Whitesell Corporation v. Whirlpool Corporation et al

Filing 611

OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)

UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF MICHIGAN S O U T H E R N DIVISION

W H I T E S E L L CORPORATION, P l a in tif f , C a se No. 1:05-CV-679 v. H O N . ROBERT HOLMES BELL W H I R L P O O L CORPORATION, W H IR L P O O L MEXICO S.A. de C.V., a n d JOSEPH SHARKEY, D e f e n d a n ts , and W H I R L P O O L CORPORATION, C o u n te r- P l a in tif f , v. W H I T E S E L L CORPORATION, C o u n ter -D e f e n d a n t. / OPINION T h is matter is before the Court on Defendant and Counter-Plaintiff Whirlpool C o rp o ra tio n 's motion for partial summary judgment on Plaintiff and Counter-Defendant W h ite se ll Corporation's claim for lost profits (Dkt. No. 434). As part of its motion, D e f en d a n t asks this Court to declare a provision limiting Defendant's breach of contract lia b ility contained in Defendant's purchase orders (the "liability limitation") enforceable as

a matter of law, and thereby preclude all of Plaintiff's claims for lost profits. (Dkt. No. 435, D e f .'s Mot. 8-9, 12-14.) Plaintiff has not moved to have the liability limitation declared u n e n f o rc e a b le as a matter of law. However, "district courts are widely acknowledged to p o s s e ss the power to enter summary judgments sua sponte, so long as the losing party was o n notice that she had to come forward with all of her evidence." Celotex Corp. v. Catrett, 4 7 7 U.S. 317, 326 (1986). On September 4, 2009, this Court notified Defendant that it sh o u ld come forward with all of its evidence tending to show that the liability limitation is n o t unenforceable as a matter of law. (Dkt. No. 561, 09/04/2009 Order.) For the reasons that f o llo w , this Court will grant summary judgment in favor of Plaintiff declaring the liability lim ita tio n unenforceable as a matter of law. I. Factual Background O n March 15, 2002, the parties jointly executed a "Strategic Alliance Agreement" ("2 0 0 2 SAA"). The 2002 SAA required Defendant to purchase all of Defendant's

re q u ire m e n ts for certain categories of "fasteners" (screws, nails, nuts, bolts, etc.) from P lain tiff over the term of the 2002 SAA. Defendant used boilerplate purchase orders to s o lic it these fasteners from Plaintiff. The purchase orders contained a provision stating: In no event shall Buyer be liable to Seller for anticipated profits o r for incidental or consequential damages for a claim of any k in d , or for any loss or damage arising out of or in connection w ith this agreement, or from any performance or breach, term in atio n or expiration of this agreement or any order. (D k t. No. 434, Def.'s Mot. Summ. J. Ex. 7 ¶ 20.)

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II . Law and Analysis M ic h . Comp. Laws § 440.2719 permits parties to "limit or alter the measure of d a m a g e s recoverable under [the Michigan Commercial Code]." Comment 1, however, p ro v id e s that "it is the very essence of a sales contract that at least minimum adequate re m e d ie s be available." Id. at cmt. 1. Furthermore, "there must be at least a fair quantum of re m e d y for breach of the obligations or duties outlined in the contract." Id. Comment 1 p ro v id e s that provisions impermissibly limiting liability are stricken from the agreement and re p la c e d by the remedies provided by the Michigan Commercial Code. Id. In pertinent part, the liability limitation in Defendant's purchase orders provides that " in no event shall [Defendant] be liable to [Plaintiff] for . . . any . . . damage arising . . . from a n y . . . breach . . . of [the 2002 SAA]." 1 (Dkt. No. 434, Def.'s Mot. Summ. J. Ex. 7 ¶ 20.) P a r a g ra p h 20 attempts to deprive Plaintiff of all remedies, including direct damages.2 B e c a u s e ¶ 20 does not provide Plaintiff with a "minimum adequate remed[y]" or "a fair q u a n tu m of remedy," it violates § 440.2719. It must be stricken from the agreement and Defendant argues the liability limitation can reasonably be read to exclude only anticipated profits, consequential and incidental damages, and when a contractual provision admits of two reasonable interpretations, the court should favor an interpretation that does not invalidate the provision. (Dkt. No. 566, Def.'s Resp. 5-6.) The Court holds, however, that the only reasonable interpretation of ¶ 20 is that it disclaims liability for "any loss or damage," and not just consequential and incidental loss or damage. Defendant argues that three other contractual provisions provide Plaintiff with the "minimum adequate remedies" necessary to permit this Court to enforce ¶ 20 without violating § 440.2719. (Dkt. No. 566, Def.'s Resp. 6-7.) None of these remedies, however, permits Plaintiff to recover any damages for Defendant's mere failure to purchase items from Plaintiff prior to the phase-out period. For a breach of this nature, therefore, ¶ 20 deprives Plaintiff of "minimum adequate remedies." 3
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re p la c ed by the contractual remedies provided by the Michigan Commercial Code, including th e right of a seller to seek lost profits for breach of contract. Mich. Comp. Laws § 4 4 0 .2 7 0 8 . Defendant argues that, for a liability limitation to be invalid under § 440.2719, it must b e both substantively and procedurally unconscionable. (Dkt. No. 566, Resp. 3-5.) Section 4 4 0 .2 7 1 9 does not require, though, that a provision that disclaims all contractual liability be p ro c e d u ra lly unconscionable for it to be unenforceable. It requires only that such a provision d e p riv e a party of "minimum adequate remedies" for it to be unenforceable. Under § 2719(3), a limitation on consequential damages will only be unenforceable if it is u n c o n s c io n a b le . But the provision at hand disclaims liability for all damages, not just c o n s e q u e n tia l damages, and so § 2719(3) does not apply. I I I . Conclusion U n d e r Mich. Comp. Laws § 440.2719, a contractual provision is invalid if it deprives a contracting party of "minimum adequate remedies." The liability limiting provision co n tain ed in Defendant's purchase orders violates § 440.2719 by disclaiming Defendant's lia b ilit y for "any loss or damage" arising from Defendant's breach of the 2002 SAA. The p ro v is io n is therefore unenforceable as a matter of law. A n order consistent with this opinion will be entered.

Dated: October 13, 2009

/s/ Robert Holmes Bell ROBERT HOLMES BELL UNITED STATES DISTRICT JUDGE

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