BAE Industries, Inc. v. Agrati - Medina, LLC

CourtDistrict Court, E.D. Michigan
DecidedSeptember 20, 2022
Docket2:22-cv-12134
StatusUnknown

This text of BAE Industries, Inc. v. Agrati - Medina, LLC (BAE Industries, Inc. v. Agrati - Medina, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
BAE Industries, Inc. v. Agrati - Medina, LLC, (E.D. Mich. 2022).

Opinion

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

BAE INDUSTRIES, INC.

Plaintiff,

v. Civil Case No. 22-12134 Honorable Linda V. Parker AGRATI – MEDINA, LLC, and AGRATI – TIFFIN, LLC

Defendants. _______________________________/

OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION (ECF NO. 5)

I. Introduction

This is a diversity action arising from Defendants’ demand of a price increase to specialty manufactured auto parts (steel-based rivets, bushings, and main pivots). Plaintiff needs to produce automotive parts for Tier-1 customers, who then incorporate Plaintiff’s components into car seats, which are shipped to original equipment manufacturers. On September 9, 2022, Plaintiff BAE Industries, Inc., filed this lawsuit against Defendants Agrati -Medina, LLC and Agrati-Tiffin, LLC (hereafter “Agrati”). (ECF No. 1.) Plaintiff alleges the following claims against Agrati: (I) breach of contract/specific performance, (II) declaratory judgment, and (III) repudiation of a requirements contract. (ECF No. 1 ¶¶ 81-99, Pg ID 15-17.)

Presently before the Court is Plaintiff’s Emergency Motion for Entry of a Temporary Restraining Order and Order to Show Cause Why a Preliminary Injunction Should Not Issue, or In the Alternative, An Expedited Preliminary

Hearing, and Brief in Support filed on September 9, 2022. (ECF No. 5.) The motion has been fully briefed (ECF Nos. 10, 12) and the Court held a motion hearing on September 19, 2022 during which both parties participated in oral argument. For the reasons that follow, the Court grants the motion and enters a

preliminary injunction. II. Background According to Plaintiff, Agrati supplies Plaintiff with specialty automotive

parts, including Steel-based rivets, bushings, and main pivots. (ECF No. 1 at Pg ID 4.) Plaintiff uses the specialty parts to manufacture and supply auto part components to Tier-1 customers, who incorporate the components into car seats, then ship to the original equipment manufacturers, Stellantis and GM (“OEMs”).

(Id. ¶¶ 15-16.) Finally, the OEMs incorporate the car seats into their DT and T1XX vehicle programs, respectively. (Id. ¶¶ 17-18.) Agrati is Plaintiff’s only supplier for the specialty parts, Plaintiff is the sole supplier for the Tier-1 manufacturers, and the Tier-1 manufacturers are the sole suppliers for the OEMs. (Id.)

Plaintiff alleges that the parties entered into a long-term fixed-price requirements contracts for the supply of the specialty parts due to the terms in the Purchase Orders. (Compl. Ex. 1, ECF No. 1 ¶ 1 at Pg ID 1.) Under the agreement,

Agrati agrees to supply all of Plaintiff’s requirements. (Id. ¶ 35, Pg ID 7.) Pursuant to Plaintiff’s Terms and Conditions (“T&Cs”), Agrati accepted to be bound by the agreement by manufacturing and shipping the materials in response to Plaintiff’s purchase orders. (Id. ECF No. 1-3 at Pg ID 38.) These terms included Agrati’s

obligation to supply Plaintiff’s requirements for the duration of the OEMs’ program production life.1 (Id. § I(B), Pg ID 38.) Also included are the requirements of timely delivery of all materials Plaintiff orders. (Id. § II(B); ECF

1 ¶ 35, Pg ID 7.)

1 Paragraph I(B) of Plaintiff’s Terms reads:

Subject to Purchaser's termination rights as set forth herein, the agreement formed by this Purchase Order is binding on the parties for the length of the applicable Purchaser’s customer's vehicle program production life (including model refreshes as determined by such customer), provided that the Goods and/or Services are incorporated, either directly or indirectly, into such customer’s vehicles.

(Compl. Ex. 2, ECF No. 1-3 at Pg ID 76.) Between 2020 and 2022, the price of steel—which is used to produce Plaintiff’s specialty parts—began to rise. (ECF No. 10 at Pg ID 335.) In Spring of

2020, the COVID-19 pandemic caused lockdowns, the closing of steel mills, and U.S. Border restrictions. (Id. at Pg ID 335, 345.) The increased price of steel was further exacerbated by the Russian-Ukraine war, lockdowns in China, and

inflation. (Id. at Pg ID 335.) As a result of Agrati’s alleged cost increase of 11.7 percent, Agrati sought price increases for its specialty parts sold to Plaintiff in July of 2021. (Id.) In response, Plaintiff directed Agrati to the T&Cs of the parties’ agreement, including the fixed-price requirements. (ECF No. 1 ¶ 39, Pg ID 8.)

After the initial communication, the parties did not communicate again about the pricing for months. (Id.) On December 7, 2021, Agrati sent a letter indicating anticipation of higher

costs for steel in 2022 and that as a result, it would be increasing prices for specialty parts beginning the first of the year. (Id.; see Compl. Ex. 3) Again, Plainitff directed Agrati to Plaintiff’s T&C and notified Agrati that Plaintiff does not update prices in its contracts as a result of fluctuations in the market. (Id.)

Agrati then responded that it successfully obtained price increases from the majority of its other customers. (Id.) On May 22, 2022, Plaintiff requested that Agrati provide financial

statements to support the need for increased prices. (Id.) On June 14, 2022, Agrati sent a letter demanding the price increase and stated that if Plaintiff did not agree to pay the higher prices by June 30, 2022, Agrati would refuse to ship the specialty

parts beginning July 1, 2022. (ECF No. 5 at Pg ID 128). On June 17, 2022, Agrati sent an e-mail refusing to provide the requested financial statements, and in response, Plaintiff sent a letter the same day seeking adequate assurance of

continued performance under Michigan Compiled Laws § 440.2609. (ECF No. 5 at Pg ID 129.) On June 23, 2022, Agrati requested that parties seek mediation, which occurred on July 18, 2022 but was unsuccessful in resolving the matter. (Id.)

On August 30, 2022, Agrati sent a final letter to Plaintiff demanding price increases stating that Agrati would cease any further shipments beginning on September 1, 2022. (ECF No. 5 at Pg ID 129.) On September 1, 2022, Plaintiff

sent a revised purchase order under protest at the increased price that Agrati demanded. (Id. at Pg ID 130; see also Mot. Ex. 11, ECF No. 5-12.) However, Agrati rejected the proposal to pay the higher pricing under protest and requested that Plaintiff also issue purchase orders retroactively dating back to January 1,

2022, which would include the increased price. (Id.; see also Mot. Ex. 14, ECF No. 5-14.) This retroactive pricing is estimated to be approximately $188,000. (Id.) Plaintiff refused to pay the retroactive payment and as a result, Agrati ceased

all shipments of specialty parts. (Id.) Maintaining that it will run out of the materials needed to produce parts for its customers on or about September 16, 20222 (id. at Pg ID 131), Plaintiff filed

this lawsuit and motion for injunctive relief. III. Preliminary Injunction Standard Federal Rule of Civil Procedure 65 grants district courts the power to issue

an ex parte temporary restraining order to maintain the status quo until the court has the opportunity to hold a hearing and decide whether a preliminary injunction should issue. First Tech. Safety Sys., Inc. v. Depinet, 11 F.3d 641, 650 (6th Cir. 1993) (citing Granny Goose Foods, Inc. v. Bhd. of Teamsters, 415 U.S. 423, 439

(1974)).

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