Dana Ltd. v. Sypris Technologies, Inc.

2015 Ohio 5311

• Court: Ohio Court of Appeals
• Decided: December 18, 2015
• Docket: L-15-1058
• Status: Published

Opinion

[Cite as Dana Ltd. v. Sypris Technologies, Inc., 2015-Ohio-5311.]

IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT LUCAS COUNTY

Dana Limited Court of Appeals No. L-15-1058

Appellee Trial Court No. CI0201401138

v.

Sypris Technologies, Inc. DECISION AND JUDGMENT

Appellant Decided: December 18, 2015

*****

J. Daniel Sharp, Cary Rodman Cooper, David Rodman Cooper and Margaret J. Lockhart, for appellee.

James P. Silk, Jr., John F. Hartmann and Erica Zolner, for appellant.

PIETRYKOWSKI, J.

{¶ 1} Appellant Sypris Technologies, Inc. (Sypris) appeals the March 4, 2015

judgment of the Lucas County Court of Common Pleas which granted appellee Dana

Limited’s (Dana) motion for judgment on the pleadings or summary judgment on its

complaint for declaratory judgment. The court declared that the July 2013 document at issue was not a binding contract between the parties and, thus, Dana was not required to

submit to arbitration to resolve the dispute. Because we agree that a binding agreement

was not formed, we affirm.

{¶ 2} Sypris and Dana have a business relationship dating back to 2001. Sypris

has supplied Dana with driveline components including axle shafts, gear sets, knuckles,

I-beams, carriers, differential cases, etc., for use in light, medium, and heavy-duty trucks

pursuant to multi-year, sole-sourced contracts. In 2007, the parties entered into a supply

agreement stemming from Dana’s bankruptcy proceedings including litigation and

arbitration involving Sypris. The agreement, which was approved by the bankruptcy

court, was for approximately 2,000 automotive part numbers (approximately 2 million

units per year) to be supplied to Dana through December 31, 2014.

{¶ 3} The agreement provided that the parties, 24 months prior to the expiration of

the contract term, could “negotiate in good faith to enter into an extension of this

agreement for a renewal period agreed upon by the parties.” The agreement also

provided that Dana, “on or after July 1, 2013,” could enter into long-term contracts for

the parts provided for in the agreement with third parties.

{¶ 4} Pursuant to the agreement, in 2012, the parties began negotiating an

extension. Negotiations continued and on July 2, 2013, the parties reached what was

characterized as a “handshake agreement” with most of the material components agreed

upon. The parties continued working toward a finalized agreement and on July 16, 2013,

a draft agreement was signed which provided:

2. DRAFT-SUBJECT TO FURTHER REVISION

AMENDED AND RESTATED SUPPLY AGREEMENT

This Amended and Restated Supply Agreement (the “Agreement”)

is made effective as of the execution of Exhibit A hereto (the “Effective

Date”), by and between Dana Corporation [handwritten Limited inserted]

(“Dana”) and Sypris Technologies, Inc. (“Sypris”).

{¶ 5} Exhibit A, attached to the body of the agreement stated:

DRAFT-SUBJECT TO FURTHER REVISION

EXHIBIT A- EXISTING PARTS

To be supplied by mutual agreement of the Parties as a precondition

to the effectiveness of this Agreement. If such mutual agreement has not

been reached on or before July 26, 2013, then this Amended and Restated

Agreement shall be deemed null and void, unless separately re-executed,

and the underlying Agreement shall otherwise remain in full force and

effect.

{¶ 6} Also attached was “EXHIBIT B-LENGTH OF WARRANTY FOR LIGHT

DUTY TRUCK PARTS” and “EXHIBIT 1-FIVE YEAR FORECAST” which identically

stated: “To be supplied by mutual agreement of the parties as a precondition to the

effectiveness of this Agreement.”

{¶ 7} With the July 26 expiration of the draft agreement nearing, the parties

attempted to resolve disputes regarding the parts and pricing schedules and whether the

3. agreement would include an additional tube assembly product. Sypris requested an

extension until August 9, 2013; Dana refused to agree to the extension. Pursuant to the

2007 supply agreement, on August 26, 2013, Dana sent Sypris written notice of its

decision not to extend the agreement expiring on December 31, 2014.

{¶ 8} On November 25, 2013, Sypris served Dana a notice of arbitration pursuant

to the 2007 agreement and the July 16, 2013 agreement which contained identical

arbitration clauses. The clauses provided:

27. Dispute resolution. If either party has a dispute with regard to

contractual issues under this Agreement and is unable to successfully

resolve those issues with the other party, the other party shall have the right

to initiate mediation and binding arbitration in accordance with the

following: (i) in the case of mediation, the Model Procedure for Mediation

of Business Disputes of the Center for Public Resources and (ii) in the case

of arbitration, the CPR Rules for Non-Administered Arbitration of Business

Disputes (“CPR”).

{¶ 9} In its request for arbitration, Sypris claimed that Dana breached the July 16,

2013 agreement which was finalized shortly thereafter and failed to act in good faith

regarding negotiations. Sypris sought an award of compensatory damages and costs and

fees.

{¶ 10} On January 17, 2014, Dana commenced this declaratory judgment action

requesting that the court determine that no new contract was formed between Dana and

4. Sypris as a result of the July 2013 draft agreement. Dana attached to its complaint the

2007 supply agreement, the July 16, 2013 draft agreement, and its August 26, 2013 notice

of intent not to renew the supply agreement. In its answer, Sypris agreed that the July 16,

2013 draft agreement “speaks for itself.” Sypris denied, however, that the condition

precedent to its characterization as a binding contract was not met. Regarding Dana’s

request for declaratory judgment, Sypris argued that the question of contract formation

was one for a jury and that “Dana is entitled only to a determination of whether the

July 16 Agreement contains a binding arbitration provision.”

{¶ 11} Sypris asserted a counterclaim for declaratory relief as to whether Dana

was bound to arbitrate Sypris’ claims for breach of the July 16 agreement. Sypris

included a jury demand.

{¶ 12} On October 7, 2014, Dana filed a motion for judgment on the pleading or,

alternatively, a motion for summary judgment. In its motion, Dana argued that the draft

agreement was not binding under Ohio law and, thus, Dana was not bound to the

arbitration provision. In opposition, Sypris contended that the document’s designation as

a draft does not prevent it from a binding agreement on the parties. Sypris further

contended that Dana’s position in the case was inconsistent with it stance in pending

litigation, Dana Ltd. v. Grede Holdings, LLC, Lucas C.P. No. CI0201403963, involving

a similar supply agreement.

5. {¶ 13} A hearing on the motion was held on February 10, 2015. The parties

engaged in extensive arguments regarding their respective positions; the court also posed

several questions.

{¶ 14} On March 4, 2015, with little discussion, the trial court granted Dana’s

motion finding that “Plaintiff is entitled, as a matter of law, to a declaratory judgment that

the July 2013 Document is not a valid and binding contract between the parties * * *.”

This appeal followed with Sypris raising the following assignment of error:

The trial court erred in determining as a matter of law that Appellant

Sypris Technologies, Inc. (“Sypris”) and Appellee Dana Limited (“Dana”)

did not form a contract for arbitration on or about July 16, 2013.

{¶ 15} In Sypris’ sole assignment of error, it contends that the trial court erred

because issues of fact regarding whether a contract was formed precluded summary

dismissal of the case. Sypris’ position is that the July 16 agreement was intended to be

binding on the parties. Conversely, Dana asserts that the clear language of the draft

agreement demonstrates that it was subject to revisions, was missing key components

and, thus, was not binding on the parties.

{¶ 16} Although unclear from its decision, based upon the voluminous discovery

and hearing on the motion we assume that the trial court granted summary judgment to

Dana. Thus, our review of the decision is de novo. Grafton v. Ohio Edison Co., 77 Ohio

St.3d 102, 105, 671 N.E.2d 241 (1996). A motion for summary judgment should only be

granted when there remains no genuine issue of material fact and, when construing the

6. evidence most strongly in favor of the nonmoving party, reasonable minds can only

conclude that the moving party is entitled to judgment as a matter of law. Harless v.

Willis Day Warehousing Co., 54 Ohio St.2d 64, 66, 375 N.E.2d 46 (1978); Civ.R. 56(C).

{¶ 17} This case involves the validity of an arbitration clause. We first note that in

Ohio arbitration is an encouraged method of dispute resolution. Hussein v. Hafner &

Shugarman Enter., Inc., 176 Ohio App.3d 127, 2008-Ohio-1791, 890 N.E.2d 356, ¶ 24

(6th Dist.), citing Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 471, 700 N.E.2d 859

(1998). A presumption in favor of arbitration arises where the claim in dispute falls

within the arbitration agreement. Id. However, the “gateway” issue of whether an

enforceable agreement to arbitrate exists is generally for a court to decide. Granite Rock

Co. v. Internatl. Bhd. of Teamsters, 561 U.S. 287, 296, 130 S.Ct. 2847, 177 L.Ed.2d 567

(2010). In determining whether the agreement itself is enforceable, state contract law

controls. See Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1014

(6th Cir.2003).

{¶ 18} In Ohio,

[r]ules of contract formation dictate that courts look to the plain

language of the contract to determine contractual intent. See, e.g., Graham

v. Drydock Coal Co., 76 Ohio St.3d 311, 314, 667 N.E.2d 949 (1996) (“The

intent of the parties is presumed to reside in the language they choose to use

in their agreement.”); Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d

241, 246, 374 N.E.2d 146 (1978) (“[W]here the terms in an existing

7. contract are clear and unambiguous, this court cannot in effect create a new

contract by finding an intent not expressed in the clear language employed

by the parties.”) Faurecia Auto. Seating, Inc. v. Toledo Tool & Die Co.,

Inc., 579 F.Supp.2d 967, 971-72 (N.D.Ohio 2008).

{¶ 19} In Faurecia, the court examined whether the parties intended for “letters of

intent” to form binding and enforceable contracts for the purchase and sale of automotive

parts. Examining the letters, the court noted that they hinged on mutual agreement to

additional terms. Id. at 972. Specifically, “[w]hile the parties had agreed on the

fundamental terms of quantity, price and timing, the parties did not contemplate a final

buy/sell agreement until reaching mutual agreement to the terms and conditions of the

Nomination letter.” Id.

{¶ 20} In the present case, as in Faurecia, the July 2013 draft supply agreement

clearly indicated that it would be made effective following the execution of Exhibit A.

Exhibit A plainly stated that the terms were to be supplied by “mutual agreement” and

that if a mutual agreement could not be reached by July 26, the “Amended and Restated

agreement shall be deemed null and void.” Sypris requested and Dana rejected an

extension until August 9. Dana then, pursuant to the 2007 supply agreement, sent a

formal notice of its intent not to renew the agreement past its expiration on December 31,

2014.

{¶ 21} Unlike the cases relied upon by Sypris, including this court’s case

regarding the formation of a real estate contract, Brown v. Lagrange Dev. Corp., 6th Dist.

8. Lucas No. L-09-1099, 2015-Ohio-133, there was no question that the parties were

negotiating a draft supply agreement, and there was no issue as to the terms contained

therein. The issue was limited to an examination of the clear language the parties used in

the agreement. Thus, the issue could be resolved as a matter of law. See Adams v.

Suozzi, 433 F.3d. 220, 228-229 (2d Cir.2005) (failure of a condition precedent to the

implementation of a contract did not require a trial to determine the issue of arbitrability

where the court ruled on the arbitration agreement as a matter of law based on the record

before it).

{¶ 22} Further, the Grede case referenced above is also distinguishable from the

present facts. In Grede, Dana sought and was granted a permanent injunction requiring

specific performance of the agreement with the court finding that “[o]nce negotiations

were completed between the parties on May 16, 2014, the parties began to act upon their

new contract.” Dana Ltd. v. Grede Holdings, LLC, Lucas C.P. CI0201403963 (Dec. 23,

2014). In addition, the document at issue, “Summary of Business Agreement,” was not

missing essential terms.

{¶ 23} Finally, in addition to the specific, unambiguous language used in the draft

agreement, during the course of this litigation any potential ambiguity or fact question

was eradicated by the extensive discovery conducted by the parties and, particularly,

Sypris. Accord Specht v. Netscape Communications Corp., 306 F.3d 17, 28 (2d

Cir.2002).

9. {¶ 24} Based on the foregoing, we find that the trial court did not err in granting

Dana’s motion to dismiss or motion for summary judgment and in declaring that the

parties were not bound by the arbitration clause in the July 2013 draft supply agreement.

Appellant Sypris’ assignment of error is not well-taken.

{¶ 25} On consideration whereof, we find that substantial justice was done the

party complaining and the judgment of the Lucas County Court of Common Pleas is

affirmed. Pursuant to App.R. 24, appellant is ordered to pay the costs of this appeal.

Judgment affirmed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.

Mark L. Pietrykowski, J. _______________________________ JUDGE Arlene Singer, J. _______________________________ Thomas J. Osowik, J. JUDGE CONCUR. _______________________________ JUDGE

This decision is subject to further editing by the Supreme Court of Ohio’s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court’s web site at: http://www.sconet.state.oh.us/rod/newpdf/?source=6.

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