Ordos City Hawtai Autobody Company, Ltd. et al v. Dimond Rigging Company, LLC

Filing 28

OPINION AND ORDER Denying 10 Motion to Dismiss. Signed by District Judge Sean F. Cox. (JMcC)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

Ordos City Hawtai Autobody Company, Ltd.
and Inner Mongolia OED Engine Company,
Ltd.,
Plaintiffs,
v.

Case No. 13-14909
Honorable Sean F. Cox

Dimond Rigging Company, LLC d/b/a
Absolute Rigging & Millwrights,
Defendant.
______________________________/
OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS
This case involves, among many other things, contract disputes. Plaintiffs Ordos City
Hawtai Autobody, Ltd. (“Ordos”) and Inner Mongolia OED Engine Company, Ltd. (“Inner
Mongolia”) (collectively, “Plaintiffs”), allege that Defendant Dimond Rigging Company, LLC, d/b/a
Absolute Rigging & Millwrights (“ARM”) breached contracts concerning Defendant’s care for, and
transportation of, automotive manufacturing equipment that Plaintiffs purchased from companies
located in the United States.
This matter is before the Court on Defendant’s Motion to Dismiss Pursuant to Federal Rules
of Civil Procedure 12(b)(1) and 12(b)(6). The motion has been fully briefed by the parties. The
Court heard oral argument on Defendant’s motion on April 2, 2014. For the reasons set forth below,
the Court shall DENY Defendant’s Motion to Dismiss.
FACTUAL BACKGROUND
Plaintiffs Ordos City Hawtai Autobody Company Co., Ltd. (“Ordos”) and Inner Mongolia

OED Engine Company, Ltd. (“Inner Mongolia”) are wholly-owned subsidiaries of Hawtai Motor
Group (“Hawtai”). (Verified Compl. at ¶ 3). Hawtai, Ordos and Inner Mongolia are organized
under the laws of China, and their principal places of business are in China. (Verified Compl. at ¶¶
1-3). Defendant Dimond Rigging Company, LLC, d/b/a Absolute Rigging & Millwrights (“ARM”)
is a Michigan limited liability company located in Birmingham, Michigan. (Verified Compl. at ¶
4).
1)

The “Line 7 Equipment”
In 2011, Ordos purchased two pieces of very large automobile manufacturing equipment

referred to by the parties as “the Line 7 Equipment.” (Verified Compl. at ¶ 8). Ordos entered into
a Rigging Agreement with Defendant ARM, whereby Ordos was obligated to pay ARM over $1
million, and in exchange ARM would “provide for the rigging, dismantling, washing, packing, and
loading of all of the Line 7 Equipment.” (Verified Compl. at ¶ 9; see Line 7 Rigging Agreement,
attached to Compl. at Ex. 1). The Line 7 Rigging Agreement contains a clause that states:
Disputes Settlement. The disputes between the two parties will be solved by
amicable negotiation. If a dispute between the parties concerning the provisions of
this Agreement cannot be resolved within thirty days, then the dispute is to be
referred to Singapore for arbitration, Singapore laws will be applicable.
(Compl. at Ex. 1, ¶ 6.10).
Ordos and ARM also entered into an agreement whereby Ordos was obligated to pay ARM
$1,250,000, and in exchange ARM would provide numerous services necessary to transport the Line
7 Equipment to Plaintiff Ordos’ location in China. (Verified Compl. at ¶¶ 10-11; see Line 7
Transportation Agreement, attached to Compl. at Ex. 2). The Line 7 Transportation Agreement
contains a clause that states:
Disputes Settlement. The disputes between the two parties will be resolved by
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amicable negotiation. If a dispute between the parties concerning the provisions of
this Agreement cannot be resolved within thirty days, then the dispute is to be
referred to Singapore for arbitration. Singapore laws will be applicable.
(Compl. at Ex. 2, ¶ 5.10).
2)

The “Line 15 Equipment”
In approximately August of 2011, Plaintiff Inner Mongolia purchased another piece of

“massive” automotive manufacturing equipment that the parties refer to as the “Line 15 Equipment.”
(Verified Compl. at ¶ 13). Inner Mongolia and ARM entered into a Rigging Agreement, which was
similar to the Rigging Agreement between Ordos and ARM, pursuant to which Inner Mongolia
agreed to pay $760,000 to ARM in exchange for ARM’s “rigging, dismantling, washing, packing,
and loading of the Line 15 Equipment.” (Verified Compl. at ¶ 15; see Line 15 Rigging Agreement,
attached to Compl. at Ex. 4). The Line 15 Rigging Agreement contains a clause that states:
Disputes Settlement. The disputes between the two parties will be solved by
amicable negotiation. If a dispute between the parties concerning the provisions of
this Agreement cannot be resolved within thirty days, then the dispute is to be
referred to any court of competent jurisdiction in Ohio or the Beijing 1st
Intermediate People’s Court.
(Compl. at Ex. 4, ¶ 7.9).
Inner Mongolia and ARM also entered into a transportation agreement, which obligated
ARM to “handle all services and pay all expenses” associated with transporting the Line 15
Equipment from Ohio to the Plaintiff’s location in China. (Verified Compl. at ¶ 17; see Line 15
Transportation Agreement, attached to Compl. at Ex. 5). Inner Mongolia was obligated to pay ARM
$1,050,000 under the Line 15 Transportation Agreement. (Verified Compl. at ¶ 19). The Line 15
Transportation Agreement contains a clause that states:
Disputes Settlement. The disputes between the two parties will be resolved by
amicable negotiation. If a dispute between the parties concerning the provisions of
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this Agreement cannot be resolved within thirty days, then the dispute is to be
referred to Singapore for arbitration. Singapore laws will be applicable.
(Compl. at Ex. 5, ¶ 5.10).
3)

The Amended Transportation Agreement
Plaintiffs allege that, “[b]y March 2013, ARM still had not completed most of the Line 7

Transportation Services or the Line 15 Transportation Services.” (Verified Compl. at ¶ 21). As a
result, the parties entered into an Amended Transportation Agreement (“Amendment”), whereby
Plaintiffs agreed to pay “an additional $700,000 in order for ARM to complete the Line 7
Transportation Services and the Line 15 Transportation Services.” (Verified Compl. at ¶ 23, see
Amended Transportation Agreement, attached to Compl. at Ex. 6). The Amended Transportation
Agreement states, in pertinent part:
1.

This Amended Agreement amends the Line 7 Transportation Agreement
fully executed by the Parties on June 7, 2011 and the Line 15 Transportation
Agreement fully executed by the Parties on November 3, 2011 (collectively,
the “Transportation Agreements.”)
...

3.

In addition to the promises and obligations in the other paragraphs of this
Amended Agreement, the Parties agree to perform the following services and
obligations
...
(j)

The parties agree that this Amended Agreement will be governed by
the laws of the United States and enforceable by either party for
equitable, injunctive relief in any U.S. District Court, in addition to
actions for money damages in the same court.

Compl. at Ex. 6, pp. 1-2). The Amended Transportation Agreement is signed only by “Nancy,” a
representative of Ordos.
In May 2013, after the Amended Transportation Agreement was executed, President of ARM
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Ronald W. Lech II signed and delivered a Statement to Plaintiffs, which states, in pertinent part:
While addressing Line 7 & CTL and Line 15 Amendment, Inner Mongolia
OED Engine co., Ltd commissioned Ordos city Hawtai Autobody Co., Ltd to sign
the amendment with Absolute Rigging & Millwrights (ARM) for the Line 15
Amendment.
ARM has no objection to the above arrangement, and agreed to that Ordos
city Hawtai Autobody Co., Ltd as the main body to pay the Line 15 supplemental
transportation costs which both sides have agreed in the Amendment . . . .
(Statement of Ronald Lech, attached to Pl. Resp. at Ex. D). ARM also attached Invoices to the
Statement that notified Ordos that certain amounts were due under the Amended Transportation
Agreement. (Pl. Resp. at Ex. D).
4)

The Parties’ Current Dispute
Plaintiffs allege that they have paid to ARM all amounts owed under the Line 7 Rigging,

Line 7 Transportation, and Line 15 Rigging Agreements, plus additional amounts under the
Amendment and the Line 15 Transportation Agreement. (Verified Compl. at ¶ 29). Yet, Plaintiffs
claim, Defendant has either failed to perform, has only partially performed, or has performed
imperfectly under all the contracts. (Verified Compl. at ¶¶ 30-34).
Plaintiffs further allege that ARM is alleging an invalid “artisan’s lien” for its millwright
work on the Line 15 Equipment, even though Plaintiffs paid ARM all amounts due under the Line
15 Rigging Agreement. (Verified Compl. at ¶ 42).
Finally, Plaintiffs are facing problems related to Defendant’s storage of the Line 15
Equipment. Plaintiffs maintain that ARM leased a piece of industrial property in Twinsburg, Ohio
where it planned to store the Line 15 Equipment. (Verified Compl. at ¶ 39). Plaintiffs have been
notified that ARM’s lease on the Twinsburg property has expired, and that the owner of the
Twinsburg property has “threatened to use self help or legal remedies to remove Hawtai’s equipment
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from its property.” (Verified Compl. at ¶ 41). Plaintiffs aver that ARM has moved some of the Line
15 Equipment to other locations in Michigan, but that Plaintiffs have been unable to obtain
possession of any of the Line 15 Equipment located in Ohio and Michigan. (Verified Compl. at ¶¶
44-46).
PROCEDURAL HISTORY
Plaintiffs filed their Verified Complaint on November 27, 2013. (Doc. #1). Plaintiffs allege
six (6) counts against Defendant:
Count One:

Claim and Delivery

Count Two:

Conversion

Count Three: Declaratory Relief
Count Four:

Breach of Contracts

Count Five:

Negligence

Count Six:

Unjust Enrichment

On December 24, 2013, Defendant filed its Motion to Dismiss, arguing, generally, that
Plaintiffs’ Verified Complaint should be dismissed because its claims are subject to the arbitration
clause contained in the Line 15 Transportation Agreement. (Doc. #10). Plaintiffs timely responded
(Doc. #13) and Defendant replied. (Doc. #14).
Thereafter, this Court ordered the parties to submit supplemental briefs on the issue of
whether the Amended Transportation Agreement constitutes a valid amendment to the Line 15 and
Line 7 Transportation Agreements, and whether the individual counts in the Verified Complaint fall
within the scope of any of the parties’ several arbitration agreements. (Doc. #17). Defendant filed
its supplemental brief (Doc. #20). Plaintiff filed its own supplemental brief, pursuant to this Court’s
order, on March 20, 2014. (Doc. #23).
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STANDARD OF DECISION
Defendant has moved the Court, pursuant to Federal Rule of Civil Procedure 12(b)(1), to
dismiss this action because it lacks subject matter jurisdiction due to the existence of an arbitration
clause in the parties’ contract. “A motion to dismiss based on an arbitration clause is more
appropriately filed under Rule 12(b)(6), because the existence of a valid arbitration clause does not
technically deprive the Court of subject matter jurisdiction.” Dental Associates, P.C. v. Am. Dental
Partners of Michigan, LLC, 2011 WL 6122779 at *1 (E.D. Mich. Dec. 9, 2011) aff'd, 520 Fed.
App'x 349 (6th Cir. 2013), citing Moore v. Ferrellgas, Inc., 533 F. Supp. 2d 740, 744 (W.D. Mich.
2008); see also High v. Capital Senior Living Properties 2-Heatherwood, Inc., 594 F. Supp. 2d 789,
795 (E.D. Mich. Dec. 17, 2008). Therefore, this Court will analyze Defendant’s motion under Fed.
R. Civ. P. 12(b)(6).
In considering a Rule 12(b)(6) motion, the Court must construe the complaint in the light
most favorable to the plaintiff and must accept all the factual allegations contained in the complaint
as true. Lambert v. Hartman, 517 F.3d 433, 439 (6th Cir. 2008). The Court may consider: 1)
documents referenced in, or attached to, the complaint and central to the plaintiff’s claims; 2)
matters of which a court may properly take notice; and 3) public documents and records. Costell
v.Bank of New York Mellon, 2013 WL 317746 (E.D. Mich. 2013); Meyer v. Citimortgage, Inc., 2012
WL 411995 (E.D. Mich. 2012); Devlin v. Kalm, _Fed. App’x _, 2013 WL 4265757 (6th Cir. 2013).

In order to survive a Rule 12(b)(6) motion to dismiss, a plaintiff’s complaint need only
contain “enough facts to state a claim for relief that is plausible on its face.” See Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “Where a complaint pleads facts that are merely consistent
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with a defendant’s liability, it ‘stops short of the line between possibility and plausibility of
entitlement to relief.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), citing Twombly, 550 U.S. at
557. “Determining whether a complaint states a plausible claim for relief will . . . be a contextspecific task that requires the reviewing court to draw on its judicial experience and common sense.”
Iqbal, 556 U.S. at 679.
ANALYSIS
Initially, the Court notes that this motion has been extensively, yet inadequately briefed by
the parties. Plaintiffs’ Verified Complaint contains six counts, one of which is a claim for “Breach
of Contracts,” wherein Plaintiffs allege that Defendant breached all four of the contracts existing
between the parties. (Compl. at Count Four, ¶¶ 67-71). Three of those contracts provide that the
parties will arbitrate all disputes in Singapore, but the Line 7 and Line 15 Transportation
Agreements were purportedly amended and the arbitration clause removed. The Line 15 Rigging
Agreement contains no arbitration clause at all.
Despite the fact that some contracts at issue contain arbitration clauses and some clearly do
not, the parties’ briefs proceed as though the only contract at issue in the Complaint is the Line 15
Transportation Agreement. (Compl. at Ex. 5; see also Def.’s Mo. at pp. 1-2: “Plaintiff’s complaint
generally arises out of one contract . . . the Line 15 Transportation Agreement . . . the Line 15
Transportation Agreement contains a mandatory arbitration clause.”). Based only on the Line 15
Transportation Agreement’s arbitration clause, Defendant asks this court to dismiss the entire action.
(Def. Mo. at 5).
This Court ordered Defendant and Plaintiffs to submit supplemental briefs addressing each
count of the Complaint individually, stating whether or not that claim was covered under the scope
of any arbitration agreement, and whether or not this Court should dismiss the count, citing to
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relevant legal authority. (Doc. #17). Defendant neglected to comply with this Court’s order, instead
submitting a supplemental brief that adopted the same position Defendant asserted in its opening
motion: that the Line 15 Transportation Agreement is the only contract put at issue by Plaintiffs’
Complaint.
Therefore, this Court will confine its consideration of Defendant’s motion to the issue as it
has been defined by the parties, i.e. whether this Court should enforce the arbitration agreement
contained in the Line 15 Transportation Agreement.
1)

This Court Will Not Enforce The Line 15 Transportation Agreement’s Arbitration
Clause.
Defendant argues that “the Court is without jurisdiction to take up this case because the Line

15 Transportation Agreement contains a mandatory arbitration clause.” (Def. Mo. at 2, citing Line
15 Trans. Agreement, attached to Compl. at Ex. 5, ¶ 5.10). The arbitration clause contained in the
original Line 15 Transportation Agreement provides that all disputes between the parties would be
resolved through arbitration in Singapore. (Compl. Ex. 5 at ¶ 5.10).
An arbitration agreement is, quite simply, a contract. See Atkinson v. Sinclair Ref. Co., 370
U.S. 238, 241 (1962). Therefore, the Court will look to the parties’ contracts to determine if an
agreement to arbitrate exists.
Plaintiffs argue that the Line 15 and Line 7 Transportation Agreements were amended by
execution of the Amended Transportation Agreement (“Amendment”) (Compl. at Ex. 6), and that
the arbitration clauses were explicitly eliminated from the Line 15 and Line 7 Transportation
Agreements. The Amendment states that disputes will be governed by the laws of the United States
and enforceable by either party in United States District Court. (Compl. at Ex. 6, ¶ 3(j)).
Defendant claims that “the Amendment could not have . . . ever served to modify the terms
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of the original [Line 15] Transportation Agreement because it was not signed by both parties to the
original [Line 15] Transportation Agreement.” (Def. Reply at 1). Here, Defendant highlights the
fact that the Line 15 Transportation Agreement states that it “is made by and between Absolute
Rigging and Millwrights . . . and Inner Mongolia OED Engine Co., Ltd.,” (Compl. at Ex. 5), whereas
the Amendment states that it is “made by and between Ordos City Hawtai Autobody Co., Ltd. . . .
and Absolute Rigging & Millwrights.” (Compl. at Ex. 6).
Plaintiffs have a sound explanation for this anomaly. Plaintiffs explain that they designated
a representative of Ordos City to sign and execute the Amendment on behalf of Inner Mongolia, and
that this arrangement was agreeable to all involved.
Defendant admits that this arrangement existed, and was agreeable to all parties. After the
Amendment was executed, ARM’s president, Ronald Lech, was asked to provide a Statement
acknowledging that Ordos City signed and executed the Amendment for itself, as well as on behalf
of Inner Mongolia.

(Pl. Resp. at 6).

Mr. Lech provided Plaintiffs with their requested

documentation, in which he stated:
While addressing Line 7 & CTL and Line 15 Amendment, Inner Mongolia
OED Engine co., Ltd commissioned Ordos city Hawtai Autobody Co., Ltd to sign
the amendment with Absolute Rigging & Millwrights (ARM) for the Line 15
Amendment.
ARM has no objection to the above arrangement, and agreed to that Ordos
city Hawtai Autobody Co., Ltd as the main body to pay the Line 15 supplemental
transportation costs which both sides have agreed in the Amendment . . . .
(Statement from Ronald Lech to Plaintiffs, attached to Pl. Resp. at Ex. D). Thus, Plaintiffs maintain
that ARM, through its President, “expressly ratified the execution of the [Amendment] by Hawtai,
including by Ordos City on behalf of Inner Mongolia.” (Pl. Resp. at 6; Pl. Resp. at Ex. D).
Additionally, Plaintiffs allege (and Defendant does not deny) that Defendant issued invoices
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and accepted payments from Plaintiffs that were only due to Defendant under the Amendment. The
Court finds that, in light of Defendant’s own ratification and acknowledgment of the Amended
Transportation Agreement as an effective amendment to both the Line 15 and Line 7 Transportation
Agreements, Defendant’s argument to the contrary is disingenuous and without merit.
Based on Defendant’s statement and conduct, the Court finds that the parties amended the
Line 15 Transportation Agreement, including the arbitration clause. Therefore, because the
Amendment contains no arbitration clause, this Court shall DENY Defendant’s Motion to Dismiss
Pursuant to Federal Rule of Civil Procedure 12(b)(6).
2)

Plaintiffs Have Stated A Claim For “Claim and Delivery” Under Michigan Law.
Defendant argues, without citation to authority, that the Court should dismiss Count One of

Plaintiffs’ Verified Complaint (Claim and Delivery) because it is a claim for relief under Michigan
law, but the Line 15 Transportation Agreement provides that disputes arising therefrom will be
governed by Ohio and Chinese laws. (Def. Mo. at 5).
As previously discussed, this Court finds that the Line 15 Transportation Agreement was
modified by the Amendment. The Amendment states that “the Amended Agreement will be
governed by the laws of the United States . . . .” rather than Ohio and/or Chinese laws. (Verified
Compl. at Ex. 6, ¶ 3(j)).
There is no “common law of contracts” or “common law of property” of the United States.
Thus, the Amendment’s choice of law provision does not instruct this Court as to which state’s
contract laws would govern the parties’ contract disputes. Typically, in diversity cases, the Court
applies the law of the forum state’s highest court. Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938).
Under Erie, this Court must apply Michigan law to the issues before it in this case. Defendant has

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provided this Court with no other valid reason to do otherwise.
Thus, the Court shall DENY Defendant’s Motion to Dismiss Count One of Plaintiffs’
Complaint because the original Line 15 Transportation Agreement’s choice of law provision was
amended.
CONCLUSION & ORDER
For the reasons set forth above, Defendant’s Motion to Dismiss Pursuant to Rule 12(b)(6)
(Doc. #10) is DENIED.
IT IS SO ORDERED.
S/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: April 10, 2014
I hereby certify that a copy of the foregoing document was served upon counsel of record on April
10, 2014, by electronic and/or ordinary mail.
S/Jennifer McCoy
Case Manager

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