Johnson Controls, Inc. v. Jay Industries, Inc.

• Decision Date: 18 August 2006
• Docket Number: No. 05-1826.,No. 05-1879.,05-1826.,05-1879.
• Citation: 459 F.3d 717
• Parties: JOHNSON CONTROLS, INC., Plaintiff-Appellee/Cross-Appellant, v. JAY INDUSTRIES, INC., Defendant-Appellant/Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

459 F.3d 717

JOHNSON CONTROLS, INC., Plaintiff-Appellee/Cross-Appellant, v. JAY INDUSTRIES, INC., Defendant-Appellant/Cross-Appellee.

No. 05-1826.

No. 05-1879.

United States Court of Appeals, Sixth Circuit.

Argued June 7, 2006.

Decided and Filed August 18, 2006.

Appeal from the United States District Court for the Eastern District of Michigan, Avern Cohn, Senior District Judge.

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ARGUED: E. Edward Hood, Dykema Gossett, Ann Arbor, Michigan, for Appellant. Sheldon H. Klein, Butzel Long, Detroit, Michigan, for Appellee. ON BRIEF: E. Edward Hood, Bradley L. Smith, Dykema Gossett, Ann Arbor, Michigan, for Appellant. Sheldon H. Klein, Philip J. Kessler, Robin K. Luce, Butzel Long, Detroit, Michigan, for Appellee.

Before: MARTIN, MOORE, and ROGERS, Circuit Judges.

OPINION

KAREN NELSON MOORE, Circuit Judge.

Defendant-Appellant Jay Industries, Inc. ("Jay") appeals from the district court's judgment against it following a jury trial and the district court's denial of its post-trial motions. Plaintiff-Appellee Johnson Controls, Inc. ("JCI") cross-appeals from the district court's denial of its post-trial motions. The dispute in this case arose over the price of packaging for parts that Jay supplied to JCI for use in constructing automobile seats; JCI claims that the parties had an agreement according to which Jay would purchase returnable packaging and then amortize the cost of the packaging over the course of several months. Jay never stopped charging JCI for the packaging, even after the packaging costs should have been paid in full. When JCI discovered the overcharges several years later, it brought this suit against Jay. The district court awarded damages to JCI for the overcharges accruing after the point at which it notified Jay of the problem. In its appeal, Jay argues that the district court should have granted its motion for judgment as a matter of law because of the untimely nature of JCI's claims and because of the lack of evidence of an amortization agreement, that the district court erred in instructing the jury and in presenting the verdict form, and that the district court improperly admitted parol evidence of the amortization agreement. In its cross-appeal, JCI contends that it was entitled to damages prior to the time that it notified Jay of the overcharges and that the district court erred in allowing the jury to determine that Jay was entitled to an ongoing "packaging charge." For the reasons discussed below, we AFFIRM the judgment of the district court on each of the claims presented on appeal.

I. BACKGROUND

Jay is a tier-two automotive supplier that manufactures components of automobile parts. JCI—a tier-one supplier—purchases components from Jay, incorporates them into automotive systems, and then sells the systems to automobile manufacturers. In June 1993, Jay and JCI entered into a long-term agreement regarding the Ford Villager/Nissan Quest and the Ford Econoline; JCI agreed to purchase parts from Jay "for the life of the program" at a reduced price. 3 J.A. at 867 (JCI-ASG Long-Term Agreement).

On December 6, 1994, Jay provided JCI with an estimate for the cost of three new front-seat manual pedestals for the Econoline Van program ("VN127 program"). The letter setting forth the estimate explained that packaging was not included but that Jay "will . . . amortize returnable racks—investment and amortization content to be determined." 3 J.A. at 870 (Letter from Todd M. Gensheimer to Vic Bohacheff). JCI agreed to purchase the pedestals from Jay, stating that the cost of packaging would be determined at a later time. The parties began the process of designing the pedestals, without ever finalizing the packaging issue. In March 1996, the parties agreed temporarily to use expendable packaging (cardboard) and to add $1.62 per assembly to cover the cost of the cardboard packaging. On June 3, 1996, JCI issued its first permanent production order for the pedestals. Jay began shipping the pedestals pursuant to this order.

After the parties agreed temporarily to use expendable packaging, Jay submitted several letters to JCI proposing amortization terms for returnable containers. The final letter on this topic, dated June 4, 1996, proposed that Jay would purchase 390 containers ($249,795) and that JCI would reimburse Jay for the containers at a cost of $1.26 per part to be paid over the course of eight or nine months. Darren Robinson from JCI signed and returned the letter to Jay the next day; however, Robinson deleted one section and added an amendment.¹ Todd Gensheimer from Jay testified that he called Robinson upon receipt of the amended letter to inform him that Jay would not sign the agreement with the proposed changes. Robinson testified that he did not recall being contacted by anyone from Jay regarding the changes. After this exchange, the parties continued to work on the returnable packaging issue. On November 21, 1996, JCI sent a letter "authoriz[ing][Jay] to release the order for returnable containers for the following part numbers . . ." 3 J.A. at 887 (Letter from Jim Veil to Dick Young). The letter concluded that "[p]ayment terms and conditions will be handled at a later date with JCI-Plymouth and Todd Gensheimer." 3 J.A. at 887. Jay purchased the returnable containers.

Jay asserts that at this time, "JCI personnel were actively reviewing whether JCI should abandon the idea of an amortization agreement and instead purchase the returnable containers itself outright." Appellant Br. at 12; see also 3 J.A. at 1019-20 (Broshco Returnable Summary) (comparing the costs of purchasing versus amortizing the containers); 3 J.A. at 1021 (Mem. from Don Mills to Mike Warner) (stating that "[w]e would perfer [sic] to buy the containers out-right to save money"). JCI responds by explaining that Veil and Mills did look into the prospect of purchasing the containers; however, they stopped investigating this option when Mills was informed that the parties had a "binding contract and that it was closed and nonnegotiable." 3 J.A. at 755-56 (Trial Tr. at 33-34) (Mills Test.).

In February 1997, Jay began using the returnable containers in its shipments. The parties amended the prices of the pedestals several times over the next few years, yet the $1.62 that had been included for the cost of the cardboard packaging never was eliminated. Not only was the $1.62 never eliminated, but Jay also never reduced the price of the pedestals by $1.26 once Jay recovered the price of the returnable packaging as per the proposed amortization agreement. In 2001, a JCI employee analyzed the VN127 pedestal data while researching another project and discovered that the $1.26 was never eliminated from the purchase orders.

On February 4, 2002, JCI filed a complaint against Jay in federal district court. JCI's final amended complaint included the following claims related to the packaging dispute: breach of contract, unjust enrichment, promissory estoppel, and a request for declaratory judgment. The complaint also included various claims regarding a price increase imposed by Jay and JCI's right to submit the VN127 program for competitive bidding.² Jay filed both a motion to dismiss and a motion for summary judgment on the returnable-container claims, and JCI filed a motion for summary judgment. In June 2003, the district court denied Jay's motion to dismiss, and it denied both parties' motions for summary judgment. The district court also concluded that "JCI is time barred from making any claim based on overcharges which occurred more than 4 years prior to filing suit, or prior to February 1998." 2 J.A. at 524 (Dist. Ct. Mem. & Order Granting in Part and Denying in Part Def.'s Mot. to Dismiss at 13 ("Dist. Ct. Mot. to Dismiss Order")).

In August 2004, the district court ordered that the issues of liability and damages be tried separately. The jury trial began on October 19, 2004. On November 8, 2004, Jay filed a motion for judgment as a matter of law "on JCI's packaging claims," 2 J.A. at 612; subsequently, JCI filed a motion for judgment as a matter of law on these claims, and Jay filed a second motion for judgment as a matter of law. The district court did not rule on these motions before the case was submitted to the jury. The jury came to the following conclusions with regard to the packaging claims: Jay breached the parties' agreement as to the VN127 pedestals; the agreement required that Jay reduce its price by $1.26 after JCI had fully paid for the returnable packaging; and JCI did not notify Jay of the overcharge "within a reasonable time after it discovered or should have discovered this charge." 2 J.A. at 646 (Verdict). The district court entered judgment in favor of JCI on the packaging claims "in the amount of $1,810,336 for the period February 5, 1998 through July 7, 2001 and $1,402,366 for the period July 8, 2001 (the date on which JCI notified Jay of the packaging overcharge dispute) through September 14, 2004." 2 J.A. at 660(J.).

On May 16, 2005, the district court entered an order addressing the various post-trial motions that were submitted by Jay and JCI. The district court amended the judgment so that JCI would no longer receive the $1,810,336 for the period prior to July 8, 2001. Jay timely appealed the district court's December 3, 2004 and May 16, 2005 judgments (Case No. 05-1826), and JCI filed a cross-appeal (Case No. 05-1879).

The district court had diversity jurisdiction pursuant to 28 U.S.C. § 1332 because JCI is incorporated in Wisconsin with its principal place of business in Wisconsin, and Jay is incorporated in Ohio with its principal place of business in Ohio; the amount in dispute in this case clearly exceeds the amount-in-controversy jurisdictional requirement. This court has jurisdiction pursuant to 28 U.S.C. § 1291 because the parties filed timely notices of appeal.

II. ANALYSIS

A. Standard of Review

We review de novo a district...