American Furukawa, Inc. v. HOSSAIN

Filing 108

ORDER Denying Defendants' 103 Motion for Reconsideration. Signed by District Judge Gershwin A. Drain. (DPar)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

AMERICAN FURUKAWA, INC.,
a Delaware Corporation
Plaintiff,

Case No. 14-cv-13633

v.

UNITED STATES DISTRICT COURT JUDGE
GERSHWIN A. DRAIN

ISTHIHAR HOSSAIN, an Individual and
Michigan resident, and HT WIRE & CABLE
AMERICAS, LLC, a Michigan limited liability
company,

UNITED STATES MAGISTRATE JUDGE
MICHAEL J. HLUCHANIUK

Defendants.
/
ORDER DENYING DEFENDANTS’ MOTION FOR RECONSIDERATION [103]
I. INTRODUCTION
American Furukawa, Inc., (“American Furukawa” or “Plaintiff”), commenced the instant
action against Isthihar Hossain on September 19, 2014. See Dkt. 1. On September 16, 2015, the
Plaintiff filed an Amended Complaint adding HT Wire & Cable Americas, LLC (“HT Wire”) as
a Defendant. See Dkt. No. 65. On October 5, 2015, the Defendants Moved to Dismiss and Defer
the action to arbitration. See Dkt. No. 79. The Court denied the Defendants’ Motion on
November 19, 2015. See Dkt. No. 97.
Presently before the Court is Defendants’ Motion for Reconsideration. See Dkt. No. 103.
For the reasons discussed below, the Court will DENY the Defendants’ Motion.
II. BACKGROUND
Plaintiff, American Furukawa, is an American company owned by Furukawa Electric
Co., Ltd. (“Furukawa Electric Group”). Dkt. No. 89 at 6 (Pg. ID No. 1697). Furukawa Electric

-1-

Group has several other subsidiaries, including Furukawa Electrical Industrial Cable Co. Ltd
(“FEIC”) and Shenyang Furukawa Cable Co. Ltd. (“SFC”). Id. American Furukawa, FEIC, and
SFC are all different companies with different management teams, directors and customers. Id.
(Exhibit 1, ¶¶ 5–8). Defendant Hossain is a former employee of American Furukawa, and is the
resident agent of a competing company, Defendant HT Wire & Cable Americas, LLC (“HT
Wire”). Id. at 6.
FEIC and SFC entered into a Joint Venture Agreement with Hebei Huatong and Cables
Group Co. Ltd. (“Huatong”) on July 16, 2010. Id. at 7 (Pg. ID No. 1698). The Joint Venture
Agreement contains an arbitration clause. Id. Neither the Plaintiff nor the Defendants were
signatories to the agreement. Id.
American Furukawa filed this lawsuit against Hossain for the alleged misappropriation of
trade secrets, and other related claims, including violation of the Computer Fraud and Abuse Act,
in September of 2014. Id. at 8 (Pg. ID No. 1699).
After a about year of litigation, the Plaintiff added Defendant HT Wire. In September of
2015, Defendants moved for deferral to arbitration. See Dkt. No. 79. The Defendants argued that
the action was subject to the arbitration clause of the Joint Venture Agreement between Huatong,
FEIC and SFC. This Court held that the Defendants waived that argument by conducting
litigation for the past year. See Dkt. No. 97. Defendants have now moved for reconsideration.
III. LEGAL STANDARD
Under this Court’s Local Rules, the Court may not grant a motion for reconsideration
which merely presents the same issues that the Court already ruled on. LR 7.1(h)(3)(E.D. Mich.
July 1, 2013). Additionally, the movant must demonstrate that there is a palpable defect in the
opinion or order under attack and that correcting the defect will result in a different disposition of

-2-

the case. Id.; Indah v. U.S. S.E.C., 661 F.3d 914, 924 (6th Cir. 2011). “A ‘palpable defect’ is a
defect which is obvious, clear, unmistakable, manifest, or plain.” Hawkins v. Genesys Health
Systems, 704 F. Supp. 2d 688, 709 (E.D. Mich. 2010) (quoting Ososki v. St. Paul Surplus Lines
Ins. Co., 162 F. Supp. 2d 714, 718 (E.D. Mich. 2001)).
IV. DISCUSSION
Defendants originally moved to defer on the grounds that the matter should be sent to
arbitration in China pursuant to a “Joint Venture Agreement” between FEIC and Huatong. See
Dkt. No. 79. Although none of the parties to the present litigation were signatories to the Joint
Venture Agreement, Defendants argue that the parties are bound by the agreement “by ordinary
contract and agency principles.” Id. at 16 (Pg. ID No. 1341) (quoting Shammami v. Broad Street
Securities, Inc., 544 F. Supp. 2d 585, 586–87 (E.D. Mich. 2008)). This Court has already stated
that it found the applicability of the Joint Venture Agreement to be dubious but did not believe it
necessary to rule on those merits. Dkt. No. 97 at 3 (Pg. ID No. 1834). However, the Court shall
take this opportunity to set the record straight.
A. The Purported Joint Venture Agreement
There are four factors, identified by the Sixth Circuit, that the Court should consider
when addressing a motion to compel arbitration: (1) Whether the parties agreed to arbitrate; (2)
the scope of the arbitration agreement; (3) if federal statutory claims are asserted, whether
Congress intended those claims to be nonarbitrable; (4) if some, but not all, of the claims in the
action are subject to arbitration, whether to stay the remainder of the proceedings pending
arbitration. Glazer v. Lehman Bros., Inc., 394 F.3d 444, 451 (6th Cir. 2005).
As stated above, Defendants concede that none of the parties to the action are signatories
to the purported Joint Venture Agreement. Dkt. No. 79 at 16 (Pg. ID No. 1341). Defendants

-3-

argue that Plaintiff “does not have to personally sign an agreement to be bound, but may stand in
the shoes of the entity that signed the agreement.” Id. (citing Kruse v. AFLAC Intern, Inc., 458 F.
Supp. 2d 375, 382–83 (E.D. Ken. 2006)).
Defendants are partially correct. A nonsignatory of an arbitration agreement may be
bound by the agreement under ordinary contract and agency principles. Arnold v. Arnold Corp.Printed Communications for Business, 920 F.2d 1269, 1281–82 (6th Cir. 1990) (citing Letizia v.
Prudential Bache Securities, Inc., 802 F.2d 1185, 1187 (9th Cir. 1986)). Furthermore, there are
“[f]ive theories for binding nonsignatories to arbitration agreements [that] have been recognized:
(1) incorporation by reference, (2) assumption, (3) agency, (4) veil-piercing/alter ego, and (5)
estoppel.” Javitch v. First Union Sec., Inc., 315 F.3d 619, 629 (6th Cir. 2003). However, the
Defendants have not demonstrated that any of the five theories apply.
a. Agency
In Arnold, the Plaintiff brought suit against individual Defendants. However, the
Defendants were agents of a party who had agreed to an arbitration agreement with Plaintiff. Id.
at 1271. The Sixth Circuit further found that the Defendants were alleged “to have committed
acts related to their running of the corporation.” Id. at 1282. “[T]hese alleged wrongful acts relate
to the nonsignatory defendants’ behavior as officers and directors or in their capacities as agents
of the Arnold Corporation.” Id. Thus, the Court held that the Defendants were entitled to the
benefits of the arbitration agreement.
Defendants principally have argued that the same agency theory applies in the instant
matter. Here however, both the Defendants and the Plaintiff are nonsignatories. Defendants offer
no authority that a nonsignatory Defendant may invoke an arbitration agreement to a
nonsignatory Plaintiff. See Reilly v. Meffe, 6 F. Supp. 3d 760, 778 (S.D. Ohio 2014).

-4-

Furthermore, just because Plaintiff is a sister-company to FEIC and SFC, that does not mean that
Plaintiff is their agent that may be bound to an agreement that Plaintiff did not sign. Even under
the assumption that Defendants were acting within their capacities as agents of Huatong, the
same agency relationship does not exist between American Furukawa and its sister companies.
See Dkt. No. 89 (Exhibit 1, ¶ 5); see also National Carbide v. C.I.R., 366 U.S. 422, 437 (1949)
(“Whether the corporation operates in the name and for the account of the principal, binds the
principal, by its actions, transmits money received to the principal, and whether receipt of
income is attributable to the services of employees of the principal and to assets belonging to the
principal are some of the relevant considerations in determining whether a true agency exists.”).
Moreover, Defendants have not alleged facts, nor argued, that FEIC and SFC are
corporate fronts for the parent company, Furukawa Electric Group. Thus, there is no way to
connect American Furukawa to the Joint Venture Agreement through agency principles.
b. Alter Ego
Defendants also hint that American Furukawa is merely an alter ego for FEIC. Dkt. No.
79 at 17–18 (Pg. ID No. 1342–43). “The alter ego doctrine is an equitable doctrine ‘developed to
prevent employers from evading obligations under the [National Labor Relations] Act merely by
changing or altering their corporate form.” Trustees of Detroit Carpenters Fringe Benefit Funds
v. Industrial Contract, LLC, 581 F.3d 313, 318 (6th Cir. 2009). When determining whether two
companies are alter egos, “[w]e look to see ‘whether the two enterprises have substantially
identical management, business, purpose, operation, equipment, customers, supervision and
ownership.’ ” Id. (quoting NLRB v. Fullerton Transfer & Storage Ltd., Inc., 910 F.2d 331, 336
(6th Cir. 1990)). “In applying these factors, no individual factor is outcome determinative;

-5-

instead, ‘all the relevant factors must be considered together.’ ” Id. (quoting NLRB v. Allcoast
Transfer, Inc., 780 F.2d 576, 582 (6th Cir. 1986)).
On Defendants’ list of facts purporting to demonstrate that FEIC and American Furukawa
are “closely intertwined companies,” Dkt. No. 79 at 17–18 (Pg. ID No. 1342–43), Defendants
merely demonstrate that American Furukawa and FEIC are subsidiaries of Furukawa Electric
Group. Defendants have not demonstrated that American Furukawa and FEIC have identical
management, equipment, operation, customers, and supervision.
Instead there is evidence to the contrary. See Dkt. No. 89 (Exhibit 1, ¶¶ 5–7). American
Furukawa and FEIC are located on opposite sides of the planet. Id. The two companies have
different primary product lines. Id. The two companies have completely different management
teams. Id. The two companies have completely different Boards of Directors. Id. The two
companies have different customer bases. Id. There is very little to suggest that one is the alter
ego of the other.
c. The Demand Letter
Finally, Defendants argue that Plaintiff “acknowledged that it stood in FEIC’s shoes in its
demand letter to Defendant Hossain on June 9, 2014.” Dkt. No. 79 at 19 (Pg. ID No. 1344). The
Demand letter read, in relevant part, as follows:
In addition to the foregoing, Furukawa has a joint venture agreement with
Huatong, whereby Huatong has acquired know-how and trade secrets directly
from Furukawa. By selling Huatong cables, which include Furukawa know-how
and trade secrets, you may be liable, as a co-conspirator for violation of the joint
venture agreement.
Id. (Exhibit L: Demand Letter). Plaintiff argues that the joint venture agreement referenced in the
demand letter is not the same agreement brought in Defendants’ Motion. Dkt. No. 89 at 16 (Pg.
ID No. 1707).

-6-

The Court is not persuaded by Defendants’ argument. Pointing to a particular
correspondence between the Plaintiff and Defendant Hossain referencing a generic “joint venture
agreement” does not mean that the Plaintiff agreed to be bound to, what could be, a completely
different joint venture agreement that Defendants may have found elsewhere. To say that these
particular pieces of paper constitute the joint venture agreement referenced in a demand letter
from last year is at best a speculative conclusion.
Therefore, the Court finds that Defendants have failed to demonstrate that American
Furukawa agreed to arbitrate the matter at hand. Thus, the Defendants have failed to point to a
defect that if corrected would result in a different disposition of the case. Accordingly, the
Motion for Reconsideration fails.
V. CONCLUSION
For the reasons discussed above, the Defendants’ Motion for Reconsideration [103] is
DENIED.
IT IS SO ORDERED.
Dated: December 30, 2015
Detroit, Michigan

s/Gershwin A. Drain
GERSHWIN A. DRAIN
United States District Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record
and any unrepresented parties via the Court's ECF System to their respective email or First Class
U.S. mail addresses disclosed on the Notice of Electronic Filing on December 30, 2015.
s/Tanya R. Bankston
TANYA R.BANKSTON
Case Manager & Deputy Clerk

-7-