Preview:

STATE OF MICHIGAN
COURT OF APPEALS


AMERICAN AUTOCOAT, INC., Plaintiff-Appellee, v MACDONALD'S INDUSTRIAL PRODUCTS, INC., Defendant-Appellant.

UNPUBLISHED November 8, 2007

No. 267036 Kent Circuit Court LC No. 04-001170-CK

Before: Whitbeck, C.J., and Talbot and Fort Hood, JJ. PER CURIAM. Defendant MacDonald's Industrial Products, Inc. (MIP) appeals as of right from the trial court's order granting judgment in favor of plaintiff American Autocoat, Inc. on its breach of contract claim against MIP. We affirm. I. Basic Facts And Procedural History Sometime in 2002-2003, MIP and Lear Corporation entered a contract that required MIP to supply Lear with handle assemblies for the rear lift gate of the Cadillac SRX. The contract required MIP to mold a plastic handle, paint it, and then assemble it. But MIP did not have the expertise or facilities required to paint the handles, so it approached American Autocoat to do the painting portion of the project. American Autocoat's facility was equipped with a robotic, electrostatic paint-application process. According to American Autocoat President and CEO Scott Skoog, he realized from his first meeting with Robert MacDonald, Sr., the owner of MIP, that the parts posed "a variety of challenges" but that the project presented future "opportunities" for American Autocoat. Skoog testified that the handles, which were rectangular with many sharply angled surfaces, were inherently difficult to paint. One of the most significant problems with painting handles with that design was a condition known as the "Farady Cage" effect. When the electrostaticallycharged paint is applied to such a part, the paint builds up on the flat surfaces and is repelled from the angled surfaces. Overall, the process results in heavy paint and a condition called "orange peel," an unacceptably textured surface, on the flatter surfaces, and "light," "dry," or "under" spray on the angled surfaces.

-1-


Skoog further explained that major defects with the raw molded parts included "flow lines where the mold is not fully--you can actually see seams in the part," and glass fiber on the face of the part, which made the surface very porous. Skoog stated that these defects were "enhanced by the paint process." Skoog confirmed that such "defects with the raw molded handle make it difficult to paint it to a good cosmetic finish." Skoog also noted that some parts had a "significant flash line[,]" which he explained as follows: When the resin is injected into the mold, it actually separates to remove the part and it can cause you a lot of problems because it's a gap in the mold, and it's--if the mold is overly pressurized, or, in fact, if there's a lot of glass resin it'll find its way into that crack and create a real flash. And so it's something that you've really got to be--you've gotta have process control in the mold and you've gotta certainly be able to control the flow of glass fiber at the surface if you're gonna be successful and have a paintable grade molding. So this is an example of a very early state we found ourselves in terms of the quality of molding that we were doing. MIP and American Autocoat engaged in a prototyping period before launching the program, during which MIP supplied American Autocoat with sample handles. After MIP supplied American Autocoat with the sample handles, MIP Vice President Scott MacDonald met with Skoog to discuss American Autocoat's ability to properly paint the handles. Skoog circulated a Process Study that informed MIP and Lear that American Autocoat would have a "high" rate of success in painting the handles using a process called "Alternative Process 4," which was ultimately used to paint the handles throughout the duration of the project. Alternative Process 4 was a multi-step process to robotically apply the paint and to mask poor surface quality on the raw molded handle. Skoog explained that Alternative Process 4 involved first washing, drying, priming, and baking the part, then a base coat and a clear coat were applied, and the part was cured. After that, the part was "finessed," which involved sanding the part with very fine sandpaper to "knock down" any flash line or glass fiber defects. The parts were then "reracked" on the line and another base coat and another clear coat were applied. Skoog testified that of the five different processes tested, Alternative Process 4 was the "most promising." Skoog further testified that by giving Alternative Process 4 a "high" rating for success American Autocoat intended to convey to MIP that "[b]y double processing and finessing the parts that we had good success in terms of getting to a cosmetic finish that would be acceptable." Skoog confirmed that he did not intend to guarantee that there would no problems with painting the handles. Indeed, he stated: It was common knowledge in discussions with Lear involved that we were dealing with a molding--molding conditions that were significant and open issues that couldn't be addressed in a short time period prior to launch of this particular program. So it was an effort of establishing a production process that would band-aid the fact that the mold was what the mold was gonna be and it was time to make vehicles. The Process Study identified the following "Open Issues" with respect to the handles: -Looking at alternative resin solution
-Current moldings may require MEK soak
-2-


-High parting line on inside needs to be addressed -Gas assist hole may require mask sticker -APOP's parts for colors other than black Skoog explained each issue. According to Skoog, MIP proposed to look into an alternative resin solution that would improve the quality of the mold. An MEK soak was a pre-painting procedure that would swell the surface. The high parting line on the inside was similar to the flash line that Skoog described on the outside of the handle--Lear was concerned that customers could feel "the rib" on the inside of the handle. The gas assist hole was a concern because it could allow water from washing the part to become trapped inside the part, turn to steam during the curing process, and then cause the part to pop apart. Skoog testified that he contacted DuPont for advice on the project. According to Skoog, "the reaction was overwhelming from DuPont that this would be a real challenge and they really didn't have--beyond their traditional primers they really didn't have primers that could overcome this. . . . The solution was multiple layers of paint, sandpaper and reprocessing." Lyn Gunderman, a DuPont employee acting as a paint quality consultant to American Autocoat testified that Skoog approached her during the prototype stage regarding American Autocoat's ability to paint the handles, and she told him that American Autocoat "probably didn't want the job" because the design of the part posed challenges that would make it hard to paint. Gunderman also testified that some of the samples that Skoog showed her, which did not exhibit paint defects, appeared to have been hand sprayed. However, Skoog explained that all of the sample handles and all of the handles painted during the program were painted with robotic applicators and electrostatically-charged paint. He denied that anyone from DuPont ever told him not to paint the handle. Skoog stated that he could not recall asking Gunderman specifically whether American Autocoat could paint the handles. Robert MacDonald, Sr., testified that neither Skoog nor anyone else from American Autocoat ever told him about the inherent painting problems. Robert MacDonald, Sr., testified that "there was never a question in [his] earlier dealings with American Autocoat that that they weren't capable of painting the handle." Skoog testified that he could not recall whether he informed MIP about the inherent problems expected to occur when painting the handles. However, Skoog also testified that the existence of certain painting defects were general knowledge in the industry. On May 19, 2003, MIP issued a blanket purchase order to American Autocoat for the painting of the handles. American Autocoat has never disputed that the purchase order is the controlling contract document. By its terms, the purchase order was a completely integrated contract and acceptance of its terms and conditions was expressly effectuated by acknowledgement and acceptance by the seller or commencement of the work. The purchase order further provided as follows: 3. QUALITY - All material delivered hereunder by Seller must conform to the specifications set forth herein (or incorporated herein by reference) and/or samples required to be furnished by Seller under this purchase order, and will be subject to Buyer's inspection within a reasonable time after delivery. Buyer may reject any material not conforming to such specifications and/or samples. Buyer -3-


shall advise Seller of such rejection by either written notice or return of the rejected material, at Seller's risk and expense, within a reasonable time after such rejection. In the event of rejection by written notice, Buyer may thereafter either return the rejected material to Seller or [sic] Seller's risk and expense or hold the same for Seller at Seller's risk and expense. *** 7. DEFAULT - Upon the occurrence of any one of the following events, Buyer shall have the unrestricted right, upon written notice, to terminate this purchase order and, upon the delivery or mailing of such notice to Seller at its address shown herein, every obligation of the Buyer hereunder shall immediately terminate: . . . (iv) Seller's failure to comply with any of the provisions, terms and conditions of this purchase order . . . . If Buyer cancels this purchase order as hereinabove provided, Seller shall compensate Buyer for all losses sustained by it by reason of such default and cancellation. TERMINATION

Download AMERICAN AUTOCOAT INC V MACDONALD'S INDUSTRIAL PRODUCTS INC.pdf

Michigan Law