Wallace Sales & Consulting, LLC v. Tuopu North America, Limited
Filing
120
OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARYJUDGMENT 94 . Signed by District Judge Gershwin A. Drain. (TBan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
WALLACE SALES & CONSULTING, LLC,
Case No. 15-cv-10748
Plaintiff/Counter Defendant,
UNITED STATES DISTRICT COURT JUDGE
GERSHWIN A. DRAIN
v.
TUOPU NORTH AMERICA, LIMITED,
UNITED STATES MAGISTRATE JUDGE
DAVID R. GRAND
Defendant/Counter Claimant.
/
OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY
JUDGMENT [94]
I. INTRODUCTION
On March 2, 2015, Wallace Sales & Consulting, LLC (“Plaintiff”) filed a
Complaint and Demand for Trial by Jury against Tuopu North America, Limited
(“Defendant”), alleging breach of contract and seeking a declaratory judgment. See
Dkt. No. 1. On August 7, 2015, Defendant asserted a counterclaim against Plaintiff
for Unjust Enrichment/Quantum Meruit. Dkt. No. 21, pp. 3–4 (Pg. ID No. 506–
07). Plaintiff amended its complaint on August 28, 2015. Dkt. No. 28.
Presently before the Court is Defendant’s Motion for Summary Judgment,
filed on September 30, 2016. Dkt. No. 94. Upon review of the briefing, the Court
concludes that oral argument will not aid in the resolution of the instant motion.
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Accordingly, the Court will resolve Defendant’s present motion on the briefs. See
E.D. Mich. LR 7.1(f)(2).
For the reasons discussed herein, the Court will DENY Defendant’s Motion
for Summary Judgment [94].
II. BACKGROUND
Plaintiff is a Michigan sales representative firm in the automotive industry,
whose sole member is James Wallace (“Wallace”). Dkt. No. 105, p. 6 (Pg. ID No.
2733). Defendant is an Ontario, Canada corporation and a subsidiary of a Chinese
manufacturing conglomerate, and functions as the North American supplier of
automotive suspension parts. Id.
In October 2005, Wallace emailed with James Robbescheuten at Topew
International Incorporated. Id. at 8. In response to Robbescheuten’s request,
Wallace attached a résumé that stated he had an Associate’s Degree in Engineering
Technology from Henry Ford Community College and a Bachelor’s of Science
degree in Mechanical Engineering from Lawrence Technological University. Id.;
Dkt. No. 105-2, p. 4 (Pg. ID No. 2764).
Defendant, Tuopu North America, was incorporated on January 24, 2006.
Dkt. No. 105-4. Defendant first retained Plaintiff as its sales representative
pursuant to a written agreement in February 2007. Dkt. No. 105-6. The 2007
agreement appointed Plaintiff to be Defendant’s “sales agent for the sale and
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servicing of Products to the Customers” and to “assist in representing [Defendant]
to other customers.” Id. at 2 (Pg. ID No. 2279).
In December 2011, after several years of working together, Plaintiff and
Defendant agreed to execute a new written Manufacturer’s Representative
Agreement (hereinafter “the Agreement”), under which Plaintiff served as an
independent manufacturer’s representative. Dkt. No. 105-9. The Agreement
became effective on January 1, 2012. Id. at 2 (Pg. ID No. 2802). According to the
Agreement, any disputes related to the Agreement shall be governed solely by
Ontario, Canada law. Id. at 8.
The Agreement included detailed provisions governing the sales
commissions that Defendant would be required to pay to Plaintiff in the event of
termination, which varied based upon whether Plaintiff’s termination was “without
cause” or “for cause.” Id. at 6–7. If Defendant terminated Plaintiff “without cause,”
it was required to continue paying sales commissions to Plaintiff on all sales for
which an order or quotation was received prior to December 31, 2014. Id. at 7.
However, if Defendant terminated Plaintiff “for cause,” it was only required to pay
Plaintiff commissions on parts shipped during the one-month period following the
effective termination date. Id.
The parties’ allegations diverge as to the quality of Plaintiff’s work for
Defendant. Plaintiff asserts that by 2014, the orders it procured were resulting in
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sales of around $40 million per year. Dkt. No. 105, p. 6 (Pg. ID No. 2733).
Conversely, Defendant alleges that the parties’ working relationship was
problematic, due to Plaintiff’s failure to work well with Defendant’s staff. Dkt. No.
94, pp. 16–17 (Pg. ID No. 2232–33).
On July 11, 2014, Defendant sent Plaintiff notice of termination, effective
immediately. Dkt. No. 105-12. The termination notice stated that the “termination
is due to financial reasons and is without cause.” Id. Additionally, the letter
provided that Defendant would pay Plaintiff sales commissions through December
31, 2014. Id.
On March 2, 2015, Plaintiff filed this suit, alleging breach of contract to pay
sales commissions and seeking a declaratory judgment. Dkt. No. 1. In April 2015,
shortly after the present case was filed, Defendant sent Plaintiff a letter rescinding
the termination without cause and replacing it with a termination for cause. Dkt.
No. 105-14. Defendant then filed a counterclaim against Plaintiff, seeking
reimbursement for commissions paid after termination. Dkt. No. 21.
In Wallace’s December 2015 deposition, he stated that he did not have a
bachelor’s degree from Lawrence Technological University because he had never
finished the program. Dkt. No. 105-8, p. 3 (Pg. ID No. 2797). In August 2016,
Defendant sought leave to amend its counterclaim to add six new claims premised
on Plaintiff’s résumé fraud. Dkt. No. 79. Defendant also sent a new notice of
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termination for cause to Plaintiff on August 5, 2016, alleging that Plaintiff’s claim
of having earned a bachelor’s degree in engineering constituted fraudulent
misrepresentation, which voided the parties’ contract. Dkt. No. 94-15.
III. LEGAL STANDARD
Federal Rule of Civil Procedure 56(c) “directs that summary judgment shall
be granted if ‘there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.’ ” Cehrs v. Ne. Ohio Alzheimer’s
Research Ctr., 155 F.3d 775, 779 (6th Cir. 1998). The court must view the facts,
and draw reasonable inferences from those facts, in the light most favorable to the
non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). No
genuine dispute of material fact exists where the record “taken as a whole could
not lead a rational trier of fact to find for the non-moving party.” Matsushita Elec.
Indus., Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Ultimately, the court
evaluates “whether the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as a
matter of law.” Anderson, 477 U.S. at 251–52.
IV. DISCUSSION
A. After-Acquired Evidence Doctrine
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Defendant first argues that the after-acquired evidence doctrine bars
Plaintiff’s claims and requires that the agreement be terminated for cause, relying
on case law about employer-employee relationships.1 Dkt. No. 94, p. 23 (Pg. ID
No. 2239). The Supreme Court of Canada in Lake Ontario Portland Cement Co. v.
Groner, [1961] S.C.R. 553 (S.C.C.), quoted from Halsbury’s Laws of England in
describing after-acquired cause for termination:
It is not necessary that the master, dismissing a servant for good
cause, should state the ground for such dismissal; and, provided good
ground existed in fact, it is immaterial whether or not it was known to
the employer at the time of the dismissal. Justification of dismissal
can accordingly be shown by proof of facts ascertained subsequently
to the dismissal, or on grounds differing from those alleged at the
time.
Id. at 563–64.
As Plaintiff noted in its response, this case does not involve the wrongful
termination of an employer-employee relationship, but rather a breach of contract
1
The Court encountered challenges in reviewing the Canadian case law cited by
Defendant. The vast majority of Defendant’s Canadian citations did not include pin
cites, even for quotations. Many of the cases were attached at different exhibit
numbers than those cited to in the motion’s brief. See Dkt. No. 94, pp. 23–33 (Pg.
ID No. 2239–49). Additionally, for several cases cited, Defendant failed to attach
the correct case. For one case cited, McIntyre v. Hockin [1889], 16 Ont. App. Rep.
498, Defendant attached an error message that the case was unavailable, rather
than attach the case itself. Dkt. No. 95-9, p. 2 (Pg. ID No. 2461). For another case,
Defendant attached an older reversed opinion, rather than the opinion actually cited
in Defendant’s brief. Dkt. No. 95-4, p. 2 (Pg. ID No. 2350). Finally, several of the
cases cited and attached were not Ontario or Canadian Supreme Court cases. See
Dkt. No. 95-4, 95-13, 95-14, 95-15. Accordingly, the Court was not able to review
and utilize all of the Canadian cases cited by Defendant in its motion.
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claim between two business entities. Dkt. No. 105, p. 20 (Pg. ID No. 2747). In
reply, Defendant cites to several Canadian cases, including one Ontario case,
where an after-acquired cause for termination can apply to contracts between
corporate bodies. Dkt. No. 114, p. 2 (Pg. ID No. 3023).
In Sandid Enterprises Ltd. v. Komtech Inc., [2010] ONSC 4779, the Ontario
Superior Court of Justice noted that “[e]ven though an employer can rely on an
after-acquired cause as justification for dismissal, the after-acquired cause must be
sufficiently serious to warrant dismissal.” Id. at ¶ 139. Weighing the evidence, the
Sandid court then found that the after-acquired cause for dismissal—disclosing a
customer list to another employer—was not sufficiently serious to justify a
dismissal. Id. at ¶ 148.
In the present case, there is a dispute of material fact as to whether a
bachelor’s degree in engineering was required for Plaintiff’s position as a sales
representative for Defendant. Defendant submitted a belated affidavit of Dino
Zonni, dated and sworn on November 3, 2016, over a month after the Motion for
Summary Judgment was filed. Dkt. No. 115-1, pp. 2–5 (Pg. ID No. 3101–04). In
that affidavit, Zonni states that Plaintiff’s position was that of a “sales engineer”
and required a Bachelor’s of Science degree in Mechanical Engineering. Id. at 4.
Conversely, Plaintiff asserts neither the 2007 Agreement nor the 2012 Agreement
required an engineering degree, and that neither agreement imposed any
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engineering duties. Dkt. No. 105-6; Dkt. No. 105-9. Additionally, Wallace testified
that his duties for Defendant were those of a sales representative, rather than an
engineer:
Q. Tell me what you did for Tuopu.
A. I would visit the customer. I would meet with purchasing and
engineering once or twice a week, find out what was new, what
opportunities might be coming their way. I would supply
quotations to purchasing. I would participate in tech reviews with
purchasing and engineering. And I would attend customer
meetings with both purchasing and engineering.
Dkt. No. 105-8, p. 4 (Pg. ID No. 2798). Wallace also stated that he did not have
responsibility for engineering decisions during his work with Defendant:
Q. Did you have any role yourself in any of the designs or design
changes?
A. When you say “role,” did I make suggestions on certain—
Q. Yes.
A. I would make suggestions, but it was only up to the engineers to
decide what to do.
Q. So it was not your role to tell the engineers what to do, correct?
A. Correct.
Dkt. No. 105-8, p. 6 (Pg. ID No. 2800).
Based on the facts presented, the Court is unable to determine whether
Plaintiff’s submission of a résumé bearing false educational credentials to Topew
International in 2005 was sufficiently serious to warrant Defendant’s termination
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of the 2012 Agreement with cause in 2014. Thus, the Court will not grant
Defendant summary judgment in reliance on the after-acquired evidence doctrine.
B. Fraudulent Procurement of the Contract
Defendant next asks the Court to void the parties’ contract as a result of
fraud committed by Plaintiff and Wallace, stating that the 2012 Agreement was
void ab initio. Dkt. No. 94, pp. 29–33 (Pg. ID 2245–49). In Clark v. Coopers &
Lybrand Consulting Group, [1999] O.J. No. 4284, the Ontario Supreme Court of
Justice noted some of the principles of contract law regarding fraudulent
misrepresentation:
Lord Atkinson made it clear that to establish a case of false or
fraudulent misrepresentation the following had to be established: (1)
that the representations complained of were made by the wrongdoer to
the victim; (2) that these representations were false in fact, (3) that the
wrongdoer, when he made them either knew that they were false or
made them recklessly without knowing whether they were false or
true; (4) that the victim was thereby induced to enter into the contract
in question.
Id. at ¶¶ 36–37. The Clark court went on to note that:
A fraudulent misrepresentation amounts to the tort of deceit, for
which the injured party will receive damages from the misrepresentor.
A contract induced by fraud is voidable at the election of the
defrauded party. It is not void ab initio, it is liable to be upset.
Rescission may be granted. But the equitable remedy of rescission is
discretionary.
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Id. at ¶ 48 (emphasis added). To void the contract, “[t]he misrepresentation must
be ‘material,’ ‘substantial,’ or ‘go to the root of’ the contract.” Guarantee Co. of
North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, ¶ 47.
There are several reasons why Defendant has not established all the elements
of fraudulent misrepresentation at the summary judgment stage. First, there is a
dispute that Plaintiff submitted the résumé bearing false educational credentials to
Defendant, with the intention that Defendant would act in reliance upon that
misrepresentation. Defendant has produced evidence that Defendant sent the false
résumé to individuals at Topew International in 2005, the year prior to Defendant’s
incorporation, but has not presented evidence that Plaintiff submitted the résumé in
question to Defendant itself. Defendant has similarly not provided evidence that
Defendant relied on the false information in Wallace’s LinkedIn profile in entering
into the contract with Plaintiff. Thus, Defendant has not yet satisfied the first prong
of fraudulent misrepresentation: “that the representations complained of were made
by the wrongdoer to the victim.” See Clark, [1999] O.J. No. 4284, at ¶ 36.
Next, there is also a dispute of fact as to whether the misrepresentation of
Wallace’s educational attainment was material, substantial, or went to the root of
the contract. While Defendant relies on Dino Zonni’s affidavit that a bachelor’s
degree in engineering was required for the position, Dkt. No. 115-1, p. 4 (Pg. ID
No. 3103), Plaintiff—the non-moving party—disputes this fact. Plaintiff points to
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the absence of any language in the 2007 Agreement and 2012 Agreement requiring
an engineering degree or detailing any duties related to engineering, which
support’s Plaintiff’s claim that the misrepresentation to Topew International was
not material to Defendant. See Dkt. No. 105-6; Dkt. No. 105-9. As the Ontario
Court of Appeals held in Sagl v. Cosburn, Griffiths & Brandham Insurance
Brokers Ltd., [2009] ONCA 388, “[w]hether a misrepresentation or non-disclosure
is material is a matter of fact to be determined by the trier of fact[.]” Id. at ¶ 52.
Accordingly, the Court will allow a jury to determine whether Plaintiff’s
representation that he had a bachelor’s degree in engineering in 2005 was material
to the parties’ decision to enter into the 2012 Agreement.
V. CONCLUSION
For the reasons stated herein, the Court will DENY Defendant’s Motion for
Summary Judgment [94].
IT IS SO ORDERED.
Dated:
November 17, 2016
/s/Gershwin A Drain
HON. GERSHWIN A. DRAIN
United States District Court Judge
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