Almetals, Inc. v. Wickeder Westfalenstahl, Gmbh

67 UCC Rep. Serv. 2d 562 (2008)

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Nature of the Case

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Facts

Almetals (P) is a Michigan corporation. P provides distribution and other services for metals in the automotive and other industries. Wickeder (D) is a German Corporation. D is a global supplier of semi-finished clad materials, including clad metal. The clad metal that D provides P is steel or stainless steel 'cladded' with another metal, such as aluminum, copper, brass, or nickel. The clad metal that D supplies to P is 'unique.' P and D first established a joint business relationship to sell and market clad metal in North America. P was granted the exclusive right to sell D's clad metal in North America (with limited exceptions) and required D to supply such product. P also performs value-added services (including slitting, recoiling, inspection, labeling, warehousing, and logistics) before distributing the clad metal to customers in North America. P spent a substantial amount of money and time developing a market for D's clad metal in North America. Both realized that once the customers began using clad metal in long-term programs, the customers would require that specific clad metal for the duration of the program. The P-D contract was for a term of seven years and included an additional ten-year commitment for existing customer orders and programs under what was called the Customer Order and Protection Clause. P's efforts have been hugely successful. Almetals initially purchased a few hundred thousand dollars worth of clad metal, but in 2008 its purchases may reach eight or nine million dollars. Most of Ps' customers require P to carry at least 16 weeks of inventory to protect against any interruption in the just-in-time supply chain. Once a product such as D’s is designed in it is almost impossible or it is very difficult to acquire a new source of supply. In 2000, D purchased a metal distributor in the United States, which could replace P as a distributor. In early 2006, D notified P that it was terminating the Contract for new business, effective March 31, 2007. D also purchased its closest competitor, Engineered Material Solutions (EMS), which was formerly a division of Texas Instruments. D began imposing increasingly oppressive payment terms on P for the existing business that survived under the Customer Order and Protection Clause. Payment terms were changed from 60 days after receipt of the material to 60 days after invoice. D then imposed COD terms, in exchange for a 1% price reduction. P has always paid D on time. There was no change in P's financial condition to warrant the imposition of COD terms. There are no other suppliers in the world known to make the clad metal that P purchases from D. Ps' customers have tried, but have been unable to find an alternative source to supply the clad metal from D. D has admitted that there is no possible alternative source of supply for 40% of the business and, with regard to the remaining 60% of the business, it does not know of another supplier currently making the product nor whether another supplier can actually make the product. P sought an injunction to D from charging COD. The court found that D violated the contract and issued a TRO (temporary restraining order) in P’s favor. P now seeks a permanent injunction.