Chrysler Group, LLC v. Eagle Auto-Mall Corp.

Filing 75

MEMORANDUM AND ORDERGRANTING DEFENDANTS MOTION FOR LEAVE TO FILE SECOND AMENDED COUNTERCLAIM (Doc. 69) AND DENYING DEFENDANTS MOTION FOR RECONSIDERATION (Doc. 70). Signed by District Judge Avern Cohn. (MVer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

CHRYSLER GROUP, LLC,
Plaintiff,
v.

Case No. 14-12964

EAGLE AUTO-MALL CORP.,

HON. AVERN COHN

Defendant.
_________________________________________/
MEMORANDUM AND ORDER
GRANTING DEFENDANT’S MOTION FOR LEAVE TO FILE SECOND AMENDED
COUNTERCLAIM (Doc. 69)
AND
DENYING DEFENDANT’S MOTION FOR RECONSIDERATION (Doc. 70)1
I. Introduction
This is a business dispute in a automotive dealer relationship. Plaintiff Chrysler
Group, LLC2 is suing Eagle Auto-Mall Corporation (Eagle) seeking declaratory relief on
the grounds that Eagle has, or will, breach of a letter of intent (LOI) between the parties.
As will be explained, Eagle counterclaimed.
Before the Court is Eagle’s motion for leave to file a second amended
counterclaim (Doc. 69) and Eagle’s motion for reconsideration of the Court’s denial of its
motion for leave to file a second amended counterclaim (Doc. 70). For the reasons that
follow, the motion for leave to file a second amended complaint will be granted. Eagle’s

1

Upon review of the parties’ papers, the Court deems this matter appropriate for
decision without oral argument. See Fed. R. Civ. P. 78(b); E.D. Mich. LR 7.1(f)(2).
2

Effective December 15, 2014, Chrysler is now known as FCA US LLC (FCA).

motion for reconsideration will be denied.
II. Background
Eagle’s amended counterclaim (Doc. 31) asserted the following claims:
Count I

Declaratory Relief as to Modification of the LOI and FCA’s Breach

Count II

Contract Reformation

Count III

Breach of Contract and Duty of Good Faith and Fair Dealing

Count IV

Fraud

Count V

Promissory Estoppel

Eagle also made explicit prayer for specific performance as a form of relief on its claim
for breach of contract. See Doc. 30.
During an October 23, 2014 status conference, the Court instructed the parties to
narrow the issues and bifurcated the case. Thereafter, on November 20, 2014, the
parties filed a Rule 26(f) Joint Discovery Plan (Doc. 22). It provides that the case will
proceed in two phases. Phase I concerns Eagle’s claims for reformation of the LOI and
modification. Phase II concerns the parties’ remaining claims of breach of contract,
fraud, and promissory estoppel–the latter only being asserted by Eagle. Phase II was
stayed pending the outcome of Phase I.
FCA filed a motion for summary judgment on Counts I and II of Eagle’s amended
counterclaim in which Eagle essentially argued that the LOI was either modified by
subsequent oral agreement should be reformed to reflect the intent of the parties which
is not reflected in the LOI. (Doc. 34). In other words, FCA sought summary judgment
on Phase I of the case. The Court granted the motion, holding that the LOI controls.
The Court also stated:
2

The LOI was neither orally modified by the parties nor is it subject to reformation.
The parties’ rights and obligations will rise and fall within the parameters of the
LOI.
(Doc. 60 at p. 1). This left FCA’s claim for declaratory relief and the following
counterclaims:
Count III

Breach of Contract and Duty of Good Faith and Fair Dealing

Count IV

Fraud

Count V

Promissory Estoppel

Eagle then filed a motion to file a Second Amended Counterclaim to Add a claim
for Rescission (Doc. 64). Eagle also said that the Second Amended Counterclaim will
eliminate its claims for fraud (Count IV) and promissory estoppel (Count V). The Court
denied the motion on several grounds, explaining:
First, there is an element of delay. Eagle already amended its
counterclaim once before. It offers no explanation for waiting until FCA prevailed
on its summary judgment motion in Phase I to seek leave to add a claim for
rescission.
Second, the rescission claim is really a repackaging of its rejected claims
for modification and reformation under the auspices of a new claim for rescission.
The gravamen of all of these claims is Eagle’s contention that was not possible to
perform within the eight month time period and therefore the LOI must be
modified or reformed or rescinded. The Court rejected this contention in Phase I.
Third, the Court already expressed a view on a rescission claim. While
FCA says it is the “law of the case,” Eagle is correct that the Court technically did
not rule on the merits of a rescission claim as Eagle had not formally asserted
such a claim. However, there can be no doubt the Court addressed rescission,
as noted above, stating that the impossibility necessary for rescission was not
present and noting that rescission applies to the entire contract, not just a
particular term.
Finally, consistent with the Court’s earlier observation, it would be futile to
permit Eagle to assert a rescission claim at this stage in the case. The Court has
ruled that the terms of the LOI apply and that Eagle chose the eight-month
renovation option. Eagle’s time to complete a renovation expired on October 27,
2014. Even if Eagle had chosen the 18-month “new build” option, the LOI would
have expired on August 27, 2015. Based on the Court’s summary judgment
ruling, Eagle’s rescission claim is moot. See Great Lakes Exteriors, Inc. v. Dryvit
3

Sys., Inc., 2000 WL 156811, at *2-3 (E.D. Mich. Jan. 27, 2000) (holding that
claims regarding pricing issues under a contract were moot where the contract
had expired by its terms).
Further, as the Court noted in the summary judgment order, a successful
claim for rescission rescinds an entire contract, not a single term that a party
does not like. The Court cited Roberts v. Farmers Ins. Exchange, 275 Mich. App.
58, 73 (2007) in which the Michigan Court of Appeals said that “[a] promisor’s
liability may be extinguished in the event his or her contractual promise becomes
objectively impossible to perform.” Eagle cannot use a “rescission” claim to
accomplish indirectly what it could not do directly through its modification and
reformation claims: rewrite the LOI.
(Doc. 68)
Three days after the Court denied Eagle leave to assert a claim for rescission,
Eagle filed a second motion for leave to file a second amended counterclaim. Eagle (1)
eliminates its claims for fraud and promissory estoppel and (2) clarifies that its breach of
contract claim is a claim for breach of the parties’ LOI and not a claim for breach of the
duty of good faith and fair dealing.
Eagle also moved for reconsideration of the denial of leave to add a claim for
rescission.
Each motion is addressed in turn below.
III. Motion for Leave to Amend
A. Legal Standard
Under Fed. R. Civ. P. 15(a), a party may amend their pleadings after 20 days
“only by leave of court or by written consent of the adverse party; and leave to amend
pleadings "shall be freely given when justice so requires.” The decision whether or not
to permit the amendment is committed to the discretion of the trial court. See, e.g.,

Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-32 (1971); Estes v.
4

Kentucky Util. Co., 636 F.2d 1131, 1133 (6th Cir. 1980). This discretion, however, is
“limited by Fed.R.Civ.P. 15(a)'s liberal policy of permitting amendments to ensure the
determination of claims on their merits.” See Marks v. Shell Oil Co., 830 F.2d 68, 69
(6th Cir. 1987) (citation omitted). In determining whether to permit amendment, some of
the factors which may be considered by the district court are undue "delay in filing, lack
of notice to the opposing party, bad faith by the moving party, repeated failure to cure
deficiencies by previous amendments, undue prejudice to the opposing party, and
futility of amendment." Hageman v. Signal L.P. Gas, Inc. 486 F.2d 479, 484 (6th Cir.
1973). See also Foman v. Davis, 371 U.S. 178, 182 (1962). Delay by itself is not
sufficient to deny a motion to amend. Hageman, 486 F.2d at 484. See also General
Elec. Co. v. Sargent & Lundy 916 F.2d 1119, 1130 (6th Cir. 1990).
B. Application
FCA agrees that Eagle’s claims for fraud and promissory estoppel should be
dismissed. However, FCA says that Eagle’s attempted clarification of its breach of
contract claim is improper because the claim cannot withstand a motion to dismiss, i.e.
it lacks plausibility in large part because it seeks to override the express terms of the
LOI.
While FCA may be correct as to the merits of Eagle’s breach of contract claim,
the better course is to grant Eagle leave to amend. The Second Amended
Counterclaim eliminates the fraud and promissory estoppel claims and contain only a
breach of contract claim. After the Second Amended Complaint is filed, FCA may move
for any relief it deems fit, including seeking relief on its claim for declaratory relief.
IV. Motion for Reconsideration
5

A. Legal Standard
E.D. Mich LR 7.1(h)(3) governs motions for reconsideration, providing in relevant
part:
Generally, and without restricting the court’s discretion, the court will not
grant motions for rehearing or reconsideration that merely present the
same issues ruled upon by the court, either expressly or by implication.
The movant must not only demonstrate a palpable defect by which the
court and the parties have been misled but also show that correcting the
defect will result in a different disposition of the case.
A “palpable defect” is a defect which is obvious, clear, unmistakable, manifest or plain.
Marketing Displays, Inc. v. Traffix Devices, Inc., 971 F. Supp. 262, 278 (E.D. Mich.
1997)(citing Webster's New World Dictionary 974 (3rd ed. 1988)). A motion for
reconsideration which presents the same issues already ruled upon by the court, either
expressly or by reasonable implication, will not be granted. Czajkowski v. Tindall &
Associates, P.C., 967 F. Supp. 951, 952 (E.D. Mich. 1997).
B. Application
Eagle has not satisfied the standard for reconsideration. Eagle essentially
repeats the arguments considered and rejected by the Court as to whether it has a
viable claim for rescission. The Court fully explained why Eagle’s claim was not legally
or factually plausible. As further explained in FCA’s response (Doc. 74), Eagle has not
shown a palpable error in the Court’s detailed analysis of Eagle’s proposed rescission
claim.

V. Conclusion
6

For the reasons stated above, Eagle’s motion for leave to file a Second Amended
Counterclaim is GRANTED. Eagle’s motion for reconsideration is DENIED.
SO ORDERED.

S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE
Dated: December 22, 2015
Detroit, Michigan

7