Julie Maynard, Inc. v. Whatever it Takes Transmissions & Parts, Inc.

Julie Maynard, Inc., doing business as Consolidated Vehicle Converters, Plaintiff/Counter-defendant, v. Whatever It Takes Transmissions and Parts, Inc., et al., Defendants/Counter-claimants.

No. 3:19-cv-238

United States District Court, S.D. Ohio, Western Division, Dayton

April 5, 2022

DECISION AND ENTRY GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT DOC. 50, AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT. DOC. 53, 73. PLAINTIFF IS AWARDED SUMMARY JUDGMENT ON ITS CLAIM FOR FAILING TO PAY MONEY OWED; DEFENDANTS ARE AWARDED SUMMARY JUDGMENT ON THEIR RECOUPMENT COUNTERCLAIM. OFFSETTING THE TWO, AS A RESULT DEFENDANTS ARE AWARDED $345, 508. PLAINTIFF IS AWARDED SUMMARY JUDGMENT ON DEFENDANTS' COUNTERCLAIMS FOR CONVERSION AND PUNITIVE DAMAGES. MOTIONS FOR SUMMARY JUDGMENT ARE DENIED IN ALL OTHER RESPECTS AND THE CASE IS TERMINATED.

THOMAS M. ROSE UNITED STATES DISTRICT JUDGE

Pending before the Court are Plaintiff's Motion for Partial Summary Judgment, Doc. 50, and Defendants' Motion for Summary Judgment. Doc. 53, 73. The case involves two parties who went their separate ways, and then decided to litigate over long-ago vague promises made.

I. FACTS

Plaintiff Julie Maynard, Inc., which does business as Consolidated Vehicle Converters (“CVC”), and Defendant Whatever it Takes Transmissions & Parts (“WIT”), did business together for almost 40 years. Deposition of Marcia Prugh 11: 18-24. WIT sells and distributes automotive transmissions and transmission parts. CVC is a re-manufacturer of used torque converters. CVC was WIT's primary supplier for nearly 20 years. WIT was CVC's largest customer. WIT would send CVC used converter cores with the expectation that CVC would recondition and store them in a core bank to ensure that WIT had cores available.

A torque converter is a mechanical device that goes between a car engine and the transmission, which allows the vehicle to come to a stop without stalling the engine and yet when you push on the gas it transfers power to the tires. Deposition of Tim Prugh 16:9-13. A used torque converter is also called a converter core. Id. 17:3-6. CVC takes used torque converters and remanufactures them into like-new transmission components. Different vehicles use different torque converters.

CVC is owned equally by sisters Julie Maynard Turner and Marcia Prugh, who are daughters of John Maynard. PUF ¶¶ 15-16. Maynard, Turner and Prugh are personal friends of WIT's former President Kenny Hester. PUF ¶¶ 7 19.

The parties executed a Memorandum of Understanding (“MOU”), dated October 12, 2012, which governed the terms and conditions by which WIT and CVC conducted business. The MOU was signed by Julie Maynard Turner, the President of CVC, and Kenneth Hester, the founder of WIT. Deposition of Julie Maynard Turner 7:1-25; 8:1-17.

WIT and CVC hereby mutually agree to a 10-year “products requirements contract” (through December 31, 2022) whereby CVC remanufactures converters to be acquired by WIT, under the following enumerated standards and conditions:

1. Minimum number of units manufactured by CVC and sold to WIT approximately equivalent to 2012 levels,

2. Measure of CVC service and quality approximately equivalent to standards achieved in 2012, 3. Industry competitive prices to be mutually agreed upon on an annual basis, to be paid by WIT within commercially reasonable standards.

It is the express intention of both WIT & CVC that that the terms of this Memorandum of Understanding be enforceable in any event during the ten-year term of this agreement - including, but not limited to - (1) changes in ownership or management of WIT or CVC, and/or (2) the sale of stock or assets of either company to a third party.

Doc. 50-1, PageID 484-85.

After his ouster as President of WIT, Hester affied to the existence of a separate agreement:

I also have personal knowledge of an oral agreement between WIT and Julie Maynard Turner, President of CVC Julie Maynard, Inc. dba Consolidated Vehicle Converters (“CVC”), made at about the same time as the MOU in 2012 where both parties agreed that any used converter cores provided by WIT to CVC would be the property of CVC after one year if not ordered for remanufacture by WIT.

Doc. 52, PageID 489.

Hester was removed as President of WIT on August 8, 2018, because of employee complaints about his harassing behavior. ECF 53-13 ¶ 3 PageID 735; ECF 53-14 ¶ 9 PageID 739; ECF 53-15 ¶ 12 PageID 831. This upset John Maynard and he threatened the WIT Board of Directors, telling them, “Wait until Monday. You'll see what you've done.” ECF 53-2 at 28:2-19 PageID 540; ECF 53-4 at 41:4-14 PageID 562; ECF 53-5 at 45:21-46:16 PageID 576-77; ECF 53-6 at 58:11-61:6 PageID 589-92; ECF 53-49 PageID 1170. WIT management believed this was a threat to cut off WIT's supply of torque converters. ECF 53-4 at 41:4-42:3, 44:20-45:7 PageID 562, 2550-51. Hester told WIT Salesman Charlie Litchfield that “John [Maynard] wanted to cut you all off immediately as soon as I was let go off the board, and I told them to wait until there was a time advantageous to you.” ECF 53-8 at 62:25-65:1.

CVC began negotiating with WIT's competitor Transtar Industries, LLC to enter into an exclusive supplier agreement which would necessitate terminating its relationship with WIT. ECF 53-8 at 70:12-16 PageID 634. For its part, WIT contacted other potential suppliers about the possibility of dual sourcing WIT's torque converter supply. ECF 53-4 at 37:2-6 PageID 561; ECF 53-14 ¶ 14 PageID 740. That way, if there was a problem with one supplier, WIT could purchase products from the other supplier without any severe disruption to its business. ECF 53-10 at 38:8-14 PageID 709. WIT ultimately retained Dynamic Precision Reman, LLC (“Dynamic”) as its secondary supplier. ECF 53-4 at 48:5-8 PageID 563; ECF 53-10 at 18:2-5 PageID 699.

In December 2018, WIT informed CVC that it was continuing their relationship but also that it would dual-source its torque converters. PUF ¶¶ 72, 74. CVC never mentioned the MOU or claimed that WIT's proposal would violate that alleged contract. PUF ¶¶ 73, 75-76. Subsequently, CVC complained to WIT several times in January and February 2019 about WIT's volume of purchases; however, it never mentioned the MOU or claimed that WIT was violating or in danger of violating that alleged contract. ECF 53-8 at 10:19-13:8 PageID 598-601; ECF 53-21 at CVC-0089.

In 2018 and early 2019, CVC manufactured and sold to WIT torque converters for which it billed $530, 598, excluding interest, for which WIT has not paid. Deposition of Tim Prugh 139: 6-20; Deposition of Kelly Hammock 72:3-25; 73:5-23 (Sept. 19, 2020).

On February 15, 2019, CVC terminated its relationship with WIT effective immediately. ECF 53-8 at 53:8-14 PageID 621; ECF 53-24 at WIT 00967 PageID 894. The termination notice did not mention the MOU or alleged violation of it. ECF 53-24 at WIT 00967 PageID 894. That same day, CVC signed an exclusive supplier agreement with Transtar. ECF 53-11 at 31:22-32:9 PageID 716-17; Def.'s Dep. Ex. 14 PageID 1225-26. Since termination, CVC has retained more than 40, 000 WIT converter cores and continued to cut them open and use them to fill other orders, PUF ¶¶ 108-12, 118, despite repeated assurances that it would return those cores to WIT. PUF ¶¶ 92-93, 96-107, 113, 116-17.

An aspect of the business relationship which was not addressed in the MOU was transporting, inspecting and storing used converters. WIT sells automotive parts including transmission components. When a customer purchased a replacement torque converter it would often leave the old torque converter with WIT. When CVC delivered remanufactured torque converters to WIT, CVC would pick up used torque converters and take them to Dayton. CVC did not charge WIT for transporting, inspecting and storing used converters. Deposition of WIT by Kelly Hammock 64:16-22 (Feb. 12, 2021). CVC loosely tracked these used cores via a “core bank, ” an inventory record of the used parts. Deposition of Tim Prugh, 18:9:25;19:1-13.

In practice, if WIT ordered a remanufactured torque converter for which CVC had a used core listed in the core bank, CVC would not charge WIT anything for that part. Deposition of Tim Prugh, 18:9-25; 19:1-13; 115:1- 25;119:3-21. If there was no corresponding part in the core bank, CVC would purchase the part in the market and pass that charge through to WIT. Deposition of Tim Prugh, 18:9:25;19:1- 13;118:15-24;119:3-21.

Also in practice, and consistent with the understanding reflected in the purported oral contract, ^[1] any cores in CVC's possession that had not been ordered for remanufacture within one year belonged to CVC. Affidavit of Kenneth Hester (March 12, 2021), Doc. 52, PageID 489. WIT has never paid CVC for storing converters. Deposition of WIT by Kelly Hammock 64:16-22 (Feb. 12, 2021). WIT has never paid CVC for the cost of transporting used cores from WIT locations to CVC. Id. at 54:23-25; 55:1. WIT never asked for an accounting of the used converter cores. Deposition of Kelly Hammock 73:5-23 (Sept. 19, 2020). WIT never requested a return of used cores until March of 2019, once this dispute arose between the parties. Deposition of WIT, 49:20-25; 55:1-23 (Feb. 11, 2021), Doc. 62-7, PageID 2753. WIT never requested any money from CVC for all or any portion of the cores WIT sent to CVC. Deposition of WIT 50:13-22 (Feb. 12, 2021). WIT knew CVC sold cores for salvage and never expected to receive any money from such sales. Id. at 50: 17-22; 51: 1-25; 52: 1-2.

On April 4, 2019, CVC informed WIT that the MOU obligated WIT to purchase “Minimum number of units manufactured by CVC and sold to WIT approximately equivalent to 2012 levels” through December 31,...