Macquinados v. Mectron Eng'g Co.
| Decision Date | 11 February 2019 |
| Docket Number | Case No. 17-12187 |
| Parties | FORJAS Y MACQUINADOS, S.A. De C.V. and VIRTEL S.A. de C.V., foreign corporations, Plaintiffs, v. MECTRON ENGINEERING COMPANY, INC., a domestic corporation Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Pending before the Court is Defendant Mectron Engineering Company's motion for summary judgment. (ECF No. 19.) Plaintiffs oppose the motion. On January 19, 2018, the Court held a hearing in connection with Defendant's motion. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the motion.
Plaintiffs are members of a joint venture that manufacturers various knurled products, such as nuts, used in the manufacturing of automobiles. Defendant manufactures high speed inspection systems. This dispute arises out of Plaintiffs' purchase of an HSN100 inspection machine from Defendant for the purpose of inspecting the presence of "thread" or "no thread" in certain products manufactured by Plaintiffs.
In January 2015, Plaintiffs' representatives contacted Defendant about purchasing an inspection machine for the purpose of inspecting and sorting a particular nut manufactured by Plaintiffs for sale to Nissan for use in Nissan's vehicles. This product is referred to by the parties as the "Nissan Nut." Plaintiffs told Defendant that they were having a problem with the Nissan Nut such that customers were receiving pieces without thread and that a visual inspection was not able to remedy the situation.
Defendant told Plaintiffs that it could probably provide a solution for its Nissan Nut inspection problem. In February 2015, Defendant presented Plaintiffs with a proposal (referred to by the parties as "Proposal A") which provided for the purchase of a HSN100 inspection machine capable of inspecting the Nissan Nut. The HSN100 described in Proposal A included one nut feeding bowl and one camera. The cost of the HSN100 described in Proposal A was $76,420.
In August 2015, at Plaintiffs' request, Defendant submitted a revised proposal ("Proposal B") to accommodate the manufacture and purchase of a HSN100 capable of sorting and inspecting the Nissan Nut and several of Plaintiffs' other products.1 Proposal B included line items for an additional feeding bowl and two additional cameras which were necessary to enable the HSN100 to inspect the Nissan Nut and Plaintiffs' additional products. The cost of the HSN100 described in Proposal B was $147,320, nearly double the cost of Proposal A. While it is clear from the record that the HSN100 agreed to in Proposal B was supposed to be capable of inspecting up to eight of Plaintiffs' other products, it is not clear which specific additional products were actually agreed to be incorporated into the HSN100. This is because Proposal B does not expressly identify the products that will be inspected by the HSN100. Instead Proposal B states that afterPlaintiffs delivered samples of its products to Defendant for testing, Defendant will tell Plaintiffs which products will work on the HSN100.
From August 2015 through approximately March 2015, Defendant worked on completing the HSN100 for Plaintiffs. In April 2016, the HSN100 arrived at Plaintiffs' facility in Mexico. Plaintiffs allege that they began experiencing problems with the HSN100 from the time it arrived at their facility. According to Plaintiffs, the HSN100 never fully performed as promised, and, in January 2017, completely stopped working. Plaintiffs claim that because Defendant was unable or failed to repair or replace the HSN100, and did not respond to Plaintiffs' requests for a refund, Plaintiffs filed this lawsuit asserting claims for breach of contract, breach of warranty, fraud, fraudulent inducement, and fraud by omission. Plaintiffs allege that the HSN100 never actually performed as represented by Defendant, and even when it did work, it was only capable of inspecting the Nissan Nut and could not inspect any of Plaintiffs' other products as required by Proposal B. Plaintiffs seek to rescind their agreement and recover damages from Defendant, including lost profit damages, consequential damages, and exemplary damages.
Defendant moves for summary judgment arguing that no genuine issues of material fact exist as to Plaintiffs' claims. Defendant contends the summary judgment evidence conclusively demonstrates that it satisfied all of its contractual obligations, and that any issues with the HSN100 were caused by Plaintiffs' own failures—such as the failure to properly clean the machine or the failure to adequately train its employees to use the machine. Defendant further argues that Plaintiffs' claims are barred by the limited warranties, limited remedy of "repair or replace", and limitations of damages provision contained in the parties' contract. Finally, Defendant argues that Plaintiffs' fraud basedclaims, including its claim for fraudulent inducement, are barred by the economic loss doctrine.2 Plaintiffs oppose the motion and argue there are several issues of fact that preclude summary judgment.3
"Summary judgment is proper only if the moving party shows that the record does not reveal a 'genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Benison v. Ross, 765 F.3d 649, 658 (6th Cir.2014) (quoting FED. R. CIV. P. 56(a)). A genuine issue of material fact exists when there are "disputes over facts that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). But "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (internal quotation marks omitted) (citing First Nat. Bank of Ariz. v. Cities Servs. Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)).
This Court has subject matter over this dispute on diversity grounds. (See ECF No. 1.) "[F]ederal courts sitting in diversity 'apply state substantive law and federal procedural law.'" Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 417, 130 S.Ct. 1431, 176 L.Ed.2d 311 (2010) (quoting Hanna v. Plumer, 380 U.S. 460, 465, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965)). When deciding issues of substantive law, this Courtmust apply the law of the state's highest court. Saab Auto. AB v. Gen. Motors Co., 770 F.3d 436, 440 (6th Cir.2014). If the state's highest court has not decided the applicable law, the state law must be ascertained "'from all relevant data,' which includes the state's appellate court decisions." Id. (quoting Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir.1995)).
"Under Michigan law, the elements of a breach of contract claim are: (1) the existence of a contract between the parties, (2) the terms of the contract require performance of certain actions, (3) a party breached the contract, and (4) the breach caused the other party injury." Burton v. William Beaumont Hosp., 373 F.Supp.2d 707, 718 (E.D.Mich.2005) (citing Webster v. Edward D. Jones & Co., L.P., 197 F.3d 815, 819 (6th Cir.1999)). To prevail on summary judgment, Defendant must establish that there are no genuine issues of material fact with respect to each of these elements. Here, Defendant argues that no genuine issues of material facts exist with respect to Plaintiffs' breach of contract and breach of warranty claims. Specifically, Defendant claims that Plaintiffs fail to identify any actual breach of the parties' agreement.
Defendant's position is not supported by the record in this case. As the long, detailed, and conflicting factual backgrounds provided in the parties' briefing reflects, there remain several disputed genuine issues of material fact as to whether Defendant breached the parties' agreement. Indeed, the parties submit differing accounts of almost every stage of their relationship. For example, the parties produce conflicting evidence concerning the HSN100's actual and expected sorting speed, its capabilities andperformance, and its failure rates. There is also conflicting evidence concerning the training of Plaintiffs' employees, the required maintenance for the HSN100, and Defendant's efforts to repair the HSN100. Despite Defendant's assertion to the contrary, the summary judgment evidence does not conclusively establish that the HSN100 could sort and inspect the Nissan Nut in the manner agreed to by the parties.
Moreover, the record is clear that Defendant failed to deliver a machine capable of inspecting Plaintiffs' additional parts as required by the parties' agreement. And while Defendant argues that its performance was excused because Plaintiffs allegedly instructed Defendant to only focus on the Nissan Nut, this issue, as well as many others, presents genuine issues of material fact to be decided at trial. Summary judgment on Plaintiffs' breach of contract and breach warranty claims is therefore not proper.
Defendant argues that even if there are genuine issues of material fact as to the alleged breach, Plaintiffs' claims are barred by the limited remedy and limitation of damages provisions in Proposal B. The Court agrees with Defendant that Proposal B limits the damages available to Plaintiffs in this dispute. However, Defendant fails to establish it is entitled to summary judgment on its limited remedy defense.
(1) Limited remedy
Proposal B provides that Plaintiffs' only remedy in the event of an issue with the HSN100 will be repair or replacement of the HSN100. Defendant argues that this provision...
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