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Whitesell Corp. v. Electrolux Home Products, Inc.

United States District Court, S.D. Georgia, Augusta Division

May 25, 2018




         Defendant Husqvarna Outdoor Products, Inc. ("Husqvarna") has filed a "Motion for Partial Summary Judgment Regarding the Identity of the Remaining Course of Performance Parts in Suit and Computation of Their Contract Duration Terms." (Doc. No. 897.) The matter came before the Court for oral argument on April 17, 2018.[1] Based upon the arguments of counsel at the hearing and in brief, and upon a thorough review of the record, the Court hereby GRANTS IN PART and DENIES IN PART Husqvarna's motion for partial summary judgment as explained below.

         I. BACKGROUND[2]

         On December 14, 2000, Husqvarna's predecessor in interest, Electrolux Home Products, Inc. ("EHP") entered into a Strategic Partnership Agreement ("SPA") with Plaintiff Whitesell Corporation ("Whitesell"), whereby EHP agreed to buy-all of its current and future requirements for certain goods from Whitesell during the pendency of the SPA, and Whitesell agreed to supply all of Husqvarna's requirements for such goods.[3] (See Doc. No. 568, Ex. 1, Supply Agreement § 2.0.) The initial term of the SPA was January 1, 2001 through April 1, 2008. (Id. § 3.0.) Thus, Husqvarna was obligated to purchase and Whitesell was obligated to sell 100% of Husqvarna's requirements for covered parts from January 1, 2001 to April 1, 2008. Recognizing that Husqvarna had to wind down its existing relationships with other suppliers, the SPA gave Husqvarna approximately 2.5 years to transition the covered parts to Whitesell, providing that "[f]ailure to complete the transition [of parts by June 30, 2003] shall proportionally extend the initial term of [the SPA] ." (Id. § 3.1.) The scope of goods subject to the SPA was to be identified on an attached Exhibit B.

         The parties did not create an Exhibit B. Nevertheless, the parties began to transition certain parts under the terms of the SPA. However, a dispute arose between them regarding whether the SPA covered certain parts for lawn tractors manufactured by Husqvama at its Orangeburg, South Carolina facility. This dispute led to the filing of this lawsuit in 2003.

         On May 23, 2003, the parties executed a Settlement Memorandum through which they agreed to define the scope of goods subject to the SPA through a "clarified Exhibit B." (See Doc. No. 568, Ex. 2, Settlement Memorandum ¶ 1.) Further, the parties agreed to include "Brunner and/or wireform parts" in their supply relationship, which were to be listed on a newly created Exhibit B-l. (Id. ¶ 3.) The initial term of the parts subject to the Settlement Memorandum was December 31, 2003 to November 1, 2008, [4] or 58 months. (Id.) Thus, the termination date for all parts listed on the clarified Exhibit B and newly created Exhibit B-l was to be November 1, 2008. Similar to the SPA, the parties contemplated that transition of the parts would not be immediate but instead set the transition date as December 31, 2003. Important to the instant motion, the Settlement Memorandum provided that, for the parts that were not transitioned by December 31, 2003, the initial term for those parts would be "proportionally extended by the time it takes to fully transition" those parts. (Id.) This will be referred to herein as the "proportional extension provision."

         Just as the parties never created the initial Exhibit B, they never created the clarified Exhibit B or the Exhibit B-l referenced in the Settlement Memorandum.

         In 2005, the parties entered into a Consent Order "to preserve and govern the rights of the parties prior to this Court's final judgment on the parties' disputes regarding the interpretation, enforcement, validity, and meaning of the parties ['] Settlement Memorandum and Supply Agreement." (Doc. No. 30, Order of May 17, 2005, ¶ 7.) The Consent Order extended the transition deadline to December 31, 2005, for "all wireform products used or to be used by EHP's Orangeburg, South Carolina, McRae, Georgia, or any future or alternative locations or production facilities within North America" and for "all parts that were to be transitioned under the Settlement Memorandum." (Id. ¶ 4.) Notably, the Consent Order did not identify the specific parts that were to be transitioned under the Settlement Memorandum. It also did not change the initial term for covered parts that was provided for in the Settlement Memorandum, i.e. January 1, 2004 to November 1, 2008.[5]

         On October 14, 2008, this Court concluded that the subject matter of the Supply Agreement between the parties (i.e., the scope of "goods") was too indefinite to be enforced. (Order of Oct. 14, 2008, Doc. No. 212, at 22.) The Court, however, determined that the Settlement Memorandum gave rise to four enforceable part categories, one of which is the Course of Performance category. Because the initial duration term of the Settlement Memorandum was seemingly about to end, the Court invited the parties to present argument regarding "the date of termination of the parties' contractual obligations." (See Orders of October 14, 2008 and October 31, 2008, Doc. Nos. 212 & 216, respectively.)

         Thereafter, Defendants EHP and Husqvarna filed separate motions for partial summary judgment concerning the duration term of the parties' contractual obligations. (Doc. Nos. 225 & 260.) On March 25, 2010, the Court resolved the motions, reaching three legal conclusions respecting the contract duration terms of covered parts:

1. The Settlement Memorandum's duration term provision (January 1, 2004 to November 1, 2008) is applicable to the four enforceable part categories as determined by the Order of October 14, 2008. Thus, for certain covered parts, the termination date of the parties' contractual obligation was November 1, 2008.

(See Order of March 25, 2010, Doc. No. 3 06, at 13, adopted in the Order of March 25, 2010, Doc. No. 307, at 7.)

2. The termination date for covered, active parts transitioned to Whitesell prior to December 31, 2003, as well as those parts which first came into use by Husqvarna after that date and were then immediately transitioned to Whitesell, is November 1, 2008.

(See Order of March 25, 2010, Doc. No. 307, 8-9.)

3. Husqvarna's obligation to purchase parts in use prior to December 31, 2003, but which were not transitioned to Whitesell until after that date, was properly terminable 58 months after the part was fully transitioned to Whitesell. Thus, each of these non-transitioned parts would have its own contract duration term of 58 months beginning on the date of its full transition to Whitesell.

(Id. at 17.)

         To apply these legal rulings in determining the contract duration term of a part, the Court must first determine when the part came into existence and when the part was then fully transitioned to Whitesell. (See Order of June 24, 2013, Doc. No. 499, at 3.) If these matters are undisputed, then the Court may determine the contract duration term of a part as a matter of law.

         Through the course of discovery, which commenced in earnest in February 2013 with the exchange of usage and purchase history data (see also Order of November 12, 2013, Doc. No. 541, at 16-23 (explaining the importance of such data in determining the fully transitioned dates of parts)), the parties have been able to agree on contract duration terms for a vast majority of Parts in Suit. Duration terms for many more parts have been determined through the arguments and concessions of counsel in the most recent round of motions for partial summary judgment, as evidenced by the Orders that will come out of the April 17th hearing.

         Nevertheless, there remains a handful (proportionally speaking) of parts for which the contract duration terms remain in dispute. Through the instant motion for partial summary judgment, Husqvarna contends that this Court may determine the contract duration terms as a matter of law as to the parts in dispute between Husqvarna and Whitesell. Husqvarna's motion also seeks a determination from the Court that the list of parts provided by Whitesell in response to certain interrogatories ...

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