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R.E. Phelon Co., Inc. v. Clarion Sintered Metals

July 28, 2006

R.E. PHELON COMPANY, INC., PLAINTIFF,
v.
CLARION SINTERED METALS, INC., DEFENDANT.



The opinion of the court was delivered by: Margaret B. Seymour United States District Judge

ORDER AND OPINION

Plaintiff R.E. Phelon ("Phelon") brings this action against Defendant Clarion Sintered Metals ("Clarion") seeking interpretation of its liability under a series of agreements between both parties. This case is before the court on Clarion's motion for partial summary judgment filed on September 29, 2005. Phelon filed a response on October 24, 2005, to which Clarion filed a reply on October 31, 2005. Also before the court is Phelon's motion for summary judgment filed on September 29, 2005. Clarion filed a response on October 24, 2005, to which Phelon filed a reply on November 03, 2005. The court held a hearing on the motions on May 1, 2006. The court has considered the motions, memoranda, exhibits, affidavits, and applicable case law. For the reasons set forth below, the court grants Clarion's motion for partial summary judgment. The court also grants, in part, and denies in part, Phelon's motion for summary judgment.

I. FACTS

Phelon manufactures ignition systems for the lawn and garden industry. Clarion's Motion for Partial Summary Judgment, 1. Clarion makes powdered metal products for companies that manufacture automotive and industrial products. Phelon's Motion for Summary Judgment, 2.

Phelon has purchased Clarion products for several years. Id. This case centers on the interpretation of three pieces of correspondence between both parties detailing the sale of two products, inertia rings and counterweights, from Clarion to Phelon.

On December 22, 2000, a Phelon representative sent a representative of Clarion a letter detailing an arrangement to buy inertia rings and counterweights from Clarion for use in Phelon's ignition systems. Plainitff's Motion for Summary Judgment, 2. Clarion contends this letter is a contract requiring Phelon to purchase from Clarion eighty to ninety percent (80% to 90%) of its inertia ring requirements through June 30, 2004. Clarion's Motion for Partial Summary Judgment, 9. Clarion also contends that the letter bound Phelon to purchase forty percent (40 %) of its required counterweights through the end of fiscal year 2000 and eighty to ninety percent (80% to 90%) thereafter until June 30, 2004. Id.

At some point, Phelon began receiving pressure from a purchaser of its assembled ignition systems to lower its prices. Clarion's Motion for Partial Summary Judgment, Ex. H, 4. To that end, Phelon sought lower prices for the components of the ignition systems from suppliers including Clarion. Id. at 6-7. Negotiations to lower the price of components ensued between Phelon and Clarion. Id. On July 16, 2003, a letter was exchanged between representatives of both parties proposing a price discount for the inertia ring if Phelon would purchase one hundred percent of its requirements for the part from Clarion. Phelon's Motion for Summary Judgment, 2. Clarion contends that this letter represents a contract binding Phelon to purchase inertia rings at the price and quantity requirements detailed therein. Clarion's Motion for Partial Summary Judgment, 9.

Clarion also alleges that a new deal for the counterweight was brokered on July 16, 2003 during a conversation between representatives of both parties. Clarion's Response to Phelon's Motion for Summary Judgment, 12. Clarion argues that it orally contracted with Phelon to produce one hundred percent of Phelon's required counterweight business as additional compensation for the renegotiated inertia ring price. Id. This alleged contract is not included in the July 16, 2003 letter but was memorialized in a facsimile correspondence sent from Clarion to Phelon on the same date. Id. at 14.

On February 2, 2004, Clarion received another letter via facsimile from a Phelon representative. In this letter, Phelon stated that it intended to honor the terms of the December 22, 2000 letter but believed the July 16, 2003 to be "merely an agreement that if certain quantity volumes are met then pricing will be adjusted accordingly . . . ." Phelon's Motion for Summary Judgment, Ex. D, 1-2. Accordingly, Phelon stated that the July 16, 2003 letter was not a contract and that Phelon was not bound by the letter's terms. On February 23, 2004, Clarion sent a letter to Phelon indicating that Clarion considered both the December 22, 2000 letter and the July 16, 2003 letter to be contracts requiring purchases of inertia rings and counterweights through 2006 at the required volumes outlined in each piece of correspondence. Id. at Ex. E., 1-2.

On March 9, 2004, Phelon filed this action in state court for declaratory judgment asking the court to ascertain the respective obligations of the parties under the agreements outlined above. Complaint, 3. On April 9, 2004, Clarion removed the case to federal court and answered the complaint. Clarion responded to the complaint by arguing that the December 22, 2000 and July 16, 2003 letters were contracts obligating Phelon to purchase inertia rings and counterweights from Clarion. Answer, 2-3. Clarion also alleged seven counterclaims.

First, Clarion alleged that Phelon breached the December 22, 2000 contract by purchasing less than eighty percent of its requirements for the counterweight during the period beginning at the start of the 2001-02 fiscal year and ending June 30, 2004. Answer, 3.

Second, Clarion counterclaimed that Phelon breached the July 16, 2003 Inertia Ring Contract by purchasing less than one hundred percent of its requirements for the inertia ring during the contract period. Id. at 4.

Third, Clarion counterclaimed that Phelon breached a July 16, 2003 counterweight contract. Clarion argues that this contract obligated Phelon to purchase one hundred percent of its required counterweights from August 1, 2003 through July 31, 2006. Id. at 6. Clarion claims that Phelon breached this contract by purchasing less than one hundred percent of its required counterweights from Phelon during this period. Id.

Fourth, Clarion claims that Phelon made a promise in the December 22, 2000 document to purchase certain quantities of inertia rings. Id. at 7. Clarion alleges that it relied on that promise and incurred costs stemming from that reliance. Clarion seeks to have that promise enforced by invoking promissory estoppel. Id.

In its fifth, sixth, and seventh counterclaims, Clarion argues promissory estoppel with regard to the counterweight agreement in the December 22, 2000 letter, the inertia ring agreement in the July 16, 2003 fax, and the counterweight agreement in the July 16, 2003 letter. Id. at 8-10.

Clarion has moved for partial summary judgment as to its first and second counterclaims. Phelon has moved for summary judgment on all of its claims as well as Clarion's counterclaims.

II. LAW/DISCUSSION

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be rendered when a moving party has shown "[that] 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 and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The court must determine "whether the evidence . . . is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). Summary judgment should be granted in those cases where it is perfectly clear that there remains no genuine dispute as to material fact and inquiry into the facts is unnecessary to clarify the application of the law. McKinney v. Bd. of Trustees of Mayland Community College, 955 F.2d 924, 928 (4th Cir. 1992). In deciding a motion for summary judgment, "the judge's function is not [herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.

The party moving for summary judgment has the burden of demonstrating that there is an absence of sufficient evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). The nonmoving party must establish that there is a genuine factual dispute about a material fact. See Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 248; Celotex Corp., 477 U.S. at 324.

An issue of fact is "material" only if establishment of the fact might affect the outcome of the lawsuit under the governing substantive law. Anderson, 477 U.S. at 248. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp., 477 U.S. at 323. Production of a mere scintilla of evidence in support of an essential element will not prevent the granting of a properly supported motion for summary judgment. Anderson, 477 U.S. at 251.

In Rossignol v. Voorhaar, the Fourth Circuit summarized the court's obligation when faced with cross motions for summary judgment:

When faced with cross-motions for summary judgment, the court must review each motion separately on its own merits "to determine whether either of the parties deserves judgment as a matter of law." Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 n. 4 (1st Cir.1997) (citation and internal punctuation omitted). When considering each individual motion, the court must take care to "resolve all factual disputes and any competing, rational inferences in the light most favorable" to the party opposing that motion. Wightman v. Springfield Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir.1996). 316 F.3d 516, 523 (4th Cir. 2003). Accordingly, the court has reviewed each party's motion independently and resolved all factual disputes in the favor of the non-moving party.

A. Clarion's Motion for Partial Summary Judgment

Clarion moves for partial summary judgment as to its first and second counterclaims. In the first counterclaim, Clarion alleges that its correspondence with Phelon on December 22, 2000 formed a contract binding Phelon to purchase from Clarion specific requirements of counterweights and inertia rings from the start of the 2001-02 fiscal year to the end of June 30, 2004. Clarion argues in its second counterclaim that the July 16, 2003 letter represents a contract binding Phelon to purchase inertia rings at price and quantities detailed therein. Clarion avers that Phelon breached both contracts by purchasing less than the mandated percentages of Phelon's inertia ring and counterweight requirements.

The initial question is whether the December 22, 2000 and July 16, 2003 letters comprise enforceable contracts. A contract is an obligation which arises from actual agreement of the parties manifested by words, oral or written, or by conduct. Regions Bank v. Schmauch, 582 S.E.2d 432, 439 (S.C. App. 2003) (additional citations omitted). The elements of a contract are offer, acceptance, and valuable consideration. Sauner v. Pub. Serv. Auth. of South Carolina, 581 S.E.2d 161, 166 (S.C. 2003). "In order for there to be a binding contract between parties, there must be a mutual manifestation of assent to the terms [of the contract]." Edens v. Laurel Hill, Inc., 247 S.E.2d 434, 436 (S.C. 1978). In order for a contract to be valid and enforceable, the parties must have a meeting of the minds as to all essential and material terms of the agreement. Davis v. Greenwood Sch. Dist. 50, 620 S.E.2d 65, 67 (S.C. 2005). These essential terms include "price, time and place." Edens, 247 S.E.2d at 436. "Where a contract does not fix price, there must be a definite method for ascertaining it." Id.

If evidence before the court is conflicting or raises more than one reasonable inference as to the formation of a contract, the issue should be submitted to a jury. Hendricks v. Clemson University, 578 S.E.2d 711, 716 (S.C. 2003). However, "[when the] material facts concerning the formation of an alleged contract are not in dispute, the issue of contract vel non is a question of law." W.E. Gilbert & Associates v. South Carolina Nat. Bank, 330 S.E.2d 307, 309 (S.C. App. 1985) (quoting Valjar, Inc. v. Maritime Terminals, Inc., 265 S.E.2d 734, 736 (Va. 1980)). Further, "[a]n action to construe a written contract is an action at law." S. Atl. Fin. Servs., Inc. v. Middleton, 562 S.E.2d 482, 484 (S.C. Ct. App. 2002). Whether a contract's language is ambiguous is a question of law. South Carolina Dep't of Natural Res. v. Town of McClellanville, 550 S.E.2d 299, 302-03 (S.C. 2001). "[W]hen a contract is clear and unambiguous, the construction thereof is a question of law for the court." Bowen v. Bowen, 547 S.E.2d 877, 880 (S.C. Ct. App. 2001).

Under South Carolina law, the formation of a contract involving the sale of goods*fn1 is governed by the Uniform Commercial Code ("U.C.C."). See S.C. Code Ann. § 36-2-102 (2005). Section 36-2-204 provides that:

(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably ...


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