In re Exemplar Manufacturing Company

Lear Corporation (Lear) (defendant) supplied automotive parts for a General Motors Corporation (GM) program. Lear contracted with Exemplar Manufacturing Company (Exemplar) for Exemplar to produce certain parts for GM’s program. Exemplar produced some of the parts but claimed that the arrangement was causing it to lose $500,000 per month. Accordingly, in September 2002, Exemplar and Lear entered into a resourcing agreement under which Lear agreed to provide the resourcing needed for the GM program. The Resourcing Agreement contained a purported liquidated-damages clause stating that Lear would pay Exemplar $16,667, which represented one-thirtieth of $500,000, for each day that the resourcing continued after November 7, 2002. At that time, Exemplar also entered into an agreement with Lear, GM, Ford Motor Company (Ford), and Exemplar’s other customers, which gave the customers a right of access upon Exemplar’s default such that the customers could produce their own parts, and the parts of the other customers, at Exemplar’s facilities. In October 2002, Ford exercised the right of access. Lear did not complete the resourcing until November 23, 2002, but did pay Exemplar the $16,667 per day pursuant to the Resourcing Agreement. Ford produced the rest of the parts for the GM program. Exemplar and its subsidiary (plaintiffs) filed for bankruptcy. During bankruptcy proceedings, Exemplar and its subsidiary filed an adversary complaint against Lear seeking $266,676 in damages pursuant to the Resourcing Agreement. Exemplar and Lear both moved for summary judgment. Lear argued that the liquidated-damages clause was an unenforceable penalty provision, that Exemplar was only entitled to actual damages, and that Exemplar failed to plead any actual damages.