JD Norman Indus. v. Am. Axle & Mfg.

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JD NORMAN INDUSTRIES, INC., Plaintiff/Counterdefendant-Appellant, v. AMERICAN AXLE & MANUFACTURING INC., Defendant/Counterplaintiff-Appellee, And METALDYNE PERFORMANCE GROUP INC., METALDYNE LLC, and METALDYNE SINTERFORGED PRODUCTS LLC, Defendants-Appellees.

No. 360041

Court of Appeals of Michigan

April 20, 2023

UNPUBLISHED

Wayne Circuit Court LC No. 21-000523-CB

Before: GARRETT, P.J., and K. F. KELLY and HOOD, JJ.

PER CURIAM

Plaintiff/counterdefendant JD Norman Industries, Inc. ("plaintiff" or "JDN") appeals by right the trial court's stipulated order dismissing defendant/counterplaintiff American Axle &Manufacturing, Inc.'s ("American Axle" or "AAM") counterclaim. In this dispute between part manufacturers for General Motors ("GM") vehicles, plaintiff argues the trial court erred when it granted defendants' motion for summary disposition and abused its discretion when it denied plaintiff's request for leave to amend. Finding no errors warranting reversal, we affirm.

I. BASIC FACTS AND PROCEDURAL HISTORY

Prior to February 2021, plaintiff was "a leading diversified manufacturer of highly engineered metal components and systems with operations in the United States, Mexico, and Canada." As relevant here, plaintiff supplied manufactured connecting rods to Federal-Mogul Powertrain LLC which in turn used those rods for rod and piston assemblies in two GM engine programs: (1) the Duramax V8 engines, and (2) the Gen V+ and 6.2L V8 engines. According to plaintiff, it was the sole supplier of the rods for the Gen V+ and 6.2L V8 engines and supplied the majority of the rods for the Duramax engines.

Defendant American Axle is a metal forming automotive supplier and supplied plaintiff with component parts for the rods. In addition to supplying component parts for the rod assemblies, American Axle was also capable of competing directly with plaintiff by supplying the assembled rods directly to Federal-Mogul. Defendants Metaldyne LLC, Metaldyne Performance Group, Inc., and Metaldyne SinterForged Products LLC are subsidiaries of American Axle, which acquired the subsidiaries in 2017.

On October 7, 2019, as a result of plaintiff's failure to pay the past due amounts for its orders, defendants terminated their agreement with plaintiff. The parties subsequently entered into a "Standstill Agreement" under which defendants would refrain from pursuing the past due amounts provided plaintiff complied with certain payment conditions. The Standstill Agreement also allowed plaintiff to continue to obtain components for the rods on a spot-purchase basis. Subsequently, on May 12, 2020, the parties entered into a "Supply Agreement," which is the subject of this dispute. The original term of the Supply Agreement was to last through October 31, 2020. Although the term of the Supply Agreement was extended twice, defendants notified plaintiff that it would not continue its business relationship with plaintiff after the January 31, 2021 expiration date.

Before the term of the Supply Agreement expired, plaintiff filed suit in the trial court, seeking damages for breach of contract and relief under theories of specific performance and declaratory and injunctive relief. Plaintiff also moved for a preliminary injunction, in which plaintiff asked the court to order the parties to maintain the status quo under the Supply Agreement, which the trial court denied.

Plaintiff would amend its complaint twice, eventually asserting three counts of breach of contract,^[1] one count of breach of the covenant of good faith and fair dealing, and two counts of tortious interference. In response, defendants moved for summary disposition, arguing, as relevant here, that the Supply Agreement contained a condition precedent to suit that plaintiff failed to satisfy. Defendants also argued that plaintiff's tortious interference claims failed as a matter of law because plaintiff did not allege a breach of a duty separate from those duties found in the Supply Agreement. The trial court agreed, granting summary disposition in defendants' favor under MCR 2.116(C)(8). The trial court also denied plaintiff's motion to amend its complaint, concluding any such amendment would be futile.

This appeal followed.

II. SUMMARY DISPOSITION

A. STANDARD OF REVIEW

This Court reviews de novo a trial court's decision on a motion for summary disposition. Ahmed v Tokio Marine America Ins Co, 337 Mich.App. 1, 6; 972 N.W.2d 860 (2021). "A motion under MCR 2.116(C)(8) tests the [legal] sufficiency of the complaint based on the pleadings alone." Bauserman v Unemployment Ins Agency, 330 Mich.App. 545, 559; 950 N.W.2d 446 (2019), aff'd 509 Mich. 673 (2022). "In reviewing a motion brought under MCR 2.116(C)(8), all well-pleaded factual allegations are accepted as true and construed in a light most favorable to the nonmovant." Id. (quotation marks and citation omitted). "Judgment is properly granted under this subrule when the claims are so clearly unenforceable as a matter of law that no factual development could possibly justify recovery." Id. (quotation marks and citation omitted).

B. ANALYSIS

Plaintiff contends that the trial court erred because the Supply Agreement did not require plaintiff to give defendants five days' notice and an opportunity to cure before bringing suit. Accordingly, plaintiff argues the trial court's conclusion that plaintiff failed to satisfy the condition precedent in the contract was erroneous and did not bar its breach of contract claim. We disagree.

"[T]he main goal in the interpretation of contracts is to honor the intent of the parties." Mahnick v Bell Co, 256 Mich.App. 154, 158-159; 662 N.W.2d 830 (2003). Words in a contract are given "their plain and ordinary meanings." Reicher v SET Enterprises, Inc, 283 Mich.App. 657, 664; 770 N.W.2d 902 (2009). "An unambiguous contract must be enforced according to its terms." Reed v Reed, 265 Mich.App. 131, 141; 693 N.W.2d 825 (2005). "Plain and unambiguous contract language cannot be rewritten by the Court under the guise of interpretation, as the parties must live by the words of their agreement." Harbor Park Market, Inc v Gronda, 277 Mich.App. 126, 131; 743 N.W.2d 585 (2007) (quotation marks and citation omitted).

A "condition precedent" is "a fact or event that the parties intend must take place before there is a right to performance." Id. (quotation marks and citation omitted). "If the condition is not satisfied, there is no cause of action for a failure to perform the contract." Id. The party seeking enforcement of the condition precedent, however, "cannot avoid liability on the contract for the failure of a condition precedent where [that party] caused the failure of the condition." Id.

The relevant provision from the Supply Agreement is from section 7(a), which states:

(a) During the Term, and as to JDN's bona fide accounts payable arising from shipments of Parts made prior to the expiration or termination of the Term owed to AAM (the "AAM Accounts"), JDN agrees to not setoff, recoup, or deduct against the AAM Accounts: provided, however, JDN may setoff, recoup, or deduct against the AAM Accounts for improper invoicing, mispricing, duplicate payments or billing errors (subject to written notice and reasonable documentation) and any and all documented defective or nonconforming Parts and quality problems, unordered or unreleased Parts that JDN returns to AAM, short shipments, misshipments, premium freight charges (not caused by JDN), and reasonable out-of-pocket professional fees and costs incurred by JDN relating to the foregoing (collectively, the "Allowed Parts Setoffs"): provided, that JDN shall provide AAM a five (5) business-day notice (the "Setoff Notice") prior to implementing any Allowed Parts Setoffs to provide AAM the opportunity to correct the matter.

There is no dispute that plaintiff did not provide defendants with the required five-day notice under this provision of the Supply Agreement. There is also no dispute that section 7(a) contains a condition precedent for something; however, the parties do not agree on what that something is. According to plaintiff, this provision did not prevent it from bringing suit for breach of contract for failure to supply the components because the provision related to the ability of plaintiff to recoup monies for missing or defective parts, not its ability to sue for breach of contract. Plaintiff is correct that section 7(a) of the Supply Agreement does not specifically reference bringing suit; however, it defines, in relevant part, the "Allowed Parts Setoffs" as "all documented defective or nonconforming Parts and quality problems, unordered or unreleased Parts that JDN returns to AAM, short shipments, [or] misshipments ...." In such a circumstance, plaintiff would be entitled to "setoff, recoup, or deduct" those amounts.

While the parties focus on the term "setoff," as demonstrated above, the Supply Agreement refers to plaintiff's ability to "setoff, recoup, or deduct" in the event of a defective or short delivery. In plaintiff's complaint, it alleged that defendants "breached the Supply Agreement by delivering non-conforming Components." In light of that alleged breach, plaintiff sought to recoup its damages. Accordingly, we have little trouble concluding that under the Supply Agreement, plaintiff's act of bringing suit for damages as a result of defendants' alleged failure to supply conforming components was an attempt to "recoup" those amounts.

Plaintiff also contends the trial court erred because it concluded that plaintiff failed to plead its breach-of-contract claim with particularity. For its part, the trial court stated:

JDN does not allege any specific instances in which it provided notice of any defects, either in quantity or

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