ALMETALS, INC., PLAINTIFF v. WICKEDER WESTFALENSTAHL, GMBH, DEFENDANT U.S. DISTRICT COURT FOR THE…

ALMETALS, INC., PLAINTIFF v. WICKEDER WESTFALENSTAHL, GMBH, DEFENDANT U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN 2008 U.S. DIST. LEXIS 87403 Almetals, Inc., a Michigan company, entered into a contract with the German firm Wickeder Westfalenstahl regarding the purchase of clad metal, a specialty metal used in a variety of industries but primarily the automotive industry. Wickeder is the worlds largest manufacturer of clad metal, a bonded product of layers of different metals. Almetals, Inc., would take the clad metal from Wickeder and process it to specifications for its
ALMETALS, INC., PLAINTIFF v. WICKEDER WESTFALENSTAHL, GMBH, DEFENDANT U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN 2008 U.S. DIST. LEXIS 87403 Almetals, Inc., a Michigan company, entered into a contract with the German firm Wickeder Westfalenstahl regarding the purchase of clad metal, a specialty metal used in a variety of industries but primarily the automotive industry. Wickeder is the worlds largest manufacturer of clad metal, a bonded product of layers of different metals. Almetals, Inc., would take the clad metal from Wickeder and process it to specifications for its customers, such as BorgWarner and Dana Corporation. From an initial purchase of just a few hundred thousand dollars of clad metals, Almetals, Inc., became one of the largest suppliers of processed clad metal, a market that took Almetals nearly seven years to cultivate. The contract between Almetals and Wickeder was for seven years with a ten-year add-on for customers that Almetals had under contract. Wickeder, seeing the huge success in North America, attempted to take over Almetals, Inc. In a proposed acquisition, Almetals successfully opposed that attempt. In retaliation, Wickeder refused to renew the contract after the seven years and then demanded that Almetals pay cash for clad metal purchased from Wickeder for the customers under the contract in the ten-year add-on period. The original contract called for payment 60 days after invoicing. Almetals sued for breach of contract and asked for specific performance as the remedy. The trial court granted Almetals request and analyzed the facts against the UCC requirements for granting specific performance and the subsequent request for a permanent injunction. JUDGE NANCY EDMUNDS_Almetals is entitled to an order requiring Wickeder to abide by the Courts ruling as to the payment terms (60 days after invoice of the materials in exchange for a .5% price discount) for the duration of the Customer and Order Protection clause for two independent reasons: (1) Almetals has met the test for specific performance under the UCC; and (2) Almetals has met the common-law test for a permanent injunction. 1. Almetals Is Entitled to Specific Performance Under the UCC The power to grant specific performance rests within the discretion of the court. Under Michigan law, [t] he remedy of specific performance is an extraordinary one granted only in unusual cases to prevent irreparable harm. It is a matter of grace and not right. . . . The UCC authorizes specific performance of contracts involving unique goods or in other proper circumstances: i. Specific performance may be decreed where the goods are unique or in other proper circumstances. ii. The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just. Michigan has also adopted Comment 2 from the 1962 official text to UCC 2-716, which states that: Output and requirements contracts involving a particular or peculiarly available source or market present today the typical commercial specific performance situation. . . . [U]niqueness is not the sole basis of the remedy under this section for the relief may also be granted in other proper circumstances and inability to cover is strong evidence of other proper circumstances. The UCC is consistent with the common law in which specific performance is well-recognized as an appropriate remedy where goods are unique or scarce. Jaup v. Olmstead, 334 Mich. 614, 55 N.W.2d 119, 120 (Mich. 1952) (Generally, specific performance is not decreed where the subjectmatter of the contract is personalty. However, if the specific property is not obtainable on the market and damages will not provide adequate compensation, equity may take jurisdiction); In re Smith Trust, 480 Mich. 19, 745 N.W.2d 754, 756 (Mich. 2008) (Because real property is unique . . . specific performance is the proper remedy); 71 Am. Jur. 2d Specific Performance 175 (2008); Bohnsack v. Detroit Trust Co., 292 Mich. 167, 290 N.W. 367 (Mich. 1940) (ordering specific performance of agreement among shareholders to buy life insurance to benefit surviving shareholders). Indeed, under UCC 2-716, a more liberal test in determining entitlement to specific performance has been established than the test one must meet for classic equitable relief. Eastern Air Lines, Inc. v. Gulf Oil Corp., 415 F. Supp. 429, 44243 (S.D. Fla. 1975) (In the circumstances, a decree of specific performance becomes the ordinary and natural relief rather than the extraordinary one). Specific performance under UCC 2-716 is the appropriate remedy because the varieties of clad metal supplied by Wickeder pursuant to the parties requirements contract are unique and there are no known alternative sources of supply, but only speculation as to a possible alternative source for .2% or .3% of the product. Sherwin Alumina L.P. v. Aluchem, Inc., 512 F. Supp. 2d 957, 960 n. 2, 970 (S.D. Tex. 2007) (applying UCC 2-716 and ordering specific performance of a contract to supply calcined alumina, a scarce product, where the supplier had very few competitors, there [was] only one other manufacturer of [the product] in North America, and the buyer needed the products for its business to survive). ORDER FOR SPECIFIC PERFORMANCE GRANTED. CRITICAL THINKING In that the defendants actions appeared to be retaliatory and the result of an unsuccessful takeover bid, should the court have taken evidence to that effect into consideration. Why or why not? ETHICAL DECISION MAKING In this case, Almetals relies heavily on a single supplier for its supply chain. In this case, that amount was over 40 percent. Does such an arrangement place some kind of ethical burden on the supplier who is acutely aware that such a one-sided relationship exists?