WENDELL A. MILES, Senior Judge.
This diversity action arises out of an agreement by defendant/counter-plaintiff/third-party plaintiff Wohlert Corporation ("Wohlert") to purchase gas products from plaintiff/counter-defendant AGA Gas, Inc. ("AGA"). After executing the agreement, the parties disagreed on whether Wohlert had provided an acceptable storage site to which AGA could deliver the product, and Wohlert ultimately contracted with an alternate supplier, The BOC Group, Inc. ("BOC").
AGA filed this action against Wohlert seeking damages for Wohlert's alleged breach of the parties' written contract. Wohlert in turn asserted several counterclaims against AGA, essentially contending that AGA had deceived Wohlert during pre-contract discussions by representing that Wohlert's existing storage site was acceptable for the delivery of the product. Wohlert also asserted various third-party claims against BOC, alleging that BOC agreed to indemnify Wohlert should AGA sue for breach of contract.
On August 9, 1999, BOC filed a motion for summary judgment in its favor on Wohlert's third party claims (docket no. 57). Wohlert has filed a written response opposing BOC's motion (docket no. 64), to which BOC has filed a reply (docket no. 66). For the reasons to follow, the court grants the motion.
I
AGA is an Ohio corporation with its principal place of business in Independence, Ohio. The company manufactures and sells industrial gas products. Wohlert is a Michigan corporation having its principal place of business in Lansing, Michigan. Wohlert manufactures items for the auto industry, including ring gears and flywheels. The company uses industrial gases, including liquid oxygen and argon, for welding performed during the manufacturing process.
For many years, Wohlert purchased its liquid oxygen and argon from a company known as Praxair. However, Wohlert ultimately became dissatisfied with Praxair as a supplier due to pricing and customer service concerns, and made a decision to seek an alternate supplier. In early 1996, James "Zeke" Secord, Wohlert's director of materials, instructed his subordinate, senior buyer Tico Duckett, to locate a new supplier to replace Praxair when Wohlert's current contract with Praxair ended.
In early 1997, Duckett initiated discussions with AGA concerning Wohlert's industrial gas needs. Representatives of the two companies met a number of times during the ensuing months, and representatives of AGA also viewed the site of the existing oxygen tank at Wohlert's Lansing manufacturing facility.
(Praxair had been servicing an oxygen tank at this same location for numerous years, apparently with no difficulty.)
According to Wohlert, during the site visit AGA's representatives indicated that the site was acceptable to AGA for the delivery of oxygen.
AGA ultimately presented Wohlert with a written proposal for delivery of liquid oxygen and argon for use in Wohlert's Lansing operations. Duckett, with Secord's input, reviewed drafts of the written proposal, suggesting at least one substantive change. In early June, 1997, the two companies entered into an agreement, known as the "Product Supply Agreement," under which Wohlert agreed to buy, exclusively from AGA, all of Wohlert's requirements of specified gas products for a five-year period beginning on July 1, 1997.
According to Wohlert, after the Product Supply Agreement was executed, representatives of AGA again viewed the site of the existing oxygen tank at Wohlert's facility. However, also according to Wohlert, this time AGA personnel informed Wohlert that the site was unacceptable for safety reasons. In its counterclaim filed against AGA, Wohlert alleges that although it made diligent efforts to find an appropriate alternate site for storage of the oxygen, due to space and cost considerations no reasonable alternative location could be found.
Counterclaim, at p. 2, ¶ 8. Wohlert also alleges that it ultimately concluded that the existing storage tank was in fact suitable, as AGA had earlier represented. Id., ¶ 9.
Based on this disagreement with AGA over the site of the tank, Wohlert terminated the Product Supply Agreement on March 26, 1998. Id., ¶ 10.
Consistent with the allegations made in Wohlert's counterclaim against AGA, Duckett's testimony confirms that the two companies "reached a deadlock" on the issue of the location of the oxygen tank from the time of AGA's second site visit, which occurred after the parties had executed their written agreement. Duckett Dep. at 44, 48, 75. Given this deadlock, Praxair continued to serve as Wohlert's supplier on a month-to-month basis. Id. at 169. However, because Wohlert considered Praxair's prices excessive, Wohlert remained receptive to replacing Praxair, and, in view of the deadlock with AGA, Wohlert also remained receptive to other suppliers.
Secord's deposition testimony confirms that Wohlert concluded that its contract with AGA was "null and void" shortly after its execution. According to Secord, he believed that the contract was unenforceable "[w]hen we came to the realization that AGA would not accept the existing location, which was probably, you know, within 60 days of the day that they inspected the site." Secord Dep. at 109. Secord also testified that "[i]f we hadn't resolved it in that period of time that it wasn't going to get resolved." Id.
In late 1997, a few months after Wohlert had signed the Product Supply Agreement with AGA, Duckett received a "cold call" from John McNabb, a sales representative for BOC. BOC's principal business consists of supplying industrial gases for industry, hospitals, and research. BOC is a competitor of AGA, a fact which was known to Duckett. Id. at 154. During their first meeting, which took place at Wohlert, McNabb expressed to Duckett BOC's desire to do business with Wohlert. At this time, Duckett testified, he told McNabb that Wohlert "[wasn't] interested because we have already signed a contract with AGA." Id. at 82.
However, within hours of his meeting with McNabb, Duckett told Secord about BOC's interest. Duckett described this conversation with Secord as follows:
Q: What was that conversation?
A: Just simply being if we are deadlocked with AGA what should we do, basically.
Q: Were you deadlocked with AGA?
A: Yes.
Q: Did AGA realize that, to your knowledge
A: Oh, most definitely.
Id. at 83-84. After learning of BOC's interest, Secord authorized Duckett to enter into further discussions with BOC. Id. at 85.
During their discussions, Duckett informed McNabb of Wohlert's disagreement with AGA regarding the site of the oxygen tank. McNabb then took a look at the site and told Duckett that he "couldn't see why there would be a problem" with the site. Id. at 86. Later, after a more complete review by BOC's technical personnel, BOC confirmed that it approved of the existing site. Id. at 90. In addition, as Wohlert's luck would have it, BOC's pricing for both liquid oxygen and argon was less than what AGA had quoted. Id. at 89.
Although Duckett and McNabb were the principal participants in the discussions between Wohlert and AGA, Kevin Baudhuin, the bulk sales manager for BOC, also attended at least one meeting between the parties. Clearly aware of Wohlert's contract with AGA, Baudhuin expressed to Duckett that Basically seeing as though we have not done any business with AGA yet, that, him being knowledgeable in the field, we shouldn't have a problem terminating the contract and going with BOC; and if there are any legal problems, which he could not see why or where there would be, he would have the BOC lawyers take care of it. Id. at 103. During his deposition, Duckett testified that he did not remember Baudhuin using the terms "indemnification" or "reimbursement," but merely the phrase "take care of it." Id. at 104-105.
During his deposition, Secord also recalled Baudhuin's saying that "if there was a problem, not to worry about it, that the BOC lawyers would take care of it." Secord Dep. at 102. Secord testified that Baudhuin made this statement after he (Secord) told Baudhuin that he was "a little concerned about [Wohlert's] AGA position." Secord Dep. at 102. Secord also testified that he understood that by "take care of it," Baudhuin meant "[t]hat if something did come up, that it would be no cost to [Wohlert]." Id. at 103.
On March 27, 1998, Wohlert and BOC entered into a written agreement under which BOC agreed to supply, and Wohlert agreed to buy, liquid oxygen and argon. Id. at 116. Incidentally, the parties also entered into an agreement under which Wohlert agreed to purchase some related products from BOC — such as cylinders and wire — which Wohlert had been obtaining from AGA. Id. at 117-118. The written agreements contain no mention of Baudhuin's alleged promise that BOC would "take care of" any problems Wohlert might have with AGA.
Secord Dep. at 113.
Realizing that Wohlert would now have to communicate with AGA regarding its decision to terminate the Product Supply Agreement, Duckett requested, and McNabb provided, some written language which Duckett used in drafting a termination letter to AGA. Id. at 109. Armed with this letter, Duckett arranged to meet with an AGA representative at Wohlert's facility. During the meeting, Duckett hand-delivered the letter and offered reasons for the termination.
However, Secord also testified that he did not ask Baudhuin what he meant by the phrase, and that he did not remember Baudhuin using the word "indemnify." Id. at 104-107.
Secord further testified that Baudhuin told him that "[h]e didn't think [Wohlert] would have any problem" terminating the contract with AGA. Id. at 107. However, Secord clarified that he "had felt at the time that [Wohlert's] AGA contract was no longer in force," and that Baudhuin's "assurances" had given him "the confidence to go ahead and recommend that [Wohlert] go ahead with the deal." Id. at 108. Id. at 120-124.
As noted above, Wohlert's counterclaim alleges that it terminated the Product Supply Agreement with AGA on or about March 26, 1998. Counterclaim, at p. 2, ¶ 11. However, during his deposition Duckett testified that Secord had directed him to prepare a termination letter before McNabb had first presented BOC's proposal to Wohlert. Duckett Dep. at 176-177. It was at that time that Duckett had asked McNabb to provide him with some "verbiage" which he could include in the letter. Id. at 177-178.
AGA filed its complaint in this action on November 12, 1998, seeking damages — which it estimated to be approximately $300,000 — for Wohlert's alleged breach of the Product Supply Agreement. Wohlert answered the complaint and filed a counterclaim against AGA on December 28, 1998. In its answer, Wohlert admitted that it had found an alternate supplier for its gas requirements, but contended that it had done so only after it discovered AGA's alleged misrepresentations about the adequacy of the storage site.
Wohlert's counterclaim against AGA, as filed, asserted six claims:
innocent misrepresentation (Count I) silent fraud (Count II) fraud based on false representations (Count III) fraud based on a bad faith promise (Count IV) breach of contract (Count V) and promissory estoppel (Count VI). Subsequently, however, the court granted a Fed.R.Civ.P. 12 motion by AGA for dismissal of all of these counterclaims, with the exception of the claim for breach of contract.
In addition to asserting counterclaims against AGA, Wohlert also filed a third party complaint against BOC. In its third party complaint, Wohlert made the following allegations:
11. As a direct result of AGA's misrepresentations and breach of contract, representatives of Wohlert spoke with BOC, another supplier of oxygen and argon regarding possible product supply arrangement.
12. BOC informed Wohlert that BOC would supply oxygen to Wohlert at the existing site already in use by Wohlert.
13. BOC represented to Wohlert that, should AGA sue Wohlert for breach of the Product Supply Agreement, BOC would indemnify Wohlert for any liability and costs associated with such a claim.
Based on those representations, Wohlert entered into a supply contract with BOC.
Third-Party Complaint. at p. 3, ¶¶ 11-13. Based on these allegations, Wohlert asserted the following third party claims against BOC: promissory estoppel (Count I) innocent misrepresentation (Count II) fraud based on a bad faith promise (Count III) and contractual indemnity (Count IV). As relief, Wohlert requested that the court "enter a judgment in its favor and against BOC for whatever amount that AGA obtains in a judgment against Wohlert, if any, plus costs, interest and attorneys' fees." Id., at p. 5.
ANALYSIS
Summary judgment is appropriate where "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In evaluating a motion for summary judgment, the court must determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law."
Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 251-52 (1986). The party moving for summary judgment bears the burden of establishing the non-existence of any genuine issue of material fact and may satisfy this burden by "`showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). While inferences drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. CO. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Only factual disputes which may have an effect on the outcome of a lawsuit under the applicable substantive law are "material." Anderson, 477 U.S. at 248.
In its motion for summary judgment, BOC argues that all of Wohlert's claims against BOC fail as a matter of law. Wohlert has apparently conceded that at least one of its third party claims — the promissory estoppel claim (Count I) — fails. Therefore, the court will grant BOC's motion to dispose of this claim. However, Wohlert has opposed dismissal of the remainder of its third party claims.
The concluding sentence of Wohlert's brief in response states that "Wohlert will stipulate to a dismissal of Count I of the Third Party Complaint (Promissory Estoppel)." Wohlert's Brief in Opposition, at 15.
Innocent Misrepresentation BOC argues that Wohlert's claim in Count II for innocent misrepresentation fails as a matter of law due to Michigan's economic loss doctrine. Under this doctrine, adopted by the Michigan Supreme Court in Neibarger v. Universal Cooperatives, Inc., 439 Mich. 512, 486 N.W.2d 612, 618 (1992), [W]here a plaintiff seeks to recover for economic loss caused by a defective product purchased for commercial purposes, the exclusive remedy is provided by the UCC, including its statute of limitations. . . .
. . . [T]he UCC provides remedies sufficient to compensate the buyer of a defective product for direct, incidental, and consequential losses, including property damage. . . . Where damage to other property was caused by the failure of a product purchased for commercial purposes to perform as expected, and this damage was within the contemplation of the parties to the agreement, the occurrence of such damage could have been the subject of negotiations between the parties. 486 N.W.2d at 618-20. More recently, in Imaging Financial Serv., Inc. v. Lettergraphics/Detroit, Inc., No. 97-1930, 1999 WL 115473. at *3 (6th Cir. Feb. 9, 1999), a Sixth Circuit panel held that Michigan's economic loss doctrine applied to bar the counterclaimant's claim of "fraud and misrepresentation" arising out of an agreement to lease a graphic arts system. 1999 WL 115473, at *3 (applying Michigan law).
Wohlert argues that the economic loss doctrine only applies to cases involving allegations of defective product. The doctrine does not, Wohlert contends, apply to cases that involve misrepresentations made to induce a party to enter into a contract. The principal case on which Wohlert relies in support of this argument, Huron Tool Eng'g Co. v. Precision Consulting Servs., Inc., 209 Mich. App. 365, 532 N.W.2d (1995), was also discussed in Imaging Financial. 1999 WL 115473, at * 3-4. However, the Sixth Circuit panel in the latter case concluded that even assuming that Michigan law recognizes an exception to the economic loss doctrine, the counterclaimant's tort claim of fraud and misrepresentation was still barred:
Assuming arguendo that this exception applies in Michigan, the district court addressed Lettergraphics's claim that it fit within the exception, and found it lacking. Like the plaintiff in Huron Tool, Lettergraphics has not alleged any fraudulent representations that are distinct from the breach of contract and/or warranty claims.
. . .
Thus, we affirm the district court's determination that Lettergraphics does not meet the exception, and we conclude that Lettergraphics's tort claim of fraud and misrepresentation is barred by the economic loss doctrine. 1999 WL 115473, at * 4. Likewise here, Wohlert's allegations, even if true, do not exempt it from the operation of the economic loss doctrine. Wohlert is therefore limited to pursuing whatever remedy contract law may provide.
Even if Wohlert's claim of innocent misrepresentation was not barred by the economic loss doctrine, the claim would still fail as a matter of law. This claim, as pled by Wohlert, is based on Wohlert's allegation that before it entered into a written agreement with BOC, BOC had represented that it would indemnify Wohlert for any liability or costs Wohlert incurred as a result of terminating the Product Supply Agreement with AGA and entering into a supply agreement with BOC. Third-Party Complaint, at p. 4, ¶ 20. However, under Michigan law, "[a] promise regarding the future cannot form the basis of a misrepresentation claim." Forge v. Smith, 458 Mich. 198, 580 N.W.2d 876. 884 (1998) (citing Kamalnath v. Mercy Memorial Hosp. Corp., 194 Mich. App. 543, 487 N.W.2d 499, 506 (1992) and Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336. 247 N.W.2d 813 (1976)).
Wohlert's separate claim of fraud based on a bad faith promise (Count III of the Third-Party Complaint) is addressed separately below.
Wohlert argues that its claim against BOC for innocent misrepresentation is not based solely on BOC's future promise to indemnify, but rather on BOC's alleged representation of an "existing fact," namely, "that Wohlert's [sic] existing site for the gas tanks conformed in all respects to all applicable laws and regulations." Wohlert's Brief in Opposition, at 11. However, Wohlert's pleading against BOC simply does not allege that BOC made this representation.
In addition, as the court has noted in its separate Opinion and Order on Wohlert's Statement of Appeal from Order Denying Leave to Amend, even if Wohlert were to allege that BOC made such a representation, BOC's actions were preceded in time by Wohlert's dealings with AGA, one of BOC's competitors.
AGA had already informed Wohlert that it would not deliver oxygen to the site of the existing tank due to safety concerns.
"A claim of innocent misrepresentation is shown where a party detrimentally relies on a false representation in such a manner that the injury inures to the benefit of the party making the misrepresentation." Forge, 580 N.W.2d at 883.
Here, the evidence shows that Wohlert did not detrimentally rely on BOC's alleged representation that the site conformed to safety laws and regulations. By the time BOC made any such representations, Wohlert had already rejected AGA's conclusion that the site was unsafe. In addition, even if Wohlert had relied on BOC's representations about the site's regulatory conformance, such reliance could not have been reasonable as a matter of law, where Wohlert knew that BOC's competitor had concluded that the site was not safe. Wohlert knew that two different firms (three, if one includes Praxair), experienced in the field, had reached different conclusions about the safety of the site, and that choosing either firm posed a risk. Thus, whether based on an alleged promise to indemnify or an alleged representation of "existing fact" regarding the regulatory compliance, Wohlert's claim against BOC based on innocent misrepresentation fails as a matter of law.
The court's conclusion that such a claim would fail as a matter of law is confirmed by undisputed evidence that Wohlert continued to receive deliveries at the site from Praxair, even after becoming aware of AGA's concerns about its safety. The evidence therefore shows that Wohlert had formed its own beliefs about the site, and acted upon those beliefs, before BOC ever entered the picture.
Fraud Based on a Bad Faith Promise This claim, as pled by Wohlert, is barely distinguishable from the claim of innocent misrepresentation, with two unremarkable differences. The first difference consists of a minor change in wording by Wohlert. Rather than alleging that BOC "represented" that it would indemnify Wohlert, Wohlert alleges that BOC "promised" to indemnify Wohlert.
(Compare paragraphs 20 and 27 of the Third-Party Complaint.) However, as noted above, because That competing suppliers reached different conclusions about the safety of the site raises a question regarding whether their representations about the site constitute fact, or merely opinion.
The distinction between the two is not always clear. See Guge v. Neitzel, 248 Mich. 312, 226 N.W. 869, 870 (1929) ("The dividing line between a false representation and a mere opinion is not well marked, and cannot be marked in the abstract, as it must necessarily depend upon the facts in the case"). In this case, however, the distinction is not critical, for by Wohlert's own admission, the company had made its own judgment and concluded that the existing site was a suitable one. See Counterclaim, at p. 2, ¶ 9 ("Wohlert also concluded that the existing site of the oxygen tank was in fact suitable, as AGA had earlier represented").
Michigan law provides that "[a] promise regarding the future cannot form the basis of a misrepresentation claim," Forge, 580 N.W.2d at 884, this allegation fails to supply Wohlert with a basis for claiming misrepresentation.
In alleging misrepresentation based on a bad faith promise. Wohlert also adds an allegation that "[a]t the time the promise was made, BOC did not intend to keep its promise" to indemnify Wohlert. Third-Party Complaint, ¶ 28. Relying on what has been called the "false token" exception to the general rule that broken promises are not actionable as torts, Wohlert argues that the allegation of an intent not to perform saves this particular claim based on misrepresentation. The "false token" exception applies "where, although no proof of the promisor's intent exists, the facts of the case compel the inference that the promise was but a devise to perpetrate a fraud." Hi-Way Motor Co., 247 N.W.2d at 817.
Wohlert argues that its allegation that BOC never intended to keep its alleged promise creates a fact question for trial because the evidence shows that BOC "did not even make a pretense of carrying out its promise" to "take care of everything with regard to the termination of the AGA contract[.]" Wohlert's Brief in Opposition at 12. However, assuming that a promise to "take care of everything" can be viewed as a promise to indemnify, here, as in Hi-Way Motor Co. . . . 247 N.W.2d at 817, the record contains no facts supporting the conclusion that BOC made its "promise" with an intent to defraud Wohlert. Here, as in that case, the claim of fraud arises from "the negotiations of two knowledgeable commercial parties." Id. At the time BOC made the alleged promise, it knew that Wohlert and AGA had reached a deadlock in their relationship based on their disagreement over the suitability of the site of the oxygen tank. Even if the facts are viewed in the light most favorable to Wohlert, they suggest merely that BOC made its "promise" in order to clinch Wohlert's signature on the contract and secure its business — and not to cause Wohlert to breach an agreement with AGA which was already in a state of deadlock. The facts simply do not support Wohlert's claim of fraud based on a promise made with an intent not to perform.
Contractual Indemnity Wohlert's claim of contractual indemnity is based on its allegation that "BOC expressly contracted . . . to indemnify Wohlert in the event that AGA sued Wohlert for breach of the Product Supply Agreement." Third-Party Complaint. at p. 5. ¶ 33. In its motion, BOC argues that this claim fails as a matter of law because the alleged oral promise of indemnity contradicts the unambiguous terms of the parties' written agreement.
Michigan courts have adopted the parol evidence rule, under which [P]arol evidence of contract negotiations, or of prior or contemporaneous agreements that contradict or vary the written contract, is not admissible to vary the terms of a contract which is clear and unambiguous. . . . This rule recognizes that in back of nearly every written instrument lies a parol agreement, merged therein. . . . The practical justification for the rule lies in the stability that it gives to written contracts; for otherwise either party might avoid his obligation by testifying that a contemporaneous oral agreement released him from the duties that he had simultaneously assumed in writing. . . . In other words, the parol evidence rule addresses the fact that disappointed parties will have a great incentive to describe circumstances in ways that escape the explicit terms of their contracts. . . . UAW-GM Human Resource Center v. KSL Recreation Corp., 228 Mich. App. 486, 579 N.W.2d 411, 414 (1998) (quotation marks and citations omitted).
As noted above, Wohlert's written agreement with BOC contains no promise of indemnity. Indeed, the agreement provides that "[t]his Agreement constitutes the entire agreement between BOC and [Wohlert] relating to the purchase and sale of Product at the Consuming Locations." BOC's Motion for Summary Judgment, Exhibit 1, ¶ 11.0.
Wohlert argues that the parol evidence rule does not apply to evidence of collateral agreements, particularly where the collateral agreement operates as an inducement for entering into the written agreement. Stimac v. Wissman, 342 Mich. 20, 69 N.W.2d 151, 154 (1955) (quoting Clare County Savings Bank v. Featherly, 173 Mich. 292, 302, 139 N.W. 61, 65 (1912)). Wohlert argues that the integration clause merely integrates the parties' agreements "relating to the purchase and sale of product at the Consuming Locations," and that the promise to indemnify is collateral because it does not concern "the purchase and sale of product." Wohlert also argues that the parol evidence rule does not apply where an agreement is only "partially integrated" because essential elements were not reduced to writing. NAG Enterprises, Inc. v. All State Indus., Inc., 407 Mich. 407, 285 N.W.2d 770, 772 (1979). Wohlert's arguments, however, are not persuasive. The cases on which it relies for support — Stimac, Clare County Saving Bank, and NAG Enterprises — contain no mention of an integration clause. In UAW-GM Human Resource Center v. KSL Recreation, the court expressly held that when the parties include an integration clause in their written contract, it is conclusive and parol evidence is not admissible to show that the agreement is not integrated except in cases of fraud that invalidate the integration clause or where an agreement is obviously incomplete `on its face' and, therefore, parol evidence is necessary for the `filling of gaps.' 579 N.W.2d at 418 (citation omitted).
An integration clause is clearly present in this case, notwithstanding Wohlert's contrived assertion that it should not be given effect. Moreover, at the conclusion of the parties' written agreement, in the same paragraph containing the integration clause, Wohlert "acknowledges that it has (a) read and underst[ood] the provisions of this Agreement and has had an opportunity to have the same reviewed by an attorney of its choice[.]" Exhibit 1, ¶ 11.0. Wohlert's claim based on an express oral contract to indemnify therefore fails as a matter of law based on the parol evidence rule.
CONCLUSION
For the foregoing reasons, the court grants BOC's motion for summary judgment. Wohlert's third party action is therefore dismissed.
So ordered this 8th day of October, 1999.