Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 1 of 27 PageID #: <pageID> UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION FOAM SUPPLIES, INC., ) ) Plaintiff, ) ) vs. ) Case No. 4:05CV1772 CDP ) THE DOW CHEMICAL ) COMPANY, ) ) Defendant. ) MEMORANDUM OPINION Plaintiff Foam Supplies, Inc. (FSI) was both a customer and a competitor of defendant The Dow Chemical Company. FSI brought this suit because Dow failed to sell it quantities of methyl diphenyl diisocyanate that FSI contends were required by a contract. The remaining claims are breach of sales contract, tortious interference with business expectancy, fraudulent misrepresentation, and breach of non-disclosure agreement. Dow seeks summary judgment on the remaining claims. Because the case is set for trial in three weeks, I entered an order ruling on these motions last week, even though I was not yet ready to issue an opinion explaining the reasons for my rulings. This opinion contains those reasons. Dow is entitled to judgment as a matter of law on the fraud and breach of non-disclosure agreement claims, as FSI’s proof of several of the essential Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 2 of 27 PageID #: <pageID> elements of these claims is lacking. FSI’s breach of contract claim, even if proved at trial, could not support its claim for lost profits, because the contract contains a valid limitation of liability provision excluding consequential damages. Genuine disputes remain on all other elements of the breach of contract claim, which survives because FSI has other claims of damages. Genuine disputes also remain on the claim for tortious interference with FSI’s legitimate expectancy in its business with one customer, Philips Products. Background Dow and FSI are both involved in the polyurethane foam systems business. Dow sells methyl diphenyl diisocyanate (MDI), a chemical compound used to produce polyurethane foam products. In addition to selling MDI to plaintiff and to other outside customers, Dow also sells MDI to its own subsidiary that competes with FSI. In August 2004, Dow and FSI were involved in negotiations for an MDI requirements contract for the years 2004 and 2005. Around August 15, 2004, Dow’s sales representative, Les King, emailed FSI a requirements contract for FSI’s signature. Under the signature blanks the form stated: “NOTE: This offer expires if Dow doesn’t receive a signed acceptance within 30 days after receipt by customer.” FSI signed and returned the contract the very next day, but Dow never - 2 - Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 3 of 27 PageID #: <pageID> returned a copy to FSI with Dow’s signature. FSI realized it had not received a signed copy back only later, when Dow stopped supplying it with the full amount called for by the contract. Not long after that, Dow declared force majeure as a result of an equipment breakdown at one of its plants. Dow informed FSI that it would be unable to meet FSI’s needs and that it was attempting to allocate MDI among its customers in a fair and equitable manner. Dow did not provide the quantities of MDI covered by the contract, and FSI claims that its sales and profits were adversely affected. Earlier, in December 2003, Dow and FSI had entered into a confidentiality and non-disclosure agreement concerning FSI’s ecomate® technology, as part of negotiations over a separate business deal. Dow inspected and tested FSI’s technology under the protections of the confidentiality agreement. FSI asks the court to infer that Dow breached the non-disclosure agreement; FSI seeks this inference as a discovery sanction because Dow only recently disclosed that it had obtained an additional sample of FSI’s product from another source, which it also tested. Discussion Dow has moved for summary judgment on all of FSI’s remaining claims. In determining whether summary judgment should issue, the Court views the facts - 3 - Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 4 of 27 PageID #: <pageID> and inferences from the facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The moving party has the burden to establish both the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “[A] complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Celotex, 477 U.S. at 323. Breach of Contract (Count III) In order to prove its breach of contract claim, FSI must establish: (1) the elements of a valid contract, (2) the terms of the contract, (3) that Dow breached the terms of the contract, and (5) that the breach caused FSI’s injury. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003) (interpreting Michigan law).1 FSI contends that Dow breached the contract by failing to deliver the quantities of MDI covered by the contract. It seeks lost profits, refunds of a surcharge, and rebates. Dow argues 1The contract specifically states that Michigan law applies. In determining which law to apply in this case, I am bound by Missouri’s choice of law principles. Brown v. Home Ins. Co., 176 F.3d 1102, 1105 (8th Cir. 1999). Generally, Missouri courts will honor the parties’ choice of law provision so long as the law is not contrary to a fundamental policy of Missouri. Block Fin. Corp. v. Am. Online, Inc., 148 S.W.3d 878, 884 (Mo. Ct. App. 2004). Therefore, I will apply Michigan’s law to the breach of contract claim. Michigan and Missouri have both adopted the UCC, however, so the differences are slight. - 4 - Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 5 of 27 PageID #: <pageID> that the lost profits claim is barred by a limitation clause in the contract, that the claimed lost profits were not caused by any breach, that the surcharge damages are unrecoverable because FSI passed them on to its customers, and that no contract existed. I conclude that the limitation of liability clause prohibits FSI’s claims for lost profits, but factual disputes remain on all other issues. 1. Did a Contract Exist? Dow argues that FSI cannot prove that a contract existed because Dow never signed the contract. FSI has provided sufficient evidence to withstand summary judgment on this claim. FSI has evidence that Dow made an offer by sending the contract, and that FSI accepted the offer by signing it and returning it. Whether a contract was formed is an issue of law for me to decide, but underlying factual disputes are to be resolved by the jury. Kloian v. Domino’s Pizza L.L.C., 733 N.W.2d 766, 770 (Mich. Ct. App. 2006).2 Under Michigan law, “before a contract can be completed, there must be an offer and acceptance. Unless an acceptance is unambiguous and in strict conformance with the offer, no contract has been formed.” Kloian, 733 N.W.2d at 770. 2If the contract was not valid, then the choice of law provision is not effective. See Citibank (South Dakota), N.A. v. Wilson, 160 S.W.3d 810, 812-13 (Mo. Ct. App. 2005). Still, under Missouri law, there is only a conflict of law where the interests of two or more states cannot be reconciled. Because the contract formation requirements of all of the states with contacts to the contract formation issue are similar, I may apply the law of either Michigan or Missouri. Brown v. Home Ins. Co., 176 F.3d at 1105. - 5 - Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 6 of 27 PageID #: <pageID> The August 15, 2004 email and attachment can be seen as an offer from Dow to FSI. FSI signed and sent the document back the next day, which can be viewed as acceptance. This evidence is sufficient to withstand a motion for summary judgment. See McKain v. Moore, 431 N.W.2d 470, 475 (Mich. Ct. App. 1988). Contrary to Dow’s arguments, neither PCS Sales (USA), Inc. v. Nitrochem Distrib. Ltd., 2004 WL 944541 (S.D.N.Y. May 3, 2004) nor Herm Hughes & Sons, Inc. v. Quintek, 834 P.2d 582 (Ut. Ct. App. 1992), are persuasive. In PCS Sales the offeree, Nitrochem, did not accept PCS’s offered contract immediately, but instead responded with objections to certain provisions, and only after extensive negotiations did Nitrochem “resurrect” the offer, countersign it, and mail it back. PCS Sales, 2004 WL 944541, at *3. In Quintek the offeree did not accept the offer within the ten-day limit provided by the offer. Instead, it later proposed a different contract, and there were further negotiations between the parties. 834 P.2d at 583. It is hardly surprising that neither court found a contract to have been formed. Dow argues that the parties’ conduct shows that no contract was formed, but this is a disputed factual question. Under Michigan law, all that is necessary to show a meeting of the minds is “conduct by both parties which recognizes the - 6 - Case: 4:05-cv-01772-CDP Doc. #: 182 Filed: 08/04/08 Page: 7 of 27 PageID #: <pageID> existence of such a contract.” Mich. Comp. Laws § 440.2204(1); see also Detroit Radiant Prod.