ABC Debt Collection, LLC v. Gleason Corporation et al
OPINION AND ORDER granting 5 defendant Gleason Corporation's Motion to Dismiss. Signed by District Judge George Caram Steeh. (MBea)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
ABC DEBT COLLECTIONS, LLC,
Case No. 16-14225
HON. GEORGE CARAM STEEH
GLEASON CORPORATION, and
GLEASON GEAR TECHNOLOGY
OPINION AND ORDER GRANTING DEFENDANT GLEASON
CORPORATION’S MOTION TO DISMISS (DOC. 5)
Plaintiff ABC Debt Collections, LLC sued Gleason Corporation and
Gleason Gear Technology (Suzhou) Co. Ltd., hereafter referred to as
GGTS, arising out of a failure to complete payments under a sales contract.
Plaintiff brings three claims, Breach of Contract against GGTS (Count 1);
Open Account under Mich. Comp. Laws § 600.2145 against GGTS (Count
II); and Unjust Enrichment against both defendants (Count III). Plaintiff
also seeks to pierce the corporate veil and hold Gleason Corporation liable
for Counts I and II. The matter is presently before the Court on defendant
Gleason Corporation’s motion to dismiss pursuant to Federal Rules of Civil
Procedure 12(b)(2) for lack of personal jurisdiction, and 12(b)(6) for failure
to state a claim. (Doc. 5). The Court heard oral argument on May 11,
2017. For the reasons stated below, Gleason Corporation’s motion to
dismiss will be GRANTED pursuant to Rule 12(b)(2). The Court, therefore,
does not address the arguments based upon Rule 12(b)(6).
In June 2012, GGTS contracted to purchase eleven machines from
Moore Controls, LLC. (Doc. 1 at PageID 7). GGTS is a Chinese
corporation with its principal place of business in China. (Doc. 10 at
PageID 197). GGTS is owned by Gleason (Mauritius) Holdings Ltd., which
is incorporated in and has its principal place of business in Mauritius. (Doc.
10 at PageID 197). Gleason Holdings Ltd. is held by The Gleason Works,
a New York corporation with its principal place of business in New York.
(Doc. 10 at PageID 197-98). The Gleason Works is held by Gleason
Corporation. (Doc. 10 at PageID 198). Gleason Corporation is
incorporated in Delaware and has its principal place of business in New
York. (Doc. 10 at PageID 196).
GGTS made several progress payments, but allegedly failed to make
the final payment amounting to 10% of the purchase price. (Doc. 1 at
PageID 8). Moore Controls, LLC assigned this account to plaintiff, a
Michigan limited liability company, on May 20, 2016. (Doc. 1 at PageID 8).
Plaintiff sued GGTS and Gleason Corporation in Washtenaw County Circuit
Court in an attempt to receive this final payment. (Doc. 1 at PageID 6).
Gleason Corporation was served on November 22, 2016. (Doc. 1 at
PageID 2). Gleason Corporation removed the case to federal court on
December 2, 2016. (Doc. 1 at PageID 1-3). GGTS has not yet been
served, and did not join in the removal. (Doc. 1 at PageID 1-3).
II. Legal Standard
Plaintiff bears the burden of establishing the Court’s personal
jurisdiction over Gleason Corporation. Neogen Corp. v. Neo Gen
Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002). Where, as here, the
court does not conduct an evidentiary hearing regarding personal
jurisdiction, the plaintiff “need only make a prima facie showing of
jurisdiction.” Id. at 887. “Nevertheless, the plaintiff may not simply reassert
the allegations contained in its pleadings, but instead must ‘set forth
specific facts showing that the court had jurisdiction.’” GKN Driveline v.
Stahl Specialty Company, No. 15-cv-14427, 2016 WL 1746012, at *3 (E.D.
Mich. May 3, 2016) (quoting Theunissen v. Matthews, 935 F.2d 1454, 1458
(6th Cir. 1991)). The Court must view the pleadings and affidavits in the
light most favorable to plaintiff, Third Nat. Bank in Nashville v. WEDGE
Group Inc., 882 F.2d 1087, 1089 (6th Cir. 1989), and will not consider
contrary assertions made by defendant. Neogen, 282 F.3d at 887 (citing
Serras v. First Tenn. Bank Nat’l Ass’n, 875 F.2d 1212, 1214 (6th Cir.
“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, 282 F.3d at 888 (quoting Reynolds v.
Int’l Amateur Athletic Fed’n, 23 F.3d 1110, 1115 (6th Cir. 1994)).
Michigan’s long-arm statute extends general jurisdiction pursuant to
Mich. Comp. Laws § 600.711 and limited jurisdiction pursuant to Mich.
Comp. Laws § 600.715. General jurisdiction enables a court to exercise
jurisdiction over a corporation “regardless of whether the claim at issue is
related to its activities in the state or has an in-state effect.” Neogen, 282
F.3d at 888. Limited jurisdiction, in contrast, “extends only to claims arising
from the defendant’s activities that were either within Michigan or had an instate effect.” Id. at 888.
A. General Jurisdiction over Defendant Gleason Corporation
“In order to be subject to general jurisdiction in Michigan, a
nonconsenting, nonresident corporation. . . must have carried on a
‘continuous and systematic part of its general business’ within Michigan.”
Id. at 889 (citing Mich. Comp. Laws § 600.711(3)). The Supreme Court
stated that the appropriate inquiry is whether a foreign corporation’s
“affiliations with the State are so ‘continuous and systematic’ as to render
[it] essentially at home in the forum state.” Daimler AG v. Bauman, 134
S.Ct. 746, 749 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v.
Brown, 131 S.Ct. 2846, 2853 (2011)). Michigan courts require foreign
corporations to “actually be present within the forum state on a regular
basis, either personally or through an independent agent.” Glenn v. TPI
Petroleum, Inc., 305 Mich.App. 698, 707 (2014). In making this
determination, Michigan courts consider “whether the particular corporate
entity has a physical location, officers, employees, or bank accounts in
Michigan,” and the corporation’s “conduct in soliciting and procuring sales
and purchases within Michigan.” Id. at 707. The “mere suggestion” that a
defendant corporation “is, in some manner, conjoined with various
subsidiaries that operate in Michigan is not sufficient to establish general
personal jurisdiction.” Id. at 710 (citing Avery v. American Honda Motor
Car Co., 120 Mich.App. 222, 225 (1982). Plaintiff must instead “plead or
demonstrate an adequate ‘alter ego’ relationship between” a defendant
corporation “and its subsidiaries or that” a defendant corporation had
control over the subsidiaries. Id. at 711.
Gleason Corporation states that it does not have a physical location,
officers, employees, or bank accounts in Michigan. (Doc. 5-2 at PageID
69). Plaintiff alleges that Gleason Corporation conducts business in
Michigan and, by way of William J. Simpson’s involvement in negotiating
with Christopher Mackey of Moore, solicited and procured a sale within
Michigan. (Doc. 1 at PageID 7; Doc. 12-1 at PageID 205).
contacts are not of a “continuous and systematic” nature to render Gleason
Corporation “at home in [Michigan],” Daimler, 134 S.Ct. at 754, or establish
that Gleason Corporation is “actually present within [Michigan] on a regular
basis.” Glenn, 305 Mich.App. at 707. The Court, therefore, does not have
general jurisdiction over Gleason Corporation.
B. Limited Jurisdiction over Defendant Gleason Corporation
Mich. Comp. Laws § 600.715 provides limited personal jurisdiction
over a nonresident corporation for claims “arising out of the act or acts
which create any of the following relationships,” including “the transaction
of any business within the state.” Mich. Comp. Laws § 600.715(1). “[T]he
slightest act of business in Michigan” satisfies this standard. Neogen, 282
F.3d at 888 (quoting Lanier v. Am. Bd. Of Endodontics, 843 F.2d 901, 906
(6th Cir. 1988)). Establishing the requisite showing is so “extraordinarily
easy” that Michigan courts have stated that “[t]he only real limitation placed
on this [long arm] statute is the due process clause.” Viches v. MLT, Inc.,
127 F. Supp. 2d 828, 830 (E.D. Mich. 2000) (internal quotations and
Mackey’s affidavit asserts that Gleason Corporation Executive
William Simpson was involved in negotiating the contested sales contract.
(Doc. 12-1 at PageID 205). “This single act is sufficient to satisfy
Michigan’s long-arm statute under the broad ‘slightest transaction’ test
described above.” Beydoun v. Wataniya Restaurants Holding, O.S.C., 768
F.3d 499, 505 (6th Cir. 2914)).
Although Mich. Comp. Laws § 600.715(1) authorizes personal
jurisdiction over Gleason Corporation, plaintiff must “present a prima facie
case that the district court’s exercise of personal jurisdiction would not
offend due process.” Neogen, 282 F.3d at 889 (citing CompuServe, Inc. v.
Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996)). “[Plaintiff] must therefore
establish with reasonable particularity sufficient ‘minimum contacts’ with
Michigan so that the exercise of jurisdiction over [Gleason Corporation]
would not offend ‘traditional notions of fair play and substantial justice.’” Id.
at 889 (quoting Int’l Shoe v. Washington, 326 U.S. 310, 316 (1945)). In the
Sixth Circuit, this analysis is guided by a three-prong test:
First, the defendant must purposefully avail himself
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
S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).
“Purposeful availment. . . is present where the defendant’s contacts
with the forum state proximately result from actions by the defendant
himself that create a substantial connection with the forum state, and where
the defendant’s conduct and connection with the forum are such that he
should reasonably anticipate being haled into court there.” Neogen, 282
F.3d at 889 (citations, quotation marks, and emphasis omitted). “In the
Sixth Circuit, the emphasis in the purposeful availment inquiry is whether
the defendant has engaged in some overt actions connecting the defendant
with the forum state.” Beydoun, 768 F.3d at 506 (quoting Fortis Corporate
Ins. v. Viken Ship Mgmt., 450 F.3d 214, 218 (6th Cir. 2006)).
Plaintiff seems to argue that Gleason Corporation purposefully
availed itself of the privilege of acting in Michigan by using William Simpson
to negotiate with Michigan company Moore Controls, LLC regarding a sales
contract between Moore and GGTS for eleven machines that were
manufactured and stored in Michigan. Plaintiff does not allege any
additional specific contacts between Gleason Corporation and Michigan,
and merely asserts that Gleason Corporation “conducts business in. . .
Michigan.” (Doc. 1 at PageID 7).
Simpson’s contacts with Mackey do not create a sufficient connection
such that Gleason Corporation would anticipate being haled into a
Michigan court. Gleason Corporation did not “reach out” beyond its home
states and “create continuing relationships and obligations with citizens” of
Michigan. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985).
Plaintiff’s proofs instead illustrate that the parties engaged in a one-time
transaction, suggesting the contacts are “random,” “fortuitous,” or
“attenuated,” as opposed to deliberate conduct amounting to purposeful
availment. Id. at 475. See also August v. Manley Toys, Ltd., 68 F. Supp.
3d 722, 730 (E.D. Mich. 2014) (comparing one-time transactions and
continuing business relationships that last multiple years).
Each Mohasco Industries criterion “represents an independent
requirement, and failure to meet any one of the three means that personal
jurisdiction may not be invoked.” LAK, Inc. v. Deer Creek Enterprises, 885
F.2d 1293, 1303 (6th Cir. 1989). The Court, therefore, may rule that limited
personal jurisdiction does not exist without “dwell[ing] on the other criteria.”
C. Piercing the Veil between Gleason Corporation and GGTS
Courts may “exercise personal jurisdiction over . . . a corporation that
would not ordinarily be subject to personal jurisdiction in that court when
the . . . corporation is an alter ego or successor of a corporation that would
be subject to personal jurisdiction in that court.” Estate of Thomson ex rel.
Estate of Rakestraw v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 362
(6th Cir. 2008) (citing Patin v. Thoroughbred Power Boats Inc., 294 F.3d
640, 653 (5th Cir.2002)). “The alter-ego theory provides for personal
jurisdiction,” in the parent-subsidiary context, “if the parent company exerts
so much control over the subsidiary that the two do not exist as separate
entities but are one and the same for purposes of jurisdiction.” Indah v.
U.S. Sec. and Exch. Comm’n, 661 F.3d 914, 921 (6th Cir. 2011) (internal
quotations and citations omitted).
In applying the alter-ego theory of personal jurisdiction in this diversity
action, the Court must look to the law of the forum state. Thomson, 545
F.3d at 362. Michigan law presumes that the corporate form will be
respected. Seasword v. Hilti, 449 Mich. 542, 547 (1947). The presumption
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that “parent and subsidiary corporations are separate and distinct,”
Seasword, 449 Mich. at 547, “often called the ‘corporate veil,’ may be
pierced only where an otherwise separate corporate existence has been
used to ‘subvert justice or cause a result that [is] contrary to some
overriding public policy.’” Servo Kinetics, Inc. v. Tokyo Precision
Instruments Co., 475 F.3d 783, 798 (6th Cir. 2007) (quoting Seasword, 449
Mich. at 548). “Michigan courts will not pierce the corporate veil unless (1)
the corporate entity was a mere instrumentality of another entity or
individual; (2) the corporate entity was used to commit a fraud or wrong;
and (3) the plaintiff suffered an unjust loss.” Id. at 798 (internal citations
omitted). Factors to be considered include undercapitalization of the
corporation, the maintenance of separate books, the separation of
corporate and individual finances, the use of the corporation to support
fraud or illegality, the honoring of corporate formalities, and whether the
corporation is merely a sham. Laborers' Pension Trust Fund v. Sidney
Weinberger Homes, Inc., 872 F.2d 702, 704–05 (6th Cir. 1988) (internal
citations omitted). “The propriety of piercing the corporate veil is highly
dependent on the equities of the situation, and the inquiry tends to be
intensively fact-driven.” Servo Kinetics, 475 F.3d at 798.
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Gleason Corporation sets forth specific facts relevant to the Laborers’
Pension Trust Fund factors in the amended affidavit of Edward J. Pelta, an
authorized representative of Gleason Corporation. Pelta declares that
“GGTS is not undercapitalized,” Gleason Corporation and GGTS “keep
separate books and records” as well as “separate finances” including
“financial records and bank accounts,” “Gleason Corporation has never
used GGTS. . . for fraud or illegality,” Gleason Corporation “observe[s]
corporate formalities,” and that neither Gleason Corporation nor GGTS are
sham corporations. (Doc. 10 at PageID 198).
Plaintiff fails to set forth specific facts relevant to the aforementioned
factors. Plaintiff instead simply reasserts the allegations in its complaint,
including that (1) GGTS “is a wholly controlled agent of Gleason
[Corporation],” (2) GGTS “is a mere instrumentality of Gleason
[Corporation],” and (3) GGTS “is wholly owned, operated, and controlled by
Gleason [Corporation].” (Doc. 1 at PageID 8, 10). This is insufficient.
GKN Driveline, 2016 WL 1746012, at *3 (quoting Theunissen, 935 F.2d at
1458) (stating that a plaintiff “may not simply reassert the allegations
contained in its pleadings, but instead must ‘set forth specific facts showing
that the court ha[s] jurisdiction.’”). The Court, therefore, may not exercise
personal jurisdiction of Gleason Corporation under an alter ego theory.
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For the reasons stated above, Gleason Corporation’s motion is
GRANTED pursuant to Rule 12(b)(2).
IT IS SO ORDERED.
Dated: May 23, 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
May 23, 2017, by electronic and/or ordinary mail.
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