General Motors Corp. v. Paramount Metal Products

• Decision Date: 28 March 2000
• Docket Number: No. 98-CV-60287-AA.,98-CV-60287-AA.
• Citation: 90 F.Supp.2d 861
• Parties: GENERAL MOTORS CORPORATION, Woodbridge Corporation, Woodbridge Foam Corporation, and Cartex Corporation, Plaintiffs/Counter-defendants, v. PARAMOUNT METAL PRODUCTS COMPANY, f/k/a Paramount Seating Company, Defendant/Counter-plaintiff.
• Court: U.S. District Court — Eastern District of Michigan

90 F.Supp.2d 861

GENERAL MOTORS CORPORATION, Woodbridge Corporation, Woodbridge Foam Corporation, and Cartex Corporation, Plaintiffs/Counter-defendants, v. PARAMOUNT METAL PRODUCTS COMPANY, f/k/a Paramount Seating Company, Defendant/Counter-plaintiff.

No. 98-CV-60287-AA.

United States District Court, E.D. Michigan, Southern Division.

March 28, 2000.

COPYRIGHT MATERIAL OMITTED

Judy B. Calton, Daniel G. Helton, Scott A. Wolfson, Honigman Miller Schwartz & Cohn, Detroit, MI, Frank K. Zinn, Laurence D. Connor, Dykema Gossett, Detroit, MI, for plaintiffs.

Jeffrey M. Embleton, Edward O. Patton, Mansour, Gavin, Cleveland, OH, William McCandless, Mark F. Miller, Denardis, McCandless & Muller, Detroit, MI, for defendants.

OPINION AND ORDER GRANTING, IN PART, PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT; DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, AND; DENYING PLAINTIFFS' OBJECTION AS MOOT

STEEH, District Judge.

Plaintiffs General Motors Corporation ("GMC"), Woodbridge Corporation, Woodbridge Foam Corporation, and Cartex Corporation (collectively "Woodbridge") move for summary judgement of: (1) defendant Paramount Metal Products Company's counterclaims of fraud, breach of a duty of good faith and fair dealing, and punitive damages; (2) defendant's counterclaim for unliquidated damages, and; (3) defendant's affirmative defenses of contractual bar, contractual satisfaction by past performance, compromise/settlement, accord and satisfaction, adhesion contract, and economic impossibility. Defendant Paramount moves for summary judgment of plaintiffs' claims of breach of purchase order contracts and economic duress. For the reasons set forth below, plaintiffs' motion for summary judgment will be GRANTED, IN PART, as to defendant's counterclaims of fraud, breach of a duty of good faith and fair dealing and punitive damages, as well as defendant's affirmative defenses of adhesion contract and economic impossibility. The remainder of plaintiffs' motion for summary judgment will be DENIED. Defendant's motion for summary judgment will be DENIED. Plaintiffs' objection to the submission of supplemental authority will be DENIED as moot.

BACKGROUND

The circumstances underlying this lawsuit have been set forth in previous opinions and orders, and will be reiterated herein only to the extent necessary to adjudicate the instant motions. Plaintiffs GMC and Woodbridge contracted with defendant Paramount under various purchase orders for the manufacture of automobile seat frames for ultimate installation into GMC vehicles. Paramount was the plaintiffs' sole source for these seat frames for the 1997 model year, with contracts extending through the year 2000. Plaintiffs used a "just-in-time" supply system to maintain minimum inventories, making the plaintiffs dependent upon continuous shipments of seat frames from Paramount. In the Fall of 1997, Paramount was struggling financially. At the same time, GMC announced it would be selling its seat frame business. Paramount allegedly asked GMC to either purchase Paramount for $18.0 million or grant Paramount $10.0 million in retroactive price increases, or else Paramount would be forced to immediately cease seat frame production. According to GMC and Woodbridge, if they did not continue to receive seat frames from Paramount, GMC would be unable to continue automobile production and would incur substantial daily losses. Plaintiffs allege they therefore granted defendant certain price adjustments, despite Paramount's continuing threats to stop production.

After considerable negotiations, the parties executed a December 11, 1997 Accommodation Agreement in Cleveland, Ohio which provided inter alia that: $488,935.00 would be released to Paramount from escrow as a reversal of ceratin improper debits; Woodbridge would pay Paramount a $4.4 million retroactive price increase, and; Paramount would be paid a $2.13 prospective price increase on certain parts effective January 1, 1998. On June 22, 1998, the plaintiffs found an alternate seat frame supplier. On June 24, 1998, the plaintiffs filed this lawsuit seeking to invalidate the Accommodation Agreement on the basis of economic duress, and to enforce the pricing set forth in pre-existing purchase orders. Paramount filed counterclaims seeking to enforce the Accommodation Agreement and alleging the plaintiffs are liable in fraud in the inducement for executing the Accommodation Agreement without a present intent to perform the Agreement. Paramount alleges the plaintiffs have failed to pay $500,000.00 of the $4.4 million price increase promised under the Accommodation Agreement, as well as another $2.0 million owing under the Accommodation Agreement for parts and tools. Paramount also alleges it has incurred $13.5 million in unliquidated damages.

Plaintiffs seek to invalidate the Accommodation Agreement on the basis of economic duress, and to enforce the purchase order prices that existed prior to the Accommodation Agreement. Paramount maintains the plaintiffs are liable for breaching the Accommodation Agreement, and for fraud in the inducement because the plaintiffs intended to dishonor the Accommodation Agreement once they found an alternate seat frame supplier. Specifically, the plaintiffs allege: breach of GMC purchase orders (Count I); breach of Woodbridge purchase orders (Count II); breach of GMC tooling purchase orders (Count III); conversion of GMC tooling (Count IV); economic duress in executing the Accommodation Agreement (Count V); constructive trust (Count VI); unjust enrichment (Count VII), and; recission of the Accommodation Agreement (Count VIII). By way of remaining counterclaims, defendant Paramount alleges: fraud (Count I); breach of contract (Count II); breach of a duty of good faith and fair dealing (Count III); defamation (Count IV), and; punitive damages (Count VII).

STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(c) empowers the court to render summary judgment "forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See FDIC v. Alexander, 78 F.3d 1103, 1106 (6th Cir.1996). The Supreme Court has affirmed the court's use of summary judgment as an integral part of the fair and efficient administration of justice. The procedure is not a disfavored procedural shortcut. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Kutrom Corp. v. City of Center Line, 979 F.2d 1171, 1174 (6th Cir.1992).

The standard for determining whether summary judgment is appropriate is "`whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Winningham v. North Am. Resources Corp., 42 F.3d 981, 984 (6th Cir. 1994) (citing Booker v. Brown & Williamson Tobacco Co., 879 F.2d 1304, 1310 (6th Cir.1989)). The evidence and all inferences therefrom must be construed in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Enertech Elec., Inc. v. Mahoning County Comm'r, 85 F.3d 257, 259 (6th Cir.1996); Wilson v. Stroh Cos., Inc., 952 F.2d 942, 945 (6th Cir.1992).; see also Hartleip v. McNeilab, Inc., 83 F.3d 767, 774 (6th Cir. 1996). If the movant establishes by use of the material specified in Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law, the opposing party must come forward with "specific facts showing that there is a genuine issue for trial." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 270, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); see also Adams v. Philip Morris, Inc., 67 F.3d 580, 583 (6th Cir.1995). The nonmoving party cannot rest on its pleadings to avoid summary judgment, but must support its claims with some probative evidence. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Kraft v. United States, 991 F.2d 292, 296 (6th Cir.), cert. denied, 510 U.S. 976, 114 S.Ct. 467, 126 L.Ed.2d 419 (1993).

I. PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

Plaintiffs GMC and Woodbridge move for summary judgment of Paramount's counterclaims of fraud, breach of a duty of good faith and fair dealing, and punitive damages. Plaintiffs also move for summary judgment of Paramount's counterclaim for unliquidated damages. Plaintiffs further move for summary judgment of Paramount's affirmative defenses of accommodation, accord and satisfaction, settlement, adhesion contract, and economic impossibility of performance.

A. Fraud

Paramount's fraud in the inducement counterclaim is directed at the Accommodation Agreement executed in Cleveland, Ohio. The Accommodation Agreement provides at paragraph 18: "This Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Ohio, without regard to principles regarding conflicts of laws." Applying the choice of law provisions of the forum state, see Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 360-361 (6th Cir.1993), Michigan law permits parties to choose for themselves which state's law will govern their contract. See Johnson v. Ventra Group, Inc., 191 F.3rd 732, 738-739 (6th Cir.1999); Liberty Mutual Ins. Co. v. Vanderbush Sheet Metal Co. 512 F.Supp. 1159, 1169 (E.D.Mich.1981). Accordingly, Ohio law is controlling.

Ohio's version of the Uniform Commercial Code ("UCC") does not displace common law actions for fraud. See Ohio Savings Bank v. H.L. Vokes Company, 54 Ohio App.3d 68, 70, 560 N.E.2d 1328 (1989) (involving claim for fraudulent inducement). Fraud in the inducement is an "exception" to the general rule that a fraud claim must be based upon a past or existing fact. See Dunn...