Eplet, LLC et al v. DTE Pontiac North, LLC et al
Filing
41
OPINION AND ORDER Denying Plaintiffs' 29 MOTION for Reconsideration re 27 Memorandum Opinion & Order; Denying Plaintiffs' 32 MOTION for Certificate of Appealability and Stay of Proceedings; and Denying in Part and Granting in Part Plaintiffs' 34 MOTION to Amend/Correct 1 Complaint, (Resolved/Unresolved Issues due by 3/26/2019). Signed by District Judge Stephen J. Murphy, III. (DPar)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
EPLET, LLC and RACER
PROPERTIES LLC,
Case No. 2:17-cv-11462
Plaintiffs,
HON. STEPHEN J. MURPHY, III
v.
DTE PONTIAC NORTH, LLC
and DTE ENERGY SERVICES,
INC.,
Defendants.
/
OPINION AND ORDER
DENYING PLAINTIFFS' MOTION
FOR RECONSIDERATION [29], DENYING
PLAINTIFFS' MOTION FOR CERTIFICATE
OF APPEALABILITY [32], AND DENYING IN PART GRANTING IN PART
PLAINTIFFS' MOTION TO AMEND COMPLAINT [34]
On May 6, 2017, Plaintiffs Eplet, LLC ("Eplet") and RACER Properties LLC
("RACER") filed their complaint. ECF 1. On July 28, 2017, Defendants DTE Pontiac
North, LLC ("DTEPN") and DTE Energy Services, Inc. ("DTE Energy") filed a motion
to dismiss the complaint. ECF 11. On March 23, 2018, the Court granted in part and
denied in part Defendants' motion to dismiss. ECF 27. After stipulating to an
extension, ECF 28, on April 13, 2018, Plaintiffs filed a motion for reconsideration,
ECF 29. On April 20, 2018, Plaintiffs also filed a motion for a certificate of
appealability. ECF 32. On May 4, 2018, Plaintiffs filed a motion to amend or correct
the complaint. ECF 34. The Court has reviewed the briefs and finds that a hearing is
unnecessary. See E.D. Mich. LR 7.1(f)(2). For the reasons below, the Court will deny
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the motion for reconsideration, deny a certificate of appealability, and deny in part
the motion to amend the complaint.
BACKGROUND
The litigation arises from General Motors' ("GM") bankruptcy filing and how
it affected agreements between GM and DTEPN regarding a GM facility in Pontiac,
Michigan. In January 2007, GM and DTEPN entered into four agreements
concerning the facility: an asset purchase agreement, a lease agreement, a utility
services agreement, and an environmental indemnity agreement.1 See ECF 27, PgID
553. DTE Energy, which was DTEPN's parent company, executed a parental
guaranty guaranteeing all of DTEPN's obligations under the utility services
agreement. Id. GM filed for bankruptcy two and a half years later. Id. GM and
DTEPN entered into a stipulation in bankruptcy court that established that the
utility services agreement, the asset purchase agreement, and the lease agreement
constituted a single, integrated contract and that GM was rejecting the contract. Id.
at 553–54. For the next six years, DTEPN remained in exclusive possession of the
premises, but the buildings fell into disrepair and environmental hazards emerged.
Id. at 554. When the lease expired in January 2017, DTEPN handed the keys to the
facility to RACER, a successor-in-interest to GM concerned with environmental
issues. Id. at 552, 554.
Plaintiffs' complaint alleged eight counts: (I) breach of associated agreements,
(II) breach of guaranty, (III) quantum meruit, (IV) nuisance, (V) negligence, (VI)
The Court recites the facts as pleaded, as it did in reviewing Defendants' motion to
dismiss. The summary does not constitute a finding of fact by the Court.
1
2
statutory waste, Mich. Comp. Laws § 600.2919, (VII) a
Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") claim, 42
U.S.C. § 9601, et seq., and (VIII) violation of the Natural Resources and
Environmental Protection Act ("NREPA"), Mich. Comp. Laws § 324.3101, et seq. ECF
1. In Defendants' motion to dismiss, DTEPN moved only for dismissal of the breach
of associated agreements claim, while DTE Energy moved to dismiss all claims
against it. ECF 11, PgID 98.
The Court granted Defendants' motion to dismiss the breach of associated
agreements claim. ECF 27, PgID 562. In making the claim, Plaintiffs argued that
DTEPN's continued possession of the facility meant that the utility services
agreement remained in effect. But the Court held that GM's breach of the three
integrated agreements was substantial, permitting DTEPN to terminate the
integrated contract. Id. at 560. And DTEPN filed a proof of claim and subsequently
did not perform under the utility services agreement. Id. at 560–61. Furthermore,
Plaintiffs never renegotiated the lease agreement upon termination of the utility
services agreement. Id. at 562. The breach of associated agreements claim therefore
failed to state a claim upon which relief could be granted.
The Court also granted in part DTE Energy's motion to dismiss the breach of
guaranty agreement claim, dismissing with prejudice any claims arising under the
parental guaranty agreement after April 12, 2011. Id. at 565. Specifically, there were
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no longer any obligations due after April 12, 2011,2 so DTE Energy had no obligations
under the parental guaranty agreement after that date. Id.
The Court also dismissed the quantum meruit and negligence claims against
DTE Energy because they alleged liability only through veil piercing. Id. at 566.
Plaintiffs could therefore pursue only those claims against DTEPN, which had
exclusive possession and control over the leased premises. Id.
But the Court held that Plaintiffs could proceed against DTE Energy on the
negligence, statutory waste, CERCLA, and NREPA claims for claims arising before
April 12, 2011. Id. And Plaintiffs could pursue all those claims against DTEPN as
pleaded. Id.
In their motion to alter or amend judgment under Federal Rule 59(e)—titled a
motion for reconsideration3—Plaintiffs argue that the Court was mistaken in
concluding that the utility services agreement and lease were severable and
terminated on April 12, 2011. ECF 29, PgID 576-77. They argue that: (1) DTEPN's
proof of claim did not terminate the utility services agreement because it was not
served on RACER and because it could not bind a non-debtor third party, id. at 577;
(2) the lease did not terminate under § 7.2 of the lease agreement because § 7.2
requires DTEPN to elect to continue under the utility services agreement, id. at 578;
(3) the associated agreements were not severable, id.; (4) DTEPN would have been a
The proof of claim was actually filed on March 31, 2011, and not April 12, 2011. See
ECF 1-4, PgID 58, ECF 1-5, PgID 63. Defendants have asked the Court to amend the
March 23, 2018 order to reflect March 31, 2011 as the correct filing date. ECF 33,
PgID 726.
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3
Plaintiffs also cite Local Rule 7.1(h), which governs motions for reconsideration.
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holdover tenant in the leased property, requiring it to comply with all contractual
provisions, id.; (5) the Court should not have concluded on a motion to dismiss that
there was a material breach of the associated agreements, id.; and (6) their complaint
adequately pleaded a claim for piercing the corporate veil against DTE Energy, id.
In the motion for certification of interlocutory appealability, Plaintiffs argue
that the Court should certify several issues addressed in the March 23, 2018 order.
They maintain that the following issues are controlling issues of law subject to
substantial grounds for difference of opinion: (1) whether filing a proof of claim in a
bankruptcy case "can act as a termination of a contract," (2) whether "Bankruptcy
Code § 365(h)(1)(A) prohibits a party to several agreements forming a single
integrated contract, which include a lease, from terminating its obligations under
only some of the agreements where it has elected to remain in possession of the leased
premises for the duration of the lease[,]" and (3) "whether allegations that a parent
corporation intentionally caused a subsidiary to take actions to breach a contract are
sufficient to pierce the corporate veil[.]" ECF 32, PgID 691–92.
In the motion for leave to amend their complaint, Plaintiffs request that the
Court allow them to amend their complaint in three ways: (1) to add allegations of
fact and "admissions by Defendants" that the associated agreements were never
terminated; (2) to add allegations to support their veil-piercing theory against DTE
Energy; and (3) to add a count for breach of implied-in-law contract. ECF 34, PgID
1064. But Plaintiffs' blacklined proposed amended complaint reflects edits that
extend beyond the three categories of changes. See ECF 34-2. For example, the
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proposed amended complaint endeavors to add that RACER is a successor to GM "for
expressly limited purposes[,]" id. at 1084, and that "RACER has no responsibilities
to GM or its creditors," id. at 1087. The Court will address Plaintiff's express requests
in their motion to amend separately from its proposed amended complaint.
STANDARD OF REVIEW
I.
Motion to Alter or Amend a Judgment
"A federal court may grant a Rule 59(e) motion to alter or amend if there is: (1)
a clear error of law; (2) newly discovered evidence; (3) an intervening change in
controlling law; or (4) a need to prevent manifest injustice." Intera Corp. v. Henderson,
428 F.3d 605, 620 (6th Cir. 2005) (citing GenCorp, Inc. v. Am. Int'l Underwriters, 178
F.3d 804, 834 (6th Cir. 1999)).
"To constitute 'newly discovered evidence,' the evidence must have been
previously unavailable." Leisure Caviar, LLC v. U.S. Fish & Wildlife Serv., 616 F.3d
612, 617 (6th Cir. 2010) (quoting GenCorp, 178 F.3d at 834). Evidence was previously
available—and is thus insufficient to warrant an amended judgment—if it "could
have been previously submitted in the exercise of reasonable diligence[.]" Hurst v.
Fed. Nat'l Mortg. Ass'n, No. 14-CV-10942, 2015 WL 1757225, at *1 (E.D. Mich. Apr.
17, 2015) (quoting Kenneth Henes Special Projects Procurement v. Cont'l Biomass
Indus., Inc., 86 F. Supp. 2d 721, 726 (E.D. Mich. 2000)).
The Court generally "will not grant motions for . . . reconsideration that merely
present the same issues ruled upon by the court, either expressly or by reasonable
implication." E.D. Mich. LR 7.1(h)(3). The movant must demonstrate a "palpable
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defect" by which the Court has been misled and that correcting the defect would
"result in a different disposition of the case." Id.
A palpable defect is a defect that is "obvious, clear, unmistakable, manifest, or
plain." United States v. Cican, 156 F. Supp. 2d 661, 668 (E.D. Mich. 2001). A party
cannot introduce "evidence for the first time in a motion for reconsideration [when]
that evidence could have been presented earlier." Shah v. NXP Semiconductors USA,
Inc., 507 Fed. App'x 483, 495 (6th Cir. 2012); Bank of Ann Arbor v. Everest Nat'l Ins.
Co, 563 Fed. App'x 473, 476 (6th Cir. 2014).
II.
Certificate of Interlocutory Appealability
When a district judge, in making in a civil action an order
not otherwise appealable under [§ 1292], shall be of the
opinion that such order involves a controlling question of
law as to which there is substantial ground for difference
of opinion and that an immediate appeal from the order
may materially advance the ultimate termination of the
litigation, he shall so state in writing in such order.
28 U.S.C. § 1292(b). "Review under § 1292(b) is granted sparingly and only in
exceptional cases." In re City of Memphis, 293 F.3d 345, 350 (6th Cir. 2002) (citation
omitted).
An issue is a controlling question of law if resolution of the issue on appeal
could "materially affect the outcome of litigation in the district court." In re Baker &
Getty Fin. Servs., Inc., 954 F.2d 1169, 1172 n.8 (6th Cir. 1992). A
substantial ground for difference of opinion exists when: (1)
the question is difficult, novel and either a question on
which there is little precedent or one whose correct
resolution is not substantially guided by previous
decisions; (2) the question is difficult and of first
impression; (3) a difference of opinion exists within the
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controlling circuit; or (4) the circuits are split on the
question.
City of Dearborn v. Comcast of Mich. III, Inc., No. 08–10156, 2008 WL 5084203, at *3
(E.D. Mich. Nov. 24, 2008). The Court's resolution of an issue would materially
advance the ultimate termination of the litigation if the court's decision on the issue
would substantially affect the manner in which litigation is conducted. In re City of
Memphis, 293 F.3d at 351 (citation omitted).
III.
Motion for Leave to Amend a Complaint
A party not amending as a matter of course may amend its complaint only with
the opposing party's written consent or the court's leave. Fed. R. Civ. P. 15(a)(2). The
Court "should freely give leave when justice so requires." Id. The Court should
therefore freely give leave
in the absence of any apparent or declared reason—such as
undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment,
futility of amendment, etc.
Foman v. Davis, 371 U.S. 178, 182 (1962).
DISCUSSION
I.
Plaintiffs' Motion to Alter or Amend Judgment or Motion for Reconsideration
Plaintiffs rely on allegedly previously unavailable new evidence to support their
first argument that DTEPN's proof of claim did not terminate the utility services
agreement. Specifically, Plaintiffs point to provisions of the bankruptcy court's
Confirmation Order's notice provision, ECF 29, PgID 596–97, and two declarations,
ECF 29-2 (declaration of Elliott Laws, sole member of Eplet), 29-3 (declaration of
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Michael Blumenthal, Plaintiffs' counsel, with email attachments dating from 2013
through 2016). Plaintiffs argue that the new evidence shows that RACER was not
served with the proof of claim and the proof of claim could not bind RACER.
The Court will not consider the newly-introduced evidence. Under Rule 59's
standard for a motion to alter or amend judgment, it does not appear that the
evidence upon which Plaintiffs rely could not have previously been submitted in the
exercise of reasonable diligence. See Hurst, 2015 WL 1757225, at *1. All the new
evidence would have been previously available upon exercise of reasonable diligence.
The bankruptcy court proceedings initiated in 2011, see ECF 29, PgID 573–74, and
the emails date from 2013 through 2016, see ECF 29-3. And Plaintiffs do not show
that there was a palpable defect in the Court's conclusion that the utility services
agreement did not remain in force after 2011. See E.D. Mich. LR 7.1(h)(3). The Court
bases its conclusion on the parties' conduct reflected in the record. Because Plaintiffs
fail to show palpable defect, a clear error of law or present newly discovered evidence
to the contrary, they are not entitled to relief on the Court's determination that the
lease agreement was terminated 180 days after the utility services agreement was
terminated in 2011. The lease agreement terminated pursuant to § 7.2.
Second, because the utility services agreement was terminated in 2011, there
was no clear error of law or palpable defect that the parental guaranty agreement
applied only to obligations accruing before the date of the utility services agreement's
termination. After the utility services agreement's termination, DTE Energy could
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not accrue further obligations under the parental guaranty agreement, which applied
only to obligations arising under the utility services agreement.
Third, the agreements were severable by their own terms. See ECF 27, PgID
562. Plaintiffs' argument based on Michigan law's severance analysis is inapposite.
Fourth, § 7.2 of the lease agreement did not mean that DTEPN's course of
conduct—after the utility services agreement terminated—reinstated the terminated
contract. Indeed, Plaintiff's position that DTEPN was a holdover tenant required to
comply with all contractual provisions is inconsistent with the terms of the lease
agreement itself.
Fifth, Plaintiffs do not prevail on their argument that the Court improperly
determined at the motion to dismiss phase that GM committed a material breach of
the integrated agreements. Whether a breach is material is generally a question of
fact. E.g., Hodak v. Madison Capital Mgmt., LLC, 348 F. App'x 83, 90 (6th Cir. 2009)
(citation omitted). Here, however, the Court concluded that there was no question of
fact after reviewing the complaint's allegations and the terms of the agreements.
Simply put, GM rejected the integrated agreements, indicating its intent not to
purchase more utility services, and DTEPN could no longer perform under the utility
services agreement.
Sixth, Plaintiffs do not convincingly argue that there was a clear error of law
or that the Court committed palpable defect in ruling that their complaint did not
adequately plead a veil piercing theory. The Court addressed the adequacy of the
complaint's veil piercing theory in its March 23, 2018 order. Plaintiffs merely rehash
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arguments already addressed by the Court. The Court will therefore deny Plaintiffs'
motion for reconsideration.
II.
Application for Interlocutory Appeal
None of the three issues that Plaintiffs present in their motion for certification
are appropriate for interlocutory appeal because they do not present any controlling
question of law on which a substantial ground for difference of opinion exists. See 28
U.S.C. § 1292(b). Plaintiffs are merely repackaging their disagreement with the
Court's conclusions that the contract was terminated, that DTEPN's holdover did not
mean that the remainder of the agreements survived, and that the complaint failed
to sufficiently allege a veil-piercing theory against DTE Energy to seek review in
another venue.
The issues that Plaintiffs identify are not controlling questions of law. The
Court's conclusions involved contract interpretation and the application of law to
facts, rather than any pure question of law. Even if they were pure questions of law,
interlocutory appeal would still be inappropriate. The Court founded its conclusions
about the contracts at issue—that the contract was terminated because of
nonperformance and that one party's holdover did not necessarily demand that the
other agreements survived—upon well-settled principles of contract law and
interpretation. And the Court based its conclusion that the complaint failed to
sufficiently allege a veil-piercing theory on well-established law regarding pleading
requirements. Despite Plaintiffs' attempt to reframe the issues, no substantial
ground for difference of opinion exists here. See City of Dearborn, 2008 WL 5084203,
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at *3 (describing the circumstances where substantial ground for difference of opinion
may exist). Interlocutory appeal would be inappropriate.
III.
Motion for Leave to File Amended Complaint
Plaintiffs identify three ways they wish to amend their complaint, and they
attach a proposed amended complaint that includes additional changes. Because
Plaintiffs did not brief the additional changes, the Court will not allow the Plaintiffs
to amend their complaint as proposed in their exhibits.
As to the three briefed proposed changes—to add allegations of fact and
"admissions by Defendants" that the agreements were never terminated, to add
allegations to support the veil-piercing theory against DTE Energy, and to add a
count for breach of implied-in-law contract—the Court will determine whether justice
requires amendment. See Foman, 371 U.S. at 182.
"Ordinary delay, alone, does not justify denial of leave to amend." Morse v.
McWhorter, 290 F.3d 795, 800 (6th Cir. 2002) (citation omitted). But at some point,
"delay will become 'undue,' placing an unwarranted burden on the court, or will
become 'prejudicial,' placing an unfair burden on the opposing party." Id. (quoting
Adams v. Gould, 739 F.2d 858, 863 (3d Cir. 1984)). Parties seeking to amend a
complaint after an adverse judgment must meet a heavier burden. Mich. Flyer LLC
v. Wayne Cty. Airport Auth., 860 F.3d 425, 431 (6th Cir. 2017); Leisure Caviar, 616
F.3d at 616. "If a permissive amendment policy applied after adverse judgments,
plaintiffs could use the court as a sounding board to discover holes in their arguments,
then 'reopen the case by amending their complaint to take account of the court's
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decision.'" Leisure Caviar, 616 F.3d at 616 (quoting James v. Watt, 716 F.2d 71, 78
(1st Cir. 1983)).
Although Defendants pointed out deficiencies with Plaintiffs' claims in their
motion to dismiss, Plaintiffs failed to seek leave to add the allegations, evidence, and
claims until after the Court issued its order on the motion to dismiss. ECF 37, PgID
1533. Here, the Court's order did not result in a final judgment of the entire case. Cf.
McWhorter, 290 F.3d at 799 (stating that the court's order resulted in final judgment).
Some of Plaintiffs' claims survived the motion to dismiss. Ultimately, however,
Plaintiffs faced a dispositive motion which could have resulted in final judgment but
still did not seek to amend their complaint until after the Court issued its order. The
Court is therefore wary of possible gamesmanship and undue delay. And critically,
Plaintiffs seek to amend the complaint only in response to the Court's articulation of
how the complaint was insufficient. Thus, much of the reasoning in cases when
plaintiffs moved to amend their complaint after entry of final judgment applies here.
Plaintiffs did not indicate before the Court's order that they wished to seek
leave to amend and they do not explain why they failed to amend their complaint
prior to the entry of an order on a dispositive motion. See McWhorter, 290 F.3d at 800
("[I]n the post-judgment context, we must be particularly mindful of not only
potential prejudice to the non-movant, but also the movant's explanation for failing
to seek leave to amend prior to the entry of judgment").4 The Court therefore finds
McWhorter is distinguishable because there, the magistrate judge issued a report
and recommendation to which the plaintiffs objected and then the plaintiffs moved to
amend before the district court dismissed the action. See Mich. Flyer, 860 F.3d at 432
4
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that there is undue delay and dilatory motive in adding an entirely new count for
breach of implied contract, which is an alternative theory of liability.
Plaintiffs' other grounds for amending the complaint—to add allegations of fact
and "admissions by Defendants" that the associated agreements were never
terminated—is also dilatory and would be futile. Plaintiffs seek to introduce emails
from Defendants—some of which date from early 2013, ECF 34-8, and others of which
date from July 2015 to October 2016, ECF 34-5, 34-6, 34-7—and an activity report
dated December 2016, ECF 34-9. Plaintiffs provide no explanation for why they could
not have relied upon these emails earlier. Furthermore, Defendants' purported
admissions do not support Plaintiffs' claim that Defendants admitted or
acknowledged that the agreements remained in force. At best, the communications
from Defendants' nonlawyer employees in 2015 and 2016—which use language
referring to a "lease"—indicate that there was some form of tenancy. They do not
suggest that there was continued performance under the utility services agreement.
And the report states that "all boilers have been permanently shutdown for several
years." ECF 34-9, PgID 1492. Similarly, although DTE continued to submit reports,
"each report notes zero emissions." Id. at 1493. Contrary to Plaintiffs' protestations,
DTEPN ceased generating utilities well before 2017. Years of nonperformance show
that the utility services agreement was terminated. Plaintiffs' proposed evidence and
allegations do not undermine the Court's conclusions that the utility services
(stating the same and holding that McWhorter was distinguishable). Here, Plaintiffs
did not indicate that it would seek leave to amend before the Court issued its order.
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agreement and lease agreement terminated, which were based on the demonstrated
nonperformance of the agreements and the terms of the lease agreement itself. The
Court therefore will deny Plaintiffs leave to amend on this ground.
But courts are more lenient in allowing plaintiffs to amend their complaints
when they fail to allege fraud with particularity. E.g., U.S. ex rel. Bledsoe v. Cmty.
Health Sys., Inc., 342 F.3d 634, 644 (6th Cir. 2003); Brege v. Lakes Shipping Co. Inc.,
225 F.R.D. 546, 549–550 (E.D. Mich. 2004) (citing Morse, 290 F.3d at 799–800);
Empire Title Servs., Inc. v. Fifth Third Mortg. Co., 298 F.R.D. 528, 530 (N.D. Ohio
2014) (collecting cases). The Court will therefore grant Plaintiff leave to add
allegations to support their veil-piercing theory against DTE Energy.
The Court thus denies in part and grants in part Plaintiffs' motion for leave to
amend. Plaintiffs may amend their complaint only to add allegations to support their
veil-piercing theory against DTE Energy.5 The Court does not grant Plaintiffs leave
to make any unbriefed changes reflected in their proposed amended complaint.
ORDER
WHEREFORE, it is hereby ORDERED that Plaintiffs' motion for
reconsideration [29] is DENIED.
IT IS FURTHER ORDERED that Plaintiffs' motion for certification for
interlocutory appeal [32] is DENIED.
Defendants argue that amendment on this ground would be futile. But given the
liberal standard for amendment to allege fraud, the Court will allow Plaintiffs to
amend. Nothing in this order prevents Defendants from moving to dismiss the
amended complaint.
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IT IS FURTHER ORDERED that Plaintiffs' motion to amend the complaint
[34] is DENIED IN PART AND GRANTED IN PART. Plaintiff may add
allegations to support their veil-piercing theory against DTE Energy no later than
March 26, 2019.
IT IS FURTHER ORDERED that the Court's March 23, 2018 Order is
AMENDED to reflect March 31, 2011 as the correct filing date of the proof of claim,
instead of April 12, 2011.
SO ORDERED.
s/ Stephen J. Murphy, III
STEPHEN J. MURPHY, III
United States District Judge
Dated: February 26, 2019
I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on February 26, 2019, by electronic and/or ordinary mail.
s/ David P. Parker
Case Manager
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