseeability by reasonable testing for

its analysis of the second and third elements of the implied

11 In Vassallo, the plaintiff sued the successor of a company that manufactured silicone breast implants she had implanted in her, claiming that they were negligently designed, accompanied by negligent product warnings, and breached the implied warranty of merchantability, with the consequence of causing injuries to her person. 696 N.E.2d at 912.

-18- warranty of merchantability test, the district court improperly

commingled contract-based and tort-based theories of implied

warranty. See Rule v. Fort Dodge Animal Health, Inc.,

(1st Cir. 2010) (warning that "[g]eneraliz[ations] about

warranty law should be [made] with care; there are variations in

state law, changes over time, modification by statutes like the

Uniform Commercial Code, [and] a mingling of tort and contract

concepts"). When economic loss is the only injury that is claimed,

recovery for breach of an implied warranty should be construed as

contract-based, not tort-based, under Massachusetts law. Jacobs

v. Yamaha Motor Corp., U.S.A.,

(Mass. 1995)

(recognizing a contract-based warranty claim "to recover against

a manufacturer or remote seller for breach of warranty causing

damage other than personal injury"); Bay State-Spray &

Provincetown S.S., Inc. v. Caterpillar Tractor Co.,

(Mass. 1989). We have made the same distinction, see

Wilson v. Hammer Holdings, Inc.,

(1st Cir. 1988)

(noting a difference between "products liability actions" and

"contractually based warranty claims"), and the Supreme Court has

said as much in the context of an admiralty case, see East River

Steamship Corp. v. Transamerica Delaval, Inc.,

, 871-

75 (1986) ("When a product injures only itself the reasons for

imposing a tort duty are weak and those for leaving the party to

-19- its contractual remedies are strong."); see also 18 Williston on

Contracts § 52:67 (4th ed.) ("An implied warranty may be breached

whether or not the seller is aware of a defect in the goods

. . . .").

Because the injury here was to the shrunk-die

KA7805s -- the product itself -- it sounds in contract, not tort.

As a result, the reasonableness of the testing of the shrunk-die

KA7805 was inconsequential. Instead, the district court's

analysis should have been circumscribed to the foreseeability of

the shrunk-die KA7805's use. See

-

314(2)(c) ("Goods to be merchantable must at least be . . . fit

for the ordinary purposes for which such goods are used . . . .");

see also Cigna Ins. Co.,

.

Thus, to conduct the proper contractual implied warranty

of merchantability inquiry, we must turn to the question of whether

AcBel's use of the shrunk-die KA7805's was foreseeable. The

shrunk-die KA7805's functionality was contingent on it being

soldered into a circuit board, as AcBel did to install the KA7805s

onto its PSUs. The act of soldering the KA7805 into a circuit

implicates exposure to high heat. Furthermore, the tests employed

by Fairchild to verify the KA7805's reliability in accordance with

the industry standard and later to determine its failure mechanism

-20- all involved exposure to high heat.12 Finally, testimony at trial

revealed that Fairchild was aware of the multiple uses given to

the shrunk-die KA7805. Fairchild US's vice-president, Eric Hertz,

described the KA7805 as a "jelly bean product" -- "a product that

. . . is sold to a lot of different customers[] [for] a lot of

different applications." Taking these facts into account, we

cannot conclude that AcBel was unable to meet the implied warranty

of merchantability test's burden of establishing that its use of

the shrunk-die KA7805 was foreseeable.

Our inquiry, however, does not end here. Even assuming

that its use of the shrunk-die KA7805s was foreseeable, AcBel was

still required to meet the fourth and last element of the implied

warranty of merchantability test: establishing that a defect or

unreasonably dangerous condition of the shrunk-die KA7805

constituted the legal cause of the injuries sustained by itself

and EMC. See Provanzano,

. The district

court found that the root cause of the failures experienced by EMC

with the shrunk-die KA7805 was the sequence of events recreated by

running the HAST, with bias, followed by a LTOL, but that is of

little help to establish legal or proximate causation. 13 See

12 These tests exposed the shrunk-die KA7805 to temperatures as high as 150 degrees Celsius. For context, water's boiling point is 100 degrees Celsius. 13 The terms "legal cause" and "proximate cause" are

-21- Restatement (Second) of Torts § 9 cmt. a (Am. Law. Ins. 1965)

(establishing that legal causation traces liability to a person).

Legal cause must be sufficient to result in liability. Restatement

(Second) of Torts § 9 (Am. Law. Ins. 1965). Be it the result of

an act or omission, legal causation leads to a consequence for

which liability may be imposed on a party. Id.

Given its finding on foreseeability, the district court

had no need to reach a finding on legal causation. The evidence

on this issue was conflicting. As the district court observed,

the problems EMC experienced with the shrunk-die KA7805s may have

originated when AcBel soldered them to its PSU circuit boards14 and

other users reported a rate of 0.012%, while AcBel reported a

failure rate of 7.5% for the same relevant time period (third and

fourth quarters of 2010).15 In conflict with these observations,

interchangeable. See CSX Transp., Inc. v. McBride,

, 701 (2011); Cause, Black's Law Dictionary (10th ed. 2014). 14 Specifically, the district court found that "the problem with the shrunk-die KA7805 may have resulted from delamination caused by extreme heat during AcBel's wave soldering process." AcBel Polytech,

, at *8. In further support of this conclusion, it noted that "[d]elamination was not present when the KA7805s were originally shipped [by Fairchild]. It occurred when the KA7805s were in the care of AcBel."

15 Furthermore, our own review of the record reveals that AcBel's internal documents reflect that 80% of its employees, including engineers, failed their soldering skill performance examinations in 2008. This, considered in tandem with EMC's heightened failure rates in comparison with other sources, raises serious questions as to whether AcBel's soldering practices caused the KA7805

-22- the court also noted -- without making any statements as to

credibility -- that AcBel's expert testified that AcBel's

soldering process was within industry standards.

The inconclusive nature of the district court's findings

coupled with the absence of a causation analysis -- considered in

conjunction with its application of an erred foreseeability

analysis -- counsels us against making a final determination as to

whether Fairchild actually breached the shrunk-die KA7805's

warranty of merchantability. With the benefit of the guidance set

out above as to the proper inquiry to be performed in adjudicating

a contract-based implied warranty of merchantability claim, we

believe the district court is in an improved position to evaluate

the parties' arguments and evidence in this all but simple case.

Accordingly, we vacate the district court's dismissal of AcBel's

implied warranty of merchantability claim and remand for trial

where the district court shall determine: whether the shrunk-die

KA7805 had a defect or unreasonably dangerous condition that

rendered it not suitable for the ordinary use for which it was

sold; whether AcBel and EMC were using the shrunk-die KA7805 in a

manner that Fairchild intended or could have reasonably foreseen;

and whether a defect or unreasonably defective condition of the

failures.

-23- shrunk-die KA 7805 constituted the legal cause of AcBel's and EMC's

injury.16

B. AcBel's Fraud and Misrepresentation Claims (Counts III, IV, and V)

AcBel also challenges the district court's entry of

summary judgment dismissing its fraud (Count III), fraud by

omission (Count IV), and negligent misrepresentation (Count V)

claims. Our review is de novo. See Scholz v. Goudreau,

(1st Cir. 2018). "In so reviewing, we must 'tak[e] the

facts and all reasonable inferences therefrom in the light most

favorable to [the non-moving party]," in this case AcBel.

(quoting Aponte-Rosario v. Acevedo-Vilá,

(1st Cir.

2010)). We will affirm a district court's grant of summary

judgment only "when there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law."

Rivera-Rivera v. Medina & Medina, Inc.,

(1st Cir.

2018) (citation and internal quotation marks omitted).

The core of AcBel's fraud and negligent

misrepresentation claims rests on the following factual

allegation: despite being required by industry custom, Fairchild

16 We assume, without concluding, that as part of trial proceedings the district court will also have to evaluate the misuse, unreasonable use, and unforeseeable use defenses raised by Fairchild. See generally Cigna Ins. Co.,

; Allen v. Chance Mfg. Co.,

(Mass. 1986).

-24- did not notify AcBel that it abandoned the shrunk-die KA7805 and

reverted back to the large-die model in week 35 of 2010, either

through a change in part number or issuance of a PCN. The district

court based its dismissal of all three of AcBel's fraud and

misrepresentation claims primarily on its conclusion that AcBel's

reliance on Fairchild's failure to change the KA7805's part number

when the part was switched from the large-die to the shrunk-die

model was, as a matter of law, unreasonable. We disagree and

therefore vacate the district court's dismissal of AcBel's fraud

and misrepresentation claims and remand for adjudication of these

claims at trial. For clarity, we discuss each of AcBel's fraud

and misrepresentation claims in turn.

Under Massachusetts law, to recover on fraudulent

misrepresentation claims, a plaintiff must establish that

defendants: (1) " made a false representation of material fact";

(2) "with knowledge of its falsity"; (3) "for the purpose of

inducing the plaintiff[] to act on this representation"; (4) "that

the plaintiff[] reasonably relied on the representation as true";

and (5) "that [the plaintiff] acted upon it to their damage."

Cumis Ins. Soc'y, Inc. v. BJ's Wholesale Club, Inc.,

, 47 (Mass. 2009) (emphasis added); see also Rodi v. S. New

England Sch. of Law,

(1st Cir. 2008) (pursuant to

Massachusetts law, reliance upon the alleged misstatement must be

-25- "reasonable under the circumstances").

The standard for a fraudulent omission claim retains the

above-cited elements but the "false representation" element takes

the form of an omission. See Sahin v. Sahin,

, 138

n.9 (Mass. 2001). Additionally, to establish a fraud by omission

claim, a plaintiff must establish defendants' "concealment of

material information" and "duty requiring disclosure."

The standard for a negligent misrepresentation claim,

however, differs to a larger extent. "Unlike fraud, negligent

misrepresentation does not require an intent to deceive or actual

knowledge that a statement is false." Cumis Ins. Soc'y, 918 N.E.2d

at 47. To succeed on a negligent misrepresentation claim, a

plaintiff must establish that:

[T]he defendants, "in the course of [their] business, profession or employment, or in any other transaction in which [they had] a pecuniary interest, suppli[ed] false information for the guidance of others in their business transactions" without exercising "reasonable care or competence in obtaining or communicating the information," that those others justifiably relied on the information, and that they suffered pecuniary loss caused by their justifiable reliance upon the information.

Id. at 47-48 (citation omitted) (some alterations in original)

(emphasis added).

As may be noted, and most importantly for purposes of

our current analysis, all three of AcBel's fraud and

misrepresentation claims have a reliance requirement.

-26- The district court addressed two elements of AcBel's

fraud claims: Fairchild's alleged false representation and

omission, and AcBel's reasonable reliance on the alleged

misrepresentation and omission. Its decision to grant summary

judgment in favor of Fairchild, however, rested exclusively on the

latter.17

As to the first switch from the large-die to shrunk-die

model, the district court found that Fairchild did not make a

misrepresentation by failing to change the KA7805's part number

because, in 2008, it provided AcBel "adequate notice of the design

change" through the delivery of a PCN.18 The PCN described the

changes that were going to be made to the KA7805 and stated that

the first shipment of shrunk-die model was expected to take place

in approximately three months. As to the switch back to the large-

die model in week 35 of 2010, the district court concluded that,

17 A finding of a misrepresentation hinges on whether Fairchild had an obligation to change the KA7805's part number when it switched the microcircuit from the large-die to the shrunk-die model. Because the parties dispute the requirement of a change in part number, this raises an issue of material fact. Specifically, AcBel contends that industry custom and standards required Fairchild to add a suffix to the part number, while Fairchild sustains that no change was required. Notwithstanding, for purposes of its summary judgment disposition, the district court assumed the change was required and rested its conclusion on the supposed unreasonableness of AcBel's reliance on the KA7805's part number. 18 The PCN was delivered to AcBel by Fairchild's agent, Synnex.

-27- inasmuch as "the [KA7805s] were returned to their original

design[,] . . . labeling them with the original part number was

not a false statement even under AcBel's representation of the

industry custom." Accordingly, it held that Fairchild's "failure

to change the part number when 'the second change' was made [did]

not amount to a misrepresentation."

Whether Fairchild's continued use of the same part

number for the shrunk-die KA7805 constituted a misrepresentation

is contingent on whether industry norm required a change -- an

issue of material fact. On review, we must presume as much. See

Scholz,

. Assuming that the change was required, as

we must, the district court's position in granting summary judgment

that Fairchild's failure to change the KA7805's part number was

somehow cured as a matter of law by the PCN in 2008, and then by

the reassignment of the unchanged part number back to the large-

die version in 2010, is unavailing. While it is true that Fairchild

sent a PCN informing AcBel that a switch to a new shrunk-die model

was going to take place, nowhere in the PCN does Fairchild affirm

or deny that a new part number was going to be assigned. Under

these circumstances was it not safe for AcBel to assume, at some

point, that the shrunk-die model retained the large-die model's

part number, despite this being contrary to the usual practice

under industry custom? In such case, would changing the KA7805

-28- back to a large-die design without informing such change not

constitute a misrepresentation given that its original part number

now constituted the shrunk-die's part number? We view these

questions as too dependent on the idiosyncrasies of industry norms

to be addressed with the record available to the district court at

summary judgment.

Furthermore, the extent to which the PCN could have cured

Fairchild's failure to change the part number when switching to

the shrunk-die model is in itself an issue of material fact better

left for trial. Likewise, whether Fairchild was required to issue

a PCN in 2010 when switching back to the large-die model in 2010,

as AcBel alleges was required by industry norm, is also an issue

of material fact better left for trial.

That the KA7805's part number, after week 35 of 2010,

once again coincided with the large-die model to which it was

originally assigned does not preclude the existence of an

affirmative misrepresentation. The thrust of AcBel's affirmative

misrepresentation claim lies in that, by keeping the same part

number for both the large-die and shrunk-die models, Fairchild

misrepresented that the part had not undergone a material change.

The factfinder could certainly find that a highly unusual switch

back to the large-die model, which would have put AcBel on notice

regarding issues with the shrunk-die model, is a material change.

-29- In any case, we now turn to what we read as the district

court's primary basis for dismissing AcBel's fraud and

misrepresentation claims, regardless of whether Fairchild's

failure to change the part number constituted a misrepresentation

-- AcBel's allegedly unreasonable reliance on the unchanged part

number.

In regard to AcBel's reliance on the unchanged part

number, the district court held that, even assuming that the

unchanged part number constituted a misrepresentation, AcBel's

reliance upon it was unreasonable as a matter of law because the

PCN placed AcBel on notice that the KA7805 was being switched to

the shrunk-die model. For the district court, the PCN and the

unchanged part number (to the extent that it represented that the

KA7805 had not been altered) constituted "conflicting statements"

that "engender[ed] doubt" and thus rendered AcBel's reliance on

the part number unreasonable as a matter of law. Along the same

vein, the court considered that AcBel's reliance was unreasonable

because, at the very least, these "conflicting statements"

triggered AcBel's duty to inquire as to whether "the information

in the PCN was nullified by the allegedly unchanged part number,"

which the record reflects AcBel did not do. AcBel Polytech, Inc.

v. Fairchild Semiconductor Int'l, Inc., No. CV 13-13046-DJC,

, at *12 (D. Mass. Dec. 9, 2016).

-30- In order to establish a claim for fraud, reliance upon

the alleged misstatement must be "reasonable under the

circumstances." Rodi,

. While "[a] party may

justifiably rely on a misrepresentation even if he could have

ascertained its falsity by conducting an investigation,"

misrepresentations that could be discovered by a "cursory glance,"

and are known to be false or obviously false, may not be relied

upon. Sanford Inst. for Sav. v. Gallo,

(1st

Cir. 1998).19 As the SJC has explained, a plaintiff may not rely

"on a representation that [is] either preposterous or palpably

false." Yorke v. Taylor,

(Mass. 1955); see

also Damon v. Sun Co., Inc.,

(1st Cir. 1996)

("Only reliance on 'preposterous or palpably false'

representations vitiates a misrepresentation claim." (citation

omitted)). "[I]f a mere cursory glance would have disclosed the

falsity of the representation, its falsity is regarded as obvious

. . . ." Kuwaiti Danish Comput. Co. v. Dig. Equip. Corp.,

(Mass. 2003). Accordingly, if the plaintiff could

19 Although Sanford is a bankruptcy case, the cited expressions regarding reasonable reliance are guided by the same common law concepts adopted by Massachusetts law. Compare Sanford,

-76 (citing Restatement (Second) of Torts §§ 540, 541 cmt. a (1976)) with Kuwaiti Danish Comput. Co. v. Dig. Equip. Corp.,

(Mass. 2003) (citing Restatement (Second) of Torts §§ 540, 541).

-31- have discovered the falsity of the defendant's representation, but

failed to do so, plaintiff's reliance is reasonable unless there

were "any warning signs . . . either in the documents, in the

nature of [a] transaction, or in [defendant's] conduct or

statements." Sanford,

(quoting Restatement (Second)

of Torts § 540, cmt. a (1977)); see also Kenda Corp., Inc. v. Pot

O'Gold Money Leagues, Inc.,

(1st Cir. 2003)

("Certainly where a defendant has willfully made false

representations with intent to deceive he ought not to be relieved

of liability because of his victim's lack of diligence." (quoting

Yorke,

)).

Clearly conflicting statements, however, "should [place]

petitioner on notice that he should not rely on either statement.

Confronted by such a conflict a reasonable person investigates

matters further; he receives assurances or clarification before

relying." Trifiro v. N.Y. Life Ins. Co.,

(1st

Cir. 1988). "Explicit conflict engenders doubt, and to rely on a

statement the veracity of which one should doubt is unreasonable."

(emphasis added).

The conflicting information that the district court

found triggered AcBel's duty to inquire -- or otherwise make its

reliance on either piece of information unreasonable -- was the

content of the Fairchild's 2008 PCN and the unchanged part number

-32- in the KA7805's label. The PCN represented that the KA7805 was

undergoing a design change. The unchanged part number, on the

other hand, could be perceived to represent that no change was

made to the KA7805's design following the delivery of the PCN. In

light of the fact that the PCN did not provide a specific date for

the shipment of shrunk-die KA7805s, we cannot agree that there was

no issue of material fact regarding the existence of a conflict

between the representations, much less as to the existence of an

"[e]xplicit conflict" that "engender[ed] doubt" and thus triggered

AcBel's duty to inquire.

Given the uncertainty as to shipment

date reflected in the PCN, and the lack of temporal proximity

between the delivery of the PCN and the actual commencement of

shipment of shrunk-die KA7805s to AcBel -- approximately one year

and nine months later -- we conclude that the issues of AcBel's

reasonable reliance (in general) and the existence of a conflict

in information that triggered AcBel's duty to inquire (more

specifically) would be more properly addressed at trial.20 See

Marram v. Kobrick Offshore Fund, Ltd.,

, 1031 (Mass.

20 The district court did not address AcBel's reliance on the unchanged part number in relation to Fairchild's switch back to the large-die model in week 35 of 2010, but rather only as to the first switch to the shrunk-die in week 1 of 2010. Fairchild's failure to differentiate between the two models based on part number permitted it to revert to the large-die model without explicitly revealing that this change had been made.

-33- 2004).

By the same token, we cannot agree that AcBel's reliance

on the unchanged part number was unreasonable as a matter of law.

A court's reasonable reliance analysis is based on the

circumstances of the alleged reliance on a representation. Rodi,

. The circumstances in the present case are clearly

distinguishable from those presented in the cases cited by

Fairchild, as well as other we have located, where the First

Circuit or Massachusetts courts have found a plaintiff's reliance

unreasonable due to the existence of conflicting information.

For example, in Trifiro, cited approvingly by the

district court, the plaintiff claimed that he reasonably relied on

a statement made by defendant's officer as to the formation of a

contract which was directly contradicted by a letter sent by

defendant shortly thereafter.

. Specifically,

during an initial conversation, defendant's officer expressed to

plaintiff's agent that, despite his employer having a committee

approval requirement, the transaction proposed by plaintiff "would

be a small deal for [defendant] and . . . committee approval would

be a mere formality."

Notwithstanding, a mere two days to a

week later, the defendant sent the plaintiff a letter explicitly

stating that "approval of any proposal would be at the sole

discretion of the appropriate committee or authority" and,

-34- furthermore, requesting that plaintiff "acknowledge [his]

understanding of . . . [the requirement of committee approval] by

signing and dating the enclosed copy of th[e] letter."

(some

alterations in the original). Plaintiff signed the letter but,

nonetheless, later asked this court to "hold that he acted

reasonably in relying on the earlier oral statement made to [his

agent] that committee approval would be a mere formality."

We rejected the plaintiff's request holding that "[w]hen a person

acts in a way contrary to his own acknowledged understanding of

the facts, his acts must be deemed unreasonable as a matter of

law," and, furthermore, that the circumstances rendered the

plaintiff's reliance unreasonable because he was the recipient of

explicitly conflicting information -- one statement that approval

of his proposal was certain versus a second representing that it

was uncertain.

These cases are very fact-dependent. Nevertheless, the

circumstances in the present case lead us to conclude that the

question of whether AcBel's reliance on the unchanged part number

was reasonable is an issue of fact. First, while it is true that

AcBel admitted it received the PCN informing that Fairchild would

switch to a small-die model, nowhere in the PCN did Fairchild state

that the part number would not be changed in contravention to

industry norm. Second, the discrepancy between the PCN and

-35- unchanged part number was not as explicit as, perhaps, conflicting

statements such as being told "yes" and later "no." The statements

here are more similar, at best, to a "yes" followed by "maybe no."

That is, an unchanged part number does not provide the same level

of certainty regarding contradiction as does an affirmative

statement to the opposite. See

. Third, the temporal

proximity between the conflicting statements in Trifiro was

significantly short, a week at most, while the supposed conflict

between the PCN, representing that the KA7805 was to be redesigned,

and the shrunk-die KA7805's labelling (i.e., with the same part

number as the large-die model), representing that the part had not

undergone a change, came into effect approximately one year and

nine months later. With this amount of time before the KA7805's

labelling could possibly constitute a false statement, a

factfinder might find it hard to understand how its falsity could

be obvious to AcBel. See Restatement (Second) of Torts § 541

(1977) ("The recipient of a fraudulent misrepresentation is not

justified in relying upon its truth if he knows that it is false

or its falsity is obvious to him.").

Similarly, in Kuwaiti Danish Computer Co., the plaintiff

alleged that a contract had been formed based on his reliance on

the conduct and statements made by one of the defendant's employees

at the end of negotiations.

. The SJC held that

-36- plaintiff's reliance was unreasonable as a matter of law because

"any statement or conduct" of defendant's employee "conflicted

with the qualifying language of [his] quotation, which stated that

it was only an invitation to offer, and that any contract required

approval from someone with authority at [the defendant company]."

In reaching this conclusion, the SJC stressed that "[t]he

qualifying language was presented essentially contemporaneously

with [the defendant's employee's] statements."

Again, the distinctions between these circumstances and

those presented in the case at hand are clear. The conflict

between the defendant employee's statement and the information in

the quotation he provided was unequivocal. As the SJC noted,

"[a]ll that was required of [plaintiff's representatives] was that

they read the document to ascertain the obvious."21

As noted

21 Fairchild cites to this passage in support of its contention that AcBel's reliance on the KA7805's unchanged part number was unreasonable, despite the noted difference between the circumstances faced by the plaintiff in Kuwaiti Danish Computer Co. from those faced by AcBel. As mentioned above, the circumstances were also significantly different in the other cases cited by Fairchild. See, e.g., Rodi,

(information that conflicted with statement on which plaintiff relied regarding defendant law school's accreditation was contemporaneously available in the school's catalogue); Liberty Leather Corp. v. Callum,

(1st Cir. 1981) (reliance by plaintiff on representations by defendant regarding imminence of completion of sale of stock to him was unreasonable given that: (1) three to four days after representations were made, defendant called the plaintiff to request an increased offer for the stock; and, within a maximum of seventeen days after defendant's representations, plaintiff came to knowledge of shareholder's unanimous vote to

-37- above, the supposed conflicting statements in the present case

were not obviously contradictory nor presented within a short

period of time, much less contemporaneously.

Based on the foregoing analysis, we conclude that the

district court erred in dismissing AcBel's fraudulent

misrepresentation claim summarily. Because the district court's

basis for dismissal of AcBel's fraudulent omission and negligent

misrepresentation 22 also rested on its erroneous holding that

AcBel's reliance on the KA7805's unchanged part number was

unreasonable as a matter of law, we conclude that the court erred

in dismissing these two claims as well. Accordingly, we vacate

the district court's entry of summary judgment dismissing AcBel's

reject his offer). 22 Inasmuch as the district court's dismissal of AcBel's negligent misrepresentation claim is based on AcBel's supposed failure to provide an affirmative misstatement or presentation of false information regarding the design changes made to the KA7805, we hold that the district court erred given that the evaluation of falsity regarding design changes in the present case's context is dependent on industry custom, which is at issue. See supra at 28- 32. The same logic applies to the district court's dismissal of AcBel's fraud by omission and negligent misrepresentation claims on the grounds that Fairchild did not have a duty to disclose issues regarding the KA7805's design or that the part was switched back to the large-die version. See Restatement (Second) of Torts § 551(2)(e) (1977) (providing that duty to disclose may arise out of "the customs of the trade"); see also Greenery Rehab. Grp., Inc. v. Antaramian,

(Mass. App. Ct. 1994) (recognizing that a duty to disclose arises out of the situations described in § 551).

-38- fraud (Count III), fraud by omission (Count IV), and negligent

misrepresentation (Count V) claims, and remand for trial on the

merits.

C. Fairchild's Cross-Appeal

Because we are remanding for further proceedings below,

we now turn to Fairchild's cross-appeal. Fairchild asks us to

order that it be permitted to conduct additional discovery in

relation to documents produced by AcBel after the case's discovery

deadline had elapsed.

Weighing the equities and in light of the possibility

that discovery related to issues or leads suggested by the late-

produced documents will lead to evidence relevant to the remanded

claims, we instruct the district court to reopen discovery

exclusively for purposes of Fairchild's discovery of evidence

strictly related to AcBel's late-produced documents. See

AngioDynamics, Inc. v. Biolitec AG,

(1st Cir.

2015); see also Vineberg v. Bissonnette,

(1st Cir.

2008) (recognizing that a party's proffer of relevant leads it

might obtain through additional discovery "may be an important

factor in deciding whether to reopen discovery"); Young v. Gordon,

(1st Cir. 2003) (implying that a party's failure

to meet a case-management deadline should only be to his own

peril).

-39- III. CONCLUSION

For the reasons explained above, we vacate the district

court's judgment dismissing AcBel's implied warranty of

merchantability (Count I), fraud (Count III), fraudulent omission

(Count IV), and negligent misrepresentation (Count V) claims, and

remand for further proceedings consistent with this opinion.

Vacated and Remanded. Each party shall bear its own

costs.

-40-