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Hitachi Automotive Systems Americas, Inc. v. TI Automotive Ligonier Corp.

United States District Court, E.D. Kentucky, Central Division

April 26, 2019

HITACHI AUTOMOTIVE SYSTEMS AMERICAS, INC., Plaintiff,
v.
TI AUTOMOTIVE LIGONIER CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER

          JOSEPH M. HOOD SENIOR U.S. DISTRICT JUDGE.

         This matter was recently transferred to the undersigned because it is related to another matter pending before this Court, Hitachi Auto. Sys. Am., Inc. v. TI Auto. Ligonier Corp., No. 5:18-cv-438-JMH-MAS. In the above-captioned action, Plaintiff Hitachi has filed a motion for a temporary restraining order (“TRO”) and preliminary injunction. [DE 3]. Hitachi seeks a court order requiring TI Ligonier to immediately resume production and shipment of certain parts pursuant revised design specifications. [DE 3-1 at 20-21, Pg ID 81-82].

         After reviewing the motion and accompanying materials, the Court does not have sufficient information to demonstrate that Hitachi will suffer immediate irreparable harm without an ex parte TRO. As a result, Hitachi's motion for a TRO is DENIED at this time.

         Still, the Court will withhold consideration of Hitachi's motion for a preliminary injunction until a hearing may be held. As such, a MOTION HEARING on the motion for preliminary injunction [DE 3] is scheduled for Wednesday, May 1, 2019, at 2:00 p.m., subject to intervening orders of the Court.

         I. Factual & Procedural Background

         Hitachi Automotive manufactures automotive systems for major automotive manufacturers. [DE 3-1 at 3, Pg ID 64]. To that end, Hitachi has multiple contracts with TI Ligonier for the supply of automotive parts. [Id.]. Two of those requirement contracts appear to be relevant to the instant motion.

         On February 26, 2016, the parties entered into Requirements Contract No. B015833 (“Gen-1 Requirements Contract”) where the TI agreed to manufacture and supply 100% of Hitachi's requirements for Gen-1 LFY LH Rail parts. [DE 3-1 at 4, Pg ID 65; DE 3-2 at 2, Pg ID 85]. Then, on August 4, 2016, the parties entered into Requirements Contract No. B015894 (“.675T Requirements Contract”) where TI agreed to manufacture and supply 100% of Hitachi's requirements for .675T Bare Fuel Rail parts. [DE 3-1 at 4, Pg ID 65; DE 3-3 at 2, Pg ID 87]. Hitachi asserts that both parts are critical components in Hitachi's fuel rail systems.[1]

         A “special note” at the bottom of the contracts expressly limits the requirements contracts to the terms stated in the contracts themselves “and the terms and conditions of purchase set forth in Hitachi Automotive Systems Americas, Inc.'s, Supplier Handbook.” [See DE 3-2; DE 3-3 (emphasis omitted)]. Pursuant to the terms and conditions, time is of the essence, and TI is obligated to manufacture and deliver the parts to Hitachi on the delivery date, in conformity with specific engineering requirements, and for the contractually agreed price certain per part. [DE 3-1 at 5, Pg ID 66].

         But the present dispute relevant to this motion is about design changes to the parts that Hitachi claims it is contractually permitted to make. Section 15.9 of the terms and conditions says,

These terms may be modified only in writing signed by authorized representatives of buyer and supplier. However, buyer may, at any time, by written change order, make changes in: . . . (B) the drawings, designs or specifications applicable to the goods or services covered by this order. . . . If such changes materially affect the time for performance, the cost of manufacturing the goods, or the costs of furnishing services, buyer will make an equitable adjustment in the purchase price or the delivery schedule or both. Any dispute with respect to an equitable adjustment shall not relieve seller of its obligation to perform in accordance with a written change order.

[DE 3-4 at 11, Pg ID 98].

         According to Hitachi, General Motors (“GM”) mandated a change in specification pertaining to the parts at issue through an Engineering Work Order (“EWO”) in November 2018. [DE 3-1 at 6, Pg ID 67]. To effectuate these mandated changes, Hitachi claims that it notified TI Ligonier of the requested specification changes on December 13, 2018. [Id.]. According to Hitachi, the parties worked together for several months to implement the EWO change and eventually reached a solution to the specification change that was ready to be submitted to GM for testing and approval. [Id.].

         Subsequently, Hitachi claims that they submitted a request for quotes to TI regarding additional costs for the parts based on the change in specifications.[2] [Id.]. Hitachi claims that TI only responded to the request for quote for the .675T Bare Fuel Rail parts, as evidenced by an email from Scott Hacias, Senior Manager of Business Development at TI, and that the offered quote was 11% higher than the original price per part. [DE 3-1 at 7, Pg ID 68; DE 3-5 at 4-5, Pg 104-05]. Hacias's email also provided a lead time for the prototype of six to seven weeks and a production lead time of fourteen weeks. [DE 3-5 at 4-5, Pg ID 104-05].

         On April 8, 2019, Anne Wells, a Hitachi Procurement Manager, followed-up on the quoted price, stating in part, GM is pushing hard for a cost breakdown for quotes (see summary below).

The quote is much higher than expected and we need a cost breakdown to better understand the cost drivers so that we can better explain.
It seems they are unwilling to wait until Scott's return next week and have demanded that we escalate which is the cause for this email. If there any way you would have someone that could support us in completing the attached worksheet in support of the submitted quote?

[DE 3-5 at 3-4, Pg Id. 103-04].

         Then, relations apparently soured. In response to Hitachi's request for a cost breakdown, Todd Pontillo, a TI employee, responded to Wells's email and said,

As a general matter, Hitachi has not demonstrated any willingness to work with, or have a collaborative or cooperative partnership with, TI. As such, TI is not interested in expanding our commercial relationship with Hitachi in any way.
TI withdraws its prior engineering estimate for this new product design/specification and will not be providing any further estimates or quotes. Instead, we are only willing to supply the product in accordance with current contract specifications.

[DE 3-5 at 3, Pg ID 103].

Wells responded on April 11, 2019, saying in relevant part, I am sure you are aware that this is not an expansion of business, however, it is for contracted business that ...

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