BRC Rubber & Plastics, Inc. v. Cont'l Carbon Co., Cause No. 1:11–CV–190.

949 F.Supp.2d 862

BRC RUBBER & PLASTICS, INC., Plaintiff,

v.CONTINENTAL CARBON COMPANY, Defendant.

Cause No. 1:11–CV–190.

United States District Court,

N.D. Indiana,

Fort Wayne Division.

June 5, 2013.

Daniel N. Sharkey, Brad A. Danek, Brooks Wilkins Sharkey & Turco PLLC, Birmingham, MI, Karen T. Moses, Shannon K. Reed, Faegre Baker Daniels LLP, Fort Wayne, IN, for Plaintiff.

Matthew J. Elliott, Beckman Lawson LLP, Fort Wayne, IN, Stephen M. Ryan, DLA Piper U.S. LLP, Houston, TX, for Defendant.

OPINION AND ORDER

ROGER B. COSBEY, United States Magistrate Judge.

Plaintiff BRC Rubber & Plastics, Inc. (“BRC”), and Defendant Continental Carbon Company (“Continental”) entered into a Supply Agreement as of January 1, 2010, in which Continental agreed to supply all of BRC's requirements for carbon black.¹ On June 2, 2011, BRC terminated that Agreement and filed this lawsuit against Continental, advancing claims of breach of contact and anticipatory repudiation and seeking declaratory relief and damages. The crux of BRC's claims is that Continental breached and repudiated the Agreement when it failed to confirm BRC's orders for carbon black, failed to ship the material to BRC, and limited the annual quantity it would supply.

Now before the Court is a motion for summary judgment filed by BRC, contending that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law on all claims. For the following reasons, the Court finds BRC's arguments persuasive and thus will GRANT its motion for summary judgment.

I. FACTUAL BACKGROUND²

A. Relationship of the Parties

Continental manufactures furnace-grade carbon black, a raw material filler used in tires and other rubber and plastic products. (Moccia Decl. ¶ 3.) BRC was a longtime customer of Continental, purchasing three grades of carbon black for incorporation into the numerous rubber products it supplies to customers. (Nunley Dep. 134; Cornwell Dep. 12.) Continental was BRC's exclusive supplier of carbon black at least back to 1997. (Nunley Dep. 134; Cornwell Dep. 12.) From 2005 to 2008, Continental annually supplied BRC between 1.89 and 2.43 million pounds of carbon black (Pl.'s Mem. of Law. Ex. 3), and in 2009, 1.9 million pounds (Moccia Decl. ¶ 6; Cornwell Dep. 62). Continental supplied about forty customers and its potential annual capacity for carbon black was approximately 500 million pounds; consequently, BRC was a “very small” customer of Continental. (Moccia Dep. 17.)

B. The Parties Enter Into the Supply Agreement as of January 1, 2010

Thomas Nunley, a salesperson for Continental, handled the BRC account from 1997 to May 2011. (Nunley Dep. 134.) In 2009, Continental's President, Kim Pan, asked his sales team “to negotiate as many long-term contracts that we could convince our customer base to take” and to “get as much as we could committed long term in volume[.]” (Nunley Dep. 9.)

Accordingly, Nunley negotiated the terms of the Supply Agreement with Mike Cornwell, BRC's Vice President of Materials (Pl.'s Mem. of Law Ex. 5; Nunley Dep. 20–21, 26, 29–30), and the parties executed it as of January 1, 2010 (Pl.'s Mem. of Law Ex. 7; Moccia Decl. ¶ 4). Nunley was the sole negotiator of the Agreement for BRC. (Moccia Dep. 10). The Agreement obligated Continental to supply, and BRC to purchase, all of BRC's requirements of three grades of carbon black (N339, N550, and N762) during the five-year term of the Agreement. (Docket # 46.)

The terms of the two-page Agreement relevant to this dispute are:

Quantity of Material

It is the intent of this Agreement that Continental Carbon Company agrees to sell to BRC Rubber and Plastics approximately 1.8 million pounds of prime furnace black annually. These volumes are to be taken in approximately equal monthly quantities. BRC Rubber and Plastics, to the best of their ability, will provide accurate forecasts of the future usage of their manufacturing sites which will assist Continental Carbon Company in meeting these and additional requirements.

Carbon Black Pricing

The following baseline prices for all rubber grade carbon blacks purchased by BRC Rubber & Plastics as of January 1, 2010 are as follows and are to remain firm throughout the term of this agreement.

....

Additional Volume Rebate/Penalty

An additional rebate or penalty will be applied according to the following schedule:

Lower Limit

Upper Limit

Amount Applied

1,500,000

2,100,000

$.005/lb

1,400,000

2,200,000

An additional $.005/lb for a total of $.01/lb

Rebates or penalty are applied to all pounds purchased during a calendar year. Rebates will be credit or invoice will be issued to make the appropriate adjustment.

Should the normal annual volume for BRC shift significantly BRC and Continental Carbon agree to establish new upper and lower limits.

(Pl.'s Mem. of Law Ex. 7.)

Thus, as long as BRC purchased between 1.5 and 2.1 million pounds of carbon black a year, the price for the material remained the same. (Cornwell Dep. 52.) But if BRC purchased more than 2.1 million pounds a year, it would receive a half-cent rebate on each pound purchased that year, and if it purchased less than 1.5 million, it would pay an additional half-cent per pound penalty. (Nunley Dep. 33; Cornwell Dep. 32.) The rebate or penalty would correspondingly increase to one cent per pound if BRC purchased more than 2.2 million pounds or less than 1.4 million pounds. (Nunley Dep. 33; Cornwell Dep. 32.) BRC and Continental never established new upper and lower limits for the rebate/penalty during the term of the Agreement (Moccia Decl. ¶ 29), so the annual volume in the terms of the contract did not “shift significantly.”

Also, in late 2009, Continental internally classified BRC as a “Tier 1” customer who would get its orders “filled first” if Continental faced a shortage of supply. (Pl.'s Mem. of Law Ex. 9; Moccia Dep. 92; Nunley Dep. 14–15.)

C. The Parties Perform Under the Agreement Without Dispute Until April 2011

Continental projected in its 2010 Forecast that it would supply BRC with 1.95 million pounds that year. (Moccia Dep. 16; Moccia Decl. ¶ 5; Nunley Dep. 37; Pl.'s Mem. of Law Ex. 10.) But BRC's requirements increased with the rebounding automotive industry, and Continental actually supplied BRC with 2.612 million pounds in 2010. (Nunley Dep. 37; Pl.'s Mem. of Law Ex. 10.) The monthly quantities supplied to BRC varied from 93,000 to 322,000 pounds. (Pl.'s Mem. of Law Ex. 10.) Continental awarded BRC a rebate in the amount of $26,118.30 for its purchases in 2010. (Nunley Dep. 37–38.)

Continental's 2011 Sales Forecast, updated as of May 27, 2011, planned for BRC to order 2.68 million pounds, consisting of 339,000 pounds of N339; 1,699,000 pounds of N550; and 780,000 pounds of N762. (Pl.'s Mem. of Law. Ex. 11; Moccia Decl. ¶ 31.) Accordingly, Continental designated 2.734 million pounds for BRC in its 2011 Annual Operating Plan. (Pl.'s Mem. of Law Ex. 11.) Continental, however, does not actually reserve quantities of carbon black based on these forecasts because they are provided by its sales personnel and are often inaccurate. (Moccia Decl. ¶ 30.) The forecasts are merely used as a tool to predict demand and assist planning production of particular grades of carbon black throughout the year. (Moccia Decl. ¶ 30.)

D. Market Demand for Carbon Black Increases and Continental Seeks a Price Increase From BRC

As the economy improved during late 2010 and early 2011, demand for carbon black increased and its market price began to rise. (Moccia Dep. 25–26; Moccia Decl. ¶ 8; Scott Dep. 67.) Despite this high demand, Continental was operating at a loss and purportedly had to choose between going out of business or seeking price increases from its customers. (Moccia Decl. ¶ 8.) Consequently, Thomas Moccia, who had joined Continental in July 2010 as its Director of Marketing and Development, instructed Nunley to seek higher base prices from Continental's customers, including BRC. (Nunley Dep. 73; Moccia Decl. ¶¶ 2, 9.)

Nunley notified BRC on April 14, 2011, that despite their “multi-year agreement[,]” Continental was effectuating a two cents per pound base price increase to BRC effective June 1, 2011. (Pl.'s Mem. of Law Ex. 12.) But BRC rejected Continental's request for a price increase, first by e-mail and then by letter, and insisted that Continental provide adequate assurance that it would fill BRC's orders under the Agreement and “hold up its end of the bargain.” ³ (Pl.'s Mem. of Law Exs. 13, 14; Nunley Dep. 66, 73.) All of Continental's other customers, however, agreed to a price increase, most ranging from four to five cents per pound. (Moccia Decl. ¶ 9.)

When Moccia learned of BRC's response, he told Nunley to raise the price anyway and that “if they did not like it, they could get their carbon black someplace else.” (Nunley Dep. 73.) Then, on April 29th, Moccia instructed not only Nunley, but also Linda Nelson, a customer service representative for Continental, and several other Continental employees not to ship to fourteen customers, including BRC, due to a “negative GP [gross profit].” (Pl.'s Mem. of Law Ex. 16.) Shortly thereafter, Continental internally downgraded BRC from a “Tier 1” to a “Tier 3” customer. (Pl.'s Mem. of Law Ex. 17.)

On April 26, 2011, BRC sent Continental a purchase order for 110,000 pounds of N550 to be shipped on May 4; 110,000 pounds of N550 on May 11; and 140,000 pounds of N762 on June 4, requesting that Continental confirm the order.⁴ (Pl.'s Mem. of Law Ex. 18; Moccia Decl. ¶ 14.) When Continental failed to do so, BRC sent several additional requests for confirmation, but Continental still did not confirm the order. (Cornwell Dep. 108; Pl.'s Mem. of Law Ex. 16, 21.) Continental only confirms a customer's purchase order if it has the capacity to fill it. (Moccia Decl. ¶ 15.)

E. Continental Fails to Confirm and Fill BRC's Order for a May 11, 2011, Shipment

By May 2011, Continental could no longer keep up with the demand for carbon black. (Mocc...