Johnson Controls v. Trw Vehicle Safety Systems

• Citation: 491 F.Supp.2d 707
• Decision Date: 07 June 2007
• Docket Number: No. 06-15217.,06-15217.
• Parties: JOHNSON CONTROLS, INC., a Wisconsin corporation, and Johnson Controls Automotriz Mexico de RL de CV, a foreign corporation, Plaintiffs, v. TRW VEHICLE SAFETY SYSTEMS, INC., a Delaware Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

491 F.Supp.2d 707

JOHNSON CONTROLS, INC., a Wisconsin corporation, and Johnson Controls Automotriz Mexico de RL de CV, a foreign corporation, Plaintiffs, v. TRW VEHICLE SAFETY SYSTEMS, INC., a Delaware Corporation, Defendant.

No. 06-15217.

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

June 7, 2007.

COPYRIGHT MATERIAL OMITTED

Ann Marie Uetz, Vanessa L. Miller, Foley & Lardner, Howard W. Burdett, Jr., Boyle Burdett, Detroit, MI, for Plaintiffs.

Moheeb H. Murray, Richard W. Paige, Bush, Seyferth, Troy, MI, for Defendant.

OPINION AND ORDER

ZATKOFF, District Judge.

I. INTRODUCTION

This matter is before the Court on the parties' cross-motions for summary judgment. Plaintiffs' filed their Motion for Summary Judgment (Docket # 7) on December 22, 2006, and Defendant filed its Motion for Summary Judgment (Docket # 15) on January 12, 2007. Each party has responded to the others' motions and both parties have provided the Court with extensive briefs and numerous exhibits. The Court finds that the facts and legal arguments are adequately presented in the parties' papers and the decision process would not be significantly aided by oral argument. Therefore, pursuant to E.D. MICH. LR 7.1(e)(2), it is hereby ORDERED that the motion be resolved on the briefs submitted. For the reasons set forth below, both parties' motions will be DENIED.

II. BACKGROUND

This case involves an alleged breach of an automotive supply contract. Plaintiffs Johnson Controls, Inc., and Johnson Controls Automortriz Mexico DE RL DE CV (collectively JCI) are engaged in the business of manufacturing interior automotive component systems, notably seat assemblies. (See Pls.' Compl. 8.) Defendant TRW Vehicle Safety Systems, Inc. (TRW), manufactures and supplies custom made automotive parts, including components to JCI's seat assemblies. (See id. 9.)

For the last several years, JCI has ordered certain component parts from TRW for the restraint systems of two General Motors vehicle platforms: the GMT 257 and the GMT 201. For the GMT 257 parts, JCI issued Purchase Orders 910-003 (Order 003) and 910-031 (Order 031).¹ (See Pls.' Ex. E, F.) For the GMT 201 parts, JCI issued Purchase Order 7002653 (Order 2653). (See Pls.' Ex. G.) JCI issued the purchase orders to TRW for the purchase of various parts for a period of one year. The purchase orders stated the specific price of each part but did not state the quantity. This was because JCI's need for parts depended on General Motor's production schedule. Accordingly, when JCI had a need for parts it would issue a material release to TRW, requesting that TRW ship a specified number of parts. JCI followed this practice, which is standard in the automotive industry and known as a just-in-time supply system,² in order to maintain a minimum inventory. JCI would periodically revise its purchase orders, which, according to the terms incorporated therein, would supercede previous purchase orders. JCI issued the latest revisions on February 21, 2006 for purchase orders 003 and 031, and on September 5, 2006, for purchase order 2653. (See Pls.' Ex. E-G.)

JCI's purchase orders detail the part number, the part description and the unit price. In the column labeled quantity, the orders state "AS REL."³ (See Def.'s Ex. D, E.) The face of the orders also state:

This purchase order is governed exclusively by Johnson Controls' Global Terms of Purchase (available at http:// johnsoncontrols.com/asg/global-terms.

htm or by calling 734-254-7500, and incorporated here by reference), except as modified provided therein. Any terms and conditions appearing on the reverse side of this purchase order form do not apply and should be disregarded. All other terms are rejected.

(Id.) JCI revises the Global Terms periodically; however, the revisions do not apply retroactively to purchase orders that have already been issued.⁴

The Global Terms identify each purchase order as an offer for the purchase of goods and further state in bold that the "Order is limited to and conditional upon Seller's acceptance of these Terms exclusively." (Def.'s Ex. F.) The agreement formed by the Order, including the Global Terms, is binding on the parties for one year. (See id.) Finally, under paragraph 3, labeled "Quantity; Material Releases; Delivery," the Global Terms state

Quantities listed in each Order as estimated are Buyer's best estimate of the quantities of Supplies it might purchase from Seller for the contract term specified in the Order. If no other quantity is stated on the face of the Order or if the quantity is blank or states zero, "blanket," "see release" or similar term, then for consideration of U.S. $10 to be paid by Buyer upon expiration or termination of the Order, Seller grants to Buyer an irrevocable option during the term of the Order to purchase Supplies in such quantities as determined by Buyer and identified as firm orders in material authorization releases, manifests, broadcasts, or similar releases ("Material Releases") that are transmitted to Seller during the term of the Order, and Seller will supply all such Supplies at the price and other terms specified in the Order; provided that the Buyer may purchase no less than a minimum quantity of at least one piece or unit of each of the Supplies and no more than 100% of Buyer's requirements for the Supplies.... Material Releases are part of the Order, are governed by these Terms and are not independent contracts.... Buyer is not obligated to accept early deliveries, late deliveries, partial deliveries or excess deliveries.

(Id.)

Sometime after JCI issued the purchase orders on February 21, 2006, it sent TRW material releases for the parts identified in these orders. TRW acted on the material releases and shipped the identified parts to TRW. According to JCI, TRW accepted JCI's offers to buy, as set forth in the purchase orders and Global Terms, when it shipped goods pursuant to the material releases JCI issued under the purchase orders. JCI further contends that a contract was formed that required TRW to supply JCI with its requirements for the parts identified in the purchase orders at the prices stated in the purchase orders for a duration of one year.

On February 23, 2006, TRW notified, JCI that due to the increased cost of materials, it would be raising its prices for components sold to JCI. (See Pls.' Ex. H.) JCI responded that it could not pay higher prices for the parts it purchased from TRW because it could not control the pricing set by General Motors, and recommended that TRW discuss its pricing concerns directly with General Motors. (See Pls.' L) In an email dated March 3, 2006, TRW notified JCI that it was objecting to the inclusion of JCI's Global Terms in the purchase orders issued on February 21, 2006. (See Pls.' Ex. DD.) Apparently, TRW had not been aware that the Global Terms existed prior to the issuance of the February 21, 2006 purchase orders. (Id.)

Less than one week later, on March 8, 2006, TRW again notified JCI that it would be increasing its prices for parts, but would honor the prices stated in JCI's purchase orders for the material releases JCI had issued as of that date. (See Pls.' Ex. J.) In addition, TRW indicated that unless JCI amended its purchase orders to reflect TRW's higher prices, it would cease shipping parts once its obligations under the current material releases had been fulfilled. (See id.) On March 10, 2006, TRW again objected to JCI's Global Terms and expressed its belief that "its supply agreements with Johnson Controls [were] binding only to the extent of [the] firm releases" that JCI issued. (Def.'s Ex. 11.)

In response to TRW's statement that intended to cease shipping parts, JCI informed TRW that the purchase orders were binding contracts that required TRW to supply JCI with parts at a fixed price for the duration of the order. (See Pls.' Ex. K.) JCI further stated that TRW's threat to stop shipping constituted a breach of the contracts and that if TRW stopped shipping parts General Motors would have to stop production on the affected vehicles. (See id.) Accordingly, JCI requested assurances from TRW that it would continue to ship parts as scheduled. (See id.) On March 21, 2006, TRW assured JCI that it would continue to ship parts as scheduled and rescinded the letter that threatened to stop shipment. (See Pls.' Ex. L.) However, ten days later, TRW sent JCI another letter notifying JCI of TRW's intent to not renew the current purchase orders once they expired. (See Pls.' Ex. M.) In this letter, TRW relied on a provision in JCI's Global Terms that required the seller to notify JCI of an intent to not renew a purchase order 180 days before the order is set to expire. (See Pls.' Ex. F.)

Throughout the summer of 2006, JCI continued to issue material releases and TRW continued to ship parts to JCI. Nevertheless, in October 2006, TRW again demanded that JCI revise its purchase orders to reflect the increased cost TRW was paying for materials. (See Pls.' Ex. P.) JCI informed TRW that based on the February 21, 2006, purchase orders, TRW was obligated to continue shipping parts at the current prices until February 21, 2007. (See Pls.' Ex. S.) Likewise, JCI expressed its belief that under the purchase order issued on September 5, 2006, TRW was obligated to continue shipping parts at the current prices until September 5, 2007. (See id.)

On October 11, 2006, when JCI refused to negotiate a price increase, TRW reconfirmed its intent to not renew the purchase orders and threatened to stop shipping parts as of October 29, 2006. (See Pls.' Ex. T.) As it had done in March, JCI demanded assurances from TRW that shipments would continue on time. (See Pls.' Ex. V.) This time, however, TRW stood by its threat to stop shipments. (See Pls.' Ex. W.) Because it did not want to damage its relationship with General Motors or cause production to cease, JCI issued revised purchase orders that reflected TRW's increased prices. (See...