Where a defendant was granted a preliminary injunction in a contract dispute, that decision must be reversed and the case remanded because the defendant has not demonstrated a likelihood of success on the merits of its counterclaim.
“Plaintiffs Higuchi International Corporation and Higuchi Manufacturing Mexico S. de R.L. de C.V. (collectively, ‘Higuchi’) appeal the district court’s grant of a preliminary injunction to Defendant Autoliv ASP, Inc. (‘Autoliv’). Higuchi, an automotive parts supplier, brought this declaratory judgment action against Autoliv, seeking a declaration that it was not obligated to supply automotive parts to Autoliv because the parties lacked an enforceable requirements contract. Autoliv thereafter filed a breach of contract counterclaim and moved for a preliminary injunction to direct Higuchi to supply automotive parts pending the resolution of the parties’ suit. The district court granted Autoliv’s motion for a preliminary injunction. For the reasons set forth below, we REVERSE the district court’s order and REMAND for further proceedings consistent with this opinion.
“Higuchi is an automotive parts supplier that for some time has sold seatbelt parts to Autoliv, which manufacturers seatbelt safety systems for car companies. Autoliv has purchased these parts from Higuchi by way of ‘purchase orders’ and ‘releases.’ The purchase orders, which Autoliv sends to Higuchi, list certain general information such as the price per unit and tariff numbers for the parts Autoliv desires to purchase. After sending a purchase order, Autoliv later issues releases to Higuchi, which request to buy specific quantities of Higuchi’s automotive parts.
“We begin, and largely end, with the first factor of the preliminary injunction analysis: whether Autoliv is likely to succeed on the merits.
“The sole merits issue raised by the parties is whether there is an enforceable contract under which Higuchi is required to fulfill Autoliv’s requests, via releases, to purchase specific quantities of automotive parts. According to Autoliv, its purchase orders formed such a contract and obligated Higuchi to fulfill Autoliv’s releases ‘for the period ... ending upon the termination of the vehicle platform.’ ... Higuchi responds that Autoliv’s purchase orders do not create a contract because they fail to comply with the Uniform Commercial Code’s statute of frauds.
“Because the parties appear not to have formed a requirements contract, Higuchi may turn down Autoliv’s requests to purchase automotive parts on a release-by-release basis. Autoliv is therefore unlikely to succeed on the merits.
“The likelihood of success on the merits is generally the most important factor of a preliminary injunction analysis. ... That factor weighs strongly against a preliminary injunction in this case. The district court’s assessment of two of the other preliminary injunction factors the public interest and balance of equities depended on its conclusion that the parties’ purchase orders created a valid contract. However, it is unlikely that the purchase orders created a valid contract, and correspondingly neither the public interest nor the balance of equities favors a preliminary injunction. We need not reach the remaining factor of the preliminary injunction analysis the likelihood of irreparable harm. ... Because at least three of four preliminary injunction factors weigh against Autoliv, the ‘extraordinary remedy’ of a preliminary injunction is not warranted in this case.”
Higuchi Int'l Corp. v. Autoliv ASP Inc.; MiLW 01-108041, 12 pages; U.S. Court of Appeals for the Sixth Circuit; Clay, J., joined by Cole, J., Thapar, J.; on appeal from the U.S. District Court for the Eastern District of Michigan at Detroit; Stephen J. van Stempvoort for appellant; Jason D. Killips for appellee.
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