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Stalloy Metals, Inc v. Kennametal

December 3, 2012

STALLOY METALS, INC., PLAINTIFF-APPELLANT,
v.
KENNAMETAL, INC., DEFENDANT-APPELLEE.



Civil Appeal from the Geauga County Court of Common Pleas, Case No. 10M000478.

The opinion of the court was delivered by: Cynthia Westcott Rice, J.

Cite as Stalloy Metals, Inc. v. Kennametal, Inc.,

OPINION

Judgment: Affirmed in part; reversed in part and remanded.

{¶1} Appellant, Stalloy Metals, Inc., appeals the judgment of the Geauga County Court of Common Pleas, following a bench trial, in which the court found in favor of appellee, Kennametal, Inc., on Stalloy's breach-of-contract claim. At issue is whether Kennametal breached its contract with Stalloy to purchase scrap carbide. For the reasons that follow, we affirm in part; reverse in part and remand.

{¶2} On May 3, 2010, Stalloy filed a complaint against Kennametal alleging breach of contract. The complaint alleged that Kennametal had agreed to purchase 120,000 pounds of scrap carbide from Stalloy at $12.25/pound for a total price of $1,470,000. While the case was pending, Kennametal filed a motion in limine to exclude parol evidence of an oral agreement permitting Stalloy to ship the carbide in containers weighing more than the weight specified in the contract. The court decided to hear the trial evidence before ruling on the issue. The case proceeded to bench trial.

{¶3} Sugar Peck, president of Stalloy, testified that Stalloy was in the business of processing scrap carbide. Stalloy purchased the material from various manufacturers, sorted it into different grades, re-packaged it, and then sold and shipped it to its customers.

{¶4} Ms. Peck testified that Stalloy had sold scrap carbide to Kennametal for many years. In October 2008, she learned about Kennametal's carbide recycling program, pursuant to which Kennametal now purchases its scrap carbide.

{¶5} Ms. Peck reviewed the terms and conditions of Kennametal's purchasing program that were posted on its website. She wanted to sell 120,000 pounds of carbide to Kennametal. On Friday, October 17, 2008, she called Kennametal and spoke to its buying agent, David Burns.

{¶6} Ms. Peck told Mr. Burns she had 120,000 pounds of carbide to sell. She asked him if Kennametal was interested in buying it. Mr. Burns said that Kennametal was interested and quoted her a price of $12.25/pound, which Ms. Peck accepted.

{¶7} Ms. Peck was familiar with the provision in Kennametal's terms and conditions regarding shipping, which provided that no more than 1,000 pounds of recyclable carbide could be shipped in any one container. She told Mr. Burns that Stalloy had already packaged the carbide in 2,000-pound containers, and asked if it would be acceptable for her to ship it that way. She said she could have the scrap repackaged in 1,000-pound containers, but it would take two weeks to get the smaller drums. Mr. Burns asked Ms. Peck if a tow motor could lift 2,000 pounds. She said the carbide Stalloy purchases is typically packaged in 2,000-pound containers and that is how Stalloy generally re-packages it. As a result, Mr. Burns said there was no need to re-package it, and it was all right to send it in the 2,000-pound containers. Mr. Burns said he would like to get a truck there that same day to start picking up the scrap. He said he would call her back to let her know if that could be done.

{¶8} At 12:30 p.m., Mr. Burns sent Ms. Peck a confirmation order by e-mail stating Kennametal had purchased 120,000 pounds of recyclable carbide at $12.25/pound.

{¶9} At 1:00 p.m., Ms. Peck sent an e-mail to Mr. Burns stating that Kennametal's confirmation order had been received and was accepted, and that Stalloy could ship on Monday, October 20, 2008, if Kennametal's truck was ready.

{¶10} At 2:00 p.m., Mr. Burns sent Ms. Peck an e-mail saying he was working on getting three trucks to Stalloy to pick up the scrap. He said he was not sure it would happen that day, but he would let her know when he found out.

{¶11} Ms. Peck testified that when she got off the phone, she told her operations manager, Dennis Morley, to write up the shipping tickets because she had just sold the carbide they had for sale.

{¶12} Mr. Morley testified he was aware of Kennametal's 1,000-pound weight limitation. He asked Ms. Peck if they needed to re-package the carbide in 1,000-pound drums, but Ms. Peck indicated that shipping the carbide in the 2,000-pound containers was acceptable to Kennametal.

{¶13} Martha Henson, scrap buyer for Stalloy, testified for the defense. On cross-examination, she testified she overheard Ms. Peck's end of her telephone conversation with Mr. Burns. Ms. Henson heard Ms. Peck ask Mr. Burns if it would be acceptable to ship the carbide in 55-gallon drums containing 2,000 pounds each.

Immediately after this conversation, Ms. Peck instructed her personnel to ship the 60 barrels of carbide each containing 2,000 pounds, for a total of 120,000 pounds. In its judgment, the trial court found: "Thus one evaluating the testimony would be entitled to infer that Sugar Peck's question to David Burns with respect to 2,000 pound drums was answered by him in the affirmative."

{¶14} Ms. Peck testified that on Monday, October 20, 2008, and Tuesday, October 21, 2008, the trucking company Kennametal hired arrived at Stalloy and picked up the carbide. Stalloy's personnel loaded the carbide onto the three trucks, and it was thereafter delivered to a Kennametal facility in North Carolina.

{¶15} Ms. Peck testified that during the week of October 20, 2008, the price of carbide dropped "like a rock" due to the economy. On Wednesday, October 22, 2008, Kennametal's trucking company called Ms. Peck, and told her that Kennametal had received the first two truckloads on Tuesday, but was not accepting the third truckload.

{¶16} Ms. Peck called Mr. Burns. He said he had no idea what was going on, but he would call her back. However, Mr. Burns did not return the call. Instead, he sent her an e-mail later that day in which he said he was informed that Kennametal was not accepting shipments this large right now so he had to send the carbide back.

{¶17} Ms. Peck testified she had a conference call with Paul Treml, manager of Kennametal's carbide recycling program, and Mr. Burns' boss, Ron O'Rourke. Mr. O'Rourke said he had no idea why the materials were rejected.

{¶18} Ms. Peck testified that one week later, on October 29, 2008, Tom Barrett of Kennametal sent her a letter saying that Kennametal would not accept Stalloy's shipment because it did not comply with the provision in the terms and conditions requiring that no more than 1,000 pounds of carbide be shipped in any one container. Mr. Barrett's letter also advised Ms. Peck that Kennametal had suspended its carbide recycling program and was not accepting carbide under the program until further notice. This was the first time Ms. Peck was informed there was a problem with the weight of the containers.

{¶19} A few days later, Ms. Peck met with Mr. Barrett at Kennametal's facility in Solon, Ohio. She told him that Mr. Burns had said the drums were fine the way they were. He asked her if she had it in writing and she said she did not. He said, "well, then you have no proof." She said that Stalloy would re-package it and send it back if that was how he wanted it, but he refused her request to cure. Ms. Peck said they both know this has nothing to do with packaging and that Kennametal rejected the shipment because the market price had dropped. Mr. Barrett did not respond to this statement.

{¶20} Thereafter, Kennametal returned the entire shipment. Stalloy eventually sold the material to another purchaser in a series of transactions at an average price of $7.12/pound for a total of approximately $854,400.

{¶21} David Burns, Kennametal's buying agent, testified that Kennametal manufactures and sells metal working tools made of carbide. He was assigned to Kennametal's carbide recycling program, and was the primary contact person to take calls from sellers wanting to sell recyclable carbide. Pursuant to this program, sellers sell scrap carbide to Kennametal, and Kennametal recycles it to make new products. He said that Kennametal started this program because it was less expensive for it to purchase and recycle scrap carbide than to buy the raw materials. He said that, pursuant to the terms and conditions of the carbide recycling program, carbide was to be shipped to Kennametal in closed metal containers and no more than 1,000 pounds of carbide was to be shipped in any one container.

{¶22} Mr. Burns testified that after Ms. Peck told him she had 120,000 pounds of carbide to sell, he called Mr. Treml, manager of the carbide recycling program, asking if he should pursue this. Mr. Treml said yes and told Mr. Burns to quote a price of $12.25/pound.

{¶23} Mr. Burns said he called Ms. Peck back and offered her $12.25/pound, and Ms. Peck agreed. He then e-mailed her a confirmation order. He made arrangements for a truck company to send three trucks to pick up the scrap. He said he did not have any discussion with Ms. Peck regarding the weight of the containers.

{¶24} Mr. Burns sent an e-mail to Ms. Peck saying he was working on getting three trucks to her to pick up the scrap. He said that once he learned when the pick-up would occur, he would e-mail her the bills of lading.

{¶25} Mr. Burns testified that on October 22, 2008, he was instructed by

Kennametal's in-house attorney to contact Ms. Peck and tell her that Kennametal had decided to reject the shipment. He sent an e-mail to Ms. Peck saying he was informed that Kennametal was "not accepting quantities this large right now so * * * we have to send this scrap back. * * * Sorry for the confusion and any problem this may cause."

{¶26} Mr. Burns conceded on cross-examination that, shortly after the return of this shipment, Kennametal suspended the carbide recycling program because in the fall of 2008, the price of carbide went down significantly. He testified the price went from $12/pound in the summer to $4/pound by the end of the year.

{¶27} Thomas Barrett, director of Kennametal's carbide recycling program, testified that on October 28, 2008, he sent a letter to various Kennametal employees saying that, effective immediately, Kennametal was suspending the carbide recycling program. As a reason, he said that "the value of carbide started dropping big last week." The week Mr. Barrett was referring to was the week of October 20, 2008, the same week that Kennametal rejected Stalloy's shipment.

{ΒΆ28} Mr. Barrett also testified that on October 29, 2008, he sent a letter to Ms. Peck, which was prepared by Kennametal's in-house counsel, saying that Kennametal rejected Stalloy's shipment because it did not ...


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