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Source Associates, Inc. v. Mitsui Chemicals America

United States District Court, N.D. Ohio, Eastern Division

June 16, 2017

SOURCE ASSOCIATES, INC., et al., PLAINTIFFS,
v.
MITSUI CHEMICALS AMERICA, et al., DEFENDANTS.

          MEMORANDUM OPINION

          HONORABLE SARA LIOI UNITED STATES DISTRICT JUDGE

         This matter is before the Court on two motions for summary judgment.[1] The first is the motion of defendants Mitsui Chemicals America, Inc. (“MCA”) and Gregory Bushman (in his capacity as an employee of MCA) (“Bushman”) (collectively, the “MCA defendants”) for judgment on the claims asserted against them by plaintiffs Source Associates, Inc. (“Source”) and Conrad A. Mamajek, Inc. (“CAM”) (collectively “plaintiffs” or “Source/CAM”) (Doc. No. 92 [“MCA SJ Mot.”]). Plaintiffs opposed the motion (Doc. No. 99 [“Opp'n MCA SJ Mot.”]), and the MCA defendants filed a reply (Doc. No. 103 [“MCA SJ Reply”]). The second is the amended motion of defendants Bushman (in his individual capacity) and Lewis Breon (“Breon”) (collectively the “Bushman/Breon defendants”) (Doc. No. 94 [“B&B SJ Mot.”]). Plaintiffs opposed the motion (Doc. No. 100 [“Opp'n B&B SJ Mot.”]), in response to which the Bushman/Breon defendants filed an amended reply. (Doc. No. 106 [“B&B SJ Reply”]).

         For the reasons that follow, defendants' motions for summary judgment are granted.

         I. BACKGROUND

         A. Factual

         After this case was removed from the Summit County Court of Common Pleas on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332, plaintiffs were granted leave to file an amended complaint. The first amended complaint (Doc. No. 23 [“FAC”]), brought against defendants MCA, Bushman, [2] Breon, and NXT Phase, LLC (“NXT”), [3]sets forth six claims for relief: against MCA for breach of contract (claim one) and for breach of the covenant of good faith and fair dealing (claim two); against Bushman, Breon and NXT for tortious interference with the contractual and business relationship between MCA and Source/CAM (claim three); against all defendants for tortious interference with contractual and business relationships between Source/CAM and non-parties Complex Chemicals Co., Inc. (“Complex”) and John Brindle Oil and Chem LTD (“Brindle”) (claim four); and against all defendants for unjust enrichment (claim five) and civil conspiracy (claim six).

         The undisputed facts generally underlying all six claims can be briefly summarized as follows.[4] In the spring of 1999, Source and CAM entered into a joint venture for the purpose of selling off-spec viscosity modifier polymer (“VME”) produced by Mitsui Chemicals, Inc. (“MCI”) and Mitsui Elastomers Singapore Pte Ltd (“MELS”). The off-spec VME produced by MCI and MELS was sold to plaintiffs through MCA. Plaintiffs had two customers for this product-Brindle and Complex.

         From 1999 through December 2013, Source purchased off-spec VME from MCA at prices CAM negotiated with MCA for re-sale to Brindle and Complex. MCA drop-shipped the product to Brindle and Complex. Net profits of the joint venture were divided equally between Source and CAM.

         Bushman was an employee of MCA until his retirement on December 31, 2013. He held the position of Director of Business Development, and the sale of prime and off-spec VME was his responsibility. Bushman discussed his retirement plans with his supervisor in the first half of 2013, and recommended that in 2014, MCA utilize his company, NXT, to sell off-spec VME. MCA terminated off-spec VME sales to plaintiffs, effective December 31, 2013, and directed the sale of off-spec VME to NXT, instead.[5]These events triggered this lawsuit.

         B. Procedural

         Bushman (in his individual capacity) and Breon moved to dismiss the claims asserted against them in the first amended complaint for failure to state a claim. The motion was granted in part and denied in part. Source Assocs., Inc. v. Mitsui Chemicals Am., Inc., No. 5:15-CV-215, 2016 WL 828785 (N.D. Ohio Mar. 3, 2016).

         With respect to claim three, the motion was granted as to Breon but denied as to Bushman. As to claim four brought against all defendants, the Court ruled that claim failed to state a claim against Bushman and Breon, and claim four was dismissed as to those defendants. Id. Bushman and Breon's motion to dismiss claims five and six were denied. Id. at *5-6. Finally, the Court declined to resolve the issue of whether plaintiffs' claims are preempted by Ohio's Uniform Trade Secret Act (“OUTSA”), leaving that issue for summary judgment. Id. at *6-7.

         MCA now moves for summary judgment on all claims asserted against the MCA defendants: breach of contract (claim one); breach of the covenant of good faith and fair dealing (claim two); tortious interference with contractual and business relationships between plaintiffs and their customers, Brindle and Complex (claim four); unjust enrichment (claim five); and civil conspiracy (claim six).

         Bushman and Breon seek summary judgment on all claims that survived their motion to dismiss. Bushman seeks summary judgment on claim three (tortious interference with the relationship between plaintiffs and MCA), and Bushman and Breon seek summary judgment on claims five and six.[6]

         II. LEGAL STANDARD

         A. Summary Judgment

         Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).[7] A fact is material if its resolution affects the outcome of the lawsuit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine, and summary judgment is not appropriate, “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The moving party must provide evidence to the court that demonstrates the absence of a genuine dispute as to any material fact. Whether a disputed fact is material is entirely dependent upon the essential elements of each particular claim for which a party seeks summary judgment. See In re Meridia Prod. Liab. Litig., 328 F.Supp.2d 791, 796 (N.D. Ohio 2004) (“In seeking summary judgment, the moving party bears the initial burden of showing an absence of a genuine issue of material fact as to an essential element of the nonmoving party's case.”) (citing Waters v. City of Morristown, 242 F.3d 353, 358 (6th Cir. 2001)). Once the moving party meets this initial burden, the opposing party must come forward with specific evidence showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson, 477 U.S. at 250. The nonmoving party may oppose a summary judgment motion “by any of the kinds of evidentiary material listed in Rule 56(c), except the mere pleadings themselves[.]” Celotex, 477 U.S. at 324. The Court must view all facts and evidence, and inferences that may be reasonably drawn therefrom, in favor of the nonmoving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

         General averments or conclusory allegations of an affidavit do not create specific fact disputes for summary judgment purposes. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888-89, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990). “‘The mere existence of a scintilla of evidence in support of the [nonmoving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party].'” Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989) (quoting Anderson, 477 U.S. at 252).

         The district court's review on summary judgment is a threshold inquiry to determine whether there is the need for a trial due to a genuine factual dispute that must be resolved by a finder of fact because those issues may reasonably be resolved in favor of either party. Anderson, 477 U.S. at 250. Put another way, this Court must determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52; Wexler v. White's Fine Furniture, Inc., 317 F.3d 564, 578 (6th Cir. 2003).

         Summary judgment is required:

against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party bears the burden of proof at trial. In such a situation, there can be no genuine issue as to any material fact, since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is entitled to judgment as a matter of law because the nonmoving party has failed to make a sufficient showing of an essential element of [his] case with respect to which [he] has the burden of proof.

Celotex, 477 U.S. at 322-23 (internal quotation marks and citation omitted).

         B. Choice of Law

         Neither party has advanced any evidence or argument regarding the issue of choice of law applicable to plaintiffs' claims. “Absent an effective choice of law provision, Ohio courts apply the law of the state with the most significant relationship to the contract.” Bruster v. Uber Tech., Inc., 188 F.Supp.3d 658, 663 (N.D. Ohio 2016) (quoting Andrews v. Columbia Gas Transmission Corp., 544 F.3d 618, 623 (6th Cir. 2008) (further citation omitted)). “To assist in making this determination, Section 188(2)(a) through (d) [of the Restatement of Conflicts] more specifically provides that courts should consider the place of contracting, the place of negotiation, the place of performance, the location of the subject matter, and the domicile, residence, nationality, place of incorporation, and place of business of the parties.” Ohayon v. Safeco Ins. Co. of Illinois, 747 N.E.2d 206, 209 (Ohio 2001).

         Both plaintiff corporations are citizens of Ohio, and their principal places of business are in Ohio. (FAC ¶¶ 1, 2.) The oral agreement that plaintiffs allege controls this case was negotiated in Japan, as discussed below. MCA, which performed administrative functions related to the alleged agreement, is incorporated in the State of Delaware, with its principal place of business in New York. (Doc. No. 1 ¶ 8). Bushman is a citizen of New York, and Breon now resides in California. (Id. ¶¶ 9, 10.) During all time periods relevant to this case, however, Breon was an employee of Lubrizol, an Ohio corporation. (See MCA SJ Mot. at 2426.)

         Neither side has briefed the choice of law issue, but both sides apply Ohio law to their analysis. Upon balancing the above factors, the Court finds that Ohio has the most significant relationship to this dispute and, therefore, will apply Ohio law.

         III. ANALYSIS

         A. Claim one-Breach of contract against MCA

         “Under Ohio law, the elements of a breach of contract claim are: (1) the existence of a contract; (2) performance by the plaintiff; (3) breach by the defendant; and (4) damage or loss to the plaintiff as a result of the breach.” V & M Star Steel v. Centimark Corp., 678 F.3d 459, 465 (6th Cir. 2012) (citing, among authorities, Savedoff v. Access Grp., Inc., 524 F.3d 754, 762 (6th Cir. 2008)).

         Plaintiffs claim that there is an enforceable contract between MCA and plaintiffs, requiring MCA to sell off-spec VME to them exclusively and until such time as plaintiffs no longer desire to purchase that product. According to plaintiffs, the alleged contract was formed when Mamajek traveled to Japan as a Lubrizol employee, just before he retired in 1998, in order to meet with MCI executive, Katsuhiko Tasaka (“Tasaka”). During that meeting, plaintiffs claim that Tasaka told Mamajek that MCI had a warehouse full of off-spec VME that it could not sell because of MCI's existing agreement to sell prime VME to Lubrizol, and Tasaka sought Mamajek's help.

         According to Mamajek, he and Tasaka reached an agreement concerning the purchase and resale of off-spec VME. (Doc. No. 68-1 (Deposition of Conrad Mamajek [“Mamajek Dep.”]) at 950-51.) Mamajek agreed to buy MCI's off-spec VME and sell it, with 30-60 day payment terms, at an agreed price (subject to changes in the market). Under their agreement, Mamajek was not obligated to buy a specific amount of off-spec VME, or any at all. (Id. at 952-53.) According to Mamajek, his oral agreement with Tasaka was good for a year and then it was “evergreen” and “kept rolling over every year after that.” (Id. at 952-54.)

         Mamajek testified that, under the alleged agreement, MCI was free to stop selling off-spec VME to Mamajek and Mamajek was free to stop buying the product and, if either took that action, they could not be sued by the other party. (Id. at 954-55.) That said, Mamajek testified that his alleged agreement with MCI was exclusive and, although he was not actually required to purchase any off-spec VME from MCI, MCI could not sell off-spec VME to anyone but Mamajek as long as he lived or wanted to buy the product. (Id. at 956-59.) Source did not have an agreement with MCI regarding off-spec VME, but had an agreement with Mamajek to re-sell the product. (Id. at 1036-38.) Source contends, however, that MCI's agreement survives Mamajek and applies to Source “[f]orever.” (Doc. No. 64-1 (Deposition of Chester Danforth [“Danforth Dep.”]) at 638 (216-17).[8])

         Plaintiffs contend that Mamajek's alleged exclusive agreement with MCI to buy and sell off-spec VME extends to, and obligates, all of MCI's affiliated companies, including MCA.[9] (Opp'n MCA SJ Mot. at 2690.) Plaintiffs argue that MCA has the same obligations as MCI under the alleged contract with Mamajek because: (1) MCA is a wholly-owned subsidiary controlled by MCI (including its performance of the alleged contract between MCI and Mamajek); (2) MCA is a third-party beneficiary to the MCI agreement; and (3) MCA is in privity with MCI. Plaintiffs further argue that MCA is estopped from denying that it owed plaintiffs any obligations under the alleged contract because MCA cannot accept the benefits of the alleged contract, but deny its burdens. (Id. at 2709-2712.) Finally, plaintiffs contend that MCA's alleged obligations extend to Source by virtue of the joint venture between Mamajek and Danforth, and because Source is a third-party beneficiary of Mamajek's agreement with MCI. (Id. at 2710-11.)

         MCA argues that it is entitled to summary judgment on plaintiffs' claim for breach of contract because: (1) plaintiffs cannot show the existence of a contract and, even if they can, the contract is with MCI (who is not a party to this case), and not MCA; (2) any agreement is too indefinite to be enforceable; and (3) any agreement is unenforceable under the statute of frauds. (See MCA SJ Mot. at 2434.)

         All of plaintiffs' arguments regarding MCA's contractual obligations to plaintiffs hinge on the enforceability of the Mamajek's agreement with Tasaka. In the absence of an enforceable agreement between Mamajek and MCI, there is no enforceable agreement against MCA. For the reasons that follow, the Court finds that Mamajek's alleged oral agreement with MCI is not enforceable under Ohio's statute of frauds.

         1. Agreement with MCI unenforceable under Ohio's statute of frauds

         MCA argues that plaintiffs' alleged oral contract with MCI is unenforceable under Ohio Rev. Code § 1302.04(A) because the agreement is for more than $500 in sales of off-spec VME.[10] That section provides:

(A) Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some 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 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 division beyond the quantity of goods shown in such writing.

         “The purpose of the statute of frauds is to prevent unfounded oral contract claims[.]” Copeland Corp. v. Choice Fabricators Inc., 345 F.App'x 74, 77 (6th Cir. 2009) (citation omitted). “While the writing need only ‘afford a basis for believing that the offered oral evidence rests on a real transaction, ' it must satisfy ‘three definite and invariable requirements': (1) it must ‘evidence a contract for the sale of goods, ' meaning it must indicate a contract has been made although the contract itself may be oral; (2) it must include ‘authentication which identifies the party to be charged' and (3) ‘it must specify a quantity.'” Copeland Corp., 345 F.App'x at 76 (citing U.C.C. § 2-201 cmt. 1; see also Columbus Trade Exch., Inc. v. AMCA Int'l Corp., 763 F.Supp. 946, 950 (S.D. Ohio 1991)). The writing must indicate a completed transaction for goods, not a future transaction. Puritan Sys., Inc. v. M. G. Indus., Inc., No. 18093, 1997 WL 775681, at *3 (Ohio Ct. App. Oct. 29, 1997) (citation omitted).

         Plaintiffs do not dispute that § 1302.04 applies to the alleged agreement. There is no dispute that the agreement is oral-there are no faxes, emails, or other written communications with MCI, Tasaka, or his assistant, that state the terms of Mamajek's alleged agreement regarding off-spec VME. (Mamajek Dep. at 1106-1107; see also Doc. No. 92-3 at 2462 (Answer to Request for Admission No. 1).) Thus, the alleged agreement between Mamajek and MCI is not enforceable under § 1302.04(A).

         2. Merchant exception-§ 1302.04(B)

         Even though an oral agreement for more than $500.00 may not be enforceable under § 1302.04(A), an agreement may still be enforceable if it satisfies the requirements of the merchant exception under § 1303.04(B).[11]

         MCA posits that Source, Mamajek, MCA, and MCI are “merchants” within the meaning of the statute. (See MCA SJ Mot. at 2437 n.11.) A “‘[m]erchant' means a person who deals in goods of the kind or otherwise by the person's occupation holds the person out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by the person's employment of an agent or broker or other intermediary who by the agent's, broker's, or other intermediary's occupation holds the person out as having such knowledge or skill.” Ohio Rev. Code § 1302.01(A)(5). In opposing MCA's motion, plaintiffs do not dispute that Source, Mamajek, MCI, and MCA are “merchants” under the statute.

         Section 1302.04(B) provides:

Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of division (A) of this section against such party unless written notice of objection to its contents is given within ten days after it is received.

         In order “[f]or a writing to be ‘sufficient against the sender, ' it must meet the requirements set forth in R.C. 1302.04(A).” Aubin Indus., Inc. v. Smith, No. C-1-04-681, 2007 WL 2626433, at *10 (S.D. Ohio Sept. 6, 2007).

First, the writing must be signed by the party to be charged. Puritan Systems, Inc. v. M.G. Industries, Inc., 1997 WL 775681, *2-4 (Ohio App. 9 Dist., 1997). Second, the writing must indicate that there has been a completed transaction for goods, not a future transaction. Id. Third, the writing must state the quantity of goods involved. In the case of a requirements contract, a writing indicating that a buyer would get its supply of a product from the seller and giving a definite time frame to the agreement may be sufficient to fulfill the quantity term requirement.

Id.

         Whether a confirmatory writing is sufficient against the sender is a question of law. Puritan Sys., 1997 WL 775681, at *3 (citation omitted); see also Carcorp, Inc. v. Chesrown Oldsmobile--GMC Truck, Inc., 823 N.E.2d 34, 39 (Ohio Ct. App. 2004) (“The issue whether appellant's breach of contract claim is barred by R.C. 1301.12 [(statute of frauds for personal property)] . . . was properly before the trial court for determination as a matter of law.”).

         Plaintiffs contend that both MCI and MCA confirmed the oral agreement between Mamajek and Tasaka by an email on July 25, 2012 from Bushman (an MCA employee) to Mamajek, which states:

Tokyo has confirmed that you are the only outlet for off spec VME. They are very concerned about potential confusion in market and are ...

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