Iverson Industries v. Metal Management Ohio
| Decision Date | 04 December 2007 |
| Docket Number | No. 06-14835.,06-14835. |
| Citation | 525 F.Supp.2d 911 |
| Parties | IVERSON INDUSTRIES, INC., Plaintiff, v. METAL MANAGEMENT OHIO, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
George S. Fish, Strobl and Sharp, Bloomfield Hills, MI, for Plaintiff.
Kevin J. Gleeson, Sullivan, Ward, Southfield, MI, Mark A. Larose, Larose and Bosco, New Buffalo, MI, for Defendant.
The principal issue presented by the parties' cross motions for summary judgment now before the Court is whether there is evidence establishing an agreement to extend a contract for the purchase and sale of scrap metal beyond its express termination date. The motions present other issues as well, namely, whether the defendant breached the express contract by paying less than the prescribed contract formula for scrap metal and assessing a fuel surcharge during the contract term, whether the plaintiff's claim is barred by laches, whether the defendant is entitled to a setoff for payments in excess of the formula after the expiration of the express contract, and whether the defendant was unjustly enriched. The Court heard oral argument on these motions on November 26, 2007. The Court now finds that the plaintiff is entitled to summary judgment on its claim that the fuel surcharge was improperly imposed during the term of the express contract, fact issues preclude summary judgment for either party on the question whether the express contract was breached or extended, the doctrine of laches does not bar the plaintiff's claim, and the plaintiff's unjust enrichment claim cannot proceed. Therefore, the Court will grant each party's motion for summary judgment in part and deny them in part.
The plaintiff, Iverson Industries, Inc., is an automotive materials and parts finisher that operates three facilities in southern Michigan. A byproduct of Iverson's precision machining operations is scrap metal in the form of shavings and solids from machine shop turnings and cast iron borings. There is a market for this industrial waste, and the defendant, Metal Management Ohio, Inc., is in the business of buying this type of scrap metal from manufacturers and selling it on the open market. According to the parties, Metal Management has been purchasing Iverson's scrap metal for the past ten years. Metal Management typically calculates the price it will pay for scrap metal each month according to the fluctuating market, taking into account its costs and a profit margin.
In 2002; Iverson and Metal Management entered into a contract whereby Iverson would sell all of its scrap metal from two of its Michigan plants exclusively to Metal Management, and in exchange Metal Management guaranteed its pricing according to a formula tied to an industry publication, Iron Age Scrap Price Bulletin, Detroit, which is printed monthly, with fixed adjustments. The pricing provision of the contract stated:
The following formulas will be used to determine the value of each scrap commodity at your plants. All prices will be based on the Iron Age Scrap Price Bulletin, Detroit, high side pricing. Pricing is in dollars per gross ton (S/GT). FOB shipping point loaded MTLM Ohio container. (1 GT = 2240 lbs).
Steel Turnings Machine shop turnings plus $4
Cast Iron Borings Cast iron borings plus $12
Solids Cupola cast minus $18
The above pricing structure is the minimum you will receive, based on current production levels. The formulas can be changed at any time with mutual consent of both parties.
Compl. Ex. 1; Def.'s Mot. for Summ. J., Ex. 1. To facilitate the operation, Metal Management agreed to place its covered "rolloff boxes" at Iverson's two plants so that scrap could be deposited there by Iverson on site, and Metal Management could empty them regularly.
The contract was for a fixed two-year term, which was measured as follows:
This Scrap Agreement will be in effect for a period of two (2) years from the date the six (6) new rolloff boxes are put into service, and can be amended at any time with mutual consent of both parties.
Ibid. As are many of the facts in this case, the precise date the rolloff boxes were placed is in doubt, and neither party can furnish definitive proof on this point; but it appears that the parties agree that the rolloff boxes were' delivered no earlier than September 2002 and no later than November 2002. Therefore, this contract would expire of its own terms no later than November 2004.
The parties have maintained their business relationship, even through, the pendency of this lawsuit, but a dispute has arisen over Metal Management's pricing of the scrap metal it continues to purchase from Iverson. Iverson alleges that Metal Management departed from the contract pricing formula for some of the months in early 2004, and it added fuel surcharges that were unauthorized. Iverson also insists that the parties also engaged in a course of conduct that establishes an intent to continue, extend, or renew the contract and its formula pricing scheme well after the November 2004 expiration, and Metal Management breached this contract implied in fact by underpaying for scrap metal after 2004. There is no dispute that Metal Management regularly has picked up scrap metal from Iverson's two Michigan plants, delivered detailed statements each month documenting the quantity and price paid for each type of scrap metal, and issued monthly checks to Iverson throughout this period. However, Iverson did not bring its objections to light until July 2006.
The undisputed facts establish that beginning in 2003, Metal Management started deducting a fuel service charge from the price paid to Iverson. Metal Management deducted $197.62 for this charge in 2003, $2,050.60 in 2004, $3,995.09 in 2005, and $1,172.36 in 2006, for a total of $7,415.67. Although it is not clear how the fuel service charge was calculated, Metal Management claims that it imposed this charge on all customers consistent with the industry standard. The parties agree that Iverson otherwise was paid consistent with the contract throughout 2002-2004 (with some disparities during a few isolated months). Beginning in January 2005, it appears that Metal Management no longer paid under the contract formula.
However, it appears that both companies forgot about the 2002 contract. Iverson employee Marie Zak testified at her deposition that she began reviewing the Metal Management file in the spring of 2006 when she discovered that Metal Management was paying much less for scrap metal than Metal Management's competitor, Zalev Brothers, Co. Iverson began getting quotes from other scrap metal dealers. Ms. Zak then discovered that Iverson was being underpaid under the 2002 contract in June of 2006 when she "actually found the contract." Def.'s Resp. to Pl.'s Mot. for Summ. J., Ex. 2, Dep. of Marie Zak 23:16, July 10, 2007. Larry Finnell, CEO of Iverson, testified that he first became aware of the written contract (which apparently was signed before he became CEO) in 2006.
Metal Management had significant attrition in 2004 and periods of turmoil in upper management thereafter, which led to a gap in knowledge of how Iverson was being paid, or even which employee was handling the account. Christopher Beck was Metal Management's account executive assigned to Iverson's account until 2003 or 2004, and when he left, it is unclear who took over. David Hammer testified that he took over the account in early 2005 from "[n]o one." Pl.'s Resp. to Def.'s Mot. for Summ. J., Ex. 5, Dep. of David Hammer 12:10, Sept. 7, 2007. He stated that "[t]here was a void on the Iverson account where accounting was looking for information, pricing ... There was no information." Id. at 12:6-8. Mr. Hammer was unaware of the existence of the 2002 contract until the present lawsuit was filed, and he set prices each month" based on the market accounting for expense in order to target a profit margin of $80 per gross ton. According to Mr. Hammer, approximately ninety percent of Metal Management's relationships are based on monthly pricing without a written contract, and half are priced unilaterally by Metal Management.
Mr. Hammer turned over the Iverson account to Alan Moll in early 2005. In July 2006, Iverson first complained to Metal Management about the prices it was being paid for its scrap metal. On August 2, 2006, David Hammer met with Marie Zak and Kenneth Pociask from Iverson to attempt to salvage the account, according to Hammer. Mr. Hammer offered to pay the difference from the contract back to April 2006, but he could not pay beyond that without authorization from upper management, which was not forthcoming. For future purchases, Mr. Hammer offered to "cut the margins to the bone and to a minimally acceptable margin." Def.'s Resp. to Pl.'s Mot. for Summ. J., Ex. 1, Aff. of David Hammer at ¶ 33. The parties continue to do business, although "margins being made [by Metal Management] on the current scrap purchases is way lower than the average margins acceptable to Metal Management's Defiance facility." Ibid.
No agreement was reached, however, and this lawsuit was commenced in October 2006. After discovery, the cross motions for summary judgment followed.
Summary judgment is appropriate "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." Fed.R.Civ.P. 56(c). The parties have filed cross motions for summary judgment, which might imply that there are no facts in dispute. Nonetheless, the Court must apply the well-recognized standards when deciding such cross motions; "[t]he fact that the parties have filed cross-motions for summary judgment...
To continue reading
Request your trial