Grammer Industries, Incorporated v. Beach Mold & Tool, Inc.

Filing 169

ORDER Adopting 158 Report and Recommendation GRANTING IN PART AND DENYING IN PART 114 Motion for Partial Summary Judgment,, filed by Grammer Industries, Incorporated - Signed by District Judge Paul D. Borman. (DTof)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
GRAMMER INDUSTRIES, INC.,
Plaintiff,

Case No. 15-cv-12694

v.

Paul D. Borman
United States District Judge

BEACH MOLD AND TOOL, INC.
et al.,

R. Steven Whalen
United States Magistrate Judge

Defendants.
______________________________/
OPINION AND ORDER
(1) ADOPTING MAGISTRATE JUDGE WHALEN’S AUGUST 26, 2018
REPORT AND RECOMMENDATION (ECF NO. 158);
(2) OVERRULING DEFENDANT BEACH MOLD & TOOL, INC.’S
OBJECTIONS (ECF NO. 161);
3) OVERRULING PLAINTIFF GRAMMER INDUSTRIES, INC.’S
OBJECTIONS (ECF NO. 160); AND
(3) GRANTING IN PART AND DENYING IN PART GRAMMER’S MOTION
FOR PARTIAL SUMMARY JUDGMENT(ECF NO. 114)
On August 26, 2018, Magistrate Judge R. Steven Whalen issued a Report and
Recommendation (ECF No. 158) to grant in part and deny in part Plaintiff Grammer
Industries, Inc.’s (“Grammer”) Motion for Partial Summary Judgment (ECF No. 114).
Before the Court are Defendant Beach Mold & Tool, Inc. (“Beach Mold”) and
Grammer’s objections to the Magistrate Judge’s August 26, 2018 Report and
Recommendation. (ECF No. 160, Pl.’s Objections, ECF No. 161, Def.’s Objections.)
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The Court, having conducted de novo review under 28 U .S.C. § 636(b)(1) and Fed.
R. Civ. P. 72(b) of those portions of the Report and Recommendation to which
specific and timely objections have been filed, OVERRULES the objections,
ADOPTS the Report and Recommendation and GRANTS IN PART AND DENIES
IN PART Grammer’s Motion for Partial Summary Judgment.
I.

BACKGROUND
The background facts of this litigation are set forth in detail in the Magistrate

Judge’s Report and Recommendation. As relevant to the Court’s resolution of the
parties’ objections, Grammer supplies automotive assemblies to original equipment
manufacturers and engaged Beach Mold, a tooling manufacturer and parts producer,
to make certain tools and to take possession of other tools that were to be used by
Grammer for a potential contract to produce parts for Fiat Chrysler Automotive LLC
(“FCA”). Beach Mold was to build the specified tooling and to build parts from those
tools at a future date. Beach Mold was to make the majority of the tools and a smaller
aspect of the tooling, the “Top Hat Tool,” was being built by Advance Mold
Incorporated (“Advance Mold”) and was delivered to Beach Mold to be made a part
of the FCA tooling necessary for Grammer’s FCA program. (ECF No. 114, Pl.’s Mot.
Partial Summ. J. Ex. A, PgID 2079-84; Ex. R, Jan. 4, 2017 Affidavit of James Beal
¶¶ 3-4.) Under the parties’ agreement, Beach Mold made its tooling at its facility in
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Albany, Indiana and then shipped its tooling and the Top Hat Tool of which it had
taken delivery (collectively “the Tooling”) to Beach Mold’s facility in Queretaro,
Mexico (“Beachmold Mexico”), where the parts for Grammer’s FCA program were
to be produced. Beach Mold issued a price quotation stating that “pricing [is] based
on parts being manufactured at our Queretaro, Mexico facility,” and the quote
indicated only an address in Queretaro, Mexico. (Pl.’s Mot. Ex. B, PgID 2086; Ex.
R. Beal Aff. ¶ 8.) (Emphasis added.) Under the relevant purchase orders, Beach Mold
was responsible for the shipment and delivery of the Tooling from new Albany to
Queretaro, Mexico and Beach Mold “remain[ed] AAR responsible for the components
and tooling through the life of the project.” (Pl.’s Mot. Ex. A, PgID 2079; Ex. R.,
Beal Aff. ¶ 10.) Nowhere in these documents did Beach Mold identify the Beachmold
Mexico facility as a separate legal entity. (Beal Aff. ¶ 7.)
Beach Mold’s account manager, Tammy Rickard, testified regarding the content
of the Beach Mold website which states that: “Beach Mold and Tool has brought total
solutions capability south of the border with its newest facility in Queretaro, Mexico.”
(Pl.’s Mot. Ex. D, June 29, 2016 Deposition of Tammy Rickard 18:18-25.) Ms.
Rickard explained that she understood that the Beachmold Mexico facility was a
separate legal entity from Beach Mold and she recalled generally discussing that
relationship with some customers but not with Grammer. She could not recall specific
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individuals at other customers with whom she had such conversations and she was
unaware of any writings of any nature that explained the separate legal status of Beach
Mold and Beachmold Mexico. (Rickard Dep. 19:20-23:6, PgID 2100-2101.) As
Magistrate Judge Whalen correctly concluded: “There has been no evidence produced
showing that the corporate status of Beachmold Mexico was listed anywhere, and
certainly not on Beach Mold’s website, which referred to “its newest facility in
Queretaro, Mexico.” (Report 5, n. 3, PgID 3541.) Ms. Rickard explained that the
acronym “AAR,” as used in the purchase orders indicating that Beach Mold “remains
AAR responsible for the components and tooling for the life of the project,” means
that Beach Mold was responsible to make a quality part from the Tooling for the life
of the program. (Rickard Dep. 33:2-8, PgID 2103.)
Sometime in 2012, with no provision of notice to Grammer, Beachmold Mexico
was sold to a third party, American Industrial Acquisition Corporation d/b/a iP3
(“iP3”). (Pl.’s Mot. Ex. F, Beach Mold Answers to Interrogatories 2, PgID 2121.)
Subsequently, Grammer’s FCA program was put on hold and FCA asked Grammer
to produce evidence of possession of the Tooling. Grammer then contacted Beach
Mold in Albany, Indiana, and requested return of the Tooling. Beach Mold responded
that it had no ability to return the Tooling. Beach Mold explained: “There had been
a relationship between Beach Mold & Tool and Beachmold Mexico prior to the sale
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in 2012. But after the ownership of Beachmold Mexico was sold to iP3, Beach Mold
& Tool had no ability to recover the Tooling for Grammer.” (Id.) Unable to provide
the Tooling to FCA, or even to provide proof of possession, Grammer was forced to
reimburse FCA for the Tooling. The value of the Tooling was $136,560.00. (Pl.’s
Mot. Ex. R, Beal Aff. ¶ 15.)
“Prior to Grammer’s request for the Tooling, no representative of Beach Mold
advised Grammer that Beach Mold’s Mexico facility had not been previously owned
and controlled by Beach Mold.” (Beal Aff. ¶ 14.) In June, 2015, Grammer filed suit
against Beach Mold in Oakland County Circuit Court for breach of contract and
conversion. The action was removed to this Court on July 31, 2015. Since removal
parties have been added and cross claims asserted. Grammer has amended its
complaint three times. (ECF Nos. 17, 41, 68) The most recent and operative
Complaint is the Third Amended Complaint, asserting against Beach Mold claims for
breach of contract (Count I), and conversion (Count II) (“the TAC”). The TAC also
asserts claims of breach of contract and conversion against Beachmold Mexico (Count
III) and asserts claims of breach of fiduciary duty against iP3 and other third parties
(Count IV).
On January 18, 2017, Grammer filed a motion for partial summary judgment
against Beach Mold, which this Court referred to Magistrate Judge Whalen, along
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with all pretrial matters, on January 31, 2017. (ECF No. 128, Order Referring Pretrial
Matters to Magistrate Judge R. Steven Whalen, specifically including ECF No. 114.)
On August 8, 2018, Magistrate Judge Whalen issued his Report and Recommendation
on Grammer’s Motion for Partial Summary Judgment. (ECF No. 158.) Presently
before this Court for resolution are both parties’ objections to the Magistrate Judge’s
Report and Recommendation.
II.

STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 72(b) and 28 U.S.C. § 636(b)(1),

the Court conducts a de novo review of the portions of the Magistrate Judge’s Report
and Recommendation to which a party has filed a “specific written objection” in a
timely manner. Lyons v. Comm’r Soc. Sec., 351 F. Supp. 2d 659, 661 (E.D. Mich.
2004). A district court “may accept, reject, or modify, in whole or in part, the findings
or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). Only
those objections that are specific are entitled to a de novo review under the statute.
Mira v. Marshall, 806 F.2d 636, 637 (6th Cir. 1986). “The parties have the duty to
pinpoint those portions of the magistrate’s report that the district court must specially
consider.” Id. (quotation marks and citation omitted). “A general objection, or one that
merely restates the arguments previously presented is not sufficient to alert the court
to alleged errors on the part of the magistrate judge.” Aldrich v. Bock, 327 F. Supp.
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2d 743, 747 (E.D. Mich. 2004). “‘[B]are disagreement with the conclusions reached
by the Magistrate Judge, without any effort to identify any specific errors in the
Magistrate Judge’s analysis that, if corrected, might warrant a different outcome, is
tantamount to an outright failure to lodge objections to the R & R.’” Arroyo v.
Comm’r of Soc. Sec., No. 14-cv-14358, 2016 WL 424939, at *3 (E.D. Mich. Feb. 4,
2016) (quoting Depweg v. Comm'r of Soc. Sec., No. 14-11705, 2015 WL 5014361,
at *1 (E.D. Mich. Aug. 24, 2015) (citing Howard v. Secretary of Health & Human
Services, 932 F.2d 505, 509 (6th Cir. 1991)).
In evaluating the merits of the underlying summary judgment motion, the Court
must view the facts in the light most favorable to the non-moving party (here Beach
Mold) and may grant summary judgment to the Plaintiff only if no rationale trier of
fact could find for the Defendant on those facts:
Because [Grammer] seeks summary judgment on claims for which it has
the burden of persuasion, [Grammer’s] showing “must be sufficient for
the court to hold that no reasonable trier of fact could find other than for
[it].” See Calderone v. United States, 799 F.2d 254, 259 (6th Cir. 1986)
(quoting W. Schwarzer, Summary Judgment Under the Federal Rules:
Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 487–88
(1984)). In making this determination, the Court views the evidence, and
any reasonable inferences drawn from the evidence, in the light most
favorable to [Beach Mold].
Tapper’s Fine Jewelry, Inc. v. Chubb Nat’l Ins. Co., 14-cv-13280, 2015 WL 9268750,
at *4 (E.D. Mich. Dec. 21, 2015).
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III.

ANALYSIS
A.

Beach Mold’s Objection

Defendant’s “objection,” which reads more like a summary judgment brief than
an objection to a Report and Recommendation, is largely a summary of the Magistrate
Judge’s Report and Recommendation, followed by a rehashing of Plaintiff’s summary
judgment arguments, with which Defendant disagrees. The “objection” does not
“pinpoint those portions of the magistrate’s report that the district court must specially
consider.” Mira, 806 F.2d at 637. Beach Mold does not clearly articulate specific
objections directed to particular portions of the Magistrate Judge’s Report and
Recommendation, but as best the Court can determine Beach Mold disagrees with (1)
the Magistrate Judge’s determination that portions of the Declaration of James
Mahoney were not based on personal knowledge, and (2) the Magistrate Judge’s
conclusion that Beach Mold should be equitably estopped from presenting facts to
demonstrate that Beachmold Mexico was a legal entity separate from Beach Mold or
from arguing that Grammer was or should have been aware of such facts. Beach Mold
argues that summary judgment in favor of Grammer on its contract and conversion
claims was error because “sworn evidence of record,” specifically the Declaration of
James Mahoney, creates genuine issues of material fact regarding Grammer’s
knowledge of the legal separateness of Beach Mold and Beachmold Mexico.
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The Court disagrees with Beach Mold and OVERRULES Beach Mold’s
objections, finding no error in Magistrate Judge Whalen’s conclusions that (1) the
Mahoney Declaration is not competent summary judgment evidence for the reasons
proffered as it is not based on the declarant’s personal knowledge as to the issues
presented in Grammer’s motion, and (2) on the facts presented on this summary
judgment record Beach Mold must be estopped from denying that Beach Mold and
Beachmold Mexico were a single legal entity because “any customer [] would
reasonably be led to conclude that the Mexican production facility was a whollyowned division of Beach Mold & Tool, Inc. A neon sign would not have made it
plainer.” (Report 12, PgID 3548.)
Beach Mold attaches to its objections the Declaration of James Mahoney, a
document that was actually filed in support of Beach Mold’s motion to dismiss (ECF
No. 102), a motion that is not addressed by the Report and Recommendation currently
before the Court. (Def.’s Objs. Ex. C, Jan. 9, 2017 Declaration of James J. Mahoney.)
Beach Mold relies on the Mahoney Declaration to support its argument that the
Magistrate Judge erred in finding no genuine issue of material fact that Grammer was
unaware (until sometime in 2015) that Beachmold Mexico was not owned and
controlled by Beach Mold. Beach Mold argues that “sworn evidence of record []
establishes that Grammer was aware that its tooling in Mexico was at a facility owned
9

and operated by someone other than Beach Mold & Tool” and states that Mr.
Mahoney’s Declaration supplies this sworn evidence of record. (Def.’s Objs. 7-8,
PgID 3575-76) (emphasis in original).
The Mahoney Declaration is not competent summary judgment evidence on this
point:
“An affidavit or declaration used to support or oppose a motion [for
summary judgment] must be made on personal knowledge, set out facts
that would be admissible in evidence, and show that the affiant or
declarant is competent to testify on the matters stated.” Fed.R.Civ.P.
56(c)(4). “It must be remembered that when the moving party presents
admissible evidence justifying a summary judgment if uncontradicted,
the opposing party has the duty to show the existence of a genuine issue
of material fact.” 10B Wright, Miller & Kane, Federal Practice and
Procedure § 2738, at 345 (3d ed.1998) (referencing Rule 56(e), the
predecessor of Rule 56(c)(4)). As part of this duty, Federal Rule of Civil
Procedure 56(c)(4) “limits the matter to be properly included in an
affidavit to facts, and the facts introduced must be alleged on personal
knowledge. Thus, . . . statements made on belief or ‘on information and
belief,’ cannot be utilized on a summary-judgment motion.” Id. at
345–46, 350–54 (footnotes omitted).
Ondo v. City of Cleveland, 795 F.3d 597, 605 (6th Cir. 2015).
First of all, it is undisputed that during the time period that Beach Mold asserts
Grammer became aware of these facts, i.e. sometime in 2012-2013, Mahoney either
did not have any relationship with Beachmold Mexico or was only functioning as a
commercial consultant. Mr. Mahoney testified in his deposition that from August,
2013 until January, 2014 (when Mr. Mahoney replaced Alex MacDonald as President
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of Beachmold Mexico), Mr. Mahoney was an unpaid informal consultant to
Beachmold Mexico, giving advice on commercial matters from time to time. (ECF
No. 150-4, July 31, 2017 Deposition of James J. Mahoney, 8:20-9:19, PgID 3468-69.)
Prior to August, 2013, Mr. Mahoney had no formal or informal relationship to
Beachmold Mexico. Mr. Mahoney admitted in his deposition that the statements
made in paragraph three (3) of his declaration were “secondhand” and that he “did not
have first hand knowledge of the reason [Grammer] and [Beachmold Mexico] ceased
their commercial relations.” (Id. at 48:2-12, PgID 3478.) And when asked if he knew
who at Beachmold Mexico was responsible for the Grammer FCA program, Mahoney
responded: “That occurred before my arrival, so anything I would know about it
would be second hand.” (Id. 12:10-11, PgID 3469.) Beach Mold concedes that
portions of the Mahoney Declaration were in fact not based on Mahoney’s personal
knowledge and have backed away from Mr. Mahoney’s testimony that the Tooling at
issue in this action was returned to Grammer. (ECF No. 161, Def.’s Objs. 4 n. 2,
PgID 3572; ECF No. 164, Def.’s Reply to Objs. 3, PgID 3654.) It is undisputed that
the tooling that Mr. Mahoney refers to in his Declaration that was allegedly removed
by Grammer was not the tooling that is at issue in this action and that the Tooling for
the FCA program was in fact never returned to Grammer. Yet Beach Mold insists that
the Court should not disregard the balance of Mr. Mahoney’s Declaration because Mr.
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Mahoney indicated that he “relied upon his staff to advise him about ordinary course
of business matters including Grammer.” (Def.’s Objs. 9, PgID 3577.) In urging the
Court to rely on, and find genuine issues of material fact created by, the Mahoney
Declaration, Beach Mold cites cases that stand for the proposition that personal
knowledge can be based on a review of regularly kept business records. See Lloyd v.
Midland Funding, LLC, 639 F. App’x 301, 305 (6th Cir. 2016) (recognizing that an
affidavit that might not be admissible at trial may suffice at the summary judgment
stage if the testimony in the affidavit is based on “records kept in the regular course
of [] business”); and Daniel v. West Asset Management, Inc., No. 11-cv-10034, 2011
WL 5142980, at *9 (E.D. Mich. Oct. 28, 2011) (“Personal knowledge . . . is not
strictly limited to activities in which the declarant has personally participated . . . .
[P]ersonal knowledge can come from review of the contents of files and records.”
(Citing Washington Cent. R. Co., Inc. v. Nat'l Mediation Bd., 830 F. Supp. 1343, 1353
(E.D. Wash. 1993)) (ellipsis in original). But Mr. Mahoney does not purport to base
his knowledge on a review of business records at all – he apparently relied on
“conversations” with his “staff” to advise him of many of the matters to which he
speaks in his Declaration. In fact Mr. Mahoney testified at his deposition that anything
he knew of events that occurred before his arrival in January, 2014, “would be second
hand.” (Id. 12:10-11, PgID 3469.) And it is undisputed that as to an important aspect
12

of his Declaration, the reported information he received “from staff” was inaccurate
(or at least interpreted by Mr. Mahoney inaccurately). Mr. Mahoney was not noticed
or offered by Beach Mold as a 30(b)(6) deponent with knowledge of corporate matters
– in fact his deposition was expressly “limited to matters raised in the declaration
signed by Mr. Mahoney that was attached to [Beach Mold’s motion to dismiss – ECF
No. 102].” (Mahoney Dep. 6:16-24, PgID 3468.) Beach Mold repeatedly asserts that
the “sworn Mahoney declaration” is evidence creating a genuine issue of material fact
that Grammer was aware that Beach Mold and Beachmold Mexico were separate
entities. But Beach Mold fails to identify the specific statements of the Mahoney
Declaration that have adequate foundational support that either state that fact or
support that inference. The Court is not weighing credibility or deciding factual
issues, as Beach Mold asserts, in declining to consider the Mahoney Declaration – it
is finding a fundamental lack of foundational support for the statements from the
Declaration on which Beach Mold seeks to rely. This is the function of the Court, not
the trier of fact. The Magistrate Judge did not err in concluding that the Mahoney
Declaration contained speculative statements regarding contacts between Grammer
and Beachmold Mexico not based on personal knowledge that could not be relied

13

upon to create a genuine issue of material fact for trial.1
The Court concludes that the Magistrate Judge correctly disregarded the
Mahoney affidavit and appropriately relied on the testimony of James Beal, the senior
buyer for Grammer during the events that are the subject of this action, that: “Prior to
Grammer’s request for the Tooling, no representative of Beach Mold advised
Grammer that Beach Mold’s Mexico Facility had not been previously owned and
controlled by Beach Mold.” (ECF No. 114-18, Jan. 4, 2017 Affidavit of James Beal
¶ 14.) As the Magistrate Judge observed, this testimony stands unrebutted. Beach
Mold has not offered a single witness who has testified that Beach Mold informed
Grammer at any time prior to 2015 that Beach Mold did not own or control
Beachmold Mexico, and therefore had no control over the disposition of the Tooling
after it left Beach Mold in Albany, Indiana. Nor has Beach Mold offered a single

1

Beach Mold also suggests that an inference can be drawn that Grammer was aware
of the separate ownership of Beachmold Mexico in 2013 from the fact that Grammer
allegedly did not contact Beach Mold in Albany in 2013 to “sever its relationship” and
obtain return of the Ford tools (tooling unrelated to the Tooling at issue in this case).
(Def.’s Objs. 11, PgID 3579.) Yet Beach Mold asserts that in 2015, when Grammer
sought return of the FCA Tooling that is the subject of this action, “Grammer
contacted Beach Mold & Tool in New Albany, Indiana requesting the tooling.”
(Def.’s Objs. 5, PgID 3572.) Beach Mold further states that it “referred Grammer to
the new owners of the former Beahmold Mexico facility, but no one at that facility
could account for the tooling.” (Id.) Grammer’s contacting Beach Mold in 2015 then
surely supports an inference that Grammer was not aware of the separate ownership
and still believed Beach Mold to be responsible for the Tooling and capable of
returning it at Grammer’s request.
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document that conveys this information to Grammer. In fact, all of the evidence
suggests just the opposite – that Beach Mold and Beachmold Mexico were commonly
owned and that Beach Mold would continue to be responsible for the Tooling
(including the Top Hat Tool which became a part of the Tooling when Beach Mold
took possession of the Top Hat Tool and later delivered it along with its own tooling
to Beachmold Mexico) through the life of the program. Even viewing the facts in the
light most favorable to Beach Mold, no reasonable juror could conclude based on the
evidence presented that Grammer was aware, or at anytime prior to 2015 became
aware, that Beach Mold’s responsibility for the Tooling ended when the Tooling left
Beach Mold’s Albany, Indiana facility for delivery to Beach Mold’s Mexico facility.
Beach Mold was required to respond to Grammer’s motion for summary judgment
with “evidence of evidentiary quality” creating genuine issues of fact for trial. Bailey
v. Floyd County Bd. of Educ., 106 F.3d 135, 145 (6th Cir. 1997). It did not do so.
The facts on this summary judgment record, even when viewed in the light most
favorable to Beach Mold, compel the conclusion that Beach Mold induced Grammer
to believe that Beachmold Mexico was owned by Beach Mold throughout the relevant
period of time and that Grammer was unaware of any facts that would suggest a
separate corporate existence, that Grammer relied on this belief and would be
prejudiced if Beach Mold were allowed to deny these facts now. The Magistrate
15

Judge did not err in concluding that “Beach Mold should be equitably estopped from
presenting facts showing that Beachmold Mexico was a separate entity, or from
presenting legal arguments flowing from those facts.” (Report 12-13, PgID 3548-49.)
Each of Beach Mold’s remaining “arguments” (which are not specific
objections pinpointing the Magistrate Judge’s error) flows from Beach Mold’s
assertion that Beach Mold cannot be equitably estopped from arguing that Beach
Mold and Beachmold Mexico are separate corporate entities and that Grammer was
aware of this “separateness.” Beach Mold continues to assert that “Beach Mold &
Tool in Indiana” took no action with respect to the Tooling that was inconsistent with
Grammer’s interests. This ignores the Court’s ruling that Beach Mold is estopped
from arguing that it is a separate corporate entity from Beachmold Mexico – whom
Beach Mold concedes transferred all of the assets of Beachmold Mexico to a third
party (iP3) and now cannot account for the Tooling. Beach Mold is estopped to deny
that it and Beachmold Mexico are a single legal entity and the Magistrate Judge did
not err in concluding that Beach Mold both breached the bailment contract with
Grammer and converted the Tooling (including the Top Hat Tool over which Beach
Mold assumed possession and control and delivered to its Beachmold Mexico
facility), over which Beach Mold had assumed responsibility for the life of the FCA
program but failed preserve and return to Grammer. The Magistrate Judge correctly
16

concluded that Grammer is entitled to summary judgment on its breach of contract and
common law conversion claims.
B.

Grammer’s Objection

Magistrate Judge Whalen recommended that the Court deny Grammer’s motion
for summary judgment on a separate statutory conversion claim, both because that
claim had not been pleaded in Plaintiff’s complaints and because Plaintiff failed to
meet the elements of a statutory conversion claim. Statutory conversion in Michigan
covers a more narrow swath of conduct than the common law tort of conversion, as
“someone alleging conversion to the defendant’s ‘own use’ under [M.C.L. §
600.2919a(1)(a)] must show that the defendant employed the converted property for
some purpose personal to the defendant’s interests, even if that purpose is not the
object’s ordinarily intended purpose.’” Aroma Wines & Equipment, Inc. v. Columbian
Distribution Services, Inc., 497 Mich. 337, 359 (2015)) (alterations in original). The
key additional element in a statutory conversion claim, which allows for the recovery
of treble damages and attorneys’ fees, is that the converter must use the property
converted “for a purpose personal to the converter,” but that purpose need have no
relation to the intended use of the thing converted.
Grammer filed an objection to Magistrate Judge Whalen’s recommendation that
Grammer be denied summary judgment on its statutory conversion claim, principally
17

relying on Aroma Wines and arguing that the Magistrate Judge erred in failing to
apply that decision to find statutory conversion here and also erred in dismissing the
claim rather than finding that genuine issues of material fact precluded summary
judgment in Grammer’s favor on the statutory conversion claim. (ECF No. 160, Pl.’s
Objs. 3-6, PgID 3563-65.) Grammer appears to interpret the Magistrate Judge’s
Report and Recommendation as recommending that the Court dismiss its statutory
conversion claim as a matter of law. (Pl.’s Objs. 5, PgID 3565.) While the Court does
have the discretion to grant summary judgment to the non-moving party, i.e. to grant
summary judgment in favor of Beach Mold despite the absence of a motion before it
by Beach Mold seeking such relief, see Fed. R. Civ. P. 56(f)(1), the Court does not
interpret Magistrate Judge Whalen’s Report as having done so here. True the
Magistrate Judge does state affirmatively that “Plaintiff in this case is not entitled to
triple damages, costs, and attorney fees as provided for in the statute.” (Report 17,
PgID 3553.) However, the Magistrate Judge concluded that “summary judgment be
DENIED as to any claim for statutory conversion,” (Report 18, PGID 3554) and, as
this Court interprets the Magistrate Judge’s ruling, he did not recommend that
judgment as a matter of law be entered in favor of Beach Mold on Grammer’s
statutory conversion claim at this time.

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Turning to the merits of Grammer’s objection, Grammer argues that Magistrate
Judge Whalen erred in relying on Graham Medical Technologies, LLC v. Akron
Medical, Inc., No. 09-cv-14905, 2011 WL 1899230 (E.D. Mich. May 19, 2011) in
concluding that in this case, as in Graham, Plaintiff has not presented any evidence
that the “converter” (Beach Mold) stole or embezzled the Tooling, or converted it to
its own use and recommending that summary judgment to Grammer be denied.
(Report 17, PgID 3553.) In Graham, the plaintiff, a developer and manufacturer of
certain medical devices, entered into an agreement with the defendant under which the
defendant would sell and distribute the plaintiff’s devices. Id. at *1. The plaintiff
provided certain of its devices to the defendant to sell, along with demonstration
models and training manuals. Id. At some point the plaintiff implemented a new
inventory management system and requested that defendant return the devices and
demonstration models that had been provided by the plaintiff. Id. According to the
plaintiff, the defendant returned some but not all of the inventory and plaintiff filed
suit against the defendant for breach of contract, claim and delivery, and conversion.
Id. The district court granted the plaintiff summary judgment on the breach of
contract, claim and delivery, and common law conversion claims. Id. at *2-7. The
court denied plaintiff’s motion for summary judgment on the statutory conversion
claim, declining to award plaintiff “treble damages at this stage of the proceedings,”
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because plaintiff presented no evidence to suggest what had happened to the
admittedly missing inventory and therefore could not demonstrate at the summary
judgment stage that the inventory was “stolen, embezzled or converted to Defendant’s
own use for purposes of statutory conversion.” Id. at *7. While plaintiff did establish
that defendant failed to return the inventory to the defendant – an act “sufficient to
prove common law conversion” – the absence of evidence demonstrating the
whereabouts of the inventory precluded a finding of summary judgment in favor of
the plaintiff. Id. Magistrate Judge Whalen concluded that Grammer’s inability to
produce any definitive evidence concerning the whereabouts of the Tooling similarly
precluded a finding of summary judgment in Grammer’s favor here.
Grammer asserts in its objection that Magistrate Judge Whalen erred in
applying Graham and argues that the facts of this case are “more akin” to the property
storage arrangement in Aroma Wines. In Aroma Wines, the jury was presented with
evidence that the defendant, who entered into an agreement with the plaintiff to store
some of the plaintiff’s wine in defendant’s temperature controlled facility, at some
point physically moved the wine from the temperature controlled facility to an
uncontrolled environment. The issue was not whether the defendant had moved the
wine, as defendant admitted to moving the wine to a different facility, and there was
no mystery as to its whereabouts. Rather, the court grappled with the issue of whether
20

this amounted to statutory conversion where the defendant claimed that it moved the
wine in order to complete renovations to the temperature controlled facility and did
not therefore use the wine for its “intended or common purpose,” presumably drinking
it or selling it. 497 Mich. at 358. The Michigan Supreme Court concluded that the
Michigan legislature did not intend to limit the definition of “use” in the statutory
conversion statute to uses that were related to “the intended purpose of the converted
property,” in that case the drinking or perhaps selling of the wine. Id. at 358. The
court explained:
Columbian proffered, and the circuit court adopted, a narrow definition
of “use” focused on the intended purpose of the converted property, such
as the definition of the word as “habitual or customary usage” quoted
above. Under this definition, to convert Aroma's wine to Columbian's
“own use” means that “one would have to drink it or perhaps sell it.”
In reversing the circuit court's decision, the Court of Appeals held that
“the definition of ‘use’ encompasses a much broader meaning” than the
circuit court's definition allows. Under the Court of Appeals' preferred
definition, “use” “requires only that a person ‘employ for some
purpose....’” As a result, converting to the other person's “own use”
means merely that a defendant “employ[s]” another person's property for
any purpose, as long as it is “to [the defendant's] own purposes.”
497 Mich. at 358 (citations and footnotes omitted) (alterations in original).
Accordingly, under Aroma Wines, “someone alleging conversion to the defendant's
‘own use’ under MCL 600.2919a(1)(a) must show that the defendant employed the
converted property for some purpose personal to the defendant's interests, even if that
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purpose is not the object's ordinarily intended purpose.” Id. at 359. Thus, the court
agreed with the court of appeals that, “the act moving plaintiff’s wine contrary to the
contract in order to undertake an expansion project to benefit itself” was “an act of
employing the wine to [defendant’s] own purposes constituting ‘use’ of the wine.”
Id. at 360. Again directly embracing the court of appeals’ reasoning, the Michigan
Supreme Court concluded that “[i]f a jury believed the evidence showing that
defendant moved plaintiff’s wine for its own purpose . . . it could have determined that
defendant converted the wine to its own use.” Id. Here, Grammer argues, “Beach
Mold improperly sold and transferred the property for its own use” in connection with
the sale of the Mexico operation,” and Beach Mold’s “selling Grammer’s property to
a third party is for one’s own use when applying Aroma Wines.” (Pl.’s Objs. 4, PgID
3564.)
The Court agrees with the Magistrate Judge that Grammer is not entitled to
summary judgment on its statutory conversion claim because genuine issues of
material fact remain for trial regarding whether Beach Mold converted the Tooling
“for some purpose personal to its interests.” Aroma, 497 Mich. at 359. Viewing the
facts in the light most favorable to Beach Mold, Beach Mold took possession of the
Tooling at its facility in Indiana and transferred the Tooling to the Beachmold Mexico
facility. As Magistrate Judge Whalen concluded, and as this Court agreed, Beach
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Mold is estopped from denying that it retained possession of and responsibility for the
Tooling once it was transferred to the Beachmold Mexico facility. And Beach Mold
admits in its Answer to Plaintiff’s Third Amended Complaint and in Answers to
Interrogatories that the all of the assets of Beachmold Mexico were sold to a third
party (iP3) and Beach Mold admits that it cannot now locate and return the Tooling.
(ECF No. 80, ¶¶ 28, 32.) As Magistrate Judge Whalen correctly concluded, these
facts are sufficient to establish common law conversion here. But because neither
party appears to have knowledge of the whereabouts of the Tooling at this point, and
because there is no evidence in this summary judgment record establishing under what
circumstances the Tooling disappeared, Grammer has failed to establish that there is
no genuine issue of material fact that Beach Mold converted the Tooling to its own
purpose, i.e. to a purpose personal to Beach Mold’s interests, and that no reasonable
juror could conclude otherwise.
The Court concludes that Magistrate Judge Whalen did not err in concluding
that Grammer is not entitled to summary judgment on its statutory conversion claim
and therefore OVERRULES Grammer’s objection. Accordingly the statutory
conversion claim lives on and Grammer is not entitled to the damages otherwise

23

available on that statutory claim at this time.2
IV.

CONCLUSION
For the foregoing reasons the Court OVERRULES both Plaintiff’s and

Defendant’s Objections, ADOPTS the Report and Recommendation, and GRANTS
IN PART AND DENIES IN PART Grammer’s motion for summary judgment.
Grammer is GRANTED summary judgment on its breach of contract claim and its
common law conversion claim. Summary judgment is DENIED on Grammer’s
statutory conversion claim.
Grammer is awarded damages of $136,560.00.

2

Beach Mold also argues in its Response to Plaintiff’s objections that Grammer did
not “cite” the statutory conversion statute in its claims against Beach Mold in any of
its four complaints filed in this action. This is false. Plaintiff’s First Amended
Complaint expressly captioned its conversion claim “Count II - Common Law and
Statutory Conversion (against Beach [Mold] and iP3) and further cited to the
Michigan statute, MCL 600.2919a, and alleged that both Defendants had converted
the Tooling “for their own use.” (ECF No. 17, ¶¶ 18-24.) In both the Second and
Third Amended Complaints, although the statutory cite is not repeated, the allegation
that Beach Mold converted the Tooling “to its own use,” an element unique to the
statutory conversion claim, is repeated in both. (ECF No. 41, Second Amended
Complaint ¶ 43; ECF No. 68, Third Amended Complaint ¶ 51.) As Beach Mold notes
in its Response to Plaintiff’s objections, the phrase “for their own use . . . is important
and the words matter.” (Def.’s Resp. 4, PgID 3634.) Beach Mold cannot credibly
claim to lack notice of Grammer’s intent to pursue a claim for statutory conversion
against it.
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IT IS SO ORDERED.3

s/Paul D. Borman
PAUL D. BORMAN
UNITED STATES DISTRICT JUDGE
Dated: March 15, 2019

3

Both parties requested oral argument on their objections. The Court is not obligated
to hold a hearing on objections to a Magistrate Judge’s Report and Recommendation
and in any event finds that a hearing would not assist the Court in determining the
issues raised in the parties’ objections. See E.D. Mich. L.R. 7.1(f)(1).
25