The Creelgroup, Inc. v. NGS American, Inc. Employee Benefit Plan Trust et al

Filing 24

MEMORANDUM AND ORDER granting 13 Defendants' Motion to Dismiss. Signed by District Judge Avern Cohn. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
THE CREELGROUP, a
Nebraska Corporation,
Plaintiff,
v.

Case No. 11-13798
HON. AVERN COHN

NGS AMERICAN, INC.,
a Michigan corporation,
TRUSTCO INC., a Delaware
Corporation, and SCOTT MCLELLAN,
Defendants.
MEMORANDUM AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
(DOC. 13)
This is a tortious interference and breach of contract case. Plaintiff, The
Creelgroup, Inc. (Creel), says that defendants NGS American, Inc. (NGS) and its
corporate parent, Trustco Holdings, Inc. (Trustco),1 breached their contract to pay
commissions to Creel. In addition, Creel says that Scott McClellan (McClellan), a former
NGS employee, tortuously interfered with its contractual rights and business expectancy
by stealing a customer, Oakwood Hospital (Oakwood). The complaint is in three counts:
Count (I) Tortious Interference with a Contract (McClellan); Count (II) Tortious
Interference with a Business Expectancy (McClellan); and Count (III) Breach of Contract
(NGS and Trustco).

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The amended complaint’s allegations do not support Trustco as a proper party to this
case. The only allegation against Trustco is that it controls the management and
operation of NGS. There are no factual allegations to support this assertion nor does
Trustco appear to have a presense with the events underlying the complaint.

Now before the Court is defendants’ Motion to Dismiss the First Amended
Complaint. (Doc. 9). For the reasons that follow, the motion is GRANTED. This case is
DISMISSED.
I. Background
A. Oakwood Hospital
The material facts as gleaned from the parties’ papers follow. This case is based
on a business dispute. Geoff Brieden, a former Creel employee, left the company and
took Oakwood’s business with him. Creel is a healthcare consulting firm and broker,
which provides services to employers with self-funded medical benefit plans. Creel
assists its clients with selection and oversight of third-party plan administrators, such as
NGS. Creel began working with Oakwood in 2000. In 2005, Creel brokered a deal for
Oakwood under which NGS administered its healthcare plan. NGS paid Creel
commissions of two dollars ($2) per employee per month.
Creel was not a party to the first contract between Oakwood and NGS. Although,
Creel appears on subsequent addendums to the contract under the heading: “[i]n the
event that fees or commissions are payable to an agent by NGS under this addendum,
such fees or commissions will be mailed to [Creel].” Whether or not Creel was a party to
the contracts between Oakwood and NGS, and therefore entitled to commissions, is at
the heart of the present dispute.
After the initial contract in 2005, NGS and Oakwood renewed their agreement in
2008 for an additional thirty-six (36) months. The 2008 renewal, called the Second
Amendment to Service Agreement, included the same reference to Creel as cited
above. Creel expected to receive commissions for the entire thirty-six month (36) term.
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However, Creel stopped receiving payments from NGS in October 2008 when Brieden
left Creel to form his own firm (called Kane Atwood) and took Oakwood’s business with
him. Subsequently, NGS and Oakwood negotiated a new contract that listed Kane
Atwood as the commission agent.
B. Brieden
Prior to his departure, Creel employed Geoff Brieden, previously an employee of
NGS, as its national sales manager. One of Brieden’s duties was to provide in person
services to Oakwood. The employment relationship between Creel and Brieden did not
work out. Brieden formed, Kane Atwood, which subsequently replaced Creel as NGS’
commission agent. That replacement was the subject of a similar lawsuit before this
Court, Creelgroup v. Brieden, no. 09-12493, which the parties resolved and dismissed
by stipulation. Creel says that McCellan began working on behalf of Kane Atwood
during his employment by NGS and assisted Brieden’s efforts to take Oakwood’s
business from Creel.
C. McClellan
In support of its allegation that McClellan assisted Brieden, Creel notes that
Brieden established a Kane Atwood email address for McClellan during his employment
at NGS. Further, Creel alleges that McClellan “intentionally, willfully, unlawfully, without
justification, with malice, and in bad faith, induced contributed to, participated in, and
caused the unlawful breach of the 2005 Agreement and the 2008 Second Amendment
among Oakwood, NGS and Creelgroup.” Beyond this allegation, it is unclear what role,
if any, McClellan played in the scenario of this case.

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II. Motion to Dismiss
The defendants filed a motion to dismiss arguing that Creel is a stranger to the
contract between NGS and Oakwood and therefore cannot maintain a claim for breach
of contract. McClellan argues that Creel’s allegations of tortious interference as to
Counts (I) and (II) are insufficient as a matter of law and therefore should be dismissed.
III. Matters Outside the Pleadings
Both NGS and Creel presented documents outside of the pleadings, including
the contracts between NGS and Oakwood. FED. R. CIV. P. 10(c) provides that a written
instrument attached to a pleading is part of the pleading for all purposes. Creel attached
the contracts to its complaint; therefore, the Court will consider the contracts as part of
the pleadings for purposes of the motion to dismiss.
IV. Legal Standard
A motion to dismiss pursuant to FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) tests
the sufficiency of a complaint. To survive a Rule 12(b)(6) motion to dismiss, the
complaint's "factual allegations must be enough to raise a right to relief above the
speculative level on the assumption that all of the allegations in the complaint are true."
Bell Atlantic Corp. v. Twombley, 550 U.S. 544, 545 (2007). See also Ass'n of Cleveland
Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir.2007). The court is
"not bound to accept as true a legal conclusion couched as a factual allegation."
Aschcroft v. Iqbal, 556 U.S. 662 (internal quotation marks and citation omitted).
Moreover, "[o]nly a complaint that states a plausible claim for relief survives a motion to
dismiss." Id. Thus, "a court considering a motion to dismiss can choose to begin by

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identifying pleadings that, because they are no more than conclusions, are not entitled
to the assumption of truth.
While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations. When there are well-pleaded factual allegations, a
court should assume their veracity and then determine whether they plausibly give rise
to an entitlement to relief." Id. In sum, "[t]o survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state a claim for relief that is
plausible on its face." Id. at 1949 (internal quotation marks and citation omitted).
V. Discussion
A. Tortious Interference with Contract/Expectancy: McCellan
1. Prima Facie Case
A prima facie case of tortious interference with contract or expectancy requires
proof of the following: (1) the existence of a valid business relationship, expectancy, or
contract (2) knowledge of the relationship, expectancy, or contract by the interferer, (3)
an intentional and wrongful interference inducing or causing a breach or termination of
the relationship, expectancy or contract, and (4) resultant damage to the party whose
relationship, expectancy or contract was disrupted. CH Holding Co. v. Miller, No.
293686, 2011 WL 5008573 (Mich. Ct. App. Oct. 20, 2011) (internal citation omitted).
2. Creel’s Allegations
Under FED. RULE

OF

CIV. P. 8(a)(2), a complaint must contain a “short and plain

statement of the claim showing that the pleader is entitled to relief.” “[D]etailed factual
allegations” are not required, Twombly, 550 U.S. at 555. However, to state a claim for
relief the complaint must allege sufficient facts to state a plausible claim. The factual

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allegations made against McClellan are sparse.2 Creel says that McClellan knew of
Brierden’s impending departure from Creel and that Brierden created a Kane Atwood
email address for McClellan. The remaining allegations consist of conclusory
statements that recite elements of tortious interference with contract.
Creel has not alleged any facts that would raise its right to relief above the
speculative level. Iqubal, 556 U.S. at 663, instructs that conclusory statements and
threadbare recitals of the elements of a cause of action are insufficient to survive a
motion to dismiss. As such, the amended complaint does not create a plausible claim
for tortious interference with contract or business expectancy.
B. Breach of Contract: NGS/Trustco
1. Party to Contract
Next, Creel argues that it was a party to the 2005 and 2008 contracts between
Oakwood and NGS. However, the fact that the document names Creel and bears the
signature of its officer does not create a contractual relationship. In Michigan, the
formation of a contract requires (1) competent parties; (2) proper subject matter; (3)
legal consideration; (4) mutuality of agreement; and (5) mutuality of obligation. Thomas
v. Leja, 187 Mich. App. 418, 422 (1991).
Creel’s claim fails on the fifth element, mutuality of obligation. The contracts
between Oakwood and NGS do not create an obligation for Creel to discharge. The
contract merely requires that Oakwood pay commissions of two dollars ($2) per
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The First Amended Complaint removes the allegation that at all times McClellan was
acting within the scope of his duties at NGS and asserts the opposite: at all times
McClellan acted outside the scope of his employment.” The parties dispute whether the
complaint was an admission and whether or not amending the complaint revoked the
admission. Because Creels claims of tortious interference with contract fail on other
grounds it is unnecessary for the Court to resolve this question.
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employee per month (pepm) to NGS. The contract says that if NGS owes fees or
commissions they will be mailed to Creel. Nothing in the language of the contract
creates an obligation for Creel to do anything. As such, Creel did not form a contract
with NGS or Oakwood.
2. Intended or Incidental Beneficiary
Although Creel is not a party to the agreements between NGS and Oakwood,
Michigan law allows a third-party beneficiary of a contract to enforce its terms. “Thirdparty beneficiary status requires an express promise to act to the benefit of the third
party; where no such promise exists, that third party cannot maintain an action for
breach of the contract. Thus, a person who incidentally benefits from the performance of
some duty required under a contract has no rights under the contract.” Dynamic Const.
Co. v. Barton Malow Co., 214 Mich. App. 425 (Mich. Ct. App. 1995) (citations omitted).
Therefore, it Creel can only enforce the contract if it was the intended beneficiary.
However, NGS did not make an express promise to act for the benefit of Creel thus,
Creel is not an intended beneficiary of the contract. Creel benefits from performance of
the contract as an incidental beneficiary.
There are several instructive cases involving sub-contractors attempting to assert
standing as a third-party beneficiary under a contact between the general contractor
and landowner that illustrate the difference between an intended an incidental
beneficiary. For example, in Dynamic Const., 214 Mich. App. at 429, a general
contractor attempted to assert a breach of contract claim against the project manager.
The contract, however, was between the project manager and property owner. The
court of appeals observed: “[c]ontractors, subcontractors, and their employees are

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generally held not to be the third-party beneficiaries of the contract between the general
or supervisory contractor and the project owner.” “In general terms, a contractor is an
incidental beneficiary absent clear intent manifested in the owner-architect contract to
the contrary.” Id. The contract between NGS and Oakwood manifests no such intent.
Like the subcontractor in Dynamic, Creel derives a benefit from performance of
the contract, but is neither a party to the contract nor a third-party beneficiary, as such, it
cannot enforce the terms of the agreement between NGS and Oakwood. Creel has
failed to state a plausible claim for breach of contract.
SO ORDERED.
Dated: April 16, 2012

s/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE

I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, Monday, April 16, 2012, by electronic and/or ordinary mail.
s/Julie Owens
Case Manager, [phone]

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