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Delphi Automotive Systems, LLC v. IEP Technology, Inc.

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

November 30, 2017

DELPHI AUTOMOTIVE SYSTEMS, LLC, Plaintiff/Counter-Defendant,
IEP TECHNOLOGY, INC., et al., Defendants/Counter-Plaintiffs.



         Delphi Automotive Systems, Inc. and IEP Technology, Inc. worked together for several years to develop geothermic fuel cell technology. IEP and its affiliate company, IEP Technology, Inc. (“IEPT”), ordered several tests from Delphi pertaining to this technology. IEP and IEPT failed to fully pay Delphi for these tests. As a result, the parties entered into two promissory notes, a security agreement, and a guaranty to secure the remaining payments. When the IEP entities still failed to pay, Delphi brought this breach of contract lawsuit to collect on these agreements. IEP and IEPT filed a counter-complaint alleging that Delphi breached a separate contract and made misrepresentations to IEP and IEPT by failing to inform them that Delphi was leaving the fuel cell business.

         Delphi has moved to dismiss the Amended Counter-Complaint pursuant to Rule 12(b)(6). (R. 27.) The motion is fully briefed (R. 31, 32) and the Court heard argument on November 21, 2017. For the reasons stated below, the motion is granted as to Counts I, III, and IV, and denied as to Count II.


         IEP alleges that, while in “an ongoing relationship” with Delphi, the parties “entered into an agreement” in October 2012 for Delphi to supply geothermic fuel cell technology to IEP. (R. 24, PID 366.) During that time, IEP issued two purchase orders to Delphi “for goods and services involving geothermic fuel cell technology.” (R. 1, PID 5.) IEP and IEPT made some payments on the orders, but were unable to pay the final $716, 890. (Id.)

         In October 2013, Delphi and IEP signed a Memorandum of Understanding (“MOU”). The MOU states, in part:

This Memorandum of Understanding (“MOU”) seeks to clarify and agree to [sic] the intended framework under which a long term business relationship would develop for the mutual benefit of both parties. Upon execution of this MOU and the successful initial field demonstration, the parties shall, in good faith, seek to work out the details of a formal joint technology development agreement expressing the rights and obligations of the two parties (the “Agreement”).
The parties expressly understand and agree that neither party shall have any obligation or commitment to enter into an Agreement or to otherwise engage in business activities with the other party unless and until the terms of such business relationship is accepted by the parties' respective management and the Agreement is executed by authorized representatives of both of the parties. The parties agree that the terms of the MOU are not legally binding.

(R. 24-2, PID 380.) The MOU then lays out several pages of “intended terms of the Agreement.”

(R. 24-2, PID 381-84.) The MOU closes:

Either party has the right to terminate discussions at any time and for any reason prior to entering into the definitive Agreement contemplated by this MOU, provided, that the terms and conditions set forth in the October 2, 2012 GFC Quotation Letter shall remain in full force and effect.

(R. 24-2, PID 384.)

         On September 23, 2014, IEPT and Delphi executed a promissory note addressing IEP's unpaid balance of $716, 690.00, plus interest, from the October 2012 orders. (R. 24-5, PID 392- 95.) That same day, IEP signed a continuing guaranty agreement in which IEP agreed to pay the amounts owed if IEPT did not. (R. 24-7, PID 408-10.) After two successful payments, IEPT failed to make the final installment payment of $516, 890.00. (R. 24-5, PID 396.) Delphi sent IEPT a Notice of Default. (Id.) The remaining payment was not made.

         On August 1, 2015, IEPT and Delphi signed an amended promissory note. (R. 24-5, PID 396-98.) The amended promissory note added unpaid sums from two other orders, which, after interest, amounted to $848, 933.00. (R. 24-5, PID 396.) The amount was owed on or before July 31, 2016. (R. 24-5, PID 397.) Delphi secured the amended promissory note with a security interest in IEPT's intellectual property, formalized in a security agreement. (R. 24-6, PID 400-06.)

         On October 4, 2016, IEPT's president sent a letter to Delphi discussing efforts to “conclude a transaction” in order to “retire the obligations under [IEPT's] Promissory Note with Delphi.” (R. 24-3, PID 386.)

         The same day, IEPT sent another letter to Delphi regarding the “unannounced shutdown of Delphi Fuel Cell Operations.” (R. 24-4, PID 389-90.) The letter indicated that the president of IEPT was shocked and upset after learning that Delphi had shut down its fuel cell program a year earlier, in September 2015. (R. 24-4, PID 389.) The president stated that “in virtually all communications with [the] parties we have been in contact with to date, Delphi has been represented as our strategic manufacturing partner for fuel cell products, expertise and support.” (R. 24-4, PID 389.) IEPT's president stated that he viewed Delphi's failure to promptly ...

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