BRIEF ON APPEAL - APPELLANT DHL EXPRESS

141 Pages·2014·3.65 MB·English

IN THE SUPREME COURT
Appeal from the Court of Appeals
Judges Kirsten Frank Kelly, Douglas B. Shapiro, and Amy Ronayne Krause
THE SERVICE SOURCE, INC. and THE
SERVICE SOURCE FRANCHISE, LLC,
Plaintiffs-Appellees,
Docket No. 147860
v.
DHL EXPRESS (USA), INC.,
Defendant-Appellant.
BRIEF ON APPEAL - APPELLANT DHL EXPRESS (USA), INC.
ORAL ARGUMENT REQUESTED
Attorneys for Defendant-Appellant
Christopher S. Ruhland (pro hac vice)
Andrew S. Wong (pro hac vice)
Amy L. Rudd (pro hac vice)
Dechert LLP
633 West 5th Street, 37th Floor
Los Angeles, CA 90071
Tel: [phone]
Noreen L. Slank (P31964)
Collins, Einhorn, Farrell P.C.
4000 Town Center, Suite 909
Southfield, MI 48075
Tel: [phone]
OCEIV
JUL 1 8 2014
Q,
LARRY S. ROYSTER
suPREme GG
TABLE OF CONTENTS
Page
INDEX OF AUTHORITIES (cid:9) iii
INDEX OF EXHIBITS (cid:9) vii
STATEMENT REGARDING JURISDICTION (cid:9) viii
STATEMENT OF QUESTIONS PRESENTED (cid:9) ix
INTRODUCTION AND SUMMARY OF ARGUMENT (cid:9) 1
STATEMENT OF FACTS (cid:9) 3
I.(cid:9) The Parties (cid:9) 3
IL(cid:9) The Contracts Between DHL And Plaintiffs (cid:9) 3
III. DHL's Cessation Of U.S. Domestic Shipping Services (cid:9) 5
IV. Plaintiffs' Conduct Following The November 10 Announcement (cid:9) 6
V. TSS Fails To Pay For Shipments, And DHL Terminates The TSS Reseller
Agreement (cid:9) 7
VI. The Complaint And The Counterclaim (cid:9) 7
VII. The Trial Court Grants Plaintiffs' Motion For Partial Summary Disposition (cid:9) 8
VIII. The Trial (cid:9) 9
IX. The Court Of Appeals Decision (cid:9) 10
STANDARD OF REVIEW (cid:9) 12
ARGUMENT (cid:9) 13
I.(cid:9) The Contracts Are Not Requirements Contracts (cid:9) 13
A.(cid:9) A Non-Exclusive Contract For The Sale Of Services Is Not A
Requirements Contract (cid:9) 13
1. The Contracts Do Not Involve A Sale Of Goods (cid:9) .13
2. The Contracts Are Not Exclusive (cid:9) ..15
B.(cid:9) If Plaintiffs Had Argued That These Were Requirements Contracts, That
Would Have Created An Issue Of Fact Requiring A Trial (cid:9) 16
II.(cid:9) Plaintiffs Should Not Have Been Granted Summary Disposition On Liability (cid:9) 18
A.(cid:9) Summary Disposition Should Have Been Denied Because Only DHL
Advanced A Reasonable Interpretation Of The Contracts (cid:9) 18
TABLE OF CONTENTS
(continued)
Page
1. DHL's Interpretation Gives Plain And Reasonable Meaning To The
Contracts (cid:9) 19
2. The Trial Court's Interpretation Excises Provisions From The
Contracts (cid:9) 20
3. The Court Of Appeals Rewrote The Contracts (cid:9) .21
B. Even If DHL's Interpretation Was Not The Only Reasonable
Interpretation, Summary Disposition Should Have Been Denied (cid:9) 22
C. If Provisions Of The Reseller Agreements Are In Conflict, Summary
Disposition Should Have Been Denied (cid:9) 24
III.(cid:9) DHL Is Not Responsible For Profits Lost Before Breach Or After Contract
Expiration (cid:9) 25
A. Damages Should Not Have Been Awarded For The Period Before
DHL's Alleged Breach (cid:9) 25
B. TSS Was Not Entitled To Damages For Loss Suffered After
March 5, 2009 (cid:9) 26
1. TSS Was Only Entitled To The Benefit Of The Bargain, Which
Included Termination After Non-Payment (cid:9) 27
2. The First Material Breach Rule Is Inapplicable (cid:9) .30
CONCLUSION AND RELIEF REQUESTED (cid:9) 31
INDEX OF AUTHORITIES
CASES(cid:9) Page
Acemco, Inc v Olympic Steel Lafayette, Inc,
unpublished opinion per curiam of the Court of Appeals,
issued October 27, 2005 (Case No. 256638) (cid:9) 15
Aleris Aluminum Canada, LP v Valeo, Inc,
718 F Supp 2d 825 (ED Mich 2010) (cid:9) 17
Alyeska Pipeline Sery Co v
645 P2d 767 (Alas 1982) (cid:9) 16
Baxter Healthcare Corp v Fresenius Med Care Holdings, Inc,
unpublished opinion of the United States District Court for the Northern
District of California, issued February 19, 2010 (Case No. C 07-1359 PJH) (cid:9) 14
Benedict Mfg Co v Aeroquip Corp,
unpublished opinion per curiam of the Court of Appeals,
issued July 8, 2004 (Case No. 242563) (cid:9) 15
Bonner v City of Brighton,
495 Mich 209, slip op (2014) (cid:9) 23
Dailey Co v Clark Can Co,
128 Mich 591, 87 NW 761 (1901) (cid:9) 14
D 'Avanzo v Wise & Marsac, PC
223 Mich App 314; 565 NW2d 915 (1997) (cid:9) 23
Eberspaecher N Am, Inc v Nelson Global Prods,
unpublished opinion and order of the United States District Court for the
Eastern District of Michigan, issued September 23, 2012 (Case No. 12-11045) (cid:9) 17
Ehlert v Wiser,
unpublished opinion per curiam of the Court of Appeals,
issued December 11, 2003 (Case No. 239777) (cid:9) 12
E. G. Dailey Co v Clark Can Co,
128 Mich 591, 594, 87 NW 761 (1901) (cid:9) 14
Ferguson v Pioneer State Mut Ins Co,
273 Mich App 47; 731 NW2d 94 (2007) (cid:9) 27
Foamade Indus v Visteon Corp,
unpublished opinion of the Court of Appeals,
issued March 4, 2008 (Case No. 271949) (cid:9) 16
INDEX OF AUTHORITIES
(continued)
Page
GB "Boots" Smith Corp v Cobb,
860 So 2d 774 (Miss 2003) (cid:9) 16
Harvey v Fearleses Farris Wholesale, Inc,
589 F2d 451 (CA 9, 1979) (cid:9) 16
Hickey v 0 'Brien,
123 Mich 611, 82 N.W. 241 (1900) (cid:9) 14
J & B Sausage Co v Dep 't of Mgt & Budget,
unpublished opinion per curiam of the Court of Appeals,
issued January 4, 2007 (Case No. 259230) (cid:9) 14
Kewin v Mass Mut Life Ins Co,
409 Mich 401; 295 NW2d 50 (1980) (cid:9) 29
Kirkwood-Easton Tire Co v St Louis Cnty,
568 SW2d 267 (Mo 1978) (cid:9) 16
Klapp v United Insurance Group Agency, Inc,
468 Mich 459; 663 NW2d 447 (2003) (cid:9) 12, 21, 24
Knox v Knox,
337 Mich 109; 59 NW2d 108 (1953) (cid:9) 21
Lorenz Supply Co v Am Standard, Inc,
419 Mich 610; 358 NW2d 845 (1984) (cid:9) 15
McDonald v Farm Bureau Ins Co,
480 Mich 191; 747 NW2d 811 (2008) (cid:9) 21
Merritt-Campbell, Inc v RxP Prods, Inc,
164 F3d 957 (CA 5, 1999) (cid:9) 16
Miller-Davis Co v Ahrens Const, Inc,
495 Mich 161;(cid:9) NW2d(cid:9) (2014) (cid:9) 25
Monarch Photo, Inc v Qualex, Inc,
935 F Supp 1028 (DND 1996) (cid:9) 14
ON Jonas Co, Inc v Badische Corp,
706 F2d 1161 (CA 11, 1983) (cid:9) 16
Orchard Grp, Inc v Konica Med Corp,
135 F3d 421 (CA 6, 1998) (cid:9) 16
-iv-
INDEX OF AUTHORITIES
(continued)
Page
Patel v Wyandotte Hosp & Med Ctr, Inc,
unpublished opinion per curiam of the Court of Appeals,
issued April 29, 2003 (Case No. 230189) (cid:9) 27
Plastech Engineered Prods v Grand Haven Plastics, Inc,
unpublished opinion per curiam of the Court of Appeals,
issued March 31, 2005 (Case No. 252532) (cid:9) 16
PMC Corp v Houston Wire & Cable Co,
147 NH 685; 797 A2d 125 (NH 2002) (cid:9) 16
Roll-Ice Int'l LLC v V-Formation, Inc,
unpublished opinion per curiam of the Court of Appeals,
issued December 19, 2006 (Case No. 264806) (cid:9) 27
Rory v Continental Ins Co,
473 Mich 457; 703 NW2d 23 (2005) (cid:9) 18-19, 23
Royal Property Group, LLC v. Prime Insurance Syndicate,
267 Mich App 708; 706 NW2d 426 (Mich App 2005) (cid:9) 21-22
Schnepf v Thomas L McNamera, Inc,
354 Mich 393; 93 NW2d 230 (1958) (cid:9) 30
United Servs Auto Ass 'n v Schlang,
111 Nev. 486; 894 P2d 967 (Nev 1995) (cid:9) 16
Westpoint Stevens, Inc v Panda-Rosemary Corp,
unpublished opinion of the Superior Court of North Carolina,
issued December 16, 1999 (Case No. 99-CVS-9818) (cid:9) 14
Wilsonville Concrete Prods v Todd Bldg Ca,
281 Or 345; 574 P2d 1112 (Or 1978) (cid:9) 16
Zahn v Kroger Co of Mich,
483 Mich 34; 764 NW2d 207 (2009) (cid:9) 22
OTHER AUTHORITIES
2A Anderson UCC § 2-306:3 (3d ed) (cid:9) 14-15
17B CJS Contracts § 754 (West 2013) (cid:9) 31
2-6 Corbin on Contracts § 6.5 (cid:9) 15
11-15 Corbin on Contracts § 55.3 (cid:9) 25
-v-
INDEX OF AUTHORITIES
(continued)
Page
Farnsworth on Contracts § 2.15 (cid:9) 15
1 White, Summers, & Hillman., UCC § 4:20 (6th ed) (cid:9) 15, 17
3 Williston on Contracts § 7:12 (4th ed.) (cid:9) 16
24 Williston on Contracts § 64:1 (4th ed) (cid:9) 27
CONST 1963, art. 6, § 4 (cid:9) viii
MCR 2.116(1)(2) (cid:9) 20
MCR 2.116(C)(10) (cid:9) 8, 23
MCR 7.301(A)(2) (cid:9) viii
M Civ JI 142.32 (cid:9) 27
-vi-
INDEX OF EXHIBITS
Tab A(cid:9) Ehlert v Wiser, unpublished opinion per curiam of the Court of
Appeals issued December 11, 2003 (Case No. 239777)
Tab B(cid:9) J & B Sausage Co v Dep't of Mgt & Budget, unpublished opinion per
curiam of the Court of Appeals issued January 4, 2007 (Case No.
259230)
Tab C Westpoint Stevens, Inc v Panda-Rosemary Corp, unpublished opinion
of the Superior Court of North Carolina, issued December 16, 1999
(Case No. 99-CVS-9818)
Tab D Baxter Healthcare Corp v Fresenius Med Care Holdings, Inc,
unpublished opinion of the United States District Court for the
Northern District of California, issued February 19, 2010 (Case No. C
07-1359 P.M)
Tab E Acemco, Inc v Olympic Steel Lafayette, Inc, unpublished opinion per
curiam of the Court of Appeals, issued October 27, 2005 (Case No.
256638)
Tab F(cid:9) Benedict Mfg Co v Aeroquip Corp, unpublished opinion per curiam of
the Court of Appeals, issued July 8, 2004 (Case No. 242563)
Tab G(cid:9) Plastech Engineered Prods v Grand Haven Plastics, Inc, unpublished
opinion per curiam of the Court of Appeals, issued March 31, 2005
(Case No. 252532)
Tab H (cid:9) Foamade Indus v Visteon Corp, unpublished opinion of the Court of
Appeals, issued March 4, 2008 (Case No. 271949)
Tab I (cid:9) Eberspaecher N Am, Inc v Nelson Global Prods, unpublished opinion
and order of the United States District Court for the Eastern District of
Michigan, issued September 23, 2012 (Case No, 12-11045)
Tab J (cid:9) Roll-Ice Int'l LLC v V-Formation, Inc, unpublished opinion per curiam
of the Court of Appeals, issued December 19, 2006 (Case No. 264806)
Tab K (cid:9) Patel v Wyandotte Hasp & Med Ctr, Inc, unpublished opinion per
curiam of the Court of Appeals, issued April 29, 2003 (Case No.
230189)
-vii-
STATEMENT REGARDING JURISDICTION
This Court has jurisdiction over appeals from decisions of the Court of Appeals. Coast
1963, art 6, § 4; MCR 7.301(A)(2). Defendant-Appellant DHL Express (USA), Inc. ("DHL")
appeals from the ruling of the Court of Appeals. Appellant's Appendix ("App'x") at 31a-39a
(July 11, 2013 Court of Appeals Opinion). That ruling affirmed the trial court's grant of partial
summary disposition on liability to Plaintiffs-Appellees The Service Source, Inc. ("TSS") and
The Service Source Franchise, LLC ("TSSF"). Id.; see also App'x at 23a-24a (Oct. 12, 2009
Order Granting Partial Summary Disposition). The Court of Appeals' ruling also affirmed in
part the October 20, 2010 amended judgment and order denying a motion for a new trial, signed
by Lenawee Circuit Judge Margaret M.S. Noe. App'x at 31a-39a (Court of Appeals Opinion);
see also App'x at 28a-30a (Oct. 20, 2010 Order Amending July 12, 2010 Judgment and Order
and Denying Motion for New Trial). The Court granted DFIL's application for leave to appeal
on May 23, 2014.
STATEMENT OF QUESTIONS PRESENTED
1. A requirements contract is an agreement in which a supplier agrees to sell — and the
buyer agrees to buy — all of the goods described in the contract that the buyer
requires. The buyer agrees to buy these goods exclusively from the supplier. DHL
entered into non-exclusive discount contracts with Plaintiffs, in which DHL agreed
to sell certain services (not goods) that DHL provided to its general customer base.
DHL did not agree to fulfill all of Plaintiffs' requirements. Nor did Plaintiffs agree
to purchase anything from DHL, much less fulfill all of their requirements from
DHL. Are the contracts between DHL and Plaintiffs requirements contracts?
The trial court did not answer the question.
The Court of Appeals did not answer the question.
Plaintiffs have not answered the question.
DHL submits that the answer is "no."
2, The contracts provided that DHL would pick up and deliver packages only to those
locations "regularly" serviced by DHL. As of January 31, 2009, MIL ceased
picking up and delivering packages to points solely within the United States for all
customers. Plaintiffs claim that the contracts required DHL to provide domestic
shipping services to Plaintiffs even though DHL no longer offered those services to
anyone else. The trial court granted the Plaintiffs' motion for summary disposition
as to liability on their breach of contract claim, ignoring the contractual provision
that limited DHL's service obligations. The Court of Appeals agreed that DHL's
interpretation of the contracts has literal, textual support, but it nevertheless
affirmed summary disposition. Was summary disposition appropriately granted to
Plaintiffs on liability?
The trial court answered the question "yes."
The Court of Appeals answered the question "yes."
Plaintiffs contend the answer is "yes."
DHL submits that the answer is "no."
3. The trial court awarded plaintiff TSS lost profits damages for the period of January
1, 2009 to December 31, 2012 (approximately when the contracts would have
ended if not terminated sooner). The Court of Appeals affirmed. However, DHL's
alleged breach did not occur until January 31, 2009. In addition, TSS admittedly
breached the contract by not paying for shipping services rendered by DHL. DHL
properly terminated the contract for non-payment as of. March 5, 2009, thus ending
DHL's liability for lost profits as of that date. Was the trial court required to limit