Venture Industries Corp. v. Himont U.S.A., Inc.

Citation: 106 F. App'x 943Docket: Nos. 02-2172, 02-2194

Court: Court of Appeals for the Sixth Circuit; July 13, 2004; Federal Appellate Court

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Venture Industries Corporation and VEMCO, Inc. (collectively "Venture") appeal a district court’s partial summary judgment favoring Himont U.S.A. Inc., which denied Venture's claim for lost future profits due to a breach of their sales agreement. After the judgment, the parties agreed to arbitration, but Venture reserved the right to appeal the lost profits issue if Himont was found liable. Following a partial victory in arbitration, Venture appealed the district court ruling on consequential damages, while Himont cross-appealed, arguing that Venture waived its right to appeal under the arbitration agreement.

The district court ruled that Venture could not recover lost profits beyond its contract with Chrysler, as they had covered their losses by securing substitute materials. Under Michigan's Uniform Commercial Code (UCC) § 2-715, a buyer can recover consequential damages only if the seller had reason to know of the buyer's specific requirements at the time of contracting. The court concluded that the damages claimed by Venture were not foreseeable to Himont at the time the contract was executed, as the potential loss of a future Chrysler contract arose after the agreement with Himont had expired. Therefore, the court held that even if there was no waiver of appeal, Venture could not succeed on merits as they failed to establish that lost future profits were a foreseeable result of Himont's breach.

The plaintiff contends that the district court improperly treated foreseeability as a legal issue rather than a factual one. However, the court found that the plaintiff did not provide adequate objective evidence of foreseeability to oppose summary judgment favoring the defendant. For the plaintiff to succeed, it needed to demonstrate that Himont was aware of Venture's expectations regarding its contract with Chrysler or that Himont’s economic success hinged on its ability to renew that contract. The U.C.C. stipulates that a buyer's specific needs must be communicated to the seller, while general needs do not require such notification. Evidence indicated that, barring extreme circumstances, Chrysler would likely have renewed Venture's contract, which would have generated significant revenue. Nevertheless, there was no evidence that Himont knew of Venture’s anticipation for contract renewal.

On appeal, the plaintiff argued that Himont's involvement in securing the Chrysler contract implied knowledge of potential risks to Venture’s supplier status. However, the contract only forecasted material supply amounts and did not guarantee continuation beyond 1994. Furthermore, the record did not support the assertion that Himont's breach led to Venture's loss of future contracts, as Venture offered the least competitive bid for the 1996 contract despite a Chrysler employee's testimony suggesting otherwise.

The court also addressed the duty to mitigate damages under the U.C.C., stating that a party can recover future lost profits only if those losses could not have been reasonably prevented. Venture mitigated its loss by using materials from an alternate supplier during the original contract period and subsequently bid with that supplier for the 1996 Chrysler contract. The court clarified that it did not rule out the possibility of recovering consequential damages when covering losses; rather, in this case, it determined that Venture avoided lost profits under the 1992 contract, and post-contract damages were not recoverable as they were not foreseeable. The judgment of the district court was affirmed.