Yeager Asphalt v. Veneta Technologies et al

Filing 44

ORDER Granting 38 Motion to Quash Writ of Garnishment. Signed by District Judge Thomas L. Ludington. (Sian, M)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
YEAGER ASPHALT,
Plaintiff,
v

Case No. 14-cv-11044
Honorable Thomas L. Ludington

BAGELA BAUMASCHINEN GMBH & CO. KG,
et al.,
Defendants.
__________________________________________/
ORDER GRANTING MOTION TO QUASH WRIT OF GARNISHMENT
Plaintiff Yeager Asphalt initiated the above-captioned action on March 10, 2014 by filing
its complaint against Bagela Baumaschinen GmbH & Co. KG (“Bagela Germany”), Veneta
Technologie (“Vaneta”), and individuals Bagela and Dragan Stevanovic for breach of contract.
See ECF No. 1. Plaintiff claimed it contacted Bagela Germany regarding the purchase of an
asphalt machine, and that Bagela directed Plaintiff to purchase the machine through its agent,
Veneta. See Compl. ¶¶ 5-12. Plaintiff alleges that it wired Veneta $69,100 for the purchase of the
machine, and that Vaneta in turn forwarded the money to Bagela Germany. See Compl. ¶¶ 1315. Despite receipt of payment, Plaintiff alleged that Defendants never delivered the asphalt
machine, and incurred consequential damages. See Compl. ¶¶ 16-17.
After Plaintiff secured default judgment for $120,354.00 against Bagela Germany,
Plaintiff requested issuance of a non-periodic writ of garnishment against Bagela Germany and
Garnishee Bagela USA, LLC. Apparently Plaintiff then mailed the writ of garnishment to
Shelton, Connecticut by certified mail, rather than registering the judgment in Connecticut and
having process issued in Connecticut. Bagela USA now moves to quash the writ of garnishment

for lack of personal jurisdiction. See ECF No. 38. For the reasons stated below, Bagela USA’s
motion will be granted.
I.
After filing its complaint, on February 26, 2015 Plaintiff served Defendant Bagela
Germany with summons pursuant to Article 6 of the Hague Convention. Defendant Bagela
Germany did not respond to Plaintiff’s complaint or otherwise appear to defend the action.
Therefore, on April 22, 2015, Plaintiff requested and received a clerk’s entry of default as to
Defendant Bagela Germany. See ECF No. 21. On April 29, 2015, Plaintiff filed a motion for
default judgment against Bagela Germany. See ECF No. 23. The Court conducted an evidentiary
hearing on June 30, 2015, during which Mark Yeager (the owner of Yeager Asphalt) testified
that Defendants had agreed to deliver an asphalt machine in exchange for $69,180.00 dollars.
When Defendants failed to deliver the machine, Mr. Yeager was forced to cover for the breach
by repairing his old asphalt machine at a cost of $50,000.00.
Following the hearing, Plaintiff’s motion for default judgment was granted. Plaintiff was
awarded $69,180.00 for actual damages; $50,000.00 for consequential damages; $400.00 for
filing fees; $450.00 for international service of process fees; and $324.4312 in interest
(calculated at a rate of .27% from the date of service to the date of judgment). In total, a default
judgment was entered against Defendant Bagela Germany in the amount of $120,354.40. The
remaining Defendants were dismissed without prejudice because they were not timely served
with the summons under Federal Rule of Civil Procedure 4(m). See ECF No. 25.
Plaintiff subsequently requested and received the issuance of a non-periodic writ of
garnishment as to Bagela Germany and Garnishee Bagela USA, LLC. On December 14, 2016
the president of an entity called Dankov Enterprises Inc. (“DKE Inc.”), Dan Kovalick, filed an

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objection to a request for writ of garnishment purportedly on behalf of the corporation. See ECF
No. 31. DKE Inc. is an Ontario company that identifies itself as the North American distributor
and importor of asphalt recycling equipment, accessories, and parts for Defendant Bagela
Germany. Because corporations may only be represented in federal court by a licensed attorney,
Mr. Kovalick’s objections were stricken on January 5, 2017. See ECF No. 34.
II.
On February 16, 2017, Garnishee Bagela USA filed the current motion to quash the writ
of garnishment for lack of personal jurisdiction. See ECF No. 38. Bagela USA is a limited
liability company formed under Connecticut law and with a principle place of business in
Connecticut. In its motion to quash, Bagela USA alleges that it is a sub-distributor for DKE,
Inc., and has no direct legal affiliation with Bagela Germany. It alleges that it does not maintain a
registered agent for service in Michigan, is not registered to do business in Michigan, and does
not have offices, employees, accounts, property, or assets in Michigan. It also alleges that it has
not derived a significant part of its revenue from goods sold or services used in Michigan, and
has not engaged in any advertising or marketing activities directed to anyone in Michigan.
Finally, Bagela USA argues that it has not entered into any contracts or transaction in Michigan
that are related to the above-captioned matter, as it was not involved in the underlying sale of the
asphalt machine to Plaintiff by Veneta Technologies.
In response, Plaintiff argues that Bagela USA does business as Pavement Recyclers LLC.
Plaintiff further notes that Pavement Recycler’s website identifies it as “the exclusive distributor
of Bagela® Asphalt Recyclers parts and accessories in the United States and Caribbean.” See
ECF No. 42 Ex. B. Finally, Plaintiff argues that Bagela USA has engaged in repeated business
in the state of Michigan.

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A.
The parties agree that Michigan law supplies the rule of decision concerning garnishment
in this diversity action pursuant to Federal Rule of Civil Procedure 64. See Fed. R. Civ. P. 64(a)
(“[a]t the commencement of and throughout an action, every remedy is available that, under the
law of the state where the court is located, provides for seizing a person or property to secure
satisfaction of the potential judgment. But a federal statute governs to the extent it applies.”);
Fed. R. Civ. P. 64(b) (specifying that the rule applies to garnishment). However, Plaintiff first
argues that it need not establish personal jurisdiction under Michigan law. This argument is
without merit.
By statute, garnishment may be effected where “[p]ersonal property belonging to the
person against whom the claim is asserted but which is in the possession or control of a third
person if the third person is subject to the judicial jurisdiction of the state and the personal
property to be applied is within the boundaries of this state.” Mich. Comp. Laws §
600.4011(1)(a) (emphasis added). Similarly, an obligation owed to a defendant may be garnished
from the obligor “if the obligor is subject to the judicial jurisdiction of the state.” Mich. Comp.
Laws § 600.4011(1)(b) (emphasis added). The plain language of these provisions requires a
party seeking to garnish the property of another to establish personal jurisdiction. Michigan law
and basic principles of due process require that personal jurisdiction be established prior to
garnishment.
B.
The court may exercise personal jurisdiction over an out-of-state party only after
confirming that the state long-arm statute authorizes jurisdiction over the nonresident, and that
the exercise of personal jurisdiction would not deny the nonresident the constitutional right to

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due process of law. Omni Capital Int’l v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987).
“[W]here the state long-arm statute extends to the limits of the due process clause, the two
inquiries are merged and the court need only determine whether exercising personal jurisdiction
violates constitutional due process.” Bridgeport Music, Inc. v. Still N. the Water Publ’g, 327
F.3d 472, 477 (6th Cir. 2003). The Sixth Circuit has historically “understood Michigan to intend
its long-arm statute to extend to the boundaries of the fourteenth amendment.” See Theunissen v.
Matthews, 935 F.2d 1454, 1461 (6th Cir. 1991)
Personal jurisdiction “can either be specific or general.” Air Prods and controls, Inc., v.
Safetech Intern., Inc., 503 F.3d 544, 549-50 (6th Cir. 2007) (citation omitted). Specific (or
limited) jurisdiction exists “in cases in which the subject matter of the lawsuit arises out of or is
related to the defendant’s contacts with the forum.” Nationwide Mut. Ins. Co. v. Tryg. Intern.
Ins. Co., Ltd., 91 F.3d 790, 793 (6th Cir. 1996). It may only be applied when the plaintiff’s cause
of action arises out of the defendant’s transactions of business with the forum state. Id. at 414
n.8.

If specific jurisdiction is present, there is no need to reach the question of general

jurisdiction. Air Prods., 503 F.3d at 550. General jurisdiction exists “in cases in which a
defendant’s ‘continuous and systematic’ conduct within the forum state renders that defendant
amenable to suit in any lawsuit brought against it in the forum state.” Nationwide Mut, 91 F.3d at
793 (citations omitted). The principles of general jurisdiction are usually applied when the
plaintiff’s cause of action is unrelated to the defendant’s in-state activities.

Helicopteros

Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.9 (1984).
i.
Bagela USA’s argument that the Court lacks limited personal jurisdiction over it will be
addressed first. Michigan Compiled Law § 600.715 serves as Michigan’s long arm statute for

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corporations. Under the statute, the requirements of limited personal jurisdiction are satisfied
where a corporation or its agent acts to create any of the following relationships:
(1) The transaction of any business within the state.
(2) The doing or causing any act to be done, or consequences to occur, in the state
resulting in an action for tort.
(3) The ownership, use, or possession of any real or tangible personal property
situated within the state.
(4) Contracting to insure any person, property, or risk located within this state at
the time of contracting.
(5) Entering into a contract for services to be performed or for materials to be
furnished in the state by the defendant.
Id. In addition to determining whether the statute has been satisfied, courts must apply a threepart test to determine whether a party’s minimum contacts with a state are constitutionally
sufficient for the exercise of specific jurisdiction:
First, the defendant must purposefully avail himself of the privilege of conducting
activities within the forum state; second, the cause of action must arise from the
defendant’s activities there; and third, the acts of the defendant or consequences
caused by the defendant must have a substantial enough connection with the
forum state to make its exercise of jurisdiction over the defendant fundamentally
fair.
Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998) (internal citations omitted). A cause of action
arises from purposeful availment if the cause of action would not exist but for the contacts cited.
See Theunissen, 935 F.2d at 1461; Payne v. Motorists’ Mutual Ins. Cos., 4 F.3d 452, 456 (6th
Cir. 1993). Although this does not require that a plaintiff’s claims arise “formally and directly”
from the defendant’s contacts with Michigan, the claims must still “have a substantial connection
with the defendant’s in-state activities.” Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1275
(6th Cir. 1998). “[W]hen the operative facts of the controversy are not related to the defendant’s
contact with the state,” the cause of action does not arise from that contact. Id.
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In support of its argument that Bagela USA should be subject to specific jurisdiction in
the state of Michigan, Plaintiff points to a series of invoices for parts it allegedly purchased from
Bagela. See ECF No. 42 Ex. C. Problematically, none of the attached invoices were issued by
Bagela USA, or even mention Bagela USA. Instead, each of the invoices lists DKE Inc. as the
vendor. Plaintiff has not argued that DKE Inc. is a mere alter-ego of Bagela USA such that the
doctrine of alter-ego personal jurisdiction should apply. See Daimler AG v. Bauman, 134 S.Ct.
746 (2014). Plaintiff therefore has not met its burden of establishing personal jurisdiction over
Bagela USA through the attached DKE Inc. invoices.
Even if Bagela USA was involved in prior transactions with Plaintiff, Plaintiff still has
not demonstrated that its injuries are substantially connected to any of those prior transactions.
See Dean, 134 F.3d at 1275. That is, Plaintiff does not allege that Bagela USA played any role
in the events that gave rise to Plaintiff’s lawsuit against Defendants for breach of contract.
Plaintiff therefore has not shown that Bagela USA’s alleged contacts with Michigan were related
to the relevant controversy.
Plaintiff asserts, in the alternative, that it is aware of other asphalt corporations located in
the state of Michigan that use Bagela USA’s parts and machinery. This argument is irrelevant to
the issue of specific jurisdiction, which, again, requires a parties’ contact with the forum to have
some relationship to the plaintiff’s specific injury. See Dean, 134 F.3d at 1275. Plaintiff does not
even attempt to argue that Bagela USA’s sales to other Michigan companies have any
relationship to Defendants’ failure to deliver Plaintiff an asphalt machine, and thus to Plaintiff’s
injuries in this case. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 927
(2011) (holding that the flow of a company’s product into the forum may bolster the case for

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specific jurisdiction where that product is the source of the injury) (citing World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980)).
ii.
Because Plaintiff has not established that this Court has specific personal jurisdiction
over Bagela USA, the question becomes whether Bagela USA is subject to general personal
jurisdiction. General jurisdiction exists if a defendant’s contacts with a State “are so ‘continuous
and systematic’ as to render them essentially at home in the forum State.” Goodyear Dunlop
Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (quoting International Shoe Co. v.
Washington, 326 U.S. 310, 317 (1945)). With some exceptions, corporations are generally only
considered “at home” in their place of incorporation and where their principal place of business
is located. See Daimler, 134 S.Ct. at 760.
While conceding that Bagela USA is incorporated and maintains its principle place of
business in Connecticut, is not registered to conduct business in Michigan, and does not maintain
a registered agent in Michigan, Plaintiff argues Bagela USA still should be considered at home in
Michigan because it carries on continuous and systematic business in Michigan.1 In support of
this argument, Plaintiff again points to the invoices issued by DKE Inc. Again, Plaintiff has not
furnished any rationale for the proposition that Bagela USA should be subject to alter-ego
personal jurisdiction for the acts of DKE Inc. See Daimler, 134 S.Ct. at 746. Nonetheless, the
Supreme Court has held that “mere purchases, even if occurring at regular intervals, are not

1

In its response Plaintiff challenges Bagela USA’s failure to register to conduct business in the state of Michigan.
Plaintiff’s argument in this regard again relies on the DKE Inc. invoices, which do not even mention Bagela USA.
Moreover, transacting business in interstate commerce, without more, does not constitute transacting business in the
state of Michigan such that registration is required. See Mich. Comp. Laws Ann. § 450.5008. Finally, even if
Bagela USA was subject to the requirements of Michigan’s registration statute, numerous courts have determined
that parties do not consent to general jurisdiction by registering to do business in the state of Michigan, without
more. See Magna Powertrain De Mexico S.A. De C.V. v. Momentive Performance Materials USA LLC, 192 F. Supp.
3d 824, 830 (E.D. Mich. 2016) (collecting cases). Bagela USA’s registration status in the State of Michigan is
therefore largely irrelevant to the question of personal jurisdiction.

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enough to warrant a State’s assertion of in personam jurisdiction over a nonresident corporation
in a cause of action not related to those purchase transactions.” Helicopteros, 466 U.S. at 418.
See also Goodyear, 564 U.S. at 929 (holding that a petitioner’s sporadic sale of tires to
purchasers in North Carolina through intermediaries was insufficient to subject the petitioner to
general jurisdiction in the state).
Plaintiff’s assertion that other asphalt corporations in the state of Michigan use Bagela
USA’s parts and machinery is similarly insufficient to establish general jurisdiction. Even if
true, again, “mere purchases, even if occurring at regular intervals, are not enough to warrant a
State’s assertion of in personam jurisdiction over a nonresident corporation in a cause of action
not related to those purchase transactions.” Helicopteros, 466 U.S. at 418. Moreover, the mere
suggestion that Bagela USA parts wound up in Michigan is, without more, insufficient to
establish that Bagela USA has sufficient minimum contacts with the forum. See Goodyear, 564
U.S. at 929 (rejecting the “stream-of-commerce” theory as a sufficient basis for exercising
general personal jurisdiction over a party).
III.
Plaintiff has not identified any other contact that Bagela USA has with the state of
Michigan that would tie its activities to Plaintiff’s injuries or render it essentially “at home” in
the state. Plaintiff therefore has not met its burden of demonstrating personal jurisdiction over
the garnishee. Mich. Comp. Laws §§ 600.4011(1)(a)&(b). Bagela USA’s motion to quash will be
granted. Plaintiff may pursue its garnishment action against Bagela USA in a forum in which
Bagela USA is subject to personal jurisdiction.
Accordingly, it is ORDERED that Bagela USA’s motion to quash, ECF No. 38, is
GRANTED.

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s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: March 30, 2017

PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on March 30, 2017.
s/Michael A. Sian
MICHAEL A. SIAN, Case Manager

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