United States District Court, E.D. Michigan, Southern Division
OPINION & ORDER DENYING DEFENDANT'S MOTION TO
DISMISS (Dkt. 23)
A. Goldsmith, United States District Judge.
matter is before the Court on Defendant Principal
Manufacturing's (“Principal”) motion to
dismiss (Dkt. 23). The issues have been fully briefed.
Because oral argument will not aid the decisional process,
the motion will be decided based on the parties'
briefing. See E.D. Mich. LR 7.1(f)(2); Fed.R.Civ.P.
78(b). For the reasons that follow, Principal's motion is
supplies products to Plaintiff BorgWarner Ithaca LLC
(“BorgWarner”), which in turn supplies products
to Ford Motor Company. 2d Am. Compl. ¶¶ 7-8 (Dkt.
17). At issue in this case are two purchase orders, numbered
902660 and 902661, to supply Intake and Exhaust Inner Plate
components. Id. ¶¶ 6, 9. The
“Purchase Order Terms and Conditions” specify
that the orders are requirements contracts (unless otherwise
stated on the face of an individual purchase order), meaning
that Principal has agreed to supply 100% of the parts that
BorgWarner requires for its production. Id. ¶
11, quoting Purchase Order Terms and Conditions, Ex. 2 to 2d
Am. Compl., at 1 (Dkt. 17-2). As part of a settlement
agreement following poor production quality in 2017,
“Principal [also] acknowledge[d] and confirm[ed] that
no price increases are permitted under the parties'
supply arrangement except as provided in the applicable
P.O.'s, and the governing terms and conditions (i.e. the
BorgWarner standard P.O. Terms and Conditions).”
Id. ¶ 15, quoting Settlement Agreement, Ex. 5
to 2d Am. Compl., at 2 (Dkt. 17-2).
contract volumes are based on weekly volumes, referenced as
APW (average per week) and MPW (maximum per week). 2d Am.
Comp. ¶ 18. These APW and MPW figures refer to the
“capacity commitment” of the supplier. See,
e.g., Purchase Order 902660, Ex. 3 to 2d Am. Compl.
(Dkt. 17-2). Until December 31, 2018, the requirement was 14,
170 APW and 15, 520 MPW. 2d Am. Compl. ¶ 19. In May
2018, Ford informed BorgWarner that it would require an
increase in parts to 15, 443 APW and 16, 990 MPW as of
January 1, 2019. Id. When alerted of the change,
Principal demanded a large piece price increase, id.
¶ 20, to which BorgWarner responded that this was a
violation of the settlement agreement, id. ¶
21. Principal asserted that it was only required to provide a
maximum weekly volume of 15, 520 units, and claimed that it
did not have the manufacturing capacity to meet the 16, 990
MPW volume. Id. ¶ 22.
filed this suit, requesting a declaratory judgment that
Principal has contractual obligations that it must continue
to supply parts to BorgWarner. BorgWarner also filed a motion
for preliminary injunction, which was later resolved via a
stipulated order (Dkt. 21). Principal has now filed a motion
STANDARD OF REVIEW
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), “[t]he defendant has the burden of showing
that the plaintiff has failed to state a claim for
relief.” Directv, Inc. v. Treesh, 487 F.3d
471, 476 (6th Cir. 2007) (citing Carver v. Bunch,
946 F.2d 451, 454-455 (6th Cir. 1991)), cert.
denied, 552 U.S. 1311 (2008). To survive a Rule 12(b)(6)
motion, the plaintiff must allege sufficient facts to state a
claim to relief above the speculative level, such that it is
“plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). The plausibility
standard requires courts to accept the alleged facts as true,
even when their truth is doubtful, and to make all reasonable
inferences in favor of the plaintiff. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009); Twombly, 550
U.S. at 555-556.
a complaint's plausibility is a “context-specific
task that requires the reviewing court to draw on its
judicial experience and common sense.” Iqbal,
556 U.S. at 679. Although a complaint that offers no more
than “labels and conclusions, ” a
“formulaic recitation of the elements of a cause of
action, ” or “naked assertion[s]” devoid of
“further factual enhancement” will not suffice,
id. at 678, it need not contain “detailed
factual allegations, ” Twombly, 550 U.S. at
555; see also Erickson v. Pardus, 551 U.S. 89, 93
(2007) (“[S]pecific facts are not necessary . . .
.”). Rather, a complaint needs only enough facts to
suggest that discovery may reveal evidence of illegality,
even if the likelihood of finding such evidence is remote.
Twombly, 550 U.S. at 556.
raises a number of arguments in favor of dismissal. Principal
contends (i) that the plain language of the contract caps
Principal's obligation to deliver parts at the MPW stated
therein, (ii) that the settlement agreement did not change
the terms of this obligation, and (iii) that the MPW stated
on the 2018 order forms was not a mere typographical error.
The premise on which all of Principal's arguments rely is
that the contract is clear on its face. But this is not so.
reviewing a Rule 12(b)(6) motion to dismiss, the Court may
resolve issues of contract interpretation when the contract
is properly before the Court, but must resolve all
ambiguities in the contract in Plaintiffs' favor.”
Ajuba Intern., L.L.C. v. Saharia, 871 F.Supp.2d 671,
689 (E.D. Mich. 2012) (internal quotation marks omitted).
“A court should not choose between reasonable
interpretations of ambiguous contract provisions when
considering a motion to dismiss under Rule 12(b)(6), ”
meaning that the “construction of ambiguous contract
provisions is a factual determination that precludes
dismissal on a motion for failure to state a claim.”
Id. (internal quotation marks omitted).
from the face of the complaint and the attached contract, it
is clear is that the parties agreed to enter into a
requirements contract unless otherwise stated on the face of
the purchase order. See Purchase Order 902660.
BorgWarner argues that there is no such language that would
negate the requirements contract, while Principal contends
that the inclusion of a maximum capacity commitment per week
requires a finding that it cannot be required to produce more
than that amount without it constituting a new contract.
Thus, this case seemingly turns on what “capacity
contract provides no guidance in determining the meaning of
the term “capacity commitment.” “Where a
contract provides little guidance in interpreting a disputed
term, we may properly look to the plain language of the
contract; to relevant dictionary definitions of the term; to
other decisions of courts that have previously interpreted
the term; to the standards and practices within the relevant
industry; and to how the parties' actions during the
pendency of the agreement have reflected an understanding of
the term.” City of Wyandotte v. Consolidated Rail
Corp., 262 F.3d 581, 586 ...