Opinion
No. 8:97CV608.
March 2000.
MEMORANDUM AND ORDER
This matter comes before the Court on the defendant's motion for summary judgment (filing No. 31). In support of its motion for summary judgment, the defendant has filed an index of evidence (filing No. 32), a supplemental index of evidence (filing 53), and has submitted a brief and reply brief. In opposition to the motion for summary judgment, the plaintiff has submitted an index of evidence (unfiled), a supplemental index of evidence (filing 55) as well as opposition and sur-reply briefs. Following the Court's review of the pleadings, evidence and arguments, the Court finds no genuine issues of material fact. Therefore, the defendant is entitled to summary judgment as a matter of law.
I. Standard of Review
A court ruling on a motion for summary judgment must view all the facts in the light most favorable to the nonmoving party and give the nonmoving party the benefit of all reasonable inferences that the court can draw from the facts. Fed.R.Civ.P. 56(b)(c). The moving party bears the responsibility to identify those portions of the record which illustrate the lack of a genuine issue of material fact. If a moving party carries this burden to show the nonexistence of a material fact, the nonmoving party must go beyond the pleadings to the evidence and specify facts establishing a genuine issue of material fact for trial.
II. Factual Background
In 1988, International Business Machines ("IBM") began negotiating with various companies, including American Shizuki Corporation ("ASC"), for the manufacture and purchase of 2.5mm film capacitors for IBM mainframe computers. In April 1988, IBM sent a request for information ("RIF") to ASC to determine ASC's ability to supply a film capacitor replacement for the ceramic decoupling capacitor used by IBM. The RFI covered years 1989-1993 in quantities ranging from one million to 50 million pieces. In July 1988, ASC responded to the RFI and provided pricing and a plan to IBM. On September 2, 1988, ASC and IBM entered into a Standard Ordering Agreement ("SOA"), which set forth the terms and conditions under which IBM would purchase capacitors manufactured by ASC. The express language of the SOA did not obligate IBM to purchase any capacitors from ASC.
On February 1, 1989, K. A. Wing, an associate buyer of IBM, wrote ASC's employee, A. Tompkins, expressing "the possibility of IBM purchasing 15,000,000 Plastic Capacitors per two consecutive twelve (12) month periods." The letter also stated that "[t]his quantity is a forecast only, and represents no commitment by IBM to purchases these quantities during or after this time period." (Filing 32, Def.'s Index of Evidence, at Ex. 4, bate stamp # 003037). IBM buyer Richard Guiliani testified in his deposition that the purpose of Ms. Wing's letter was to assure ASC that IBM was "serious about the program." Plt. Ex. 1, Guiliani Dep. 30:5-8. Guiliani further testified that IBM knew that in order for ASC to supply IBM with the forecasted number of film capacitors, ASC would need to make an estimated $2.1 million capital expenditure to acquire manufacturing equipment. Id. at 25:21-25 and 26:1-5.
After receiving Ms. Wing's letter dated February 1, 1989, Mr. Tompkins spoke telephonically with Mr. Guiliani and expressed reservation about Ms. Wing's letter and also expressed to Guiliani that he wanted greater assurances from IBM before ASC made an estimated $2.1 million capital expenditure on equipment to manufacture the 2.5mm film capacitors. Id. at 30:7-14. Following this conversation, Guiliani testified that he prepared a letter addressed to R. Silverstein at ASC for R.T. Cannone, an IBM Senior Commodity Purchasing Manager, to sign. Id. at 31:3-8. The signed letter dated February 22, 1989, stated that based on previous conversations and correspondence concerning plastic film capacitors, "[i]t is our intent to order from American Shizuki 30,000,000 capacitors . . . over a minimum period of two years, contingent upon the following conditions: 1. That IBM's requirements for these capacitors continue; 2. Providing that American Shizuki demonstrates an ability to provide quality components and pass IBM's qualification plan (to be defined); and 3. That American Shizuki meet the terms and conditions of IBM's Request for Information (RFI), and the response to that RFI." Plt. Ex. 4, bate stamp #002179.
On March 14, 1989, Mr. Silverstein, ASC's Executive Vice President and General Manager, wrote Mr. Cannone, acknowledging and thanking him for his letter dated February 22, 1989. Mr. Silverstein's letter also notified Mr. Cannone that ASC was moving forward "to support IBM's requirements for the 2.5 millimeter film decoupling capacitors." Plt Ex. 4 bate stamp document #002184. Mr. Guiliani testified that as of March 1989, he understood that ASC was going forward to acquire manufacturing equipment for the production of 2.5mm film capacitors. Guiliani Dep. 33:25; 34:1-6. In May 1989, ASC placed purchase orders for both the assembly equipment and element preparation equipment, expending approximately $2.6 million. Plt. Ex. 5, Affid. of Steven Zimmerman at 2.
After acquiring the necessary manufacturing equipment but before commencing production, IBM unilaterally made several changes to the design of the 2.5mm film capacitor and directed ASC to make the changes prior to full production. These requested changes required ASC to retool the manufacturing equipment and delayed the commencement of manufacturing. The cost of retooling manufacturing molds was paid, in part, by IBM, but a substantial part of the cost was to be amortized over the per piece price of the capacitors. Plt. Ex. 4, documents bate stamped #002008, #002007, #002710 and #003150. In December 1990, IBM approved the design changes and production of the capacitors commenced to "ramp up" in February 1991.
On December 6, 1991, Jim Butler from IBM wrote Bob Harris, ASC's Vice President of Operations, requesting that ASC add a second shift manufacturing operation to meet IBM's needs of 18 plus million pieces of film capacitors for the 1992 fiscal year. Plt. Ex. 5 bate stamped # 002083. On December 11, 1991, Mr. Harris responded in writing to Mr. Butler regarding the second shift start up of the 2.5mm line. Plt. Ex. 5. In his letter, Mr. Harris stated in part:
Over the last four months, August 91 — November 91, we have shipped IBM to request $259,999 worth of product. During this same time period we have produced $431,000 worth of product and at this time have some 1,200,000 pcs of product on inventory.
Continuing this trend of producing considerably more product than we sell is not good business for ASC. We must determine a method for IBM to support this increase in a timely manner.
Please be assured of our intentions of supporting IBM with this and other products, however we must determine the process to attain this support in a manner that is not detrimental to either IBM or ASC.
Id.
A week later, on December 18, 1991, Grace Sagan-Cooksey, an IBM Base Products Project Manager, wrote a letter of intent to Mr. Harris. In the letter, Sagan-Cooksey wrote in part:
The purpose of this letter is to confirm IBM's intention of ordering more than American Shizuki Corporation's (ASC) existing manufacturing capacity for 2.5mm capacitors, which is approximately 18 million pieces for 1992. Accordingly, IBM is requesting that ASC tool up to meet the following total annual projected IBM requirements:
• 1992: 18 to 30 million pcs
• 1993: 35 to 50 million pcs
• 1994: 35 to 50 million pcs.
IBM's subsequent purchase of any such additional volumes from ASC will be determined by negotiations between the parties based upon IBM's forecasted 2.5mm capacitor requirements for that year together with ASC's competitiveness in the following areas as well as meeting IBM's requirements:
• Price
• Quality/Reliability
• Leadtimes, Reschedules and cancellation provisions
• Ship/Delivery Performance
• Willingness to work with IBM to meet IBM's needs
IBM plans on issuing a VPA to ASC during the first quarter of 1992 with a start date of April 1, specifying a 2.5mm capacitor anticipated ordering quantity (AOQ) of 18 to 30 million maximum capacity, whichever is less, for delivery by June 30, 1993.
ASC shall be financially responsible to put in place any additional 2.5mm capacitor manufacturing capacity in expectation of fulfilling IBM's prospective future requirements as indicated above.
. . . I would appreciate ASC indicating the additional annual 2.5mm capacitor capacity you expect to put in place as well as your target date for doing so.
. . . .
Plt. Ex. 4, document bate stamped #002338.
When asked at his deposition about the above letter, James Butler, Jr. explained that he had drafted the letter which Sagan-Cooksey signed. He explained that the letter was "a request by American Shizuki because they were concerned about what was happening with the program. At that particular point, they needed some reassurance that the program was still valid." Plt. Ex. 3. Butler Dep. 26:1-6. Butler testified that he probably did not discuss his forecasts with the engineering department. Id. at 31:9-12.
Despite Butler's letter of request for a second manufacturing line and Sagan-Cooksey's letter of intent to purchase tens of millions of 2.5mm film capacitors, ASC could not justify setting up a second production shift based on IBM actual volume purchases to date. Filing 53, Harris Dep. at 31:8-10 and Tompkins Dep. at 65:9-11.
Sometime thereafter, IBM made another change to the design of the capacitor, which required ASC to retool the manufacturing equipment causing additional cost expenditures and a ten-month production delay. ASC completed and IBM approved retooling the manufacturing mold in January 1993. On January 15, 1993, ASC and IBM signed a Fundamental Ordering Agreement. Attached to Def's Answer, Filing 5. In March 1994, IBM advised ASC that it would no longer purchase 2.5mm film capacitors from ASC at the volume levels previously represented. Plt. Ex. 5, Zimmerman Affid. at 3. From 1990 to March 1994, IBM purchased a total of 14,344,000 capacitors from ASC. Id. In June 1997, IBM advised ASC that it would no longer purchase 2.5mm capacitors from ASC.
On December 16, 1997, the plaintiff filed a complaint alleging claims of promissory estoppel, negligent misrepresentation and fraudulent representation, and seeking monetary damages (filing No. 1). The defendant seeks summary judgment on all claims.
III. Discussion
In its complaint ASC alleges that IBM promised and represented to ASC that IBM would initially purchase 30,000,000 2.5mm film capacitors, which were custom-designed for use in IBM mainframe computers. ASC also alleges that IBM promised and represented to ASC that it would have a continuing need to purchase between 18,000,000 and 50,000,000 capacitors from ASC during the years 1992-94 and into the future. IBM's promises and representations were conditioned upon ASC demonstrating to IBM its ability to manufacture the capacitors according to IBM's qualifications and specifications. ASC further alleges that it relied on IBM's representations and promises and in doing so incurred substantial capital costs exceeding $3,000,000 as well as operating losses exceeding $700,000.
Based on these alleged promises and representations and ASC's reliance thereon, ASC contends that an enforceable agreement was created between the parties which was subsequently breached by the defendant causing the plaintiff to suffer damages in the amount of $8,500,000. In addition to its promissory estoppel claim, ASC contends that it relied to its detriment on IBM's negligent and fraudulent misrepresentations.
The Court has carefully reviewed both the initial indices of evidence as well as the supplemental indices of evidence (filings 53 55) filed by the parties. The Court has placed considerable weight on the sworn testimony of two key ASC officers, Robert Harris, former Vice President of Operations, and Allen Tompkins, former National Account Manager for IBM and Regional Sales Manager. Both former ASC officers testified that IBM made no oral or written promises that it would either purchase a specified quantity of 2.5mm film capacitors or that ASC would recover the costs of its capital expenditures. Filing 53, Ex. B, Harris Dep. 26:14-23; 27:6-11, 16-19; 31:22-25; 32:1, 4-7; Ex. C. Tompkins Dep. 62:7-15; 66:2-10. Both Harris and Tompkins testified that all purchases of capacitors by IBM were made through purchase orders. Harris. Dep. 31:14-21; Tompkins Dep. 59:5-12. Harris further testified that he understood that the only direct commitment by a buyer is evidenced by a purchase order or a volume purchasing agreement. Harris Dep. 61:2-5. Furthermore, both Harris and Tompkins testified that IBM never made intentionally false representations to ASC about any matter relating to the 2.5mm film capacitor project. Filing 53, Ex. B, Harris Dep. 64:15-25; 65:1. Based on this undisputed testimony, the Court must grant the defendant's motion for summary judgment on the plaintiff's promissory estoppel and fraudulent misrepresentation claims.
The plaintiff has also brought a claim for negligent misrepresentation. The Nebraska Supreme Court has recognized the tort of negligent misrepresentation. In Gibb v. Citicorp Mortgage, Inc., 246 Neb. 355, 371, 518 N.W.2d 910, 922 (1994), the Nebraska Supreme Court officially adopted the definition of negligent misrepresentation found in Restatement (Second) of Torts § 552 (1977). This section of the Restatement (Second) reads, in relevant part, as follows:
(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Following a review of the applicable state case law, the Court finds two deficiencies in the plaintiff's claim for negligent representation. First, the Court seriously questions whether the defendant corporation qualifies as an entity which is in the business of providing information for guidance to others in their business transactions. The facts of this case are significantly different from cases involving accountants, insurance agents, insurance brokers, and others who are clearly in the business or profession of providing information for the guidance of others. See St. Paul Fire Marine Ins. Co. v. Touche Ross Co., 244 Neb. 408, 507 N.W.2d 275 (1993); Flamme v. Wolf Ins. Agency, 239 Neb. 465, 476 N.W.2d 802 (1991). The instant case involves two sophisticated corporate entities conducting arms-length transactions. In his deposition Tompkins testified that ASC had "lots of activity with IBM" other than the 2.5mm project. Filing 53, Ex. C, Tompkins Dep. 12:13-15.
Even assuming arguendo that the defendant corporation met this first criteria of the Restatement (Second) definition, the plaintiff has failed to meet its burden of establishing the existence of any genuine issue of material fact on the requisite element of justifiable reliance. The plaintiff has failed to present any evidence that ASC relied on any specific oral or written statement, representation, projections, forecasts, letters of intent, etc., supplied by IBM. Harris testified that ASC did not rely on IBM volume forecasts for anything other that to determine whether ASC's raw materials were adequate for future product demand. Harris Dep. 41:16-20. Harris further testified because the IBM 2.5mm capacitor volume forecasts "were never accurate," ASC "never produced any product to these requirements." Id. at 41:21, 42:22-23. As regards the defendant's letter of intent dated December 18, 1991, and signed Grace Sagan-Cooksey, Harris testified that he could not recall anything that ASC did as a result of receiving the letter of intent, nor could he recall any specific follow-up on the letter of intent. Id. at 43:21-25; 44:1-5; and Harris Dep. Ex 17. Additionally, in Tompkins' deposition, he testified that besides discussing the defendant's letter of intent (Harris. Dep. Ex. 17), ASC did not double its production line nor did ASC incur any expense for tooling based on the letter. Tompkins Dep. 65:9-11, 25; 66:1. Moreover, the plaintiff has directed the Court to no evidence establishing that ASC justifiably relied to its detriment upon the defendant's February 1989 written correspondence signed by IBM employees K. A. Wing and R. T. Cannone. Plt. Ex. 4, documents bate stamped #003037 and #002179.
The plaintiff directs the Court to the affidavit of Steven Zimmerman, Controller of ASC, which attests that the actual number of 2.5mm capacitors purchased by IBM between 1990-94 fell far short of IBM's representations. While the affidavit documents a purchase volume and capital expenditures, the Zimmerman affidavit and the exhibits attached thereto do not establish justifiable reliance on IBM representations. To the contrary, the evidence establishes that ASC did not rely on IBM representations. For instance, Robert Harris and Allen Tompkins both testified that ASC did not implement a second 2.5mm film capacitor production line in response to or reliance on IBM's correspondence dated December 1991 requesting ASC to establish a second manufacturing shift. Harris. Dep. Ex. 15; Harris. Dep. 31:8-10; Tompkins Dep. 65:9-11.
IV. CONCLUSION
Based on the evidence presented, the Court concludes that IBM has established the nonexistence of any genuine issues of material fact, and further concludes that ASC has failed to meet its burden of specifying facts establishing any genuine issues of material fact for trial. Accordingly, the Court must grant the defendant's motion for summary judgment.
IT IS HEREBY ORDERED:
The defendant's motion for summary judgment (filing 31) is granted; and
The Clerk of the District Court shall file the plaintiff's index of evidence in opposition to the defendant's motion for summary judgment received on November 12, 1999.
JUDGMENT
In accordance with my memorandum and order filed today, judgment is entered in favor of the defendant and against the plaintiff.