Masco Cabinetry, LLC v. Savvy Homes, LLC

Filing 18

OPINION and ORDER Granting Defendant's 5 MOTION to Dismiss for LACK OF PERSONAL JURISDICTION and Dismissing Plaintiff's Complaint re 1 Notice of Removal. Signed by District Judge Matthew F. Leitman. (HMon)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MASCO CABINETRY, LLC,
Plaintiff,

Case No. 15-cv-10462
Hon. Matthew F. Leitman

v.
SAVVY HOMES, LLC,
Defendant.
_________________________________/
OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO
DISMISS FOR LACK OF PERSONAL JURISDICTION (ECF #5) AND
DISMISSING PLAINTIFF’S COMPLAINT (ECF #1)
INTRODUCTION
Plaintiff Masco Cabinetry, LLC, (“Masco”), a Michigan-based cabinet
maker with offices in North Carolina, sold cabinetry products and provided
installation services to Defendant Savvy Homes, LLC, (“Savvy”), a North
Carolina-based residential home builder. Masco installed its products in Savvy
homes under construction in North Carolina. Masco says that Savvy has failed to
pay the full amount owing for the products and services that Masco provided, and
Masco has filed this action to collect the outstanding balance. (See Complaint,
ECF #1.) Savvy says that the cabinets were defective.
Savvy has moved to dismiss this action for lack of personal jurisdiction (the
“Motion to Dismiss”). (See ECF #5.) Masco contends that the Court may assert
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personal jurisdiction over Savvy because Savvy entered into a contract with Masco
under which Savvy consented to personal jurisdiction in Michigan. The Court
concludes that Savvy did not give such consent. Accordingly, for the reasons
explained in more detail below, the Court will GRANT Savvy’s Motion to
Dismiss (ECF #5) and DISMISS Masco’s Complaint (ECF #1).
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Savvy is a North Carolina company that builds homes in North Carolina and
Alabama. (See Affidavit of Savvy founder George Aiken, ECF #5-1 at ¶¶ 2-3.)
Savvy has never built a home in Michigan, nor is it licensed to build homes or do
business in this state. (See id. at ¶3.)
In mid-2012, Savvy selected Masco as a subcontractor “to provide and
install various cabinetry products [for] approximately 370 residential homes that
Savvy was designing and building” in North Carolina. (Id. at ¶5.) “The persons
[at Masco] with whom Savvy dealt on a day-to-day basis when the foregoing
homes were built were located in North Carolina, not Michigan.” (Id.)
When Savvy selected Masco, Savvy had Masco sign the “Savvy Agreement
General Terms & Conditions” (the “Savvy Agreement”). (See ECF #5-2; see also
Aiken Aff., ECF #5-1 at ¶4.) Savvy also had Masco initial each and every page of
the Savvy Agreement. (See ECF #5-2.) Savvy signed the Savvy Agreement as
well. Among other things, the Savvy Agreement established quality levels that

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Masco had to achieve; set a work schedule; required a clean job site; addressed
issues related to liens; required Masco to indemnify Savvy for certain claims; and
required Savvy to obtain and maintain insurance coverage. (See ECF 5-2 at ¶¶ 1-2,
4, 7, 10-13.)

The Savvy Agreement also provided that Savvy would “issue

purchase orders to [Masco] for all authorized work at prices agreed upon in
advance.” (Id. at ¶11.) The Savvy Agreement did not contain a forum-selection
clause.
After the parties executed the Savvy Agreement, Masco conducted a more
detailed “review of the document,” determined that it was not satisfied with some
of the provisions, and “negotiated certain changes to the agreement.” (Masco
Supplemental Brief, ECF #12 at 3, Pg. ID 272.) These changes were memorialized
in an “Addendum” to the Savvy Agreement. (See ECF #12 at 30-31, Pg. ID 296297.)

The changes Masco “negotiated” included revisions to Masco’s

indemnification obligations, changes to the type of warranties provided, and
modifications of details with respect to pricing. Notably, Masco and Savvy did not
include in the Addendum a forum-selection clause under which disputes between
the parties would be adjudicated in Michigan.
After the parties executed the Addendum, Savvy began making purchases
from Masco. As part of this process, Masco provided Savvy with quotes listing the
price of the fixtures it proposed to supply and install (the “Masco Quotes”). (See

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Affidavit of Patrice Roe, ECF #7 at ¶¶2-3; see also example Masco Quotes, ECF
#6 at 28-29, Pg. ID 102-103.) Each Masco Quote included a boilerplate statement
that the quote was “subject to [Masco’s] standard sales terms and conditions as in
effect from time to time, which are found at www.mascocabinetry.com and are
incorporated herein by reference [the “Masco Terms and Conditions”].” (ECF #6
at 28-29, Pg. ID 102-103.) None of the Masco Quotes actually listed any of the
Masco Terms and Conditions.
The Masco Terms and Conditions conflicted with several of the terms and
conditions that the parties had specifically “negotiated” in the previously-executed
Addendum.

For example, the warranties provided in the Masco Terms and

Conditions (see ECF #6 at 45, ¶¶ 2-3, Pg. ID 119) are fundamentally different from
the warranties provided in the Addendum (see ECF #12 at 30, Pg. ID 296). More
specifically, the Addendum requires Masco to “commence and diligently pursue to
correct any breach, default or defect in the work” (id); the Masco Terms and
Conditions, on the other hand, do not require Masco to repair any breaches and
allow Masco instead to issue a “credit for [a] nonconforming product” in lieu of a
repair. (ECF #6 at 45 at ¶3, Pg. ID 119). In addition, the Masco Terms and
Conditions place substantial limits on Masco’s potential liability in any civil action
brought against it (see id. at ¶4, Pg. ID 119), while the Addendum specifically
incorporates Savvy’s broad right to indemnification in “personal injury and

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property damage” actions that was initially included in the Savvy Agreement. (See
ECF #12 at 30, Pg. ID 296.) The Masco Terms and Conditions and the Addendum
also conflict with respect to accounting for applicable taxes. The Addendum
requires Masco’s pricing to “include[] applicable state and local taxes at the rate in
effect at the time of [Masco’s] bid submittal.” (ECF #12 at 31, Pg. ID 297;
emphasis added.) But the Masco Terms and Conditions state that “[i]n addition to
the price specified, [Savvy] is responsible” for any applicable taxes. (ECF #6 at 45
at ¶5, Pg. ID 119; emphasis added). Finally, even though Masco had specifically
agreed to do business with Savvy on Savvy’s terms (as modified by the negotiated
Addendum), the Masco Terms and Conditions provided that Masco would not do
business with a contractor (like Savvy) unless and until the contractor accepts
Masco’s terms:
Our quote, acknowledgment or acceptance of your order
is expressly limited to and made conditional upon your
acceptance of these terms and conditions.
[….]
You acknowledge that the prices stated are predicated on
the enforceability of these [t]erms, that the prices would
be substantially higher if these [t]erms did not apply, and
that you accept these [t]erms in exchange for such lower
prices.
(ECF #6 at 45, ¶1, Pg. ID 119; see also Roe Aff., ECF #7 at ¶8.))

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The Masco Terms and Conditions also provided that any disputes between
Masco and its customers would be resolved in Michigan (the “Michigan ForumSelection Clause”):
All orders shall be construed, interpreted and the rights of
the parties determined in accordance with the laws of the
State of Michigan without regard to any conflict of laws
provision that might otherwise apply. [….] You agree to
exercise any right or remedy in connection with these
[t]erms exclusively in, and you agree to submit to the
jurisdiction of the appropriate state or federal court
in Ann Arbor, Michigan.
(ECF #6 at 46, ¶19, Pg. ID 120; emphasis added.)
When Savvy chose to purchase the Masco products and services at the prices
listed in the Masco Quotes, Savvy issued purchase orders (on its own, pre-printed
forms) specifying the quantity ordered and the price to be paid. (See, e.g., id. at
59-61, Pg. ID 133-135.) These purchase orders did not contain any reference to
the Masco Quotes and did not expressly accept the Masco Terms and Conditions.
(See id.; see also Aiken Aff., ECF #5-1 at ¶4.) Savvy says it “never agreed to be
bound by [the Masco Terms and Conditions]” and never received a copy of those
terms until Masco filed this action. (See Aiken Aff., ECF #5-1 at ¶4.)
Masco, however, says that the Masco Quotes were offers to enter into
contracts that incorporated the Masco Terms and Conditions and that Savvy
accepted those offers – and agreed to the Masco Terms and Conditions – when it
issued purchase orders in response to the quotes. Masco further claims that it

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“extended credit and shipped goods [to Savvy], on the basis that the transactions
between the parties would be governed by the laws of the State of Michigan, and
that the state and federal courts in Ann Arbor, Michigan, would have exclusive
jurisdiction over any disputes that arose between the parties….” (Roe Aff., ECF #7
at ¶9.) Masco insists that it would not have done business with Savvy if Savvy had
not accepted the Masco Terms and Conditions. (See id.)
In 2014, a dispute arose between the parties concerning whether Masco had
breached its obligation to provide products of sufficient quality and workmanship
and whether Savvy had failed to pay Masco all amounts due and owing. On
December 18, 2014, Masco filed this breach of contract action against Savvy in the
Washtenaw County Circuit Court. (See ECF #1-1, Pg.ID 6-15.) Savvy removed
Masco’s action to this Court on February 4, 2015, based on the Court’s diversity
jurisdiction. (See ECF #1.)
Savvy has now moved to dismiss Masco’s Complaint for lack of personal
jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). (See ECF #5.)
The Court heard oral argument on the Motion to Dismiss on May 26, 2015.
Following the hearing, the parties filed two sets of supplemental briefs (see ECF
##12, 13, 16, 17) which the Court has reviewed.

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GOVERNING LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(2), “[t]he plaintiff bears the
burden of establishing through specific facts that personal jurisdiction exists over
the non-resident defendant, and the plaintiff must make this demonstration by a
preponderance of the evidence.” Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir.
2012) (internal quotation marks omitted). Where, as here, a court does not hold an
evidentiary hearing, “the plaintiff need only make a prima facie case that the court
has personal jurisdiction.” Id. (internal quotation marks omitted). The Court does
“not weigh the facts disputed by the parties but instead consider[s] the pleadings in
the light most favorable to the plaintiff.” Id. The Court may, however, “consider
the defendant's undisputed factual assertions.” Id. “[A]lso where, as here, … there
does not appear to be any real dispute over the facts relating to jurisdiction, the
prima facie proposition loses some of its significance.” Id. (internal quotation
marks omitted).
ANALYSIS
A.

The Personal Jurisdiction Issue Before the Court Turns on Whether the
Michigan Forum-Selection Clause is Part of the Parties’ Contracts
In a federal diversity action, “the law of the forum state dictates whether

personal jurisdiction exists, subject to constitutional limitations.” Intera Corp. v.
Henderson, 428 F.3d 605, 615 (6th Cir. 2005). “A federal court must analyze
jurisdiction in a two-step process. First, the court must determine if state law, here

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Michigan law, grants the court authority to exercise personal jurisdiction over the
defendant.

Second, the court must determine if the exercise of personal

jurisdiction over the defendant satisfies the Fourteenth Amendment's Due Process
Clause.” In Re Trade Partners, Inc., Investors Litigation, 627 F.Supp.2d 772, 776777 (W.D. Mich. 2008).
A valid contractual forum-selection clause may be sufficient to satisfy both
steps in the jurisdiction analysis process. First, Michigan law “permits parties to
contractually agree, in advance, to personal jurisdiction ....” Omne Fin., Inc. v.
Shacks, Inc., 596 N.W.2d 591, 595 (Mich. 1999); see also In Re Trade Partners
Inc., 627 F.Supp.2d at 778 (concluding that forum-selection clause satisfied
Michigan law with respect to the exercise of personal jurisdiction over nonresident defendant).1 Second, “[a] freely-negotiated forum-selection provision that
is not unreasonable or unjust ‘does not offend due process.’” Id. at 779 (quoting
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n. 14 (1985)).

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Michigan law provides that where, as here, a forum-selection clause “provides the
only basis for the exercise of jurisdiction” in this State, a Michigan court “shall
entertain the action” if the following four criteria are satisfied: “(a) The court has
power under [Michigan law] to entertain the action[;] (b) [Michigan] is a
reasonably convenient place for the trial of the action.[;] (c) The agreement as to
the place of the action is not obtained by misrepresentation, duress, the abuse of
economic power, or other unconscionable means[;] [and] (d) The defendant is
served with process as provided by court rules.” M.C.L. § 600.745(2)(a)-(d).
Given the Court’s conclusion that the Masco Terms and Conditions are not part of
the parties’ contracts, the Court need not address whether enforcing the Michigan
Forum-Selection Clause would be permissible under M.C.L. § 600.745(2)(a)-(d).

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Here, Masco argues that the Michigan Forum-Selection Clause satisfies both
of these requirements. (See Masco Response Brief, ECF #6 at 7-8, Pg. ID 86-87.)
Savvy has not disputed that the Michigan Forum-Selection Clause could satisfy
both prongs of the test for personal jurisdiction. Instead, Savvy insists that the
clause is not part of the parties’ contracts.
Masco counters that the Michigan Forum-Selection Clause is part of the
parties’ contracts because Savvy agreed to be bound by the Masco Terms and
Conditions that contained the clause. More specifically, Masco insists that each
time Savvy responded to a Masco Quote by submitting a purchase order to Masco,
Savvy and Masco formed a contract that incorporated the Masco Terms and
Conditions – including the requirement that any disputes be resolved in Michigan.
(Id. at 10-11, Pg. ID 89-90.)2

Masco explains that the Masco Terms and

Conditions became part of the parties’ contracts through the following four-step
process:
(1)

the Masco Quotes “constituted an offer to sell goods
to [Savvy]” (id. at 10, Pg. ID 89);

(2)

each Masco Quote “clearly referenced and
incorporated” the Masco Terms and Conditions (id.
at 9, Pg. ID 88);

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 Masco does not assert any other basis for this Court’s personal jurisdiction over
Savvy other than Savvy’s consent to jurisdiction in the Michigan Forum-Selection
Clause. (See, e.g., Masco Response Brief, ECF #6 at 7-8, Pg. ID 86-87.)

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(3)

the Masco Terms and Conditions “expressly provide
that … jurisdiction [for any dispute between the
parties] lies exclusively within the federal or state
courts in Ann Arbor, Michigan” (id.); and

(4)

Savvy “accepted [the Masco Quotes], and the
[Masco] Terms and Conditions, by submitting the
[the Savvy] Purchase Orders to purchase the goods
described in [the Masco Quotes].” (Id. at 10, Pg. ID
89.)

The question before the Court therefore is: did the parties enter into
contracts that included the Masco Terms and Conditions? Since the parties did not
mutually execute a single written contract including the Masco Terms and
Conditions, the Court must determine whether Masco made an offer to enter into a
contract containing those terms and whether Savvy accepted such an offer. The
Court must construe the offer and acceptance at issue “in light of the surrounding
circumstances.” E.C. Dailey Co. v. Clark Can Co., 87 N.W. 761, 762 (Mich. 1901)
(looking to course of business dealings between parties in construing offer and
acceptance); see also Patrick v. U.S. Tangible Investment Corp., 595 N.W.2d 162,
167 (Mich. App. 1999) (in determining whether parties have formed a particular
contract, “a court will look to the language of the proposal, then consider any prior
communications coupled with the circumstances surrounding the bargain”).

For

the reasons explained below, the Court concludes that the parties never entered into
a contract that included the Masco Terms and Conditions.

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B.

Savvy and Masco Did Not Agree That the Masco Terms and Conditions,
Which Include the Michigan Forum-Selection Clause, Would Govern
the Parties’ Relationship, and Thus the Clause May Not Serve as the
Basis for Asserting Personal Jurisdiction Over Savvy
As described in detail above, Masco argues that it entered into contracts with

Savvy that incorporated the Masco Terms and Conditions, including the Michigan
Forum-Selection Clause, when Savvy issued purchase orders in response to the
Masco Quotes (which incorporated Masco’s terms). This argument ignores the
“prior communications” between the parties, Patrick, 595 N.W.2d at 167, and it
fails to put Savvy’s responses to the Masco Quotes in the proper context of “the
surrounding circumstances.” E.C. Dailey Co., 87 N.W. at 762. When the entire
course of dealings between the parties is considered, the most reasonable
conclusion is that neither party – and certainly not Savvy – intended that the Masco
Terms and Conditions would govern the parties’ relationship and contracts.
The relationship between the parties did not start with the Masco Terms and
Conditions. It began with the execution of the Savvy Agreement. That agreement
addressed the working relationship between the parties and established a
framework under which the parties would do business with one another. Masco
signed the Savvy Agreement and initialed each and every page to make clear that it
reviewed and accepted all of the provisions.

(See ECF #5-2.)

Masco then

conducted an additional review of the Savvy Agreement, negotiated a set of
changes to that agreement, and memorialized those changes in the Addendum.

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(See ECF #12 at 30-31, Pg. ID 296-297.) The most reasonable view of the Savvy
Agreement and the specifically-negotiated Addendum is that they represented the
terms and conditions on which each party was willing to do business with the
other.
There is no persuasive reason to believe, as Masco now claims, that after
Masco specifically agreed to do business with Savvy on the terms set forth in the
Savvy Agreement and the Addendum, Masco then turned around and offered (in
the Masco Quotes) to make sales to Savvy if and only if Savvy accepted the Masco
Terms and Conditions. Simply put, if Masco was unwilling to do business with
Savvy unless Savvy accepted the Masco Terms and Conditions, then Masco would
not have entered into the Savvy Agreement and the Addendum. Likewise, there is
no reason to believe that Savvy intended to be bound by the Masco Terms and
Conditions after (1) initially insisting that Masco accept the Savvy Agreement and
(2) then agreeing to make only a limited set of changes to the Savvy Agreement by
entering into the Addendum.

Against this background, it is unreasonable to

conclude that Masco’s offers to sell products to Savvy were contingent upon
Savvy’s acceptance of the Masco Terms and Conditions, and it is likewise
unreasonable to conclude that Savvy accepted those terms when it made purchases
from Masco.

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Masco resists this conclusion. It stresses that the Masco Quotes specifically
stated that they incorporated the Masco Terms and Conditions. But the boilerplate
language purporting to incorporate the Masco Terms and Conditions is entitled to
little weight given that the parties had already specifically negotiated the precise
terms and conditions on which they would do business with one another in the
Savvy Agreement and Addendum. In light of the “surrounding circumstances,”
E.C. Dailey Co., 87 N.W. at 762, the Court cannot conclude either (1) that Masco
offered to make sales to Savvy only if Savvy accepted the Masco Terms and
Conditions or (2) that Savvy in fact accepted those terms when it issued purchase
orders in response to the Masco Quotes.3
Masco further argues that the Court’s entire analysis rests upon a faulty
premise. Masco says that, contrary to the Court’s conclusion, Masco had not
agreed to be bound by the Savvy Agreement and Addendum before Masco sent
Savvy the Masco Quotes.

In support of this argument, Masco points to the

following language in the Savvy Agreement: “Note: Beginning work constitutes
acceptance of general terms and conditions.” (See ECF #5-2 at 1, Pg. ID 53.)

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when Masco issued the Masco Quotes with proposed pricing and
Savvy responded with its own purchase orders, the parties were acting in manner
that was expressly contemplated by the Savvy Agreement (and Addendum). (See
Savvy Agreement, ECF #5-2 at ¶11, Pg. ID 55 – providing that Savvy will “issue
purchase orders at prices agreed upon in advance.”) This is yet another reason to
reject Masco’s argument that the quote/purchase order process displaced the Savvy
Agreement and Addendum in favor of the Masco Terms and Conditions. 

 Moreover,

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Masco says that it had not yet begun work – and thus was not yet bound by the
Savvy Agreement and Addendum – when it issued the Masco Quotes and Savvy
responded with purchase orders. Thus, Masco continues, it would be error to
conclude that Masco was willing to business with Savvy on the terms reflected in
Savvy Agreement and the Addendum.
This argument puts form over substance. While Savvy may not have had
any legally enforceable rights against Masco under the Savvy Agreement and
Addendum at the time Masco issued the first Masco Quote and Savvy issued the
first purchase order, the Savvy Agreement and the Addendum nonetheless
constitute a specifically-negotiated and unambiguous expression by Masco of its
willingness to abide by Savvy’s terms (as amended). Simply put, those agreements
are the essential background against which the parties’ relationship must be
evaluated, and the Masco Quotes and the responsive purchase orders must be
interpreted in light of those agreements. And when the Masco Quotes and Savvy
purchase orders are so interpreted, it becomes clear that neither side intended to
enter into a contract containing the Masco Terms and Conditions.
Because the Masco Terms and Conditions were not a part of the parties’
agreements, the Michigan Forum-Selection Clause therein may not serve as the
basis on which this Court may exercise personal jurisdiction over Savvy. And

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because Masco has not argued this Court may exercise personal jurisdiction over
Savvy on any other basis, the Court must grant Savvy’s Motion to Dismiss.
CONCLUSION
For the reasons explained above, Masco has failed to satisfy its burden to
establish that the Court may exercise personal jurisdiction over Savvy. Therefore,
IT IS HEREBY ORDERED that Savvy’s Motion to Dismiss (ECF #5) is
GRANTED, and the Complaint (ECF #1) is DISMISSED for lack of personal
jurisdiction.

s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE

Dated: September 1, 2015

I hereby certify that a copy of the foregoing document was served upon the
parties and/or counsel of record on September 1, 2015, by electronic means and/or
ordinary mail.
s/Holly A. Monda
Case Manager
[phone]

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