Sanmina Corporation v. Dialight PLC

Background

Sanmina Corporation and Dialight PLC entered a Manufacturing Services Agreement in March 2016. Sanmina agreed to manufacture custom lighting products according to Dialight’s specifications, ship them to Dialight or its customers, and send invoices. Dialight later terminated the agreement effective January 31, 2019.

Each party accused the other of breaching the agreement. Sanmina claimed that Dialight failed to pay about $5.3 million for delivered goods and also owed about $4.55 million for excess and obsolete materials ordered based on Dialight’s forecasts. Dialight alleged that Sanmina failed to deliver complete, timely, and conforming orders, including defective safety lanyards. Dialight also claimed that Sanmina induced it to sign the agreement by falsely representing its existing manufacturing experience and capacity, and that Sanmina engaged in willful misconduct after the agreement was signed.

Sanmina moved for partial summary judgment, asking the court to rule in its favor on Dialight’s fraudulent-inducement and willful-misconduct claims and on Sanmina’s claim for unpaid invoices. Sanmina also sought a ruling that the agreement’s liability limitations were enforceable.

Evidence and summary-judgment standard

Summary judgment is appropriate when there is no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment as a matter of law. The court must view the evidence in the light most favorable to the party opposing the motion. The court rejected Sanmina’s objections to exhibits submitted through a declaration by Dialight’s counsel, concluding that the materials could potentially be presented in admissible form at trial.

Fraudulent inducement

The court denied summary judgment on Dialight’s fraudulent-inducement claim. Under New York law, that claim required evidence that Sanmina made a material false statement, intended to defraud Dialight, that Dialight reasonably relied on the statement, and that the reliance caused damages.

The court concluded that Dialight’s allegations were not merely a restatement of its contract claim. Dialight identified alleged pre-contract statements about Sanmina’s existing equipment, information-technology systems, supply-chain tools, financial condition, manufacturing space, and ability to handle Dialight’s high-mix, low-volume production model. Statements about existing capacity or resources can support a separate fraud claim, unlike a simple promise to perform the contract in the future.

The court did not treat every alleged statement as supporting the claim. In particular, the statement about Sanmina’s ability to serve Dialight from a single profit center appeared in the agreement itself and therefore did not support a claim based on an extraneous, pre-contract representation. It could still be relevant to whether other statements were material or reasonably relied upon.

The court also held that whether Dialight reasonably relied on Sanmina’s statements was a factual question. Dialight was represented by counsel and conducted an investigation that included a factory visit by a consultant and a detailed request for information. But the court concluded that these facts did not establish as a matter of law that Dialight’s reliance was unreasonable. A jury could decide whether Sanmina’s statements were false or material and whether Dialight reasonably relied on them. Because the fraudulent-inducement claim could potentially invalidate the agreement or its liability limitation, the court also denied Sanmina’s request for a declaration that those limitations were enforceable.

Willful misconduct

The court granted summary judgment on Dialight’s willful-misconduct claim. Dialight alleged that Sanmina intentionally harmed its business by failing to improve its performance, failing to reduce resulting harm, and shipping defective products despite knowing that defects could harm Dialight’s customers.

The court resolved the claim on the required-duty element and did not decide whether Sanmina’s conduct was sufficiently reckless or intentional. Under the governing principles, a tort claim based on contractual conduct requires a duty independent of the contract. The court held that Dialight did not identify legal authority imposing such an independent duty on contract manufacturers or on companies subject to industry standards. Because the claim sought to enforce duties arising from the agreement, the court found it duplicative of Dialight’s breach-of-contract claim.

Sanmina’s unpaid-invoices claim

The court denied summary judgment on Sanmina’s claim for about $5.3 million in unpaid invoices. Sanmina argued that Dialight owed the amount under the agreement because Sanmina invoiced Dialight for shipped goods and Dialight did not reject them within the agreement’s 15-business-day acceptance period.

Dialight presented evidence that some billed goods were never shipped or delivered, that it rejected some goods after inspection, and that it sent Sanmina emails identifying rejected products. The court held that this evidence created a genuine factual dispute for trial.

Disposition

Sanmina’s summary-judgment motion was granted as to Dialight’s willful-misconduct claim and denied as to Dialight’s fraudulent-inducement claim and Sanmina’s accounts-receivable claim. The opinion was filed in both related actions, Nos. 19 Civ. 11710 and 19 Civ. 11712.