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Autoforge, Inc. v. American Axle & Manufacturing

March 14, 2007


The opinion of the court was delivered by: McVerry, J.


Before the Court for consideration and disposition are two motions in limine: DEFENDANT AMERICAN AXLE & MANUFACTURING, INC.'S MOTION IN LIMINE, with brief in support (Document Nos. 119, 120) and PLAINTIFF AUTOFORGE, INC.'S FIRST MOTION IN LIMINE ON DAMAGES, with brief in support (Document Nos. 122, 123). The parties have filed responsive briefs and Defendant has filed a reply brief. After a thorough review of the filings and the exhibits attached thereto, both motions will be granted in part and denied in part.


On August 15, 2005, the Court entered a Memorandum Order (Document No. 72) which adopted the Report and Recommendation authored by Chief United States Magistrate Judge Francis X. Caiazza on July 7, 2005. 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.

On August 8, 2006, the Court issued an Order (Document No. 110) which resolved motions in limine that had been filed by Defendant AAM. In summary, the Court ruled that Plaintiff could not introduce the diminution in value of its business as evidence of its damages at trial and could not introduce evidence of lost profits beyond December of 2002. The Court also ruled that Plaintiff's damages are governed and limited by M.C.L.A. § 440.2208 (Michigan law) and that Plaintiff would have the opportunity to introduce evidence of Defendant's alleged bad faith in the breach of the contract for Splined Yolk Forgings. Since the Court's ruling, the parties have engaged in mediation efforts and Defendant has procured its own damages expert. At a pretrial conference on December 8, 2006, the Court ordered further briefing on the remaining disputes regarding the parties' experts.


A. Defendant American Axle & Manufacturing, Inc.'s Motion in Limine

AAM's motion in limine seeks to exclude four separate categories of information: (1) testimony by Plaintiff's expert David Kaplan, which calculates damages based on the cross-wedge rolling production method; (2) testimony regarding damages sustained in 2002; (3) Plaintiff's claim for prejudgment interest; and (4) references to the term "fraud." The Court will address each category seriatim.

1. Calculation of Damages Based on Cross-Wedge Rolling

Kaplan has based his calculation of damages upon the anticipated ability of Autoforge to produce the spine yolk forgings utilizing a cross-wedge rolling manufacturing technology throughout the contract. In essence, cross-wedge rolling would enable Autoforge to make the subject parts two at a time. Defendant has articulated numerous objections to this approach. Primarily, AAM emphasizes the fact that the contract purchase order was based on the use of the hammer forge manufacturing technique and the parts which were produced were never actually manufactured with the cross-wedge rolling technology. Thus, the profits which Autoforge may have reaped through the utilization of cross-wedge rolling are purely hypothetical. AAM points out that Kaplan does not make any allowance for a learning curve, transition problems, additional manpower, machinery, maintenance or other costs associated with the implementation of the cross-wedge rolling technology. In addition, Defendant contends that Autoforge would have had to secure Product Part Approval Authorization ("PPAP") for the cross-wedge rolling technology before it could have been utilized. Autoforge, in response, contends that Kaplan's methodology to determine damages was reasonable, and that he made conservative assumptions based on the best information available, including his interview with Jitendra Nath, the president and owner of Autoforge. Autoforge argues that Defendant's objections to Kaplan's report and testimony go to the weight of the damages evidence rather than admissibility.

The Court finds that Defendant's objections are well-founded. There are two insurmountable factual problems that render Kaplan's testimony on this issue inadmissible. First, Autoforge never had the necessary equipment to actually utilize the cross-wedge rolling technology. Nath testified that Autoforge had three cross-wedge rolling machines, including one from Belarus which it purchased in February 2000 for use on the spline yolk forging ("SYF"). Nath Deposition at 310-311. See also Nath Deposition at 312-313, 482-483. However, Marvin Patterson testified at his deposition that Autoforge never actually had the money which was necessary to buy the steel to make the dies which were required in order to make the SYF part on the cross-wedge rolling machine. Patterson Deposition at 38, 41.

Second, Autoforge never sought or obtained the requisite PPAP approval from AAM. The original PPAP was based on hammer forge technology, see Exhibit J, and new authorization would have been necessary in order to switch to cross-wedge rolling. Plaintiff contends that such approvals are commonplace. Defendant contends that the approval process is difficult and lengthy, such that cross-wedge rolling could not have been implemented for some or all of the contract period. The record is clear that Autoforge never sought, let alone received, PPAP authorization for cross-wedge rolling. Thus, it is demonstrably erroneous for Kaplan to calculate damages based on the cross-wedge rolling technology throughout the entire alleged term of the contract. At best, Plaintiff might argue that it would have obtained PPAP approval for cross-wedge rolling at some time in the future. However, a jury would be purely speculating as to whether, and when, PPAP approval would be obtained. Indeed, because Autoforge never obtained the die steel, it could not even submit parts made by the cross-wedge rolling technology to initiate the PPAP. In summary, the Court concludes that the expert's damages calculation based on the cross-wedge rolling technology is too speculative and unreliable. The motion in limine to exclude this testimony will be granted. Plaintiff's damages claim must be confined to the costs it actually incurred and projected through the utilization of the hammer forge manufacturing technique upon which the original purchase order contract was based.

2. Damages for 2002

Defendant contends that damages for the year 2002 are speculative. This issue has been previously resolved and will not be revisited. Autoforge is entitled to present to the jury evidence to support its claim that the parties entered into a settlement agreement in December 2000 which extended the purchase order. See Magistrate Judge's Report and Recommendation dated July 7, 2005 ("Report and Recommendation") at 9-10, 13-14. ...

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