Opinion
CASE NO. 00-09122-AJM-11, ADVERSARY PROCEEDING NO. 00-453
August 1, 2000
FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER ON DEBTOR'S COMPLAINT FOR INJUNCTIVE RELIEF
This matter was tried by the Court on September 22, 2000 on the issues raised in the Motion for Preliminary Injunction filed by the Plaintiff, Huetter Corporation (the "Plaintiff" or the "Debtor") against the Defendant, Impact Forge, Inc. ("Impact"). Present at the September 22, 2000 hearing were James Knauer for the Debtor and Alan Mills and Christine Jacobson for Impact. Pursuant to Fed.R.Civ.P. 52 and Bankruptcy Rule 7052, the Court enters the following Findings of Fact followed by its Conclusions of Law:
FINDINGS OF FACT
1. Debtor-plaintiff Huetter, Inc. (the "Debtor") is an Indiana corporation that provides machining services. On August 1, 2000, Debtor filed Chapter 11 bankruptcy pursuant to 11 U.S.C. § 101 et seq. Thereafter, on September 6, 2000, the Debtor initiated this adversary proceeding against Impact Forge, Inc. ("Impact"), seeking, in part, injunctive relief.
2. Impact is an Indiana corporation whose business consists, in part, of designing and forging parts.
3. In connection with the NV5600 project, Impact provided forged parts for New Venture Gear, Inc. ("New Venture"), which is a supplier for the automotive industry.
4. In February 1999, pursuant to a request for quotes issued by Impact, the Debtor and Impact had discussions regarding machining work that Impact needed for parts forged for New Venture.
5. On February 8, 1999, the Debtor submitted a quote to Impact in connection with work for the NV5600 project. That quote included costs for machining each part as well as tooling, gaging and other related costs. Impact rejected that quote.
6. Thereafter, the Debtor submitted, in writing, a new quote dated February 23, 1999. In that quote, the Debtor gave Impact prices for work. In connection with that written quote, the Debtor guaranteed one of the quotes for sets at a level about 20,000 parts per year and requested a two (2) year "contractual" commitment from Impact. Impact informed the Debtor that it could not and would not make that commitment.
7. The deposition testimony of Ross Westerfeld, an employee of Impact, was read into the record at trial. That deposition testimony established that, at a 1999 meeting in which Gerdts, Joseph Kitterman and Bill Holstein (employee of Impact) were present, Westerfeld indicated that, as long Impact continued to receive work from New Venture, and as long as there were no quality, performance or delivery problems on the Debtor's part, there would be no reason why the Debtor could not expect to receive parts from Impact to machine. Clearly, this deposition testimony establishes that there were no specifics or agreements with respect either to the duration of the contract, or to whether the Debtor would be Impacts' exclusive supplier of machining services.
8. On March 27, 1999, the Debtor gave Impact a written "revised quote" setting forth the prices and other conditions upon which it would agree to do work with Impact in connection with the NV5600 project. That written quote made no reference to any agreement, oral or otherwise, between the parties for a contract between them for a specific duration.
9. On June 3, 1999, Impact issued a purchase order to the Debtor for machining services on certain forged parts that Impact, at its option, might deliver to the Debtor (the "June Purchase Order"). Under that purchase order, the machining work only would be performed when Impact issued "releases" to the Debtor setting forth the quantities of the machined parts needed.
10. The June Purchase Order contained no quantities, but set forth the prices Debtor agreed to charge for its services from June 1, 1999 until December 31, 1999. The June Purchase Order contained no terms requiring Impact to provide the Debtor with any work. Nor did it set any duration for the relationship between the parties.
11. On December 30, 1999, Impact issued another purchase order to the Debtor for machining services on certain forged parts that Impact, at its option, might deliver to the Debtor (the "December Purchase Order", together with the June Purchase Order, are called the "Purchase Orders"). The December Purchase Order superceded the June Purchase Order. Like the June Purchase Order, however, the machining work only would be performed when Impact issued "releases" to the Debtor setting forth the quantities of the machined parts needed.
12. The December Purchase Order contained no quantities, but set forth the prices Debtor agreed to charge for its services from January 1, 2000 until December 31, 2000. The December Purchase Order also contained no terms requiring Impact to provide the Debtor with any work. Nor did it set any duration for the relationship between the parties.
13. The Purchase Orders provided on their face that they were "blanket" purchase orders and also provided that "purchase order shall cover the requirements of the machining of parts per print specifications". Joseph Kitterman, former general manager of the Debtor from March, 1998 to March, 2000, testified that essentially that the term "blanket purchase order" referred only to the listing of the parts on the order, and that Impact was not obligated to send any work to the Debtor under the Purchase Orders or the Machining Agreement. Kitterman also testified that the use of the term "requirements" referred only to the requirements of Impact for such things as shipping and packaging. The Purchase Orders did not require the Debtor to be the "exclusive" or the only source of machining work to be provided for Impact. In fact, in 1999 and 2000, the Debtor was aware that Impact was considering other companies for the machining work performed by the Debtor. The Debtor did not object to that and, in fact, assisted Impact in identifying other such companies.
14. On March 7, 2000, subsequent to issuance of the Purchase Orders, the parties executed a Machining Agreement. The Machining Agreement governed the overall relationship between the parties. It also was not for a specific duration and did not require Impact to provide the Debtor with any work.
15. The Machining Agreement, like the Purchase Orders, contained no defined quantity of work and provided, in part, that "[i]n connection with [the Debtor's] performance of services for IMPACT, IMPACT may or will from time to time supply [the Debtor] with tooling, gaging, programming, forged parts or raw materials (the "Parts") with or upon which [the Debtor] will perform machining services." That language made the Machining Agreement and the relationship between Impact and the Debtor terminable-at-will.
16. Joseph Kitterman testified that he was employed as general manager of the Debtor from March, 1998 through his resignation in March, 2000. As general manager, Kitterman not only had a role in negotiating the purchase orders and the Machining Agreement, but also was the primary liaison. Kitterman testified that Impact had not given any term commitment with respect to the duration of the work and Kitterman understood that Impact could outsource the work to other suppliers. Furthermore, Kitterman testified that, even though, at the direction of Gerdts, the Debtor reviewed the Machining Agreement, and in fact, also had the Machining Agreement reviewed by its attorney before signing it, Gerdts never requested that the Machining Agreement be revised to include that the Debtor would be the exclusive supplier of machining services, or that a specific term be included, even though other revisions to the Machining Agreement were requested by Gerdts and made.
17. The Debtor knew that the Purchase Orders and the Machining Agreement contained no term for a specific duration, set forth no quantity of work, and did not require that the Debtor be the sole provider of machining services for Impact. However, despite these omissions, which the Debtor admitted were important terms, the Debtor executed the Purchase Orders and the Machining Agreement and elected to do business with Impact.
18. On June 13, 2000, Impact terminated its relationship with the Debtor.
19. If the Debtor were entitled to any breach of contract damages from Impact, which it is not, those damages could be calculated with a reasonable degree of certainty.
20. To the extent that any Conclusion of Law constitutes a Finding of Fact, it is incorporated herein by reference as an additional Finding of Fact.
CONCLUSIONS OF LAW
1. This Court has exclusive jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 157(b).
2. This adversary proceeding is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2).
3. The Debtor is a duly qualified debtor-in-possession in this Chapter 11 adversary proceeding.
4. Any preliminary discussions and negotiations between the parties before June 3, 1999 merged into the subsequently executed Purchase Orders and Machining Agreement. Thus, to the extent those discussions and negotiations are not part of the written agreements between the parties, neither party is bound by such. Carr v. Hays, 11 N.E. 25 (Ind. 1887); McCae Management Corp. v. Merchants Nat. Bank and Trust Co. of Indianapolis, 553 N.E.2d 884 (Ind.Ct.App. 1990); McCaskey Register Co. v. Curfman, 90 N.E. 323 (Ind.Ct.App. 1910).
5. The Purchase Orders and the Machining Agreement are the exclusive medium of ascertaining the agreement between the parties. Carr, 11 N.E. at 27; see also Ralya v. E. C. Atkins Company, 61 N.E. 726 (Ind. 1901); Hostetter v. Auman, 20 N.E. 506 (Ind. 1889); Rhoads v. Jones, 92 Ind. 328 (Ind. 1883).
6. There is no five (5) or six (6) year contract, oral or otherwise, between Impact and the Debtor. Nor is there any written or oral contract between Impact and the Debtor for any specific duration. The only reference to a specific term was contained in Plaintiff's Exhibit H, a February 23, 1999 letter from Kitterman to Ross Westerfeld of Impact, which provided information in response to certain inquiries of Impact from a previous meeting. The last line of that exhibit provides that, for a volume level in excess of 20,000 sets per year, a "two (2) year commitment was required", for a per set price of $36.90. However, the price per set that was ultimately agreed upon by the parties in March, 1999 was $38.16 per set, which would indicate that no two-year commitment, let alone a five or six-year commitment, was given by Impact. Furthermore, requests to put the desired two year time commitment in writing were repeatedly rejected, and no such commitment was contained in the Purchase Orders or the Machining Agreement.
7. The Purchase Orders set forth no quantities of work and are not contracts between the parties for a specific duration. Nor do the Purchase Orders require Impact to provide the Debtor with any work. Indiana-American Water v. Town of Seelyville, 698 N.E.2d 1255 (Ind.Ct.App. 1998)
8. The Purchase Orders are terminable-at-will. Miller v. Ortman, 136 N.E.2d 17 (Ind. 1956); The House of Crane, Inc. v. H. Fendrich, Inc., 256 N.E.2d 578 (Ind.Ct.App. 1970); Stanley v. Kelley, 422 N.E.2d 663 (Ind.Ct.App. 1981); Monon Railroad v. New York Central Railroad Co., 227 N.E.2d 450 (Ind.Ct.App. 1967); B T Distributors, Inc. v. Meister Brau, Inc., 459 F.2d 29 (7th Cir. 1972); see also Bell v. Speed Queen, 407 F.2d 1022 (7th Cir. 1969).
9. The Machining Agreement governs the overall relationship between the parties, and it provides that Impact may provide the Debtor with work "from time to time." Thus, the relationship between the parties is terminable-at-will. Miller v. Ortman, 136 N.E.2d 17 (Ind. 1956); The House of Crane, Inc. v. H. Fendrich, Inc., 256 N.E.2d 578 (Ind.Ct.App. 1970); Stanley v. Kelley, 422 N.E.2d 663 (Ind.Ct.App. 1981); Monon Railroad v. New York Central Railroad Co., 227 N.E.2d 450 (Ind.Ct.App. 1967); B T Distributors, Inc. v. Meister Brau, Inc., 459 F.2d 29 (7th Cir. 1972); see also Bell v. Speed Queen, 407 F.2d 1022 (7th Cir. 1969).
10. Because the Purchase Orders and the Machining Agreement contain no definite quantities and no commitment from Impact to provide any work to the Debtor, any purported contract arising therefrom is illusory and therefore unenforceable. Indiana-American Water v. Town of Seeleyville, 698 N.E.2d 1255 (Ind.Ct.App. 1998).
11. Even assuming that the parties had orally agreed to do business for a period of five (5) or six (6) years, that oral agreement violates the Statute of Frauds, and is therefore unenforceable. Ind. Code § 23-2-1-1; Board of Commissioners of Clark County v. Howell, 52 N.E. 769 (Ind. 1899); International Shoe Co. v. Lacy, 53 N.E.2d 636 (Ind.Ct.App. 1944); Montgomery Ward Company v. Guignet, 45 N.E.2d 337 (Ind.Ct.App. 1942).
12. There was no material "change in position" or reliance by the Debtor that would take any purported oral agreement between the parties outside of the Statute of Frauds. Swales v. Jackson, 26 N.E. 62 (Ind. 1890); Genda v. Hall, 154 N.E.2d 527 (Ind.Ct.App. 1958); Lloyd v. Lloyd, 48 N.E.2d 837 (Ind.Ct.App. 1943); Summerlot v. Summerlot, 408 N.E.2d 820 (Ind.Ct.App. 1980).
13. The Debtor carries the burden of proof in connection with its request for injunctive relief. In re Gathering Restaurant, Inc., 79 B.R. 992 (Bkrtcy. N.D. Ind. 1989).
14. The Debtor has failed to meet its burden in connection with its request for injunctive relief in that it failed to show a reasonable likelihood of success on the merits, irreparable harm, an inadequate remedy at law, that an injunction will not harm the public interest, and any balancing of harm to the parties. Kellas v. Lane, 923 F.2d 492 (7th Cir. 1990); Somerset House, Inc. v. Turnock, 900 F.2d 1012 (7th Cir. 1990).
15. In the past, the Debtor has made income projections. Therefore, the Debtor can quantify any damages. Thus, the Debtor has an adequate remedy at law, thereby precluding injunctive relief. Kellas v. Lane, 923 F.2d 492 (7th Cir. 1990); Somerset House, Inc. v. Turnock, 900 F.2d 1012 (7th Cir. 1990).
16. The Purchase Orders and the Machining Agreement were, and are, all terminable-at-will. Consequently, the Debtor is not entitled to injunctive relief.
17. There are no executory contracts to assume or reject pursuant to 11 U.S.C. § 365 because the Purchase Orders and Machining Agreement were terminable-at-will.
18. To the extent that any Finding of Fact constitutes a Conclusion of Law, it is incorporated herein by reference.
ORDER
WHEREFORE, the Court hereby orders and decrees that:
(A) there is no five (5) or six (6) year oral or written agreement between the parties requiring Impact to submit all, or any, of its machining work to the Debtor;
(B) there is no oral or written contract between Impact and the Debtor for any specific duration;
(C) the Purchase Orders and/or the Machining Agreement do not require Impact to submit any work to the Debtor, and do not preclude Impact from submitting machining work to other sources;
(D) the relationship between Impact and the Debtor was terminable-at-will; and
(E) the Debtor's request for a temporary restraining order or other injunctive relief is DENIED.