Garmin Wurzburg GmbH v. Automotive Imagineering & Manufacturing, LLC et al
Filing
88
OPINION AND ORDER GRANTING 67 MOTION for Summary Judgment by Defendant Kelly Aroney; GRANTING 68 MOTION for Summary Judgment by Defendant Michael Aroney; GRANTING 72 MOTION for Partial Summary Judgment by Plaintiff Garmin Wurzburg GmbH; DENYING AS MOOT 79 MOTION (Joint) for Leave to File Supplemental Affidavit in Support of Motions for Summary Judgment by Defendants Kelly Aroney, Michael Aroney. Parties ORDERED to file a notice within ten (10) days of the entry of this Opinion and Order apprising the Court of the status of Count IV of the Second Amended Complaint. Signed by Chief Judge Philip P Simon on 6/1/16. (cer)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
GARMIN WURZBURG GMBH,
)
)
Plaintiff,
)
)
v.
) CAUSE NO. 3:14-cv-02006-PPS-CAN
)
AUTOMOTIVE IMAGINEERING &
)
MANUFACTURING, LLC, EXPRESSO
)
SATELLITE NAVIGATION, INC., EXPRESSO )
SATELLITE NAVIGATION, LTD., MICHAEL )
ARONEY, and KELLY ARONEY,
)
)
Defendants.
)
OPINION AND ORDER
Garmin Wurzburg GmbH brought this action to confirm and enforce an
arbitration award and to pierce the corporate veil of Defendant Automotive
Imagineering & Manufacturing, LLC (“AIM”) to hold its principal and sole owner,
Michael Aroney, personally liable. Garmin also claims that Aroney and his wife Kelly
committed fraud when they induced Garmin to deliver software to them without
paying for it. Garmin previously moved for summary judgment to confirm the
arbitration award, which I granted, and for which final judgment has already been
entered. Garmin subsequently moved for partial summary judgment on its piercing the
corporate veil claim against Michael Aroney, and Michael and Kelly Aroney moved for
partial summary judgment on Garmin’s fraud claim against them. For the reasons
discussed below, both motions will be granted so the fraud claim will be dismissed and
Garmin will be allowed to pierce the corporate veil.
BACKGROUND
Garmin1 is a German corporation with its principal place of business in that
country. [DE 27 at ¶7.] It entered into a software license agreement with AIM whereby
Garmin agreed to develop software and license it to AIM, and AIM agreed to pay an
initial fee, a fee for the software, and annual licensing fees. [DE 73-2 at 67.] The parties
agreed to arbitrate legal disputes arising out of the transaction. [Id. at 81.] Specifically,
the parties agreed to arbitrate in Chicago through the American Arbitration Association
and to award the prevailing party all costs and fees connected to both the arbitration
and enforcement of any arbitration award. [Id.]
AIM is a Michigan company and its only shareholder and officer is Michael
Aroney. [DE 58 at 4.] Kelly Aroney is Michael’s wife and has performed bookkeeping
for AIM from time to time. [Id.] Expresso Satellite Navigation, Ltd. was formed in
Hong Kong in July 2009 by AIM and a company called Sky River, each owning about
half, with AIM nominating one director (it chose Michael Aroney) and Sky River
nominating two. [DE 71-1 at 22.] (I’ll call this company “Expresso HK.”) Expresso
Satellite Navigation, Inc. was formed in Indiana in August 2010 by sole shareholder
Expresso HK, with the same directors as Expresso HK and Michael Aroney as its
President. [Id.] For ease of reference, I’ll refer to Expresso Navigation, Inc. as “Expresso
When it made the deal described below, Garmin was called Navigon; it
changed its name in January 2012. [DE 71-1 at 22.] For ease of reference I will use the
name Garmin throughout this opinion.
1
2
Indiana.”
To make a long story short, Garmin did a lot of work, delivered the software to
the Defendants, and were promptly stiffed. After the Defendants failed to pay $749,630
in licensing fees, the parties participated in an arbitration proceeding pursuant to the
License Agreement. [DE 71-1 at 20-30.] On July 31, 2014, the arbitrator awarded
Garmin a “partial final award” of $1,090,014.61 for which the corporate defendants —
AIM, Expresso HK, and Expresso Indiana — were jointly and severally liable. [Id. at
28-29.] This included the $749,630 in unpaid licensing fees and $340,384.61 in interest
on that amount. [Id.] Garmin also was awarded future interest at 12 percent per year
on the unpaid licensing fees until those fees were paid in full. [Id.] Finally, the
corporate defendants were ordered to pay certain to-be-determined fees and costs of the
arbitration pursuant to the License Agreement. [Id. at 29.] A “final award” signed on
September 4, 2014, included legal costs of $198,039.38, plus interest, and reimbursement
of $32,588 in arbitration fees already paid by Garmin. [Id. at 32-35.]
Shortly after filing this case, Garmin moved for summary judgment on Count I of
its complaint, arguing that it is entitled to confirmation of the arbitration award and that
the corporate defendants are liable for fees and costs in enforcing the award. [DE 29.]
The Defendants responded by stating they did not oppose the motion but making it
clear that enforcement of the arbitration award applies only to the corporate defendants,
not the Aroneys individually. [DE 52.] So I granted Garmin’s motion for summary
judgment on Count I, confirming the arbitration award. Garmin then moved for
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certification under Federal Rule of Civil Procedure 54(b) directing entry of final
judgment confirming Garmin’s arbitration award against the corporate defendants,
which I granted. [DE 65.]
After taking additional discovery on the remaining counts, the parties now have
filed cross motions for summary judgment. Michael and Kelly Aroney seek summary
judgment on Count III of the second amended complaint — the count alleging fraud.
For its part, Garmin seeks summary judgment on Count II of the second amended
complaint — the piercing the corporate veil count where Garmin is attempting to hold
Michael Aroney jointly and severally liable for AIM’s debts and obligations.
Discussion
Summary judgment is proper “if 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). A genuine dispute about a material fact exists only “if the
evidence is such that a reasonable jury could return a verdict for the non-moving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A nonmoving party is
not entitled to the benefit of “inferences that are supported by only speculation or
conjecture.” Argyropoulos v. City of Alton, 539 F.3d 724, 732 (7th Cir. 2008) (citations and
quotations omitted).
I will begin by addressing the fraud claim. Much of the briefing by the parties is
spent arguing which state law — Illinois or Indiana — applies to this claim. Because
this is a case invoking diversity jurisdiction, I am tasked with determining what law
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applies by considering the conflict-of-laws rules of Indiana, the state in which I sit.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97 (1941). Michael and Kelly
Aroney argue that Indiana law applies because the allegedly fraudulent statements they
made were uttered from their office in LaPorte, Indiana. [DE 70 at 10 n.4; DE 69 at 15
n.4; DE 80 at 2-7; DE 81 at 4-8.] Garmin argues that Illinois law applies because the
injury occurred in Illinois, where Garmin asserts it was located. [DE 76 at 11-12.]
The Aroneys have the better of the argument since, under Indiana law, the most
important factor when considering choice of law in a tort case is “where the conduct
causing the injury occurred.” Simon v. United States, 805 N.E.2d 798, 806-07 (Ind. 2004).
Any fraudulent act by Mr. Aroney took place in LaPorte, Indiana and so Indiana law
most likely should apply. I say “most likely” because, while interesting, the dispute
over what state law applies is academic as there is no difference between Illinois and
Indiana law in this area. Both states bar fraud claims where the damages arising from
the fraud claim are not separate and distinct from the damages resulting from a breach
of contract. See, e.g., Epperly v. Johnson, 734 N.E.2d 1066, 1073 (Ind. Ct. App. 2000)
(finding that the plaintiff’s fraud claim failed because the defendant’s misrepresentation
was merely a breach of the parties’ contract and “[t]he misrepresentation did not result
in injury distinct from that resulting from the breach, and it thus is not independently
actionable as fraud”); Tobin v. Ruman, 819 N.E.2d 78, 86 (Ind. Ct. App. 2004) (upholding
the trial court’s grant of summary judgment in favor of defendant on a fraud claim
where the fraud claim was “merely a repackaged version of [the plaintiff’s] breach of
5
contract claim”); Johnson v. George J. Ball, Inc., 248 Ill. App. 3d 859, 867, 617 N.E.2d 1355,
1361 (Ill. App. Ct. 1993) (“Generally, a party may not recover in tort for what is
essentially a breach of contract.”); Smith v. Prime Cable of Chicago, 276 Ill. App. 3d 843,
855, 658 N.E.2d 1325, 1335 (Ill. App. Ct. 1995) (“The failure to perform in the manner
promised resulted in one of the parties not receiving the benefit of their bargain, the
remedy of which is a breach of contract action not an action for fraud.”)
It is true that Illinois recognizes an exception where a plaintiff is fraudulently
induced to enter into the contract in the first place. See Johnson v. George J. Ball, Inc., 248
Ill. App. 3d 859, 867, 617 N.E.2d 1355, 1361 (Ill. App. Ct. 1993). But that doctrine is
neither here nor there for our purposes because Garmin’s second amended complaint
does not allege that it was fraudulently induced into entering into the License
Agreement. Its beef is with what the Aroneys may have done during the performance of
the License Agreement. The allegedly fraudulent acts all occurred after the parties
signed the License Agreement. So with that nuance in Illinois law brushed away, there
is no meaningful distinction between Illinois and Indiana law.
There is an obvious incentive to convert a breach of contract claim into a fraud
claim. Fraud claims allow for enhanced damages, including punitive damages. But to
allow this would be to undermine contract law. See All-Tech Telecom, Inc. v. Amway
Corp., 174 F.3d 862, 865 (7th Cir. 1999) (“Where there are well-developed contractual
remedies . . . there is no need to provide tort remedies for misrepresentation. The tort
remedies would duplicate the contract remedies, adding unnecessary complexity to the
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law. Worse, the provision of these duplicative tort remedies would undermine contract
law.”)
Garmin’s fraud claim against Michael and Kelly Aroney is simply a restyled
breach of contract claim, which Garmin already successfully arbitrated and had the
award confirmed by this Court. Specifically, Garmin alleges that Michael Aroney
repeatedly made false statements about the status of AIM’s payments to Garmin,
including that Expresso HK was owned by AIM and would be assuming responsibility
for AIM’s payment obligations under the License Agreement, for the purpose of
inducing Garmin to deliver the master copy of the software it developed. [DE 57 at
¶¶42, 44; DE 76 at 13-14.] Garmin also alleges that Kelly Aroney conspired with
Michael Aroney to defraud Garmin by, among other things, concealing her relationship
with Michael Aroney in communications with Garmin and, like Michael Aroney,
authoring deceptive emails to Garmin regarding the status of AIM’s payments. [DE 57
at ¶¶39-41, 45, 47; DE 76 at 15-16.] While some of the evidence offered by Garmin is
certainly fishy, it does not change the fact that the Defendants’ actions were part and
parcel of their breach of the contract between them and Garmin. And Garmin already
has been awarded damages to make it whole for these wrongs, specifically AIM’s
failure to meet its payment obligations under the License Agreement.
I note that the contract that was breached, the License Agreement, was between
Garmin and the corporate defendants, not the Aroneys. As I will address next,
however, AIM is a sham entity and a mere instrumentality of Michael Aroney, who is
7
jointly and severally liable for the damages resulting from AIM’s breach of the License
Agreement. Furthermore, even if this were not the case (as it is not for Kelly Aroney,
against whom the veil is not pierced), Garmin’s fraud claim against the Aroneys is
based on a series of misrepresentations stemming from and about the License
Agreement and Garmin should not receive a windfall in the form of double recovery by
pursuing damages for the same harm via two different claims. See Tobin, 819 N.E.2d at
86. For these reasons, Michael and Kelly Aroney’s motions for summary judgment on
Count III of the second amended complaint are granted.
I now turn to Garmin’s piercing the corporate veil claim. Count II of the second
amended complaint seeks to pierce the corporate veil of AIM and hold Michael Aroney
personally liable for the arbitration award entered against AIM. First, I must determine
what law applies to this claim. Veil piercing is a separate equitable doctrine that does
not depend on the contract at issue. I previously grappled with this choice of law issue
in Chapel Ridge Investments, L.L.C. v. Petland Leaseholding Co., No. 1:13-CV-00146-PPS,
2013 WL 6331095, at *2 (N.D. Ind. Dec. 4, 2013). In that case, I decided that absent a
statement of settled law in Indiana directly addressing which state’s law applies when
the corporate veil is at risk of being pierced, a trial court should proceed by the general
principle that “in the vast majority of situations, the law of the state of incorporation
governs attempts to disregard the corporate entity.” Chapel Ridge Investments, L.L.C.,
2013 WL 6331095, at *2 (quoting Secon Serv. Sys. v. St. Joseph Bank & Trust Co., 855 F.2d
406, 413 (7th Cir. 1988)). Because AIM is a limited liability company organized under
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the laws of Michigan, Michigan law will apply to Garmin’s veil piercing claim.
Under Michigan law, to pierce the corporate veil, a complainant must establish
that:
(1) the entity was the mere instrumentality of the owner, (2) the owner
exercised his or her control in such a manner as to defraud or wrong the
complainant in some way, and (3) the complainant would suffer an unjust
loss or injury unless the court disregards the existence of the entity as
separate from its owner.
Green v. Ziegelman, 310 Mich. App. 436, 454-59, 873 N.W.2d 794, 805-808 (Mich. Ct. App.
May 7, 2015). “Under Michigan law, there is a presumption that the corporate form will
be respected. . . . The propriety of piercing the corporate veil is highly dependent on the
equities of the situation, and the inquiry tends to be intensively fact-driven.” Servo
Kinetics, Inc. v. Tokyo Precision Instruments Co., 475 F.3d 783, 798 (6th Cir. 2007). “Factors
used by courts to determine the propriety of piercing the corporate veil include: (1)
whether the corporation is undercapitalized, (2) whether separate books are kept, (3)
whether there are separate finances for the corporation, (4) whether the corporation is
used for fraud or illegality, (5) whether corporate formalities have been followed, and
(6) whether the corporation is a sham.” Glenn v. TPI Petroleum, Inc., 305 Mich. App. 698,
716, 854 N.W.2d 509, 520 (Mich. Ct. App. 2014).
Weighing all of the factors and the evidence, AIM’s corporate veil should be
pierced and Michael Aroney should be held jointly and severally liable for the
arbitration award to Garmin. The evidence establishes that AIM was the mere
instrumentality of Michael Aroney. The record shows that AIM essentially was Michael
9
Aroney and two bank accounts, and Michael Aroney and his wife frequently relied on
those accounts for personal expenses. Starting with the corporate structure, AIM has
not observed any corporate formalities. See Dietrich v. Stephens, No. 05-cv-72113, 2010
WL 1286204 at *6 (E.D. Mich. Mar. 30, 2010) (piercing the corporate veil where a LLC
was not capitalized, there were no records or books, and the LCC only had one member
and manager, who funded the LLC’s bank accounts to make payments on a promissory
note); Michigan Laborers’ Health Care Fund v. Taddie Const., Inc., 119 F. Supp. 2d 698, 703
(E.D. Mich. 2000) (piercing the corporate veil where sole owner of a thinly-capitalized
entity failed to comply with corporate formalities).
Michael Aroney is the President and sole member of AIM and AIM never has
had any employees. [DE 73-1 at 54, 56.] Yet Michael Aroney is entirely uncertain
regarding certain operating issues of AIM including the existence of certain types of
operating documents, such as those setting forth the manner in which AIM will make
distributions to members, and the consistency with which AIM has paid annual
franchise taxes to the State of Michigan. [DE 73-1 at 54-55.] Michael Aroney does not
know whether AIM ever filed state or federal income taxes, is not aware of AIM ever
issuing a W-2 , 1099, or K-1 to any person or entity, and does not remember ever giving
anyone a financial statement. [DE 73-1 at 55.] There is no limited liability company
agreement or operating agreement for AIM, no board minutes, and no shareholder
resolutions. [DE 73-1 at 49.]
AIM’s capitalization (or lack thereof) and financial expenditures also are
10
indicative that AIM was merely a shell organization for the benefit of Michael Aroney.
AIM only has had two bank accounts since it was first established, one with Bank of
America and one with Chase, and while Garmin requested production of all AIM bank
statements for the period between January 1, 2009 and the present, AIM only produced
Bank of America account statements from October 2010 through September 2011 and
Chase account statements from October 2010 through March 2011 and January 2014
through March 2015. [DE 73-1 at 56-59, 78, 136.] Michael Aroney testified that he
believes all bank statements in AIM’s possession and control were produced. [DE 73-1
at 73.]
The account statements that were produced paint a questionable picture at best.
First of all, they show that AIM was undercapitalized. During the one-year period
commencing October 2010, the average month-end balance in AIM’s Bank of America
account was $713.72. [DE 73-2 at 97.] In January 2011, the month-end balance in the
Bank of America account was $79.31, and in five other months during this period it was
less than $300. [Id.] During the six-month period between October 2010 and March
2011, the average month-end balance in AIM’s account was $1,023.35. [Id.] The License
Agreement committed AIM to paying a $30,000 kick-off fee, prior to commencement of
the project, at least $100,000 in the form of a Golden Master Fee for the actual software,
and a minimum of $779,556 in annual license fees. [DE 73-1 at 69; DE 73-2 at 84.] At no
point was AIM sufficiently capitalized to come anywhere close to meeting its
obligations.
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Furthermore, Aroney and his wife appear to have used AIM bank accounts as
personal accounts. Many of the cash transfers and expenses reflected in the account
statements, at least at first glance, appear to be of a personal nature. For example,
between October 2010 and September 2011, AIM made 96 online cash transfers totaling
over $25,000 from its Bank of America account to a third-party checking account (“Chk
8086”). [DE 73-1 at 78; DE 73-2 at 99.] Kelly Aroney thinks that the third-party account
was the Aroneys’ personal account and Michael Aroney believes it “may have been”
but doesn’t know who was initiating the transfers or what they were for. [DE 73-1 at
63-64, 76.] In addition, between October 2010 and August 2011, AIM made at least
thirty ATM withdrawals from its Bank of America and Chase accounts totaling over
$2,500. [DE 73-2 at 95.] On February 11, 2011, Michael Aroney wrote a $4,400 check
payable to AIM and then deposited it into a personal account at New Buffalo Savings
Bank. [DE 73-1 at 82.] Michael Aroney testified that AIM did not have an account at
New Buffalo Savings Bank, but the Aroneys had a personal account there. [DE 73-1 at
64.] AIM also made payments on and off in 2010 and 2011 to Capital One Auto and
Chase Auto in connection with a Prius that was titled in Michael Aroney’s name and a
Jeep that Mr. Aroney was using on a regular basis. [DE 73-1 at 65, 67, 84, 98, 109, 112,
127, 143, 145, 148, 151.] During this 2010-2011 time frame, AIM also made hundreds of
purchases at dozens of different local food-service establishments such as Arby’s,
Burger King, KFC, Jimmy John’s, McDonald’s, and Wendy’s using its Bank of America
and Chase debit cards. [DE 73-2 at 89-93.] It also used these debit cards to make
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purchases at establishments such as 7-11, Menard’s, New Buffalo Pharmacy, the Dollar
Tree, Lowe’s, Wal-Mart, and the Gap Outlet. [DE 73-1 at 85, 102, 106, 141, 144-45.]
Turning to the 2014-2015 time frame, in 2014, AIM made 66 separate ATMfacilitated cash withdrawals totaling over $12,000. [DE 73-2 at 95.] Every month
between January 2014 and February 2015 (except April 2014), AIM paid Wells Fargo
Home Mortgage between $1,855.89 and $2,037.42. [DE 73-2 at 4, 9, 13, 23, 28, 33, 37, 41,
45, 49, 53, 57, 61.] Kelly Aroney confirmed that the Aroney’s home mortgage was being
paid through AIM on all of these occasions. [DE 73-1 at 77.] Every month between
January 2014 and March 2015, AIM paid for at least one monthly Netflix subscription
and from December 2014 through March 2015 AIM paid for two subscriptions. [DE 732 at 3, 7, 12, 17, 22, 27, 32, 36, 40, 44, 48, 52, 56, 60, 64.] Michael Aroney does not recall
having a Netflix account under AIM. [DE 73-1 at 67.] During this 2014-2015 time
frame, AIM also made hundreds of purchases at dozens of different local food-service
establishments such as Arby’s, Burger King, Buffalo Wild Wings, Chili’s, IHOP, Pizza
Hut, and McDonald’s. [DE 73-2 at 91-93.] In the months of January 2014, July 2014, and
March 2015, AIM purchased items from the Smoke Shop in LaPorte, Indiana. [DE 73-2
at 4, 32, 64.] In 2014, AIM also used its debit card to make purchases at the Dollar
General and Dunham’s Sports. [DE 73-2 at 23, 44.]
In response to this avalanche of compelling evidence that AIM was a mere
instrumentality of Michael Aroney, Aroney submitted only two affidavits, one from
himself and one from his wife. In his affidavit, Michael Aroney states the following:
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I have reviewed the material Garmin filed on January 15, 2016, in support of
its Motion for Partial Summary Judgment on its claim to pierce the corporate
veil of AIM. With respect to the transfers and expense payments Garmin
identifies at pages 4 through 6 of the Memorandum of Law it has filed, I do
not have documentation to confirm the purpose or business basis for each
transfer or expense payment because AIM’s electronic records were
irretrievably lost when the computer hard drive crashed, as explained in
Paragraph 25 of this Affidavit. Morever, I cannot recall the specific purpose
for each transfer or expense payment Garmin has identified. I do recall,
however, that during the time frame Garmin has identified in its Motion for
Partial Summary Judgment, there were many instances where AIM either
directly paid or provided reimbursement to me for business related meals
and entertainment expenses. For example, there were many instances where
AIM paid or reimbursed me for the cost of travel and meals when I
conducted meetings with AIM customer representatives, potential
customers, vendor representatives, trade partners and automotive wheel
industry representatives. There were also instances during the time frame
Garmin has identified where AIM either directly paid or reimbursed me for
automotive expenses given the fact that I used my personal vehicle for a
significant amount of travel in connection with the business AIM was
conducting. Any payment that might have been made from AIM’s bank
account to my home mortgage lender would need to be classified as loans to
me personally if they cannot be classified as part of the compensation AIM
was paying me for the services I was providing to the company.
[DE 75-6 at 9-10.] Kelly Aroney’s affidavit echoes these sentiments almost identically.
[DE 75-7 at 6.]
This type of generalized statement, without more, is insufficient to oppose a
motion for summary judgment. “The nonmovant will successfully oppose summary
judgment only when it presents definite, competent evidence to rebut the motion.”
Vukadinovich v. Bd. of Sch. Trustees of N. Newton Sch. Corp., 278 F.3d 693, 699 (7th Cir.
2002) (internal quotations and citations omitted); see also Lawshe v. Simpson, 16 F.3d 1475,
1478 (7th Cir. 1994) (“[A] scintilla of evidence in support of the non-movant’s position is
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insufficient to successfully oppose summary judgment; there must be evidence on
which a jury could reasonably find for the [nonmovant].”). Michael Aroney fails to
provide any evidence to rebut the evidence proffered by Garmin that AIM was a mere
instrumentality of Michael Aroney, often serving as his own personal piggy bank, and
that AIM did not follow the customary corporate formalities. In fact, in his affidavit,
Michael Aroney says that he “do[es] not have documentation to confirm the purpose or
business basis for each transfer or expense payment” and “cannot recall the specific
purpose for each transfer or expense payment Garmin has identified.” [DE 75-6 at 9.]
Instead, Michael Aroney makes the general assertion that there were many instances
where he was paid or reimbursed for the cost of travel and meals, implying that some of
those instances account for some the transactions reflected in the bank records, but does
not (and cannot) identify a single payment in the dozens of pages of bank records
where such a payment or reimbursement was made. Such a general assertion is
inadequate to oppose a motion for summary judgment. Green v. Ziegelman, 310 Mich.
App. 436, 461, 873 N.W.2d 794, 808 (Mich. Ct. App. 2015) (piercing the corporate veil
where there was evidence to support an inference that the sole owner used the entity to
cover his personal expenses notwithstanding his testimony that the expenses were all
related to his effort to find business for the entity).
What’s more, Michael Aroney’s assertion that the payments from AIM’s account
to his home mortgage lender should be classified as a loan if they cannot be classified as
part of his AIM compensation in no way relieves him of the responsibility to present
15
definite and competent evidence of that fact, such as a contract or promissory note. The
totality of the evidence supports the conclusion that Michael Aroney operated AIM as a
mere instrumentality.
The record also supports the conclusion that Michael Aroney exercised his
control over AIM in a manner that caused a wrong against Garmin. A breach of
contract is considered a wrong for purposes of veil-piercing analysis. See
Servo Kinetics, Inc. v. Tokyo Precision Instruments Co., 475 F.3d 783, 799 (6th Cir. 2007);
Tredit Tire & Wheel Co. v. Regency Conversions, LLC, 636 F. Supp. 2d 598, 602 (E.D. Mich.
2009). Here the arbitrator found that AIM breached the License Agreement when it
failed to pay the contracted-for $100,000 Golden Master Fee and licensing fees and
awarded Garmin damages, which this Court confirmed. [DE 57-1 at 9-11.] AIM’s
breach of its contractual obligations to Garmin under the License Agreement is
sufficient to establish this element of the veil-piercing analysis. In his opposition to
Garmin’s motion for partial summary judgment, Michael Aroney argues that the
corporate veil should not be pierced because Garmin was not relying on AIM’s ability
to pay under the License Agreement because all of AIM’s payment obligations were
transferred and assigned to Expresso HK. [DE 74 at 17-18.] This argument, however, is
a non-starter because, as I just stated, this issue was resolved at arbitration (where,
notably, AIM argued that Expresso HK had not assumed AIM’s payment obligations)
with the arbitrator finding that AIM, Expresso HK, and Expresso Indiana were jointly
and severally liable to Garmin for their breach of the License Agreement. [DE 57-1 at
16
14.] AIM is on the hook for the arbitration award. The only issue before me is whether
Michael Aroney is as well, and I find that he is.
Finally, Garmin will suffer unjust loss or injury unless the corporate veil is
pierced. Despite being awarded damages by the arbitrator and this Court confirming
the award, Garmin has not yet recovered any portion of the damages owed to it. The
evidence shows that Michael Aroney, acting as AIM, caused those damages and
breached the License Agreement by failing to pay the Golden Master Fee and licensing
fees while using AIM to pay his personal expenses. It would be unjust to allow Michael
Aroney to continue to hide behind a sham entity to prevent Garmin from recovering the
loss caused by him. See Green, 873 N.W.2d at 811 (finding that it would consummate
the wrong that the sole owner perpetrated through his control of the entity if the
corporate veil was not pierced to hold the owner liable for uncollectible damages). For
these reasons, AIM’s corporate form is to be disregarded, and Michael Aroney is jointly
and severally liable for the arbitration award entered against AIM and confirmed by
this Court.
Now having ruled on the first three counts of the second amended complaint, I
turn to the attachment claim found in Count IV. [DE 57 at ¶¶ 50-55.] None of the
parties moved for summary judgment on this issue or even acknowledged it in their
briefing or the proposed pretrial order [DE 83]. While I take this to mean this count is
no longer at issue, I ask that within ten days of entry of this opinion and order, the
parties file a notice apprising the Court of its status.
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CONCLUSION
For the foregoing reasons, Michael and Kelly Aroney’s motions for summary
judgment on Count III of the second amended complaint [DE 67, 68] are GRANTED and
Garmin’s motion for partial summary judgment on Count II of the second amended
complaint [DE 72] is GRANTED.
Michael and Kelly Aroney’s joint motion for authority to file supplemental affidavit
in support of motions for summary judgment [DE 79] is DENIED AS MOOT.
The parties are ORDERED to file a notice within TEN DAYS of entry of this opinion
and order apprising the Court of the status Count IV of the second amended complaint.
SO ORDERED.
Entered: June 1, 2016
_s/Philip P. Simon________________
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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