Jack Tyler Engineering Company, Inc. v. Colfax Corporation

Filing 118

OPINION AND ORDER denying 103 Defendant's Motion for Summary Judgment and Converting the Motion Hearing into a Status Conference set for 2/8/2013 at 1:30 pm, Courtroom 7 . Signed by U.S. District Judge Robert H. Cleland on 1/30/2013. (lgw)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

JACK TYLER ENGINEERING
COMPANY, INC.,
Plaintiff,
v.

Case No. 10-02373

COFLAX CORPORATION,
Defendant.
/
OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY
JUDGMENT AND CONVERTING THE HEARING INTO A STATUS CONFERENCE
Plaintiff Jack Tyler Engineering Company, Inc. (“JTE”) brought a breach of
contract action against Defendant Coflax Corporation (“Coflax”) after Coflax unilaterally
terminated the parties’ distributorship agreement. Coflax moves for summary judgment
alleging that JTE is unable to prove that it suffered damages as a result of the
termination, an essential element to all of JTE’s claims. The motion has been fully
briefed, and a hearing is unnecessary. For the following reasons, the court will deny
Coflax’s motion for summary judgment.
I. BACKGROUND
JTE entered into an exclusive distributorship agreement with Coflax on
September 28, 2001. JTE held the exclusive distributorship rights to sell Coflax
products in western Tennessee, northern Mississippi, and Arkansas. While Coflax
promised that the parties would reduce their agreement to a formal, written agreement

by the end of 2004, the agreement was never memorialized. Coflax unilaterally
terminated the agreement effective October 15, 2007.
JTE did not earn a profit from 2002-2006, the five years preceding termination.
In 2007, following the termination, JTE earned a profit for the first time since 2001. JTE
realized even higher profits in 2008. Coflax claims that JTE did not suffer any damages
as a result of the agreement’s termination, and even if JTE did incur damages, Coflax
argues, JTE successfully mitigated those damages. JTE disagrees, asserting that it
would have earned even higher profits in 2007 and 2008 had it retained the distribution
rights for the Coflax products. JTE also disputes that it mitigated its damages.
JTE filed suit against Coflax alleging (1) violation of Tennessee’s Repurchase of
Terminated Franchise Inventory Act, Tenn. Code Ann. § 47-25-1301 et seq.; (2) breach
of contract; (3) fraud; and (4) unjust enrichment. JTE also seeks a declaratory
judgment. JTE claims that Coflax terminated the distributorship agreement without
good cause or proper notice and opportunity to cure. The court previously dismissed
JTE’s fraud count for failure to state a claim. Coflax now moves for summary judgment
on the remaining counts.
II. STANDARD
Under Federal Rule of Civil Procedure 56, summary judgment is proper when
“there is no genuine issue as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). The moving party must first show the
absence of a genuine issue of material fact. Plant v. Morton Int’l, Inc., 212 F.3d 929,
934 (6th Cir. 2000) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). The
burden then shifts to the non-moving party, who “must do more than simply show that
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there is some metaphysical doubt as to the material facts.” Matsushita Electric Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
The non-moving party must put forth enough evidence to show that there exists a
genuine issue to be decided at trial. Plant, 212 F.3d at 934 (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 256 (1986)). “[T]here is no issue for trial unless there is
sufficient evidence favoring the nonmoving party for a jury to return a verdict for that
party. If the evidence is merely colorable, or is not significantly probative, summary
judgment may be granted.” Anderson, 477 U.S. at 249-50 (internal citations omitted).
Summary judgment is not appropriate when “the evidence presents a sufficient
disagreement to require submission to a jury.” Id. at 251-52. When deciding summary
judgment motions, “the court must view the evidence in the light most favorable to the
non-moving party, drawing all reasonable inferences in that party’s favor.” Sagan v.
United States, 342 F.3d 493, 497 (6th Cir. 2003) (citing Matsushita Electric Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The court does not weigh the evidence
to determine the truth of the matter, but rather to determine if the evidence creates a
genuine issue for trial. Sagan, 342 F.3d at 497 (quoting Anderson, 477 U.S. at 249).
III. DISCUSSION
Coflax argues that summary judgment is warranted because JTE is unable to
prove that it incurred any damages, an essential element to its remaining claims. It is
acknowledged that JTE earned no gross profit while selling Coflax products from 2001
until the termination of the distributorship agreement in October 2007, and Coflax claims
that JTE therefore cannot demonstrate it suffered lost profits as a result of being unable
to sell Coflax products thereafter.
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Coflax is mistaken, however, in focusing upon JTE’s gross profits in its damages
analysis. The pertinent question before the court is whether there is a genuine issue of
fact regarding the existence of lost net profits from JTE being unable to sell Coflax
products. Under Tennessee law, the recovery of lost profits is based on net profits, not
gross profits. Waggoner Motors Inc. v. Waverly Church of Christ, 159 S.W.3d 42, 59
(Tenn. Ct. App. 2004). When determining the loss of expected profits from the sale of
goods, “the expected net profits equals the expected revenue from the sale of the goods
minus the cost of the goods sold minus all of the seller’s expenses fairly attributable to
the sale of the goods.” Id. “The best evidence of lost profits is a comparison of the
experience of the injured party’s own business before and after the wrongdoing.” Id.
Further, “an injured party may recover lost anticipated profits when their nature and
occurrence have been established with reasonable certainty.” Id. at 58. The
reasonable certainty standard, which is flexible and “permits the courts to take the
particular facts of each case into consideration,” applies as well “to the evidence
regarding the existence of damages.” Id. “The existence of damages has been proven
with reasonable certainty when the mind of a prudently impartial person is satisfied that
the injured party has been damaged.” Id.
Coflax offers no evidence that JTE did not earn a net profit from selling Coflax
products before the termination, but JTE does. Jack Tyler, CEO of JTE, testified at
deposition that the net profit margin on Coflax products was “[p]robably three or four
percent.” (Jack Tyler Dep. at 100, Dkt. # 101-6.) Furthermore, Tyler submitted an
affidavit that asserts JTE “would have experienced even more profit” in 2007 and 2008
had it represented the Coflax line. (Jack Tyler Aff. ¶ 11, Dkt. # 113-5.) This evidence
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alone identifies a genuine issue of material fact regarding JTE’s ability to prove “with
reasonable certainty” that it suffered lost profits.
Coflax secondly claims that even if JTE did suffer damages, JTE successfully
mitigated those damages such that it is not entitled to any further relief. Although “a
plaintiff has a duty to mitigate damages, a wrongdoer carries the burden of establishing
that damages were lessened or might have been lessened by the plaintiff.” Jackson v.
City of Cookeville, 31 F.3d 1354, 1359 (6th Cir. 1994). The only evidence Coflax offers
to meet this burden is the fact that following the termination, JTE earned a profit in 2007
for the first time since it began selling the Coflax products in 2001. Coflax argues that
JTE realizing a positive operating revenue immediately after the termination, “at a
minimum, shows JTE has sufficiently mitigated any possible damages it could have
allegedly incurred.” (Def.’s Mem. at 6, Dkt. # 104.)
JTE maintains, in Tyler’s affidavit, that JTE was unable to obtain and sell a
competing product line to the Coflax products because no such product line exists.
(Jack Tyler Aff. ¶ 9, Dkt. # 113-5.) Tyler also avers that JTE did not divert any
resources or efforts attributable to the Coflax products to an already existing product
line. (Id.) JTE argues that Coflax merely assumes that JTE mitigated its damages
because it earned a profit in 2007 and 2008 but produces no evidence to prove that JTE
did, in fact, mitigate. Summary judgment is not warranted because there exists a
genuine issue of fact regarding whether JTE effectively mitigated termination-related
damages.
IV. CONCLUSION

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IT IS ORDERED that Defendant’s motion for summary judgment [Dkt. # 103] is
DENIED.
IT IS FURTHER ORDERED that the hearing presently scheduled on Defendant’s
motion in limine [Dkt. # 100], Defendant’s motion for summary judgment [Dkt. # 103],
and Plaintiff’s motion in limine [Dkt # 107] shall be converted into a status conference
which counsel are directed to attend. All pending deadlines are cancelled and will be
re-set at the status conference in Courtroom 7 on February 8, 2013 at 1:30 pm. .

s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: January 30, 2013
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, January 30, 2013, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]

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