Judge awards auto supplier AirBoss $3.5 million in dispute with wide implications

AUBURN HILLS, Mich.—An Oakland County judge has awarded a local auto supplier $3.5 million in a contract dispute that has potentially big implications for the supplier industry.

Auburn Hills-based tier two supplier AirBoss Flexible Products Co. won the damages claimed against its customer MSSC Inc. in Oakland County Circuit Court on Dec. 13, marking another major supplier victory after a landmark Michigan Supreme Court decision in 2023.

The Michigan Supreme Cour previously issued a precedent-setting ruling that MSSC's contract with AirBoss was nonbinding. Last month's circuit court decision went a notch further, finding that MSSC's refusal to pay AirBoss' price increases resulted in unjust enrichment.

"At stake in this case is whether a buyer, through erroneously issued court orders, can, without a contract, compel its supplier to sell products below their reasonable fair market value and never repay the coerced supplier the value of the benefit the buyer erroneously gained?" Judge Michael Warren wrote in the opinion. Because this is the very definition of unjust enrichment, the answer is 'no,' and the coerced supplier in this case is entitled to recover the full value of the benefits it provided."

While the case is specific to a pricing dispute over suspension systems for Stellantis NV, the Supreme Court's decision, coupled with the lower court's award of damages, could give sellers more leverage in contract negotiations traditionally tipped in the buyer's favor, said Michael Brady, attorney with Warner Norcross + Judd who represented AirBoss in the case.

At the very least, the decisions affirm that suppliers can win disputes if they take the proper steps before, during and after execution of a contract, he said.

"Parties really need to assess their rights at the beginning of a dispute and ensure they're protecting their interests," Brady told Crain's. "It's important for parties to clearly and accurately articulate their positions in written correspondence."

The dispute between MSSC and AirBoss arose in mid-2019 when AirBoss began losing money on parts it was supplying to MSSC for suspensions being built for Stellantis. AirBoss sought to pass on the roughly $1 million in annual losses to its customer. While MSSC eventually agreed to a price increase, AirBoss continued to lose money on the business and ceased taking orders in 2020.

At the center of the lawsuit was the "blanket" purchase order between the two companies. MSSC argued that the blanket order was a requirements contract binding AirBoss to fulfill its orders. AirBoss argued that because there was no quantity listed, it was a "release-by-release" contract and not binding long-term.

MSSC sued AirBoss in a move that ultimately backfired. However, MSSC filed an appeal to the circuit court's decision soon after it was issued.

Crain's reached out to lawyers representing MSSC for comment.

The case is one of many closely watched supplier disputes in Michigan, where the automotive industry's tumultuous transition to electric vehicles and overall cost pressures have spurred purchasing conflicts that have periodically spilled into court. In the past year, Stellantis has proved to be the most litigious, suing half a dozen suppliers over pricing disputes.

Brady said his client's meticulous record-keeping of written correspondence with MSSC, as well as its prompt assertion of its rights and counterclaims helped win the case.

"AirBoss vigorously asserted its rights, and MSSC demanded injunctive relief and continued to do so while issuing more and more releases," the judge's opinion said. "As such MSSC ran the risk it would lose, and it knew exactly how much it was placing in jeopardy if it lost. MSSC should not escape the consequences of its actions."