52 F.4th 274
6th Cir.2022Background
- Stackpole ordered transmission and engine oil pump shafts from Precision Metals; Angstrom Automotive (a management company) signed a Letter of Intent (LOI) with Stackpole specifying quantities, prices, and discounts.
- Stackpole issued supplemental purchase orders that included unilateral termination language, but neither Angstrom Automotive nor Precision Metals signed those purchase orders.
- Precision Metals produced and shipped parts under the LOI for about two years; in 2017 it demanded price increases and threatened to stop shipments, and Stackpole agreed to increases "under duress and protest."
- Stackpole sued Angstrom Automotive and Precision Metals for breach of contract; Precision Metals counterclaimed that Stackpole improperly withheld approval for an automatic manufacturing process.
- The district court granted partial summary judgment holding the LOI was an enforceable contract binding Precision Metals and Angstrom Automotive, that APQP was not an unambiguous condition precedent, and that Stackpole had no duty to approve automatic production; a jury awarded Stackpole roughly $1 million and the Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Stackpole) | Defendant's Argument (Angstrom/Precision) | Held |
|---|---|---|---|
| Whether LOI formed an enforceable contract with Precision Metals | LOI set quantities/prices and Precision Metals accepted by performance (shipping) — enforceable | LOI was preliminary; purchase orders governed and were unsigned, so no binding contract | LOI was a binding contract; acceptance by performance made it enforceable |
| Whether Angstrom Automotive was a party to the contract | Angstrom Automotive signed LOI and received bargained-for benefits — therefore bound | Angstrom Automotive was only a managerial affiliate or agent for Precision Metals and did not intend to be bound | Angstrom Automotive was a contracting party as a matter of law (signature + consideration; objective test) |
| Whether APQP (advanced product quality planning) was a condition precedent excusing performance | Stackpole: APQP was not an unambiguous condition precedent; performance and two years of shipments show no suspension of obligations | Angstroms: APQP language in quotes made acceptance subject to APQP, so duties were contingent | APQP was ambiguous and, given performance, did not bar enforcement; no unambiguous condition precedent |
| Whether contract required reasonable pre-termination notice or permitted immediate termination | Stackpole: LOI created a successive-performance, indefinite contract requiring reasonable notice before termination | Angstroms: termination language in unsigned purchase orders (or industry practice) permitted shorter/no notice; threats were sufficient notice | LOI did not dispense with notice; under Michigan UCC such contracts require reasonable notice; jury to decide if notice given was reasonable |
| Whether Stackpole breached by refusing to approve automatic manufacturing (Precision's counterclaim) | Stackpole: no duty to approve because Precision never produced samples of automatic process as industry procedure required | Precision Metals: Stackpole unreasonably withheld approval; planned automatic process should have triggered approval | Summary judgment for Stackpole: no duty to approve; Precision never submitted conforming automatic-produced samples and no bad-faith evidence |
Key Cases Cited
- Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487 (choice-of-law principle used to apply Michigan law)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- AFT Mich. v. Michigan, 866 N.W.2d 782 (Mich. 2015) (elements of contract formation under Michigan law)
- Gen. Motors Corp. v. Dep’t of Treas., Revenue Div., 644 N.W.2d 734 (Mich. 2002) (consideration and good-faith duties)
- Sanchez v. Eagle Alloy, Inc., 658 N.W.2d 510 (Mich. Ct. App. 2003) (acceptance by performance)
- Kamalnath v. Mercy Mem’l Hosp. Corp., 487 N.W.2d 499 (Mich. 1992) (mutual assent requirement)
- Nichols v. Seaks, 295 N.W. 596 (Mich. 1941) (certainty of terms sufficient for remedy)
- Empro Mfg. Co., Inc. v. Ball-Co Mfg., Inc., 870 F.2d 423 (7th Cir. 1989) (letters of intent may be nonbinding in some contexts)
- MacDonald v. Perry, 70 N.W.2d 721 (Mich. 1955) (interpretation of conditions precedent)
- Miller-Davis Co. v. Ahrens Const., Inc., 848 N.W.2d 95 (Mich. 2014) (elements of breach of contract)