Far East Services v. Tracker Marine

• Decision Date: 03 December 2007
• Docket Number: No. 27847.,No. 27829.,27829.,27847.
• Citation: 246 S.W.3d 486
• Court: Missouri Court of Appeals
• Parties: FAR EAST SERVICES CORP., and D & W Sales, Inc., Plaintiffs/Appellants/Respondents, v. TRACKER MARINE, L.L.C., Defendant-Third Party Plaintiff/Respondent/Cross-Appellant, v. Joel Detwiler, Counterclaim Defendant/Respondent.

246 S.W.3d 486

FAR EAST SERVICES CORP., and D & W Sales, Inc., Plaintiffs/Appellants/Respondents, v. TRACKER MARINE, L.L.C., Defendant-Third Party Plaintiff/Respondent/Cross-Appellant, v. Joel Detwiler, Counterclaim Defendant/Respondent.

No. 27829.

No. 27847.

Missouri Court of Appeals, Southern District, Division Two.

December 3, 2007.

Motion for Reconsideration Denied December 26, 2007.

Tim Gammon, Springfield, for plaintiffs/appellants/respondents Far East Services, Corp. and D & W Sales, Inc., of MO.

Bryan O. Wade and Ginger K. Gooch, Husch & Eppenberger, L.L.C., Springfield, MO, for defendant-third party plaintiff/respondent, cross-appellant Tracker Marine, L.L.C.

Stuart H. King, McDonald & Hosmer King Royce, P.C., Springfield, MO, for counterclaim defendant/respondent Joel Detwiler.

GARY W. LYNCH, Judge.

The two principal parties to a series of transactions revolving around the manufacture and sale of goods cross-appeal the trial court's judgment alleging altogether fourteen points of error. Only finding merit in one point, we reverse and remand that portion of the judgment awarding damages plus prejudgment interest for engineering services related to those goods. In all other respects, the judgment is affirmed.

(1) Factual Background

Plaintiffs D & W Sales, Inc., a Missouri corporation, d/b/a Far East Services, and Far East Services, a corporation authorized to do business in, and in good standing under the laws of the Cayman Islands (collectively "Far East"), conducted business in Missouri through its agents, D & W Sales, and Far East Services and its owner and agent, Robert Minor ("Minor"). Defendant Tracker Marine, LLC ("Tracker") is a Missouri limited liability company, whose principal place of business is in Greene County, Missouri.

During all relevant time periods Tracker had five production plants, all of which make different types of boats at different rates of production. The plants in Bolivar and Lebanon, Missouri, make aluminum boats and use the most fasteners. Tracker's other plants were in Ozark, Missouri; Clinton, Missouri; and Murfreesboro, Tennessee.

Joel Detwiler was in Tracker's employ from August 14, 2000, through August 31, 2001. His office was in Tracker's corporate headquarters in Springfield, Missouri. At the time Detwiler was hired by Tracker, he executed an Associate Agreement which required him to keep confidential certain defined information concerning Tracker.

Upon being hired, Detwiler was directed to address the investigation of overseas purchasing, the consolidation of materials management at Tracker's corporate office, and the implementation of a quality-control process similar to that used in the automotive industry, which process would include a pre-production approval process ("PPAP"). Also included within his responsibilities was the oversight of inventory control, transportation functions, accounts-payable functions, and some product warranty issues. Detwiler's management authority with respect to the purchasing of materials included the oversight of Tracker employees Janet Jones and Steven Spencer.

During a meeting at the Clinton, Missouri plant in November of 2000, the president of Tracker, Ken Burroughs, specifically identified the purchasing of fasteners as a problem, based upon an excessive number of vendors being used by Tracker, an excessive number of warranty claims based upon failed or rusted fasteners, and the opportunity for cost savings through overseas purchasing.

Detwiler and his supervisor, Jack Wagner, determined that the most appropriate way to initiate the increased purchase of materials from overseas suppliers was to create drawings of the materials used by Tracker, which drawings would include the drawing of the part, its dimensions, and the specifications to which the part would be manufactured. Tracker did not have personnel with both the expertise and time to create these drawings.

Detwiler and Minor were acquaintances before Detwiler was hired at Tracker. After taking the Tracker job, Detwiler contacted Minor to see if Minor could help, as Tracker was having problems with boat returns, rusting fasteners, fastener supplier quality, and delivery. This contact also included an inquiry as to Minor's interest in both preparing the drawings of Tracker parts and submitting proposals to supply parts to Tracker.

Detwiler and Minor agreed that Far East would implement a PPAP for any parts Tracker ordered. As part of that process, Far East would provide Tracker with drawings and first-piece inspection reports with samples attached for review and approval by Tracker's engineers before any parts were manufactured. Far East agreed to be responsible for including all necessary information on the drawings, and Far East had the responsibility to research the engineering issues it could not independently resolve. Detwiler and Minor agreed that Tracker must approve the drawings and first-piece inspection reports before parts were manufactured. Sometime before the end of January 2001, Tracker and Far East reached an agreement whereby Far East agreed to prepare the drawings required by the PPAP at an hourly rate of $50.00, with a monthly cap of $3,500.

In order to effectuate the process of preparing these drawings, Detwiler introduced personnel of Far East, including Minor and Mike Giebel, to Tracker personnel at the various Tracker plants, including the plant "engineers." Detwiler further made arrangements for Far East to take possession of samples of each of the parts for which it was to prepare a drawing. Detwiler also provided to Far East a fastener reference guide¹ to lend Far East assistance in determining appropriate materials and specifications. The process of gathering parts as necessary to prepare drawings went on at least through March of 2001. This process also included Detwiler providing Giebel lists of parts, annual usages, and target costs.

Detwiler expected Far East to reverse engineer the parts in order to obtain the necessary information to be included on the drawings and to provide a price quote. Far East had metallurgical analyses performed on some of the samples. Tracker knew that the parts it was currently using (the pool from which Far East took the samples) met quality specifications for corrosion and other relevant factors.

Giebel delivered the parts samples and the other information provided by Detwiler to Mighty AA and NationsBond, foreign corporations Far East contracted with to draw and manufacture fasteners and other parts. Giebel had these potential manufacturers and Jason Hargis, whom he hired, prepare initial drawings. Over 150 drawings were prepared or reviewed by Giebel and then submitted to Tracker. Giebel holds an engineering degree, but he is not a licensed engineer.

Upon receipt of drawings from Far East, Detwiler directed that copies be made of each drawing and forwarded to the plant "engineers" for review and approval. Most drawings were forwarded to the engineer at the Bolivar, Missouri plant at the direction of Jack Wagner, because this engineer had prior experience in the automotive industry and was generally familiar with the PPAP process. Detwiler did not personally follow up with the plant engineers with respect to approval or rejection of the drawings.

No drawing was ever approved or signed by an engineer or other employee of Tracker. According to the terms of the PPAP agreement between Tracker and Far East, the parts should not have been manufactured or shipped absent such approval.

Tracker internally issued written purchase orders for Far East's engineering services in preparation of the drawings although they were not delivered to Minor or Far East. Tracker paid two or three of Far East's invoices for these services totaling $20,500, leaving a balance of $6,750 for unpaid services.

In addition to the agreement with Far East regarding the preparation of drawings, Detwiler also had discussions with Minor regarding Far East submitting quotes to supply parts, including fasteners, to Tracker. In order to allow Far East to submit quotes on parts, Detwiler either provided or directed Tracker's purchasing agents to provide to Far East anticipated yearly usages of the subject parts and "target prices" for the subject parts. Far East submitted price quotes for various parts to Tracker on or about January 30, February 23, and March 5, 2001.

Upon receipt of quotes from Far East, Detwiler directed Steven Spencer to prepare analyses comparing the cost of the parts quoted by Far East to the cost being paid by Tracker to its current suppliers. Based upon these analyses showing a cost savings, Tracker, by and through its purchasing agent Spencer as approved by Detwiler, issued its purchase order T26411 on February 6, 2001, for a portion of the parts quoted by Far East on January 30, 2001, in the amount of $165,205.46. This purchase order specifically included the terms that the parts would be "FOB Destination" and would be "Vendor Warehouse for Release as Needed."

Tracker, by and through its purchasing agent Spencer and approved by Detwiler, issued its purchase order T26428 on March 9, 2001, for a portion of the parts quoted by Far East on February 23, 2001, in the amount of $117,946.02. This purchase order also specifically included the terms that the parts would be "FOB Destination" and would be "Vendor to Warehouse for Release by Tracker." Purchase order T26428 was then corrected or modified by Tracker on or about March 23, 2001, to reduce the amount of the order to $91,836.02. The corrected purchase order again included the terms that "all prices are FOB Tracker Marine" and "Vendor to Warehouse Items at their Facility for Release by Tracker."

The circumstances surrounding the final purchase order are less clear. What is apparent from the record is that Far East submitted a quote on or about March 5, 2001. The initial cost analysis by Spencer on this quote indicated a savings of $12,700 to...