McDonnell Douglas Corporation v. Commodore Business MacHines Inc. And Commodore Business MacHines (Canada) Limited

Commodore Business Machines (Commodore) appeals the judgment of the United States District Court for the Northern District of California, awarding plaintiff McDonnell Douglas the full $432,000 claimed in its breach of contract action, and denying Commodore’s claim for a set off in the amount of $261,000. Commodore does not contest its liability for the balance of the debt.

The dispute arose out of a contract between subsidiaries of the two parties. McDonnell Douglas’ subsidiary, Nitron, supplied Commodore with semiconductors for use in electric calculators. The product supplied by Nitron was a wafer containing a number of individual chips. When Commodore received the wafers it sent them to Electronic Arrays, a subcontractor, where the wafers were tested and diced and the individual chips were packaged. The $261,-000 at issue is the value of the approximately 319,000 chips that were rejected as defective during the Electronic Arrays packaging process from February, 1975 through June, 1976.

Commodore introduced evidence that several months after the chips were rejected in its testing process, Commodore presented a debit memorandum for their value to Ni-tron. Commodore’s then…