Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Autoforge, Inc. v. American Axle & Manufacturing

August 8, 2006

AUTOFORGE, INC., PLAINTIFF,
v.
AMERICAN AXLE & MANUFACTURING, INC. DEFENDANT.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER

Before the Court for consideration and disposition are two motions in limine:

DEFENDANT AMERICAN AXLE & MANUFACTURING, INC.'S MOTION IN LIMINE TO EXCLUDE PLAINTIFF'S METHODOLOGY FOR CALCULATING DAMAGES AS IMPROPER, with brief in support (Document Nos. 99 & 100) and DEFENDANT AMERICAN AXLE & MANUFACTURING, INC.'S SECOND MOTION IN LIMINE ON DAMAGES, with brief in support (Document Nos. 103 & 104). In response to the two motions, Plaintiff has filed its BRIEF IN OPPOSITION TO DEFENDANT'S MOTION IN LIMINE and BRIEF IN OPPOSITION TO DEFENDANT'S SECOND MOTION IN LIMINE (Document Nos. 101 & 105). With respect to the Second Motion, Defendant has filed a reply brief, and Plaintiff has filed a sur-reply thereto (Document Nos. 106 & 109). The Court has reviewed all filings and the exhibits attached thereto. The Court will address the motions seriatim.

Background

On August 15, 2005, the Court entered a Memorandum Order which adopted the Report and Recommendation ("R & R") authored by Chief United States Magistrate Judge Francis X. Caiazza (Document No. 72). To summarize, at this juncture three claims for breach of contract remain viable: 1) a claim for breach of a contract for Idler Arm Supports, 2) a claim for breach of a contract for Splined Yolk Forgings, and 3) a claim for enforcement of an alleged oral settlement agreement between the parties, as memorialized in a December 21, 2000 fax from Jeet Nath to Defendant. Plaintiff has submitted two expert reports regarding damages, and Defendant seeks to exclude the expert opinion evidence of damages set forth therein.

Discussion

A. Defendant American Axle & Manufacturing, Inc.'s Motion in Limine to Exclude Plaintiff's Methodology for Calculating Damages as Improper (the "First Motion")

Defendant contends in its First Motion that Plaintiff may not recover the value of its business as the measure of damages, as set forth in Plaintiff's Pretrial Statement and the accompanying "Analysis of the Diminution in the Value of Autoforge, Inc." (hereinafter "Analysis") (Document Nos. 76 & 77). See Plaintiff's Pretrial Statement at 9-10 ("As a result of [the alleged breaches of contract], Autoforge went out of business. Autoforge had been a growing business but was damaged in the diminution of the value of its business in the amount of $6,198,766 ..."); see also Analysis at unnumbered 3 ("This report was prepared solely for the purposes of assisting [Plaintiff's counsel] in calculating the economic damages resulting from the diminution in the value of Autoforge ..."). Defendant's specific argument is that the value of the business is an impermissible attempt to recover consequential damages, and that the Michigan Uniform Commercial Code ("U.C.C.") does not permit an aggrieved seller to recover consequential damages. First Motion at ¶ 14-15. The Court agrees with Defendant's position. Consequential damages are not an authorized remedy for aggrieved sellers under the U.C.C. See M.C.L.A. § 2708; S. C. Gray, Inc. v. Ford Motor Co., 286 N.W.2d 34, 44 (Mich. App. 1979) ("The U.C.C. does not allow the seller to recover consequential damages."). Moreover, even if the value of the business were not properly characterized as consequential damages, the U.C.C. simply does not allow the value of the business to be recovered by an aggrieved seller.

The Court also rejects Plaintiff's attempt to characterize the loss of the value of the business as incidental damages. See Brief in Opposition to Defendant's Motion in Limine at 16. The loss of the value of the business is far beyond the scope of that which is contemplated by the provision of the Michigan U.C.C. which permits the recovery of incidental damages.*fn1

Defendant also contends that Plaintiff may not seek to recover lost profits, to which Plaintiff claims entitlement in its Supplemental Pretrial Statement and the accompanying expert report. Defendant contends that the Terms and Conditions of the parties' Purchase Orders preclude the recovery of lost profits. First Motion at ¶ 17. The Purchase Orders for the components at issue provide, inter alia, that in the event that Defendant terminates the Purchase Order(s), it shall not be liable for "loss of anticipated profits." Document No. 50, exh. 28, ¶ 13.

The Court does not agree that the Purchase Order(s) Terms and Conditions are controlling. It appears that Plaintiff may be able to demonstrate that the limitation on lost profits contained therein "fail[s] of its essential purpose," and therefore the "standard" remedies provided by the Michigan U.C.C. would be reinstated. See M.C.L.A. § 440.2719(2) ("Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act."); see also id., Comment n.1 ("[U]nder subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article."). It appears that the limitation on Plaintiff's damages set forth in the Terms and Conditions would, if enforced, leave Plaintiff with virtually no remedy whatsoever in the event of a bad faith breach of contract, in which case the limited remedy could be said to "fail of its essential purpose." Additionally, the R & R expressly rejected Defendant's contention that the Terms and Conditions of the Purchase Orders "governed each and every dealing between the parties," and more generally rejected Defendant's reliance upon those Terms and Conditions. R & R at 14-15. The Court finds that Judge Caiazza's determination on that issue is the "law of the case." Therefore, Plaintiff's ability to recover damages is not limited by the Terms and Conditions of the Purchase Orders.

Defendant also contends that lost profits are not recoverable because "such damages were not foreseeable to Autoforge and AAM at the time in which they executed their contracts." First Motion at ¶ 18. However, the U.C.C., which governs the contracts for the Splined Yolk Forgings and Idler Arm Supports, expressly provides for the recovery of lost profits, albeit under the limited circumstances set forth in the Code. See Tigg Corp. v. Dow Corning Corp., 962 F.2d 1119 (3d Cir. 1992); M.C.L.A. § 440.2708. Therefore, the Court rejects Defendant's contention that Plaintiff's lost profits may not be recovered because they were not foreseeable.

Defendant also argues that the alleged oral settlement agreement between the parties precludes Plaintiff from seeking lost profits because the settlement agreement incorporated, by reference, the Purchase Orders, which in turn preclude recovery of lost profits. First Motion at ¶ 19. However, as mentioned below, the alleged oral settlement agreement does not contain any language which specifically incorporates the Purchase Orders by reference. See Complaint, exh. S & infra n.2. Moreover, as stated above, Plaintiff's ability to recover damages will not be limited by the Terms and Conditions of the Purchase Orders.

Defendant also challenges the methodology for calculating lost profits set forth in the supplemental expert report on the grounds that it is "unreliable and highly speculative," and that it also "fails to establish the necessary causal link between AAM's alleged breach of contract and the lost profits ..." First Motion at ΒΆΒΆ 20-22. The Court has reviewed Plaintiff's supplemental expert report and finds that the methodology employed therein is neither unreliable nor highly speculative. As for the alleged lack of a causal link, the first sentence of the supplemental expert report states that it quantifies "the lost profits damages that [Plaintiff] sustained as a result of the alleged actions of [Defendant] in the above-captioned litigation." The remainder of the report goes on to explain the procedures performed, sources of information utilized, and ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.