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Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp.

United States District Court for the Eastern District of Michigan
749 F.Supp. 794 (1990)


Facts

In 1987, Galtaco Redlaw Castings Corp. (Galtaco) (defendant) entered into an agreement to sell castings to Kelsey-Hayes Co. (Kelsey-Hayes) (plaintiff) for use in brake assemblies. The agreement provided prices for the castings. In spring 1989, due to monetary losses, Galtaco offered all of its customers, including Kelsey-Hayes, castings at a 30 percent price increase. Galtaco made it clear that if the price increases were not accepted then it would have to halt production of castings. Kelsey-Hayes contacted six other castings manufacturers, but was unable to find an alternative supplier. Kelsey-Hayes sold the brake assemblies to auto manufacturers, such as Ford, and was Ford’s sole supplier of the brake assemblies. Kelsey-Hayes believed that a halt in castings supply would cause Ford and other manufacturers to have to halt their production.  Kelsey-Hayes also believed that such a halt in production would lead to an injured business reputation and subject it to large monetary damages. Kelsey-Hayes entered into a new agreement with Galtaco, which provided for the demanded price increase. Kelsey-Hayes did not expressly reserve a claim for breach of the 1987 agreements. However, when Galtaco made shipments of castings to Kelsey-Hayes, Kelsey-Hayes refused to pay for a specific number of shipments. The total price for that specific number of shipments reflected the price increase that Galtaco demanded under the 1989 agreements. Kelsey-Hayes filed suit in the United States District Court for the Eastern District of Michigan for breach of the 1987 agreements. Galtaco filed a motion for summary judgment.

Rule of Law

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Issue

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Holding and Reasoning (Cohn, J.)

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