Innovative Case v. Tweddle Litho , 147 F. App'x 467 ( 2005 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 05a0547n.06
Filed: June 24, 2005
No. 04-1445
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
INNOVATIVE CASE, INC.
Plaintiff-Appellee,
v. ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
TWEDDLE LITHO CO. EASTERN DISTRICT OF MICHIGAN
Defendant-Appellant.
/
BEFORE: DAUGHTREY and CLAY, Circuit Judges; GRAHAM, District Judge.*
CLAY, Circuit Judge. This state law contract dispute is before this Court pursuant to
diversity jurisdiction, 28 U.S.C. § 1332. Defendant, Tweddle Litho Company (“Tweddle”), appeals
from the district court’s grant of summary judgment to Plaintiff, Innovative Case, Incorporated
(“Innovative”). The parties agree that this case is governed by Michigan law, including Michigan’s
adoption of the Uniform Commercial Code (“U.C.C.”) See M.C.L. § 1101, et seq..
This case centers on Tweddle’s rejection of 28,000 leather portfolios supplied by Innovative
pursuant to a contract between the parties. When Innovative sued to recover the contract price of
*
The Honorable James L. Graham, United States District Judge for the Southern District of Ohio, sitting by
designation.
No. 04-1445
the rejected portfolios, Tweddle pointed to two alleged defects in the portfolios as justification for
its rejection. The district court determined that Tweddle had waived its right to rely on the first
alleged defect and had failed to make any showing that the second defect existed, except with
respect to nineteen of the 28,000 portfolios. The district court therefore granted summary judgment
to Innovative, and ordered Tweddle to pay damages, interest, and costs in the amount of
$219,141.34. For the reasons that follow, we AFFIRM the district court in all respects.
BACKGROUND
I. Facts
Innovative, an Illinois corporation with its principal place of business in Illinois, imports
cases of various kinds, including leather portfolios, which are manufactured overseas for Innovative,
and supplies them to customers in the United States. Tweddle is a printing company incorporated
in Michigan, with its principal offices in Michigan. This case arises from an agreement between the
two parties that Innovative would supply Tweddle with leather portfolios for use in glove box kits
that Tweddle, in turn, supplied to the Ford Motor Company.
Tweddle began supplying glove box kits for Lincoln vehicles to Ford Motor Company in
2000. Previously, Ford had purchased portfolios directly from The Beanstalk Group. Tweddle had
agreed to continue to purchase portfolios from The Beanstalk Group “as a pass-through,” that is,
without marking up the price The Beanstalk Group charged for the portfolios. Thus, any profit
Tweddle made on the glove box kits while using The Beanstalk Group as a supplier on a pass-
through basis came from the other components of the kit.
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No. 04-1445
Despite that arrangement, in approximately the middle of 2001, representatives of Tweddle
were introduced to David Schafer (“Schafer”), the owner of Innovative. At an initial meeting,
Innovative was given a sample of a black leather Lincoln portfolio, manufactured by The Beanstalk
Group. Innovative’s supplier in China, Palibon Leather Products Company, Ltd. (“Palibon”) then
manufactured sample portfolios, based on the portfolio provided by Tweddle to Innovative, which
were presented to and approved by Tweddle.
On October 22, 2001, Tweddle issued a purchase order to Innovative for 50,000 leather
Lincoln portfolios for $7.46 each. The purchase order noted “payment is based upon a successful
inspection of product by Tweddle Litho and that the product is identical to a sample provided by
Innovative Case that Tweddle Litho has approved.” The purchase order also contained the following
inspection clause: “Tweddle Litho Company . . . shall be afforded the right to verify at the source
that the purchased product conforms to the specified requirements . . . Such verification shall not
be used as evidence of effective control of quality. Verification by the Tweddle Litho Company
shall not absolve the Seller of the responsibility to provide acceptable product, nor shall it preclude
subsequent rejection by the Tweddle Litho Company.” The purchase order was drafted by Eric
Taylor of Tweddle.
Subsequently, at Tweddle’s request, Innovative submitted a specifications sheet to Tweddle
detailing “material specifications for the Lincoln Portfolio.” The “spec sheet” does not specify the
depth of embossing of the Lincoln name and logo. There is no evidence on the record that Tweddle
made any objection to the spec sheet.
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No. 04-1445
David Schafer signed the purchase order on January 23, 2002. Innovative arranged for the
portfolios to be produced by Palibon. Schafer stated in an affidavit that he “understood that the
Purchase Order provided for a single inspection which, in accordance with standard industry
practice, would occur in China before the portfolios were shipped. Standard industry practice is that
goods are inspected overseas and accepted before shipment.” In contrast, Taylor, Tweddle’s
purchasing agent, testified that he asked Jerry See-Tow (“See-Tow”), director of Tweddle’s
Singapore office, to arrange an inspection, and that “typically the initial inspections over in China
are pre-ship inspections to make sure there are no gross errors in the product or gross defects in the
product.”
See-Tow retained Bureau Veritas Consumer Product Services (“Bureau Veritas”) to inspect
the portfolios. According to Jack Wong (“Wong”), Palibon’s owner and president, See-Tow
attended the inspection with a representative of Bureau Veritas and spent time in the inspection room
comparing production portfolios to the approved sample. Wong’s affidavit also states that See-Tow
authorized him to complete production and ship the portfolios, and indicated that no further
inspection was necessary.
The Bureau Veritas inspection report, dated April 6, 2002, which was sent to See-Tow,
notes that “[t]he hot stamping of ‘Lincoln’ logo was not as deep as that against the client’s approved
sample.” The inspection report also indicates that “the inspection findings comply with acceptance
criteria. It is concluded that the shipment is considered as conformance with Tweddle Litho’s
requirement.” Bureau Veritas’ inspection report contains the following note: “The above reflects
our findings at the time and place of inspection. This report does not relieve sellers/suppliers from
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No. 04-1445
their contractual responsibilities with regard to quality/quantity of this delivery nor does it prejudice
buyers’ right of claim towards sellers/suppliers for compensation for our random inspection or
occurring thereafter.”
The inspection report’s observation about the light embossing is also made in Bureau
Veritas’ inspection data sheet. Schafer stated in his affidavit that Wong faxed him a copy of that
data sheet on April 5, 2002, the day after the inspection occurred, and that he in turn faxed the data
sheet to Eric Taylor at Tweddle, also on April 5.
In May 2002, the portfolios were shipped to Tweddle’s distribution facility in Clinton
Township, Michigan. Brad Hannah (“Hannah”), vice president of Tweddle, testified in his
deposition that Bruce Hill, the production supervisor of the distribution center, told him that Hill felt
there was “a quality issue with the Lincoln leather portfolios.” Specifically, Hill told him that the
embossing of the Lincoln logo was not as deep as “they were used to seeing on the line,” and that
“there were some crooked embossing of the same image.” Subsequently, Taylor, Hannah, and Brian
Suszek (also of Tweddle) went to Tweddle’s distribution center to examine the portfolios.
According to Taylor, they found “that the logos in some cases weren’t at the right depth. And in
other cases, they were a combination of not the right depth and crooked.” Asked what percentage
of the portfolios had these problems, Taylor responded that he had no idea. Tweddle initially
rejected all the portfolios.
Taylor called Schafer and informed him that there was a “quality issue,” and asked him to
come to the distribution center. Together, Schafer, Taylor, Suszek, and Andrew Tweddle looked
at several portfolios. Schafer did not agree that the portfolios were unacceptable.
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No. 04-1445
Tweddle then determined that it would inspect the portfolios using samples of “acceptable
product,” and “non-acceptable product,” as agreed upon by Andrew Tweddle, Suszek, and Taylor.
Tweddle’s major concerns were with the depth of the embossing of the logo, and any skewing of
the logo.
Following this internal inspection, Tweddle agreed to accept 22,000 of the portfolios at the
full purchase price of $7.46. Ford Motor Company accepted and paid $11 each for these 22,000
portfolios.
The remaining 28,000 portfolios are in storage in a warehouse owned by Schafer’s brother
in Wixom, Michigan. Tweddle alleges it was forced to obtain portfolios from The Beanstalk Group
at a higher price in order to fulfill its obligations to Lincoln. On August 26, 27, and 28, 2003,
Schafer personally inspected all of the Lincoln leather portfolios that were rejected by Tweddle. He
found that the embossed Lincoln name and logo was skewed only nineteen of those portfolios
II. Procedural History
Innovative filed a complaint in the United States District Court for the Eastern District of
Michigan on September 12, 2002, alleging that Tweddle had breached its contract with Innovative
by refusing to pay Innovative the full contract price for all 50,000 portfolios Innovative supplied to
Tweddle. Innovative filed a first amended complaint on November 14, 2002.
On November 19, 2002, Tweddle filed an answer to Innovative’s complaint, which asserted
that 28,000 of the portfolios supplied by Innovative were rejected as non-conforming. Tweddle also
filed a counterclaim, charging that it incurred “cover” damages because it was required to purchase
28,000 portfolios at a price higher than the contract price.
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No. 04-1445
On July 31, 2003, both parties moved for summary judgment. A hearing on the summary
judgment motions was held by the district court on October 15, 2003. The same day, the court
entered an order denying both parties’ motions for summary judgment. In addition, the court found
that “Defendant/Counter-Plaintiff Tweddle has waived its breach of contract claim to the extent that
it is based on the depth of the embossed log, unless Tweddle can demonstrate that the final portfolios
were more shallow than the 500 sample portfolios inspected in China.”
On December 29, 2003, Innovative again moved for summary judgment, on two grounds.
First, Innovative contended that because the 500 sample portfolios inspected in China were not
identified, it would be impossible to prove that any of the rejected portfolios had embossing lighter
than the sample portfolios. Secondly, Innovative argued that Tweddle had submitted no evidence
to create a genuine factual dispute as to the number of rejected portfolios with skewed logos.
Because Tweddle had not alleged any defects other than light embossing and skewed logos,
Innovative urged the district court to grant summary judgment. That motion was granted by an order
of the district court entered on February 24, 2004. Final judgment in favor of Innovative and against
Tweddle was entered in the amount of $204,045.92, pre-judgment interest in the amount of
$13,401.37, and taxable costs in the amount of $1,694.05, on March 11, 2004.
Tweddle filed a timely notice of appeal to this Court on April 7, 2004.
DISCUSSION
I. Standard of Review
We review a district court’s grant of summary judgment de novo, using the same standard
applied by the district court. Hamby v. Neel, 368 F.3d 549, 556 (6th Cir. 2004)(citing Johnson v.
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No. 04-1445
Econ. Dev. Corp., 241 F.3d 501, 509 (6th Cir. 2001)). Summary judgment is appropriate when there
are no genuine issues of material fact. Id.; FED. R. CIV. P. 56(c). In reviewing the district court’s
grant of summary judgment, we must view the evidence and draw all reasonable inferences in the
light most favorable to the non-moving party. Combs v. Int’l Ins. Co., 354 F.3d 568, 576-77 (6th
Cir. 2004)(citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)); Williams v. Int’l Paper
Co., 227 F.3d 706, 710 (6th Cir. 2000); Smith v. Thornburg, 136 F.3d 1070, 1074 (6th Cir. 1998).
The moving party initially bears the burden of proving that there is no genuine issue of
material fact. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir.1989). This burden can
be satisfied by reliance on any of the evidentiary sources listed in Federal Rule of Civil Procedure
56(c) (pleadings, depositions, answers to interrogatories, admissions, and affidavits), or by
indicating the failure of the non-moving party to produce evidence creating a genuine issue of
material fact. Id. at 1478.
If the moving party satisfies this burden, “an adverse party may not rest upon the mere
allegations or denials of the adverse party, but . . . must set forth specific facts showing that there
is a genuine issue for trial.” FED. R. CIV. P. 56(e). If the evidence does not suffice to reasonably
support a jury verdict in favor of the non-moving party, the motion for summary judgment will be
granted. Street, 886 F.2d at 1477; see also Cox v. Kentucky Dept. of Transp. 53 F.3d 146, 150 (6th
Cir. 1995). “The mere existence of a scintilla of evidence” in support of the non-moving party will
not suffice to defeat the motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 252 (1986).
II. The district court correctly ruled that Tweddle waived any right to reject the portfolios
for light embossing
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No. 04-1445
As noted above, the district court determined in a pre-judgment order that Tweddle had
“waived its breach of contract claim to the extent that it is based on the depth of the embossed logo,
unless Tweddle can demonstrate that the final portfolios were more shallow than the 500 sample
portfolios inspected in China.” The district court presumably did so on the basis of evidence that
Tweddle was aware that the embossed logo was lighter on the sample portfolios that were inspected
in China after production than it was on the sample Tweddle approved before production, and yet
permitted shipment of the portfolios to go forward. When Tweddle failed to make the showing
required by the district court’s order, the district court entered summary judgment in favor of
Innovative.
On appeal, Tweddle has inaccurately characterized the district court’s disposition of this
issue, alleging that the district court determined that Tweddle irrevocably accepted the portfolios
in question upon “preliminary inspection in China.” As just explained, the district court’s grant of
summary judgment on this issue was based not on a determination that the inspection in China
constituted “irrevocable acceptance” but rather, that Tweddle’s awareness of the alleged defect of
light embossing prior to shipment constituted a waiver of the right to subsequently reject the
portfolios based on that defect. We agree with the district court.
Michigan law states that waiver of a contractual right “may be shown by proof of express
language of agreement or inferably established by such declaration, act, and conduct of the party
against whom it is claimed as are inconsistent with a purpose to exact strict performance.”
Fitzgerald v. Hubert Herman, Inc., 179 N.W.2d 252, 254 (Mich. App. 1970) (citing Strom-Johnson
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No. 04-1445
Construction Co. v. Riverview Furniture Store, 198 N.W. 714 (Mich. 1924); Bissell v. L. W. Edison
Co., 156 N.W.2d 623 (Mich. App. 1967)).
Uncontradicted evidence presented by Innovative reflected the following facts: Jerry See-
Tow, the director of Tweddle’s Singapore office, accompanied a representative of Bureau Veritas
hired by Tweddle, to an inspection of portfolios produced for Tweddle in China at the Palibon
production plant. See-Tow indicated to the president of Palibon that the portfolios were suitable for
shipment and that no further inspection was necessary. Furthermore, in an inspection report
provided by Bureau Veritas to See-Tow prior to shipment, it was clearly indicated that “[t]he hot
stamping of ‘Lincoln’ logo was not as deep as that against the client’s approved sample,” yet the
shipment was considered in conformance nonetheless. This information was also included in an
inspection data sheet made available to Eric Taylor, Tweddle’s purchasing agent, prior to shipment.
Tweddle’s conduct in indicating that the portfolios were suitable for shipment and in
instructing Palibon to ship the order, despite knowing that the embossing was lighter than on the
approved sample, is inconsistent with a purpose to exact strict performance with respect to the depth
of the embossing. We therefore affirm the district court’s determination that Tweddle waived its
right to reject the portfolios on the ground that the embossing was lighter than on the approved
samples.
III. The district court correctly ruled that only nineteen of the portfolios could be rejected
for skewed embossing
The only other defect alleged by Tweddle as justification for the rejection of the portfolios
is that the embossed Lincoln name and logo was skewed on some of the portfolios. With respect
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No. 04-1445
to that issue, Innovative presented the affidavit of David Schafer, who testified that over the course
of three days in August, 2003, he personally inspected all of the 28,000 portfolios rejected by
Tweddle, and found that only nineteen of them were “slightly crooked” and non-conforming.1
Tweddle presented the affidavit of Eric Taylor, who testified that, also in August 2003, he
spent “less than an hour” going through some of the hundreds of boxes of rejected portfolios. Based
on “the limited sampling [he] conducted,” Taylor noted that some of the boxes (which each
contained thirty portfolios) contained no portfolios with skewed logos, while others had more than
one. He “would estimate that there was one skewed logo per box or two,” and would
“conservatively estimate there are more than 500 skewed logos.” He noted, though, that “he would
have to conduct a complete count of 28,000 portfolios to arrive at an exact number.”
Taylor’s affidavit is far too speculative to satisfy Tweddle’s burden of responding to
Innovative’s motion for summary judgment, which was supported with specific evidence. Federal
Rule of Civil Procedure 56(e) requires that in responding to a well-supported motion for summary
judgment, an adverse party “must set forth specific facts showing that there is a genuine issue for
trial.” Tweddle presented no “specific facts” but instead only the rough estimates offered in
Taylor’s affidavit. “[T]his circuit has long held that ‘[m]ere conclusory and unsupported allegations,
rooted in speculation, do not meet [the] burden’” of demonstrating that there is a genuine issue for
1
Incredibly, Tweddle entirely ignores this affidavit and repeatedly insists on relying on
Schafer’s deposition testimony, which pre-dated his inspection of August 2003, to assert that
Schaffer has never inspected the portfolios and that Innovative has no evidence that the portfolios
are conforming.
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No. 04-1445
trial. Bell v. Ohio State University 351 F.3d 240, 253 (6th Cir. 2003) (quoting Bryant v.
Commonwealth of Kentucky, 490 F.2d 1273, 1274 (6th Cir.1974) (per curiam)).
We conclude that the district court appropriately determined that without other, reliable
evidence, Tweddle had failed to demonstrate that there was a genuine issue of material fact as to
whether more than nineteen of the portfolios were skewed. In the absence of evidence of non-
conformance as to the remaining portfolios, there was, furthermore, no issue of material fact as to
whether Tweddle breached its contract by refusing to pay for them, and the district court
appropriately entered summary judgment against Tweddle.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
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