Converting Alternatives International, LLC v. Vac Pac, Inc.
OPINION and ORDER granting defendant's motion to dismiss 3 and dismissing case without prejudice. Signed by District Judge George Caram Steeh. (MBea)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
CASE NO. 16-CV-13772
HON. GEORGE CARAM STEEH
VAC PAC, INC.,
OPINION AND ORDER GRANTING
DEFENDANT’S MOTION TO DISMISS (DOC. #3)
AND DISMISSING CASE WITHOUT PREJUDICE
This is a breach of contract case in which defendant Vac Pac, Inc.
(“Vac Pac”) contracted with plaintiff Converting Alternatives International,
LLC (“CAI”) to design and build an upgrade to one of Vac Pac’s machines.
Vac Pac is a Maryland corporation and CAI is a Michigan company. CAI
filed its action invoking this court’s diversity jurisdiction pursuant to 28 U.S.C.
§ 1332. The matter is before the court on Vac Pac’s motion to dismiss for
lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). The
motion has been fully briefed and a hearing was held on March 13, 2017.
Because exercising personal jurisdiction over Vac Pac would offend
traditional notions of fair play and substantial justice, Vac Pac’s motion is
GRANTED as set forth below.
CAI, a Michigan company located in Lake Orion, Michigan, is in the
business of facilitating the design and fabrication to convert industrial
machinery. Vac Pac, a Maryland corporation headquartered in Baltimore,
is in the business of producing packaging for the food industry, particularly
cooking bags. Vac Pac does not own property in Michigan, is not licensed
to do business in Michigan, does not conduct any business activities in
Michigan, and does have a registered agent for the service of process in
Michigan. Vac Pac has no employees in Michigan and has never
advertised in Michigan.
According to CAI, in July 2014, Matt Tary, the President of Vac Pac,
made an unsolicited telephone call to Tom Williams, President of CAI.
Williams’ Decl. ¶¶ 4-6, 35-36. Mr. Williams asserts that during this phone
call, Mr. Tary inquired whether CAI would be interested in quoting the design
and build of a machine to make cooking bags. Id. Mr. Tary contacted CAI
on the recommendation of Ken Deneka of Deneka Printing Systems, Inc. Id.
Mr. Deneka even called Mr. Williams in advance to let him know that Mr.
Tary would be calling to see if CAI was interested in doing business with Vac
In its motion to dismiss, Vac Pac tells a contrasting version of the first
contact between the parties. On July 19, 2014, Mr. Deneka emailed Mr.
Williams with the details of the project at issue and Mr. Tary’s contact
information. Deneka Affidavit, ¶ 8. On July 21, 2014, Mr. Deneka
suggested that Mr. Williams contact Mr. Tary, provided his phone number
and stated, “this is the easiest way to reach him.” Deneka Affidavit, Exh.
1-A. Mr. Williams responded, “Ken, I’m in Florida on a sales call. I will not
be back until Tuesday night. . . I will call that gentleman on Wednesday.” Id.
Mr. Deneka emailed Mr. Tary on July 21, 2014 to inform him that Mr.
Williams would be calling him. On Wednesday, July 23, 2014, Mr. Williams
did call Mr. Tary. Tary Suppl. Affidavit, ¶ 4. Mr. Williams offered to fly to
Maryland to meet Mr. Tary in person, and actually did so on the following
Monday. Id., ¶ 6, Exh. B.
While each side in this litigation accuses the other side of providing a
false account regarding the first contact that took place, Vac Pac’s account is
supported by the affidavit of non-party Mr. Deneka and emails between the
It is undisputed that CAI personnel visited Vac Pac’s facility in
Maryland in July, August and September of 2014 to observe Vac Pac’s
production lines and prepare a quote. On December 9, 2014, CAI delivered
Quote #1658 to Vac Pac to design and build a bag delivery section and a
printing section to modify existing equipment. The printing section
upgrades required the use of existing Vac Pac equipment, which was in use
at Vac Pac’s Maryland location. Once CAI indicated the bag making
section was complete, it would be shipped from Michigan to Maryland to be
joined to the donor printing section, at which time the printing section
upgrades could be performed.
The total cost quoted by CAI was $818,655. The terms of payment in
the Quote were “30% upon receipt of order, 30% prior to shipment, 40%
upon completion of start-up and customer acceptance.” Vac Pac financed
the work and services to be performed under Quote #1658 through FSG
Capital, Inc. (“FSG”), a lender based in Maryland. CAI entered into a
Vendor Indemnification Agreement, where it agreed to indemnify, defend
and hold FSG harmless against any losses, liabilities, damages, costs and
expenses arising directly or indirectly out of any claim by CAI, Vac Pac or
any other party for the cost of the equipment or the funds advanced by FSG.
Vendor Indemnification Agreement, ¶ 3. The Vendor Indemnification
Agreement provides that it was executed in Maryland, shall be governed by
Maryland law, and shall be construed and enforced in accordance with
Maryland law. Vendor Indemnification Agreement ¶ 6.
On January 2, 2015, the first 30% payment in the amount of
$245,596.50 was delivered to CAI in Michigan. The structure of the press
was built in Romeo, Michigan at the facilities of a CAI subcontractor. It was
then moved to another CAI subcontractor in Oxford, Michigan on February
28, 2015. Representatives from Vac Pac travelled to Michigan on March
17, 2015 to inspect the press. They requested that several changes be
made during this inspection, as well as requesting the addition of a stacker
which was not part of the original quote. A second was done by Vac Pac
representatives in Michigan on July 20, 2015. At that time, the Vac Pac
representatives accepted the machine and instructed CAI to deliver it to Vac
Pac’s facilities in Maryland.
On July 30, 2015 the second 30% payment in the amount of
$245,596.50 was delivered to CAI in Michigan. On September 10, 2015,
the press was shipped from Michigan to Vac Pac’s facility in Maryland. CAI
installed the press and made various adjustments to optimize the operation
of the press. This included providing additional components for the press
after it was installed.
In January 2016, the press had yet to produce any acceptable product
at any reasonable speed, so Vac Pac instructed CAI to stop work on the
press and denied CAI further access to the press. CAI brought this lawsuit
seeking to recover the remaining balance due under the quote, plus $20,000
for the stacker, asserting claims for breach of contract, quantum meruit and
Vac Pac contends that in its efforts to work on the press in Maryland,
CAI caused further harm and delay, breaking two critical bearing blocks in
the sealing unit which required custom manufacture and reinstallation. Vac
Pac claims to have suffered a loss of business due to the inability to produce
products from the affected manufacturing line. In addition, Vac Pac has
spent money and 1,500 man hours of labor trying to put the machine into
production. It has engaged multiple third party contractors, many located in
Maryland, to diagnose and repair issues left unaddressed by CAI.
FSG and Vac Pac filed a lawsuit against CAI in Maryland on December
21, 2016. In that suit, Vac Pac alleges claims for breach of contract, breach
of warranty, misrepresentation and fraudulent inducement. FSG alleges a
breach of the Vendor Indemnification Agreement. CAI did not object to
personal jurisdiction over it in Maryland, but filed a motion to transfer venue
to Michigan because this lawsuit was filed first and is pending in Michigan.
STANDARD OF REVIEW
The burden is on the plaintiff to establish that personal jurisdiction
exists. Bird v. Parsons, 289 F.3d 856, 871 (6th Cir. 2002). Because the
court is deciding the issue of personal jurisdiction without first holding an
evidentiary hearing, the facts are construed in the light most favorable to the
plaintiff, the nonmoving party. Neogen Corp. v. Neo Gen Screening, Inc.,
282 F.3d 883, 887 (6th Cir. 2002). The plaintiff “need only make a prima
facie showing of jurisdiction.” Id. (citation omitted). The plaintiff can meet
this burden by “‘establishing with reasonable particularity sufficient contacts
between [the defendant] and the forum state to support jurisdiction.’ ” Id.
(quoting Provident Nat’l Bank v. California Fed. Savings Loan Ass’n, 819
F.2d 434, 437 (3d Cir. 1987)). Where the facts proffered by the defendant
conflict with those offered by the plaintiff, the court disregards the
defendant’s facts for purposes of ruling on the motion. Id. In the face of a
properly supported motion for dismissal, however, the plaintiff “may not
stand on [its] pleadings but must, by affidavit or otherwise, set forth specific
facts showing that the court has jurisdiction.” Theunissen v. Matthews, 935
F.2d 1454, 1459 (6th Cir. 1991).
“If the written submissions raise disputed issues of fact or seem to
require determinations of credibility, the court retains the power to order an
evidentiary hearing . . . and to order discovery of a scope broad enough to
prepare the parties for that hearing.” Serras v. First Tennessee Bank Nat.
Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989) (citations omitted). In such a
case, the burden on the party asserting jurisdiction becomes the same
standard that would apply if the matter were deferred to trial: the
preponderance of the evidence. Welsh v. Gibbs, 631 F.2d 436, 439 (6th
Cir. 1980). Furthermore, even if the court issues a pretrial order denying
defendant's 12(b)(2) motion, the defendant may proceed to trial without
waiving the defense. Serras, 875 F.2d at 1214 (citation omitted).
“A federal court’s exercise of personal jurisdiction in a diversity of
citizenship case must be both (1) authorized by the law of the state in which
it sits, and (2) in accordance with the Due Process Clause of the Fourteenth
Amendment.” Neogen Corp., 282 F.3d at 888 (citing Reynolds v. Int’l
Amateur Athletic Fed’n, 23 F.3d 1110, 1115 (6th Cir. 1994)). Michigan’s
long-arm statute confers general jurisdiction over a corporation pursuant to
Mich. Comp. Laws § 600.711 and limited jurisdiction pursuant to Mich.
Comp. Laws § 600.715. “Under Michigan’s long-arm statute, the state’s
jurisdiction extends to the limits imposed by federal constitutional due
process requirements and thus, the two questions become one.” Mich.
Coalition of Radioactive Material Users, Inc. v. Griepentrog, 954 F.2d 1174,
1176 (6th Cir. 1992).
Michigan Long-Arm Statute
“Personal jurisdiction exists in two forms: ‘general’ or ‘specific.’ ” Cadle
Co. v. Schlichtmann, 123 F. App’x 675, 677 (6th Cir. 2005) (citing Bird, 289
F.3d at 873). General jurisdiction “exists over a defendant when his
‘contacts with the forum state are of such a continuous and systematic
nature that the state may exercise personal jurisdiction over the defendant
even if the action is unrelated to the defendant’s contacts with the state.’ ” Id.
(citation omitted). CAI does not argue that Vac Pac is subject to general
jurisdiction in Michigan. Nor do the facts, when viewed in a light most
favorable to CAI, establish that Vac Pac has “continuous and systematic”
contacts with Michigan subjecting it to general jurisdiction.
B. Specific Jurisdiction
Mich. Comp. Laws § 600.715 extends limited personal jurisdiction over
a nonresident corporation in claims “arising out of the act or acts which
create any of the following relationships,” including: “[t]he transaction of any
business within the state” under § 600.715(1). The “transaction of any
business” necessary for limited personal jurisdiction under § 600.715(1) is
established by “the slightest act of business in Michigan.” Lanier v. Am. Bd.
of Endodontics, 843 F.2d 901, 906 (6th Cir.1988) (citing Sifers v. Horen, 385
Mich. 195, 188 N.W.2d 623, 624 n. 2 (1971)).
Plaintiff CAI argues that it has presented a prima facie case that Vac
Pac transacted business in Michigan when it reached out to CAI in Michigan
to solicit business, entered a contract with CAI, communicated by telephone
and email to CAI in Michigan, visited Michigan twice in connection with the
transaction at issue, and sent two payments totaling more than $530,000 to
The Sixth Circuit has held that an exchange of correspondence and
telephone calls between a non-resident defendant and the plaintiff in
Michigan, along with sending payments to Michigan, can be enough to
satisfy limited personal jurisdiction for purposes of Michigan’s long-arm
statute. Id. at 907-08. However, Michigan’s long-arm statute is subject to
constitutional due process considerations, which the court discusses in the
The central inquiry in determining whether specific jurisdiction is
authorized under the Due Process Clause is whether the defendant has
sufficient “minimum contacts” with the state “such that the maintenance of
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the suit does not offend ‘traditional notions of fair play and substantial
justice.’ ” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citations
To determine whether a defendant has sufficient minimum contacts
with the state, the Sixth Circuit applies a three-part test:
First, the defendant must purposefully avail [itself] of the privilege
of acting in the forum state or causing a consequence in the
forum state. Second, the cause of action must arise from the
defendant’s activities there. Finally, the acts of the defendant or
consequences caused by the defendant must have a substantial
enough connection with the forum state to make the exercise of
jurisdiction over the defendant reasonable.
Southern Machine Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir.
A. Purposeful Availment
In addressing the first factor, CAI argues that Pac Vac purposefully
availed itself of the privilege of doing business in Michigan by soliciting
business with an entity located in Michigan, communicating by telephone
and email with CAI in Michigan regarding the resulting contract, sending
money to CAI in Michigan, and traveling to Michigan in connection with the
A defendant is considered to have purposefully availed itself of the
forum state where it “reaches out” to or otherwise solicits business from the
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plaintiff. Alisoglu v. Central States Thermo King of Okla., Inc., 2012 WL
1666426, at *6 (E.D. Mich. May 11, 2012). In this case, prior to any
substantial discovery having been undertaken, the evidence supports Vac
Pac’s account that CAI solicited Vac Pac in Maryland. There is no
evidence, other than Mr. William’s refuted affidavit, that Vac Pac did anything
to “reach out” to or otherwise solicit business from CAI in Michigan.
Courts look to the quality of a non-resident defendant’s contacts with
the forum state in assessing purposeful availment. One important aspect is
whether the transaction at issue was isolated or was evidence of an ongoing
relationship. See Kerry Steel, Inc. v. Paragon Indus., 106 F.3d 147, 151
(6th Cir. 1997). In this case, the subject transaction was the only contract
Vac Pac ever entered into with a Michigan resident. In addition to likely
being initiated by CAI, the contract was for a specific piece of equipment that
would be delivered to Maryland to be integrated with existing equipment
located in Maryland. CAI points out that the contract at issue was more
complicated than the purchase of a single item because it required
installation and adjustments after it had been fabricated. However, those
continuing obligations were to be undertaken by CAI in Maryland and they do
not increase Vac Pac’s contacts with Michigan.
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Another aspect of the defendant’s contacts the court will consider is
whether the non-resident undertook communication related to the contract.
Calls and other forms of communication, standing alone, may be sufficient to
confer jurisdiction on the foreign defendant where the calls form the basis of
the breach. Neal v. Janssen, 270 F.3d 328, 332 (6th Cir. 2001) (holding
that sending fraudulent communications into a forum state constituted
purposeful availment in fraud action); Children’s Legal Services, PLLC v.
Shor Levin and Derita, PC, 850 F.Supp.2d 673, 682 (E.D. Mich. 2012).
Plaintiff’s complaint is for breach of contract, quantum meruit and unjust
enrichment based on the fact that Vac Pac owes CAI money. This is not a
case where a defendant’s communications form the basis of the plaintiff’s
claims. Furthermore, making payments in the forum state is an ancillary
factor which does not provide the minimum contacts required by due process
on its own. See Kerry Steel, 106 F.3d at 151; Campell v. Bridgeview Marina,
347 F.Supp.2d 458, 463 (E.D. Mich. 2004).
The facts of this case do not clearly support a finding that Vac Pac
“purposefully availed” itself of the benefits, privileges or protections of
conducting business in the State of Michigan.
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Even assuming CAI established purposeful availment, “[t]o satisfy the
‘arising from’ prong of the Southern Machine test, the plaintiff must
demonstrate a causal nexus between the defendant’s contacts with the
forum state and the plaintiff’s alleged cause of action.” Beydoun v.
Wataniya Rests. Holding, Q.S.C., 768 F.3d 499, 506–07 (6th Cir. 2014)
(citation omitted). In order for the cause of action to “arise from” the
defendant’s actions in the forum state, the operative facts of the controversy
must be related to the defendant’s contact with the state. Id. at 507. “[T]he
plaintiff’s cause of action must be proximately caused by the defendant’s
contacts with the forum state.” Id. at 507–08.
Here, CAI alleges that Vac Pac failed to pay certain amounts owed
under Quote #1658. For jurisdictional purposes, a defendant’s refusal to
pay amounts owed under a contract takes place where the defendant
resides. See Kerry Steel, 106 F.3d at 152 (“We are not persuaded that
Kerry Steel has shown that its cause of action arose from the defendant’s
activities in Michigan. At its most basic level, the claim arose out of
Paragon’s failure to pay the full purchase price, based on the purported
nonconformity of the goods with the specifications of the contract. The
refusal to pay occurred in Oklahoma”); Five Brothers Mortgage Co. Svcs &
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Securing, Inc. v. McCue Mortgage Co., 2017 WL 104539, at *7 (Mich. Ct.
App., January 10, 2017) (where plaintiff’s cause of action arose from
defendant’s alleged failure to pay monies owed under the parties’ contract,
defendant’s failure to pay occurred in Connecticut where defendant was
located and conducted all of its business, rather than Michigan where
plaintiff was awaiting payment).
CAI cannot demonstrate that its claims arise out of Vac Pac’s activities
in Michigan because Vac Pac’s alleged failure to pay CAI occurred in
Maryland, not in Michigan.
The last consideration is whether the court’s exercise of jurisdiction
over the Vac Pac would be reasonable. This requires considering 1) the
burden on the defendant, 2) the forum state's interest in adjudicating the
dispute, 3) the plaintiff's interest in obtaining convenient and effective relief,
4) the interstate judicial system's interest in obtaining the most efficient
resolution of controversies, and 5) the shared interest of the several states in
furthering fundamental substantive social policies. I.P. Enterprises Pension
Fund v. Hatfield, No. 06-11162, 2006 WL 2367357, at *7 (E.D. Mich. Aug.
14, 2006) (citing World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 286,
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Vac Pac argues that the burden for it to litigate this case in Michigan
would be substantial. It contends that virtually all of the documents and
equipment, and its third party witnesses, are located in Maryland. In
addition to the costs it has already incurred in attempting to get its machine
into production, the cost of litigating in Michigan would be “prohibitive”. The
court agrees that requiring Vac Pac to litigate in Michigan would be placing a
substantial burden on it, especially given the tenuous connection formed
between Vac Pac’s activities and the State of Michigan.
Michigan’s interest in this litigation is tenuous because ultimately the
contract was for goods and services to be delivered to and permanently
located in Maryland. However, Michigan does have an interest in seeing
that its residents get paid for work they perform pursuant to contracts.
Ultimately, because defendant has limited contacts with Michigan, the
burden placed on defendant outweighs plaintiff’s and the forum state’s
While this lawsuit was filed first, the court still considers that the
interests of judicial economy may favor litigating in Maryland given FSG and
Vac Pac’s lawsuit pending in that forum. The claims brought by Vac Pac
and FSG will involve the same evidence and witnesses as the instant dispute
given that Vac Pac’s breach of contract and warranty theories underlie its
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refusal to pay CAI and that the Vendor Indemnification Agreement requires
the execution of a final delivery certificate evidencing Vac Pac’s
unconditional acceptance of the equipment.
Where a plaintiff fails to establish purposeful availment, it is
unnecessary to consider the remaining two elements, because failure to
meet one element means that personal jurisdiction may not be invoked.
See, Inc. v. Imago Eyewear Pty, Ltd., 167 F. App’x 518, 523 (6th Cir. 2006)
(citing LAK, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1303 (6th Cir. 1989).
Nevertheless, as explained above, CAI has failed to establish any of the
elements required to satisfy due process. Therefore, the court cannot
exercise personal jurisdiction over Vac Pac without offending traditional
notions of fair play and substantial justice. Int’l Shoe, 326 U.S. at 316. The
court will grant Vac Pac’s motion to dismiss and dismiss the action without
prejudice. See Intera Corp. v. Henderson, 428 F.3d 605, 620–21 (6th Cir.
2005) (explaining that dismissal for lack of personal jurisdiction does not
operate as adjudication on the merits, and, therefore, must be without
For the reasons stated above, defendant’s motion to dismiss is
GRANTED and this case is DISMISSED WITHOUT PREJUDICE.
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IT IS SO ORDERED.
Dated: March 28, 2017
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
March 28, 2017, by electronic and/or ordinary mail.
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