Sparton Technology, Inc. v. Util-Link, LLC

248 F. App'x 684
CourtCourt of Appeals for the Sixth Circuit
DecidedSeptember 21, 2007
Docket06-1582, 06-1687
StatusUnpublished
Cited by12 cases

This text of 248 F. App'x 684 (Sparton Technology, Inc. v. Util-Link, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sparton Technology, Inc. v. Util-Link, LLC, 248 F. App'x 684 (6th Cir. 2007).

Opinion

GREER, District Judge.

The defendants-appellants/cross-appellees in this breach of contract/promissory estoppel case appeal from the denial by the district court of their motion for judgment as a matter of law and new trial after a jury trial. The plaintiff-appellee/crossappellant appeals the district court’s denial of its post-verdict motions for prejudgment interest and for Rule 11 sanctions. For the reasons which follow, we AFFIRM in part and REVERSE in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

National Rural Telecommunications Cooperative (“NRTC”) is a District of Columbia cooperative corporation which acts as a purchasing cooperative for its member rural electric and telephone utilities. UtilLink, LLC (“Util-Link”), a Delaware limited liability company, was a partnership *686 formed to develop and obtain production of “LINKs,” automated electric utility meter reading units, which in turn were sold to NRTC, which then marketed and sold the devices to its member utilities. NRTC was part owner of Util-Link and provided operating capital to Util-Link. Sparton Technology, Inc. (“Sparton”) is a New Mexico corporation engaged in contract manufacturing. It was stipulated by the parties that Util-Link was, for the purposes of this action, acting as the agent of NRTC. The district court treated UtilLink and NRTC as a single entity and this Court will do so as well.

In May 1997, Sparton and Util-Link entered into a manufacturing agreement for Sparton to manufacture and Util-Link to purchase 75,000 LINKs. The LINKs were to be manufactured pursuant to the design and testing specifications provided by Util-Link. From the outset, the LINK product was beset by serious problems related to various design and manufacturing flaws which led to numerous design changes in the product. As a result, certain raw materials that had been purchased by Sparton became obsolete and could no longer be utilized in production. Although not on the delivery schedule originally contained in the manufacturing agreement, the 75,000 LINKs were eventually produced and paid for by Util-Link. As a result of the alleged manufacturing defects, NRTC recalled all LINKs to have them examined and repaired as necessary. This recall was ultimately addressed under a “retrofit agreement” entered into between Sparton and NRTC, under which costs were shared.

In late 2000, Sparton and Util-Link began negotiations for a new manufacturing agreement. These negotiations continued for several months without a new agreement being executed. In February 2001, Sparton threatened to cancel advance orders for raw materials if Sparton failed to promptly receive a purchase order for additional LINKs. Util-Link told Sparton repeatedly that it could not issue a purchase order without receiving a corresponding purchase order from NRTC. On February 2, 2001, Util-Link notified Spar-ton that it had requested a purchase order from NRTC for an additional 35,000 LINKs and, as soon as NRTC’s purchase order was received, Util-Link would issue a purchase order to Sparton. Sparton advised Util-Link that advance materials were on order to support this additional production. A host of e-mails and letters were exchanged between March and May 2001, relating to the possible additional purchase of LINKs.

No purchase order was forthcoming after the February 2, 2001, notification and, on March 5, 2001, Sparton again threatened to cancel orders for raw materials needed for additional production. UtilLink responded on March 7, 2001, with an e-mail which stated: “there will be a purchase order released to Sparton to build 15,000 units beyond the original 75,000 unit order.” On March 22, 2001, Util-Link issued a purchase order to Sparton for 15,-000 LINKs units, though at a different price than had been discussed. The next day, Sparton scheduled delivery of the needed raw materials for the 15,000 units. Sparton and Util-Link continued to discuss a mutually agreeable price and Spar-ton indicated it would be willing to reduce the price if more than 15,000 units were purchased. On May 1, 2001, Sparton proposed a price of $109.00 per unit to produce 35,000 additional LINKs units. UtilLink concurred with the proposal through a pair of e-mails on the same day. In one of these e-mails, Util-Link stated: “UtilLink will pay Sparton $109.00/LINK 340-HL delivered under the current purchase order of 15,000 units ...” Util-Link committed to order such additional units by *687 purchase order to be issued within the next 90 to 150 days.

No purchase order had been received by Sparton by mid-June 2001. Around midyear, Util-Link determined that it would not be able to continue in business without receiving additional capital contributions from NRTC. NRTC declined to make further capital contributions and, in August, 2001, it was decided that Util-Link would be dissolved and its LINK business merged into NRTC. NRTC then informed Sparton that it did not intend to go forward with purchase of additional LINK units.

Sparton filed suit in the federal district court on September 24, 2002, alleging the following counts: (I) breach of contract to purchase an additional 35,000 LINK units; (II) breach of the 1997 manufacturing agreement; (III) breach of the retrofit agreement; (IV) promissory estoppel regarding the additional 35,000 LINK units; and (V) equitable estoppel regarding the additional 35,000 LINK units. The promissory estoppel and equitable estoppel claims were stated alternatively, i.e., “[i]n the event that it is determined that there was not a contract for the manufacture of an additional 35,000 “LINK” units as alleged in Count I ...” (First Amended Complaint, para. 54, 63). NRTC filed an answer and counter-complaint alleging breach of the manufacturing agreement and the retrofit agreement.

NRTC filed a motion for summary judgment on Counts I and III and partial summary judgment on Counts TV and V shortly thereafter and Sparton moved for summary judgment on the issue of whether a contract between Sparton and UtilLink existed as alleged in Count I of its complaint. On June 25, 2004, Sparton’s counsel informed NRTC’s counsel that Sparton would stipulate to the dismissal of its promissory and equitable estoppel claims (Counts IV and V). Sparton’s agreement was announced to the court on June 30, 2004, at the hearing on the parties’ motions for summary judgment. No order was entered, however, as a result of Sparton’s stipulation. On September 2, 2004, the district court denied Sparton’s motion for summary judgment, and denied in part and granted in part NRTC’s motion. Sparton’s claims for breach of the retrofit agreement and for promissory and equitable estoppel were dismissed on the merits.

The matter proceeded to trial by a jury in September 2005, on Sparton’s claims for breach of contract for the additional 35,000 LINK units and breach of the manufacturing agreement, as well as NRTC’s counterclaim. On the fourth day of trial, the district court invited a motion from Spar-ton to reconsider its prior grant of summary judgment on the estoppel claims, saying it was “embarrassed” by the previous decision. Sparton’s motion, opposed by NRTC, was then granted and the estoppel claims were reinstated.

At the conclusion of the trial, which continued sporadically over 16 days, the jury returned a verdict in the case.

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248 F. App'x 684, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sparton-technology-inc-v-util-link-llc-ca6-2007.