Reference no: EM131473804

Question: DETROIT RADIANT PRODS. CO. v. BSH HOME APPLIANCES CORP., 473 F.3D 623 (6TH CIR. 2007)

FACTS Detroit Radiant manufactures gas-fired infrared heaters for commercial and industrial applications. BSH Home Appliances Corporation manufactures home appliances under several well-known brand names. BSH supplied Detroit Radiant with detailed specifications for a burner, known as the Pro 27 burner, and requested a price quote based on an annual estimated order of 30,000 units. Once the parties had satisfactorily resolved their price negotiations, BSH sent first a purchase order for 15,000 units, followed by a purchase order for 16,000 units. Detroit Radiant began to make and ship the burners under "release schedules" provided by BSH. Detroit Radiant shipped almost 13,000 burners to BSH over an eight-month span, which BSH accepted and paid for at the contract price. BSH then contracted with a different company, Solaronics, to be its supplier of Pro 27 burners (at a lower price), and stopped ordering from Detroit Radiant. BSH did not accept the remainder of the burners from Detroit Radiant.

However, because BSH considered the Pro 27 burners in the hands of Detroit Radiant to contain proprietary technology, BSH did not want Detroit Radiant to sell the burners to competitors. Detroit Radiant sued for breach of contract and claimed damages for the 18,114 units that BSH had not purchased. Detroit Radiant claimed $312,104 in lost profits, plus $52,011 in unused inventory because the Pro 27 burners had been specially manufactured for BSH and could not be sold elsewhere. The trial court awarded $418,216 to Detroit Radiant, and BSH appealed. DECISION The appellate court affirmed the lower court decision. The court noted that the UCC provides alternative measures of damages when the buyer breaches, as here. The "default" measure of damages is "the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages." An alternative measure of damages, "lost profits," is most commonly available to a lost volume seller (which all parties agreed Detroit Radiant was not).

However, lost profits damages are also available to a plaintiff who cannot adequately recoup under the default measure: "If the measure of damages provided in [UCC 2-708(1)] is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages." Here, the Pro 27 were "specially manufactured" by Detroit Radiant to BSH's specifications. Moreover, because BSH prevented Detroit Radiant from selling the burners to any other party, there was no reasonably ascertainable or accessible market for the burners. The court concluded: Detroit Radiant was left with a warehouse of burners and component parts that it could not unload, due both to the uniqueness of the Pro 27 burner and to the fact that BSH itself did not want Detroit Radiant to share any secrets as to that burner. And Detroit Radiant was further left without its anticipated profits-i.e., the benefit of the bargain that it had entered into with BSH. Michigan contract law, not to mention common sense, dictates that BSH should pay up, and thus we AFFIRM the judgment of the district court.