United States District Court, N.D. Alabama, Middle Division
L. MAZE UNITED STATES DISTRICT JUDGE
Butcher Industrial Finishings, Inc. (“Butcher”)
shuttered its business in March 2017, (at least) two of its
partners were left holding the bag: plaintiff RPG Receivables
Purchase Group (“RPG”) and defendant WKW Erbsloeh
North America (“WKW”). There is no genuine,
material dispute that WKW holds the heavier bag of losses;
thus, WKW is entitled to summary judgment.
a Pell City, Alabama, business that supplies car parts to BMW
for use in BMW's X5 SUV. Before 2016, WKW finished
certain trim pieces by using a “black anodized”
process. BMW, however, preferred a black painted finish and
was willing to pay more for painted parts. WKW was not
equipped to paint the pieces; so, in January 2016, WKW
contracted with Ontario-based Butcher to receive WKW's
unfinished trim pieces, paint them black, and then return
them to WKW for ultimate shipping to BMW (“the Supply
Agreement”). Relevant here, the Supply Agreement
required Butcher to (a) ensure that it could timely produce
the agreed-upon capacities of painted parts (see
Supply Agreement §8.1), and (b) give WKW six
months-notice before terminating the Agreement. See
Supply Agreement §10.1.
December 2016, Butcher assigned its accounts receivable to
RPG, meaning that RPG collected the monies owed Butcher under
the Supply Agreement.
March 8, 2017-without the requisite six-month notice-Butcher
informed WKW that it was shutting down its operation. Butcher
invoiced WKW in the amount of $468, 991.99 for the work it
had performed up to point.
Butcher's assignee, RPG filed the present case to recover
the $468, 991.99 that Butcher invoiced WKW. In defense, WKW
claims that it lost more than $1.4 million due to
Butcher's abrupt closure and that the Supply Agreement
allows WKW to “set off” its losses from the
amount it was invoiced-meaning that WKW owes Butcher nothing.
Both parties have moved for summary judgment.
state law governs the Court's review of the Supply
Agreement. See Supply Agreement § 12.1 (choice
of law provision).
judgment is appropriate when there is no genuine issue of
material fact and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(a). A dispute is genuine
only “if the evidence is such that a reasonable jury
could return a verdict for the non-moving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
key points are undisputed: (1) WKW owed Butcher $468, 991.99
for work done before the shutdown; (2) against that amount,
the Supply Agreement allows WKW to set-off the amount of
monies WKW validly claims against Butcher; and, (3) the
Supply Agreement's terms apply to RPG, as Butcher's
assignee. See Doc. 36-1 at 30, §16(d)
(“Buyer may set-off against amounts payable to Seller
any indebtedness or claim which Buyer or its affiliates may
have against Seller or its affiliates”); Ala. Code
§ 7-9A-404(a)(1) (“the rights of an assignee are
subject to all terms of the agreement between the account
debtor and assignor”).
result, this case boils down to how much WKW may set off
against RPG's claim for $468, 991.99. WKW claims that the
undisputed facts establish a set-off that exceeds $1.4
million. RPG disagrees. Because the parties' motions seek
summary judgment, the pertinent question is therefore: Is
there a genuine issue of material fact whether WKW is
entitled to set off more than $468, 991.99?
motion for summary judgment, WKW claims that it presented
undisputed evidence regarding the following claims against
Replacement-related âcover costsâ
Lost profit (i.e. monies lost during the period that
WKW reverted to the black anodized process)
Tooling Costs (i.e. monies WKW spent to fabricate
tooling for use with Butcherâs replacement)
Research and Development Costs (i.e. monies spent to
ensure that parts finished by Butcherâs replacement
met BMWâs standards)
Travel costs (i.e. cost of travel to Butcherâs
Claims predating Shutdown
Defective parts (i.e. monies BMW deducted from
payments to WKW due to defective parts)
Open chargebacks (i.e. parts that WKW received from
Butcher that did not meet WKW specifications)
Unpaid shipping costs (i.e. WKWâs settlement of
shipping costs Butcher failed to pay a third-party
Unfinished parts (i.e. parts left at the Butcher
plant that could not be sold to BMW)
Shipping of usable parts (i.e. parts left at the
Butcher plant that could be anodized and sold to BMW)
See Doc. 35 at 7-12 (citing Doc. 36-1 at 33
(Kroell Declaration, Attachment C)). RPG counters that each
of these amounts is disputed, see Doc. 37 at 5-10,
and that trial is necessarily to determine the proper
the Court must determine whether RPG's arguments against
a set-off present a genuine issue of material fact. As
previously stated, a dispute is genuine only “if the
evidence is such that a reasonable jury could return a
verdict for the non-moving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Court begins and ends its inquiry with the largest category
of WKW's set-off claims: $1.059 million of profits lost
due to WKW's temporary reversion to anodizing parts. As
detailed below, if a reasonable jury viewed the evidence,
that jury could not return a verdict in favor of RPG
because-even considering RPG's arguments/disputes-the
amount of monies that WKW lost as a result of Butcher's
breach far exceeds the $468, 991.99 that WKW owed Butcher.
There is no genuine issue of material fact that WKW is
entitled to a set-off that exceeds $468, 991.99.
undisputed that when Butcher terminated the Agreement in
March 2017, WKW had to find a replacement supplier to paint
its trim pieces, so that WKW could meet its contractual
obligations with BMW. It is also undisputed that, while WKW
searched for a new paint supplier, BMW agreed to allow WKW to
revert to the less-desirable “black anodized”
process, which WKW could perform at its own facility, but BMW
would pay WKW less for each anodized part than BMW had been
paying WKW for each painted part.
law allows WKW to set off the difference between (a) what WKW
would have made if Butcher had continued painting WKW's
trim pieces and (b) what WKW actually made under its
post-termination agreement with BMW to produce black anodized
pieces. See Ala. Code § 7-2-712. WKW has
produced testimonial and documentary evidence from its
controller, Thomas Kroell, that this difference-which RPG
labels “lost profits” and WKW calls actual,
direct “cover costs”-equals $1, 059, 814.88.
See Doc. 36-1 (Exhibit A and attachments).
disputes WKW's lost profit number for various reasons,
which the Court addresses below.
There is no genuine issue of material fact whether WKW
materially breached its agreement with Butcher before
first argues that Alabama law bars WKW from claiming a
set-off because WKW materially breached the Supply Agreement
in two ways before Butcher breached the Agreement by shutting
down operations. See Doc. 37 at 15-16
(citing Blake v. Bank of Am., N.A., 845 F.Supp.2d