RBC Aircraft Prods., Inc. v. Precise Machining & Mfg., LLC

26 F.Supp.3d 156

RBC AIRCRAFT PRODUCTS, INC., Plaintiff

v.PRECISE MACHINING & MANUFACTURING, LLC, Defendant.

Civil Action No. 3:10–cv–878 SRU.

United States District Court, D. Connecticut.

Signed May 29, 2014.

Christine Jean–Louis, Jeffrey R. Babbin, Joseph W. Martini, Matthew C. Brown, Steven Bruce Malech, Wiggin & Dana LLP, New Haven, CT, for Plaintiff.

James K. Robertson, Jr., Sarah S. Healey, Carmody & Torrance, Waterbury, CT, Joe M. Fears, Robert J. Bartz, Barber & Bartz, Tulsa, OK, for Defendant.

RULING ON MOTIONS FOR A NEW TRIAL AND RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW

STEFAN R. UNDERHILL, District Judge.

On January 17, 2013, a jury returned a verdict finding that defendant Precise Machining and Manufacturing, LLC (“Precise”) breached a five-year requirements contract with plaintiff RBC Aircraft Products, Inc. (“RBC”).¹ The jury awarded RBC $2,986,089 in compensatory damages. At the close of RBC's case, Precise moved for judgment as a matter of law pursuant to Rule 50 of the Federal Rules of Civil Procedure. See Oral Motion for Judgment as a Matter of Law (doc. # 178). I reserved ruling on that motion. After judgment entered, Precise timely renewed its motion for judgment as a matter of law and filed, in the alternative, a motion for a new trial on the issue of damages pursuant to Rule 59 of the Federal Rules of Civil Procedure (doc. # 195). Precise then timely filed a separate motion for a new trial pursuant to Rule 59 (doc. # 226). For the reasons discussed below, Precise's motions are granted in part and denied in part.

I. Background and Procedural History

The following facts, which are largely undisputed, are drawn from the testimony of witnesses and the exhibits entered into evidence at trial.

A. Overview of the Parties' Relationship

Precise makes wing-assembly kits for Boeing 737 airplanes, which it sells to Spirit Aerosystems (“Spirit”). Precise has had a contract with Spirit for the 737 work since 1995, and the 737 contract makes up approximately two-thirds of Precise's business. Trial Tr. 744, 844–45, Jan. 14, 2013 (Jeff Greer). RBC is a producer of two cam-follower bearings—“18s” and “20s”—that are specially designed to fit Boeing 737s. Trial Tr. 51, Jan. 7, 2013 (Pat Bannon). RBC manufactures both bearings, which are a significant part of the kit that Precise provides to Spirit. At all times relevant to this litigation, the only other producer of those bearings was non-party Accurate Bushing Company (“Accurate”). From approximately 2004 until April 2010, RBC supplied Precise with the 18s and 20s; since April 2010, Accurate has done so.

There are two major types of contracts typically used in the aerospace supply chain—long-term agreements (“LTA”) and purchase order (“PO”) agreements. LTAs typically are signed, multi-year contracts that are formal, lengthy and complex. See, e.g., Trial Tr. 291, Jan. 8, 2013 (John Clark); Trial Tr. 1199, 1202–03, Jan. 15, 2013 (John Diver). PO agreements, by contrast, generally involve a fairly informal exchange of standardized commercial forms (including a PO), which reflect the fundamental elements of the parties' agreement—the commodity to be procured, the quantity needed, price, duration and delivery terms, and any additional terms or conditions imposed by one or both parties. E.g., Trial Tr. 1199, Jan. 15, 2013 (John Diver). Typically, the duration of a PO agreement is shorter than the contract period of an LTA. See id. Precise's expert, John Diver, who served as director of supply-chain management and procurement for Boeing and Spirit,² testified that approximately 80 to 85% of business in the aerospace industry was transacted through POs.³ Id. at 1201.

At all times relevant to this litigation, the relationship between Spirit and Precise was governed by an LTA. Trial Tr. 744–45, Jan. 14, 2013 (Jeff Greer). By contrast, Precise always transacted business with its suppliers, including RBC, through POs. See Trial Tr. 282, Jan. 8, 2013 (John Clark); Davis Dep. 110:1–5, Oct. 24, 2012 (shown at trial via videotape, Jan. 15, 2013). From 2004 until 2009, Precise asked RBC for new pricing each year and RBC provided a price quote for a year's worth of bearings. Precise then placed a PO for its annual requirements, referencing RBC's price quote. Id.; Trial Tr. 758–60, 857, Jan. 14, 2013 (Jeff Greer). Upon receipt of a PO, RBC sent an “acknowledgment” to Precise, and then manufactured and shipped the bearings as specified in the PO. See id.

With larger, long-term customers like Precise, RBC often would enter into LTAs instead of conducting business through the less formal PO agreements. RBC attempted to obtain a signed multi-year agreement with Precise several times over the 2004 to 2009 period. See Trial Tr. 58, Jan. 7, 2013 (Pat Bannon). Each time RBC asked, however, Precise replied that it was not interested in an LTA, because of the nature of its relationship with Spirit. See id.; Trial Tr. 933–34, Jan. 14, 2013 (Phil Miller).

The Precise–Spirit LTA was a fairly one-sided document that clearly advantaged Spirit over Precise. It required Precise to comply with strict terms, including the obligation to hold its prices over the course of the agreement, while providing Spirit with great flexibility. Id. at 746, 788; see also Def.'s Exs. 209–10. This disparity in power is particularly evident in the LTA's “Termination for Convenience” provision, which unequivocally permits Spirit to “terminate all or part of an Order ... by written notice to the seller,” Def.'s Ex. 210 at 17, effectively enabling Spirit to terminate the entire contract at its convenience at any time. Trial Tr. 1204, Jan. 16, 2013 (John Diver); Trial Tr. 752, 762–63, 787, Jan. 14, 2013 (Jeff Greer). According to Diver, this type of provision provided a purchaser like Spirit with great leverage over a seller like Precise. Trial Tr. 1222–23, Jan. 16, 2013 (John Diver). With the power to terminate came the ability to re-negotiate the terms of the LTA mid-contract, because Precise knew that it might lose the work altogether unless it complied with Spirit's demands. See id. Thus, there was an inherent vulnerability in its relationship with Spirit, which is why Precise repeatedly rebuffed RBC's attempts to enter into an LTA. Trial Tr. 933–34, Jan. 14, 2013 (Phil Miller).

B. Spirit Puts Precise's Work out to Bid

The power of the Termination for Convenience provision is illustrated by the events that transpired in 2009. At that time, the LTA between Precise and Spirit covered the period from June 2006 until June 2011 (though it gave Spirit a unilateral option to extend until February 2013).⁴ See Def.'s Ex. 209 at 17. In early 2009, however, Spirit informed Precise that it was putting the 737 contract out to bid two years before the LTA (minus the option period) expired. Trial Tr. 763, Jan. 14, 2013 (Jeff Greer). The year 2008 was a particularly bad one for the aerospace industry—between the financial crisis and a major strike at Boeing—and, as a result, Spirit sought a price reduction of approximately 20% for the 737 contract.See id. at 765. This news was “devastating” to Precise, because Spirit had not put its 737 work out for bid “on the street” since 1995. Id. at 763. Moreover, Spirit made it clear that it was serious about the price reductions when it pulled a small portion of Precise's work after Precise bid too high, which “scared the heck” out of Precise. Trial Tr. 428, Jan. 8, 2013 (Brian Christiano); Pl.'s Ex. 10.

C. Precise Asks RBC for Five–Year Pricing

Fearing the loss of its most important customer (and the potential loss of revenue that a 20% price reduction would yield even if it kept the business), Precise scrambled to find ways to cut costs. Trial Tr. 869, Jan. 14, 2013 (Jeff Greer); Trial Tr. 940, Jan. 14, 2013 (Phil Miller). As part of its strategy, Precise asked its suppliers—including RBC, whose cam-follower bearings constituted a significant portion of the overall cost of the kits—for price reductions. Trial Tr. 766–68, 790, Jan. 14, 2013 (Jeff Greer). Because Precise had to quote Spirit a fixed price for five years, it sought five-year discounted pricing from RBC, to incorporate into its bid to Spirit. Id.

On May 5, 2009, Precise's vice president, Phil Miller, its purchasing manager, Katherine Davis, and its controller, John Bookout met with representatives of RBC—including RBC's general manager, Pat Bannon, and its aerospace sales and marketing manager, Brian Christiano—to discuss pricing and issues related to inventory and quality. See id.; Pl.'s Exs. 10–11. During the meeting, Precise's representatives explained that Spirit was asking for a 20% price reduction on the 737 contract and that Precise consequently was looking for price reductions as well. Id. RBC already knew that Spirit was putting the 737 work out to bid and that Spirit likely would seek reduced pricing from Precise. See Trial Tr. 419–20, Jan. 8, 2013 (Brian Christiano). RBC also knew that its competitor, Accurate, typically offered much lower prices, which meant that Accurate was an attractive alternative supplier for Precise to use in putting together its bid. See Pl.'s Ex. 10. RBC therefore sought to deter Precise from considering a switch in suppliers without having to quote a rock-bottom price itself. See id.

At the meeting, the RBC representatives criticized Accurate's quality and performance. Trial Tr. 387, 424, Jan. 8, 2013 (Brian Christiano). They also asserted that RBC needed a commitment for Precise's business if it was going to quote reduced prices, and again raised the prospect of an LTA—even handing Miller a sample LTA to sign. Id.; Trial Tr. 62, Jan. 7, 2013 (Pat Bannon); Trial Tr. 933–34, Jan. 14, 2013 (Phil Miller). Miller was vehemently opposed, and explained that Precise did not sign LTAs with its suppliers, because Spirit had the ability to cancel their contract at any point. Id.; Trial Tr. 1060–61, Jan. 15, 2013 (John Bookout). RBC's representatives clarified that Precise would not be required to purchase...