## Facts

- Johnson Controls, Inc. (JCI) produced headrest stays used in certain DaimlerChrysler vehicles.
- In December 1998, JCI and Wiseco, Inc. (a tool-and-die company) made an oral requirements agreement under which Wiseco would produce a headrest-stay component made by bending a metal rod into a staple shape and rounding the ends (part 684F).
- Wiseco agreed to prepare the tooling and equipment at its own expense and to maintain the capacity to manufacture about 4,000 parts per day.
- The quantity ordered would vary with DaimlerChrysler’s needs; JCI represented that the “life of the part” was at least four years, which Wiseco understood as the expected duration of the arrangement.
- For roughly six months, Wiseco produced approximately 4,000 parts per day at JCI’s request.
- After Wiseco produced the parts, they were shipped to a JCI plant in Kentucky for finishing and then sent to a JCI plant in Canada for final assembly.
- After the initial six-month period, JCI’s orders for part 684F decreased substantially.
- Around the same time, JCI asked Wiseco to perform the finishing work itself, creating a finished version known as part 684B; later, that work also declined.
- JCI attributed the reduction in orders to DaimlerChrysler’s headrest changes: newer headrests used a different stay (a longer rod with additional notches and a pointed end) that was manufactured by a Canadian company located near JCI’s final assembly operations.
- In May 2001, Wiseco sued JCI for breach of contract; the district court granted summary judgment to JCI, and Wiseco appealed.

## Issues

1. Under U.C.C. § 2-306 and a requirements-contract theory, did Wiseco produce enough evidence for a reasonable factfinder to conclude that JCI reduced its requirements for the part in bad faith rather than for legitimate changes in demand?
2. Did the district court abuse its discretion in managing and limiting discovery in a manner that prevented Wiseco from obtaining evidence of bad faith?

## Decision

- The Sixth Circuit affirmed summary judgment for JCI.
- The court treated the dispute as involving a requirements-type arrangement and focused on whether JCI’s reduction reflected bad faith.
- The court concluded Wiseco did not present evidence creating a triable fact question that JCI’s stated reason—DaimlerChrysler’s headrest redesign and resulting change in demand—was a pretext.
- The court held that a substantial reduction (even to very low levels) does not breach a requirements contract when the buyer’s actual needs decline for legitimate business reasons.
- The court also upheld the district court’s discovery rulings, finding no abuse of discretion on the record presented.

## Legal Principles

- Under U.C.C. § 2-306(1), a buyer in a requirements contract must act in good faith when determining its requirements, and quantities may rise or fall with actual demand.
- A sharp reduction in orders is not a breach if it results from a genuine decline in the buyer’s needs, including changes driven by the buyer’s customer or product design.
- To survive summary judgment on a bad-faith reduction claim, the seller must point to evidence that the buyer still required the same goods but shifted the business elsewhere, or that the buyer’s stated reasons were not genuine.
- A supplier’s up-front tooling costs and its understanding of an expected production run do not, by themselves, prove the buyer acted in bad faith when demand later changes.
- Discovery rulings are reviewed for abuse of discretion; limits are generally upheld when the requesting party does not show that additional discovery is likely to produce evidence that would change the summary-judgment analysis.

## Conclusion

The Sixth Circuit affirmed judgment for JCI because, even assuming an enforceable oral requirements agreement, Wiseco failed to offer evidence that JCI’s steep reduction in orders for parts 684F/684B was a pretext rather than a good-faith response to DaimlerChrysler’s headrest redesign and the resulting shift in demand; the court also found no reversible error in the district court’s handling of discovery.


Wiseco, Inc. v. Johnson Controls, Inc., 155 F. App'x 815 (2005)