AMERICAN BUMPER & MANUFACTURING CO. v. Transtechnology Corp.

• Decision Date: 06 October 2002
• Docket Number: Docket No. 229616.
• Parties: AMERICAN BUMPER & MANUFACTURING COMPANY, Plaintiff-Appellant, v. TRANSTECHNOLOGY CORPORATION and TRW, Inc., Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

652 N.W.2d 252

252 Mich. App. 340

AMERICAN BUMPER & MANUFACTURING COMPANY, Plaintiff-Appellant, v. TRANSTECHNOLOGY CORPORATION and TRW, Inc., Defendants-Appellees.

Docket No. 229616.

Court of Appeals of Michigan.

Submitted June 4, 2002, at Grand Rapids.

Decided July 26, 2002, at 9:00 a.m.

Released for Publication October 6, 2002

Miller, Canfield, Paddock and Stone, P.L.C. (by Leland D. Barringer), Detroit, for the plaintiff.

Warner Norcross & Judd LLP (by Wallson G. Knack and John J. Bursch), Grand Rapids, for the defendants.

Before: JANSEN, P.J., and SMOLENSKI and WILDER, JJ.

PER CURIAM.

Plaintiff appeals as of right from the trial court's order granting summary disposition in favor of defendants under MCR 2.116(C)(10). We affirm.

In April 1989, plaintiff entered into an agreement with the Ford Motor Company to manufacture the front bumpers for Ford F-series pickup trucks. According to plaintiff's complaint, at all times Ford controlled the material specifications, processes, checking procedures, and finishes for the fasteners used in manufacturing the bumpers. Ford provided a list of approved sub-suppliers to plaintiff, which included defendants. From the suppliers of fasteners approved by Ford, plaintiff requested quotes for U-nuts that plaintiff would use to fasten the bumpers to the Ford bumper assemblies. In November 1990, the Palnut Company (first a division of defendant TRW, Inc., and later a division of defendant TransTechnology Corporation) responded to plaintiff's request by issuing a quotation for its U-nuts. In February 1991, plaintiff submitted a "blanket" purchase order, which allowed plaintiff to fill its need for U-nuts over the course of its contract with Ford. From 1991 to 1993, Palnut provided plaintiff with many U-nuts used in the bumper assemblies for Ford's F-series pickup trucks. The U-nuts that were initially supplied to plaintiff had a phosphatebased coating. In 1992, in response to Ford's requirements, Palnut changed the coating on the U-nuts to a zinc organic-based coating called Dorroflake. Late in 1992, plaintiff expressed concerns about Palnut's slow delivery performance. In response, a Palnut employee suggested changing the fastener coating to Dacromet because that coating could be done in house. Dacromet is a zinc water-based coating manufactured by Metal Coatings International. Palnut sent samples of the Dacromet-coated U-nuts to plaintiff and in April 1993, plaintiff notified Palnut that the Dacromet-coated U-nuts were approved by its quality assurance department. Ford also approved Dacromet as a coating and in August 1993, Ford required that only Dacromet be used as a coating on the U-nuts and that Dorroflake was no longer an approved coating.

In late November 1993, Ford received reports from its dealers that the U-nuts were failing, causing the bumpers to become loose or fall off the trucks. Ford relayed this information to plaintiff on November 28, 1993. Plaintiff then notified Palnut of the U-nut failure and on December 6, 1993, plaintiff canceled its contract with Palnut. In February 1994, Ford initiated a recall campaign to replace the defective U-nuts, an endeavor that cost Ford more than $9 million.

On February 25, 1994, Ford issued a report, purportedly identifying what it believed to be the causes of the failure of the U-nuts. Ford believed that plaintiff and Palnut were at fault and that plaintiff should bear the financial responsibility because it was the end item supplier. Plaintiff and Palnut conducted independent investigations regarding why the U-nuts were failing. Ultimately, it was found that the cause of the failure was stress corrosion cracking. The U-nuts, which are made of high-strength steel, would crack or corrode when the zinc coating was exposed to a salt water environment (such as when roads are salted in the winter) and when the U-nuts are stressed (by inserting and tightening a bolt). One of the experts stated that it is "bad engineering" to put zinc on high-strength steel and that this was the cause of the U-nut failure.

In June 1994, plaintiff presented its response to Ford's report. In the response, plaintiff carefully dismissed each charge against it and Palnut and instead concluded that the root cause of the failure of the U-nuts was associated with the change to Dacromet from Dorroflake. Plaintiff clearly stated that the fault was with Ford and Metal Coatings International because Ford directed Palnut and all the approved fastener suppliers to change to Dacromet, but neither Ford nor Metal Coatings International had properly tested Dacromet when Ford directed this change.

Nothing more happened between plaintiff and Palnut until plaintiff filed suit against defendants in August 1997. In the meantime, in 1995, Ford and plaintiff entered into settlement negotiations and an agreement was reached in May 1995. Plaintiff had initially paid $900,000 to Ford as part of the recall campaign, and also agreed to a one-time price reduction of $2.2 million. Palnut was not aware of or involved in the settlement negotiations.

Plaintiff's amended complaint alleges breach of express warranty, breach of implied warranties of fitness and merchantability, express indemnification, and implied indemnification. Defendants moved for summary disposition, arguing that plaintiff failed to comply with the notice provision of subsection 2-607(3)(a) of the Uniform Commercial Code, M.C.L. § 440.2607(3)(a), requiring a buyer to notify a seller of a breach of contract within a reasonable time of discovering the breach, and that plaintiff was barred from any remedy. Defendants also argued that the breach of express warranty and express indemnification claims should be dismissed because the language in plaintiff's purchase orders that supported those claims never became part of the parties' contract. Finally, defendants argued that the implied indemnification claim should be dismissed because defendants were not given notice of, or an opportunity to participate in, the settlement negotiations between plaintiff and Ford. The trial court agreed and granted summary disposition under MCR 2.116(C)(10) in defendants' favor "for the reasons set forth in the defendant[s'] brief and for the arguments made in court today."

The trial court's ruling on a motion for summary disposition under MCR 2.116(C)(10), which tests the factual sufficiency of the complaint, is reviewed de novo. Maiden v. Rozwood, 461 Mich. 109, 118, 120, 597 N.W.2d 817 (1999). The court is to consider the pleadings, affidavits, admissions, depositions, and other documentary evidence submitted by the parties in a light most favorable to the party opposing the motion. Id. at 120, 597 N.W.2d 817. If the proffered evidence fails to establish a genuine issue of material fact, the moving party is entitled to judgment as a matter of law. Id.

This case involves application of the Uniform Commercial Code, M.C.L. § 440.1101 et seq. Specifically, the trial court ruled that plaintiff had failed to give notice of breach of the contract to Palnut and, therefore, was barred from any remedy. MCL 440.2607(3)(a) provides:

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy[.]

The burden of establishing a breach is on the buyer. MCL 440.2607(4). The parties disagree regarding whether there is a "strict" or "lenient" standard in Michigan relative to the adequacy of notice. Comment four to M.C.L. § 440.2607 states that the ...