Advanced Plastics v. WHITE CONSOL. INDUSTRIES

• Decision Date: 04 August 1993
• Docket Number: No. 92-CV-76375.,92-CV-76375.
• Citation: 828 F. Supp. 484
• Parties: ADVANCED PLASTICS CORPORATION, Plaintiff, v. WHITE CONSOLIDATED INDUSTRIES, INC., d/b/a Frigidaire Company, Defendant.
• Court: U.S. District Court — Western District of Michigan

828 F. Supp. 484

ADVANCED PLASTICS CORPORATION, Plaintiff, v. WHITE CONSOLIDATED INDUSTRIES, INC., d/b/a Frigidaire Company, Defendant.

No. 92-CV-76375.

United States District Court, E.D. Michigan, S.D.

August 4, 1993.

COPYRIGHT MATERIAL OMITTED

Kurt E. Riedel, Plunkett, Cooney, Mt. Clemens, MI, for plaintiff.

Stephen D. Winter, Patrick F. Hickey, Dykema Gossett, Detroit, MI, for defendant.

OPINION AND ORDER

FEIKENS, District Judge.

Background

Plaintiff, Advanced Plastics Corporation ("Advanced Plastics"), manufactures plastic parts for refrigerators. Defendant White Consolidated Industries Inc., d/b/a Frigidaire Co. ("White Consolidated"), manufactures refrigerators. They had a contractual relationship in accordance with which plaintiff produced such plastic parts for defendant for use in its refrigerators. The contract is comprised of blanket purchase orders and releases. Deposition of plaintiff's president, Ronald Printz ("Printz"), at pp. 109-113.

The relationship between the parties is as follows. When defendant desired a part from plaintiff, defendant would submit a request for quotation to plaintiff. The request for quotation included the part name, part number, and estimated yearly usage. An estimate of defendant's yearly consumption allowed plaintiff to determine and price the quantity of tooling necessary to fulfill the anticipated annual usage. Deposition of defendant's buyer, Barbara Dakin at pp. 22-27. The request for quotation contained the following statements: "Estimated yearly usage is estimate only. Do not construe as firm commitment." Plaintiff would then produce a quote which stated: (1) materials involved in the production of the part and (2) estimated price the defendant would have to pay to buy such a part. If the price was agreeable to defendant, it would submit a purchase order to plaintiff which identified the part or parts defendant wished to buy from plaintiff but it did not state the quantity of parts; thus, the purchase orders were known as blanket purchase orders.

These blanket purchase orders contained various terms and conditions. Paragraph 4 of the terms and conditions to the blanket orders provided in relevant part:

Where this contract is for purchase and sale of a stated quantity, Buyer defendant shall not be obligated to purchase any additional quantity. In the case of Blanket Orders, (a) Seller plaintiff agrees to furnish Buyer's requirements for the goods or services covered by this Purchase Order to the extent of and in accordance with the delivery schedule set forth therein, or, if no such schedule is set forth, then pursuant to Buyer's written instructions, (b) Buyer shall have no obligation to honor invoices for goods or services fabricated, rendered, or delivered other than according to the delivery schedule or written instructions of Buyer pursuant to (a) above, and (c) Buyer shall be entitled to make other purchases at its discretion in order to assure its production operations and maintain reasonable alternative sources of supply.

Because the blanket orders did not have delivery schedules, the quantity of parts that defendant wished to buy from plaintiff was governed by defendant's written instructions, known as releases. Defendant was not obligated to pay for any parts or raw materials until a release was issued. Printz deposition at pp. 90-92, 106-108, 111-112, 166-171, and 188-190.

As with the blanket purchase orders, the releases were also subject to terms and conditions. Paragraphs 2 and 9 of the Release Terms and Conditions for Business Documents Transmitted Electronically provide:

2. DO NOT FABRICATE PARTS REQUIRED FOR EACH SHIPMENT MORE THAN 45 DAYS IN ADVANCE OF SPECIFIED DELIVERY DATE. You should release materials from your vendors for shipment to your plant only as necessary to maintain the shipping schedule as shown on this release.

....

9. If at any time the quantities ordered herein are by us reduced or cancelled, we neither have nor assume any liability or obligation for damages nor for value of materials fabricated or partially fabricated in quantities in excess of our delivery schedule for the sixty-day period immediately following our notice of reduction or cancellation.

Since 1985, the parties had utilized this procedure whenever defendant purchased parts, known as line 1 parts. In May 1991, defendant began to purchase a new line of parts, known as line 5 parts, for use in defendant's refrigerator models. In 1992, economic realities forced defendant to consolidate its supplier base; defendant decided to move all its line 1 and line 5 tooling from plaintiff to another supplier, Drake Molding Corporation. On April 28, 1992, defendant informed plaintiff of its decision to cease its business relationship with plaintiff. At this time, annual existing sales for line 1 parts were approximately $1.2 million, and line 5 part sales, based upon open purchase orders, were projected to be about $1 million. By June 25, 1992, all releases which had been issued by defendant to plaintiff had been filled, and all parts and raw materials were invoiced and paid for. Printz deposition at pp. 108-109, 115, 125-126, 156-168.

Count I claims breach of contract. Count II is a promissory estoppel claim. Plaintiff says that as a result of the assurances of defendant, plaintiff purchased real estate, machinery and equipment; hired personnel; and incurred other expenses. It also claims it turned away other business. It says that as a result of defendant's actions, it was forced to lay off employees and had real property to maintain and machinery no longer needed. Plaintiff says it had spent $120,000 to acquire such real property to make it environmentally safe; it says it had also acquired a Toshiba molding machine for $169,000 and a computer system for $10,000 to decrease the delay in providing defendant with the parts it requested. Defendant's action left plaintiff without 40% of its sales.

Pursuant to Fed.R.Civ.P. 56, defendant moves for summary judgment. For the reasons set forth below, defendant's motion is GRANTED.

Analysis

I. Count I

A. No termination

Defendant persuasively argues that pursuant to the terms of the agreement between the parties, the contractual relationship between them simply ceased. As a matter of law, there was no premature termination of the contract by defendant.

Under the express terms and conditions of the releases, specifically paragraphs 2 and 9 quoted above, defendant was not obligated to pay for parts manufactured more than 45 days in advance of the scheduled delivery date identified in the release. If a schedule or release was cancelled or reduced, defendant was obligated to pay for only those raw materials or that work-in-progress necessary to meet the delivery schedule for 60 days following the reduction or cancellation. Under such terms and conditions, whenever defendant no longer desired to order line 1 or line 5 parts from plaintiff, it could simply cease issuing releases against the blanket orders and the obligation of defendant to purchase parts would end. Printz deposition at pp. 90-92.

This account describes exactly what occurred. On April 28, 1992, defendant informed plaintiff that due to economic realities it could no longer order line 1 or line 5 parts from plaintiff. By June 25, 1992, all releases which had been issued by defendant to plaintiff had been filled; further, all parts and raw materials were invoiced and paid for.

The yearly estimates or projections which defendant provided on its requests for quotations and thereafter did not obligate it to purchase line 1 or line 5 parts. As noted, the requests for quotations state: "Estimated yearly usage is estimate only. Do not construe as firm commitment."¹See also Northern Indiana Public Service Co. v. Colorado Westmoreland, Inc., 667 F.Supp. 613 (N.D.Ind.1987), (Easterbrook, J., sitting by designation), affirmed without opinion, 845 F.2d 1024 (7th Cir.1988). In that case, Judge Easterbrook held that a coal supply contract which required a utility company to advise a coal supplier of the quantity of coal the utility company would require over the course of the year did not obligate the utility company to purchase such an amount as it was merely an estimate.

Thus, I find that defendant performed its obligations under this contract for the sale of goods; the contractual obligations of the parties simply expired. There was no termination of contract as defined under the Uniform Commercial Code ("U.C.C."). M.C.L. § 440.2106, U.C.C. § 2-106, says in part, "`Termination' occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach." Defendant stopped issuing releases, and it no longer had a contractual obligation to purchase parts from plaintiff. The contract expired; defendant did not "terminate" it. Defendant did all that it was required to do under the contract, and it is entitled to summary judgment on Count I.

Such a result, plaintiff argues, produces an unfair result. There is no question that the terms of this contract are tough terms. Sympathy for plaintiff's position does not change the result. Plaintiff's difficulty is a result of the type of contract it negotiated and to which it agreed. It seems clear that plaintiff, in order to obtain defendant's business, agreed to terms that favored defendant. Defendant had the power to dictate the terms, and did so.

To hold otherwise, I would have to rewrite the terms of the contract. "Courts can neither make a new agreement for the parties nor, by addition, give it a meaning contrary to its express and unambiguous terms." Stein, Hinkle, Dawe & Associates, Inc. v. Continental Casualty Co., 110 Mich.App. 410, 418, 313 N.W.2d 299 (1981). "Under the guise of interpretation a court may not reform or modify a contract. Contracts which are unambiguous are not open to construction and must be enforced as written." Britton v. John Hancock...