Injunctive Relief Awarded to Compel Performance on a Requirements Contract

Injunctive Relief Awarded to Compel Performance on a Requirements Contract

      In a recent decision, injunctive relief was awarded to require a parts producer to continue to provide the parts to an upstream assembler. Hitachi Automotive Systems Americas, Inc. v. TI Automotive Ligonier Corp., Act. No. 5:18-CVS-438-JMH, 2018 WL 3615993 (E.D. Ky. July 27, 2018).

      Hitachi Automotive Systems had entered into a requirements contract with, originally, Millennium Industries Corp. Millennium was in turn acquired by TI Automotive. Under that requirements agreement, Millennium was required to produce and supply to Hitachi all of Hitachi’s requirements for “damper cover assemblies.” Hitachi, in turn, incorporated the damper cover assemblies into “high pressure pumps” that in turn were sold to General Motors. The price of the damper cover assemblies was fixed by the contract, with the possibility of quarterly price adjustments based upon a Material Purchase Fluctuation Agreement. At no time over the period of the contract performance had the parties determined whether a surcharge should arise under that provision. Ultimately, however, when Hitachi issued purchase orders, TI did not ship the damper cover assemblies, stating that it was terminating the agreement and, in the meantime, the damper cover assemblies would be produced and sold only at an increased price. Absent those damper cover assemblies, Hitachi was not in a position to otherwise produce high pressure pumps, and there was the risk that the General Motors production line would shut down in consequence.

      Hitachi moved for a preliminary injunction requiring TI to make and deliver the damper cover assemblies in accordance with the requirements agreement. TI’s objections thereto were for naught, and the injunction was entered. In doing so, the court found that (a) there existed an enforceable agreement between Hitachi and TI; (b) that it was TI, and not Hitachi, who first breached the agreement.

       As to the propriety of issuing the injunction, it was found that Hitachi would suffer irreparable harm absent a compulsion upon TI to produce and deliver the damper cover assemblies. On the flipside, TI was not able to show that it would be substantially harmed consequent of the issuance of the injunction.