(December 15, 2015) As the saying goes, “the wheels of justice grind slowly.” That often holds true in litigated matters, where cases sometimes take years to resolve. One purpose of creating Business Courts in Michigan is to provide those in the business community with a more flexible and efficient forum to resolve disputes. So far, the results are positive, with many business cases resolving in less than a year. But sometimes a business needs relief right now and cannot afford to wait months or even weeks for a court to decide an issue. One avenue for immediate relief is to seek an injunction from the court, a drastic remedy whereby the court restrains a party from continuing an action that threatens or invades another party’s legal rights. A couple of recent cases decided by the Kent County Business Court highlight the sort of circumstances that will warrant an injunction in favor of a business.
First, in Dana Limited v Mico Industries, Inc., defendant Mico fabricated shock-tower brackets for plaintiff Dana in connection with Ford’s Super Duty Trucks. After some negotiation, Mico and Dana agreed to an “all in” reduced price of $5.60 per bracket. While Mico later determined that it was losing money on the brackets, it continued production at the $5.60 price in hopes of obtaining a contract for the production of components for Ford’s next generation of Super Duty trucks. When Mico lost out on its bid for the new components, it promptly demanded that Dana reduce the price for the brackets. Dana refused, and Mico then threated to discontinue production, thereby causing Dana to file suit and seek an immediate injunction prohibiting Mico from cutting off shipments of the brackets.
In addressing Dana’s request for immediate relief, the Court noted that injunctions are a “drastic” remedy, requiring Dana to establish (1) a likelihood of success on the merits of its claim; (2) irreparable harm; (3) that the balance of harms weighs in favor of granting the injunction; and (4) that the public’s interest supports injunctive relief. The Court determined that it was “virtually inevitable” that Dana would prevail on the merits of its breach-of-contract claim, as Mico’s agreement to supply the brackets at the $5.60 price was clear. The Court also noted that the case involved supply-chain litigation, where “just in time” is critical and a disruption in the supply chain can cause catastrophic harm that cannot be fixed with money damages. As further recognized by the Court, Dana had no viable alternative to supply the brackets, and it would take weeks or months to find another supplier. The Court therefore determined that the irreparable harm element was met. As to the balance of harms, the Court concluded that allowing Mico to cease supplying the brackets to Dana would “have a ripple effect throughout the supply chain,” whereas issuing the injunction would simply require Mico to live up to its agreement with Dana. Finally, the Court found the potential harm to the public to be “manifest,” as allowing Mico to cut off the supply would almost certainly result in employee layoffs and undelivered trucks. The Court therefore granted Dana the requested injunctive relief and required Mico to continue to supply the shock-tower brackets to Dana at the $5.60 per-unit price.
A similar result played out in the recent case of State of Michigan v HP Enterprise Service, LLC. There, as part of its Business Application Modernization (“BAM”) project, the State of Michigan contracted with HP to launch the ExpressSOS site, which permits the on-line completion of tasks such as annual vehicle registration.1 Problems arose with the site, resulting in subsequent agreements between the State and HP specifying “critical milestones” for completion of the project, as well as specific timeframes for HP to transfer the source code for the ExpressSOS site to the State. When HP failed to meet the critical milestones, the State exercised its contractual right to terminate the agreement. HP then pulled its implementation team out of Michigan and refused to turn over the source code, forcing the State to file suit and seek an immediate injunction requiring HP to turn over the source code.
Analyzing the four key injunction factors, the Court determined that the State was likely to win on the merits of its contract claim because it had paid millions of dollars for the ExpressSOS site and yet HP failed to meet the critical milestones and failed to provide the source code as agreed. In terms of irreparable harm, the Court pointed to the recent road-funding plan signed by Governor Snyder on November 10, 2015, which prescribes enhanced registration fees in order to fund road repairs. With those enhanced fees starting in 2017, the State needed time to make the necessary changes to the ExpressSOS site and could not do so without the source code. As a result, the Court concluded that the threat of irreparable harm was real. The Court also determined that the balance of harms weighed in favor of injunctive relief, as HP would suffer no significant harm from turning over the source code, while in the absence of injunctive relief the State would be unable to find a replacement for HP and could not implement the requirements of the road-funding plan. Finally, the Court found “genuine risks of harm to the public,” as “all of the citizens of Michigan have a vested interest in the effective implementation of the road-funding plan.” Finding that all factors favored injunctive relief, the Court ordered HP to turn over the source code to the State.
As these cases make clear, there are times when a business requires immediate action by the court in order to avoid irreparable harm that cannot be fixed with an award of money damages. In those circumstances, a business must engage legal counsel, gather its evidence quickly, and be prepared to convince the court that the circumstances require immediate action.
1 The State of Michigan originally contracted with Electronic Data Systems, LLC, but through a series of transactions HP became the contracting party.More Publications