United States District Court, N.D. Indiana, Fort Wayne Division
BRC RUBBER & PLASTICS, INC., an Indiana corporation, Plaintiff,
CONTINENTAL CARBON COMPANY, a Delaware corporation, Defendant.
OPINION AND ORDER
Collins United States Magistrate Judge
breach of contract action governed by Indiana law, Plaintiff
BRC Rubber & Plastics, Inc., an Indiana corporation
(“BRC”), alleges that Defendant Continental
Carbon Company, a Delaware corporation
(“Continental”), repudiated an agreement to
supply BRC with carbon black. BRC seeks to recover costs that
it incurred in purchasing carbon black from another
Court held a two-day bench trial on April 23 and 24, 2019.
(DE 216; DE 217). Following the preparation of a transcript
(DE 219; DE 220),  the parties submitted proposed findings of
fact and conclusions of law (DE 225; DE 226).
examining the entire record, considering the arguments of
counsel, and determining the credibility of the witnesses and
evidence, the Court makes the following Findings of Fact and
Conclusions of Law in accordance with Federal Rule of Civil
Procedure 52(a) based upon a preponderance of the evidence.
FINDINGS OF FACT
manufactures and sells molded rubber and plastic products
primarily for the automotive industry. (Tr. 7, 233). BRC
creates these products using an agent known as carbon black,
which mixes into the rubber compound of the final product.
(Tr. 8). Carbon black comes in three grades: N300, N500, and
N700. (Tr. 8). Pricing carbon black is based on three
components: the base or baseline price, an adjustment for the
price of oil, and an adjustment for the price of natural
began supplying carbon black to BRC in the mid-1990s and
served as BRC's sole supplier of carbon black through
mid-2011. (Tr. 9-10). Thomas Nunley, former regional sales
manager for Continental, was Michael Cornwell's, vice
president of materials at BRC, only point of contact at
Continental through the beginning of May 2011. (Tr. 33, 198).
2009, BRC and Continental executed the Supply Agreement (the
“Agreement”). (Tr. 16-17; Ex. 7). The relevant
terms of the Agreement are as follows:
• The Agreement was effective on January 1, 2010, and
would expire on December 31, 2014;
• The Agreement states that “[i]t is the intent of
this Agreement” that Continental “agrees to
sell” to BRC “approximately 1.8 million pounds of
carbon black annually;
• The volume of carbon black sold to BRC was “to
be taken in approximately equal monthly quantities”;
• The chart below represents the baseline price for the
corresponding grades of carbon black:
early April 2011, Continental internally discussed increasing
the price of carbon black for all of its customers. (Tr. 185;
Ex. 15). Around that time, Continental informed its customers
that it would be unable to provide grade N700 carbon black
between May 9 and 24, 2011. (Tr. 16; Ex. 13). However, Nunley
advised Don Newman, a senior buyer at BRC, that Continental
could supply a shipment of grade N762 for delivery in the
first week of June. (Tr. 17; Exs. 16, 17).
April 14, 2011, Nunley advised Cornwell that Continental was
increasing the baseline price for carbon black by two cents
per pound. (Ex. 18). Cornwell called Nunley to object to the
price increase, and the two agreed that the price increase
violated the Agreement. (Tr. 28-29). Nunley said that he
would try to get the price increase rescinded. (Tr. 28-29,
187, 193). However, Nunley's direct supervisor, Thomas
Moccia, refused to rescind the price increase, reasoning that
BRC could not get carbon black elsewhere. (Tr. 187). Moccia
instructed Nunley to withhold shipping to BRC unless it
agreed to the price increase. (Tr. 192, 196-97).
emailed Nunley on April 15, 2011, reiterating his objection
to the price increase and advising Nunley that BRC would
“do whatever necessary” to enforce the Agreement.
(Ex. 19). Nunley passed this on to Moccia, but nobody from
Continental responded to Cornwell. (Exs. 74, 75 Thomas Moccia
and Charles Chaffee, CEO at BRC, felt anxious because
Continental's actions could have delayed carbon black
shipments, which would disrupt BRC's fulfillment of its
customers' demands. (Tr. 31-33, 232). If BRC failed to
fulfill its customers' demands the results could have
been “devastating” for BRC's business. (Tr.
April 15 and 27, 2011, Cornwell did not receive
correspondence from Continental regarding the price increase.
(Tr. 30). Newman contacted Sandra Haney, a senior customer
service representative at Continental, on April 26, 2011, and
asked her to confirm a purchase order for 110, 000 pounds of
grade N550 carbon black to be delivered on May 11,
000 pounds of grade N550 carbon black to be delivered on May
18; and 140, 000 pounds of grade N762 carbon black to be
delivered in the first week of June. (Ex. 21). This purchase order was
priced according to the Agreement. (Ex. 21).
April 27, 2011, Cornwell sent a letter to Nunley, reiterating
BRC's opposition to the price increase and advising
Nunley that BRC would not pay for shipments of carbon black
that were not priced according to the Agreement. (Ex. 22).
Cornwell did not receive a response from Continental. (Tr.
April 29, 2011, Nunley told Cornwell that Moccia instructed
him to refrain from contacting BRC “and that if BRC
decide[d] to pursue legal action against Continental, they
[would] delay/withhold shipment of [carbon black].”
(Tr. 31, 197-98; Ex. 22; Exs. 74, 75 Moccia Dep. 68). BRC
became increasingly concerned. (Tr. 31-32; Ex. 23). At the
request of Greg Finch, president at BRC, Cornwell estimated
BRC's inventory and usage of carbon black. (Tr. 97; Ex.
24; Ex. 74 Alan Colwell Dep. 17-18). As of May 2, 2011, BRC
had about 2.1 months supply of grade N550 carbon black, five
months supply of grade N339 carbon black, and 1.8 months
supply of grade N762 carbon black. (Ex. 24).
April 29, 2011, Linda Nelson, who worked in the customer
service department at Continental, informed Newman that
Continental could not confirm the shipment dates requested in
the April 26 purchase order. (Ex. 26). Moccia confirmed in an
internal email that Continental was not shipping carbon black
to BRC because Continental had “negative [gross
profit]” margins on BRC's account. (Ex. 26; Exs.
74, 75 Moccia Dep. 64-65).
9, 2011, Moccia and attorney Russ Guttshall, in-house counsel
to Continental, fired Nunley for not “accomplish[ing]
his sales duties and his objectives with respect to obtaining
margin and volume from his core customers and future target
accounts, including BRC.” (Exs. 74, 75 Moccia Dep. 68;
see also Tr. 206-07). On May 10, Nunley informed
Cornwell that Continental had terminated him. (Tr. 35, 207,
218; Ex. 25).
on May 10, Cornwell sent an email to Moccia requesting a
written response to his April 27 letter no later than May 20,
27). Cornwell tried to reach Moccia via telephone prior to
emailing him but was unsuccessful. (Ex. 27). Moccia responded
to Cornwell's email by indicating that David Word, sales
manager at Continental, would contact Cornwell regarding the
issue. (Tr. 38; Ex. 28).
got in touch with Word and explained that Continental had
typically provided BRC with “updated pricing reflecting
adjustments due [to] changes in  feedstock prices” by
the tenth day of every month. (Ex. 29). However, as of May
11, BRC had not received the June pricing spreadsheet. (Ex.
29). Cornwell advised that “if [BRC] was going to
continue doing business with Continental” it needed
pricing for its next order. (Tr. 39; Ex. 29). Cornwell also
repeated BRC's objection to the price increase. (Ex. 29).
Word responded that baseline pricing was out of his control
and that he was not familiar with the pricing spreadsheet
that Cornwell referred to. (Tr. 39-40). After this
conversation, Cornwell felt that nobody at Continental had a
working understanding of BRC's relationship with
Continental. (Tr. 40).
13, 2011, Word told Cornwell that Continental could not
“ship product in accordance with” the April 26
purchase order, which Cornwell found “totally
unacceptable.” (Tr. 41; Ex. 30). Cornwell stated that
Continental's delay in shipping jeopardized
“BRC's ability to satisfy [its] customers, ”
and that BRC would not allow this to occur. (Ex. 30). Word
did not respond to Cornwell's objection. (Tr. 42).
avoid depleting BRC's inventory of grade N762 carbon
black, Cornwell began looking for a “cover”
(Tr. 42). Cornwell contacted Randy Heldman of Sid Richardson,
one of Continental's competitors, who was able to provide
a railcar of grade N762 carbon black for shipment in 30 days
at a “spot rate, ” which was higher than the
price for grade N762 carbon black in the Agreement. (Ex. 32;
see Tr. 43, 49). Cornwell also inquired whether Sid
Richardson would be interested in supplying all of BRC's
carbon black needs in the future. (Exs. 32, 33). Around this
time, BRC believed that Continental would not supply any
carbon black unless BRC agreed to the price increase. (Tr.
45, 162, 246-47; Ex. 74 Cornwell Dep. 123).
16, 2011, BRC's outside counsel, Daniel Sharkey, drafted
a letter to Moccia's attention. (Ex. 31). The letter
broadly identified two issues with respect to
Continental's performance under the Agreement: (1)
Continental had not shipped carbon black to BRC pursuant to
the April 26 purchase order; and (2) Continental's
request for a price increase was “simply
unacceptable.” (Ex. 31). Sharkey advised Moccia that
the letter constituted BRC's demand for written assurance
under the Uniform Commercial Code (“U.C.C.”)
§ 2-609 that Continental would abide by the terms in the
Agreement. (Ex. 31). Sharkey demanded that Continental
provide assurance before the close of business on May 18,
2011, or face legal action. (Ex. 31).
17, 2011, Newman sent an email to Haney requesting
confirmation by 4:00 p.m. that day regarding whether
Continental would supply a railcar of carbon black grade N762
for delivery in the first week of June in accordance with the
April 26 purchase order. (Ex. 34). Haney responded at 8:26
p.m. that Word and Nelson were working on his request and
that she would provide an answer by the next day. (Ex. 34).
on May 17, 2011, Guttshall left Sharkey a voice message
stating that he represented Continental in the dispute with
BRC. (Ex. 35). However, Guttshall did not provide his contact
information. (Ex. 35). Thus, Sharkey contacted Moccia to
obtain Guttshall's contact information and requested that
Moccia inform BRC whether it would be able to provide a
shipment of grade N762 carbon black for June delivery. (Ex.
35). Sharkey emphasized that BRC had contacted another
supplier (Sid Richardson) for a “cover” shipment
of N762, and that BRC needed a response from Continental
before 11:00 a.m. on May 18, 2011-the deadline provided by
the alternative supplier for the cover shipment. (Ex. 35).
11:04 a.m. on May 18, Moccia informed Sharkey that
Continental did “not have N762 available at the
moment.” (Exs. 35, 36). About an hour later, BRC
ordered 130, 000 pounds of carbon black grade N762 from Sid
Richardson. (Tr. 46; Ex. 38). Cornwell estimated that this
shipment would not arrive until late June or July 1 (Tr. 46),
approximately a month later than the shipment of grade N762
carbon black that Nunley told Newman would arrive the first
week of June (Exs. 16, 17). There is no evidence that
Continental provided BRC with written assurance that it would
comply with the Agreement by the close of business on May 18.
20, 2011, Nelson informed Newman that Continental could
fulfill the April 26 purchase order with modified shipping
dates. (Ex. 40). One railcar of grade N550 carbon black could
ship on May 25 and two railcars of carbon black (one railcar
of grade N550 and one railcar of grade N762) could ship on
June 6. (Ex.
40). However, the price of these shipments was higher than
the baseline price in the Agreement, which BRC found
unacceptable. (Exs. 40-42). Cornwell called Moccia, but the
call went to voicemail and Moccia did not return the call.
(Tr. 49; Ex. 41). Cornwell asked Moccia to provide a written
answer regarding whether “Continental Carbon intend[ed]
to honor the supply agreement with BRC or not.” (Ex.
41). About two hours later Moccia emailed Cornwell, stating:
“I suggest you call another supplier[, ] Mike[.]
Tom.” (Ex. 43). Cornwell and Chaffee interpreted
Moccia's email as stating that Continental would not
supply carbon black to BRC according to the Agreement. (Tr.
51, 249; Ex. 74 Chaffee Dep. 12).
that day, Guttshall contradicted Moccia's email and
informed Sharkey that Continental would continue to timely
ship in accordance with the Agreement and not cut off supply
to BRC. (Exs. 44, 45). Because of this email, BRC briefly
believed that its problems with Continental had been solved.
(Tr. 53, 301-02). Accordingly, Cornwell emailed Moccia,
inquiring when Continental would ship the three railcars of
carbon black described in the Modified April 26 Purchase
(Tr. 53; Ex. 45). Moccia responded that Continental could
“ship one [rail]car next week and do the best [it]
[could] re future orders based on [its] intent to supply 1.8
million lbs[.]” (Tr. 53; Ex. 46). Cornwell, who
believed that Continental was obligated to provide three
railcars, found Moccia's response unacceptable. (Tr.
23, 2011, Newman asked Moccia to confirm whether Continental
would ship three railcars as described in the Modified April
26 Purchase Order. (Ex. 47). Moccia responded that
Continental “intended to ship” an annual total of
1.8 million pounds of carbon black to BRC and that it was
ahead of schedule for 2011. (Ex. 47). Newman still did not
understand whether Continental would ship three railcars of
carbon black and requested that Moccia clearly state whether
he would support the shipping dates provided in the Modified
April 26 Purchase Order. (Ex. 47). Newman also requested that
Continental provide the June pricing spreadsheet. (Ex. 47).
24, 2011, Moccia responded that Continental could only ship
one railcar at that time and would do the best it could in
the future, but that it would “not short other
customers as [it] [was] supplying [BRC] based on [the]
agreement[.]” (Ex. 47). Cornwell tried to call Moccia
numerous times but Moccia did not answer and did not return
his calls. (Tr. 56-57).
again asked Moccia to confirm whether Continental would ship
according to the dates in the Modified April 26 Purchase
Order. (Ex. 49). Moccia replied that Continental had shipped
1.2 million pounds of carbon black to BRC to date for 2011
and it was shipping one railcar of grade N550 carbon black on
May 25. (Ex. 49). However, Moccia reiterated that it was
Continental's intent to supply 1.8 million pounds of
carbon black in approximately equal monthly quantities, which
amounted to 150, 000 pounds per month, and that BRC had
purchased 300, 00 pounds per month year to date in 2011. (Ex.
49). Moccia stated that Continental would “continue to
do [its] best to supply BRC” and that he would advise
BRC when another railcar of grade N550 carbon black would be
shipped. (Ex. 49). At this point, BRC lacked confidence that
Continental would adhere to the Modified April 26 Purchase
Order or the Agreement. (Tr. 58).
26, 2011, Word advised that Continental shipped one railcar
of grade N550 carbon black the day before and inquired
whether BRC would want grade N550 or grade N762 carbon black
for its next order. (Ex. 56). Two days later, Cornwell
received Continental's June pricing spreadsheet, which
reflected a two-cents-per-pound baseline price increase for
carbon black. (Tr. 60; Ex. 54). The pricing spreadsheet
undermined Guttshall's commitment on May 20 that
Continental would ship according to the terms of the
Agreement, and compelled BRC to conclude that Continental
would not ship carbon black unless BRC paid two cents more
per pound. (Tr. 60-61).
2, 2011, BRC terminated the Agreement in a letter drafted by
(Ex. 55). The letter states:
[Continental] has repeatedly, and continually, made it clear
to BRC that [Continental] will not supply BRC with BRC's
actual quantity requirements of three listed grades ...