Anaheim Industries, Inc., Frank Gilchrist, Inc., d/b/a Texas Stagecoach of Houston v. General Motors Corporation--Appeal from 55th District Court of Harris County

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Laws-info.com » Cases » Texas » 1st District Court of Appeals » 2007 » Anaheim Industries, Inc., Frank Gilchrist, Inc., d/b/a Texas Stagecoach of Houston v. General Motors Corporation--Appeal from 55th District Court of Harris County

State: Texas

Court: Texas Northern District Court

Docket No: 01-06-00440-CV

Case Date: 12/20/2007

Plaintiff: Douglas Ashworth

Defendant: Richard Brzoska--Appeal from 164th District Court of Harris County

Preview:Anaheim Industries, Inc., Frank Gilchrist, Inc., d/b/a
Texas Stagecoach of Houston v. General Motors
Corporation--Appeal from 55th District Court of Harris
County
Opinion to: SJR TGT SN TJ EVK ERA GCH LCH JB
Opinion issued December 20, 2007
In The
Court of Appeals
For The
First District of Texas
No. 01-06-00440-CV
ANAHEIM INDUSTRIES, INC. & FRANK GILCHRIST, INC.
d/b/a TEXAS STAGECOACH OF HOUSTON, Appellants
V.
GENERAL MOTORS CORPORATION, Appellee
On Appeal from the 55th District Court
Harris County, Texas
Trial Court Cause No. 2002-62430
MEMORANDUM OPINION
Anaheim Industries, Inc. (Anaheim) and Frank Gilchrist, Inc. d/b/a Texas Stagecoach of Houston (Stagecoach)
(collectively, the upfitters) appeal the trial court s grant of summary judgment in favor of General Motors (GM),
claiming that, under Michigan law, the trial court erred in granting GM summary judgment on their claims for (1)
breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) unconscionability; (4) economic
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duress; (5) promissory estoppel; (6) negligent misrepresentation; and (7) fraud. Because the trial court properly
concluded that the upfitters failed to raise a genuine issue of material fact in support of any of these claims, we affirm.
Background
The upfitters are engaged in the business of customizing vans, trucks, and other vehicles by removing factory-installed
seating and other fixtures and installing premium products and materials in their place. The upfitters performed custom
conversions for GM as well as other vehicle manufacturers and dealers.
GM provided its vehicles to upfitters, also known as converters, through its Approved Converters Program. GM
provided these converters with its Approved Converters Program Manual, which sets forth policies and procedures to
follow to qualify as an approved converter as well as for ordering and processing the GM vehicles. If an upfitter
qualified and GM selected it as an approved converter, they executed a pool converter agreement with the converter.
The converter agreement:
reserves to GM the right to change the manual in writing at any time;
reserves to GM the absolute right to accept or reject orders;
does not require GM to provide any particular number or any specific model of vehicle;
allows for termination at any time by either party with written notice;
provides notice that no waiver or modification of any term of this agreement or the creation of additional terms shall
be valid or binding upon [GM] unless made in writing, executed on its behalf ; and
contains a merger clause providing that the documents constituted the sole and complete agreement of the parties and
that they had no other agreements, either oral, or written, between them with respect to their subject matter.
Stagecoach and Anaheim entered their first pool converter agreements with GM in approximately 1988. GM from time
to time asked the upfitters to execute new agreements with revised terms, and they did so.
Over the years, consumer demand and industry developments led GM to upgrade the interior seating and other features
available as factory-installed in its standard vehicle packages. As the formerly custom details became standard features
installed on the GM assembly line, the demand for custom conversion dwindled, and the number of vehicles supplied
to the upfitters declined. Also, without notice to the upfitters, GM began installing newly designed standard seating
with integrated seatbelts in its vehicles. This change in seat design made the installation of custom seating
unprofitable, which, until then, had been a popular custom feature.
As GM made fewer numbers and models of vehicles available to the upfitters, the upfitters could not meet the
preferred volume of 300 vehicles set forth in the manual. In December 1998, GM put Stagecoach on probation in part
because it had not converted the preferred volume of vehicles. Around the same time, GM had a new computer system
installed at Stagecoach for ordering vehicles. The system did not work, though, and Stagecoach was unable to order
vehicles for four months. GM terminated its relationship with Stagecoach in May 1999.
Throughout this period, Anaheim continued its relationship with GM, but found it increasingly difficult to turn a profit
with the limited number and types of vehicles made available for conversion. As a result, Anaheim voluntarily
terminated its agreement with GM in 2001.
In 2002, both upfitters sued GM for breach of contract, breach of a covenant of good faith and fair dealing, economic
duress, promissory estoppel, negligent misrepresentation, and fraud. GM moved for summary judgment under both the
traditional and no-evidence standard on the upfitters claims, which the trial court granted. This appeal followed.
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Discussion
A. Standards of Review
GM moved for summary judgment against the upfitters under both traditional and no-evidence grounds. See Tex. R.
Civ. P. 166a(c), (i). The traditional standard for summary judgment requires a movant to show that no genuine issue of
material fact exists and that the trial court should grant judgment as a matter of law. Tex. R. Civ. P. 166a(c); KPMG
Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). We view all evidence in a light
favorable to the nonmovant and indulge every reasonable inference in the nonmovant s favor. Provident Life & Accid.
Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We review a no-evidence summary judgment de novo by
construing the record in the light most favorable to the nonmovant and disregarding all contrary evidence and
inferences. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). A nonmovant meets its burden
and defeats a no-evidence motion by bringing forth more than a scintilla of probative evidence that raises a genuine
issue of material fact. See Tex. R. Civ. P. 166a(i); Coastal Conduit & Ditching, Inc. v. Noram Energy Corp., 29 S.W.3d
282, 284 (Tex. App. Houston [14th Dist.] 2000, no pet.). When, as here, the trial court s order does not specify the
grounds for granting summary judgment, we affirm if any of the grounds raised by the movant is meritorious. FM
Props. Operating co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000); Oliphint v. Richards, 167 S.W.3d 513, 516
(Tex. App. Houston [14th Dist.] 2005, pet. denied).
B. Choice of Law
Both converter agreements contain choice of law clauses specifying that Michigan law applies to any dispute arising
under them.
C. Michigan Law on Commercial Contracts
Initially, we determine whether, as the upfitters claim, the converter agreements are ambiguous and, to the extent they
are not, the manner in which they define the parties relationship.
We depend on both the common law and the UCC in making these determinations. Among other goals, the UCC aims
to make uniform the law among various jurisdictions. Power Press Sales Co. v. MSI Battle Creek Stamping, 238 Mich.
App. 173, 180, 604 N.W.2d 772, 776 (1999) (quoting Mich. Comp. Laws Ann. 440.1102(c) (West 1994). Accordingly,
Michigan courts have found it appropriate to seek guidance from the decisions of other jurisdictions when interpreting
UCC provisions. Id.; see Conagra, Inc. v. Farmers State Bank, 237 Mich. App. 109, 121, 602 N.W.2d 390, 396 (1999).
In keeping with Michigan s judicial policy, we, too, look to other jurisdictions for guidance in interpreting the UCC
provisions at issue.
In ascertaining the meaning of a contract, we give the words used in the contract their plain and ordinary meaning that
would be apparent to a reader of the instrument. Rory v. Cont l Ins. Co., 473 Mich. 457, 464, 703 N.W.2d 23, 28
(2005). Further, [w]e read contracts as a whole, giving harmonious effect, if possible, to each word and phrase. Wilkie
v. Auto-Owners Ins. Co., 469 Mich. 41, 50 n.11, 664 N.W.2d 776, 781 n.11 (2003); see also Klapp v. United Ins.
Group Agency, Inc., 468 Mich. 459, 468, 663 N.W.2d 447, 453 (2003) (declaring that courts must give effect to every
word, phrase, and clause in a contract and avoid an interpretation that would render any part of the contract surplusage
).
1. Ambiguity
The upfitters contend that the following manual provision renders the converter agreements ambiguous:
Annual Volume: The preferred annual volume is 300 units. An exception would be low volume manufacturers for
which special consideration is required due to a strong reputation for customer satisfaction, special geographic
locations or strong and long standing relationships with local Chevrolet dealers. Facilities and sales support should be
adequate to grow over time with minimum inventory turn rates of 6 times per year.
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Specifically, the upfitters claim that this provision potentially conflicts with the express disclaimer that GM is not
obligated to deliver any particular number or type of vehicles to its upfitters, and urge us to allow the jury to find
whether the annual volume provision imposes a requirement that the upfitters customize at least 300 vehicles per year
and, in turn, a corresponding requirement that GM provide sufficient vehicles.
The threshold issue of whether contract language is clear or ambiguous is a question of law for the court. Wilkie, 469
Mich. at 61, 664 N.W.2d at 787; Port Huron Educ. Ass n v. Port Huron Area Sch. Dist., 452 Mich. 309, 323, 550
N.W.2d 228, 237 (1996). Contract language is ambiguous if it may reasonably be understood in different ways. Raska
v. Farm Bur. Ins. Co., 412 Mich. 355, 362, 314 N.W.2d 440, 441 (1982), quoted in UAW-GM Human Res. Ctr. v. KSL
Recreation Corp., 228 Mich. App. 486, 491, 579 N.W.2d 411, 414 (1998). Courts must not create ambiguity where
none exists. Mahnick v. Bell Co., 256 Mich. App. 154, 159, 662 N.W.2d 830, 833 (2003). Even if a contract is
inartfully worded, it is not ambiguous if it fairly admits of but one interpretation. Meagher v. Wayne State Univ., 222
Mich. App. 700, 722, 565 N.W.2d 401, 415 (1997).
Parol evidence may not be used to contradict or vary the terms of an unambiguous contract. Schmude Oil Co. v. Omar
Operating Co., 184 Mich. App. 574, 580, 458 N.W.2d 659, 663 (1990), quoted in UAW-GM Human Res. Ctr., 228
Mich. App. at 492, 579 N.W.2d at 414. It may be used to prove the existence of a latent ambiguity, but is otherwise
admissible only to clarify the meaning of an ambiguous contract. Meagher, 222 Mich. App. at 722, 565 N.W.2d at 415.
The converter agreements allow the upfitters to order vehicles, subject to GM s acceptance or rejection. The manual
provision language relied on by the upfitters contains no language making the annual volume required or mandatory.
To the contrary, it expressly refers to the preferred annual volume of vehicles. We may not rewrite this provision by
discarding one word and replacing it with one that has a wholly different meaning.
Accepting the upfitters proposed interpretation would also render ineffective the provision in the converter agreement
expressly reserving to GM absolute discretion over whether to accept or reject an upfitter s order. We may not change
the plain meaning of a term to create an ambiguity where none exists. See Glenwood Shopping Ctr. Ltd. v. K Mart
Corp., 136 Mich. App. 90, 99, 356 N.W.2d 281, 286 (1984); cf. Lytle v. Malady, 458 Mich. 153, 166, 579 N.W.2d 906,
911 (1998) (explaining that written policy in employee handbook that [n]o employee will be terminated without proper
cause or reason and not until management has made a careful review of the facts was insufficient to overcome express
disclaimer that [t]he contents of this booklet are not intended to establish . . . any contract between . . . [the employer]
and any employee, or group of employees ) (alteration in original); Fed. Express Corp. v. Dutschmann, 846 S.W.2d
282, 283 (Tex. 1993) (determining that express disclaimer in employee handbook negated any implication that
Guaranteed Fair Treatment Procedure outlined in personnel procedures manual placed restriction on company s right to
terminate employment at will). Thus, we conclude that the converter agreements do not contain any ambiguity
concerning GM s unfettered discretion over whether to accept vehicle orders from the upfitters.[1]
2. Quantity term
The UCC statute of frauds provides:
Except as otherwise provided in this section, a contract for the sale of goods for the price of $1,000.00 or more is not
enforceable by way of action or defense unless there is a writing sufficient to indicate that a contract for sale has been
made between the parties and signed by the party against whom enforcement is sought or by his or her authorized
agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract
is not enforceable under this subsection beyond the quantity of goods shown in the writing.
Mich. Comp. Laws Ann. 440.2201(1) (West Supp. 2007). A party may not use course of performance or other parol
evidence to supply a quantity term. In re Estate of Frost, 130 Mich. App. 556, 559, 344 N.W.2d 331, 333 (1983).
Moreover, the quantity term may not be inferred, and must be written. Lorenz Supply Co. v. Am. Standard, 419 Mich.
610, 614 15, 358 N.W.2d 845, 847 (1984).
Brooklyn Bagel Boys, Inc. v. Earthgrains Refrigerated Dough Products, Inc., 212 F.3d 373 (7th Cir. 2000), is helpful in
determining the legal effect of the converter agreements. In that case, Earthgrains contracted with Brooklyn Bagel, a
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producer of bagels for third parties, to be a co-packer for the distribution of bagels out of its regional facility in
Alabama. Id. at 375-76. The agreement provided that Brooklyn Bagel would process and package bagels for
Earthgrains under its brand and would purchase all of the raw materials and packaging supplies necessary to produce
bagels at Earthgrains regional facility in Illinois. Id. at 376. The agreement also defined a pricing structure, but did not
require Earthgrains to purchase any specific quantity of bagels from Brooklyn Bagel. Id. Instead, it obligated Brooklyn
Bagel to process and pack the ordered quantity of bagels. Id.
The court of appeals determined that the agreement, standing alone, did not expressly obligate Earthgrains to buy all or
any specified quantity of its bagel requirements from Brooklyn Bagel. Id. at 379. Rather, the court observed, the
agreement gave Earthgrains complete discretion concerning whether to order any or all of its bagel needs from
Brooklyn Bagel. The agreement did not contain any language indicating that it would be a breach of contract for
Earthgrains either to (1) stop ordering from Brooklyn Bagel, (2) use another manufacturer, or (3) manufacture its own
bagels. Id. at 379 80. The court concluded that, [u]nder the [agreement], Earthgrains clearly had no obligation to buy
all, let alone any quantity, of its bagel requirements from Brooklyn Bagel. [2] Id. at 379.
Similarly, here, the converter agreements confer absolute discretion on GM concerning whether to accept any, all, or
part of the upfitters vehicle orders. They also outline the requirements that the upfitters must satisfy so that they may
qualify as approved converters to order vehicles from GM. Like the agreement in Brooklyn Bagel, the converter
agreements do not, standing alone, constitute enforceable contracts. They expressly state that a Manufacturer s orders
for Vehicles are not binding on Chevrolet until accepted by Chevrolet, and may be cancelled by Manufacturer until
that time. Consequently, no enforceable contract exists until GM accepts an upfitter s purchase order. Each of the
accepted purchase orders specifies a quantity term which, together with the converter agreement, forms a contract that
satisfies the UCC statute of frauds. We thus view the relationship between each upfitter and GM as governed by a
series of contracts.[3] See id. at 379 n.4 (approving district court s view of parties relationship as series of separate
contracts, with added element that several of terms would relate back to original agreement, on theory that each time
Earthgrains placed order for bagels, contract was created); Benedict Mfg. Co. v. Aeroquip Corp., No. 242563, 2004 WL
1532280, at *4 6 (Mich. App. Jul. 8, 2004) (per curiam) (finding that parties course of performance substantiated
existence of contract because plaintiff manufactured parts and supplied them to defendant on demand at negotiated
price when it received purchase orders and releases; purchase orders supplied statement of quantity).
D. The Upfitters Claims
1. Breach of contract
The upfitters contend that the trial court erred in granting summary judgment on their breach of contract claims,
asserting that the evidence raises a fact issue concerning whether GM breached the converter agreements. The upfitters
request that we consider the parties course of performance in determining whether GM limited or modified its rights in
a way that is not reflected in the agreements. Course of performance may be relevant to show waiver or modification
of a written term. Mich. Comp. Laws Ann. 440.2208(3) (West 1994); accord Tex. Bus. & Com. Code Ann. 1.303(f)
(Vernon Supp. 2007).
Both the UCC and the converter agreements prohibit consideration of the parties course of performance to the extent
that it is not consistent with the language of the agreements. When an alleged course of performance conflicts with the
express terms governing a contractual relationship, the express terms prevail. Mich. Comp. Laws Ann. 440.1205(4)
(West 1994); accord Tex. Bus. & Com. Code 1.303; see Blalock Mach. & Equip. Co. v. Iowa Mfg. Co., 576 F. Supp.
774, 777-78 (N.D. Ga. 1983). Further, [a] signed agreement which excludes modification or rescission except by a
signed writing cannot otherwise be modified. Mich. Comp. Laws Ann. 440.2209(2) (West 1994); accord Tex. Bus. &
Com. Code Ann. 2.209(b) (Vernon 1994). The converter agreements specifically provide that no waiver or
modification of any term of this agreement or creation of additional terms shall be valid or binding upon [GM] unless
made in writing, executed on its behalf.
Our conclusion that converter agreements alone do not constitute enforceable contracts under Michigan law until GM
accepts an order for vehicles is dispositive of this claim. The upfitters do not allege that GM failed to satisfy any term
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of the converter agreement after committing to fulfill a purchase order. Absent an accepted purchase order, the
upfitters cannot demonstrate that GM breached the only obligation that would bind it under the converter agreements.
The trial court, therefore, correctly granted summary judgment on the upfitters breach of contract claims.
2. UCC claims
a. Breach of the implied covenant of good faith and fair dealing
The upfitters contend that the trial court erred in summarily dismissing their claim that GM breached the duty of good
faith and fair dealing implied under Michigan law. They specifically allege that GM breached that duty by:
modifying the contract language to expand GM s discretionary authority;
releasing new SUV models that incorporated new standard features that previously had been available only through
customization and altering the seat belt mounts so that it was infeasible for the upfitters to install high value seat
packages, both of which effectively shut the upfitters out from work they previously had performed;
failing to provide the number of vehicles and the particular vehicle models the upfitters requested and requiring them
to accept less marketable vehicles in order to obtain other, more marketable, vehicles; and
terminating its agreement with Stagecoach for failure to customize the preferred annual volume of customized vehicles
when the agreement gave GM absolute discretion over the number and type of vehicles it would provide to
Stagecoach.
Neither the converter agreements nor the duty of good faith obligated GM to perform otherwise. The UCC imposes a
good faith duty of honesty in fact in the conduct or transaction concerned. Mich. Comp. Laws Ann. 440.1201(119),
440.1203 (West 1994 & Supp. 2007). This good faith duty extends to the performance, enforcement, and modification
of an agreement. Id. The official comment to this section explains the duty s function as follows:
This section does not support an independent cause of action for failure to perform or enforce in good faith. Rather,
this section means that a failure to perform or enforce, in good faith, a specific duty or obligation under the contract,
constitutes a breach of that contract or makes unavailable, under the particular circumstances, a remedial right or
power. This distinction makes it clear that the doctrine of good faith merely directs a court towards interpreting
contracts within the commercial context in which they are created, performed, and enforced, and does not create a
separate duty of fairness and reasonableness which can be independently breached.
Mich. Comp. Law 440.1203 (emphasis added), quoted in Whirlpool v. Grigoleit, No. 1:06-CV-195, 2007 WL 397030,
*5 (W.D. Mich. Feb. 1, 2007). The implied covenant of good faith and fair dealing thus serves to supply limits on the
parties conduct when their contract defers decision on a particular term, omits terms or provides ambiguous terms.
Hubbard Chevrolet Co. v. Gen. Motors Corp., 873 F.2d 873, 876 77 (5th Cir. 1989) (applying Michigan law); accord
N. Nat. Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 606 07 (Tex. 1998) ( In the absence of a specific duty or obligation
[in the contract] to which the good-faith standard could be tied, section 1.203 will not support [the plaintiff s] claim for
damages. ); Fetter v. Wells Fargo Bank Tex., 110 S.W.3d 683, 689 (Tex. App. Houston [14th Dist.] 2003, no pet.)
(same); Adolph Coors Co. v. Rodriguez, 780 S.W.2d 477, 482, 482 (Tex. App. Corpus Christi 1989, writ denied)
(explaining that UCC duty of good faith and fair dealing is aimed at making effective the agreement s promises ), cited
with approval in N. Nat. Gas, 986 S.W.2d at 606.
Conversely, Michigan law does not imply a covenant of good faith and fair dealing when the parties to an agreement
have unmistakably expressed their respective rights. Hubbard Chevrolet Co., 873 F.2d at 877. Existing only in the
interstices of a contract s provisions, the good faith duty cannot override or replace express contractual terms. Aetna
Cas. & Sur. Co. v. Dow Chem. Co., 883 F. Supp. 1101, 1111 (E.D. Mich. 1995); Van Arnem Co. v. Mfrs. Hanover
Leas. Corp., 776 F. Supp. 1220, 1223 (E.D. Mich. 1991); accord Blalock Mach., 576 F. Supp. at 777 78; Adolph Coors
Co., 780 S.W.2d at 482 (warning that if fact-finder may write into contract other terms it believes are fair under
circumstances, any contract is subject to being rewritten to better suit court s or jury s view of what parties should in
good faith have included in agreement, regardless of what parties actually did or did not provide).
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The converter agreements contain specific, unmistakably expressed terms addressing and authorizing the conduct about
which the upfitters complain, and compel dismissal of this claim as a matter of law. The agreements expressly
authorize GM to modify agreement from time to time in writing; grant GM absolute discretion to accept or reject the
upfitters vehicle orders; and allow either party to terminate the agreement on notice to the other. By acceding to the
converter contracts, the upfitters agreed that GM s exercise of discretion over the identified subjects would constitute
good faith, regardless of its motivation for doing so. For example, the termination provision of the converter
agreements expressly provides:
This Agreement may be terminated by either party at any time by written notice thereof to the other party. Written
notice of termination shall be delivered personally or by certified mail, return receipt requested; termination shall be
effective at the end of the third business day after the day of receipt of such written notice or at such later time as may
be set forth in such notice.
In executing this provision, the parties mutually agreed that no showing of cause for termination was necessary and no
reason for exercising that right would amount to bad faith. See Hubbard Chevrolet, 873 F.2d at 877 78. When a
termination notice complies with the terms of the parties contract, it is reasonable. Adv. Plastics Corp. v. White
Consol. Indus., Inc., 828 F. Supp. 484, 491 (E.D. Mich. 1993), aff d, 47 F.3d 1167 (6th Cir. 1995).[4] Consequently,
GM s reasons for exercising its right to terminate its relationship with Stagecoach does not raise any issue of fact
supporting the upfitters breach claim. See Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 138 (5th Cir.
1979) ( When a contract contains a provision expressly sanctioning termination without cause there is no room for
implying a term that bars such a termination. ); cf. Tex. Farm Bur. Mut. Ins. Co. v. Sears, 84 S.W.3d 604, 609 (Tex.
2002) (reasoning that, because employment-at-will doctrine does not require employer to be reasonable in making
termination decisions and allows employer to discharge employee for bad reasons without liability, employer cannot
incur liability when it terminates employee for carelessly formed reasons).
Likewise, the converter agreements have no provision either restricting GM s own ability to modify vehicles and
upgrade the available standard options to enhance their appeal and improve GM s profit margin, or requiring GM to
accept the upfitters orders for any particular type or number of vehicles. To conclude that GM acted in bad faith for its
conduct would require GM to waive its contractual rights, contrary to Michigan law. See Van Arnem Co., 776 F.
Supp. at 1223 (holding that defendant was entitled to advance own interests by enforcement of contract terms and was
not required to forgo enforcement to put plaintiff s interests ahead of its own).
b. Unconscionability
The upfitters next contend that GM s actions in either actually or effectively terminating the converter agreements and
in modifying the contract language expanding GM s discretion in accepting vehicle orders are unconscionable. The
party seeking to prove unconscionability must show that the challenged contract or term is both procedurally and
substantively unconscionable. Clark v. DaimlerChrysler Corp., 268 Mich. App. 138, 143, 706 N.W.2d 471, 474 (2005).
Procedural unconscionability exists where the weaker party had no realistic alternative to acceptance of the term. Id.;
see also In re Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002) (explaining that procedural unconscionability relates to
actual making or inducement of contract provision). Whether the contract is one of adhesion has no bearing on whether
it is procedurally unconscionable. Clark, 268 Mich. App. at 143, 706 N.W.2d at 474; accord In re Halliburton Co., 80
S.W.3d at 572 (observing that contract provision is not procedurally unconscionable simply because party with superior
bargaining power makes take it or leave it offer, leaving weaker party with no opportunity to negotiate). If the
circumstances surrounding the contract formation show that the weaker party could have freely accepted or rejected the
contract, it is not procedurally unconscionable. Clark, 268 Mich. App. at 144, 706 N.W.2d at 475.
In defining substantive unconscionability, the Clark court explained that it
exists where the challenged term is not substantively reasonable. However, a contract or contract provision is not
invariably substantively unconscionable simply because it is foolish for one party and very advantageous to the other.
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Instead, a term is substantively unreasonable where the inequity of the term is so extreme as to shock the conscience.
Id. (citing Allen v. Mich. Bell Tel. Co., 18 Mich. App. 632, 637 38, 171 N.W.2d 689, 692 (1969), and Gillam v. Mich.
Mtg.-Inv. Corp., 224 Mich. 405, 409, 194 N.W. 981, 982 (1923)); accord In re FirstMerit Bank, N.A., 52 S.W.3d 749,
757 (Tex. 2001) ( The principle [of allowing relief for unconscionability] is one of preventing oppression and unfair
surprise and not of disturbing allocation of risks because of superior bargaining power. ).
The court decides as a matter of law whether a contract term is unconscionable. See Mich. Comp. Laws Ann.
440.2302(1) (West 1994). The high threshold a party must meet in proving unconscionability stems from the strong
policy favoring freedom of contract. As the Michigan Supreme Court declared:
The general rule of contracts is that competent persons shall have the utmost liberty of contracting and that their
agreements voluntarily and fairly made shall be held valid and enforced in the courts. Under this legal principle, the
parties are generally free to agree to whatever they like, and, in most circumstances, it is beyond the authority of the
courts to interfere with the parties agreement.
Wilkie, 469 Mich. at 62 63, 664 N.W.2d at 787 88 (quotations, citations, and footnotes omitted); see also WXON-TV,
Inc. v. A.C. Nielsen Co., 740 F. Supp. 1261, 1264 (E.D. Mich. 1990) ( The law presumes that business people are fully
competent to enter into contracts and obligate themselves to perform in any manner they wish. The courts have no
authority to rewrite the terms of a contract because they might feel that it was an unwise agreement for a party to have
entered into. ). Neither of the upfitters challenges approaches this threshold.
The upfitters first claim of unconscionability, which concerns GM s conduct leading to the termination of the parties
relationships, does not raise a fact issue for the same reason it does not support a claim for breach of the duty of good
faith and fair dealing. In their second claim, the upfitters assert that GM s alteration of the converter agreement
language addressing the scope of GM s discretion was unconscionable. The upfitters point out that the converter
agreements originally provided that [GM] shall have no obligation to deliver to [the upfitter] any model or number of
vehicles, but may deliver to [the upfitter] such number and type of vehicles as requested by [the upfitter] as it deems
appropriate, but that GM later changed that provision to state that [t]here are numerous factors which affect the
availability of vehicles to [GM] and [GM] reserves to itself discretion in accepting orders and distributing vehicles and
its judgment in such matters shall be final. We do not construe the former language as limiting GM s discretion as to
the quantity of vehicles ordered and consequently, do not view the alteration, which expressly confers absolute
discretion to GM, as material. Even if it were, the change in language is not unconscionable. Procedurally, we note that
the upfitters agreed at the outset that GM would have unrestricted power to modify the terms of the converter
agreement. The upfitters could either accept the modification by continuing to perform under the agreements or notify
GM that they were terminating the relationship. See Mich. Comp. Laws Ann. 440.2208(1) (West 1994) (providing that,
where contract for sale involves repeated occasions for performance by either party with knowledge of the nature of
the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in
without objection shall be relevant to determine the meaning of the agreement ); see also Hathaway v. Gen. Mills, Inc.,
711 S.W.2d 227, 229 (Tex. 1986) (explaining that employer may enforce changes to at-will employment contract if it
unequivocally provides notice of definite change and employee accepts change by continuing employment).
Accordingly, the trial court properly granted summary judgment on this claim.
3. Extracontractual claims
a. Economic duress
The upfitters economic duress claim rests on their allegations that GM threatened to further reduce the number of more
marketable vehicle models available to them if they failed to accept less marketable models and also imposed
minimum volume requirements after the upfitters had already entered into converter agreements and begun
performance. To succeed on a claim of duress and void an otherwise valid contract under Michigan law, a plaintiff
must prove that the defendant illegally compelled or coerced the plaintiff to act by fear of serious injury to it, its
reputation, or its fortune. Norton v. Mich. State Hwy. Dep t, 315 Mich. 313, 319 20, 24 N.W.2d 132, 135 (1946).
No evidence raises a fact issue that GM threatened to do anything it did not have a legal right to do. Either party had
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the power to terminate the contract at will with notice. At no time did any alleged action by GM impair the upfitters
ability to terminate their expressly at-will relationship with GM if they considered it to be unfair or oppressive.
The upfitters also fail to show that GM had any legal duty to continue provide them with certain types and numbers of
vehicles, or forgo its own modification of its vehicle line as a means of maximizing its profit. [E]conomic duress
requires a showing of illegal conduct. Whirlpool, 2007 WL 397030, at *4. The upfitters allege that GM attempted to
coerce them into accepting less marketable vehicles by tying their delivery to the more marketable ones, but fail to
provide any evidentiary support that GM s actual conduct violated their agreement or any law. Consequently, the trial
court correctly granted summary judgment dismissing the upfitters economic duress claim.
b. Promissory estoppel, negligent misrepresentation, and fraud
The upfitters base their promissory estoppel, negligent misrepresentation, and fraud claims on GM s alleged oral
assurances that they would receive a reasonable allocation of marketable product, allocations would return to normal,
GM products would remain suitable for conversion, GM would not compete with them, and GM would require its
dealers to use approved converters exclusively. All three claims, however, require upfitters to show that their reliance
on GM s alleged oral representations was reasonable. See Adv. Plastics Corp., 828 F. Supp. at 491 (promissory
estoppel); Novak v. Nationwide Mut. Ins. Co., 235 Mich. App. 675, 688, 599 N.W.2d 546, 553 (1999)
(misrepresentation and fraud). Because the converter agreements expressly prohibit reliance on any waiver or
modification of any term or creation of additional terms unless made in writing and executed by GM, and the upfitters
reliance conflicts with the plain language of the agreement reserving full discretion to GM, the upfitters cannot
demonstrate the reasonableness of their reliance on any of GM s oral assurances as a matter of law. See Novak, 235
Mich. App. at 689 691, 599 N.W.2d at 553 54 (holding that plaintiff s reliance is unreasonable as matter of law when
terms of parties contract specifically contradict representations on which plaintiff claims to have relied).
Moreover, GM did not owe any special duty to the upfitters to disclose its own business plans. GM and the upfitters
were parties to commercial relations defined by their respective agreements, not by any independent duty owed by GM
to act for the benefit of the upfitters or refrain from acting in its own interest at the upfitters expense. See Central
Cartage Co. v. Fewless, 232 Mich. App. 517, 524 25, 591 N.W.2d 422, 426 (1998); see also McDerment v. Biltmore
Props., Inc., No. 257155, 2005 WL 3556147, at *6 (Mich. App. Dec. 29, 2005) (per curiam) (declaring that person may
not reasonably place trust and confidence in another when their interests are adverse). Because these reasons support
the trial court s grant of summary judgment on the upfitters fraud, promissory estoppel, and misrepresentation claims,
we need not examine the remaining grounds.
Conclusion
We agree with the trial court that the upfitters did not present any genuine issue of material fact supporting their claims
for breach of contract, breach of the covenant of good faith and fair dealing, unconscionability, economic duress,
promissory estoppel, negligent misrepresentation, or fraud. We therefore affirm the judgment of the trial court.
Jane Bland
Justice
Panel consists of Chief Justice Radack and Justices Alcala and Bland.
[1] The upfitters reliance on Salpietra v. Kinder Properties, No. 248153, 2004 WL 2601209, at *2 (Mich. App. Nov. 16,
2004) (per curiam) is misplaced. In that case, the plaintiffs purchased a residential lot from the project developer
defendant, only to discover that the lot had been improperly graded and filled. The trial court granted summary
judgment, concluding that the plaintiffs purchase agreement imposed no duty to provide suitable soil. The Michigan
court of appeals reversed, noting that the agreement was ambiguous in that it specifically stated that the property was a
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building site suitable and ready for construction of a residence. Id. In contrast, neither the converter agreements nor the
guidebook in this case obligate GM to place a certain quantity of orders with the upfitters.
[2] In Acemco, Inc. v. Olympic Steel Lafayette, Inc., a Michigan court of appeals reached the same conclusion
concerning the following language: During the term of this Agreement, the Seller agrees to sell to the Buyer such
quantities of the Products as the Buyer may specify in its purchase orders, which the buyer may deliver at its
discretion. No. 256638, 2005 WL 2810716, at *4 (Mich. App. Oct. 27, 2005) (per curiam). The court declared:
Reasonable minds could not construe the above language as containing a quantity term because the language specifies
no quantity whatsoever. The language instead grants complete discretion to the buyer to deliver purchase orders
containing any amount or no amount at its discretion without any other limiting feature. The grant of complete
discretion results in a countless number of possible quantities from zero to infinity. Any quantity is in fact no quantity
at all.
Id.
[3] The Brooklyn Bagel court primarily viewed the parties relationship as creating an enforceable buyer s option
contract. Brooklyn Bagel Boys, Inc. v. Earthgrains Refrigerated Dough Prods., Inc., 212 F.3d 373, 379 (7th Cir. 2000).
Because the cases addressing Michigan s UCC statute of frauds do not appear to favor this view, which would allow
for enforcement of an agreement without a quantity term even though the agreement is neither a requirements nor an
output contract, we do not endorse it for purposes of our analysis of the converter agreements. See, e.g., Acemco, Inc.,
2005 WL 2810716, at *4; see also Merritt Campbell v. RxP Prods., Inc., 164 F.3d 957, 963 (5th Cir. 1999) (explaining
that agreement would have been option contract but was unenforceable for failure to satisfy UCC statute of frauds).
[4] The resolution of analogous facts in Brooklyn Bagel also supports the trial court s judgment in this case. See 212
F.3d at 376. Brooklyn Bagel and Earthgrains had performed under the contract for nearly two years when Earthgrains,
without informing Brooklyn Bagel, decided to begin manufacturing its own bagels. Id. A few months later, after
Earthgrains finished installing bagel-making equipment in its Illinois facility, it sent a ninety-day written notice to
Brooklyn Bagel of its intent to terminate the contract. Id. In affirming summary judgment against Brooklyn Bagel s
claim for breach of the duty of good faith and fair dealing, the Seventh Circuit noted that nothing in contract prohibited
Earthgrains from manufacturing its own bagels, and Brooklyn Bagel did not show that Earthgrains conduct could not
reasonably have been contemplated by parties. Id. at 382.
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