St. Clair, Inc. v. Lacks Enterprises, Inc. et al

Filing 31

ORDER denying 20 defendant's motion for summary judgment and denying 21 defendant Plastic-Plate's motion to join a necessary party or, in the alternative, motion to dismiss.. Signed by District Judge Denise Page Hood. (LSau)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ST. CLAIR, INC.,
Plaintiff,
v.

Case No. 10-10910
Honorable Denise Page Hood

LACKS ENTERPRISES, INC.,
LACKS EXTERIOR SYSTEMS, LLC,
LACKS WHEEL TRIM SYSTEMS, LLC,
and PLASTIC-PLATE, INC.,
Defendants.
/
ORDER DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND
DEFENDANT PLASTIC-PLATE’S MOTION TO JOIN A NECESSARY PARTY OR, IN
THE ALTERNATIVE, MOTION TO DISMISS

I.

INTRODUCTION
This matter is before the Court on Defendants’ Motion for Summary Judgment to

Dismiss All Claims Against Lacks Enterprises, Inc., Lacks Exterior Trim Systems, LLC, and
Lacks Wheel Trim Systems LLC. Docket No. 20, filed January 31, 2011. Also before the Court
is Defendants’ Motion to Join as a Party the Estate of Ronald Gault or, in the Alternative, to
Dismiss for Want of a Necessary Party. Docket No. 21, filed January 31, 2011. Plaintiff filed
responses.
II.

STATEMENT OF FACTS
Plaintiff St. Clair, Inc. (“Plaintiff”) is a sales representative firm incorporated in Ontario,

Canada with its principle place of business in Chatham, Ontario. [Pl.’s Resp. Mot. Join. at 6.]

1

The Defendants—Lacks Enterprises, Inc., Lacks Exterior Systems, LLC, Lacks Wheel Trim
Systems, LLC (“Defendant Lacks”) and Plastic-Plate (“Defendant Plastic-Plate”)—are Michigan
businesses with principle places of business in Grand Rapids, Michigan (collectively the
“Defendants”). [Def.’s Mot. Join. at 1.] Plaintiff alleges that it entered into a sales agreement
with all Defendants to procure business from Honda for the Defendants. [Pl.’s Resp. Mot.
Summ. J. at 2.] Defendant Lacks alleges that Plastic-Plate had a personal sales agreement with
one of Plaintiff’s principle shareholders, Ronald Gault. Mr. Gault passed away in a motor
vehicle accident in July 2008. [Pl.’s Resp. Mot. Join. at 7.] Plaintiff now seeks damages for
unpaid sales commissions from alleged business obtained from Honda for the Defendants. [Pl.’s
Resp. Mot. Join. at 7.]
Plaintiff alleges that Defendants knew that Ronald Gault was terminally ill during
Plaintiff’s relationship with Defendants. [Pl.’s Resp. Mot. Summ. J. Ex. C.] Plaintiff further
alleges that Defendants stopped paying commissions after learning of Mr. Gault’s death, but
offered to continue paying commissions for one year at a rate of one percent. [Pl.’s Resp. Mot.
Summ. J. Ex. C.] Defendants allege that they were only interested in business with Mr. Gault.
[Def.’s Mot. Join. at 2.] There was no written agreement between the parties. [Def.’s Mot. Join.

Ex. B.]1
III.

STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(a) provides that the court “shall grant summary

judgment if the movant shows that there is no genuine dispute as to any material fact and that the
movant is entitled to judgment as a matter of law.” The presence of factual disputes will preclude
granting of summary judgment only if the disputes are genuine and concern material facts.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is
“genuine” only if “the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Id. Although the Court must review the motion in the light most favorable to
the nonmoving party, where “the moving party has carried its burden under 56(c), its opponent
must do more than simply show that there is some metaphysical doubt as to material facts.”
Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586; Celetrex Corp v.
Catrett, 477 U.S. 317, 232-24 (1986).
Summary judgment must be entered against a party who fails to make a showing
sufficient to establish the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial. In such a situation, there can be “no genuine issue as
to any material fact,” since a complete failure of proof concerning an essential element of the
nonmoving party’s case necessarily renders all other facts immaterial. Celotex Corp, 477 U.S. at
322-23. A court must look to the substantive law to identify which facts are material. Anderson,
477 U.S. at 248.
IV.

ANALYSIS
A.

1

Defendant Lacks’ Motion for Summary Judgment

Defendants submitted an unsigned written contract between Defendant Plastic-Plate and Mr. Gault.
[Def.’s Mot. Join. Ex. C.]

Defendant Lacks argues that Plaintiff’s five claims must fail because Plaintiff is unable to
prove damages. Specifically, Defendant Lacks contends that Plaintiff did not procure any sales
for any of the Lacks Defendants. [Def.’s Mot. Summ. J. at 4.] However, it appears that
Defendant Lacks has failed to prove that they are entitled to summary judgment as a “matter of
law” or that there is “no genuine issue of material fact.” Fed. R. Civ. P. 56(a). Plaintiff has
brought sufficient evidence to raise an issue of material fact as to the existence of a contract and
damages.
1.

Count I: Breach of Contract

First, Defendant Lacks argues that there was only a personal services contract between
Ronald Gault and Defendant Plastic-Plate, who did not join in the motion, and that Plaintiff
cannot show that it performed any obligations under any contract or was damaged by a breach.
[Def.’s Mot. Summ. J. at 1-2 and 4.] Plaintiff, however, contends that a sales agreement existed
between Plaintiff and Defendant Lacks and Defendant Plastic-Plate. [Pl.’s Resp. Mot. Summ. J.
at 1.]

Under Michigan law, once a valid contract is established,2 the party seeking to support a
breach of contract claim must prove by a preponderance of the evidence the terms of the
contract, that the defendant(s) breached the contract, and that the breach caused the plaintiff’s
injury. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003). If a breach is established, a defendant has
the burden of proving justification for the breach.3 Malcolm MacDowell & Assoc., Inc. v.
Ecorse-Lincoln Park Bank, 325 Mich. 591, 598 (1949).
Defendant Lacks alleges that it was not party to any contract. It further contends that
there is nothing currently due on the personal sales contract between Defendant Plastic-Plate and
Ronald Gault. [Def.’s Mot. Summ. J. Ex. C at 3.] Defendant Lacks cite depositions from
Christopher Tremblay, president of St. Clair, Inc., and Matthew Bergsma, representative for all
four Defendants. [Def.’s Mot. Summ. J. Ex. C and D.] Both Mr. Tremblay and Mr. Bergsma
report that purchase orders were only received from Defendant Plastic-Plate. Id.
However, Plaintiff has provided sufficient evidence to demonstrate a genuine issue of
material fact. Although Defendant Lacks alleges that there was only a personal services contract
between Defendant Plastic-Plate and Mr. Gault, Plaintiff has attached copies of eleven checks
from Defendant Plastic-Plate to Plaintiff, not Mr. Gault, totaling over $118,000. [Pl.’s Resp.
Mot. Summ. J. Ex. H.] This would imply the existence of an agreement between Defendant
Plastic-Plate, at the least, and Plaintiff. In addition, Christopher Tremblay averred during his
deposition that there was a sales agreement between all the Defendants and Plaintiff to obtain

2

A valid contract is established when the following elements are met: (1) parties are competent to contract;
(2) proper subject matter; (3) legal consideration; and (4) mutuality of consideration. Thomas v. Leja, 187 Mich.App.
418, 468 (1990). The parties do not dispute the existence of a valid contract, but the terms of the contract.
3
Defendants cite Malcolm for the proposition that Plaintiff must prove that a contract existed, the terms of
the contract, Plaintiff performed its obligations under the contract, each defendant breached the contract, and that
Plaintiff was damaged by the breach. [Def.’s Mot. Summ. J. at 4.] The case stands for position that if there was some
justification for Defendants breach, the burden of establishing it rested upon Defendants. Malcolm MacDowell &
Assoc., Inc., 325 Mich. at 598.

sales from Honda. During contract negotiations, the Defendants never distinguished themselves
as separate entities or specifically indicated that the services were only for Defendant PlasticPlate. [Pl.’s Resp. Mot. Summ. J. Ex. F at 56-57, 61-62, and118-19.]
Plaintiff argues that all four Defendants acted as a single entity and the sales
representative agreement was between Plaintiff and all four Defendants. Michigan law allows a
court to pierce the corporate veil “‘where there is a unity of interest of the stockholders and the
corporation and where the stockholders have used the corporate structure in an attempt to avoid
legal obligations.’” Rymal v. Baergen, 262 Mich.App. 274, 293 (Mich. App. 2004) (quoting
Foodland Distributors v. Al-Naimi, 220 Mich.App. 453, 456 (Mich. App. 1996). This Court may
pierce the corporate veil if the corporate entity is a mere instrumentality of another individual or
entity, the corporate entity was used to commit a wrong or fraud, and there was unjust
enrichment or loss to the plaintiff. Id. at 293-94 (citations omitted).
There is sufficient evidence to raise a genuine issue of material fact as to whether
Defendant Lacks and Defendant Plastic-Plate acted as a single entity and whether the corporate
veil should be pierced. Plaintiff attaches depositions from the President and CEO of Lacks
Enterprises, Richard Lacks, Jr., Vice-President and General Manager of Lacks Wheel Trim
Systems, LLC, Lawrence O’Toole, and Christopher Tremblay, President of St. Clair, Inc. [Pl.’s
Resp. Mot. Summ. J. Ex. C, E and F.] Mr. Lacks was unable to describe the corporate structure
or identify other companies owned by Lacks Enterprises. [Pl.’s Resp. Mot. Summ. J. Ex. C at 78.] Mr. O’Toole reported that he was employed by Lacks Enterprises and managed the Lacks
Wheel Trim Division, which is actually Lacks Wheel Trim Systems, LLC. [Pl.’s Resp. Mot.
Summ. J. Ex. E at 9-10.] On the Lacks Enterprise’s website and in business meetings, Defendant
Lacks and Defendant Plastic-Plate referred to themselves as “Lacks” and not separate and

distinct entities. [Pl.’s Resp. Mot. Summ. J. Ex. A and F at 62.] In addition, Mr. Tremblay
received business cards from Defendant Plastic-Plate, describing it as a division of Lacks
Enterprises. [Pl.’s Resp. Mot. Summ. J. Ex. F at 60, Ex. G.] Deposition testimony also shows
that Honda parts may have been produced across the various Lacks entities. Any work passed to
another Lacks entity was considered an “inter-company markup” and no invoice was generated
for the work. [Pl.’s Resp. Mot. Summ. J. Ex. 25-26.] The fact that Defendant Lacks and
Defendant Plastic-Plate maintained one representative for the purpose of deposition testimony
also implies concerted activity. Defendant Lacks is not entitled to summary judgment on this
ground.
2.

Count II & III: Unjust Enrichment and Quantum Meruit

Next, Defendant Lacks argues that Plaintiff’s unjust enrichment and quantum meruit
claims should fail because Defendant Lacks did not receive or retain a benefit from Plaintiff’s
services because there were no sales and, therefore, no right to commissions. Plaintiff contends
that Defendant Lacks has denied an express contract but acknowledged receiving business
through Mr. Gault, who is a principle owner of Plaintiff. Deposition testimony shows that both
Defendant Lacks and Defendant Plastic-Plate may have produced the Honda parts although
invoicing was only through Defendant Plastic-Plate. [Pl.’s Resp. Mot. Summ. J. Ex. E at 24-28.]
To support a claim for unjust enrichment, Plaintiff must show that Defendants received a
benefit from Plaintiff, and Plaintiff suffered an inequity when Defendants retained the benefit.
Barber v. SMH, Inc., 202 Mich. App. 366, 375 (1994). The law will only imply a contract if
there is no express agreement. Id. As previously discussed, Plaintiff has sufficiently raised a
genuine issue of material fact as to the existence of a contract or agreement and to whether
Defendant Lacks may have received a benefit. It appears that Defendant Lacks and Defendant

Plastic-Plate may still produce products for Honda, resulting from sales procured by Plaintiff.
[Pl.’s Resp. Mot. Summ. J. Ex. B.] Defendants, whether pursuant to an express agreement or not,
made eleven payments to Plaintiff up until the death of Ronald Gault. Id. at Ex. D. From this it
could be inferred, that Defendants did receive some benefit from its interaction with Plaintiff.
Defendant Lacks is not entitled to summary judgment on this ground.
3.

Count IV & V: Declaratory Judgment and Violation of Michigan
Sales Representatives Commission Act

Defendants Lacks also argues that Plaintiff’s claims for a declaratory judgment and relief
under the Sales Representative Commissions Act should fail because there were no sales

procured for Defendant Lacks.4 The record is insufficient to determine whether a contract or a
breach occurred, precluding a finding on the appropriateness of declaratory judgment or liability
under the Sales Representative Commissions Act. Defendant Lacks is not entitled to summary
judgment on this ground.
D.

Defendant Plastic-Plate’s Motion to Join the Estate of Ronald Gault or, in
the Alternative, To Dismiss for Want of Necessary Party

Defendant Plastic-Plate argues that the Estate of Ronald Gault should be added as a
necessary party because without doing so Defendant Plastic-Plate could be subject to
inconsistent obligations. Defendant Plastic-Plate further contends that because the Estate is not
obligated to join the litigation, it must be added as a defendant, which would destroy diversity,
requiring this Court to dismiss this action.
Plaintiff contends that this Court can give complete relief because if a contract does exist
between Ronald Gault and Defendant Plastic-Plate, it would not exist between Plaintiff and the
all four Defendants. Defendant Plastic-Plate did not provide any evidence that the Estate is
considering a claim against it. Rather, Defendant Lacks and Defendant Plastic-Plate
acknowledged that the Estate has closed. Furthermore, Plaintiff would not have an adequate
remedy if the case was dismissed because Plaintiff cannot compel the Estate to join and a
Canadian court may not have personal jurisdiction over the Defendants. In its supplemental
brief, Plaintiff also noted that the Estate signed a Full and Final release barring any claims that
would require contribution or indemnity from Plaintiff. Pl.’s Supp. Br. Ex. 1.
4

Defendant Lacks mentions in its motion that “[i]nsofar as they are entitled to prevail on Count V
[Violation of Michigan Sales Commissions Act] of the Complaint,” they are eligible to recover attorney fees and
costs under M.C.L. 600.2961(6). Defendant Lacks did not cite any law or provide any discussion to support their
proposition in their supporting brief. Plaintiff argues that Defendant Lacks is not entitled to fees because it has not
prevailed on the motion for summary judgment. As previously discussed, the record is insufficient to determine
whether there was a contract and whether the Defendants breached it. It is too early to determine whether Defendant
Lacks is the prevailing party and entitled to costs and fees.

Fed. R. Civ. P. 19 joinder requires an initial three step analysis before a party may be
joined. First, the court must determine whether the party is necessary and should be joined if
possible. Painewebber v. Cohen, 276 F.3d 197, 200 (6th Cir. 2002) (citing Soberay Mach &
Equip Co. v. MRF Ltd., Inc., 181 F.3d 759, 763-64 (6th Cir. 1999)). Second, the court must
consider whether it has personal jurisdiction over the necessary party and whether joining that
party will destroy the basis for jurisdiction. Id. Finally, the court must assess whether equity
requires the court to dismiss the action because the absent party is indispensable. Id. Dismissal is
only appropriate when the court does not have personal jurisdiction or the party cannot be joined
without destroying the basis for subject matter jurisdiction. Id.
It does not appear that the Estate of Ronald Gault is a necessary and indispensable party
to this action. The question before this Court is whether there is a contract between Plaintiff and
all the Defendants. If the Court finds that there is a contract between the Plaintiff and all the
Defendants, then necessarily, there is no contract between Defendant Plastic-Plate and the Estate
of Ronald Gault. Additionally, as both parties agree, this Court may not have personal
jurisdiction over this Canadian citizen. Joining the Estate as a defendant would destroy subject
matter jurisdiction and deprive Plaintiff of any relief. Importantly, the Estate signed a Full and
Final Release, which appears to preclude the Estate from pursuing a claim against the
Defendants. [Pl.’s Supp. Brief. Ex. A.] Defendant Plastic-Plate’s Motion to Join or, in the
Alternative, to Dismiss should be denied.
IV.

CONCLUSION
For the reasons stated above,
IT IS ORDERED that the Defendant’s Defendant Lacks’ Motion for Summary

Judgment [Docket No. 20, filed January 31, 2011] is DENIED.

IT IS FURTHER ORDERED that Defendant Plastic-Plate’s Motion to Join as
Necessary Party or, in the Alternative, to Dismiss for Want of a Necessary Party [Docket No. 21,
filed January 31, 2011] is DENIED.

s/Denise Page Hood
United States District Judge
Dated: September 29, 2011
I hereby certify that a copy of the foregoing document was served upon counsel of record on
September 29, 2011, by electronic and/or ordinary mail.
s/LaShawn R. Saulsberry
Case Manager