E.C. Styberg Engineering Co, v. Eaton Corp.

492 F.3d 912 (7th Cir. 2007)

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Nature of the Case

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Facts

P invented an I-brake. D was interested in purchasing a large quantity of the product. Employees of P and D began discussions. D sent P an e-mail expressing D's willingness to make a minimum purchase commitment to P in order to amortize P's capital investment. A proposal for a 60,000-unit order was sent by P. The first 13,000 units sold would have an average price of $544.88. The initial price of the units would be $595, but the price would progressively decrease as P tweaked and perfected its manufacturing process. The proposal contained additional conditions, including a re-evaluation of the price and delivery schedule after the first 6,000 units were produced and an additional $31 per unit charge until a certain snap-in coil became available for manufacturing. The proposal requested $343,000 in 'tooling money.' P would begin full production of the I-brakes in six months. D was visiting P and met with its Vice President of Manufacturing. The VP asked for a bigger commitment of 20,000 units. D did not respond to the request but emailed the salesperson about the discrepancy in the needed commitment. On July 29, 1999, D wrote: Enclosed, please find a tooling commitment. . . . With this $293,000 investment Styberg will be able to produce assembly A-6971 at a rate of up to 1,400 units per month, with an approximate lead time of four months. Eaton will purchase a minimum of 13,000 units at an average unit price of $544.88 by July 29th, 2001. Additional requirements will be based on the market competitiveness and product value as the initial 13,000 units are consumed. P spoke with D on the phone and P said thank you; this being confirmation that P would product the units. Employees from both companies participated in a conference call. According to P, the parties to the conference call agreed that, in regard to the 13,000-unit order, P would prepare a schedule for D that detailed the number of units P could produce each month with its present capital. On September 9, 1999, P sent D a production schedule that included a detailed break-down of P's anticipated monthly production capacity for 13,000 units as well as a quote for an initial unit price of $595 plus $31 per unit until the snap-in coil became available. D did not issue a specific purchase order for the 13,000 I-brakes, but P contends that D told him to use an existing purchase order. P did not execute or send D a purchase order acknowledgment for the 13,000-unit order. D notified P that it expected delivery of 240 units. P shipped the units under an existing purchase order, and D paid for the units. D requested another 240 units for shipment, which were to be delivered the following month. Three days later, D canceled the request. P sued D for breach of contract, seeking approximately $3.4 million in damages, which represented P's lost profits and inventory related to the manufacture of 13,000 I-brakes. The district court entered judgment in favor of D. P appealed. The district court characterized the e-mail, telephone, and letter exchanges as evidence of continuing negotiations in which the parties could not agree on key terms like quantity, price, and monthly production volume. Accordingly, it concluded that the parties never formed a contract.