Whirlpool Corporation v. Grigoleit Company, The

Filing 123

OPINION AND ORDER OF THE COURT CONTAINING FINDS OF FACT AND CONCLUSIONS OF LAW AFTER BENCH TRIAL; parties to file agreed upon credit amount within 28 days; if agreement cannot be reached each party to file simultaneous submissions with support thereof within 56 days; signed by Chief Judge Paul L. Maloney (Chief Judge Paul L. Maloney, acr)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

WHIRLPOOL CORPORATION,
Plaintiff/Counter-Defendant
v.

Case No: 1:06-cv-0195
HONORABLE PAUL L. MALONEY
Chief United States District Judge

THE GRIGOLEIT COMPANY,
Defendant/Counter-Plaintiff
__________________________________/

OPINION OF THE COURT CONTAINING FINDINGS OF FACT
AND CONCLUSIONS OF LAW AFTER BENCH TRIAL

INTRODUCTION
This lawsuit arises from a dispute between Plaintiff/Counter-Defendant, Whirlpool Corporation,
(hereinafter “Whirlpool”), and Defendant/Counter-Plaintiff, The Grigoleit Company, (hereinafter
“Grigoleit”). Grigoleit supplied Whirlpool with knobs, a customer “touch point,” for
Whirlpool’s top-load washers and dryers, manufactured in Clyde and Marion, Ohio. Trial Tr.
vol. I, 55, Dec. 15, 2008, ECF No. 110. Whirlpool is an international corporation based in
Benton Harbor, Michigan. Second Am. Compl. 2, ECF No. 37. Grigoleit resides in Decatur,
Illinois with an affiliate, Mid-South Tool located in Hartsell, Alabama.
This Court has unquestioned diversity jurisdiction pursuant to 28 U.S.C. § 1332 (2006).
The Court heard proofs over multiple days of testimony. The principal witnesses in this
litigation are: Mr. Timothy Slade (Slade), Fabric Care Buyer for Whirlpool, Mr. Todd Beller
(Beller), Fabric Care Supply Base Manager, Mr. Joel Winick (Winick), Sales Manager for
Grigoleit, Mr. Robert Howie (Howie), President and General Manager of Grigoleit, Mr. Dean
Ortinau (Ortinau), Controller of Grigoleit, and Mr. Rodney Crawford (Crawford), Expert Witness
Accountant who testified on behalf of Whirlpool.
After several years of mutually beneficial, relatively uneventful business relations, on November
4, 2004, Grigoleit notified Whirlpool of price increases on six parts. Pl.’s Trial Ex. 2. Winnick,
Sales Manager for Grigoleit, expanded the parts list increases shortly thereafter to sixty. Pl.’s
Trial Ex. 3. Grigoleit was the sole supplier of these parts to Whirlpool. Trial Tr. vol. I, IV,

55–56, 198, 713, Dec. 15, 2008, Jan. 7 2009, ECF No. 110, 113. With gap periods which the
Court ultimately finds significant, communication occurred between the parties, culminating in
an agreement in early February 2005. Pl.’s Trial Ex. 1.
The parties operated under the “agreement” until late 2005 at which time, Whirlpool secured
other suppliers for the parts. Trial Tr. vol. I, 207, 201, 212–14, ECF No. 110. Whirlpool asserts
it paid in excess of $1.3 million due to the price increases demanded by Grigoleit above the price
that alternative suppliers, eventually substituted, charged Whirlpool. Grigoleit demands it be
paid for parts delivered and additional amounts pursuant to the agreement.
Whirlpool has interposed a defense of unconscionability under Michigan law. Grigoleit denies
that any of its actions were unconscionable and seeks payment pursuant to the agreement.
Application of Michigan Law to the Dispute
The parties concur that Michigan law guides the determination of its dispute.
Michigan Law of unconscionability
The unconscionability provision of the Michigan Commercial Code, Mich. Comp. Laws §
440.2302 (2009), mirrors the unconscionability provision of the U.C.C. § 2-302 (2003).
(1) If the court as a matter of law finds the contract or any clause of the contract to
have been unconscionable at the time it was made the court may refuse to enforce
the contract, or it may enforce the remainder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause
thereof may be unconscionable the parties shall be afforded a reasonable
opportunity to present evidence as to its commercial setting, purpose and effect to
aid the court in making the determination.
Mich. Comp. Laws § 440.2302 (2009).
Accordingly, the Court must focus on the contested parts of the agreement and determine under
the evidence presented at trial whether all, some or none of the constituent parts meets the test for
unconscionability under Michigan law.
Under Michigan law, a contract or one of its provisions will be considered unconscionable only
where both procedural and substantive unconscionability are present. Clark v. DaimlerChrysler
Corp., 706 N.W.2d 471, 474 (Mich. Ct. App. 2005) (citing Nw. Acceptance Corp. v. Almont
Gravel, Inc., 412 N.W.2d 719, 723 (Mich. Ct. App. 1987)); see also Andersons, Inc. v. Horton
Farms, Inc., 166 F.3d 308, 322 (6th Cir. 1998) (summarizing Michigan law on
unconscionability). In Allen v. Mich. Bell Tel., 171 N.W.2d 689 (Mich. Ct. App. 1969), the
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Court described the inquiry as follows: “1) What is the relative bargaining power of the parties,
their relative economic strength, the alternative sources of supply, in a word, what are the
options?; and 2) Is the challenged term substantively reasonable?” Id. at 692.
The party alleging a contract or clause is unconscionable must demonstrate “‘an absence of
meaningful choice on the part of one of the parties together with contract terms which are
unreasonably favorable to the other party.’” Pichey v. Ameritech Interative Media Servs., Inc.,
421 F.Supp.2d 1038, 1045 (W.D. Mich. 2006) (quoting Nw. Acceptance Corp., 412 N.W.2d at
723). See Coursey v. Caterpillar, Inc., 64 F.3d 662, No. 94–1348, 1995 WL 492923 at *3 (6th
Cir. Aug. 16, 1995) (Table) (per curiam) (placing the burden on the buyer to prove
unconscionability and citing James J. White & Robert S. Summers, Uniform Commercial Code,
1, § 12-11 at 607 (West Publishing Co. 3d ed. 1991)). Under Michigan law, whether a contract or
clause is unconscionable is a question for the court to decide as a matter of law. Andersons, 166
F.3d at 323 (citing Citizens Ins. Co. of Am. v. Proctor & Schwartz, 802 F.Supp. 133, 143 (W.D.
Mich. 1992) (citing Nw. Acceptance Corp., 412 N.W.2d at 722)). Unconscionability is
determined by the facts and circumstances at the time the contract was formed and not the facts
and circumstances at the time the suit was filed. Id.
I. PROCEDURAL UNCONSCIONABILITY CASES
When considering the first prong, procedural unconscionability, the Court examines “the relative
bargaining power between the parties, their relative economic strength, [and] the alternative
sources of supply . . . .” Nw. Acceptance Corp., 412 N.W.2d at 723. Procedural
unconscionability arises when the weaker party to an agreement has little or no bargaining power
and no realistic alternative but to accept the terms of the agreement. Clark, 706 N.W.2d at
474–475 (citing Allen, 171 N.W.2d at 692). When the weaker party was free to accept or reject
the term, no procedural unconscionability exits. Id. at 475. Almost forty years ago the Michigan
Court of Appeals explained the circumstances under which a party might not have any realistic
alternatives:
Implicit in the principle of freedom of contract is the concept that at the time of
contracting each party has a realistic alternative to acceptance of the terms offered.
Where goods and services can only be obtained from one source (or several
sources on non-competitive terms) the choices of one who desires to purchase are
limited to acceptance of the terms offered or doing without. Depending on the
nature of the goods or services and the purchaser’s needs, doing without may or
may not be a realistic alternative. Where it is not, one who successfully exacts
agreement to an unreasonable term cannot insist on the courts enforcing it on the
ground that it was “freely” entered into, when it was not. He cannot in the name
of freedom of contact be heard to insist on enforcement of an unreasonable
contract term against one who on any fair appraisal was not free to accept or reject
that term.

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Allen, 171 N.W.2d at 692. After examining several different opinions discussing procedural
unconscionability, the Sixth Circuit Court of Appeals concluded “the most important factors in
determining procedural unconscionability are (1) whether the relatively weaker party had an
alternative source with which it could contract, and (2) whether the contract term in question was
in fact negotiable.” Andersons, 166 F.3d at 324.
II. SUBSTANTIVE UNCONSCIONABILITY
Substantive unconscionability arises when the terms of the agreement are “not substantively
reasonable.” Clark, 706 N.W.2d at 475. “Reasonableness is the primary consideration.”
Hubscher & Son, Inc. v. Storey, 578 N.W.2d 701, 703 (Mich. Ct. App. 1998) (citing Stenke v.
Masland Dev. Co. Inc., 394 N.W.2d 418, 424 (Mich. Ct. App. 1986)); Gianni Sport Ltd. v.
Gantos, Inc., 391 N.W.2d 760, 762 (Mich. Ct. App. 1986)). “[A] term is substantively
unreasonable [where] the inequity of the term is so extreme as to shock the conscience.” Clark,
706 N.W.2d at 475. However, substantive unconscionability does not exist “simply because it is
foolish for one party and very advantageous to the other.” Id. (citing Gillam v. Mich. Mortg.Invt. Corp., 194 N.W. 981, 982 (Mich. 1923)). “‘The commercial setting, purpose, and effect of
the contractual provision determines whether that provision is substantively unreasonable or
unconscionable.’” Nw. Acceptance Corp., 412 N.W.2d at 722 (citing Reed v. Kaydon Eng’g
Corp., 196 N.W.2d 487, 488–89 (Mich. Ct. App. 1972)).
An early, and often quoted, Sixth Circuit case on appeal from the Eastern District of Michigan
interpreted a contract which provided that the law of Pennsylvania governed the agreement and
the court noted that unconscionability is rarely found in commercial settings.1 U.S. Fibres, 509
F.2d at 1045, 1048 (citing cases from outside the state of Michigan). Several federal district
courts interpreting Michigan law have noted the same, all citing U.S. Fibres. Pichey, 421
F.Supp.2d at 1045 (citing U.S. Fibres); Coursey, 1995 WL 492923 at *3 (citing U.S. Fibres);
Citizens Ins. Co., 802 F.Supp. at 143, overruled on other grounds by Detroit Edison Co. v.
NABCO, Inc., 35 F.3d 236 (6th Cir. 1994) (citing U.S. Fibres and others); WXON-TV v. A.C.
Nielson Co., 740 F.Supp. 1261, 1264 (E.D. Mich. 1990) (citing U.S. Fibres); see also Jacada
(Europe), Ltd. v. Int’l Mktg. Strategies, Inc., 401 F.3d 701, 716 (6th Cir. 2005) (Clay, J.,
concurring in part and dissenting in part), abrogated on other grounds by Hall St. Assocs. LLC v.
Mattel, Inc., 552 U.S. 576 (2008) (citing Citizens Ins. Co., U.S. Fibres, and WXON-TV). But see
Johnson v. Mobil Oil Corp., 415 F.Supp. 264, 266 (W.D. Mich. 1976) (citing J. White & R.
Summers, Uniform Commercial Code, § 12-11 at 385–386 (1972)). The only Michigan court
opinion making the same statement of law is unpublished and cites, as authority, a Western
District of Michigan opinion. See Coding Prods., Inc. v. Hale Co. of Lower Mich., Inc., No.

1

Furthermore, the court’s comment was dicta. The circuit court affirmed the district
court’s decision which “render[ed] extended discussion of the clauses which limited damages
under the contracts unnecessary.” U.S. Fibres, Inc. v. Proctor & Schwartz, Inc., 509 F.2d 1043,
1048 (6th Cir. 1975). The court went on to state that the UCC permits limiting consequential
damages so long as it is not unconscionable. Id.
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200406, 1998 WL 1997647, at *4 (Mich. Ct. App. Feb. 27, 1998) (per curiam) (citing Citizens
Ins. Co.). Michigan case law applying the doctrine of unconscionability in the context of “a
contract between merchants is ‘sparse.’” See Gianni Sport Ltd., 391 N.W.2d at 761.
Findings of Fact and Conclusions of Law
Whirlpool’s Claim of Substantive Unconscionability
As aforesaid, Whirlpool bears the burden of proof on its claim of substantive unconscionability.
On this prong of the two-part test, Whirlpool has clearly met its burden. The Court credits the
testimony of Crawford, Whirlpool’s accounting expert, who testified without persuasive
contradiction that Grigoleit was making a profit on its business with Whirlpool prior to
November 2004. Trial Tr. vol. II, 317, Dec. 16, 2008, ECF No. 111. Grigoleit unconvincingly
argues that Crawford’s testimony on the profit margin of Whirlpool’s business was inaccurate.
Crawford also cast doubt of Grigoleit’s justification for the price increase, that is decreasing
volume of parts ordered by Whirlpool. Id. at 336–337, 395–96. Specifically, Crawford testified
that based on his analysis, the reduction in volume did not increase costs for Grigoleit.
Defendant did not successfully rebut Crawford’s opinion. Accordingly, the Court concludes that
Grigoleit was certainly not losing money on the Whirlpool agreement prior to November 4, 2004.
Indeed, the evidence preponderates that it was making a profit. Therefore, the factual predicate
for Grigoleit’s first approach to Whirlpool (i.e. “we are losing money”) is not accepted as true by
the Court.
Concerning the size of the price increases, Grigoleit relies largely on the testimony of Howie, its
President, for justification. After full consideration of Howie’s testimony, it is clear to the Court
that he decided on the price increase numbers by a “seat of the pants” analysis which the Court
finds totally lacking in credibility. In short, Howie made up the prices on his asserted innate
sense of what his company needed for some unarticulated reason not shared with the Court and
his experience in the business. Howie admitted he brought no formula for determining prices.
He essentially hands the Court an ipse dixit statement concerning the price increases. Certainly,
the company had no persuasive cost data to offer the Court. Stunningly (in light of the testimony
of his associates), Howie also admitted that he had no notion of whether, even at the reduced
volumes, Grigoleit was making money on the Whirlpool parts. Trial Tr. vol. IV, 666, 850–851,
ECF No. 113. This, of course, was Crawford’s point precisely. To further buttress Whirlpool’s
contention, the Court also takes note that the increased income received by Grigoleit from the
“agreement” in Exhibit 1 almost exclusively ended up in personal compensation to Howie. Id. at
881–82; Pl.’s Trial Ex. 49. The Court also notes that Whirlpool acquired suitable replacement
parts from other suppliers after termination of the February 2005 agreement for approximately
one million dollars less. See Trial Tr. vol. II, 230, ECF No. 111.
Crawford also testified credibly about the price increases. Grigoleit admits that the increases
were 172% overall. See Def.’s Corr. Post-Trial Br. & Proposed Findings, ¶ 56 n.1, ECF No.
121–2. Further, Crawford testified that Whirlpool’s contribution to Grigoleit’s profits was 77%.
In short, Whirlpool has shown beyond a reasonable doubt that the prices for parts in Exhibit 1
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were substantively unconscionable, moored to nothing other than Howie’s unsourced estimates
as opposed to actual cost and labor data. The Court finds that the price increases shock the
conscience.
Procedural Unconscionability
Whirlpool argues that excessive price alone may render a contract unconscionable. The parties
have not provided any Michigan or Sixth Circuit cases on this direct proposition of law, and the
Court has not been unable to locate any.2 Plaintiff Whirlpool cites four cases arising in the 1960s
which support the conclusion that an excessive price may render a contract unconscionable. See
Toker v. Westerman, 274 A.2d 78 (N.J. Dist. Ct. 1970); Jones v. Star Credit Corp., 298 N.Y.S.2d
264 (N.Y. Sup. Ct. 1969); Frostifresh Corp. v. Reynoso, 274 N.Y.S.2d 757 (N.Y. Dist. Ct. 1966),
rev’d, 281 N.Y.S.2d 964 (N.Y. App. Term 1967); Am. Home Improvement, Inc. v. MacIver, 201
A.2d 886 (N.H. 1964). All four cases cited by Plaintiff involved private consumer buyers rather
than corporate buyers and all four cases involved some sort of credit charge or payment over time
interest. Three of the cases involved the sale of a refrigerator/freezer where the cash price
offered to the seller was more than double the cost of the product to the seller. See Toker, 274
A.2d at 79; Jones, 298 N.Y.S.2d at 266; Frostifresh, 274 N.Y.S.2d at 758-759. In American
Home Improvement, the combination of the interest charged and the commission paid by the
buyer was almost double the cash price of the goods purchased. The Court does not find these
consumer cases apt for guidance in this case involving mutually sophisticated business parties.
Defendant Grigoleit cites several cases for the proposition that an excessive price, standing alone,
will not render a contract unconscionable. In re Pyramid Energy, Ltd., 160 B.R. 586 (Bankr.
S.D. Ill. 1993); Bennett v. Behring Corp., 466 F.Supp. 689 (S.D. Fla. 1979); Contract Buyers
League v. F & F Inv., 300 F.Supp. 210 (N.D. Ill. 1969). Bennett was a class action suit brought
by home owners against a developer and many others. In a ruling based on Florida’s common
law,3 the court held price alone is insufficient to establish unconscionability and “[a]t most, such
proof serves only to establish ‘substantive unconscionability.’” Bennett, 466 F.Supp. at 696.
Contract Buyers League was a class action suit brought by black plaintiffs alleging the sales
terms in residential housing contracts included higher prices and more burdensome obligations
than similar sales to white buyers. Based on Illinois law, the court held a concurrence of many
factors was necessary for a finding of unconscionability. Contract Buyers League, 300 F.Supp.

2

The few Michigan cases located regarding unconscionably high prices arise under the
Michigan Consumer Protection Act, not under the Michigan Commercial Code.
3

In this part of the lengthy and complex litigation, plaintiffs alleged certain deed
restrictions which forced them, as homeowners, to lease recreational facilities, were
unconscionable. The court first found Florida’s Commercial Code inapplicable as it governed
only sales of goods. Bennett, 466 F.Supp. at 695. Second, the court held the statute did not
codify the common law concept of unconscionability. Id. at 695-696. As a result, the claim was
analyzed under Florida common law, but the court referenced the UCC as a helpful guide.
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at 227. The court noted, “the general rule” was that an excessive price was not, by itself,
sufficient to support a claim of unconscionability. Id.
The opinion in Pyramid addressed Pyramid’s motion to dismiss its Chapter 7 bankruptcy case.
In order to resolve the motion, the parties first had to resolve a claim between Pyramid and a
third party, Heyl & Patterson, Inc., who alleged Pyramid owed it $243,000 under a contract for
sale of a coal processing plant; Pyramid alleged the debt was unconscionable on the basis that it
paid $50,000 toward the contract and the plant was sold for $45,000 after foreclosure. Pyramid,
160 B.R. at 593. Pyramid argued the foreclosure sale price established the value of the coal
plant. Id. The court rejected the argument, holding “[i]n a commercial transaction, price alone is
insufficient to render a contract unconscionable, as it is inappropriate for the court to substitute
its judgment for that of a buyer and seller in a free market.” Id. at 594 (citing In re Colin, 136
B.R. 856, 858 (Bankr. D. Or. 1991)). Obviously, none of the cases cited by Defendant interpret
Michigan law.
Some guidance can be gleaned from Allen, 171 N.W.2d at 692, “[b]y like token, if the provision
is substantively unreasonable, it may not be enforced without regard to the relative bargaining
power of the contracting parties.” Applying Michigan law, Judge Feikens in Johnson, stated,
quoting J. White & R. Summers, “[m]ost courts take a ‘balancing approach’ to the
unconscionability question, and to tip the scales in favor of unconscionability, most courts seem
to require a certain quantum of procedural plus a certain quantum of substantive
unconscionability.” Johnson, 415 F.Supp. at 268 (cited in Citizens Ins. Co. 802 F. Supp at 144
(emphasis supplied)).
Accordingly, in the absence of direct Michigan authority on the question of whether price alone
may constitute unconscionability and with the guidance from Allen, Johnson, and Citizens Ins.,
the Court concludes that price alone is not enough for Whirlpool to meet its burden. Whirlpool
must show some quantum of procedural unconscionability in addition to the Court’s
determination that the prices in the “agreement” shocked the conscience. In other words, for
Whirlpool to prevail in whole or in part, the proofs must merge at some point on both prongs of
the unconscionability test in the history of the formulation of this agreement.
Procedural Unconscionability Applied In This Case
Synthesis of Michigan law of procedural unconscionability boils down to this question: Did
Whirlpool have any meaningful choice other than to agree to the contract at issue in this case?
See Clark, 706 N.W.2d at 47. Andersons teaches that the two most important factors in
procedural unconscionability are whether the relatively weaker party had an alternative source
and whether the contract terms were negotiable. Andersons, 166 F.3d at 324. Whirlpool is a
major international corporation in the appliance market worldwide. Defendant is a family-owned
business.
By any measure, it is hard to posit the notion that Whirlpool is the “weaker party”in this case on
November 4, 2004. Yet, Whirlpool argues that indeed they are the weaker party largely because
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Grigoleit was the sole supplier of the subject parts, Trial Tr. vol. I, IV, 55–56, 713, ECF No. 110,
113, switching suppliers takes at least six months, Trial Tr. vol. I, 75, 209, ECF No. 110,
especially when customer “touch point” parts such as washing machine knobs are involved. Reflooring of product would also be necessary if a “touch point” part was replaced. Id. at 202. In
addition, Whirlpool, as a wise business practice, utilized “just-in-time” ordering of parts to save
warehouse space and any interruption of the flow of parts would cause shutdown of its
manufacturing lines at the two Ohio plants. Shutdown was intolerable for Whirlpool. See id. at
57–58.
For valid business reasons as outlined exhaustively in this record, Whirlpool made a conscious
business decision to utilize a sole supplier for the subject parts. See id. at 54, 56–57. The
company saved money among other benefits. The flip side of a sole supplier arrangement is
exposure to supply interruption from that entity. Having decided to sole source the parts,
Whirlpool cannot now complain from a procedural unconscionability standpoint that at least
initially it was the weaker party on that basis. The risk of utilizing sole suppliers redounded to
Whirlpool’s detriment. The Court rejects Whirlpool’s contention that the sole supplier
relationship standing alone made it the weaker party. In essence, Whirlpool asserts that time
lines were tight in the manufacturing process. Interruption of parts supply causing
shutdown of assembly lines was unacceptable. Defendant knew of its sole source status and
blatantly (and illegally) took advantage. From November 4, 2004 to January 31, 2005,
Whirlpool had options to navigate its relationship with Grigoleit. It simply chose not to exercise
them in a timely fashion. Unfortunately for Whirlpool, the manner in which its representatives
handled the negotiations with Grigoleit in the critical time from between November 4, 2004 and
January 31, 2005, undermines its posture as the “weaker party.” It had the option to pursue
alternative sources. It did not do so.
The communication dynamics of the parties between November 4, 2004 and late January 2005
provide the crucial decision points for a judicial determination of procedural unconscionability.
Slade testified that the impact of the proposed price increases was approximately $1 million, a
significant impact on the business. Id. at 65. Given the alleged enormity of the impact,
Whirlpool’s representatives hardly fully engaged on the problem coincident with its asserted
magnitude.
Winnick transmitted a message on November 4, 2004 concerning the need for price increases.
Id. at 54. The size of the demand was increased tenfold a month later to include sixty parts. See
Pl.’s Trial Ex. 3. Inexplicably, there was no timely effective response from Whirlpool. The first
reference in this record of a Whirlpool substantive response is Exhibit 3 in which Winnick
references a November 30 telephone conversation. In that same exhibit, a Winick email of
December 2, Grigoleit conveys price options based on quantity. There is no substantive contact
from Whirlpool until December 8 (another six-day gap). Trial Tr. vol. I, 54–55, ECF No. 110;
Pl.’s Trial Ex. 4. Winick testified, without contradiction, that he called every business day
between November 30 and December 8. In the December 8 email, Slade asks for cost structure
data (cost drivers). Until December 17, on which date a face-to-face meeting occurs, Whirlpool

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continues to insist on cost drivers and Grigoleit continues to tell Whirlpool no such information
exists. See Trial Tr. vol. III, 429–31, Dec. 18, 2008, ECF No. 112.
Whirlpool makes much out of Defendant’s failure to provide cost drivers. However, Whirlpool
concedes that Grigoleit had no legal obligation to provide the information. Clearly, from
Whirlpool’s internal perspective, receipt of cost drivers information was the factual predicate for
Whirlpool’s consideration of a price increase. Trial Tr. vol. II, 246–47, ECF No. 111. The Court
has no quarrel with Plaintiff’s desire for the information and when it was not forthcoming,
concluding that the supplier’s position was “unusual.” Trial Tr. vol. I, 63, ECF No. 110.
However, Whirlpool had choices in the face of reality that cost information was not forthcoming.
It chose to dawdle and incessantly ask for the same information even in the temporal context of a
cessation of parts supply as of January 31, 2005, as discussed below. Def.’s Trial Ex. W. In the
best of all possible scenarios, Whirlpool would have received its cost information. The Court is
satisfied that Defendant did not have the discrete information Plaintiff sought. Failure to provide
the cost-driver information is not in this Court’s judgment evidence of bad faith. If there is no
legal obligation and the requested data did not exist without expense which Whirlpool implicitly
declined to pay, it is unavailing to assert that failure to perform the obligation can supply
evidence that the party was acting in an unconscionable fashion.
Five days after the December 17 face to face meeting, and with no substantive communication
from Whirlpool leading to resolution, Grigoleit conveyed a deadline of January 31, 2005 for the
cessation of parts delivery. See Pl.’s Trial Ex. 7. Whirlpool forcefully asserts that the timing,
three days before Christmas, evidences bad faith and all manner of indignity. The Court does not
accept that argument. Whirlpool is an international corporation with a large workforce of
dedicated professionals. Undoubtedly, it would have been more convenient if this dispute had
occurred in June to avoid interference with holiday vacation plans. But Whirlpool finds itself in
the untenable position of claiming catastrophic consequences for the company if the part supply
line is interrupted. And yet its employees cannot work over the holiday period to avoid such
Armageddon? This argument is especially unavailing in light of the gap periods of
communication between the parties between November 4 and December 22. In that time period,
weeks passed before Grigoleit received a return communication of any substance, except of
course for the repeated requests for cost data.
Whirlpool also claims that the January 31 cutoff date was outrageous. Once again, however,
Whirlpool’s failure to respond is critical. Quite explicitly, Winick states in his December 22
email that the January 31 date is not a“drop dead” date. Winick specifically states that Defendant
will consider an alternative cutoff date if advised by January 3. See id. While Plaintiff objected
to the January 31 date on December 28, Def.’s Trial Ex. T; Pl.’s Trial Ex. 7, Whirlpool never
proposed an alternative date. Trial Tr. vol. I, III, 148–49, 528, ECF No. 110, 112. Clearly, as to
this important aspect of supply cutoff, Whirlpool was not left with a “take it or leave it”
proposition. By December 27, Whirlpool had yet to formulate a response to the December 22
email. On December 28, Slade requests—yet again—cost structure and objects to the January 31
date, but fails to request, suggest or even hint at an alternative cutoff date which Winnick

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asserted Grigoleit was open to considering. Efforts for another face-to-face meeting yielded a
date of January 3, 2005 due to the unavailability of Derek Loikits or other Whirlpool personnel.
A face to face meeting occurs on January 3. Whirlpool still does not have a counter-proposal.
See Pl.’s Trial Ex. 16. Possible patent infringement issues are raised for the first time. Trial Tr.
vol. IV, 699–702, ECF No. 113. On January 6, agreement is reached on one aspect of the
dispute—unique raw materials. See Pl.’s Trial Ex. 17. Eight days later, Defendant offers another
proposal. Pl.’s Trial Ex. 18. In the urgent time frame which Plaintiff asserts is evidence of
unconscionability, Whirlpool does not respond for 13 days, finally stating that Exhibit 18 is
unacceptable. On January 27, Whirlpool does object to Defendant’s pricing and terms, stating
that Plaintiff expected good faith negotiations. See Pl.’s Trial Ex. 19. While Whirlpool’s
concerns of good faith negotiations may be understandable, as of this point in the chronology, the
Court cannot conclude bad faith on Defendant’s part to this point in the ever-developing
dialogue.
That said, the January 31 date arrives and Plaintiff has still not made an offer to Defendant.
On that date, Plaintiff makes its umpteenth request for cost data. Grigoleit terminates the open
purchase orders. Trial Tr. vol. I, IV, 92–93, 713–14, ECF No. 110, 113. On February 3, 2005,
Whirlpool makes its first offer, Exhibit 23, of a twenty percent price increase for all parts and a
minimum volume commitment. In sharp contrast to Plaintiff’s slow turn-around responses,
Defendant virtually immediately rejects with a counter-proposal. Pl.’s Trial Ex. 24.
Further into the month of February, proposals and counter-proposals were exchanged. The
parties in this time frame (for the first time) are engaging in substantive, albeit strained
negotiations, regarding subject matters of price and volume among other issues. Blanket orders
have been terminated and Whirlpool’s supply chain is dissipating. Trial Tr. vol. IV, 714, ECF
No. 113. However, in this time frame, Defendant suddenly introduces for the first time the
subject matter of “extrinsic costs.” See Def.’s Trial Ex. AV. Defendant asserted that it was
incurring costs in further negotiations with Plaintiff and with plant operations given the fluidity
of the business dynamic with Whirlpool. Defendant demanded $10,000 a week additional
compensation for each week beyond February 1 if an agreement was not reached the next day.
Id. The Court does not accept Defendant’s assertion of increasing costs. How Grigoleit could
possibly quantify “extrinsic costs” given its antiquated accounting system is lost on this Court. It
represents yet another ipse dixit position. This demand came at a critical time in the negotiations
when product interruptions were of particular difficulty to Whirlpool. The Court finds that this
heretofore unmentioned potential term of the contract was nothing more than a turning of the
screw of Plaintiff and represented bad faith on Defendant’s part. While Whirlpool placed itself
in a difficult position until February 21, the Court finds that Whirlpool was negotiating in good
faith from February 3. Evaluating the facts in equity as the Court must, as of February 3,
Whirlpool had placed itself in a position of having to accept even exorbitant price increases for
Defendant’s parts, even ones that “shocked the conscience” within the meaning of the case law.
However, Grigoleit’s negotiating position in its February 21 email concerning totally
undocumented “extrinsic costs” provides a “quantum” of procedural unconscionability which
tips the balance toward Whirlpool on this component of the final agreement.
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Requesting additional money as a condition of settlement left Whirlpool no choice. Indeed,
Whirlpool accepted the pricing demanded by Defendant the next day. See Pl.’s Trial Ex. 28.
The demand for $10,000 additional per week was substantively unconscionable (because the
proofs are unsatisfactory from Defendant to justify it) and procedurally unconscionable because
Plaintiff did not have a choice in that time parameter. Accordingly, the Court sets aside the
$40,000 of “extrinsic costs” ultimately agreed to by the parties. See Trial Tr. vol. I, IV, 115–16,
875, ECF No. 110, 113. The request for “extrinsic costs” may have been the final catalyst for
agreement. The final agreement of the parties as to price was consummated the next day. See
Pl.’s Trial Ex. 28. Volume guarantee negotiations continued.
Also, during the February 2005 time period, Grigoleit abruptly requests that any price increase be
implemented retroactively to November 2004. See Trial Tr. vol. I, III, 115–17, 580, ECF No.
110, 112. The Court finds this aspect of Defendant’s position troubling. Defendant had an
obligation to fill orders under the open purchase orders until January 31, 2005. With the cutoff
date passed and Whirlpool accepting a large price increase and continuing to negotiate on volume
with no choice but to continue, it is obtuse to demand unreasonable price increases retroactively
for an approximate three month period. Ultimately, Whirlpool, due to accounting restrictions,
agreed to add eight percent to Defendant’s price demands for all parts ordered under the
agreement. See Trial Tr. vol. I, IV, 115–117, 875, ECF No. 110, 113. Once again, on this
element of the “agreement,” Whirlpool has met its burden on both prongs—substantive and
procedural unconscionability. The Court sets aside this additional eight percent price increase as
the product of procedural and substantive unconscionability.
After a flurry of final negotiations, the parties finalized an agreement on February 28, 2005.
Two other aspects of Whirlpool’s position require comment. On January 3, Defendant raised the
possibility of patent infringement. Trial Tr. vol. IV, 699–702, ECF No. 113. Grigoleit’s
witnesses claimed at trial that the company would have cooperated with Whirlpool for the
transfer of the tooling. See Trial Tr. vol. I, 149, ECF 110. Plaintiff argues that subsequent
events, i.e., a patent lawsuit filed by Defendant in summer 2005, puts a lie to the claims of
cooperation. However, the Court must evaluate an unconscionability claim as determined by the
facts and circumstances at the time of the contract, not facts and circumstances which occur later.
See Andersons, 166 F.3d at 323. Whirlpool did nothing to test the assertion of cooperation of the
Defendant in the temporal context of November 2004–February 2005. Similar to the parts cutoff
deadline, Plaintiff failed to pursue Defendant’s pledges of cooperation and goodwill as to tooling
transfer. Defendant admits that a lawsuit was “under consideration,” see Trial Tr. vol. IV, 701,
ECF No. 113, but firmly claims that the issues are unrelated and indeed had been told in 2003 by
a Whirlpool employee to sue the company if Defendant disagreed with its position on the patent
issues. In any event, Anderson precludes this Court’s consideration of this aspect of Whirlpool’s
argument for unconscionability.
Whirlpool also claims that moving the tooling would have taken six months even with
cooperation and Defendant knew that when it transmitted its cutoff date. Trial Tr. vol. I, 75, ECF
No. 110. Indeed, once Whirlpool did decide to move the tooling to KI/Phillips in June 2005, it
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took six months. However, having decided to sole source the parts, Plaintiff knew of its
exposure if retooling was necessary. They cannot now be heard to complain of the adverse
consequences of that business decision. Also, as previously indicated, Plaintiff never suggested
an alternative cutoff date from January 31. The Court cannot speculate on how Grigoleit would
have responded had Whirlpool suggested an alternative cut-off date. Such an approach by
Whirlpool would have clearly mitigated the implication of a tool transfer time period, yet
Whirlpool did not pursue it.
Accordingly, the Court finds that Whirlpool cannot sustain its position of procedural
unconscionability except as to the retroactivity of the eight percent price increase and the $40,000
of extrinsic costs that Defendant demanded. Therefore, the “agreement” was a valid contract in
part and Plaintiff had the obligation to perform the contract as amended by this opinion.
Damages
Having ruled that the contract was not unconscionable, except in part, the Court must calculate
damages. Based on Grigoleit’s proposed findings, Def.’s Corr. Post-Trial Br., ¶ 184, ECF No.
121–2, the Court understands its demand to total $246,858.57 for parts delivered pursuant to the
agreement for which payment has not been received. By previous order, Grigoleit claims
$100,000 under paragraph 5 of the agreement. See Def.’s Trial Ex. BG. Whirlpool asserts a
credit of $15,601.51 for parts that were not included in Whirlpool’s firm orders. See Trial Tr.
vol. II, 238–241, ECF No. 111; Pl.’s Trial Ex. 44. Subject to provisions of this opinion below,
the Court accepts those calculations.
The Court has found the $40,000 extrinsic cost provision unconscionable. Whirlpool shall have
a credit for that amount.
The Court has set aside the eight percent retroactivity increase. Whirlpool asserts that it paid
$2,139,865 for parts pursuant to the agreement. See Pl.’s Proposed Findings of Fact, ¶ 80, ECF
No. 118. The parties will seek agreement on the credit amount that Whirlpool should receive
resulting from the Court’s unconscionability finding as to the eight percent increase. If
agreement is not had within twenty-eight (28) days of this opinion, Plaintiff and Defendant will
make simultaneous submissions to the Court with support thereof (not to exceed fifteen (15)
pages) within fifty-six (56) days of this opinion. Thereafter, the Court will decide the issue by
order.
The parties will attempt agreement on a prejudgment interest calculation within fourteen (14)
days thereafter. If agreement cannot be had, Grigoleit shall submit a interest calculation. The
calculation shall include the interest until the day of the submission. If Whirlpool disputes the
prejudgment interest amount, it shall have fourteen (14) days from the date of Defendant’s filing
to object and/or provide a counter proposal. As with the eight percent credit issue, the Court
hopes mutual agreement can be reached.

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Conclusion
The Court will enter a favorable declaratory judgment in part consistent with this opinion in
favor of Whirlpool and a judgment of no cause for action in part consistent with this opinion.
Grigoleit shall have a judgment on its counter-claim in the amounts calculated pursuant to the
Court’s direction herein as supplemented by subsequent orders of the Court issued pursuant to
this opinion.

IT IS SO ORDERED.

DATED: August 31, 2011

/s/ Paul L. Maloney
Paul L. Maloney
Chief United States District Judge

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