Federal Court Rejects FCA’s “65%-100%” Language as Insufficient to Constitute the Necessary Quantity Term in a Requirements Contract—A Win for Suppliers

A recent federal court decision marks an important win for automotive suppliers in the ongoing debate over what constitutes a valid requirements contract under Michigan law following the Michigan Supreme Court’s decision in MSSN, Inc. v. Airboss Flexible Products Co. (2023). In FCA US LLC v. MacLean-Fogg Component Solutions LLC, Judge Judith Levy of the Eastern District of Michigan ruled FCA’s use of the phrase “approximately 65%-100% of FCA’s requirements” fails to satisfy the quantity term requirement under the Michigan UCC. As a result, the court dismissed FCA’s breach of contract claims because FCA failed to establish its form contract is an enforceable requirements contract.

At the heart of the case was whether the FCA’s purchase orders—providing for “approximately 65%-100%” of FCA’s requirements—created a binding obligation for MacLean-Fogg to continue supplying parts at the previously agreed price. FCA alleged that MacLean-Fogg breached by halting shipments and demanding a retroactive price increase. But the court found that FCA’s language lacks the “clear and precise” quantity term required to support a valid requirements contract under Michigan law.

Relying on the Sixth Circuit’s recent decision in Higuchi Int’l Corp. v. Autoliv ASP, Inc. (2024), the court emphasized that quantity terms must be unambiguous on their face and cannot be clarified through parol evidence. The court rejected attempts by FCA to rely on past practices and other extrinsic evidence to fill in the gaps.

This is a good development for suppliers, especially those facing aggressive pricing tactics or unilateral demands to extend programs from OEMs who have not committed to purchase 100% of their requirements (or some other set percentage) from a supplier. The ruling underscores that vague or qualified commitments—such as ranges or “approximate” percentages—do not obligate suppliers to continue deliveries absent a clearly enforceable agreement.

While this decision is favorable to suppliers, they should proceed carefully in relying upon it to guide their contract negotiations with OEMs. First, this decision, while favorable, is not binding on other courts and does not settle the issue statewide. Second, a key appellate ruling on this issue is still pending in FCA US LLC v. Kamax Inc., which is now fully briefed before the Michigan Court of Appeals. In Kamax, the Oakland County Circuit Court held the same “approximately 65%-100%” language did satisfy the quantity requirement. In fact, Judge Levy recognized that her ruling in the MacLean-Fogg matter may be in conflict with the Oakland County Circuit Court’s ruling in Kamax but indicated that the Court is not “at liberty to depart from Higuchi,” the most recent Sixth Circuit decision on requirements contracts. Judge Levy found the reference to “approximately” 65-100% in FCA’s purchase orders particularly troubling, as that phrase does not “clearly and precisely” establish a quantity term, as Higuchi required. The forthcoming ruling of the Michigan Court of Appeals in the Kamax matter is expected later this year, and its outcome will create further clarity on this issue.

But for now, suppliers —particularly those litigating in federal court— should take heart in the MacLean-Fogg decision. It affirms courts will continue to scrutinize quantity terms closely and, under the guidance provide in the Airboss and Higuchi decisions, will not stretch vague or hedged language that imposes no obligation on the buyer into binding obligations for the seller—especially where significant pricing disputes are at stake.

Foley will continue to monitor the Kamax case and provide updates as that appellate decision takes shape.