Crestmark Bank v. Electrolux Home Products, Inc.

ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [35j AND GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [36]

This matter comes before the Court on cross motions for summary judgment regarding a contract dispute between plaintiff, Crestmark Bank, and defendant, Elec-trolux Home Products, Inc., and their rights to tools and molding equipment, finished component parts intended for purchase by defendant, and raw materials. This property was located at the facilities of Tarheel Plastics, LLC (“Tarheel”), a manufacturer-supplier for defendant and debtor to plaintiff, that had ceased business operations in early October 2013. Plaintiff asserts that that defendant breached the parties’ agreement, while defendant argues that the agreement lacked proper consideration, and, in any event, the terms that were not impossible were fully performed.

At stake is $332,000.00 in an escrow account funded by defendant -pursuant to the Accommodation Agreement. Defendant has brought counterclaims for tortious interference with contract, tortious interference with business relations, unfair and deceptive trade practices under North Carolina law, unjust enrichment, conversion, and declaratory relief that Electrolux is entitled to offset the costs of the resins it purchased on Tarheel’s behalf. (Answer and Counterclaims, Dkt. 18.)

*729I. BACKGROUND

A. Electrolux and Tarheel

Tarheel, located in North Carolina, manufactured injection-molded plastic parts for assembly into appliances made by Electro-lux beginning in 2008, and continuing until it ceased operations on October 2, 2013. (Rakes Aff., Def. Mot. Ex. 1, Dkt. 38-2 at 1; Lund Dep., Def. Mot. Ex. 6, Dkt. 38-7 at II.) Suppliers like Tarheel bid for manufacturing projects with Electrolux through a web portal, into which a quote is submitted regarding price, quantity, delivery, and other specifications for a specific project. (Rakes Aff., Dkt. 38-2 at 1-2.) If Electrolux found that quote acceptable, it posted a purchase order, along with terms of sale, for the manufacturer-supplier to accept through the web portal. (Id. at 2.) The terms of such an agreement provided, in part, “Set-off: Buyer [Electrolux] shall be entitled to set off any amount owing at the time from Seller to Buyer or any of its affiliated companies against any amount payable at any time by Buyer or any of its affiliated companies to Seller.” (Terms and Conditions of Sale, Def. Mot. Ex. 2, Dkt. 38-3 at 2.) Tarheel ordered the raw materials, called resins, used to manufacture the parts from Electrolux, and “then from time to time Electrolux offset the costs of the resins ordered by Tarheel against Ta-rheel’s open manufacturing invoices.” (Rakes Deck, Dkt. 38-2 at 2.)

A UCC Financing Statement, filed with the North Carolina Secretary of State on December 28, 2011, recorded the bailment of, and security interest in, specific tools owned by Electrolux and placed into the possession of Tarheel. (Def. Mot., Ex. 4.) A Tooling Agreement, executed on February 8, 2013, between Tarheel and Electrolux describes a different list of tools from that in the 2011 UCC Financing Statement, but similarly makes it clear that Electrolux maintained the ownership of the equipment provided to Tarheel for the manufacture of parts Electrolux would then purchase. (Tooling Agreement, Def. Mem., Ex. 3, Dkt. 38-4.) Tarheel shared this understanding that the equipment and molds belonged to Electrolux during the entire course of the relationship between the two companies. (Scott Dep., Def. Suppl. Mem., Ex. A, Dkt. 55-2 at 4.) The tooling agreement required Electrolux to have “plainly marked” its equipment and barred Tarheel from tampering or removing these markers. (Tooling Agreement, Def. Mem., Ex. 3, Dkt. 38-4 at 1.) Tarheel promised to “not allow the Tooling to become encumbered in any way as a result of any act or omission of Seller [Tarheel].” (Id. at 2.) The agreement also indicates that, even if a court determined that Electrolux had not retained ownership of the tooling, Tarheel “hereby agrees to be deemed to have granted Buyer a security interest giving Buyer all the rights of a secured creditor as to the Tooling under the Uniform Commercial Code as in effect in that jurisdiction.” (Id.)

The relationship between Electrolux and Tarheel was based on a just-in-time manufacturing supply, meaning that there would have been very little time available for Electrolux to change suppliers if one manufacturer ceased operations. (Stones Dep., Def. Mem. Ex. 9, Dkt. 38-10 at 7.) Electro-lux projects represented ninety-five percent of Tarheel’s business. (Lund Dep., PI. Mem. Ex. 5, Dkt. 36-2 at 37; but see Scott Dep., Def. Suppl. Mem., Ex. A, Dkt. 55-2 at 9 (estimating that Electrolux accounted for 90% of Tarheel’s business).)

Electrolux provides documentation that, when Tarheel ceased operations in early October, Tarheel owed Electrolux $240,450.00 in resin debits, as well as another $211,506.00 in “inventory at Ta-rheel,” and that Electrolux owed Tarheel $264,901.60 in open invoices for component *730parts received between June and October of 2013. (Rakes Aff., Def. Mem., Ex. 1 at 8.) A Tarheel minority partner testified that “hundreds of thousands of pounds” of resin filling three storage silos was onsite at'Tarheel at the time it ceased operations, although he did not state a value for this material. (Scott Dep., Def. Suppl. Mem., Ex. A, Dkt. 55-2 at 9.)

B. Crestmark and Tarheel

Crestmark was Tarheel’s primary lender, holding a line of credit with Tarheel for approximately $1,200,000.00. The earliest evidence of this relationship is a promissory note and security agreement dated November 27, 2012. (PI. Mem., Ex. 1, Dkt. 36-2 at 1-2; Lund Dep.,- PI. Mem. Ex. 5, Dkt. 36-2 at 36-37.) In consideration for the loan, Tarheel

grant[ed] to Crestmark a security interest in all of its assets, now existing or hereafter arising, wherever located included All Accounts, Goods, Inventory, Equipment,... books and records and supporting obligations for any of the foregoing, and all Proceeds of the foregoing (the “Collateral”), to secure repayment of the Obligations (“Security Interest”)..

(PI. Mem., Ex. 2, Dkt. 36-2 at 6 (emphasis added).) Three individuals, Joseph Nelson, Daniel Scott, and Craig Ward personally guaranteed the loans. (PI. Mem., Ex. 3 at 28-29.) Crestmark recorded its security interest on November 5, 2012. (UCC Financing Statement, Def. Mot. to Stay, Ex. C, Dkt. 3-3 at 2 (describing the collateral as “[a]ll assets of the Debtor now owned or hereafter acquired and wherever located”).)

The security agreement included the representation that Tarheel “is the owner of all the Collateral and there are no other liens or claims against the Collateral, except the Security Interest of Crestmark or as shown on the Schedule,” and that “[t]he Inventory and Equipment are and shall remain free from all liens, claims, encumbrances, and security interests (except as held by Crestmark, and except as identified on the Schedule).” (PI. Mem. Ex. 2, Dkt. 36-2 at 8-9.) The agreement excluded from inventory anything that was “subject to any license or other such agreement that limits, conditions, or restricts [Ta-rheel’s] or Crestmark’s right to sell or otherwise dispose of such Inventory.” (Id. at 20.) The evidence does not show that a list of Electrolux tooling was appended or otherwise exempted from this lien.

The Crestmark-Tarheel relationship also included acknowledgment by Crestmark of the resins-purchasing offset program— that “[Tarheel] from time to time got these small invoices from Electrolux that would offset against the receivables and it had been fairly small by comparison.” (Lund Dep., PI. Mem., Ex. 5, Dkt. 36-2 at 38.) However, Crestmark understood the offset program to be “a fairly small number,” and there had been “very few adjustments” in the roughly year and a half in which Crestmark managed the credit line with Tarheel. (Id. at 39.)

On September 30, 2013, Crestmark officials traveled to the Tarheel facility in North Carolina to audit its books and determine if Tarheel should continue or cease operations. (Lund Dep., PI. Mem. Ex. 5, Dkt. 36-2 at 32-34.) The records documenting the raw-material offset program with Electrolux were missing, apparently taken by the majority owner, Mr. Nelson, when he suddenly left the company. (Id. at 35; see also Scott Dep., Def. Suppl. Mem., Ex. A, Dkt. 55-2 at 9-11 (testifying that Mr. Nelson left Tarheel on September 13, 2013, after the minority partners discovered that he had falsified payroll-tax information and kept information about the offset program with Elec-*731trolux off the company’s books).) The minority owners of Tarheel, Mr. Scott and Mr. Ward, represented to Crestmark that they were not knowledgeable about the offset program. (Id. at 38.)

The analysis prepared on October 1, 2013 by Crestmark with the minority owners demonstrated that Tarheel could not continue operations. (Id. at 42-43.) The Statement of Accounts prepared by Crest-mark and dated October 16, 2013 demonstrates that Electrolux-related companies had past-due balances of $1,109,006.67. (PI. Mem. Ex. 6, Dkt. 36-2.)1

A cash-flow projection and analysis created between September 30 and October 1, 2013 demonstrated to Crestmark that Ta-rheel had a negative cash flow that would continue to grow through the Fall of 2013, and led Crestmark to cease its lending of operating funds and terminate Tarheels operations on October 2, 2013. (Lund Deck, PI. Suppl. Mem., Ex. 2, Dkt. 56-1 at 23.) There is significant disagreement between the parties regarding the meaning of this cash-flow analysis: Electrolux asserts that this analysis supports its contention that Tarheel owed it money at the time it ceased operations, while Crestmark asserts that it has no relevance to the current dispute and merely modeled cash-flow through the Fall of 2013 to help the lender decide if operations should be terminated. (Compare Def. Suppl. Mem., Dkt. 55 at 4-5; PI. Suppl. Mem., Dkt. 56 at 4-7.)2

C. Crestmark and Electrolux

Electrolux provided a letter to Crest-mark dated March 1, 2013 notifying the lender of its secured interest in tooling located at Tarheel. (Def. Mem. Ex. 5, Dkt. 38-6.) No list of tools is attached to this exhibit. (Id.) Soon after, by letter dated March 11, 2013, an Electrolux purchasing agent released any security interest the company held in Tarheel’s accounts receivable or inventory. (Electrolux Letter, PI. Mem., Ex. 4, Dkt. 36-2 at 30.)

Between October 1 and October 3, 2013, Crestmark official Lund spoke with an Electrolux official regarding tools and parts ready for shipment (“component parts”) at Tarheel. (Lund Dep., PI. Mem. Ex. 5, Dkt. 36-2 at 48.) Crestmark conditioned Electrolux’s ability to remove the tools and molds from Tarheel on having “ma[d]e arrangements to settle out all accounts receivables.” (Id.)

Q: So you informed them — it’s Crest-mark’s position that you informed Elec-trolux that they could pick up their tooling and molds?

A: If we came to an agreement with settling out our account, yes.

(Id.) An Electrolux employee onsite at Ta-rheel between October 1 and 4, 2013 explained that they were barred from gaining access to the tools and equipment. (Stones Dep., Def. Mem., Ex. 9, Dkt. 38-10 at 8.) One of the Tarheel minority partners confirmed that Crestmark would not allow finished product or tooling to leave the Tarheel plant, that Electrolux communicated its urgent need for the product and molds, and that he had explained Electro-lux’s urgent need for the molds to Crest-*732mark. (Scott Dep., Def. Suppl. Mem., Ex. A, Dkt. 55-2 at 7-8.)

The evidence provided does not clarify whether Crestmark was either fully informed or had notice regarding which equipment at the Tarheel plant was the property of Electrolux. Crestmark engaged in its promissory note and security agreement with Tarheel after Electrolux filed its 2011 security interest in a subset of the tooling at Tarheel. This UCC financing statement filed by Electrolux in 2011 appears to itemize the same parts as the first page of Schedule 4.B of the Accommodation Agreement. These facts establish that Crestmark entered the loan agreement with notice of Electrolux’s priority security interest in the subset of equipment and molds itemized in the 2011 UCC filing. (Compare Def. Mem., Ex. 3, Dkt. 38-4 at 5-6; PI. Mem., Ex. 23, Dkt. 36-3 at 97.) The Tooling Agreement executed on February 8, 2013 between Electrolux and Ta-rheel appears to cover the same tools that are itemized on the second and third pages of Schedule 4.B of the Accommodation Agreement. (Compare Def. Mem., Ex. 3, Dkt. 38-4 at 5-6; PI. Mem., Ex. 23, Dkt. 36-3 at 98-99.) However, the record does not clarify whether Crestmark or Electrolux had the priority secured interest in this subset of tools. There is no UCC filing regarding this subset; nor is there an explanation of how this arrangement was allowed in light of Crestmark’s all-asset lien, which included after-acquired equipment. The record does not show that Crestmark had information about which tools at Tarheel belonged to Electrolux or that it had documentation from Electrolux regarding its accounting of the invoices and resin offset program with Tarheel.3

To resolve the standoff over access to the finished component parts, tools and molds, Tarheel, Crestmark, and Electrolux executed an Accommodation Agreement on October 4, 2013. (Def. Mem., Ex. 11, Dkt. 38-12.) On October 1, 2013, Electrolux’s counsel, David Conaway, contacted Crest-mark’s counsel, Thomas Coughlin, indicating a desii-e to speak “first thing” to discuss tooling owned by Electrolux and in Tarheel’s possession. (PI. Mem., Ex. 8, Dkt. 36-2 at 83.) Coughlin recounts that Conaway asked about recovery of inventory and tooling at Tarheel, as well as whether Crestmark would consider funding further production, and the attorneys discussed an accommodation agreement. (Coughlin Dep., PL Mem., Ex. 9, Dkt. 36-2 at 87-88.) Crestmark was aware that Cona-way stressed Electrolux’s urgency in this matter. (Id. at 89.)

The record demonstrates that Conaway and Coughlin proceeded to negotiate the Accommodation Agreement through multiple iterations between October 2 and October 4, 2013, with acceptable terms reached on Friday, October 4, 2013. (PL Mem., Ex. 11-22, Dkt. 36-2, 36-3.) Electrolux provides a letter dated October 3 stating that Crest-mark demanded the monetary terms for the $100,000.00 payment and $332,000.00 escrow funds that morning, along with additional terms for Electrolux to fund Ta-rheel’s continuing operations. (Oct. 3, 2013 Conaway Letter to Coughlin, Def. Mem., Ex. 10, Dkt. 38-11 at 2-3.) Conaway clearly announced in this letter Electrolux’s extreme dissatisfaction with these terms and its urgent need to recover its tooling. (Id.) In the course of these rapid negotiations, Electrolux suggested modified monetary terms in an email from Conaway to Cough-*733lin later in the day on October 3, offering “$100,000 immediately upon loading the on hand parts and tooling on Electrolux designated trucks (tomorrow morning) ... [and] Electrolux will also wire tomorrow morning $332,000 into escrow, pending a good faith and best efforts reconciliation by the parties of the amounts owed by Electrolux to Tarheel on outstanding invoices.” (PI. Mem., Ex. 13, Dkt. 36-3 at 11.) More red lining of the agreement ensued before a final version was executed on the afternoon of October 4, 2013. (Id. at Ex. 22-23, Dkt. 36-3.)

As part of the Accommodation Agreement, Crestmark relinquished any interest in Electrolux’s tooling; in turn, Electrolux relinquished any interest in “any inventory or equipment other than” the tooling it owned. (PI. Mem., Ex. 23, Dkt. 36-3 at 92.) The Agreement further established that 1) Electrolux would immediately pay Crest-mark $100,000.00, in exchange for the finished parts that had not yet been shipped to Electrolux, and without any resin setoff; 2) Electrolux would wire to Crestmark’s counsel $332,000.00, to be held in escrow pending a reconciliation with five days of the outstanding invoices owed to Tarheel; 3) upon Crestmark’s receipt of these two payments, Electrolux would have the right to take immediate possession of its tooling; and 4) the only allowed setoffs for resins would be “the verifiable, actual cost of plastic resins or other raw materials paid for by Customer and delivered to Supplier and ultimately used by Supplier to produce that individual Component Part [shipped or to be shipped to Electrolux].” (Id. at 91-92.) Electrolux also had the option to take possession of resins and raw materials that it had supplied to Tarheel and then issue a credit in Tarheel’s favor. (Id. at 91.)

The Accommodation Agreement provides that it is governed by Michigan law and that jurisdiction “will be proper in federal district court or in state court in Oakland County [Michigan].” (Id. at 93.) A three-page list of itemized tools belonging to Electrolux was attached to the agreement. (Id. at 97-98.) Coughlin emailed Con-away late on Friday, October 4, 2013 to confirm that the wires had been received and Electrolux was free to take possession of the finished component parts and its tooling from the Tarheel facility. (PI. Mem., Ex. 24, Dkt. 36-3 at 100.) He indicated that Electrolux was also free to take raw materials, subject to further reconciliation, but would need someone from Ta-rheel or Crestmark present to monitor the quantity taken. (Id.)

By Thursday of the following week, October 10, 2013, Electrolux had been able to remove all of its tooling and molds from the Tarheel facility. (Knudsen Dep., PI. Mem., Ex. 7, Dkt. 36-2 at 80-81.) Neither party asserts that Electrolux was forced to suspend its operations or incur any fines due to the shut-down of the Tarheel operation. (Id. at 82; Stones Dep., PI. Mem., Ex. 25, Dkt. 36-3 at 106.)

On October 10, 2013,4 Electrolux provided Tarheel with the documentation reconciling open invoices and resin credits. (PI. Mem., Ex. 26, Dkt. 36-4; Def. Mem., Ex. 12, Dkt. 38-13.) Crestmark had allowed Electrolux an extra day to provide the reconciliation. (Matheson Dep., Def. Mem., Ex. 7, Dkt. 38-8 at 10.) The parties disagree on the validity and meaning of these documents. Electrolux claims that the reconciliation documented that Tarheel owed *734Electrolux $156,976.86 after the resins had been offset from open invoices. (Def. Mem., Ex. 12, Dkt 38-18 at 2.)5 By contrast, Crestmark found this initial reconciliation unacceptable because it documented all resins delivered, rather than the resin actually used to manufacture parts, it featured no signatures, and it had handwritten amounts on it, which made it unreliable. (Lund Dep., PI. Mem., Ex. 5, Dkt. 36-2 at 53.) It is undisputed that this first reconciliation documented all resins shipped to Tarheel, rather than a calculation of the resin actually used in finished parts. (Rakes Dep., PI. Mem., Ex. 34, Dkt. 36-8 at 4-5.)

On November 14, 2013, Coughlin provided Conaway with a detailed explanation of how the first reconciliation failed to satisfy the terms of the Accommodation Agreement and allow for resolution of the $332,000.00 in the escrow account, stressing that only the resins actually used to mold parts that were sold to Electrolux could be applied as an offset to the open invoices. (PL Mem., Ex. 27, Dkt. 36-6.) Coughlin explained that, based on what it had been able to learn from Tarheel, as well as information from Electrolux, it estimated the cost of raw materials to be between 62% and 66% of the invoice amount. (Id. at 2; but see Scott Dep., Def. Suppl. Mem., Ex. A, Dkt. 55-2 at 6 (“60 percent of your total cost i[s] typically resin.”).) Coughlin sought Electrolux’s consent to release the escrow funds to Crest-mark, based on the documentation Crest-mark provided that the $1,109.760.006 in open invoices would yield $709,760.00 in allowed setoffs under the terms of the Accommodation Agreement, and result in Electrolux owing $399,246.00, with $332,000.00 already held in the escrow account. (Id.)

Conaway responded on December 6, 2013, to indicate that Electrolux was preparing additional information. (PI. Mem., Ex. 29, Dkt. 36-6 at 28.) On January 7, 2014, with no additional information forthcoming, Coughlin renewed his demand for consent to release the escrow funds. (PI. Mem., Ex. 31, Dkt. 36-6.)

On January 21, 2014, Electrolux provided a second reconciliation, which it described as demonstrating $240,540.00 in resins used in parts listed in the open invoices, and explained the formula it used to calculate that amount. (Def. Mem., Dkt. 35 at 18; Ex.l, Dkt. 38-2 at 4-5.) Electrolux asserts that the only way to calculate the amount of resins actually used, rather than deriving an estimate, would have been to observe the actual production of each part. (Def. Mem., Dkt. 36 at 18.) Electrolux also identified open invoices with Tarheel in the amount of $264,901.60. (Id.; Ex. 1, Dkt. 38-2 at 2.) Crestmark asserts that this second reconciliation was also unacceptable, because in some cases the resin debits were larger than the value of the outstanding invoices, which would not comport with the understanding that the value of the resins used in manufactured parts could not exceed the value of the manufactured parts. (PI. Mem., Dkt. 36 at 24.)

Crestmark initiated this lawsuit seeking release of the $332,000.00 escrow funds after it rejected this second reconciliation. (Id. at 25.)

II. The Current Motions

A. Defendant’s Motion

Defendant Electrolux seeks summary judgment dismissing Crestmark’s breach-*735of-contract claim, arguing that the Accommodation Agreement fails for lack of consideration. It further argues that the definition of “allowed set offs” in the Accommodation Agreement was impossible to satisfy, but that it otherwise complied with the terms and conditions of that agreement. (Def. Mem., Dkt. 36 at 20.)

Defendant asserts that in exchange for wiring $100,000.00 to plaintiff, funding the $332,000.00 escrow account, and providing an accounting and reconciliation for all open invoices and resins used, as well as forgoing its rights regarding the raw materials it had supplied to Tarheel, it was allowed to take possession of its own tooling and the ■ parts already manufactured but not yet shipped. (Id. at 20-21.) Defendant asserts that plaintiff had no legal right to the tooling because it was at Ta-rheel under a bailment agreement and defendant’s first-priority rights to those tools were secured by a UCC financing statement. (Id. at 23.) As for the component parts, defendant argues that these were products purchased in the ordinary course of business between Electrolux and Ta-rheel and already subject to the agreement between these entities. (Id. at 25-26.) The right to take possession of the tooling and the component parts was not consideration, defendant asserts, because it already had this right, and “additional obligations are unenforceable” when they are taken on without additional consideration. (Id. at 25) (quoting Yerkovich v. AAA, 461 Mich. 732, 610 N.W.2d 542, 546 (2000).)

In what the Court understands to be an alternative argument, defendant also asserts that the requirement in the Accommodation Agreement to account for the resin “actually used in the component parts was impossible to fulfill, and that both defendant and plaintiff understood that this was impracticable. (Id. at 28-29.) Defendant explains that a promise is not binding on the parties when they both knew at the time they made the agreement that performance was impossible. (Id. (citing Rogers Plaza, Inc. v. SS Kresge Co., 32 Mich.App. 724, 742-43, 189 N.W.2d 346 (1971).)) Defendant argues that it has otherwise performed the terms of the Accommodation Agreement, has provided documentation demonstrating that it is owed $158,754.40 after taking an offset for the resins against its open invoices with Ta-rheel, and owes nothing to plaintiff. (Id. at 31.)

Plaintiff opposes, asserting that the Accommodation Agreement was negotiated between two sophisticated parties represented by prominent counsel, and that, as a result of this negotiated agreement, defendant received, without delay, the tooling and inventory free of plaintiffs lien. (PI. Mem. in Oppos. at 8.) Plaintiff also argues that defendant is in breach of the Accommodation Agreement because its first reconciliation attempted to take setoffs for all raw materials, rather than only the resins used in manufactured component parts. (Id. at 12-13.) It also found the January reconciliation unacceptable in meeting the specifications of the Accommodation Agreement by again asserting setoffs for resins not used to manufacture the component parts. (Id. at 15-16.)

Plaintiff cites Michigan caselaw for the rule that courts should uphold parties’ freedom to contract, “avoiding technical or constrained constructions,” and that even the slightest consideration will bind a contract. (Id. at 19-20) (quoting Appalachian Railcar Servs., Inc. v. Boatright Enterprises, Inc., 602 F.Supp.2d 829, 867 (W.D.Mich.2008)).7 Therefore, plaintiff, ar*736gues, plaintiff released its rights to the tooling and component parts in exchange for defendant’s performance, and defendant failed to perform the reconciliation as required. (Id. at 20-21.)

As for defendant’s argument that it was a buyer of the component parts in the ordinary course of business and therefore had a superior interest in the component parts, plaintiff argues against this proposition, because a purchaser in the ordinary course of business must give new value for the goods and actually take delivery and title from the seller, and defendant did not give new value. (Id. at 24-25) (citing In re H.S.A. II, Inc., 271 B.R. 534, 540 (E.D.Mich.2002)); GMAC Business Credit, LLC v. Ford Motor Co., 100 Fed.Appx. 404, 406 (6th Cir.2004).

The component parts were at the Ta-rheel facility, and when plaintiff declared Tarheel to be in default and asserted its lien on October 1, 2013, there was no contract between plaintiff and defendant; therefore, plaintiff asserts, it had no duty to defendant regarding the component parts. (Id. at 25-26.) Plaintiff also contends that it had an interest in the tooling at Tarheel, because Michigan law recognizes “the equitable right of a borrower to offset amounts due and owing” between two entities, (Id. at 26) (citing Walker v. Farmers Ins. Exch., 226 Mich.App. 75, 79, 572 N.W.2d 17 (1997)), and no fact-finder or court of law had resolved the two competing interests in the tooling. (Id. at 28.) Finally, plaintiff asserts that the doctrine of impossibility does not apply to defendant’s situation, in which an exact number was not required, and Electrulux did not provide even an estimate of the correct offset amount. (Id. at 30-31.)

Defendant replies that plaintiff had no valid interest in the tooling, because a security interest attaches to a debtor’s rights in a particular asset, not the asset itself, and Tarheel never had any rights in defendant’s tooling. (Def. Reply, Dkt. 43 at 2-4.) Defendant also reiterates that it had an existing agreement with Tarheel to ship the manufactured component parts; therefore, plaintiffs agreement to release them was not consideration. (Id. at 5.) Defendant also asserts that plaintiff misinterprets the caselaw regarding a buyer in the ordinary course of business, and that defendant held at least constructive possession of the component parts already manufactured but not yet shipped. (Id. at 6.)

B. Plaintiffs Motion

Plaintiff moves for summary judgment granting it full rights to the $332,000.00 escrow account on the grounds that the Accommodation Agreement was a valid, enforceable contract that defendant breached. Plaintiff argues that rescission based on a failure of consideration must be for a “complete and total” failure, and in this matter, plaintiffs release of its lien over the component parts is at least partial consideration under the Accommodation Agreement. (PI. Mem., Dkt. 36 at 30-31) (citing Adell Broadcasting Corp. v. Apex Media Sales, Inc., 269 Mich.App. 6, 12, 708 N.W.2d 778 (2005).) Plaintiff further asserts that defendant breached this valid contract by failing to provide a reconciliation that complied with the terms for what counted as allowable resin offsets under the Accommodation Agreement. (Id. at 32.)8

*737As for defendant’s counterclaims, plaintiff argues that defendant has not satisfied its burdens to demonstrate the elements for these claims. It states that there are no facts to support an intentional wrongful act as required to establish tortious interference with contract or with business relationships. (Id. at 35-39.) Plaintiff also argues that the North Carolina Unfair and Deceptive Trade Practices Act (“UDT-PA”), N.C. Gen. Stat. § 75-1.1, does not apply in this situation, and even if it did, defendant cannot demonstrate an “egregious or aggravating circumstance” or actions “in or affecting commerce” to meet the elements of this law. (Id. at 40-43) (citing UDTPA, Carcano v. JBSS, LLC, 200 N.C.App. 162, 684 S.E.2d 41, 50 (2009).) As for unjust enrichment and conversion, plaintiff argues that the $100,000.00 wired by defendant was in exchange for the release of plaintiffs lien on the component parts; therefore, there has been no conferral of a benefit or conversion of any property. (Id. at 44.) Finally, plaintiff moves to disregard defendant’s affirmative defense of fraud and duress. The Accommodation Agreement was negotiated by sophisticated parties, plaintiff argues; therefore, defendant was not forced into unreasonable terms against its will. (Id. at 45.)

Defendant opposes, arguing that the Accommodation Agreement lacks consideration and therefore is not enforceable. (Def. Oppos., Dkt 41 at 15.) Defendant asserts that the terms of the existing offset relationship with Tarheel entitled it to receive the finished component parts without first tendering payment. (Id. at 16-18.) Defendant further argues that it complied with all the terms of the Accommodation Agreement that were not impossible (id. at 19-21), and that genuine issues of material fact prevent a finding of summary judgment regarding its counterclaims. (Id. at 22-33.) Specifically, defendant asserts that plaintiffs refusal to release the tooling — in which it had no interest — until the monies were wired was an intentional wrongful act. (Id. at 23.) Similarly, defendant asserts that plaintiffs refusal to release the component parts to defendant until monies were paid may satisfy the criterion of an intentional act constituting tortious interference with the business relationship between defendant and Tarheel. (Id. at 26.)

Plaintiff counters that it had a fully perfected and superior interest in the component parts, and that releasing this right was consideration for Electrolux’s payments. (PL Reply, Dkt. 44 at 5.) Plaintiff also asserts that its all-asset security interest attached to all of Tarheel’s assets, and that its equitable right of setoff against Electrolux’s unpaid invoices was rightfully applied to the Electrolux tooling. (Id. at 7) (citing Walker, 226 Mich.App. at 79, 572 N.W.2d 17.) As for the counterclaim based on the UDTPA, plaintiff argues that defendant has not made its showing that the UDTPA applies to this matter. (Id. at 8-9.) It also asserts that defendant’s arguments regarding duress misapply caselaw. (Id. at 11) (citing Enzymes of Am. Inc. v. Deloitte, Haskins & Sells, 207 Mich.App. 28, 35, 523 N.W.2d 810 (1994).)

III. LEGAL STANDARDS

Summary judgment is proper where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The Court may not grant summary judgment if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

If the moving party bears the burden of persuasion at trial, “his showing must be *738sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party.” Calderone v. United States, 799 F.2d 254, 259 (6th Cir.1986)(quotation omitted). When the non-moving party would bear the burden of persuasion at trial, the moving party can meet its burden under Rule 56 in one to two ways: “[flirst, the moving party may submit affirmative evidence that negates an essential element of the nonmoving party’s claim. Second, the moving party may demonstrate to the Court that the nonmov-ing party’s evidence is insufficient to establish an essential element of the non-moving party’s claim.” Celotex Corp. v. Catrett, 477 U.S. 317, 331, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The reasoning behind this rests on the understanding that if the “nonmoving party cannot muster sufficient evidence to make out its claim, a trial would be useless and the moving party is entitled to summary judgment as a matter of law.” Id. (citing Anderson, 477 U.S. at 249, 106 S.Ct. 2505).

When reviewing cross-motions for summary judgment, courts “must evaluate each motion on its own merits and view all facts and Inferences in the light most favorable to the nonmoving party.” Appoloni v. United States, 450 F.3d 185, 189 (6th Cir.2006) (quoting Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir.2003)). It is not necessarily the case that judgment must be entered for one side or the other. Id. (citing Parks v. La-Face Records, 329 F.3d 437, 444 (6th Cir.2003)); B.F. Goodrich Co. v. U.S. Filter Corp., 245 F.3d 587, 592 (6th Cir.2001). “Both parties, as movants, rely on inferences favorable to their own positions in seeking to obtain summary judgment,” but in evaluating each motion, courts must still “tak[e] care in each instance to draw all reasonable inferences against the party whose motion is under consideration,” because “the standards upon which the court evaluates the motions for summary judgment do not change simply because the parties present cross-motions.” Taft Broad. Co. v. United States, 929 F.2d 240, 247-48 (6th Cir.1991) (internal citations omitted).

IV. ANALYSIS

A. Evaluation of Property Rights

There are three categories of property that were held at the Tarheel plant in early October 2013, which are at the center of the parties’ dispute over the enforceability of the Accommodation Agreement: the finished component parts not yet shipped to Electrolux, the resins not yet used to manufacture parts, and the tooling owned by Electrolux and used by Tarheel to manufacture parts. These three types of property receive distinct treatment under the terms of the Accommodation Agreement, and they are also subject to distinct legal analyses.

The Accommodation Agreement, which both parties rely on in their motions, defined the $100,000.00 payment as the “Finished Goods Payment” and indicated that it was “in full satisfaction of all obligations to [Crestmark] and [Tarheel] with respect to such Finished Component Parts only.” (Accommodation Agreement, Def. Mem., Ex. 11, Dkt. 38-12 at 1-2.) The $332,000.00 escrow payment is defined as an “Interim Accounts Payment” subject to later reconciliation and potential offset against resins used in the manufacture of those parts. (Id. at 2.) The resins and raw materials for which Electrolux had already taken an offset could be reclaimed by Electrolux, in exchange for a credit in favor of Tarheel. (Id.) Finally, the Accommodation Agreement allowed for the release to Electrolux of its tooling, which was itemized in Schedule 4.B, once the “Finished Goods Pay*739ment” and the “Interim Accounts Payment” had been made.

1. Finished Component Parts

The parties’ rights to the finished component parts hinges on whether defendant was a buyer in the ordinary course of business. Under Michigan law, “a buyer in ordinary course of business.. .takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.” M.C.L. § 440.9320(1). To be a “buyer in the ordinary course of business” one must participate in a sale that “comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices.” M.C.L. § 440.1201(2)(i). Additionally,

A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under article 2 may be a buyer in ordinary course of business. The term. does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

Id. (emphasis added). A buyer-in-ordinary-course relationship can be found in a situation like this one, where the buyer purchases and supplies the raw materials to the manufacturer and then offsets the costs of those raw materials from the cost of the finished product it purchases from the manufacturer. Sensient Flavors, L.L.C. v. Crossroads Debt, L.L.C., No. 2009-027342, 2013 WL 5857604, at *6 (Mich.Ct. App. Oct. 31, 2013). The determination relies on whether the arrangement comported with the manufacturer’s “own usual or customary practices.” Id. (citing M.C.L. § 440.1201(9) [§ 440.1201(2)® since 2013]).

The Michigan statute also requires that a buyer in ordinary course has taken possession of the goods or has a right to recover them. M.C.L. § 440.1201(2)®. In some circumstances, courts have found it unnecessary for the buyer to have taken possession to nonetheless be granted this exception to the priority of the secured interest. For instance, if the industry custom is for the buyer not to have taken immediate possession of a product, the lack of physical possession may be irrelevant to the decision of whether it was a buyer in ordinary course of business. Ace Equip. Sales, Inc. v. H.O. Penn Mach. Co., 88 Conn.App. 687, 871 A.2d 402, 406 (2005) (equipment dealer was buyer in ordinary • course of heavy construction equipment not yet in its physical possession, because the industry custom was to take possession at the time it had a purchaser lined up) (citing Chrysler Credit Corp. v. Sharp, 56 Misc.2d 261, 288 N.Y.S.2d 525, 534 (Sup. Ct.1968) (purchaser of a car out of dealer inventory with a valid contract and consideration given, but who had not yet taken title, was nonetheless buyer in ordinary course of business); Fin. Am. Commercial Corp. v. Econo Coach, Inc., 118 Ill.App.3d 385, 73 Ill.Dec. 878,