Bailey Tool & Manufacturing Co. v. Forrest Butler ( 2010 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
January 8, 2010 Session
BAILEY TOOL & MANUFACTURING CO. v. FORREST BUTLER ET AL.
Appeal from the Chancery Court for Davidson County
No. 06-2532-II Carol L. McCoy, Chancellor
No. M2009-00685-COA-R3-CV - Filed May 21, 2010
This is a dispute between two companies that supply parts in the automotive industry.
Company A claims that Company B tortiously interfered with its contract and with its
business relationships. The trial court granted summary judgment on the grounds that there
was no genuine issue of material fact as to causation and that Company B conclusively
established the affirmative defense of justification. We affirm the decision of the trial court
because Company B negated the element of causation.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
A NDY D. B ENNETT, J., delivered the opinion of the Court, in which F RANK G. C LEMENT, J R.
and R ICHARD H. D INKINS, JJ., joined.
Donald N. Capparella and Candi Renee Henry, Nashville, Tennessee, for the appellant,
Bailey Tool & Manufacturing Company.
Samuel P. Funk and Mark T. Smith, Nashville, Tennessee, for the appellees, Forrest Butler
and Servitech Industries, Inc.
OPINION
F ACTUAL AND P ROCEDURAL B ACKGROUND
Bailey Tool and Manufacturing Co. (“BTM”), a Texas company, manufactured metal
parts. Servitech Industries, Inc. (“STI”), a Tennessee company, applied coatings to parts.
Both companies supplied parts in the automotive industry and did business with another parts
manufacturer, Cooper Standard Automotive (“Cooper”).
In 2002, General Motors (“GM”) engaged Cooper to produce a body mount that
included two split shell bushings. According to GM’s specifications, the bushings were to
be coated with SermaGard, a type of ceramic coating. STI is a licensed SermaGard
applicator. Cooper got a quote from STI regarding the cost for coating the bushings. Cooper
decided to use BTM as its “Tier I” (direct supplier) for the bushings, which meant that BTM
would stamp the bushings and be responsible for getting them coated with SermaGard by
STI, the “Tier II.” In an August 2002 proposal to BTM, STI agreed to coat the bushings at
a price of 14 cents per part with payment terms of 30 days from invoice date.1 Once
production began, BTM shipped stamped parts to STI for coating, and STI would then ship
the coated parts to Cooper. Cooper paid BTM for the parts, and BTM was responsible for
paying STI for the coating work.
From the beginning of this contractual relationship, problems developed between
BTM and STI. Forrest Butler, president of STI, testified in his deposition that his
relationship with John Buttles, president of BTM, “got off on the wrong foot.” At a
September 2002 meeting, representatives from both companies, including Butler and Buttles,
met to work out some early problems. Butler and Buttles disagreed over the coating
thickness required under GM’s specifications; Buttles thought some problems with the
bushings arose because STI’s coating was too thick.
Butler thereafter began having communications with officials at Cooper regarding his
desire to replace BTM as the Tier I on the project. In an October 2002 e-mail to Gene
Emenhiser at Cooper, Butler stated that he “wanted to discuss the potential of our company
[STI] selling SermaGard coated components direct to Cooper” and that he believed STI could
offer “a lower unit price.” In February 2003, Butler sent another e-mail to Emenhiser in
which he suggested the possibility that there would be “adequate economies” to allow STI
to give Cooper a good price on spraying another part, the “Gordy/Graham part,” if STI were
the Tier I on both the Gordy/Graham part and the BTM part. Butler referenced a previous
conversation with Emenhiser in which Butler had expressed “concerns for the
quality/turnaround/reiumbursement capability” for BTM. Butler proposed that STI would
hire someone to oversee the stamping-related products and to streamline the process to get
“a better product at a lower cost.”
Although Butler did not think STI had begun having payment problems with BTM by
February 2003, he testified that, “The experience I have had with people that have issues in
1
Neither the contract between Cooper and Bailey nor the contract between BTM and STI was
memorialized in writing. The contracts were carried out through purchase orders.
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turnaround and/or quality are going to have issues with payment.” Emenhiser testified that
prior to the August/September 2006 incident at issue in this case, STI had contacted Cooper
“a few times” about payments problems with BTM. Emenhiser did not think this occurred
“more than four or five times.” Butler testified that payment problems were “a continuing
issue” in STI’s relationship with BTM. STI records show that BTM’s payments were
typically made over 30 days after invoice, with most payments taking over 70 days and some
over 100 days. Emenhiser testified that there were times when Cooper paid BTM more than
100 days after invoice.
A February 2004 e-mail from Kevin Cradduck, chief operating officer at STI, to
Butler indicates that Ronnie Daniels, a Cooper employee, was talking to STI about the
possibility of making STI the Tier I instead of BTM. According to Craddock’s e-mail,
Daniels was “very frustrated with Bailey and would like nothing better than to de-source 2
them.” In furtherance of its desire to replace BTM as the Tier I, Butler solicited quotes from
other stampers as to how much they would charge to create the split shell bushing currently
being produced by BTM. In April 2004, Butler e-mailed Emenhiser with pricing information
on his proposal to become Tier I on the split shell bushing part. Butler commented that, “I
have to believe our steel supplier will be vastly more consistent in quality, price & delivery
than your current supplier [BTM].”
In a February 2004 e-mail to Buttles at BTM, Cradduck made the following
statements:
Once again we find ourselves in a situation where your company has fallen
behind in paying Servitech Industries’ invoices. In total, Bailey Tool owes us
in excess of $70,000. Our quoted terms are net 30 days. The total amount that
is past 30 days is $43,932. We are typically willing to live with stretching to
60 days and in this case, we know that Cooper is even going out to 75 days in
paying you. The over 60 day balance due Servitech is $33,852. Over 75 is
$30,492. We are not given the luxury of going beyond 30 days with our
coating supplier so when our customers are late to pay, it severely impacts our
cash flow.
....
This situation is unacceptable. It is imperative that your company get caught
up to at least 75 days immediately. We cannot finance Bailey Tool. I have had
this discussion with you in the past. In that conversation, I told you we would
be willing to live with 75 days. If this continues, we will be forced to insist
2
It appears that “de-sourcing” is an industry term for replacing a supplier.
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upon our quoted 30 day terms or possibly even move to a pre-payment
requirement.
On September 12, 2006, Butler sent an e-mail to Emenhiser informing him of a price
quotation from Hines Group, another stamper and a possible replacement for BTM. Butler
stated that it was his understanding from Bill Simpson, a metals expert whom Butler had
previously proposed hiring to oversee the stampings should STI be named the Tier I on the
project, that Dave Petrie at Cooper wanted to remove BTM as a supplier. Butler expressed
his interest in having STI be the Tier I, or if Cooper felt Hines was “a better fit,” to support
Hines as the new Tier I.
BTM admits that in the late summer of 2006, it had fallen behind on its payments to
STI and owed STI approximately $200,000.3 According to STI, BTM owed it approximately
$275,000 by mid-September 2006. On September 15, 2006, Butler demanded that BTM have
$25,000 wired to Servitech by September 18. BTM paid $25,000 on September 18, 2006.
Buttles testified that he agreed to pay $25,000 every week thereafter to pay down BTM’s
balance.
Butler called Emenhiser at Cooper on September 19, 2006, to complain about BTM’s
lack of payments. While in Canada on September 27, 2006, Butler went to meet with Petrie
at Cooper about his problems with BTM. Butler explained the early quality/sorting issues
and the ongoing payment problems. Petrie’s deposition testimony includes the following
statements:
And then [Butler] further said to me that there was–Bailey was constantly late
paying them, there was times anywhere from 70 to 120 days, and that he was
getting very worried because it was getting to the level of payment that he
owed them that it could jeopardize shipment [by STI of coated parts to
Cooper].
....
I know [Butler] was very concerned that he was not getting paid and I believe
at that time it was between [$] 240 and 270,000. Well, as soon as I hear that
about a supplier, then I start worrying about a supplier that are they in jeopardy
of closing their doors because I’ve got quite a few product[s] with that
supplier. So then now I have to start investigating on that supplier to find out
what the heck is going on.
3
There was a dispute between STI and BTM concerning which party was responsible for about
$40,000 in sorting costs necessitated by defects.
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Petrie thereafter contacted Buttles at BTM. According to Petrie’s deposition testimony,
Buttles “wouldn’t give me an answer on when it was going to be resolved so based on not
being paid, I had to make a decision for our company.” After receiving another
communication from STI stating that STI was “very close to deciding not to ship anymore
or not to coat anymore parts because they were not getting paid,” Petrie decided to change
its relationship with BTM and to pay STI directly for all future coating. Beginning in
October 2006, Cooper directly paid STI 14 cents per coated part, the same price STI had been
receiving when BTM was Tier I.
Because BTM was no longer Tier I and thus was no longer managing STI as its
supplier, Cooper asked BTM to provide a price for just stamping the part. BTM thereafter
provided stamping at $.045 less per part than the amount it received as Tier I after it paid
STI.
In October 2006, STI filed a complaint for breach of contract on sworn account
against BTM seeking to recover $242,014 for part-coating services. BTM answered, denying
liability, and filed a counterclaim against STI and Forrest Butler, alleging causes of action
for tortious and unlawful interference with the contract between BTM and Cooper,
intentional interference with the business relationship between BTM and Cooper, and unfair
and deceptive acts under Tenn. Code Ann. § 47-18-104(b). BTM asserted that the
substantive law of Texas, particularly the common law regarding tortious interference with
contract, applied to this action.
The parties engaged in discovery. BTM amended its counterclaims in May 2007 to
allege claims of tortious and unlawful interference with contract and intentional interference
with business relationships under both Texas and Tennessee law. In August 2008, STI and
Butler filed a motion for partial summary judgment asking the court to determine that
Tennessee substantive law governed BTM’s common law counterclaims and to dismiss all
Texas counterclaims. The court ruled that Texas law should govern BTM’s claims for
tortious and unlawful interference with contract and intentional interference with business
relationships and, therefore, denied STI’s motion for partial summary judgment.
STI filed a second motion for partial summary judgment on its breach of contract
claim against BTM and BTM’s counterclaims against STI and Butler. BTM did not oppose
the motion with respect to STI’s breach of contract claim but did oppose the motion with
respect to its own tort counterclaims. In an order entered on December 18, 2008, the trial
court granted STI’s second motion for partial summary judgment and entered judgment
against BTM in the principal amount of $206,432.76 (an amount to which the parties
stipulated), $46,487.36 in prejudgment interest, and postjudgment interest. In dismissing
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counts I and II of BTM’s amended countercomplaint (the claims for tortious and unlawful
interference with contracts and intentional interference with business relationships), the court
made the following findings:
[T]he Court having found that there is no genuine issue of material fact and
that Servitech and Butler have (1) affirmatively negated under any
circumstance the element of causation essential to Bailey’s claims, and (2)
conclusively established their affirmative defense of justification because, as
a matter of law, they were pursuing a legal right, all of Bailey’s claims under
Counts I and II of its Amended Countercomplaint are dismissed with prejudice
....
The court also found that the applicable two-year statute of limitations required the dismissal
of any claims under Counts I and II of the amended countercomplaint to the extent the claims
were based on communications occurring before December 22, 2004.
STI filed a second amended complaint in February 2009 but then voluntarily
dismissed without prejudice the remaining claims set out in the second amended complaint.
BTM filed a timely notice of appeal.
ISSUES ON A PPEAL
BTM argues on appeal that the trial court erred in granting summary judgment
because genuine issues of material fact remain on the issue of causation and on the
affirmative defense of justification.
S TANDARD OF R EVIEW
Summary judgment is appropriate when there is no genuine issue of material fact and
the moving party is entitled to a judgment as a matter of law. Tenn. R. Civ. P. 56.04.
Summary judgments do not enjoy a presumption of correctness on appeal. BellSouth Adver.
& Publ’g Co. v. Johnson, 100 S.W.3d 202, 205 (Tenn. 2003). We consider the evidence in
the light most favorable to the non-moving party and resolve all inferences in that party’s
favor. Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002). When reviewing the evidence,
we must determine whether factual disputes exist. Byrd v. Hall, 847 S.W.2d 208, 211 (Tenn.
1993). If a factual dispute exists, we must determine whether the fact is material to the claim
or defense upon which the summary judgment is predicated and whether the disputed fact
creates a genuine issue for trial. Id.; Rutherford v. Polar Tank Trailer, Inc., 978 S.W.2d 102,
104 (Tenn. Ct. App. 1998). To shift the burden of production to the nonmoving party who
bears the burden of proof at trial, the moving party must negate an element of the opposing
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party’s claim or “show that the nonmoving party cannot prove an essential element of the
claim at trial.” Hannan v. Alltel Publ’g Co., 270 S.W.3d 1, 8-9 (Tenn. 2008).
A NALYSIS
We have concluded that the trial court properly granted summary judgment on BTM’s
tort counterclaims because there was no genuine issue of material fact on the issue of
causation and STI was entitled to judgment as a matter of law.
Under Texas law, the torts of tortious interference with contract and interference with
business relationships both require that the defendant’s actions caused the plaintiff’s
damages. Tex. Beef Cattle Co. v. Green, 921 S.W.2d 203, 210 (Tex. 1996); Am. Med. Int’l,
Inc. v. Giurintano, 821 S.W.2d 331, 335 (Tex. Ct. App. 1991). In this case, BTM claims as
damages the difference in price it received after Cooper started paying STI directly for its
coating services.
In support of its motion for partial summary judgment, STI submitted the deposition
testimony of Petrie and Emenhiser to establish that the cause of Cooper’s decision to change
its relationship with BTM was BTM’s failure to pay STI. It is undisputed that it was Petrie
who made the decision to change Cooper’s contract with BTM. Petrie testified as follows:
A. . . . [T]he day it was decided that we would start paying Servitech directly,
I was on the road, I was out of town and I got a phone call from Charlene
Cunningham telling me they received a phone call from Servitech and
Servitech stated that they were very close to deciding not to ship anymore or
not to coat anymore parts because they were not getting paid. I immediately
told Charlene to get in touch with our controller to ensure that we could start
paying Servitech directly . . . .
....
Q. I’m not asking if you think it’s right or wrong. What is the sequence? The
triggering event was Forrest Butler coming to Cooper and say I’m not getting
paid, want you to make a change.
[Exchange between attorneys]
THE WITNESS: . . . Based on Mr. Butler calling me, it was not–based on Mr.
Butler, as you’re saying–I get the feeling you’re trying to say to me that the
only reason I changed was because Butler come [sic] and asked me. It’s not
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why I changed. The things were changed because our company–there was the
threat, that we would not have parts to supply our customer.
In response to another question regarding whether Cooper’s change had been caused
by Butler’s request, Petrie stated: “The question you’re asking me doesn’t make sense
because if [Buttles] had paid the supplier [STI] we would not be into this issue at all.” Petrie
explained that he had to notify other managers in the plant of the reason for the change and
then get corporate to agree, and that “the reason was that we were in jeopardy of shutting a
customer down.” According to Petrie, Buttles “wouldn’t give me an answer on when it was
going to be resolved so based on not being paid, I had to make a decision for our company
on do I just sit back and do nothing and then finally let Servitech say I’m not getting paid
anymore?” Petrie stated that he could not allow that to happen. Petrie also gave the
following testimony:
Q. And you understood that Bailey had outstanding amounts that were
substantial in terms of the amount of money that was owed that had not been
paid to Servitech in a timely fashion.
A. That is correct.
Q. And that was the precipitating event as you understood it for the
communication from Servitech to Charlene that the flow of product might be
interrupted, correct?
A. That’s correct.
Like Petrie, Emenhiser testified that Cooper had to change its relationship to BTM
because Servitech was “not getting paid for coating the parts so we had to do something
different.”
Presented with a properly supported motion for summary judgment, a nonmoving
party must “produce evidence of specific facts establishing that genuine issues of material
fact exist.” Martin v. Norfolk S. Ry. Co., 271 S.W.3d 76, 84 (Tenn. 2008). The nonmoving
party may satisfy its burden of production by doing the following:
(1) pointing to evidence establishing material factual disputes that were over-
looked or ignored by the moving party; (2) rehabilitating the evidence attacked
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by the moving party; (3) producing additional evidence establishing the
existence of a genuine issue for trial; or (4) submitting an affidavit explaining
the necessity for further discovery pursuant to Tenn. R. Civ. P., Rule 56.06.
Id. (quoting McCarley v. W. Quality Food Serv., 960 S.W.2d 585, 588 (Tenn. 1998)).
In this case, BTM cites part of the testimony of Butler to support its assertion that
material issues of fact remain as to what caused Cooper to decide to change its relationship
with BTM. Butler’s deposition testimony includes the following statements:
A. . . . And that’s the reason why I went to Cooper. And the people that were
in on that conversation will testify I said I’ve got to be paid. And it’s obvious
to me Bailey Tool is not paying, and I need Cooper Standard to pay me or I’m
not doing the job.
Q. And Cooper did what you asked them to do, they went–they broke up the
contract and said we’re going to pay you directly. They did exactly what you
asked them to do, didn’t they?
A. That’s correct.
As to his meeting with Petrie, Butler testified: “I said, John [Buttles] doesn’t agree with this,
you’re going to have to pay me direct. And two days later, he set it up. That’s the way it
appears to me.”
BTM asserts that there is a conflict between the testimony of Petrie and Emenhiser
on one hand and the testimony of Butler on the other. BTM argues that, in light of the
testimony and “the evidence of Forrest Butler’s repeated disparagement of Bailey Tool, a
reasonable jury could certainly disagree as to whether Dave Petrie independently made a
business decision in light of a supplier’s cash flow problems, or whether Forrest Butler
inappropriately strong-armed him into altering Cooper’s contract with Bailey Tool.” We
cannot agree. There is no real conflict in the testimony. Petrie, Emenhiser, and Butler all
testified that Cooper changed its contract with BTM because of BTM’s payment problems
and STI’s resulting notification that it might have to stop coating and/or shipping coated
parts. Butler’s statement that Cooper did what Butler asked by changing its relationship with
BTM is not inconsistent with the testimony that Cooper’s actions were the direct result of
STI’s intention of ceasing its coating services because it was not being paid by BTM.
There is no evidence to suggest that Petrie’s decision to change its relationship with
BTM was affected by Butler’s alleged four-year campaign of statements disparaging BTM.
In fact, there is no evidence that Petrie was even aware of Butler’s dislike of Buttles and his
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previous disparaging comments about BTM.4 Moreover, the action taken by Cooper was to
pay STI directly, not to make it the Tier I, and BTM continued to stamp parts for Cooper.
Even if Butler’s actions could be found to be improper, there is nothing in the record to
suggest that his disparaging remarks played a role in the decision made by Cooper about
which BTM is complaining.
BTM also argues that summary judgment is not appropriate because witness
credibility is at issue. BTM asserts that a jury should be able to decide the weight of the
testimony of Emenhiser and Petrie because of their personal bias. This court has recognized
that “summary judgments should not be granted in cases where the outcome hinges squarely
upon the state of mind, intent, or credibility of the witnesses.” Knapp v. Holiday Inns, Inc.,
682 S.W.2d 936, 941-42 (Tenn. Ct. App. 1984). The opponent to the motion for summary
judgment must raise a genuine doubt as to witness credibility. Id. at 942. Thus, we have
stated:
The credibility concerns that warrant denying a summary judgment must raise
to a level higher than normal credibility questions that arise whenever a
witness testifies. Any other rule would essentially prevent the courts from
granting a summary judgment in any case. Thus, this court has found that
credibility concerns preclude granting a summary judgment in cases where a
witness’s credibility has been specifically challenged, Knapp v. Holiday Inns,
Inc., 682 S.W.2d 936, 943 (Tenn. Ct. App. 1984), or where the record
contained clear evidence of a witness’s lack of credibility. Burgess v. Harley,
934 S.W.2d 58, 68 (Tenn. Ct. App. 1996) (witness giving inconsistent
statements).
Hepp v. Joe B’s, Inc., No. 01A01-9604-CV-00183, 1997 WL 266839, at *3 (Tenn. Ct. App.
May 21, 1997).
In the present case, we do not find that witness credibility is a genuine issue. As
stated above, on the question of what caused Cooper to change its relationship with BTM,
we see no real conflict in the testimony. Moreover, we find the reasons cited by BTM for
questioning the credibility of Emenhiser and Petrie to be unconvincing.
As to Emenhiser, BTM argues that his testimony is “subject to bias, considering his
personal relationship with Forrest Butler.” Emenhiser testified that he had known Butler for
about 15 years through their business dealings. Butler estimated that he met with Emenhiser
about once a year, that they had dinner together on occasion, that he had met Emenhiser’s
4
Petrie and Butler met for the first time at the September 2006 meeting.
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wife, and that he and Emenhiser had golfed together. These facts are consistent with a
business relationship. Moreover, the reasons cited by BTM for questioning Emenhiser’s
credibility do not bear on the issue of causation. BTM asserts that, “[c]onsidering the
relationship between Forrest Butler and Gene Emenhiser, it is reasonable to assume that
Gene Emenhiser might be inclined to view Forrest Butler’s behavior as acceptable, even if
such behavior was against prevailing ethical standards within the industry.” On the causation
element, however, the only issue is what caused Cooper’s actions in changing its relationship
with BTM, not the propriety of Butler’s actions.
As it was Petrie who made the decision to change Cooper’s relationship with BTM,
his testimony is the most pertinent on the causation issue. BTM attempts to create an issue
of bias by pointing out that Petrie had left Cooper by the time of this deposition and that part
of his stated reason for leaving was that he would not be comfortable working for a new vice-
president who allegedly liked to surround himself with “yes person[s].” According to BTM’s
logic, “Mr. Petrie’s testimony indicates that he would be unwilling to acknowledge or admit
that anyone else could affect his decisionmaking,” and “[t]his is a form of bias.” Such
speculation is not sufficient to create a genuine issue of credibility.
Given our conclusion that the trial court properly granted summary judgment because
STI negated the element of causation, we need not consider the affirmative defense of
justification.
C ONCLUSION
We affirm the trial court’s decision. Costs of appeal are assessed against the
appellant, for which execution may issue if necessary.
_________________________________
ANDY D. BENNETT, JUDGE
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