Mersen USA- Midland-MI Inc v. Graphite Machining Services & Innovations, LLC
OPINION and ORDER Directing Supplemental Briefing, Dismissing Claims and Denying as Moot 131 MOTION for Leave to File Sur-Reply. Set Motion Deadlines/Hearings as to 60 Second MOTION for Summary Judgment : (Mersen's supplemental brief due by 5/31/2013; GMSI's supplemental brief du 6/14/2013). Signed by District Judge Thomas L. Ludington. (SGam)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
MERSEN USA – MIDLAND-MI
Case No. 12-10961
Honorable Thomas L. Ludington
GRAPHITE MACHINING SERVICES
& INNOVATIONS, LLC,
OPINION AND ORDER DIRECTING SUPPLEMENTAL BRIEFING,
DISMISSING CLAIMS, AND DENYING MOTION FOR SUR-REPLY
The parties’ papers only tangentially address the primary issue in this case — which party
breached their contract — and the Court will not address the issue until the parties present their
positions with greater clarity. Supplemental briefing will be ordered pursuant to a briefing
schedule. The parties’ other claims, however, lack merit and can be dismissed at this stage
without further investment.
On February 1, 2013, Mersen USA – Midland-MI, Inc. filed its second motion for
summary judgment. In that motion, Mersen argues that judgment as a matter of law is warranted
on the four counterclaims brought by Graphite Machining Services & Innovations, LLC (GMSI).
Then, without devoting any argument to its own three claims, Mersen requests “that this Court
grant its Motion for Summary Judgment on its Complaint against GMSI and on GMSI’s
Counterclaim against Mersen.” Pl.’s Mot. 20, ECF No. 60. A unique approach, to be sure.
GMSI responded to the motion for summary judgment on February 25, 2013, and Mersen
filed its reply brief on March 14, 2013. GMSI then moved for leave to file a sur-reply, asserting
that new information has come to light which necessitates additional briefing. According to
GMSI, the evidence was not available on February 25, 2013 when it responded, but only in the
days and weeks that followed.
But the Court cannot make heads or tails of the parties’ breach of contract claims. This is
in no small part due to the fact that the attorneys have spent little time with the material questions
posed by the case.
The logical starting point is the parties’ pleadings. Mersen’s complaint contains three
individual claims: breach of contract, unjust enrichment, and statement of account. GMSI’s
counter-claim asserts four claims: breach of contract, breach of implied warranties, unjust
enrichment, and tortious interference with business relations and expectancy. Established thus
far — this case is about a contract.
In its motion, Mersen indicates there is an express contract governing the parties’
relationship. See Pl.’s Mot. 19 (“Here, an express contract exists between the parties.”). GMSI
agrees that there are express contracts, Def.’s Resp. 19 (“the express contracts” are the “work
orders and invoices”), which are supplemented by implied contractual terms (“the quality
standards at issue must be derived from the parties’ nearly twenty year course of dealings”), id.
So there is an express contract, the parties agree on that, with the possibility of additional terms
implied through a course of dealing.1
The Uniform Commercial Code (UCC) “describes a course of dealing as ‘a sequence of conduct
concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as
establishing a common basis of understanding for interpreting their expressions and other conduct.’ ” E. Allan
Farnsworth, Contracts § 7.13 (4th ed. 2004) (quoting UCC § 1-303(b)). Professor Farnsworth, describing the effect
of a course of dealing, continues:
The concept of a course of dealing, therefore, is relevant only when the parties to an agreement
have dealt with each other in similar transactions on previous occasions. Under the Code, a
sequence of conduct by the parties in their earlier transactions “may give particular meaning to
specific terms . . . and may supplement or qualify the terms” of their later agreement. UCC § 1303(d). The Code does not make it a condition that the language be ambiguous. The words
Both Mersen and GMSI assert the other breached this contract. What is a threshold
requirement for assessing those claims? Identification of the terms of the contract.2 But the
Court’s analysis is limited by the fact that the attorneys did not identify those terms (and maybe
the parties never have as well).
Mersen argues that, as a matter of law, it is entitled to payment for performing its
obligations under the agreement between the parties. But Mersen does not deign to indicate what
its obligations under the contract were or how it substantially performed them.
GMSI’s papers are equally deficient.3 GMSI acknowledges there are express contracts,
which it claims are buttressed by implied terms from the parties’ course of dealing. But like
Mersen, GMSI takes no time to indicate what those terms are, nor does GMSI indicate clearly
why Mersen’s performance did not comply.
Suffice it to say, the parties have skipped over the first, and most important, issue in this
case: the contract that governed their respective performance. Without a clear understanding of
supplement or qualify make it clear that conduct may have an effect beyond mere interpretation of
those terms. Although the term course of dealing has been popularized by the Code, the
underlying idea that an agreement is to be read in light of the parties’ previous dealings is not
novel and has force even in situations to which the Code is not literally applicable. See
Restatement (Second) § 223 (stating an analogous rule).
Farnsworth, Contracts § 7.13 (4th ed. 2004) (emphasis in original).
Such as standards for Plaintiff’s performance; terms relating to Defendant’s right of inspection; those
concerning whether goods are accepted or rejected, and if rejected, whether Plaintiff has an opportunity to cure.
Although these are UCC terms, and the parties agree the UCC does not apply here, they offer no authority for the
proposition, and further, the Court is not convinced the contract cannot constitute a mixed contract for the sale of
goods and services under Michigan’s “predominant factor test.” See Dahlmann v. Sulcus Hospitality Tech., Corp.,
63 F. Supp. 2d 772, 774–75 (E.D. Mich. 1999). Additionally, even in cases where the UCC does not apply, courts
often analogize to the UCC when faced with service contracts. See UMIC Gov’t Sec., Inc. v. Pioneer Mortg. Co.,
707 F.2d 251, 253 (6th Cir. 1983) (“While the U.C.C. Article II applies to goods . . . it may be applied by analogy”).
GMSI attached, quite literally, thousands of pages of exhibits to its responsive brief. See ECF Nos. 66–
122. Based on the need for the Court to have and review these pages, one would think GMSI would spend some
time citing to those materials to establish a factual predicate for its claims. It was not to be. Instead, GMSI includes
one page of “Factual Background,” see Def.’s Resp. 2–3, ECF No. 66, and leaves the Court to wonder why all these
pages were necessary.
that contractual agreement, or the parties’ duties thereunder, the Court cannot assess whether the
parties have breached. This glaring omission must be remedied.
While the Court will not decide the parties’ breach of contract claims, the other claims
involved here are meritless and will be dismissed.4
Noted above, the parties agree they are governed by an express agreement. This begs the
question: Why do they both maintain claims for unjust enrichment? Under Michigan law,5 “a
contract will be implied” to prevent unjust enrichment “only if there is no express contract
covering the same subject matter.” Hudson v. Mathers, 770 N.W.2d 883, 887 (Mich. Ct. App.
2009) (citing Belle Isle Grill Corp. v. Detroit, 666 N.W.2d 271, 280 (Mich. Ct. App. 2003)).
Mersen’s claim for an account stated will not be dismissed at this point, as GMSI did not move for
summary judgment on the claim or assert it should be dismissed entirely. Under Michigan law, an account stated is
“a balance struck between the parties . . . where a plaintiff is able to show that the mutual dealings which have
occurred between two parties have been adjusted, settled, and a balance struck.” Watkins v. Ford, 37 N.W. 300, 302
(Mich. 1888) (internal quotation marks omitted); see also Keywell and Rosenfeld v. Bithell, 657 N.W.2d 759, 777
(Mich. Ct. App. 2002) (per curiam).
In order to demonstrate that fees for services have become an account stated, Mersen must prove that
GMSI “either expressly accepted the bills by paying them or failed to object to them within a reasonable time.”
Keywell, 657 N.W.2d at 777 (citing Corey v. Jaroch, 200 N.W. 957, 958 (Mich. 1924). It is clear GMSI did not
pay the invoices Mersen issued — this is why Mersen brought suit in the first place. So the only remaining question
is whether GMSI failed to object to the invoices within a reasonable time. Although not disputed at this time, the
Court is highly dubious Mersen can succeed on this claim. This is because Mersen is suing on 53 invoices that were
issued between September 13, 2011 and December 1, 2011. See Pl.’s Mot. Ex. 1, at 1–53. Mersen admits that
“GMSI failed to pay” for its services, and “in November of 2011,  GMSI began to complain of alleged visual
defects with Mersen’s coating services.” Pl.’s Mot. 4. Attached to GMSI’s response is a Rework/Replace/Credit
document created by Mersen. The document establishes that GMSI complained as early as October 3, 2011:
“Customer supplied material for double coating. 10 came out really rough after first coating run. Customer will not
accept.” Def.’s Resp. AOE Ex. 8 (emphasis added). This shows GMSI was complaining as of October 3 — only 20
days after the first invoice involved in this lawsuit. Likely a reasonable delay, as a matter of law.
The Court has jurisdiction over this matter pursuant to diversity. “[F]ederal courts sitting in diversity
apply state substantive law and federal procedural law.” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 416
(1996). Further, courts must apply the substantive law of the state in which the court sits. See Mill’s Pride, Inc. v.
Continental Ins. Co., 300 F.3d 701, 704 (6th Cir. 2002). Here, that state is Michigan, and the parties’ claims are
therefore governed by Michigan law.
GMSI indicates its unjust enrichment claim is “an alternative theory in the event the
Court were to determine a valid contract does not exist.” Def.’s Resp. 19. An interesting
strategy, given the fact that Mersen asserts there is an express contract and GMSI agrees. So
why the need for the alternative theory?
But at least GMSI addresses the issue; Mersen makes no attempt at all. It maintains that
an express contract exists which bars GMSI’s unjust enrichment claim, see Pl.’s Mot. 19, and
then hypocritically demands judgment on its own unjust enrichment claim, id. at 20. Both
parties’ claims for unjust enrichment are meritless and will be dismissed, as each acknowledges
an express contract.
Also demanding attention at this juncture are two other GMSI counterclaims: those for
breach of implied warranty and tortious interference with business relationships. Because there
is no basis in fact for these two claims, they will be dismissed as well.
The parties here agree that the contract between them was for the delivery of services, not
goods. See Pl.’s Mot. 10 (“the contract between GMSI and Mersen was for services — not the
sale of goods”); Def.’s Resp. 4 (“Mersen claims in its motion that only services are involved
here. GMSI agrees.”). Michigan law does not recognize a breach of implied warranty for
merchantability in connection with a service contract, and GMSI’s claim for breach of implied
warranty thus fails.
In a per curiam opinion, the Michigan Court of Appeals established as follows:
Plaintiffs also argue that the trial court erred in dismissing the implied warranty
claim. Plaintiff cites Nash v. Sears Roebuck & Co., 383 Mich. 136; 174 N.W.2d
818 (1970), for the proposition that “[t]here is a common-law implied warranty in
connection with the rendering of a service contract that the service contract will
be performed in a safe and skillful manner.” However, Nash does not recognize
an implied warranty in connection with a service contract. Rather, the Court
recognized an implied duty in every contract for work or services, the breach of
which may form the basis for an action in tort. As this Court observed in Co-Jo,
Inc. v. Strand, 226 Mich.App 108, 114–115; 572 NW2d 251 (1997), superseded
by statute on other grounds as stated in Compuware Corp. v. Moody’s Investor
Services, Inc., 499 F.3d 520, 532 (6th Cir. 2007)[,] whether negligent
performance of a service contract may constitute a breach of an implied warranty
is a distinct question. As in Co-Jo, Inc., any negligent performance of a service
contract does not establish breach of an implied warranty.
Butler v. Michigan Consol. Gas Co., No. 278063, 2008 WL 2268308, at *1 (Mich. Ct. App. June
3, 2008) (unpublished) (per curiam).
This has not been lost on GMSI, and instead of heedlessly pursuing its meritless breach
of implied warranty claim, it admits that “the UCC does not govern services and there is no
‘implied warranty’ available for services under Michigan law.” Def.’s Resp. 4. But GMSI,
refusing to give up, changes tack: “there is an implied duty in contracts for services that the thing
agreed to be done is performed with ordinary care.” Id. Noted above, this is true. But then
GMSI boldly announces “[n]ow that Mersen asserts that services, not goods, were provided,
GMSI proceeds with an implied duty claim, as opposed to an implied warranty theory.” Id.
Of course, these claims are not interchangeable, but “distinct.” Butler, No. 278063, 2008
WL 2268308, at *1. GMSI offers no authority for the proposition that it may jump from one
horse to another midstream simply because they are “similar, but operate under different names.”
Def.’s Resp. 4 n.2. As the Sixth Circuit established in Naples v. Lowellville Police Dept., 125 F.
App’x 636, 644 (6th Cir. 2005), a claim should be denied when asserted “for the first time in
response to [a] motion for summary judgment” because such a claim has not been raised
properly. See id. (“we further find that this due process liberty interest claim was never properly
raised by plaintiff because he did not seek to amend the complaint and asserted this new claim
for the first time in response to defendants’ motions for summary judgment.”). Likewise,
GMSI’s claim for breach of implied duty, raised for the first time in response to Mersen’s
motion, is not properly before the Court, and it will be rejected.
GMSI’s claim for tortious interference with business relationships is also without merit.
Under Michigan law, tortious interference with a business relationship or expectancy involves
the following elements:
(1) the existence of a valid business relationship or expectancy that is not
necessarily predicated on an enforceable contract, (2) knowledge of the
relationship or expectancy on the part of the defendant interferer, (3) an
intentional interference by the defendant inducing or causing a breach or
termination of the relationship or expectancy, and (4) resulting damage to the
party whose relationship or expectancy was disrupted.
Health Call of Detroit v. Atrium Home & Health Care Servs., Inc., 706 N.W.2d 843, 849 (Mich.
Ct. App. 2005) (citations omitted).
“To establish that a lawful act was done with malice and without justification, the
plaintiff must demonstrate, with specificity, affirmative acts by the defendant that corroborate the
improper motive of the interference.” BPS Clinical Labs. v. Blue Cross and Blue Shield of
Michigan, 552 N.W.2d 919, 925 (Mich. Ct. App. 1996) (per curiam) (citing Feldman v. Green,
360 N.W.2d 881, 886 (Mich. Ct. App. 1984)). GMSI has produced no evidence, even in the
thousands of pages it submitted, demonstrating affirmative acts by Mersen carried out with the
intention of interfering with GMSI’s business relationships.
GMSI argues that Mersen “intentionally provided purification and coating to GMSI that
Mersen knew was defective, and not in compliance with Mersen’s stated quality control
standards, and above the levels of acceptable impurities.” Def.’s Resp. 17. Maybe so, but even
if this is true, it is not evidence that Mersen did so to interfere with GMSI and its customers.
GMSI claims “Mersen knew the damage its defective coating was causing and could cause
GMSI.” Id. Again, this is not the evidence necessary to support the conclusion that Mersen
provided defective coatings with the intention of subverting GMSI’s business relationships.
GMSI also claims that “Mersen expressly states they ‘will actively pursue [GMSI’s
customers’] business.’ ”
Id. at 18.
But when the evidence is viewed without bracketed
mischaracterizations, it does not support GMSI’s assertion. In an intercompany email, one
Mersen employee wrote to another, “GMSI needs to know that when we bump up against them
at any customer, we will actively pursue that business.” Def.’s Mot. Ex. 17. With these words,
which Mersen made GMSI aware of (as the email was forwarded to GMSI), Mersen indicates
that it will not fail to pursue business simply because GMSI pursues it as well. This does not
corroborate a claim for tortious interference because it does not demonstrate Mersen’s
interference with GMSI’s current customers. It only indicates Mersen will not refrain from
pursuing business from companies GMSI pursues as well.
This email does not demonstrate a lawful act “done with malice and without
justification,” BPS Clinical Labs., 552 N.W.2d at 925, but a justifiable business strategy for
pursuing potential business.
One Mersen made GMSI aware of.
“Where evidence of an
unlawful purpose is absent, the policy of this state will not condemn a party in the proper
exercise of a legal right.” Feldman, 360 N.W.2d at 890 (footnote omitted).
GMSI’s additional histrionic assertions that “Mersen had a history of trying to pin GMSI
in a corner to harm its business,” id. at 17, and that “Mersen admitted GMSI was not an
important customer,” id. at 17–18, have no relevance to whether it provided the services
complained of here in order to harm GMSI’s relationships. Because it has not offered more,
GMSI has not satisfied its prima facie case for tortious interference, and the claim will be
What remains to be discussed are the parties’ next actions in the case. Because all that
remains are their claims for breach of contract (in addition to Mersen’s precarious claim for an
account stated), they will be directed to file supplemental briefing addressing those claims alone.
The supplemental briefs should contain careful and accurate references to the discovery
record and concise, clear, well-reasoned legal arguments.
These briefs must contain each
parties’ focused view of the terms of the contract, the parties’ circumstances, and the governing
Mersen’s brief will be due first, as it is the party that moved for summary judgment. Its
brief will be aimed at establishing how it did not breach the contract (after explaining the
applicable terms, of course) because it performed its obligations thereunder. Mersen will also
present its argument for how GMSI is instead the party in breach.
GMSI will then respond, indicate what contract terms govern and why, and then present
its argument to demonstrate Mersen did not live up to those terms. GMSI must indicate, clearly
and concisely, how it has been damaged by this breach. Further, if GMSI wishes to stretch
damages beyond those currently known to extend to consequential losses, it must explain why
that should be done and present legal authority for the proposition.6
As established by the Michigan Supreme Court:
[T]he damages recoverable for breach of contract are those that arise naturally from the breach or
those that were in contemplation of the parties at the time the contract was made. Application of
this principle in the commercial contract situation generally results in a limitation of damages to
the monetary value of the contract had the breaching party fully performed under it.
Lawrence v. Will Darrah & Assoc., Inc., 516 N.W.2d 43, 45 (Mich. 1994) (citations omitted) (quoting Hadley v.
Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854)).
Accordingly, it is ORDERED that Mersen’s claim for unjust enrichment (Count II) is
DISMISSED with prejudice.
It is further ORDERED that GMSI’s counterclaims for unjust enrichment (Count II),
breach of implied warranty (Count III), and tortious interference (Count IV) are DISMISSED
It is further ORDERED that Mersen is DIRECTED to file its supplemental brief no later
than May 31, 2013. The brief is limited to no more than fifteen pages.
It is further ORDERED that GMSI is DIRECTED to file its supplemental brief no later
than June 14, 2013. The brief is likewise to be no more than fifteen pages. No responsive briefs
will be permitted.
It is further ORDERED that GMSI’s motion for leave to file a sur-reply, ECF No. 131, is
DENIED as moot.
Dated: May 22, 2013
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing
order was served upon each attorney or party of record
herein by electronic means or first class U.S. mail on May
s/Tracy A. Jacobs
TRACY A. JACOBS
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