Johnson Controls Inc v. Atlantic Automotive Components LLC

STATE OF MICHIGAN

COURT OF APPEALS

JOHNSON CONTROLS, INC., and JCIM, LLC, UNPUBLISHED
October 13, 2015
Plaintiffs/Counter-Defendants-
Appellees,

v No. 321172
Wayne Circuit Court
ATLANTIC AUTOMOTIVE COMPONENTS, LC No. 09-014595-CZ
LLC,

Defendant/Counter-Plaintiff-
Appellant.

Before: BORRELLO, P.J., and JANSEN and OWENS, JJ.

PER CURIAM.

Defendant appeals as of right from the trial court’s final judgment in favor of plaintiffs
with respect to plaintiffs’ claims of claim and delivery and breach of contract and awarding
plaintiffs damages in the amount of $61,648 and prejudgment interest in the amount of $6,138.
The trial court also found no cause of action with respect to plaintiffs’ claims of negligent
misrepresentation, innocent misrepresentation, and common law and statutory conversion, as
well as to defendant’s counterclaim for breach of contract, statutory conversion, and unjust
enrichment. We affirm.

I. FACTS AND PROCEDURAL HISTORY

Ford Motor Company, an original equipment manufacturer (OEM), entered into an
agreement with tier-1 supplier Visteon for the production of the door trim panels (door substrates
and map pockets) for the Ford heavy duty truck series known as the P356 program. Visteon in
turn outsourced the molding of the parts for the P356 program to defendant, a tier-2 supplier in
which Visteon had a 70% interest, following a competitive bid process. Defendant invested
approximately $11 million as a result of its agreement with Visteon, including expansion of its
building, the purchase of four new machines, and other various costs related to the program.
Defendant amortized these costs in the piece price negotiated with Visteon.

Before defendant’s first shipment of parts, Ford re-sourced the tier-1 business from
Visteon to a Ford subsidiary, Automotive Components Holdings (ACH). Defendant’s tier-2
supply agreement remained in effect, and ACH issued purchase orders to defendant under the

-1-
same terms that had existed with Visteon. Defendant began shipping parts from its facility in
Benton Harbor to the ACH facility in Utica in January 2007.

Ford shut down ACH’s Utica plant sometime in 2007 and subsequently chose plaintiff,
Johnson Controls, Inc. (JCI), to replace ACH as the tier-1 supplier of the P3561 door trim panels.
JCI and defendant entered into a new supply agreement on May 25, 2007, with defendant as “the
sole production source for the following parts on the Ford P356 program, anticipated to transfer
to JCI on September 10, 2007 and to continue for the length of the program design life, expected
to be 2.5 years, at the prices stated below.”2 JCI reserved the right to cancel the agreement at any
time “if any of the following do not occur”:

• Atlantic submission, and Johnson Controls acceptance, of a full piece
price and tooling breakdown to include material, labor, burden, SG&A,
profit, and any other detail information requested by JCI within two weeks
of the date of this letter.

• A successful audit and approval of piece price and tooling. JCI reserves
the right to audit all tools and invoices. World market pricing will
influence supplier reimbursement for all tooling, gages and equipment.

• Our mutual agreement and execution of a detailed Supplier Statement of
Work as requested by Johnson Controls.

• Johnson Controls’ continuing satisfaction with Atlantic’s quality, delivery,
meeting of program milestones, service and price-competitiveness.
Johnson Controls may re-source part or all of prototype or production
supply, as deemed appropriate in its sole discretion, if these conditions are
not met.

JCI provided a supplier cost breakdown sheet and supplier statement of work for
defendant to fill out. The supplier cost breakdown sheet included a line item for “special
amortizations” with examples such as “for equipment, tooling, R&D, gages.”3 The supplier cost
breakdown sheet and supplier statement of work returned to JCI did not identify any amortized
costs in the piece price.

JCI conducted a process audit at defendant’s facility in February 2008. The audit
revealed faster cycle times, lower part weights, and the use of less colorant and less resin than
had been quoted to JCI by defendant, each of which would result in a lower piece price. JCI

1
Ford entered into a separate supply agreement with JCI for the P473 program, which was the
successor to the P356 program.
2
The prices were those negotiated in the contract between Visteon and defendant.
3
JCI had also informed defendant by email correspondence that it needed “the total amortized
amount that was agreed upon with Ford and the cost per piece that is added in the piece price.”

-2-
calculated that the differences resulted in a $600,000 overcharge in piece price annually. JCI
expressed to defendant its lack of satisfaction with the audit results and engaged in discussions
with defendant about price concessions. Defendant agreed only to reduce the piece price an
additional one percent annually, which would have absorbed $98,000 of the overcharge annually.
JCI and defendant never came to a mutual agreement on the issue of price concessions.

JCI, under pressure from Ford to find ways to reduce costs across all of its projects,
engaged in a “make vs buy” analysis in January 2009 to determine if it would be more cost
effective to purchase the P356 program parts from defendant or to manufacture the parts in-
house.4 JCI determined that it could make the parts for less cost than what they were paying for
the parts from defendant and that JCI could save $2.9 million annually. JCI intended to wait to
insource the production of the parts until the P356 program ended and the P473 program
commenced.5

In the meantime, JCI was experiencing quality issues with parts it was receiving from
defendant. Representatives of both JCI and defendant acknowledged that three quality issues
existed as early as 2008 involving short shots, missing heat stake bar bosses, and excess material
at the gate. JCI had issued supplier material rejection reports to defendant regarding these
defects and, because the corrective action taken by defendant did not resolve the issues, JCI
initiated management quality review meetings on March 19 and April 19, 2009.6 In each of
those months, defendant issued return material authorizations for defective parts that defendant
had shipped to JCI. Following the April meeting, defendant implemented third-party
containment7 because a pronounced level of defective parts was being produced as of April 23,
2009. According to JCI’s corporate director of supplier quality for plastics, defendant’s parts per
million (PPM)8 exceeded the standard set by JCI in 2007, 2008, and 2009.

4
In 2007 or 2008, JCI had previously considered insourcing the P356 program parts produced by
defendant, but JCI lacked the building capacity to house the tools required to produce the parts.
According to JCI, it had resisted Ford’s pressure to cut costs by insourcing the parts prior to the
termination of the P356 program. JCI had purchased a facility in 2009 in Louisville, Kentucky,
and had closed its Bardstown facility and relocated to Louisville as Johnson Controls Interiors
Manufacturing, or “JCIM.” The Louisville facility provided the additional capacity that JCI
would need in order to insource production of the parts that were being produced by defendant.
5
The P473 program used the same door substrates and map pockets that were used for the P356
program.
6
The March meeting was an MQR 2 meeting, meaning that corrective actions put in place
following an MQR 1 meeting were not effective. The April meeting was an MQR 3 meeting,
meaning that a defective product from a supplier had made it through to the OEM.
7
Containment is an added inspection by an independent person of 100 percent of the parts being
produced.
8
PPM is the number of defective parts per million produced and is utilized to gauge a supplier’s
performance.

-3-
 JCI terminated the supply agreement with defendant on May 4, 2009, “due to breach.”
The termination letter from JCI to defendant stated:

Representatives of Johnson Controls and JCIM, LLC met with representatives of
Atlantic in March regarding Atlantic’s failure to deliver products that meet
Johnson Controls and JCIM specifications. Because Atlantic is still providing
products to Johnson Controls and JCIM that do not meet required specifications,
this letter is notice to Atlantic of termination by Johnson Controls and JCIM of
their contracts with Atlantic for the parts supplied to Johnson Controls and JCIM
relating to the Ford P356 and Chrysler LC-22 vehicle programs.

The termination of these contracts is effectively immediately. However, Johnson
Controls and JCIM require that Atlantic continue producing these parts as
necessary to allow Johnson Controls and JCIM to transition production to a new
supplier as permitted by the Terms and Conditions applicable to your contracts.
We expect that this transition will be completed no later than July 31, 2009.

Defendant prepared a cancellation cost analysis as a result of the termination of the P356
supply agreement. JCI did not learn until receipt of the cancellation claim that defendant had
been amortizing $11 million in start-up costs in the piece price of the parts it was producing for
JCI.

JCI demanded that defendant allow it access to defendant’s facility in order to retrieve the
tools defendant had used to produce the parts for the P356 program. Defendant refused to
relinquish the tools, asserting that defendant had the right to continue to produce the parts and
that JCI owed defendant more than $1 million for parts that defendant had already delivered to
JCI. On June 12, 2009, JCI filed a complaint for claim and delivery in which it alleged that it
had the contractual right to terminate the supply agreement and take possession of the Ford parts
tools, as well as a motion for possession pending final judgment in which it sought immediate
possession of the tools. The trial court entered an order granting JCI’s motion, but ordered that
JCI post a cash bond in the amount of $600,000 pursuant to the molder’s lien act as a
precondition to recovering the tools. JCI took possession of the tools on July 17, 2009.
Defendant continued to provide parts to JCI from its “bank” through August 2009.

On October 8, 2009, defendant filed a counterclaim alleging that JCI’s termination of the
supply agreement was a breach of contract, that JCI’s taking possession of the tools constituted
conversion, and that JCI had been unjustly enriched through its receipt of goods and services
from defendant. Defendant asserted that JCI’s purported reason for termination of the supply
agreement was a pretext and that JCI terminated the contract so that it could produce the P356
program parts in-house to save costs. Plaintiffs thereafter filed an amended complaint asserting
an additional claim for breach of contract. Plaintiffs claimed that defendant had failed to
disclose that it had amortized $11 million in start-up costs in the piece price and that JCI had
been systematically overcharged approximately $1.4 million for the parts defendant had
produced for the P356 program.

After a bench trial, the court found, in part:

-4-
 Based on examination of all the evidence, the exhibits and testimony of
the witnesses the Courts finds: (i) Atlantic breached the contract with JCI based
on the quality of the part it produced, the results of JCI’s audit, and Atlantic’s
failure to disclose costs and fees in compliance with the contract. (ii) JCI is
entitled to terminate the contract for Atlantic’s breach of contract but the Court
awards no money damages as the piece price was agreed to by the parties and
termination was JCI’s sole remedy under the contract. (iii) Atlantic’s refusal to
return the tools to JCI (claim and delivery), as set forth below, is a breach of
contract with JCI, and JCI is awarded costs and fees for that breach. (iv) The
Court finds no cause of action on JCI’s claims of misrepresentation (negligent and
innocent), and conversion, both common law and statutory. (v) The Court finds
no cause of action on Atlantic’s counterclaim of breach of contract, conversion
and unjust enrichment.

II. JURY TRIAL WAIVER

On September 11, 2011, JCI filed a motion to strike defendant’s jury demand. JCI
argued that both JCI’s and JCIM’s terms and conditions of purchase, both dated June 2008,
contained a jury waiver and both were incorporated into the supply agreement between JCI and
defendant. Defendant asserted that the supply agreement incorporated only JCI’s global terms
and conditions of purchase that existed at the time the supply agreement was executed, and that
these terms and conditions of purchase did not contain a jury waiver. Defendant also argued that
it did not and could not have voluntarily waived its right to a jury trial by operation of JCIM’s
terms and conditions of purchase because JCIM was not a party to the supply agreement. The
trial court granted JCI’s motion to strike, finding that the supply agreement expressly
incorporated the 2007 JCI global terms and conditions, which specifically stated that future
amendments to the terms and conditions of purchase would govern any purchase orders issued
after such amendments. Whether a party waives the right to a jury trial in a contract presents a
question of law that is reviewed de novo. See Henderson v State Farm Fire & Cas Co, 460
Mich 348, 353; 596 NW2d 190 (1999).

Defendant argues that the jury waiver provision in both the 2008 JCI terms and
conditions and the 2008 JCIM terms and conditions do not apply because the supply agreement
incorporated only the 2007 JCI global terms and conditions and these are the terms and
conditions to which defendant agreed at the time it entered into the supply agreement. This issue
is a question of contract interpretation. “The primary goal in the construction or interpretation of
any contract is to honor the intent of the parties.” Rasheed v Chrysler Corp, 445 Mich 109, 127
n 28; 517 NW2d 19 (1994). To do this, courts apply the plain meaning of the words the parties
used in a written agreement. Dillon v DeNooyer Chevrolet Geo, 217 Mich App 163, 166; 550
NW2d 846 (1996). Where a contract’s language is unambiguous, this Court must interpret and
enforce the contract as written. In re Smith Trust, 274 Mich App 283, 285; 731 NW2d 810
(2007).

There is no dispute that the May 25, 2007 supply agreement for the P356 program is the
basis of the parties’ contractual relationship. The agreement provides, “This is not an order for
goods or services. No production, preparation or investment may begin except as stated in a

-5-
signed purchase order issued by Johnson Controls.” The agreement also provides, in relevant
part:

The parties’ entire relationship and any purchase order(s) issued by Johnson
Controls in connection with this program will be governed exclusively by
Johnson Controls’ Global Terms and Conditions of Purchase and any expressly
applicable Country Supplement(s) (all available at . . ., except as modified by this
letter. All others terms are rejected.

At the time the supply agreement was executed, JCI’s global terms and conditions of
purchase contained an arbitration provision, but did not contain a jury waiver. The global terms
and conditions also provided that “[b]uyer may modify these Terms with respect to future Orders
at any time by posting revised terms to its website at . . . , and such revised Terms will apply to
all Orders issued thereafter.” JCI revised its terms and conditions of purchase on June 1, 2008.
The revised terms and conditions contained an arbitration provision, and also contained a waiver
of jury trial that provided:

Waiver of Jury Trial. BUYER AND SELLER ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED. EACH OF BUYER AND SELLER, AFTER
CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF ITS CHOICE, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR OTHER LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO ANY ORDER OR OTHER DOCUMENT PERTAINING TO
ANY ORDER.

The terms and conditions of purchase also provided that “[b]uyer may modify purchase
order terms and conditions from time to time by posting revised purchase order terms and
conditions to Buyer’s internet website . . . Seller shall be responsible to review Buyer’s website
periodically.”

Both the 2007 and 2008 JCI terms and conditions of purchase define “buyer” as the
“subsidiary or affiliate of Johnson Controls, Inc. identified in the Order; if no such entity is
identified, the Buyer is Johnson Controls, Inc.” Thus, both the 2007 and 2008 JCI terms and
conditions expressly state that purchase orders may be issued by affiliate entities. There is no
dispute that JCIM is partly owned by JCI and, therefore, JCIM is at least an affiliate of JCI. On
April 2, 2009, JCIM issued the relevant purchase order to defendant. The purchase order
provided, “This purchase order is governed exclusively by JCIM, LCC terms of purchase
available at . . . and incorporated here by reference, except as modified therein.”9 The JCIM
terms of purchase are identical to the 2008 JCI terms of purchase, and contained the identical
waiver of jury trial. The trial court properly relied upon the JCIM terms and conditions in
upholding the jury waiver.

9
There is no dispute that defendant accepted the purchase order and shipped against it.

-6-
 Even assuming, as defendant argues, that the JCI terms and conditions apply and that
defendant could not be bound by JCIM’s terms and conditions because JCIM was not a party to
the supply agreement, the supply agreement expressly incorporated the JCI 2007 terms and
conditions. The 2007 terms and conditions specifically stated that future amendments to the
terms and conditions would govern any purchase orders issued after such amendments.
Accordingly, defendant agreed at the time of the contract that JCI had discretion to modify the
terms and conditions in the future and that any modification of the terms and conditions would
apply to purchase orders issued after the date of the modification. JCI amended its terms and
conditions in June 2008, and those terms and conditions expressly provided a jury waiver.
Consequently, defendant waived its purported right to a jury trial under the 2008 JCI terms and
conditions.

Defendant argues that it did not knowingly and voluntarily waive its right to trial by jury
when it agreed to be governed by modified terms and conditions of purchase. However, even the
2007 JCI global terms and condition of purchase contain an express provision requiring
arbitration at JCI’s election. Because defendant agreed to the arbitration provision, defendant
could not have expected that any claim for money damages would be asserted in court, must less
decided by a jury. See, e.g., Burden v Check into Cash of Kentucky, LLC, 267 F3d 483, 492 (CA
6, 2001) (“[T]he loss of the right to a jury trial is a necessary and fairly obvious consequence of
an agreement to arbitrate” (citation omitted). Thus, we reject defendant’s assertion that it did not
knowingly and willingly waive its right to a jury trial.

III. THE SUPPLY AGREEMENT

A. THE FORD P356 PROGRAM SUPPLY AGREEMENT

Defendant argues that the trial court erred by finding that the supply agreement was a
satisfaction contract that could be terminated in JCI’s sole discretion as long as the termination
decision was not made in bad faith. It contends that the supply agreement was a requirements
contract for the sale of goods under the Uniform Commercial Code and obligated JCI to
purchase its requirements for the P356 program from defendant for the production and service
life of the parts. We review de novo questions of contract interpretation and considerations
regarding the legal effect of a contractual provision. Alpha Capital Mgt, Inc v Rentenbach, 287
Mich App 589, 611; 792 NW2d 344 (2010).

The plain and express language of the supply agreement provided that the agreement may
be canceled by JCI at any time if, among other things, JCI did not have “continuing satisfaction
with Atlantic’s quality, delivery, meeting of program milestones, service and price-
competitiveness.” Contracts in which one party agrees to perform his part to the satisfaction of
the opposite party are known as “satisfaction contracts.” Isbell v Anderson Carriage Co, 170
Mich App 304, 312; 136 NW 457 (1912). The trial court properly construed the supply
agreement to be a satisfaction contract.

Defendant further argues that the trial court erred in determining the type of satisfaction
contract created by the supply agreement. This state’s courts have categorized contracts that are
premised on the satisfaction of one of the parties into two types. The first type is where
satisfaction is dependent on the personal taste, feeling or individual judgment of the party to be

-7-
satisfied. Isbell, 170 Mich at 312. The second type is where “mechanical utility or operative
fitness in relation to which some standard is available are bargained for.” Id. at 312-313. Where
the contract is of the former type, the reasonableness or justice of the party’s dissatisfaction
cannot be questioned. Id. at 314. However, the party’s dissatisfaction cannot be given in bad
faith, dishonestly, insincerely, or fraudulently. Id. Where the contract is of the latter type, the
party’s dissatisfaction must be both genuine and reasonable. Id. at 313; Cacavas v Zack, 43
Mich App 222, 226; 203 NW2d 913 (1972).

The trial court construed the supply agreement as being the former type:

The right to make the determination in this case, which the parties agreed,
rested with JCI. The satisfaction rested with JCI because the contract was of the
first type where the “individual judgement [sic]” of the party was agreed by JCI
and Atlantic to be in the “sole discretion” of JCI. There is no evidence the parties
bargained for or agreed to any other standard so the contract would fall under the
second type of satisfaction contract. See Isbell, supra at 312, 313; Leighton v
Leighton, 10 Mich App 424 (1968); Nohcra Communications, Inc v AM
Communications, Inc, 909 F2d 1007 (1990), citing Jenkins Towel Service, Inc v
Tidewater Oil Co, 427 Pa 601 (1966).

The trial court’s construction of the agreement is consistent with the plain and unambiguous
language of the agreement.10

We reject defendant’s assertion that the supply agreement created a requirements
contract. A requirements contract is one in which “the quantity term is not fixed at the time of
contracting [and t]he parties agree that the quantity will be the buyer’s needs or requirements of a
specific commodity or service” over the life of the contract. Corbin, Contracts (rev ed), § 6.5, p
240. Under a requirements contract, the parties are expected to act in good faith and according
to commercial standards of fair dealing in the trade. Gen Motors Corp v Paramount Metal
Products Co, 90 F Supp 2d 861, 873 (ED Mich, 2000). A party may be subject to liability for
breach of contract if it acts in bad faith or seeks to unilaterally terminate purchase orders. Id.

Here, JCI agreed to purchase its production and service requirements for the P356
program from defendant, but the parties also agreed that JCI could resource the production of the
parts if JCI did not have continuing satisfaction with Atlantic’s quality, delivery, meeting of
program milestones, service and price-competitiveness. Under these circumstances, the trial
court properly determined that the contract was a satisfaction contract and not a requirements
contract.

10
Thus, JCI’s asserted dissatisfaction must have been made in good faith. Isbell, supra at 314.
The issue of good faith is discussed in Issue III.

-8-
 B. THE CHRYSLER LC-22 PROGRAM AGREEMENT

Defendant argues that the trial court erred by granting summary disposition of
defendant’s claims relating to termination of the Chrysler LC-22 program supply agreement in
favor of JCI on the ground that the Chrysler supply agreement expressly allowed JCI to
terminate the agreement without cause. We disagree.

JCI and defendant entered into a supply agreement relating to the Chrysler LC-22
program pursuant to which JCI agreed to purchase its production and service requirements for
certain components of that program from defendant, subject to various terms and conditions and
rights of termination. The supply agreement set forth a number of circumstances under which
JCI was authorized to terminate or cancel the agreement. The agreement also provided that the
specific circumstances permitting JCI to terminate the agreement that were set forth in the
agreement were “in addition to and without limiting any other right of termination Johnson
Controls has under its purchase order or Global Terms and Conditions of Purchase.” Thus, JCI
incorporated all of its termination rights under the terms and conditions into the supply
agreement.

Section 20 of the terms and conditions provided:

Termination. In addition to any other rights of Buyer to cancel or terminate the
Order, Buyer may, at its option and in its sole discretion, terminate all or part of
the Order . . . at any time and for any reason, and notwithstanding the existence of
any event of force majeure under Section 22, by giving at least 14 days written
notice . . .

JCI exercised its contractual right to terminate the outstanding purchase orders issued to
defendant relating to the Chrysler LC-22 program for convenience, effective May 9, 2009. The
plain and unambiguous terms and conditions of purchase gave JCI the absolute discretion to
terminate the purchase order without cause with 14 days’ notice. Burkhardt v Bailey, 260 Mich
App 636, 656; 680 NW2d 453 (2004). Defendant’s argument that termination under the terms
and conditions of purchase would not affect the grounds for termination in the supply agreement
fails to consider that JCI’s termination rights under the supply agreement were “in addition to
and without limiting any other right of termination” JCI had under the terms and conditions of
purchase. If termination under the terms and conditions only affected a purchase order issued by
JCI and did not affect defendant’s rights under the supply agreement, the language, “in addition
to and without limiting any other right of termination” would be unnecessary. In order to give
effect to every word in the supply agreement, the words must be construed to mean that

-9-
defendant’s right to continue to supply JCI with parts under the supply agreement was subject to
JCI’s rights of termination under the terms and conditions of purchase.11

IV. GOOD FAITH

Defendant argues that the trial court erred by finding that JCI acted in good faith when it
terminated the supply agreement. It contends that the trial court erred by finding that defendant
breached the contract with JCI based on the quality of the parts it produced, the results of the
audit, and the failure to disclose costs and fees as required by the agreement. We review for
clear error a trial court’s findings of fact in a bench trial. Redmond v Van Buren Co, 293 Mich
App 344, 352; 819 NW2d 912 (2011).

Defendant’s assertions that there was overwhelming evidence that defendant’s quality
met JCI’s standards, and that JCI never told defendant that it was dissatisfied with defendant’s
quality until its May 4, 2009 letter to Atlantic terminating the supply agreement, are not
supported by the testimony presented at trial. JCI presented substantial evidence to support the
trial court’s finding that defendant experienced quality problems throughout the duration of the
parties’ relationship and communicated with defendant regarding the quality issues. To the
extent that defendant argues that JCI acted in bad faith in terminating the contract because there
were no quality issues with defendant’s products, this argument is not supported by the evidence.

The evidence also supported the trial court’s finding that defendant’s prices for its parts
were not competitive and that JCI was not satisfied with its audit of defendant’s processes. The
trial court found that JCI’s exercise of its discretion to terminate the P356 supply agreement was
both genuine and objectively reasonable. While defendant purported to submit evidence that
JCI’s termination on quality and price-competitiveness was pretextual, the trial court’s findings
of fact and conclusions of law make clear that the trial court carefully considered the evidence
and rejected it. The court found that Ford and JCI did not collude to eliminate defendant before
the end of the P356 contract and that, although Ford suggested that JCI could insource
production of the door substrates as one means of cutting costs across all of its Ford projects, JCI
resisted insourcing production of the parts. The trial court’s factual findings are not clearly
erroneous.

11
Additionally, the terms and conditions of purchase required two actions on the part of
defendant in the event of termination under section 20 that are inconsistent with any continuing
right to supply parts under the agreement. First, section 20 required defendant, upon a
termination for convenience, to “upon Buyer’s request, cooperate with Buyer in transferring the
production of Supplies to a different supplier, …” Second, section 21 required defendant “when
requested by Buyer, [to] return to Buyer all Buyer’s property in as good condition as when
received by Seller (reasonable wear and tear excepted).” Under the terms and conditions,
“Buyer’s Property” includes tooling used by defendant to manufacture the parts at issue.” Thus,
the distinction between termination of the supply agreement and termination of an order is
meaningless.

-10-
 V. DEFENDANT’S MOTION FOR SUMMARY DISPOSITION

Defendant argues that the trial court erred by denying defendant’s motion for summary
disposition of JCI’s breach of contract claim that was based on defendant’s refusal to turn the
tools over to JCI. We review de novo a trial court’s decision regarding a motion for summary
disposition. Lavigne v Forshee, 307 Mich App 530, 535; 861 NW2d 635 (2014).

Defendant maintained that it was entitled to summary disposition because defendant had
a right to retain the tools under the molder’s lien act, MCL 445.618, and that it turned over the
tools after the court entered an order requiring JCI to pay the amount due for completed parts as
a condition precedent to JCI’s right to possess the tools. Defendant asserted that it could not be
in breach of contract because the tools had been turned over to JCI after JCI complied with the
court’s order. The trial court rejected defendant’s contention, finding that the interim order was
not a ruling on the merits of defendant’s refusal to return the tools and that a question of fact
existed for trial.

Defendant then raised an alternate ground for its motion and asserted that the tools did
not belong to JCI but, rather, to Ford, and JCI did not get permission from Ford to remove the
tools before asking defendant to turn over the tools. Defendant acknowledged that it had not
previously raised this argument. The trial court stated:

Well, that’s a question of fact. That’s not a ruling of law that I can make.
So you can preserve that for trial or subsequent motion. But – because I can’t
make a finding that – I can’t make a – that’s not a basis upon which I can make a
resolution in a motion without something more. So you can always bring that
again. But here’s the point; is that the matter having been litigated before Judge
Torres was limited to the exchange of the tools and the payment of money
together with the posting of the bond. Whether the – what Visteon had with Ford,
whether that was expanded or contracted or amend[ed] when Ford gave it to
Johnson Controls is not something that I’m at this moment privy to. . . . And
that’s a question – that’s fact that I can’t resolve now.

Defendant than acknowledged that Ford did provide the approval after the hearing, but asserted
that up until that time, “This is Ford’s property and they [JCI] didn’t even have Ford’s approval
to move it.” JCI asserted that “if he wants to say Ford didn’t authorize us to take the tools then –
I deny that and it’s an issue of fact.” The trial court concluded:

What I already told you is Ford may own the property. But what right is
bestowed upon JCI when it entered into its contract with JCI [sic: Ford] removing
or eliminating Visteon . . . is the question. And if that is a question, that should
have been raised before Judge Torres at the time Torres ordered the tools
conveyed to JCI is my point. And that wasn’t – and that’s what I asked you. You
said, well that doesn’t matter. Well it doesn’t matter because you weren’t there
and you don’t know if it was raised or not. And that would have been the point to
say, you’re asking us to return tools to JCI and they have no right to them would

-11-
 have been a valid matter to raise in that hearing, because they were seeking the
tools pursuant to the complaint.

Now you can’t say, wait a minute, the whole cause of action is eliminated
because they don’t own them, Ford does. Well I don’t know who owns them.
But the question isn’t who owns them, the question is who had the right to have
them. And that’s implicitly decided in Torres’s order. JCI has got the right to
them because he ordered the return of them to JCI. If that’s improper that should
have been appealed for reconsideration. . . .

So my point is, now you’re saying well his cause of being [sic] should be
eliminated because they don’t own it or they haven’t put it in a contract. And I’m
saying you can argue that at trial, but for a motion I can’t make a resolution of
that fact.

So that’s my ruling, that there is – as a matter of law I am unable to grant
the defendant’s motion. Not depriving defendant of the right to litigate it, but
only I can’t give him judgment on it because of that reason.

The trial court properly found that an issue of fact existed that prevented the granting of
summary disposition.12

VI. EXCLUSION OF EXPERT TESTIMONY

Defendant argues that the trial court’s exclusion of defendant’s expert testimony was an
abuse of discretion because the expert would have testified that that JCI’s failure to engage in
any “escalation” process with respect to the quality of defendant’s parts showed that defendant’s
quality was satisfactory and, therefore, would provide support for defendant’s theory that JCI’s
reasons for terminating the supply agreement were pretextual. This Court reviews a trial court’s
ruling admitting or excluding expert testimony for an abuse of discretion. Mulholland v DEC
Int’l Corp, 432 Mich 395, 402; 443 NW2d 340 (1989).

MRE 702, which governs the admission of expert testimony, provides:

If the court determines that scientific, technical, or other specialized knowledge
will assist the trier of fact to understand the evidence or to determine a fact in
issue, a witness qualified as an expert by knowledge, skill, experience, training, or
education may testify thereto in the form of an opinion or otherwise if (1) the

12
In this issue, defendant raises a number of arguments that are related to the trial court’s post-
trial findings. Defendant did not separately identify these arguments as a question presented.
See MCR 7.215(C)(5). A party’s failure to properly identify an issue in the statement of
questions presented waives the issue for appellate review. Michigan’s Adventure, Inc v Dalton
Twp, 290 Mich App 328, 337 n 3; 802 NW2d 353 (2010). Although we decline to address the
issues, we note that we have reviewed each of the arguments and find them to be without merit.

-12-
 testimony is based on sufficient facts or data, (2) the testimony is the product of
reliable principles and methods, and (3) the witness has applied the principles and
methods reliably to the facts of the case.

MRE 702 requires that the witness be an expert, that there be facts in evidence that require or are
subject to examination and analysis by a competent expert, and the knowledge sought from the
expert is “in a particular area that belongs more to an expert than to the common man.” Surman
v Surman, 277 Mich App 287, 308; 745 NW2d 802 (2007)

The gist of the expert’s opinion was that JCI’s failure to implement an industry-standard
escalation process with respect to defects in defendant’s products established that JCI did not
terminate the P356 program supply agreement due to quality issues with defendant’s products.
The expert’s opinion, however, did not rely upon the written contract governing the parties’
relationship and, admittedly, the expert did not review the contract. Defendant conceded that the
contract did not require JCI to provide defendant with an opportunity to cure. Thus, the trial
court properly determined that the expert’s testimony would not assist the trier of fact to
understand the evidence or determine a fact in issue.

Under MRE 103(a)(1), error may not be predicated on a ruling admitting or excluding
evidence unless a substantial right is affected. Even assuming that the trial court erred by
excluding the expert’s testimony, any error would be harmless as defendant presented evidence
regarding the steps in the escalation process in the industry, as well as testimony that JCI did not
implement all of the steps in the escalation process before terminating the contract.13

Affirmed. Plaintiffs, being the prevailing party, may tax costs pursuant to MCR 7.219.

/s/ Stephen L. Borrello
/s/ Kathleen Jansen
/s/ Donald S. Owens

13
The testimony established, however, that defendant itself implemented the highest of the steps
in the escalation process, which included 100% dock audits and third-party containment.

-13-