Opinion
Case No. 1:20-cv-166
2022-09-30
DICASTAL NORTH AMERICA, INC., Plaintiff, v. MARKOWITZ METALS GROUP, LLC, Defendant.
Homayune Ahmad Ghaussi, Ashley Grace Chrysler, Warner Norcross & Judd LLP, Grand Rapids, MI, for Plaintiff. Erik Johnson, Kelly Shefferly, Patrick C. Lannen, Plunkett Cooney, Bloomfield Hills, MI, for Defendant.
Homayune Ahmad Ghaussi, Ashley Grace Chrysler, Warner Norcross & Judd LLP, Grand Rapids, MI, for Plaintiff. Erik Johnson, Kelly Shefferly, Patrick C. Lannen, Plunkett Cooney, Bloomfield Hills, MI, for Defendant. OPINION AND ORDER JANE M. BECKERING, United States District Judge
This matter is before the Court on the parties' cross-motions for summary judgment (ECF Nos. 63 & 67). Plaintiff Dicastal North America, Inc. ("DNA"), initiated this action against Defendant Markowitz Metals Group, LLC ("MMG") on February 26, 2020 (ECF No. 1), asserting claims of statutory conversion and unjust enrichment based on diversity jurisdiction under 28 U.S.C. § 1332. MMG asserted four counterclaims against DNA based in contract and quasi-contract (ECF Nos. 12 & 22). Plaintiff DNA manufactures aluminum die cast wheels for the automotive industry, a process which produces scrap aluminum byproducts. Defendant MMG purchases aluminum scrap byproduct, processes and recycles it, and resells it to third parties. Central to the parties' dispute is whether an October 26, 2018 proposal constituted a contract. Having considered the parties' submissions, the Court concludes that oral argument is not necessary to resolve the issues presented. See W.D. Mich. LCivR 7.2(d). For the following reasons, the Court grants MMG's motion in part as to the existence of an express and implied-in-fact contract, and denies in part MMG's motion as to breach. The Court denies DNA's motion. The parties' equitable claims are dismissed.
I. BACKGROUND
A. Factual Background
The following factual background is derived in part from the parties' Joint Statement of Material Facts (JSF) (ECF No. 62). Other relevant background factual information is drawn from the parties' cross-motions for summary judgment (ECF Nos. 63 & 67), and the exhibits attached thereto. The parties were not able to reach an agreement on joint exhibits.
The parties agree on the basic facts and events that gave rise to the instant suit, including an October 17, 2018 meeting between DNA and MMG employees, as well as an October 26, 2018 email proposal sent from MMG to DNA. However, the parties dispute what terms governed their continuing business relationship, if any. DNA asserts that the email proposal was not a legally binding contract, and all services provided were based on "monthly pricing sheets" sent from MMG to DNA based on scrap materials shipped. MMG asserts that the email proposal constituted a contract, accepted by DNA, and states that those terms continued to govern the parties' relationship.
1. The Parties
DNA manufactures and sells aluminum wheels (JSF ¶ 1). Aluminum scrap is generated as part of the wheel-making process in five categories: dross, sprues, painted chips (also known as "turnings"), unpainted chips (or "dry" turnings), and wheels (id. ¶¶ 2-3). MMG buys scrap, recycles it, and sells it (id. ¶ 4). In the fall of 2018, Alloy Resources, DNA's previous scrap recycler, informed DNA that Alloy would no longer be buying any scrap from DNA, because "DNA was providing significantly more scrap than Alloy anticipated" (id. ¶¶ 5-6). Eric Henkelman, Alloy's representative acting as an independent broker, proposed MMG to DNA as a replacement buyer of DNA's scrap (id. ¶ 7). Scott Petzold was DNA's then Director of Operations and Human Resources Manager, and Andrea Wressell is DNA's purchasing supervisor (id. ¶¶ 8, 11). DNA's General Manager Mike Lewis and DNA's President Jerry Zhang supervised Wressell. Also employed by DNA is Joe Gregorski, DNA's warehouse supervisor, and Hilary Snow, DNA's accounts receivable (id. ¶ 10). Bruce Markowitz is MMG's owner (id. ¶ 9).
2. October 17, 2018 Meeting
Petzold instructed Wressell to set up a meeting with DNA and MMG (JSF ¶¶ 8, 11). On October 17, 2018, Markowitz flew to Michigan to attend a meeting at DNA's facility in Greenville, Michigan (id. ¶ 9). The October 17, 2018 meeting took place, with Markowitz, Wressell, Petzold, Gregorski, and Snow, among others, present (id. ¶ 10).
As to the October 17, 2018 meeting, DNA alleges that "[b]oth sides acknowledge that the parties did not intend to reach an agreement" and that the parties did not do so (ECF No. 64 at PageID.268). Rather, DNA states that the parties "merely discussed their respective businesses and gathered information" at the meeting (id.) (quoting Pl.'s Ex. 7, Markowitz Dep. at 32-33, ECF No. 64-7 at PageID.347; Pl.'s Ex. 3, Henkelman Dep. at 53, ECF No. 64-3 at PageID.309). According to Markowitz, he "toured DNA's operation to see the process and understand the quality of the aluminum" and "explained that if he purchased scrap from DNA, he would recycle it into re-melt secondary ingot ('RSI' as it is known in the industry)" (ECF No. 67 at PageID.506) (citing Def's Ex. C, Markowitz Dep. at 48-49, ECF No. 67-4 at PageID.895). Markowitz testified nothing was "concluded on that day" but that "the facts were determined" (Pl.'s Ex. 7, Markowitz Dep. at 32-33, ECF No. 64-7 at PageID.347). Henkelman agreed that the main purpose of the meeting was to discuss MMG's business (Pl.'s Ex. 3, Henkelman Dep. at 53, ECF No. 64-3 at PageID.309) ("MMG gave a presentation of who they are, what they do, what they could be, you know, how they could service the account. . . . So Bruce [Markowitz] kind of gave, I mean, an education of MMG and what they're doing in the marketplace. And so that was the main basis of the meeting. And how do we go forward.") (alteration in quotation).
3. October 26, 2018 Email (the "Proposal")
On October 26, 2018, MMG, through Henkelman, sent Wressell (DNA's purchasing supervisor) a proposal with MMG's offered prices for purchasing various scrap byproducts with a proposed start date of November 30, 2018 (the "Proposal") (JSF ¶¶ 11-12). The email was titled "[s]crap proposal for discussion purpose" outlining MMG's "potential prices for purchasing various scrap byproducts for the following year" (JSF ¶ 11; Pl.'s Ex. 9, Oct. 26, 2018 Email from E. Henkelman to A. Wressell, ECF No. 64-9 at PageID. 366; Def's Ex. G, October 26, 2018 Proposal, ECF No. 67-8 at PageID. 1169-1171).
In the October 26, 2018 Proposal, MMG proposed to "purchase the scrap generated from DNA's production based on DNA using A356.2 Modified Primary Aluminum to make all of its wheels"; to purchase from DNA quantities of each of the five recognized categories of aluminum scrap: dross; sprues; painted chips or "turnings"; unpainted chips (dry turnings); and scrap wheels; to pay DNA based on "Platt's Primary Aluminum MW US Transaction average of month prior to shipment"; to split the cost of eight trailers in a rotating system to remove scrap from DNA's facility using a company called "TQI" c/o Brian Meert; and to "begin performing November 30, 2018 and through 2019" (ECF No. 67 at PageID. 507-508; see Pl.'s Ex. 9, ECF No. 64-9 at PageID. 366-368; Def's Ex. G, ECF No. 67-8 at PageID. 1169-1171). The October 26, 2018 Proposal specifically stated, in relevant part:
The proposal is based on Dicastal running its production on A356.2 Sr. Modified Primary Aluminum . . . , as MMG is taking direct sales against production of RSI from this specification, any change in specification would require the buyers permission, and potential change in pricing formula/volumes. This proposal is intended to run through 2019 with a start
date of November 30th, 2018. . . . We are ready to answer any questions, and move to make this agreement official as soon as possible as timing is critical . . . . Purchase:
Buyer: MMG
Seller: DiCastal North America Inc.
Pricing Formula/Volume/INCO terms:
Material: Painted Aluminum Turnings (C/D basis)
Projected volume: Approx 12,200 lbs/mo
Pricing Formula: Platts Primary Aluminum MW US Transaction average of month prior to shipment minus $.45/lb
* * *
Material: Aluminum Dry Turnings (as is up to 3% moisture, same as current)
Projected volume: Approx 100,000 lbs/mo-
Pricing Formula: . . . minus $.50/lb
* * *
Material: Dicastal Production-Aluminum Wheels
Projected volume: Approx 200,000 lbs/mo
Pricing Formula: . . . minus $.40/lb
* * *
Material: Aluminum Dross (C/D basis)
Projected volume: Approx 250,000 lbs/mo
Pricing Formula: . . . minus $.55/lb "on actual recov[er]ed material" (example: 25,000 lbs dross × 50% recovered metal units=12,500 lbs × formula price = payment value)
* * *
Material: Aluminum Sprues w/ iron inserts
Projected volume: Approx 50,000 lbs/mo
Pricing Formula: . . . minus $.60/lb
* * *
No steel banding in scrap
Payment Term: Net 60 days from date of shipment by weekly wire transfer each Monday
* * *
Reporting: Shipments: Buyer will provide weekly report for the week prior's shipments (excel spreadsheet) Monthly Pricing: Spreadsheet will be sent by buyer first week of each month by email
Volumes: Please note that the above projected volumes were provided by Joe Gregorski/Dicastal, approx shall mean +/-5% of the above projections on monthly basis.
Overage volumes: MMG on best efforts basis purchase volumes over projected volumes of the plant indicated above on market value basis at time of overage.
(Pl.'s Ex. 9, ECF No. 64-9 at PageID. 367-368; Def's Ex. G, ECF No. 67-8 at PageID. 1169-1171).If MMG is unable to place the "overage" with its customers at acceptable spot value to Discastal, MMG will toll the "overage" instand [sic] standard ingots at cost plus management fee of 10% to MMG, as purely a service provided to Dicastal, as these overages are unplanned and non quantifiable in advance.
According to DNA, the Proposal lacked essential terms and legal obligations, including quantity amounts, and the parties "never reached an agreement, 'official' or otherwise," that would convert the Proposal into a legally binding contract (ECF No. 64 at PageID.266). DNA alleges that the quantities provided were based on volume projections from DNA's previous scrap production volumes and listed various approximate projected volumes (id. at PageID.269). Specifically, DNA testified that it " 'can't guarantee how much scrap [DNA is] going to generate' and therefore 'would not agree to a contract where [DNA] had to produce [a certain amount of] scrap" (id. at PageID.267) (quoting Pl.'s Ex. 6, DNA 30(b)(6) Dep. 22, ECF No. 64-6 at PageID.337) (citing Pl.'s Ex. 3, Henkelman Dep. at 79, ECF No. 64-3 at PageID.312; Pl.'s Ex. 5, Bodner Dep. at 120-21, ECF No. 64-5 at PageID.329). Moreover, prior to the end of Alloy's relationship with DNA, DNA claims that "Alloy's vice president and general manager, Dennis Flanagan, informed Markowitz about the 'decline of the quality of the dross' and fluctuations in the quantity of scrap provided by DNA" such that Markowitz was "fully aware that DNA could not deliver specific quantities or types of scrap material" (id. at PageID.268) (quoting Pl.'s Ex. 8, Flanagan Dep. at 27, 76, ECF No. 64-8 at PageID.361, 362).
The Proposal had a deadline for acceptance of noon on October 29, 2019 (ECF No. 64 at PageID.269-270; ECF No. 67 at PageID.507-508). The parties agree that the Proposal was only seeking DNA's commitment and contemplated a separate agreement (id.). The deadline was October 29, 2019 because MMG needed to negotiate contracts for the following year with its customers, including Shipston Busche, who "wanted its pricing period to begin on November 1, 2018" (ECF No. 67 at PageID.508). The Proposal specifically stated:
MMG is presently in negotiation with its customers for volumes/formula pricing for 2019, and is under time pressure due to this last minute change in volumes. Its potential customer requires MMG's commitment on the additional volumes promptly in order to preserve the space in their buying requirements, as they have more offered then need for 2019. We are ready to answer any questions, and move to make this agreement official as soon as possible as timing is critical not to lose the limited potential homes for this product for 2019, as potential percentages of scrap/secondary have a defined limit in the production process.(Pl.'s Ex. 9, ECF No. 64-9 at PageID. 367; Def's Ex G, ECF No. 67-8 at PageID. 1170-1171). Wressell responded to the email the same day, writing:
* * *
Based on the fact that the pricing period for December begins on November 1st, in order for us to establish the transaction pricing accordingly we need to finalize the transition agreement no later than 12 p.m. (noon) on Monday, October 29, 2018.
I have to be frank, the timing on this seems extremely unreasonable. It took MMG 7 business days to put together a proposal and you want us to review it and commit in 1? There is absolutely no way that I can give you a commitment by Monday, the 29th. I have our HQ purchasing executives here today and next week so Scott, Mike and my time is very limited and we will need time to review this as a team.(Pl.'s Ex. 10, Oct. 26, 2018 Email from A. Wressell to E. Henkelman, ECF No. 64-10 at PageID. 370; Def's Ex. G, ECF No. 67-8 at PageID. 1169-1170). Henkelman then responded to Wressell that evening, stating in part, "[w]e completely understand how you feel! In reverse, it was very last minute for us as well—but a wonderful opportunity" and offered to discuss with Wressell on his mobile phone or to schedule a call for Monday morning (see Def's Ex. G, ECF No. 67-8 at PageID.1168). In addition, the evening of October 29, 2018, Henkelman emailed Wressell and stated:
Sorry to bother you Andrea. Do you think you will have feedback COB today? I sent an email to the consumer on the other side and told them I needed to
extend my feedback until COB today versus noon.(Def's Ex. L, October 29 Post Lewis Phone Call Email, ECF No. 67-13 at PageID. 1231). Mike Lewis, DNA's General Manager, also testified on behalf of DNA that any scrap sent from DNA required authorization from either Lewis or Zhang (Def's Ex. O, DNA 30(b)(6) Dep. at 31, ECF No. 67-17 at PageID.1405).
DNA maintains that it "never accepted the proposal" (Pl.'s Ex. 3, Henkelman Dep. at 87 (acknowledging that the Proposal was never signed by DNA); Pl.'s Ex. 1, Wressell Dep. at 138 ("We did not finalize the terms and neither party signed a finalized document")); see also Pl.'s Ex. 6, DNA 30(b)(6) Dep. at 13, 17, 48-49, 79, ECF No. 64-6 at PageID.335, 336, 339-340).
4. October 29, 2018 Phone Call Between Wressell and Henkelman
Wressell testified that she recalls a call with Henkelman in which Wressell stated that DNA "would like to sell scrap" to MMG but does not recall exactly what else was discussed (JSF ¶¶ 13-14). Specifically, Wressell stated in part, "I don't recall exactly what was said, but I know that there was a phone call indicating that we would like to send our scrap to MMG . . . I don't know the exact date or time. . . . I believe it would have been around the date of the 29th, but I don't know exactly what date that would have been" (Def's Ex. A, Wressell Dep. at 76, 78-81, ECF No. 67-2 at PageID.560-561). Lewis, testifying on behalf of DNA, stated that he authorized Wressell to tell Henkelman that DNA wanted to do business with MMG, although he did not recall what date and was not aware of what Wressell discussed with Henkelman on the phone call at issue (Def's Ex. O, DNA 30(b)(6) Dep. at 31, 34-35, at PageID.1405-1406).
MMG asserts that Wressell "orally agreed to the Proposal in [the] October 29, 2018 phone call" with Henkelman (ECF No. 67 at PageID.503). Specifically, however, Henkelman testified that Wressell verbally agreed to the Proposal on a telephone call with him but stated that he could not recall the exact date (Pl.'s Ex. 3, Henkelman Dep. at 77, 78, ECF No. 64-3 at PageID.311, 312) ("I don't have the exact date, but I can tell you it was snowing out. And Andrea was on her way back home, I think . . . It was - you know, late October sometime. I don't know off the top of my head"). Henkelman testified that Wressell "conveyed that although Dicastal wasn't real familiar with MMG, they did have a level of faith or comfort level with myself from my Alloy Resources days. And so . . . they were awarding MMG the business to move forward based off of this arrangement" (id. at PageID.311).
5. The Parties Engage in Business
According to MMG, on November 7, 2018, the "transition" from Alloy Resources to MMG as DNA's scrap buyer began. On November 7, 2018, Wressell replied to the October 26, 2018 Proposal, writing to Henkelman to set a transition meeting on November 15 or 19 "to go over the details and discuss how [DNA and MMG] would transition" (ECF No. 67 at PageID.510; Def's Ex. P, Transition Email, ECF No. 67-18 at PageID.1538-1539; see also Def's Ex. A, Wressell Dep. at 87, ECF No. 67-2 at PageID.563). Wressell's email included the Proposal, and the parties thereafter arranged meetings in preparation of November 30 (id.; see Def's Ex. Q, November 9, 2018 Email from Henkelman to Wressell, ECF No. 67-19 at PageID.1544; Def's Ex. R, November 13, 2018 Calendar Appointment Invitation from Wressell for November 19, 2018 Meeting, ECF No. 67-20 at PageID.1546).
On December 3, 2018, Henkelman forwarded the Proposal to Snow (DNA's accounts receivable) stating, "I wanted to forward you the particulars behind the agreement through 2019 that will translate to the spreadsheet 1 will send you each month" (JSF ¶ 15) (see Def's Ex. X, Dec. 3, 2018 Email from Henkelman to Snow, ECF No. 67-26 at PageID.1746-1747). Snow helped prepare packing slips to be completed for each shipment of scrap from DNA to MMG and communicated frequently with DNA's shipping and receiving department (ECF No. 67 at PageID. 510-511; see Def's Ex N, ECF No. 67-15 at PageID. 1309, 1324, 1351-1352). DNA began sending scrap aluminum to MMG in early December 2018 (JSF ¶ 16).
MMG provided monthly price sheets at the beginning of each month, "indicating how much MMG would pay for each type of scrap material it obtained" from DNA (ECF No. 64 at PageID.271) (citing Pl.'s Ex. 1, Wressell Dep. at 67, 217-18, ECF No. 64-1 at PageID.293, 296-297; Pl.'s Ex. 3, Henkelman Dep. at 130-34, ECF No. 64-3 at PageID.315-316; Pl.'s Ex. 6, DNA 30(b)(6) Dep. at 11, ECF No. 64-6 at PageID.335). DNA asserts that MMG obtained "over 4 million pounds" of scrap materials based on the pricing sheets (id. at PageID.270-271) (citing Pl.'s Ex. 11, Scrap Materials Accepted Spreadsheet, ECF No. 64-11 at PageID.375-376). According to DNA, however, "[n]one of the shipments were made pursuant to, or in accordance with," the Proposal (id. at PageID.271). DNA states that, for example, the Proposal included only "projected quantities of scrap wheels that could be provided to MMG on a monthly basis starting in December 2018," but that "DNA provided only a few shipments of scrap wheels in December" (id. at PageID.271) (citing Pl.'s Ex. 7, Markowitz Dep. at 129-30, 150, ECF No. 64-7 at PageID.353-355; Pl.'s Ex. 3, Henkelman Dep. at 136-38, ECF No. 64-3 at PageID.316-317).
DNA further states that MMG accepted all of the material shipped by DNA on a monthly basis, "until DNA stopped shipping any scrap materials to MMG around August 2019, after MMG failed to pay for many of the materials it had repeatedly accepted" (ECF No. 64 at PageID.271) (citing Pl.'s Ex. 7, Markowitz Dep. at 41-44, 63-67, ECF No. 64-7 at PageID.348-351; Pl.'s Ex. 1, Wressell Dep. at 67, ECF No. 64-1 at PageID.293). MMG did not return any of the scrap, including the scrap that allegedly did not meet MMG's quality expectations, and instead "plan[s] to eventually either melt . . . or sell" the scrap (id.) (see Pl.'s Ex. 7, Markowitz Dep. at 41-44, 63-67, ECF No. 64-7 at PageID.348-351; Pl.'s Ex. 1, Wressell Dep. at 67, ECF No. 64-1 at PageID.293; Pl.'s Ex. 3, Henkelman Dep. at 171-72, 174, ECF No. 64-3 at PageID.319-320; Pl.'s Ex. 6, DNA 30(b)(6) Dep. at 94, ECF No. 64-6 at PageID.341).
B. Procedural Posture
DNA initiated this action against MMG on February 26, 2020, asserting two claims: (1) statutory conversion and (2) unjust enrichment (Compl. [ECF No. 1]). On May 21, 2020, MMG filed an Answer and Counterclaim (Answer and Counterclaim [ECF No. 12]). MMG subsequently amended its pleadings multiple times. The operative pleading for MMG's counterclaims is its Second Amended Counterclaim ("SAC"), asserting four counterclaims, pled alternatively, sounding in contract and quasi-contract: (1) breach of an express contract; (2) breach of a contract implied-in-fact; (3) unjust enrichment; and (4) quantum meruit (SAC [ECF No. 22]).
A Case Management Order was entered on July 7, 2020, setting the relevant deadlines for discovery and dispositive motions (ECF No. 21), which were extended by stipulation several times. The settlement conference, final pretrial conference, and trial were adjourned without date (ECF No. 43). On January 5, 2022, this case was re-assigned to the undersigned (ECF No. 58), and on January 26, 2022, this Court required the parties to engage in facilitative mediation (1/26/22 Order, ECF No. 60). The parties engaged in facilitative mediation but did not reach an agreement (ECF No. 78).
On February 28, 2022, the parties filed the instant cross-motions for summary judgment. DNA filed its Motion for Summary Judgment (ECF No. 63), to which MMG filed a response in opposition (ECF No. 71), and to which DNA filed a reply (ECF No. 75). MMG filed its Motion for Summary Judgment (ECF No. 67), to which DNA filed a response in opposition (ECF No. 69), and to which MMG filed a reply (ECF No. 77). On August 9, 2022, MMG filed a Notice of Supplemental Authority regarding DNA's conversion claim (ECF No. 79). DNA filed a response (ECF No. 80), and MMG filed a reply (ECF No. 81).
II. MOTION STANDARD
The parties' motions are filed pursuant to FED. R. CIV. P. 56. A party may move for summary judgment, identifying each claim on which summary judgment is sought. FED. R. CIV. P. 56(a). Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id.
In resolving a motion for summary judgment, a court must consider the evidence and all reasonable inferences in favor of the nonmoving party. Burgess v. Fischer, 735 F.3d 462, 471 (6th Cir. 2013); U.S. S.E.C. v. Sierra Brokerage Servs., Inc., 712 F.3d 321, 327 (6th Cir. 2013) (citation omitted). The moving party has the initial burden of showing the absence of a genuine issue of material fact. Jakubowski v. Christ Hosp., Inc., 627 F.3d 195, 200 (6th Cir. 2010). The burden then "shifts to the nonmoving party, who must present some 'specific facts showing that there is a genuine issue for trial.' " Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). "There is no genuine issue for trial where the record 'taken as a whole could not lead a rational trier of fact to find for the non-moving party.' " Burgess, 735 F.3d at 471 (quoting Matsushita Elec. Indus., Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)); see Dow Chem. Co. v. Gen. Elec. Co., No. 04-10275-BC, 2005 WL 1862418, at *23 (E.D. Mich. Aug. 4, 2005) ("Summary judgment is appropriate 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.' ") (quoting FED. R. CIV. P. 56(c)).
The function of the court is not " 'to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.' " Moran v. Al Basit LLC, 788 F.3d 201, 204 (6th Cir. 2015) (quoting Anderson, 477 U.S. at 249, 106 S.Ct. 2505). "The ultimate inquiry is 'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.' " Sierra Brokerage Servs., 712 F.3d at 327 (quoting Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505).
When evaluating cross-motions for summary judgment, the Court "must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party." Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506-07 (6th Cir. 2003); Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) ("[t]he fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate").
III. ANALYSIS
The parties agree that Michigan law applies in this federal diversity case and that Michigan's UCC applies, MICH. COMP. LAWS § 440.2102, because this case involves the sale of goods (ECF No. 64 at PageID.274, 277; ECF No. 67 at PageID.522).
Central to the parties' dispute is whether the October 26, 2018 Proposal constituted a contract. DNA asserts that it did not, and MMG asserts that it did. Of course, something governed the conduct of the parties, as it is undisputed that DNA provided various scrap materials to MMG. Because the existence or non-existence of an express or implied-in-fact contract is outcome-determinative as to the claims and counterclaims asserted in this matter, the Court turns first to MMG's motion seeking summary judgment in its favor. For the reasons that follow, the Court grants in part MMG's motion as to the existence of an express and an implied-in-fact contract and denies in part MMG's motion as to the existence of a breach of said contract by DNA. Because this Court determines that there is no genuine issue of material fact as to whether an express and implied-in-fact contract existed between the parties, the Court does not need to reach and does not address MMG's motion for summary judgment in its favor of MMG's equitable counterclaims, which are properly dismissed. Moreover, for the same reasons, the Court denies DNA's motion for summary judgment and dismisses its equitable claims of statutory conversion and unjust enrichment.
A. MMG's Motion for Summary Judgment
In support of summary judgment in its favor, MMG asserts that there is no genuine dispute that the Proposal was a contract and that the Proposal's terms governed the parties' business relationship. MMG states that the evidence in the record "makes for an express contract, or a contract implied in fact, on the terms of the Proposal" and requests summary judgment on the existence of such a contract (ECF No. 67 at PageID.504).
1. Existence of a Contract
"Under Michigan law, a valid breach-of-contract claim must establish three elements: (1) the existence of a contract; (2) a breach of that contract; and (3) damages suffered by the nonbreaching party as a result of the breach." Lossia v. Flagstar Bancorp, Inc., 895 F.3d 423, 428 (6th Cir. 2018). The essential elements of a valid contract are: "(1) parties competent to contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of agreement, and (5) mutuality of obligation." Hess v. Cannon Twp., 265 Mich. App. 582, 696 N.W.2d 742, 748 (2005) (quotation and citation omitted).
Here, the parties agree that they are competent to contract and that the Proposal contained a proper subject matter. The terms of the Proposal on its face show that there was legal consideration and mutuality of obligation. Instead, the parties dispute only whether there was a mutuality of agreement (see ECF No. 71 at PageID.2353). "A basic requirement of contract formation is that the parties mutually assent to be bound." Rood v. General Dynamics Corporation, 444 Mich. 107, 507 N.W.2d 591, 598 (1993). "In order that there be a meeting of the minds . . . the acceptance of the offer must be substantially as made." Harper Building Company v. Kaplan, 332 Mich. 651, 52 N.W.2d 536, 538 (1952). To determine whether mutual assent exists, courts use "an objective test, looking to the expressed words of the parties and their visible acts." Rowe v. Montgomery Ward & Co, 437 Mich. 627, 473 N.W.2d 268, 273 (1991) (internal quotation marks and citation omitted). "The starting point in analyzing oral statements for contractual implications is to determine the meaning that reasonable persons might have attached to the language, given the circumstances presented." Id.
Viewing the evidence in the light most favorable to Plaintiff, the nonmoving party, the Court determines that the evidence, taken as a whole, presents no genuine issue of material fact as to whether there was mutuality of agreement to the Proposal. Therefore, MMG is entitled to summary judgment on this issue.
First, in this case, the October 26, 2018 Proposal acted as an offer. "[A] quotation can constitute an offer 'if it is sufficiently detailed and it reasonably appears from the price quotation that assent to that quotation is all that is needed to ripen the offer into a contract.' " Holbrook v. Prodomax Automation Ltd., No. 1:17-CV-219, 2021 WL 4582161, at *4 (W.D. Mich. Oct. 6, 2021) (quoting Dyno Constr. Co. v. McWane, Inc., 198 F.3d 567, 571, 573-74 (6th Cir. 1999)). Second, Wressell's email response on that same day to Henkelman was not an express rejection of the Proposal, as DNA contends, but was a rejection only to the timing, by stating "[t]here is absolutely no way that I can give you a commitment by Monday, the 29th . . . we will need time to review this as a team" (Pl.'s Ex. 10, Oct. 26, 2018 Email from A. Wressell to E. Henkelman, ECF No. 64-10 at PageID.370). On October 29, 2018, Wressell emailed Henkelman to clarify terms in the Proposal, including the pricing on painted and unpainted turnings (see ECF No. 67-4 at PageID.1026-1029). Henkelman and Wressell exchanged emails as to the corrected pricing, and Henkelman assented and later emailed Wressell seeking a response, stating that the offer (the Proposal) was "extend[ed]" until close of business (see ECF No. 67-13 at PageID.1231). "[A] proposal to accept, or an acceptance, upon terms varying from those offered, is a rejection of the offer, and puts an end to the negotiation, unless the party who made the original offer renews it, or assents to the modification suggested." See Thomas v. Ledger, 274 Mich. 16, 263 N.W. 783, 785 (1935). DNA argues that the offer nonetheless lapsed on 12:00 p.m. (noon) on October 29, 2018. MMG argues that Henkelman's October 29 response "held open, or at worst, renewed, the offer" when Henkelman asked if Wressell would respond by the close of business (see Henkelman Dep. at 77-78, 87-88, ECF No. 67-7 at PageID.1061-1062, 1064). Henkelman also testified that Wressell accepted the proposal orally to him on her cell phone. Wressell testified that she recalls the phone call and recalls stating that DNA would like to sell scrap to MMG. Wressell further testified that the call took place "around" October 29, and that she was "sure [that DNA and MMG] exchanged information about when" the parties expected DNA's sale of scrap aluminum to MMG "to start taking place" (Def's Ex. A, Wressell Dep. at 79, 81, ECF No. 67-2 at PageID.561). Further, Wressell testified that the timing of the parties' performance was consistent with the Proposal, and that DNA "accepted [MMG's] payment [for scrap] based on the pricing" in the Proposal (see Def's Ex. A, Wressell Dep. at 62, ECF No. 67-2 at PageID.556).
MMG further asserts, and the record reflects, that on March 4, 2019, Henkelman confirmed in an email to Snow that Wressell verbally accepted the Proposal on that phone call (see Def's Ex. M, March 4, 2019 Email from Henkelman to Snow, ECF No. 67-14 at PageID.1234; Def's Ex C, Markowitz Dep. at 77-78, ECF No. 67-4 at PageID.902-903). Mike Lewis, testifying on behalf of DNA, also testified that he authorized Wressell to tell Henkelman that DNA wanted to do business with MMG, and that Lewis' authorization to Wressell referred to "the proposal . . . as what [the parties] would expect" (see Def's Ex. O, Lewis 30(b)(6) Dep. at 35, ECF No. 67-17 at PageID.1406).
Thus, the Court determines that the record is clear that there is no genuine dispute as to the fact that DNA never expressly rejected the Proposal and that DNA and MMG mutually assented to the majority of terms within the Proposal, including projected volumes of quantities, timing, delivery, and other specifics of the Proposal, such as monthly pricing sheets. Further, the record reflects that a written confirmation was sent, and the parties began performance in accordance with the terms outlined in the Proposal, as discussed below.
DNA's argument and testimony place great weight on the monthly pricing sheets—and not the Proposal—as DNA's independent basis to be paid by MMG for the scrap materials sent. Even assuming arguendo that the Proposal did not include discussion of and the procedure for the monthly pricing sheets, and that the Proposal was not a valid contract, the monthly pricing sheets, standing alone, support MMG's claims that an implied-in-fact contract existed between the parties.
a. Statute of Frauds
DNA asserts the affirmative defense that the Proposal does not constitute a contract under the UCC's Statute of Frauds, because the signature requirement is not met and the Proposal does not specify a quantity term. MMG responds that the merchant exception rule and part performance exception apply.
Because this case involves the sale of goods, Michigan's UCC applies. See MICH. COMP. LAWS § 440.2102. The UCC "must be liberally construed and applied to promote its underlying purposes and policies." MICH. COMP. LAWS § 440.1103(1); Power Press Sales Co. v. MSI Battle Creek Stamping, 238 Mich.App. 173, 604 N.W.2d 772, 776 (1999). In the absence of a directly controlling UCC provision, questions are resolved according to general legal principles. Conagra, Inc. v. Farmers State Bank, 237 Mich. App. 109, 131-132, 602 N.W.2d 390 (1999); MICH. COMP. LAWS § 440.1103.
Under Michigan's Uniform Commercial Code,
a contract for the sale of goods for the price of $1,000.00 or more is not enforceable . . . unless there is a writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought. . . . A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subsection beyond the quantity of goods shown in the writing.MICH. COMP. LAWS § 440.2201(1).
i. Signature Requirement
DNA contends that there is no genuine dispute that the Proposal was not signed by DNA, and thus the Statute of Frauds applies. MMG asserts that the Statute of Fraud's merchant exception rule applies (ECF No. 71 at PageID. 2348-2349). Specifically, MMG asserts that Henkelman sent a writing (an email) in confirmation on December 3, 2018 to Snow stating, here are "the particulars behind the agreement through 2019 that will translate to the spreadsheet [MMG] will send you each month" (id.) (quoting Def's Ex. X, ECF No. 67-26 at PageID.1746-1747). MMG further states that "[t]he writing reflected the discussions that occurred on October 29, 2018 with respect to pricing, and DNA never objected to Henkelman's email. Therefore, under the UCC's merchant exception to the signature requirement, the statute of frauds does not prevent MMG from enforcing the terms of the Proposal" (ECF No. 71 at PageID. 2349).
In response, DNA argues the December 3 writing is insufficient to satisfy the merchant exception rule because: (1) there was no valid oral agreement to confirm; (2) the written confirmation was sent after or near the deadline for performance and thus was not within a reasonable time; (3) Snow was not a DNA employee with authority to contract or bind DNA to contract; and (4) the Proposal language included in the December 3 email also contained language "indicating that the parties had not yet finalized any agreement" (see ECF No. 69 at PageID.2292-2296).
In response, MMG asserts that the oral agreement was formed on October 29, and several trial runs were scheduled ahead of the November 30 start date (ECF No. 77 at PageID. 2457). MMG contends that it was reasonable to send the confirmation "[a] few days after the first pickup" to Snow, "DNA's point person," and DNA's argument fails for lack of any prejudice (id. at PageID.2457-2458). MMG also contends that "authority" is not an issue under the plain language of Mich. Comp. Laws § 440.2201(2) which requires only that "the party receiving it has reason to know its contents" (id. at PageID.2459).
The Court determines that the arguments MMG makes have merit and are outcome-determinative.
"Between merchants, if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against the party unless written notice of objection to its contents is given within 10 days after it is received." MICH. COMP. LAWS § 440.2201(2). See, e.g., Skyline Steel Corp. v. A.J. Dupuis Co., 648 F. Supp. 360, 366 (E.D. Mich. 1986) (finding invoices that were not signed by party against whom enforcement was sought but that contained quantity term were sufficient to satisfy Statute of Frauds as confirmatory memo because no objection to confirmation was made within 10 days); MSSC, Inc. v. Airboss Flexible Prod. Co., 338 Mich.App. 187, 195-98, 979 N.W.2d 718 (2021) (under merchant rule exception, where the plaintiff delivered a written confirmation of the contract to defendant, and defendant received and clearly knew of its contents but did not object, the defendant could not assert the defense of Statute of Frauds).
Here, the confirmatory memo clearly referenced the Proposal and indicated that it contained "the particulars of [the parties'] agreement." There is no evidence in the record that DNA rejected the writing. The conduct of the parties, including between Wressell, Snow, and Henkelman, is consistent with performance based on the Proposal terms. Even if the Court determined that the confirmatory email was insufficient, other facts remove it from the Statute of Frauds. "A contract is enforceable 'if the party against whom enforcement is sought admits in his pleadings, testimony or otherwise in court that a contract for sale was made.' " Skyline Steel Corp. v. A.J. Dupuis Co., 648 F. Supp. 360, 368 (E.D. Mich. 1986) (quoting MICH. COMP. LAWS § 440.2201(3)(b)). Here, as MMG argues, the following evidence in the record indicates that DNA assented to the terms of the Proposal, repeatedly referenced the "contract" or "agreement" between the parties, and performed pursuant to the terms outlined in the Proposal, for example:
• When Lewis was asked whether he had "any reason to doubt" that the terms set forth in the Proposal were the business terms between DNA and MMG, he said, "I guess not" (Def's Ex. N, Lewis Dep. at 44, ECF No. 67-15 at PageID. 1250);
• When asked whether the Proposal "request[ed] specific quantities of the various forms of scrap metal", DNA answered, "Yes" (Def's Ex. 0, DNA 30(b)(6) Dep. at 41, ECF No. 67-17 at PageID.1407);
• When asked if DNA ever communicated in writing to MMG that the terms of the Proposal were "unacceptable" in either December or January 2018, or February through August 2019, DNA answered "No" (id. at 46-48, PageID.1409);
• Snow testified "[a]t the very beginning, I thought there was a contract. Whether it was legally based, I don't know" and "I do believe Bruce thought there was a contract" based on "[c]onversations [that] were had" and that Bruce's belief that there was a contract was reasonable (Def's Ex. S, Snow Dep. at 59-60, ECF No. 67-21 at PageID. 1566);
• Petzold, Wressell's supervisor, signed an affidavit stating that he "attended a presentation by one or more representatives of [MMG] at [DNA] in or about October 2018" and that "[MMG] made a proposal to [DNA] to purchase aluminum scrap metal"; Petzold also stated that he "believe[ed] that, based on that proposal and DiCastal's response, [MMG] reached an agreement with [DNA] to purchase aluminum scrap metal" (Petzold Aff., ¶¶ 4-6, ECF No. 67-28 at PageID. 1753-1754);
• DNA itself called the Proposal a "contract" and an "agreement" but maintained that it was "never accepted" (Def's Ex. O, DNA 30(b)(6) Dep. at 94, ECF No. 64-6 at PageID.341); and
• After performance began, Gregorski stated in an email to Lewis, "[o]ur scrap company [MMG] is getting worried about not sending scrap" (Def's Ex. CC, Gregorski Email, ECF No. 68-3 at PageID. 1764).
As such, MMG's motion as to the formation of a contract based on the Proposal is properly granted.
ii. Quantity
DNA also contends that because the Proposal does not specify a quantity term, it does not satisfy the Statute of Frauds. DNA primarily argues that the quantities provided significantly varied from the projected volumes in the Proposal, and thus, neither DNA's testimony nor conduct showed assent to a quantity term (ECF No. 69 at PageID. 2287-2292). MMG argues that the Proposal provided explicit quantities, and "both parties" anticipated and accounted for "greater, but not less" volume (ECF No. 77 at PageID. 2456). MMG further states that the record shows that DNA knew the Proposal included quantities, and that Wressell and Henkelman exchanged emails related to MMG not receiving any wheels (id.). MMG asserts that Wressell "did not say there [wa]s no commitment from DNA to provide wheels" but instead arranged for wheels to be sent to MMG consistent with the Proposal terms (id. at PageID.2457).
The Court determines that MMG's argument has merit and is outcome-determinative.
"The only term which must appear in the contract is the quantity term." Skyline Steel Corp., 648 F. Supp. at 368. However, a contract " 'need not fail because the quantity term is not precise.' " MSSC, Inc., 338 Mich.App. at 195, 979 N.W.2d 718 (quoting In re Estate of Frost, 130 Mich.App. 556, 344 N.W.2d 331, 334 (1983)); see also Johnson Controls, Inc. v. TRW Vehicle Safety Sys., Inc., 491 F.Supp.2d 707, 713 (E.D. Mich. 2007) (under Michigan Statute of Frauds, once a quantity term is found to exist in the agreement, it does not need to be precise) (citing cases).
Here, like in MSSC, Inc. v. Airboss Flexible Products Co., the quantities provided were volume projections, and the Proposal did not state a specific quantity because the quantities to be provided were based on DNA's production, which is common in the automotive industry. 338 Mich. App. at 195-97, 979 N.W.2d 718; see also Cadillac Rubber & Plastics, Inc. v. Tubular Metal Sys., LLC, 331 Mich.App. 416, 952 N.W.2d 576, 582-84 (2020) (citing Johnson Controls and stating "the UCC specifically contemplates contracts with indefinite quantity terms") (internal quotation omitted). The Proposal itself specifically provided such volume projections and provided for pricing formulas for outright purchase, as well as MMG's offer of tolling services for excess scrap or variations in ultimate scrap production (Pl.'s Ex. 10, ECF No. 64-10 at PageID.371). Further, Wressell and Lewis both acknowledged the quantities provided in the Proposal, stating in an internal email forwarding the original Proposal email's terms, "[h]ere's the email from Eric regarding quantities and pricing structure" (Def's Ex. GG, Quantity Email, ECF No. 68-7 at PageID. 1776-1779).
As such, MMG's motion as to the formation of a contract based on the Proposal is properly granted.
iii. Part Performance
Finally, MMG also argues that part performance removes the Statute of Frauds defense (see ECF No. 67 at PageID.528). MMG argues that DNA's conduct and part performance evidences that DNA accepted the Proposal, and the Proposal governed the parties' business relationship. Specifically, MMG asserts that "[t]he record is replete with evidence of an agreement", including a December 3 confirmatory memorandum between DNA and MMG, the series of "transition meetings", and the parties' part performance starting on December 1, 2018 (ECF No. 71 at PageID. 2348). MMG states that "both parties referred to the Proposal dozens of times during performance, and not coincidentally never referred to any other governing terms during the course of performance. . . . DNA's acceptance and performance after October 29, 2018 shows that it accepted the terms of the Proposal" (id.).
DNA argues that the part performance exception to the Statute of Frauds requires "the existence of an underlying contract" (ECF No. 69 at PageID. 2297) (citing Andrews v. Thomas J. Moyle Const., Inc., No. 315091, 2014 WL 6602423, at *3 (Mich. Ct. App. Nov. 20, 2014)). DNA contends that their performance, as with quantity, did not show assent to the "quality" terms in the Proposal sufficient to remove the Proposal from the Statute of Frauds (id.).
In reply, MMG asserts that "acceptance of goods, among other things, occurs when the buyer 'does any act inconsistent with the seller's ownership' " (ECF No. 77 at PageID. 2461) (quoting MICH. COMP. LAWS § 440.2606(1)(c)). MMG argues that MMG "notified DNA about the nonconforming" dross and made "reasonable efforts" to sell the goods (id.) (citing MICH. COMP. LAWS § 440.2603(1)). MMG states that the Michigan UCC is clear that good faith conduct "is neither acceptance nor conversion nor the basis of an action for damages", MICH. COMP. LAWS § 440.2603(3), and that "DNA's partial performance is conclusive of the existence of an express contract with respect to delivered goods for which DNA claims nonpayment" (id.).
Because the Court determines that a valid contract existed, DNA's arguments lack merit.
Under the Michigan UCC, a "contract" that is "valid in other respects" is "enforceable . . . (c) With respect to goods for which payment has been made and accepted or that have been received and accepted under section 2606." MICH. COMP. LAWS. § 440.2201(3)(c). "Further, it is beyond dispute that the contract was subject to at least partial performance, . . . taking it altogether out of the statute of frauds." Atlas Res., LLC v. McJunkin Red Man Corp., No. 1:12-cv-41, 2013 WL 4786475, at *9 (W.D. Mich. Sept. 6, 2013) (citing Power Press Sales Co. v. MSI Battle Creek Stamping, 238 Mich.App. 173, 604 N.W.2d 772 (1999)); see also Dumas v. Auto Club Ins. Ass'n., 437 Mich. 521, 473 N.W.2d 652, 661 (1991) ("[i]f one party to an oral contract, in reliance upon the contract, has performed his obligation thereunder so that it would be a fraud upon him to allow the other party to repudiate the contract, by interposing the statute, equity will regard the contract as removed from the operation of the statute."). However, while MMG complained about the nonconforming goods, there is insufficient evidence in the record at this time that MMG did not accept the goods or has made efforts to date to resell the nonconforming goods, so its argument at this time is premature.
2. Breach
MMG asserts that "[a]fter determining contract formation, the issue in this case is whether DNA breached the contract" and moves for summary judgment in its favor that DNA breached because "even DNA does not dispute it failed to fully live up to the Proposal by not fully supplying wheels as the Proposal stated" (ECF No. 67 at PageID.531).
To prevail on a breach of contract claim, the plaintiff must establish (1) the existence of a valid contract, (2) the terms of the contract, (3) that the defendant breached those terms, and (4) that the plaintiff was injured as a result. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003) (interpreting Michigan law).
As discussed above, the evidence shows that a valid contract existed between the parties and that the Proposal's terms governed that contract. Thus, at issue is whether DNA breached the contract by failing to provide a sufficient quantity of wheels and sufficient quality dross to MMG.
MMG asserts that DNA breached "because it used nonprimary aluminum and, therefore, it did not supply scrap within the specification of the Proposal. . . . Although DNA generated aluminum scrap in November and December 2018, it was not sufficiently within the expected specifications during the terms of the contract" (ECF No. 67 at PageID.531). MMG further argues that "MMG had to sell loads of sprues, because its blend could not absorb the iron in the sprues" and that these breaches caused MMG damages (id. at PageID.531-532).
In its own motion for summary judgment, DNA argues that the issue of breach is foreclosed by MMG's waiver under MICH. COMP. LAWS § 440.2209. DNA argues that MMG did not reject or return any of the scrap aluminum that DNA shipped to MMG, and therefore it has waived its rights to pursue contract claims "on its theories that DNA either provided too much Scrap Aluminum or provided Scrap Aluminum of insufficient quality" (ECF No. 64 at PageID.284).
In reply to DNA's motion, MMG argues that waiver requires affirmative conduct or statements indicating that performance is not required, and that MMG's affirmative conduct under the facts of this case demonstrates that there was no waiver (ECF No. 71 at PageID. 2357-2358). Specifically, MMG asserts that it frequently objected to quality, and frequently complained about the low volume of wheels (id. at PageID.2358). That MMG did not return the complained of aluminum scrap, MMG argues, does not constitute waiver but shows that MMG was mitigating its damages by seeking to remelt and resell the low quality dross and by seeking wheels from other providers, including DNA's own sister company Dicastal Logistics Group, located in Canton, Michigan (id.; see ECF No. 67 at PageID.515).
"A waiver occurs when a party, with full knowledge of material facts, does or forbears to do something inconsistent with the existence of the right in question or his intention to rely on that right. A party's affirmative conduct or statements which indicate that performance is not required constitute[s] a waiver of the breach." Kvaerner U.S., Inc. v. Hakim Plast Co., 74 F. Supp. 2d 709, 718-19 (E.D. Mich. 1999) (internal quotation and citation omitted). The standard to determine inconsistency is determined according to the "reasonable commercial standards of fair dealing in the trade." Id. at 718.
Here, MMG does not seek to establish a breach based on "too much scrap" provided by DNA; rather, MMG seeks to establish breach based on DNA's failure to deliver a sufficient quantity of wheels, as stated in the Proposal's terms. Further, the record is replete with references to MMG continually raising the issues of insufficient quality of dross and aluminum from DNA, as well as the insufficient quantity of wheels being shipped. Nonetheless, the Court determines that MMG is not entitled to summary judgment as a matter of law as to DNA's breach of the Proposal, as MMG has not borne its burden at this time to show that there are no genuine issues of material fact as to the quantity of wheels or quality of dross provided, nor that MMG did not waive DNA's breach under Michigan's UCC.
Similarly, the Court does not reach the issue of damages on the summary judgment motions at bar, an element of MMG's breach of contract claims to be proved at the appropriate time or as can be agreed to among the parties.
B. DNA's Motion for Summary Judgment
DNA seeks summary judgment in its favor on its claim for statutory conversion and its claim for unjust enrichment (ECF No. 63 at PageID.260). In addition, DNA seeks summary judgment on MMG's counterclaims, arguing that MMG cannot establish that DNA breached any contract, and that MMG cannot establish damages as a result of that breach as a matter of law (id.; ECF No. 64 at PageID.266-267). In response, MMG argues that the economic-loss doctrine bars both of DNA's claims, and that summary judgment in MMG's favor is proper (ECF No. 71 at PageID. 2340). For the reasons that follow, the Court denies DNA's motion.
1. Statutory Conversion
In support of summary judgment in its favor, DNA asserts that "the undisputed evidence shows that MMG took DNA's scrap deliveries yet refused to pay DNA for many of those deliveries. There is no question that DNA is legally entitled to compensation for the scrap material that MMG took and retains to this day" (ECF No. 64 at PageID.274). Specifically, DNA states that "there is no dispute that MMG willfully accepted DNA's scrap" shipments and did not pay DNA for some of those deliveries, "despite providing DNA with monthly price sheets indicating the amount MMG would pay for each shipment" (id. at PageID.275) (citing Pl.'s Ex. 6, DNA 30(b)(6) Dep. at 44, ECF No. 64-6 at PageID.338; Pl.'s Ex. 3, Henkelman Dep. at 130-35, ECF No. 64-3 at PageID.315-316). DNA further contends that there is no dispute that "MMG has either sold the scrap it took from DNA (after melting it down) or retained it with the intention to sell it" (id.) (citing Pl.'s Ex. 7, Markowitz Dep. at 65-67, 111, ECF No. 64-7 at PageID.350-352). DNA asserts that MMG's act in taking the scrap without payment "constitutes 'an act of domain wrongfully exerted over [DNA]'s personal property in denial or inconsistent with [its] rights,' Dep't of Agric. v. Appletree Mktg., LLC, 485 Mich. 1, 779 N.W.2d 237, 245 (2010), because MMG 'intentionally disposses[ed]' DNA of its scrap and/or 'intentionally . . . alter[ed]' the scrap. [Aroma Wines & Equip., Inc. v. Columbian Distrib. Servs., Inc., 497 Mich. 337, 871 N.W.2d 136, 144 (2015)]" (id.). DNA asserts that MMG converted the scrap to its "own use" by selling or actively seeking to sell the converted materials (id. at PageID.276) (citing Pl.'s Ex. 7, Markowitz Dep. at 67, ECF No. 64-7 at PageID.351).
DNA also argues that MMG incorrectly asserts that the Proposal was "an enforceable 'contract' between the parties" in an attempt to avoid liability to DNA for the scrap MMG wrongfully converted (ECF No. 64 at PageID.276). DNA argues that the Proposal was not a valid, enforceable agreement, and thus, MMG's breach of contract claims do not overcome DNA's statutory conversion claim (id.). DNA relies on several arguments to support its position: (1) that the Proposal was not an offer (id. at PageID.277-278); (2) that DNA rejected the offer in writing (id. at PageID.278); (3) the offer lapsed on October 29, 2018 by its own terms (and that MMG cannot show a fact issue that Wressell accepted the offer orally or did not accept by the deadline provided) (id. at PageID.278-279); (4) that the Proposal does not satisfy Michigan's statute of frauds under MICH. COMP. LAWS § 440.2201(1) because it is not signed and is thus not enforceable against DNA (id. at PageID.279); and last (5) the Proposal does not satisfy MICH. COMP. LAWS § 440.2201 because it does not specify a quantity and the parties never manifested mutual assent as to specific quantities (id. at PageID.280). Next, DNA asserts that MMG's "implied-in-fact" contract theory does not compel a different conclusion, because an agreement evidenced by conduct of the parties must still meet the requirement of the statute of frauds, including signature and quantity term requirements, and the parties' conduct does not evidence mutual assent to a quantity term (id. at PageID.281-282) (quoting Precise-Mktg. Corp. v. Simpson Paper Co., No. 95 CIV 5629, 1999 WL 259518, at *10 (S.D.N.Y. Apr. 30, 1999)).
In response, MMG predominantly argues that because there was a contract based on the Proposal, which included specific quantity terms, or the parties' conduct, their statutory conversion and unjust enrichment claims must fail under the economic-loss doctrine. Specifically, MMG contends that "if this was simply an unjust enrichment or conversion case, then DNA would want 'market value' of the goods" (ECF No. 71 at PageID. 2339). According to MMG, the fact that DNA insists on being paid on the Proposal indicates that the Proposal is a contract (see id.). Further, MMG asserts that the UCC's merchant exception applies and does not require a signed document under the facts in this case (see ECF No. 71 at PageID.2337).
Under the economic-loss doctrine, MMG argues that "DNA has identified no duty [on MMG] to return any of the alleged unpaid for dross. DNA asked to be paid for goods delivered—that's a contract. It proves there is no separate and distinct duty aside from the payment DNA expected. With a separate and distinct duty, the conversion claim fails" (ECF No. 71 at PageID. 2340). MMG also relies on Garras v. Bekiares, 315 Mich. 141, 23 N.W.2d 239, 241-242 (1946), stating that the Garras court "observed that the defendant 'was not required to deliver to plaintiff the specific or identical moneys which he collected for merchandise sold or on accounts receivable, but was only required to pay plaintiff the invoiced price for merchandise delivered to him' " (id. at PageID.2341) (citing Garras, 23 N.W.2d at 241). Further, in its notice of supplemental authority, MMG cites Alisa A. Peskin-Shepherd, PLLC v. Blume, 509 Mich. 1046, 974 N.W.2d 835, 836-37 (2022), for the proposition that a conversion claim cannot lie where it is not based on a claim to specific money (ECF No. 79 at PageID. 2471).
The Court determines that MMG's arguments have merit and are outcome-determinative.
Under Michigan law, a statutory conversion claim exists when a defendant "convert[s] [the plaintiff's] property to the [defendant's] own use." MICH. COMP. LAWS § 600.2919a(1)(a). "The Michigan conversion statute does not define the word 'converting' or itself give elements for a [statutory] conversion claim." In re Dantone, 477 B.R. 28, 38 (B.A.P. 6th Cir. 2012) (citation omitted). Accordingly, the meaning of "convert" and the elements of the claim "are supplied by Michigan common law." Id. (citation omitted). The definition of "conversion" under Michigan common law includes "any distinct act of [dominion] wrongfully exerted over another's personal property in denial or inconsistent with the rights therein." Dep't of Agric., 779 N.W.2d at 245 (quotation marks and citation omitted). This "broad[ ]" standard may be met in "many different ways," including, as relevant here, where the defendant "intentionally dispossessed another of a chattel" or "intentionally . . . altered a chattel in the defendant's possession." Aroma Wines, 871 N.W.2d at 144 (cleaned up) (explaining that Michigan has adopted the Restatement of Torts with respect to the meaning of conversion, wherein these examples are provided). "[A] demand for return of the property is not necessary if a conversion has occurred." Tyson v. Sterling Rental, Inc., No. 13-cv-13490, 2017 WL 11368343, at *3 (E.D. Mich. Apr. 10, 2017) (quoting Trail Clinic, P.C. v. Bloch, 114 Mich.App. 700, 319 N.W.2d 638, 641 (1982)).
The term "own use" broadly means "some purpose personal to the defendant's interests, even if that purpose is not the object's ordinarily intended purpose." Aroma Wines & Equip., 871 N.W.2d at 148. Such purpose can include selling the plaintiff's goods or keeping the plaintiff's property as "leverage" in negotiations. Id. at 148-49. Conversion "is viewed as an intentional tort in the sense that the converter's actions are wilful [sic]"; however, the tort "can be committed unwittingly." Foremost Ins. Co. v. Allstate Ins. Co., 439 Mich. 378, 486 N.W.2d 600, 606 (1992). "No intent to violate the property rights of another, or knowledge that another's property rights are being violated, is required." In re Dantone, 477 B.R. at 38 (citation omitted). "Neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are of the gist of the action." Id. (citation omitted).
The economic-loss doctrine "prohibits a party to a contract from bringing tort claims that are factually indistinguishable from breach of contract claims." Llewellyn-Jones v. Metro Prop. Grp., LLC, 22 F. Supp. 3d 760, 778 (E.D. Mich. 2014) (citing Detroit Edison Co. v. NABCO, Inc., 35 F.3d 236, 240 (6th Cir. 1994)). "A conversion claim cannot be brought where the property right alleged to have been converted arises entirely from the plaintiff's contractual rights." Id. (cleaned up). The rationale for the distinction is that "a tort duty of care is to protect society's interest in freedom from harm," whereas a contractual duty "arises from society's interest in the performance of promises." Neibarger v. Universal Cooperatives, Inc., 439 Mich. 512, 486 N.W.2d 612, 615 (1992) (citation and quotation omitted).
First, DNA is not able to assert a claim for statutory conversion as a matter of law because it willfully provided the scrap materials to MMG, and thus, DNA cannot establish that a "conversion" or "wrongful" act of dominion was "exerted over [DNA]'s personal property in denial or inconsistent with the rights therein." Dep't of Agric., 779 N.W.2d at 245. This conclusion is supported by the record, including DNA's own factual representations and arguments, to wit:
• DNA testified that only Mike Lewis or Jerry Zhang "can authorize the release of scrap" and that Lewis "authorize[d] the release of scrap to MMG" (Def's Ex. O, DNA 30(b)(6) Dep. at 41-43, ECF No. 67-17 at PageID.1402-1407).
• DNA never made a demand for the return of scrap, because DNA "did not need that scrap back" (id. at PageID.1407).
Thus, MMG did not "intentionally dispossess" DNA of its scrap or "intentionally . . . alter" the scrap—DNA willfully offered and MMG willfully accepted the scrap aluminum—MMG simply did not pay for the scrap (ECF No. 64 at PageID.276) (citing Aroma Wines & Equip., 871 N.W.2d at 144). This Court agrees with MMG that DNA willfully offered and MMG willfully accepted the scrap, thus MMG was rightfully in possession of the scrap (ECF No. 64 at PageID.276) (citing Aroma Wines & Equip., 871 N.W.2d at 144); see Tyson, 2017 WL 11368343, at *3 (citing Trail Clinic, P.C. v. Bloch, 114 Mich.App. 700, 319 N.W.2d 638, 641 (1982)) ("A demand is unnecessary where the act of the defendant amounts to a conversion regardless of whether a demand is made."). Here, a consensual transfer does not meet the definition of conversion under Michigan law. See also In re B & P Baird Holdings, Inc., 759 F. App'x 468, 475 (6th Cir. 2019) ("This is important because as a general matter, consent is a defense to an action alleging a tort.") (citation omitted).
Second, DNA concedes that it did not demand the scrap aluminum back from MMG, and states that DNA does not "want [its] scrap back" (see, e.g., ECF No. 81 at PageID.2480). DNA states only that it made repeated requests for payment from MMG for the scrap (id.); Hoffenblum v. Hoffenblum, 308 Mich.App. 102, 863 N.W.2d 352, 359 (2014) ("Absent a demand, the plaintiff could not establish conversion and the defendants were not liable for the value of the bottles.") (citing Hank v. Lamb, 310 Mich. 81, 16 N.W.2d 671 (1944)).
Last, even if DNA could establish the elements of statutory conversion, as MMG properly argues, DNA's own factual representations and arguments support that DNA's claim is barred by the economic-loss doctrine. DNA does not want the scrap back, because it seeks payment for the scrap materials. Such payment is inevitably based on either the express contract that exists in the Proposal, or an implied-in-fact contract based on the terms of the Proposal or on the basis of the monthly pricing sheets provided from MMG to DNA. Thus, DNA's claim arises from MMG's contractual duty and DNA's interest in MMG's performance of its promise to pay DNA for the material it received.
For the above reasons, the Court determines that the evidence, even viewed in the light most favorable to DNA, provides an insufficient basis for a reasonable jury to conclude that DNA is entitled to judgment on its statutory conversion claim. Accordingly, the Court denies DNA's motion for summary judgment as to its statutory conversion claim. DNA's statutory conversion claim is properly dismissed.
2. Unjust Enrichment
In support of summary judgment in its favor, DNA asserts that "the undisputed evidence establishes both elements of DNA's unjust enrichment claim, namely that (1) MMG has received and retained a benefit from DNA in over 2 million pounds of scrap aluminum, and (2) it would be inequitable to allow MMG to retain the scrap aluminum because the materials value over $1.4 million, which "far exceeds any value that MMG provided to DNA for taking the Scrap Aluminum—$0" (id. at PageID.287).
In response, MMG argues that DNA's unjust enrichment claim also fails as a matter of law because an express contract existed between the parties (ECF No. 71 at PageID.2342) (citing Belle Isle Grill Corp. v. City of Detroit, 256 Mich.App. 463, 666 N.W.2d 271, 280 (2003)) ("a contract will be implied only if there is no express contract covering the same subject matter."). MMG asserts that "DNA's consistent testimony and actions demonstrate that a contract, both oral and written, existed between them. At worst, DNA's delivery of metal and expectation to be paid based on pricing sheets (which pricing sheets DNA admits came from the Proposal) reveals an intent for a purchase and sale of goods. That's a contract" (id.) (citing Skyline Steel Corp. v. A.J. Dupuis Co., 648 F. Supp. 360, 365 (E.D. Mich. 1986)).
The Court determines that MMG's argument has merit and is outcome-determinative.
"Under Michigan law, unjust enrichment is defined as the unjust retention of money or benefits which in justice and equity belong to another." Perlin v. Time Inc., 237 F. Supp. 3d 623, 643 (E.D. Mich. 2017) (internal quotation marks and citation omitted). "A plaintiff alleging unjust enrichment must establish two elements: (1) the receipt of a benefit by defendant from plaintiff, and (2) an inequity resulting to plaintiff because of the retention of the benefit by defendant." Id.
MMG has also asserted a Counterclaim of quantum meruit, which requires proof of the same elements. Morris Pumps v. Centerline Piping, Inc., 273 Mich.App. 187, 729 N.W.2d 898, 904 (2006).
Here, as above, under the economic-loss doctrine, "a contract will be implied only if there is no express contract covering the same subject matter." Belle Isle Grill Corp., 666 N.W.2d at 280. DNA's consistent testimony and actions demonstrate that a contract, both oral and written, existed between DNA and MMG. Therefore, DNA is not able to recover on its equitable quasi-contract claims, and DNA's unjust enrichment claim fails as a matter of law.
IV. CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Plaintiff's Motion for Summary Judgment (ECF No. 63) is DENIED; Plaintiff's Count I (statutory conversion) and Count II (unjust enrichment) are DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that Defendant's Motion for Summary Judgment (ECF No. 67) is GRANTED in part and DENIED in part; Specifically, the Court grants partial summary judgment as to the existence of an express and implied-in-fact contract under Counterclaim I (breach of an express contract) and Counterclaim II (breach of an implied-in-fact contract); and denies the motion as to whether DNA breached the contract.
IT IS FURTHER ORDERED that Defendant's Counterclaim II (unjust enrichment) and Counterclaim III (quantum meruit) are DISMISSED WITH PREJUDICE for the reasons set forth herein.