Metaldyne, LLC v. JD Norman Industries, Inc.
OPINION AND ORDER Denying Plaintiff's "Emergency" Motion for Declaratory Judgment or, in the Alternative, for Preliminary Injunction (Dkt. 10 ). Signed by District Judge Mark A. Goldsmith. (Sandusky, K)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
Case No. 17-cv-10758
HON. MARK A. GOLDSMITH
JD NORMAN INDUSTRIES, INC.,
OPINION AND ORDER
DENYING PLAINTIFF’S “EMERGENCY” MOTION FOR
DECLARATORY JUDGMENT OR, IN THE ALTERNATIVE,
FOR PRELIMINARY INJUNCTION (Dkt. 10)
This matter is before the Court on Plaintiff Metaldyne, LLC’s “emergency” motion for a
declaratory judgment or, in the alternative, a preliminary injunction (Dkt. 10), to which
Defendant JD Norman Industries, Inc. filed a response (Dkt. 19). A hearing on the motion was
conducted on April 4, 2017. For the reasons stated below, the Court denies the motion.
Metaldyne manufactures and supplies certain automotive parts to JD Norman pursuant to
the parties’ contracts. 2d Am. Compl. ¶¶ 8, 10; Pl. Br. at 2, 7-9; Def. Resp. at 4. JD Norman
performs certain machining services on these parts and then delivers them to General Motors
Corporation for use in the 6.6L Duramax, Gen V 5.3L and 6.2L and L850 programs (“GM
programs”), as well as to Fiat Chrysler Automobiles for use in the Tigershark 2.0L and 2.4L
programs (“FCA programs”). Id. The payment terms for goods supplied for the Gen V 5.3L
GM program are Net-45, while the payment terms under the other GM programs are Net-47. 2d
Am. Compl. ¶ 9.1 The payment terms for goods supplied for the FCA programs are Net-70. Id.
Metaldyne alleges that, within the last several months, JD Norman “has repeatedly failed
to make timely payments for the shipment of parts delivered under the GM programs and the
FCA programs.” Id. ¶ 13; Pl. Br. at 9 (“[S]ince November 2016, JD Norman has paid 141 of 152
invoices late, with days delinquent ranging from 1 to 27 (18 invoices were paid more than 16
days late).”). Metaldyne claims that JD Norman’s failure to make timely payments amounts to a
breach of the parties’ contracts and, as of March 8, 2017, JD Norman owed Metaldyne
approximately $2,785,385. 2d Am. Compl. ¶¶ 13, 15.2
Metaldyne further states that it sent a letter to JD Norman on March 6, 2017 demanding
that JD Norman would: “(1) pay its past due arrearage to Metaldyne of $475,251.00; (2) provide
adequate assurances that it would make full payment for all future amounts owed as such
payments became due; (3) agree to Net-20 payment terms going forward; and (4) provide
sufficient financial information to demonstrate it was not suffering financial difficulties.” Id.
¶ 17; see also 3/6/2017 Demand Letter, Ex. A to Am. Compl., at 2 (Dkt. 9-1). Metaldyne claims
that JD Norman rejected the Net-20 proposal, as well as the demand to provide financial
information. 2d Am. Compl. ¶ 19; Pl. Br. at 17 (“Late in the day on March 8th, and again via
letter received from its counsel on March 9th, JD Norman rejected Metaldyne’s demand for Net-
These “Net” numbers refer to the due dates for JD Norman’s payments to Metaldyne following
JD Norman’s receipt of the parts. Pl. Br. at 2-3; Def. Br. at 4-5. For example, Net-45 means that
JD Norman would pay Metaldyne 45 days “after JD Norman picks up the parts from
Metaldyne’s shipping dock.” Pl. Br. at 3.
In its response brief, JD Norman contends that it was “current on its payment obligations to
Metaldyne” at the times the initial complaint, first amended complaint, second amended
complaint, and the present motion were filed, see Def. Resp. at 5, which Metaldyne appears to
acknowledge, see also Pl. Br. at 22 (stating “payments are current as of this filing”).
20 payment terms and rejected its demand that JD Norman provide Metaldyne with any financial
information.” (emphasis omitted)). Metaldyne alleges that, by failing to respond to the demand
letter, JD Norman “repudiated the contract pursuant to [Mich. Comp. Laws §] 440.2609(4).” 2d
Am. Compl. ¶ 20; Pl. Br. at 17-21.
In its breach-of-contract claim, Metaldyne alleges that JD Norman breached the parties’
contracts by: (i) repeatedly failing to timely pay in accordance with the contracts’ terms; (ii)
failing to provide adequate assurance, which amounts to repudiation of the contracts; and (iii)
breaching its obligation of good faith and fair dealing. 2d Am. Compl. ¶¶ 27-29. Because of this
purported breach and repudiation, Metaldyne asserts in its declaratory-judgment claim that it is
entitled to exercise its rights as an aggrieved seller pursuant to Mich. Comp. Laws § 440.2703
and the common law. Id. ¶ 38.
Metaldyne filed the present “emergency” motion on March 17, 2017, claiming that “there
is a reasonable risk that JD Norman is financially distressed and therefore will fail to pay
Metaldyne millions of dollars that are owed for goods already delivered and to be delivered to JD
Norman.” Pl. Br. at 1-2. Metaldyne seeks a declaratory judgment or, in the alternative, a
preliminary injunction. The Court addresses each request in turn.
A. Declaratory Judgment
Metaldyne requests a declaratory judgment that it may exercise its rights as an aggrieved
seller under both Mich. Comp. Laws § 440.2703 and the common law. Pl. Br. at 1; Am. Compl.
¶ 42. This request is premised entirely on JD Norman’s purported breach and repudiation of the
See Am. Compl. ¶ 38 (“As a result of [JD Norman’s] breach and its
repudiation of the contracts, Metaldyne is entitled to exercise its rights as an aggrieved seller
pursuant to [Mich. Comp. Laws §] 440.2703 and the common law.”).
The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its
jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a); Fed. R. Civ. P. 57
(“These rules govern the procedure for obtaining a declaratory judgment under 28 U.S.C.
§ 2201.”). The exercise of jurisdiction in a declaratory judgment action is consigned to the
court’s discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). In exercising that
discretion, courts consider five factors:
(1) Whether the
(2) Whether the declaratory action would serve a useful
purpose in clarifying the legal relations at issue;
(3) Whether the declaratory remedy is being used merely for
the purpose of “procedural fencing” or “to provide an arena
for res judicata;”
(4) Whether the use of a declaratory action would increase
friction between our federal and state courts and improperly
encroach upon state jurisdiction; and
(5) Whether there is an alternative remedy which is better or
Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 554 (6th Cir. 2008) (citing Grand Trunk W. R.R.
Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984)).
Although Metaldyne correctly states in its motion the five-factor test regarding the
exercise of jurisdiction in a declaratory-judgment action, see Pl. Br. at 15-16, it does not actually
apply that test in any meaningful way. In fact, Metaldyne does not address how any of the five
factors weigh in favor of the Court exercising jurisdiction over this declaratory judgment matter
at this time. As such, Metaldyne has failed to carry its burden for its present request for a
JD Norman further argues that there are numerous issues that require further fact-finding
in this case, including whether JD Norman materially breached the contracts with Metaldyne,
and that this precludes a declaratory judgment. See generally Def. Resp. at 12-18. The Court
“[W]hen ruling under the Declaratory Judgment Act, usually only purely legal issues”
that “will not be clarified by further factual development” are “fit for judicial review.” Nat’l
Rifle Ass’n of Am. v. Magaw, 132 F.3d 272, 290 (6th Cir. 1997). This is consistent with the
approach courts have adopted in construing a party’s motion for declaratory judgment as a
“motion for summary judgment on an action for a declaratory judgment.” Kam-Ko Bio-Pharm
Trading Co. Ltd-Australasia v. Mayne Pharma (USA) Inc., 560 F.3d 935, 943 (9th Cir. 2009)
(emphasis added); Int’l Bhd. of Teamsters v. E. Conference of Teamsters, 160 F.R.D. 452, 456
(S.D.N.Y 1995) (same).
Metaldyne’s failure to establish its entitlement to a declaratory
judgment under the appropriate summary-judgment standard also warrants denial of this portion
of its motion.
Regarding JD Norman’s purported breach of contract for failing to timely pay Metaldyne
according to the contracts’ terms, there remain several issues of fact on whether such allegations
amount to material breaches. First, Metaldyne claims that, between November 1, 2016 and
March 17, 2017, “JD Norman has paid 141 out of 152 invoices late, including 18 invoices paid
more than 16 days late, with payments averaging 7 days delinquent.” Pl. Br. at 2, 9. In response,
JD Norman challenges Metaldyne’s factual conclusions, first arguing that the proper time period
for review should begin in June 2016, as that is the time when the parties’ prior case in this
district was settled. Def. Resp. at 8 & n.4. Based on this time period, JD Norman then claims
that it paid at least 50 invoices early, and that, on average, it has only been 4.8 days late on all
payments to Metaldyne since June 2016. Id. at 8. Thus, there is presently a factual dispute
concerning the timeliness of JD Norman’s payments.
Second, JD Norman contends that “marginally late payments are commonplace in the
automotive industry,” id., and that its late payments do not constitute a substantial or material
breach of the parties’ contracts, id. at 12-13. The case law is undoubtedly in JD Norman’s favor
on this issue. See JD Norman Indus., Inc. v. Metaldyne, LLC, 2016 WL 1637561, at *6 (E.D.
Mich. Apr. 16, 2016) (collecting cases and holding that “[c]ourts in this district have recognized
that late payment, or non-payment, of some invoices does not constitute a substantial breach in
the context of an automotive supply relationship”); see also Hodak v. Madison Capital Mgmt.,
LLC, 348 F. App’x 83, 90 (6th Cir. 2009) (“The determination whether a material breach has
occurred is generally a question of fact answered by weighing the consequences of the breach in
light of the customs of performance attendant to similar contracts.”). Further fact-finding is
required to determine the customs of performance regarding these automotive purchase orders
and whether JD Norman’s late payments amount to a material breach of such orders.
There also remain several issues of fact surrounding JD Norman’s purported repudiation
of the contracts. For instance, Metaldyne argues that it had “reasonable grounds to demand
adequate assurance” because JD Norman: (i) “repeatedly failed to pay Metaldyne on time”; (ii)
“reportedly struggled with a recently launched program”; (iii) “cancelled and [withdrew] from
another program with another of Metaldyne’s related companies”; and (iv) “increased its orders
on another program, which is often a signal that it is building a bank of parts.” Pl. Br. at 17.
Metaldyne then concludes that, “[t]o experienced automotive suppliers . . . these are all
indicators of an automotive supplier who is likely in trouble with its lender or equity source and
whose funds available to pay suppliers for goods delivered are usually restricted.” Id. While this
may be the case, the Court is not an “experienced automotive supplier” and Metaldyne’s
conclusion will require some sort of factual support to determine whether or not these
“indicators” would actually provide “reasonable grounds” to demand assurance.
There are also disputed factual issues regarding Metaldyne’s demand for a Net-20
payment term and access to potentially confidential financial information constituted a
“justified” demand, Mich. Comp. Laws § 440.2609(4); Precision Master, Inc. v. Mold Masters
Co., Nos. 268501, 268938, 2007 WL 2012807, at *4 (Mich. App. Ct. July 12, 2007) (per curiam)
(holding that the “demands by plaintiff did not constitute merely ‘adequate assurances’ of
performance, but in actuality comprise a unilateral attempt to alter and favorably enhance the
contractual provisions”); Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co., 532
F.2d 572, 582 (7th Cir. 1976) (demand for adequate assurances of performance is “a protective
device when reasonable grounds for insecurity arise; it is not a pen for rewriting a contract in the
absence of those reasonable grounds having arisen”), and whether the assurances JD Norman
offered were adequate according to the “commercial standards” of the automotive industry,
Mich. Comp. Laws § 440.2609(2) (“[T]he reasonableness of grounds for insecurity and the
adequacy of any assurance offered shall be determined according to commercial standards.”).
Given the number of issues requiring further factual development in this case, a
declaratory judgment that Metaldyne is entitled to exercise its rights under Mich. Comp. Laws
§ 440.2703 and the common law is premature.
See Wal-Mart Real Estate Bus. Trust v.
Eastwood, LLC, No. 1:13-cv-1348, 2015 WL 12910670, at *7 (W.D. Mich. July 27, 2015)
(recognizing that awarding a declaratory judgment would require the district court “to determine
the substantive breach of contract claims,” which would be “premature” because “there remain
significant factual disputes” surrounding those claims).
A declaratory judgment is not
appropriate at this time, and this portion of Metaldyne’s motion is denied.
B. Preliminary Injunction
The standard for a preliminary injunction is well known: “A plaintiff seeking a
preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to
suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his
favor, and that an injunction is in the public interest.” Winter v. Natural Res. Def. Council, Inc.,
555 U.S. 7, 20 (2008). Typically, no one factor is dispositive; rather, they are to be considered as
an integrative whole. Liberty Coins, L.L.C. v. Goodman, 748 F.3d 682, 690 (6th Cir. 2014)
(“Each of these factors should be balanced against one another and should not be considered
prerequisites to the grant of a preliminary injunction.”).
As an initial matter, Metaldyne is requesting a preliminary injunction that would require
“JD Norman to pay Metaldyne at Net-20 terms for goods sold in order to protect payment for
goods shipped to JD Norman.”
Pl. Mot. at iv.
However, the “purpose of a preliminary
injunction is simply to preserve the status quo.” United States v. Edward Rose & Sons, 384 F.3d
258, 261 (6th Cir. 2004) (emphasis added); Delphi Auto. PLC v. Absmeier, 167 F. Supp. 3d 868,
879 (E.D. Mich. 2016) (same). Granting Metaldyne’s requested preliminary injunction would go
beyond maintaining the status quo and would, in effect, improperly rewrite the parties’ contracts.
See Corbin v. Texaco, Inc., 690 F.2d 104, 105 (6th Cir. 1982) (“In equity, a court cannot in
effect alter specific terms of the contract by a preliminary injunction, unless there is a contention,
such as fraud or mistake, that justifies the revision.”). While it may be “necessary to alter the
existing situation” if the “currently existing status quo itself is causing one of the parties
irreparable injury,” United Food & Commercial Workers Union, Local 1099 v. Sw. Ohio Reg’l
Transit Auth., 163 F.3d 341, 349 (6th Cir. 1998), Metaldyne does not argue that the existing Net45, -47, or -70 payment terms were the result of fraud or mistake, or that the terms themselves
are causing the alleged irreparable injury. For this reason alone, the request is improper and
warrants denial. Furthermore, a proper balancing of the four factors further counsels against
entering Metaldyne’s requested preliminary injunction.
First, Metaldyne must show “more than a mere possibility of success” on the merits of its
claim. Ne. Ohio Coal. for Homeless v. Husted, 696 F.3d 580, 591 (6th Cir. 2012) (per curiam).
Given the numerous genuine factual issues that remain unresolved regarding the alleged breach
and repudiation of the contracts, see supra, Metaldyne has failed to establish that it has a strong
likelihood of success on the merits.
Second, Metaldyne has failed to show the very real possibility of irreparable harm absent
immediate equitable relief. “A plaintiff’s harm from the denial of a preliminary injunction is
irreparable if it is not fully compensable by monetary damages.” Obama for Am. v. Husted, 697
F.3d 423, 436 (6th Cir. 2012). Metaldyne posits that “[i]f JD Norman files for bankruptcy
protection and/or runs out of sufficient working capital to pay its customers and vendors, then
Metaldyne will very likely not be paid what it is owed.” Pl. Br. at 23. This assertion goes only
to monetary damages, and its mere apprehension about any conceivable future bankruptcy or
cessation of operations does not rise above the “speculative or theoretical” level. Contech
Casting, LLC v. ZF Steering Sys., LLC, 931 F. Supp. 2d 809, 818 (E.D. Mich. 2013); see also
Delphi Auto. PLC, 167 F. Supp. 3d at 885 (harm must be “certain and immediate” and not
“speculative or theoretical”); Smith v. State Farm Fire & Cas. Co., 737 F. Supp. 2d 702, 713
(E.D. Mich. 2010) (“In establishing the element of irreparable harm, a party seeking an
injunction bears a heavy burden and must demonstrate more than an unfounded fear of harm.”).
Third, the balance of equities does not tip in favor of Metaldyne. Again, Metaldyne’s
purported monetary injury is based upon the speculative notion of a “possible bankruptcy filing”
or if “JD Norman ceases operations.” Pl. Br. at 24. In response, JD Norman contends that it
would be substantially harmed by an earlier payment date under a Net-20 term because it would
merely “compound the problems Metaldyne complains of and unduly squeeze JD Norman’s cash
flow.” Def. Resp. at 24. The Court finds that the issuance of Metaldyne’s requested injunction
would likely cause more harm to JD Norman than it would to Metaldyne.
Finally, although the public has an interest in having contracts enforced, see Cellnet
Commc’ns, Inc. v. New Par, 291 F. Supp. 2d 565, 572 (E.D. Mich. 2003), there still remain
several genuinely disputed factual issues concerning JD Norman’s purported breach of the
parties’ contracts. The public interest would not be served by a court unilaterally altering
contractual terms that favor the moving party absent a finding that the other contracting party’s
conduct constituted a material breach.
Metaldyne’s request for a preliminary injunction is denied.
For the reasons stated above, Metaldyne “emergency” motion for a declaratory judgment
or, in the alternative, a preliminary injunction (Dkt. 10) is denied.
Dated: April 19, 2017
s/Mark A. Goldsmith
MARK A. GOLDSMITH
United States District Judge
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record and
any unrepresented parties via the Court's ECF System to their respective email or First Class
U.S. mail addresses disclosed on the Notice of Electronic Filing on April 19, 2017.
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