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3CEMS v. Perceptron, Inc.

United States District Court, E.D. Michigan, Southern Division

December 20, 2016

3CEMS, Plaintiff,
PERCEPTRON, INC., Defendant.


          Victoria A. Roberts United States District Judge


         In July 2007, Perceptron Inc. (“Perceptron”), 3Cems, and non-party Odyssey Electronics, Inc. (“OEI”) entered into a supply agreement (“Agreement”) for the OS6 project. The OS6 was a hand-held inspection camera with an optical scope attached to a flexible cable. Under the Agreement, 3Cems was to purchase components and manufacture the OS6, which Perceptron would then supply to its customers.

         Perceptron was to pay for any parts 3Cems purchased and manufactured on its behalf. Perceptron issued a purchase order for 100, 000 units, but only paid for 30, 000 units; - 70, 000 units remain idle in 3Cems' warehouse. 3Cems filed a single-count breach of contract complaint against Perceptron. 3Cems alleges that Perceptron breached the Agreement and the Guarantee Letter when it failed to pay for the ordered parts. Perceptron says that it does not owe 3Cems damages because 3Cems has no right to sue since its suppliers and not 3Cems purchased the units. 3Cems and Perceptron filed cross-motions for summary judgment.

         The Court GRANTS 3Cems' motion in part and DENIES it in part. The Court DENIES Perceptron's motion.


         To get the lowest price, 3Cems utilized its parent companies, such as Prime Foundation Inc., i-CEMS, and Prime Technology as suppliers. Prime Foundation shares the same board as 3Cems and controls cash flow. Prime Technology operates the facility that manufactured the OS6.

         I-CEMS and Prime Technology issued purchase orders to its suppliers in the United States and Asia for the OS6 component parts ordered by Perceptron. They directly paid their suppliers for parts. While Prime Foundation, Inc. reimbursed the suppliers, 3Cems was ultimately responsible to purchase and manufacture the parts for the OS6 under the Agreement.

         Under Section 11.4 of the Agreement, 3Cems “may assign this Agreement without the other party's prior written consent to an entity it controls, is controlled by, or is under common control with.” In addition, it may “subcontract with other parties to satisfy any of its obligations under the Agreement.” Paul Eckhoff, Senior Vice President for Perceptron and Hongji Shieh, Vice President of Prime Technology and Prime Foundation, signed the Agreement. Eckhoff reported directly to Perceptron's Chief Executive Officer and was the highest-ranking Perceptron representative with direct contact with 3Cems. Shieh manages the OS6 project for 3Cems and is an employee of all of its subsidiaries.

         Perceptron forecasted that it would sell 125, 000 OS6 units. In February 2008, Perceptron had OEI issue a purchase order to Prime Technology for 100, 000 units.

         3Cems wanted assurance that Perceptron would pay the $18, 874, 000 purchase order, so 3Cems required Perceptron to sign a Guarantee Letter. In June 2008, Eckhoff signed a Guarantee Letter for Perceptron; Perceptron agreed to pay for any “tooling cost [and] idle material costs on the OS6 series projects between Odyssey Electronics Inc. and Prime Foundation Inc.” 3Cems ordered the 100, 000 parts. Perceptron only accepted and paid for 30, 000 parts. In 2008, 3Cems contacted Perceptron to let it know 70, 000 parts remained stored in 3Cems' warehouse and Perceptron needed to pay. Eckhoff reassured 3Cems that he would work to get the parts paid for.

         Perceptron refused to pay 3Cems. 3Cems filed suit in 2013. In 2014, Perceptron and 3Cems signed a tolling agreement (“Tolling Agreement”); they agreed to toll the statute of limitations from July 2013 until December 2014. 3Cems voluntarily dismissed its 2013 suit, and refiled the suit in 2014.

         The material facts set forth above are not in dispute.


         a. Summary Judgment

         When reviewing cross-motions for summary judgment, the Court must assess each motion on its own merits. Federal Ins. Co. v. Hartford Steam Boiler Insp. and Ins. Co., 415 F.3d 487, 493 (6th Cir. 2005).

         The Court will grant summary judgment if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The movant has the initial burden to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmovant, who “must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256, 106 S.Ct. at 2514 (discussing Fed.R.Civ.P. 56(e)). “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. U.S., 342 F.3d 493, 497 (6th Cir. 2003) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

         Both parties must support their assertions “that a fact cannot be or is genuinely disputed” by “citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c)(1)(A). Alternatively, either party may carry its burden by “showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Id. 56(c)(1)(B).

         It is not enough for the nonmovant to “simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586, 106 S.Ct. at 1356, 89 L.Ed.2d 538 (1986). Rather, the nonmovant must sufficiently allege a fact that, if proven, “would have [the] effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties.” Midwest Media Prop., L.L.C. v. Symmes Twp., Ohio, 503 F.3d 456, 469 (6th Cir. 2007) (alteration in original) (quoting Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984)) (internal quotation marks omitted). The non-movant cannot rely upon bare assertions, conclusory allegations, or suspicions to substantiate his claims. Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, ...

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