Opinion ID: 175543
Heading Depth: 1
Heading Rank: 1

Heading: The Dispute Between Microplastics and Valeo

Text: The district court granted summary judgment for the insurer, plaintiff-appellee Amerisure Mutual Insurance Company. The relevant facts are undisputed, consisting primarily of the terms of the relevant insurance policies and the contents of various pleadings in the underlying lawsuit between the unhappy buyer and defendant-appellant Microplastics, Inc. Microplastics manufactures insert molding components, which are plastic pieces used to manufacture various mechanical devices. The unhappy buyer in this case was Valeo Security Systems. In 2004, Valeo began buying Microplastics components and used them to manufacture automobile door latch assemblies that it sold to automobile manufacturers (referred to in industry jargon as original equipment manufacturers or OEMs). The supply relationship between Microplastics and Valeo was governed by purchase orders that included quality specifications and prices. [1] The relationship soured quickly. By October 2004, one unidentified OEM began complaining to Valeo about problems with the door latch assemblies. It became clear to all involved that Microplastics was selling Valeo defective parts. Microplastics has forwarded some creative hypotheses for how these defects manifested themselves, but the only details with any factual support in the record are found in a February 2005 email from Valeo to Microplastics president Mike Roberts identifying the following defects: The issue is that when we launched with production parts from Microplastics we had no idea your process was allowing some parts which: 1) The potting material did not fill the voids under the terminals. 2) The potting was not adequately cured to prevent water intrusion. 3) The potting material did not bond to the upper housing. In addition the bus bar was not over-molded as it should have been, limiting protection, and elevating the effect of every issue above. Each of these is the direct result of your process which you must test and qualify to assure compliance, not Valeo. R. 37, Ex. A ¶¶ 31, 32. An internal email from Roberts to Microplastics managers a few months earlier seemed to acknowledge both the problem and Microplastics' responsibility for it: [W]e have to get rid of Valeo . . . . I am convinced that this piece of crap is a major recall in the making. It will take a while to make it go away but it NEEDS to go away . . . . I apologize for being greedy and wishful thinking that Valeo would turn out [okay]. Nothing comes from being greedy and stupid. I was both. Saw the train wreck coming two years ago but kept it going because we needed the work. Next time I do that somebody, or all of you, slap me. R. 37, Ex. G ¶¶ 11-13. These problems remained unresolved by August 2006, when Valeo sent a demand letter to Microplastics formally asserting that Microplastics had breached the quality and engineering specifications of the purchase orders. The letter stated that Valeo had chosen to terminate and cancel the Purchase Orders for cause and said that Valeo would apply a debit of about $1,300,000 to offset the damages incurred by Valeo due to Microplastics' breaches.