J&M Advertising, LLC v. The Lead Company, Inc.
Filing
134
OPINION; signed by Magistrate Judge Ellen S. Carmody (Magistrate Judge Ellen S. Carmody, cbh)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
J & M ADVERTISING, LLC,
Plaintiff,
Hon. Ellen S. Carmody
v.
Case No. 1:12-CV-564
THE LEAD COMPANY, INC.,
Defendant.
______________________________________/
OPINION
This matter is before the Court on Plaintiff J&M’s Motion for Summary Judgment, (dkt.
#93), and Defendant/Counter-Plaintiff TLC’s Motion for Summary Judgment, (dkt. #88). On August
26, 2013, the parties consented to proceed in this Court for all further proceedings, including trial and
an order of final judgment. 28 U.S.C. § 636(c)(1). By Order of Reference, the Honorable Janet T. Neff
referred this case to the undersigned. (Dkt. #60). For the reasons articulated below, both motions for
summary judgment are denied.
BACKGROUND
The parties in this matter, Plaintiff J&M Advertising (hereinafter J&M) and
Defendant/Counter-Plaintiff The Lead Company (hereinafter TLC) compete in the insurance lead
industry. An insurance lead, in this particular context, is defined as “referrals and any and all
information provided with such referrals, including but not limited to, any personal and contact
information.” (Dkt. #89, Exhibit 3). In other words, an insurance lead consists of information
concerning an individual whom an insurance agent may be interested in contacting regarding insurance
products and services.
As the parties describe it, the insurance lead industry consists of three distinct types of
participants: (1) generators; (2) aggregators; and (3) end users. The generators “create” insurance leads
by compiling personal and contact information concerning individuals whom the generator has
identified as having expressed an interest in purchasing insurance products. Aggregators purchase leads
from the generators for the purpose of reselling such to the end users who attempt to persuade the lead
to purchase insurance products or services. The parties in this matter, during the time period in question,
both operated as aggregators, albeit in slightly different capacities.
On April 29, 2011, J&M and TLC entered into an agreement (the Lead Agreement)
pursuant to which J&M developed relationships with insurance lead generators whereas TLC developed
relationships with end users. (Dkt. #89, Exhibit 3). J&M agreed to purchase insurance leads from
certain lead generators and exclusively offer such for sale to TLC which then re-sold such to certain endusers. (Dkt. #89, Exhibit 3). Collectively, J&M and TLC functioned as aggregators facilitating the sale
of insurance leads from generators to end-users.
Shortly after the execution of the Lead Agreement, the relationship between the parties
began to deteriorate. TLC determined that it no longer wished to purchase leads from certain sources
and communicated such to J&M. TLC alleges, however, that J&M, despite assurances to the contrary,
nevertheless continued to sell leads from sources which TLC had communicated were unacceptable.
TLC further alleges that J&M “mis-coded” certain leads (i.e., assigned them an incorrect JM code)
resulting in TLC being charged improper amounts for the leads in question.
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Unable to resolve their differences regarding these matter, the parties, on March 29, 2012,
executed a Settlement Agreement and Release of Claims (hereinafter the Settlement Agreement) “to
provide for an orderly termination of” the Lead Agreement. (Dkt. #90, Exhibit 8). The Settlement
Agreement provided that the parties continue their relationship, pursuant to the terms outlined in the
Lead Agreement, for a 45-day period. The Settlement Agreement also contained a provision by which
J&M and TLC each released any claims of which it “has actual knowledge” as of March 29, 2012.
J&M initiated the present action on June 4, 2012, asserting several causes of action
originating from alleged breaches of the Settlement Agreement. (Dkt. #1, 67). Specifically, J&M
asserts three state law claims, a claim under the Uniform Commercial Code, and a claim for attorney
fees. TLC responded by asserting various counterclaims arising from alleged breaches of the Lead
Agreement and Settlement Agreement. (Dkt. #7, 70). Specifically, TLC asserts three state law claims
as well as a claim for attorney fees. The parties have each now moved for summary judgment as to their
various claims.
SUMMARY JUDGMENT STANDARD
Summary judgment “shall” be granted “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). A party moving for summary judgment can satisfy its burden by demonstrating “that the
respondent, having had sufficient opportunity for discovery, has no evidence to support an essential
element of his or her case.” Minadeo v. ICI Paints, 398 F.3d 751, 761 (6th Cir. 2005); see also, Amini
v. Oberlin College, 440 F.3d 350, 357 (6th Cir. 2006) (quoting Celotex Corp. v. Catrett, 477 U.S. 317,
325 (1986)). The fact that the evidence may be controlled or possessed by the moving party does not
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change the non-moving party’s burden “to show sufficient evidence from which a jury could reasonably
find in her favor, again, so long as she has had a full opportunity to conduct discovery.” Minadeo, 398
F.3d at 761 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986)).
Once the moving party demonstrates that “there is an absence of evidence to support the
nonmoving party’s case,” the non-moving party “must identify specific facts that can be established by
admissible evidence, which demonstrate a genuine issue for trial.” Amini, 440 F.3d at 357 (citing
Anderson, 477 U.S. at 247-48; Celotex Corp. v. Catrett, 477 U.S. at 324). While the Court must view
the evidence in the light most favorable to the non-moving party, the party opposing the summary
judgment motion “must do more than simply show that there is some metaphysical doubt as to the
material facts.” Amini, 440 F.3d at 357. The existence of a mere “scintilla of evidence” in support of
the non-moving party’s position is insufficient. Daniels v. Woodside, 396 F.3d 730, 734-35 (6th Cir.
2005) (quoting Anderson, 477 U.S. at 252). The non-moving party “may not rest upon [his] mere
allegations,” but must instead present “significant probative evidence” establishing that “there is a
genuine issue for trial.” Pack v. Damon Corp., 434 F.3d 810, 813-14 (6th Cir. 2006) (citations omitted).
Moreover, the non-moving party cannot defeat a properly supported motion for summary
judgment by “simply arguing that it relies solely or in part upon credibility determinations.” Fogerty
v. MGM Group Holdings Corp., Inc., 379 F.3d 348, 353 (6th Cir. 2004). Rather, the non-moving party
“must be able to point to some facts which may or will entitle him to judgment, or refute the proof of
the moving party in some material portion, and. . .may not merely recite the incantation, ‘Credibility,’
and have a trial on the hope that a jury may disbelieve factually uncontested proof.” Id. at 353-54. In
sum, summary judgment is appropriate “against a party who fails to make a showing sufficient to
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establish the existence of an element essential to that party’s case, and on which that party will bear the
burden of proof at trial.” Daniels, 396 F.3d at 735.
While a moving party without the burden of proof need only show that the opponent
cannot sustain his burden at trial, see Morris v. Oldham County Fiscal Court, 201 F.3d 784, 787 (6th
Cir. 2000); Minadeo, 398 F.3d at 761, a moving party with the burden of proof faces a “substantially
higher hurdle.” Arnett v. Myers, 281 F.3d 552, 561 (6th Cir. 2002); Cockrel v. Shelby County Sch. Dist.,
270 F.3d 1036, 1056 (6th Cir. 2001). “Where the moving party has the burden -- the plaintiff on a claim
for relief or the defendant on an affirmative defense -- his showing must be sufficient for the court to
hold that no reasonable trier of fact could find other than for the moving party.” 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)). The Sixth
Circuit has repeatedly emphasized that the party with the burden of proof “must show the record
contains evidence satisfying the burden of persuasion and that the evidence is so powerful that no
reasonable jury would be free to disbelieve it.” Arnett, 281 F.3d at 561 (quoting 11 JAMES WILLIAM
MOORE, ET AL., MOORE’S FEDERAL PRACTICE § 56.13[1], at 56-138 (3d ed. 2000); Cockrel, 270 F.2d
at 1056 (same). Accordingly, summary judgment in favor of the party with the burden of persuasion
“is inappropriate when the evidence is susceptible of different interpretations or inferences by the trier
of fact.” Hunt v. Cromartie, 526 U.S. 541, 553 (1999).
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ANALYSIS
I.
Applicable Body of Law
J&M is a limited liability company organized under Florida law with its principle place
of business in Florida. (Dkt. #67). TLC is a corporation incorporated under Michigan law with its
principle place of business in Michigan. (Dkt. #71). For diversity purposes a corporation is considered
a citizen of its state of incorporation as well as the state in which its principle place of business is
located. See 28 U.S.C. § 1332(c)(1). As there exists complete diversity of citizenship in this matter and
the amount in controversy exceeds $75,000, the Court has subject matter over the present dispute. See
28 U.S.C. § 1332(a)(1). When presiding over a diversity action, federal courts must apply the
substantive law of the state in which the court sits, including that state’s choice of law rules. See Mill’s
Pride, Inc. v. Continental Ins. Co., 300 F.3d 701, 704 (6th Cir. 2002).
In Chrysler v. Skyline Industrial Services, Inc., 528 N.W.2d 698 (Mich. 1995), the
Michigan Supreme Court addressed the issue of the choice of law rules applicable in contract disputes.
While recognizing that the “predominant view in Michigan has been that a contract is to be construed
according to the law of the place where the contract was entered into,” the court noted that such a “rigid”
approach was not always appropriate. Id. at 702-03. In this respect, the court indicated that sections
187 and 188 of the Second Restatement of Conflict of Laws, with its “emphasis on examining the
relevant contacts and policies of the interested states, provide a sound basis for moving beyond
formalism to an approach more in line with modern-day contracting realities.” Id. at 703.
Accordingly, in the context of a contract dispute, Michigan choice of law rules require
courts to examine the factors articulated in sections 187 and 188 the Second Restatement (and employed
by the Chrysler court) so as to balance “the expectations of the parties to a contract with the interests
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of the states involved.” Mill’s Pride, 300 F.3d at 705 (recognizing that the Chrysler decision is the
controlling authority in Michigan on choice of law issues involving contract disputes); see also, Talmer
Bank & Trust v. Parikh, - - - N.W.2d - - -, 2014 WL 714867 (Mich. Ct. App., Feb. 25, 2014) (same).
Section 187 of the Second Restatement of Conflict of Laws addresses the validity of contractual choice
of law provisions. Section 188 of the Second Restatement, on the other hand, applies when the parties
have entered into an agreement which is silent with respect to the choice of law that is to govern
disputes thereunder. See Talmer Bank & Trust, 2014 WL 714867.
Both the Lead Agreement and the Settlement Agreement contain provisions that such
shall “be governed by and construed in accordance with” Michigan law. (Dkt. #89, Exhibit 3; Dkt. #90,
Exhibit 8). Pursuant to Section 187 of the Second Restatement of Conflict of Laws, this choice of law
provision is to be given effect absent exceptions or circumstances not presently applicable. Restatement
(Second) of Conflict of Laws § 187 (1971); see also, Buist v. Digital Message Systems Corp., 2002 WL
31957703 at *3 (Mich. Ct. App., Dec. 27, 2002). Accordingly, the Court will apply Michigan law in
this matter.
II.
J&M’s Motion for Summary Judgment
J&M asserts the following claims in its amended complaint: (1) complaint on an account;
(2) breach of contract; (3) unjust enrichment; (4) attorneys’ fees; and (5) violation of the UCC. (Dkt.
#67). J&M moves for summary judgment as to all claims.
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1.
Attorneys’ Fees
Both the Lead Agreement and Settlement Agreement contain provisions authorizing the
“prevailing party” to recover “reasonable attorneys’ fees, costs and necessary disbursements” incurred
in pursuit of legal action “to enforce the terms” of the agreement in question. Because J&M is not a
prevailing party at this juncture, its motion for summary judgment on the subject of attorneys’ fees is
denied.
2.
Uniform Commercial Code
J&M asserts that TLC failed to comply with Section 2 of the Uniform Commercial Code
(UCC) concerning the sale of goods. In this regard, J&M argues that the insurance leads that were the
subject matter of the Lead Agreement and Settlement Agreement are properly characterized as “goods”
under the Uniform Commercial Code. TLC counters that the UCC is inapplicable because the contracts
in question concern the provision of services rather than the sale of goods. As discussed herein, the
Court concludes that the subject contracts both concerned the provision of services and, therefore, fall
outside the purview of the UCC.
Section 2 of the UCC, which Michigan has adopted, “governs the relationship between
the parties involved in ‘transactions in goods.’” See Drummond Island Yacht Haven Inc. v. South
Florida Sod, Inc., 2014 WL 198974 at *10 (Mich. Ct. App., Jan. 16, 2014) (quoting Mich. Comp. Laws
§ 440.2102). The UCC, however, does not apply to agreements for the provision of services. See
Drummond Island, 2014 WL 198974 at *10. To determine whether a contract involves the sale of
goods, which comes within the purview of the UCC, or the sale of services, beyond the reach of the
UCC, Michigan courts apply the “predominant factor” test pursuant to which the court must determine
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whether “the purchaser’s ultimate goal” is to acquire a product or service. If the purchaser’s ultimate
goal is to acquire a product, the contract should be deemed a transaction in goods “even though service
is incidentally required.” On the other hand, if the purchaser’s ultimate goal is to acquire a service, the
contract falls outside the scope of the UCC “even though goods are incidentally required on the
provision of this service.” Id.
While resolution of this particular issue is “generally one of fact,” where “there is no
genuine issue of any material fact regarding the provision of the contract, a court may decide the issue
as a matter of law.” J&B Sausage Co. v. Department of Management & Budget, 2007 WL 28409 at *1
(Mich. Ct. App., Jan. 4, 2007). As the Court discerns no disputes of fact regarding the purpose of the
subject contracts, the Court finds that it can resolve, as a matter of law, whether the UCC has any
applicability in this matter. As discussed below, while the relationship between J&M and TLC arguably
involved items which fit within the definition of a good,1 the Court finds that the predominant
component of the relationship concerned the provision of services.
In support of its position, J&M relies on Big Farmer, Inc. v. Agridata Resources, Inc.,
581 N.E.2d 783 (Ill. App. Ct. 1991), which concerned a breach of contract claim. Big Farmer was in
the business of obtaining demographic information about individuals which it compiled into marketable
mailing lists. Id. at 784. Agridata published Farm Futures magazine. Big Farmer sold to Agridata
“mailing lists” of names of individuals “in a certain income group” which Agridata wanted to “solicit
[as] potential subscribers.” The contract dispute concerned the method by which to determine the
amount Agridata owed Big Farmed for the mailing lists. Id.
1
Under Michigan law, goods are defined as “all things (including specially manufactured goods) which are movable at the time
of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action.” Mich. Comp.
Laws § 440.2105.
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The Big Farmer court found that the contract in question came within the purview of the
UCC because it was a contract for goods. Id. at 785. However, in reaching this conclusion the court
did not apply the predominant factor test (or any similar test), but instead simply concluded that “since
the information at issue is moveable and not otherwise precluded from the purview of [the] Uniform
Commercial Code, the information may be considered goods as defined by [Illinois] statute.” Id. The
Big Farmer court appears to have simply presumed that if a contract concerned something which fit
within the definition of a “good,” the contract was governed by the UCC. As noted above, however,
no such presumption applies under Michigan law. Instead, the Court must more closely examine the
parties’ relationship. Because the Big Farmer court applied a completely different legal standard, with
respect to the applicability of the UCC, than that presently applicable, the Court finds this decision
inapplicable and unpersuasive.2
The Court finds the authority cited by TLC, Wall Street Network, Ltd. v. New York Times
Company, 80 Cal. Rptr.3d 6 (Cal. Ct. App. 2008), to be more relevant and persuasive on this particular
question. In Wall Street Network, Click2Boost (C2B), an assignee of Wall Street Network (WSN),
entered into an internet marketing agreement with the New York Times Company (NYT). Id. at 9.
Pursuant to this agreement, C2B “was to solicit subscribers for home delivery of the New York Times
newspaper by means of ‘pop up ads’ at Internet websites with which C2B maintained marketing
alliances.” If a person clicked on one of the subject pop up ads, and expressed an interest in subscribing
to the New York Times, that information was provided to NYT. Id. A dispute subsequently arose
regarding the accuracy of the information provided by C2B. Id. at 10.
2
J&M also cites to American Business Information, Inc. v. Classic Uniforms, Inc., 2002 WL 197936 (Tex. App. Ct., Feb. 6,
2002). This case, however, suffers from the same shortcoming as it relies on Big Farmer for the proposition that “[t]he sale of a mailing list constitutes
a sale of goods.” Id. at *1.
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WSN asserted that the UCC governed because the information provided by C2B was
properly characterized as goods. Id. at 18-19. In assessing whether the UCC applied, the Wall Street
Network court applied a test which mirrors that applicable in Michigan:
In determining whether the agreement was for the sale of goods or the
provision of services, we must look to the essence of the agreement.
When service predominates, the incidental sale of items of personal
property does not alter the basic transaction.
Id. at 19.
Characterizing the agreement between C2B and NYT as a contract “for the transmission
of data from an external source,” the court concluded that the contract in question was for services rather
than goods. Id. In so concluding, the court specifically distinguished the Big Farmer decision:
Pointing to Big Farmer,. . .WSN contends that C2B provided goods to
NYT because it identified potential subscribers to the New York Times,
and was paid a fee for each potential subscriber. In Big Farmer, the
publisher of a farming magazine bought a list of farmers within an
income group from a business that sold demographic information and
mailing lists, and used the list to solicit potential subscribers. The parties
subsequently fell into a dispute about whether the purchase agreement
obliged the publisher to pay a fee for each name on the list, or each new
subscriber. The court concluded that the names and addresses sold
constituted “goods” because they were “moveable.” Here, C2B did not
sell NYT names and addresses of persons to whom NYT intended - by
its own efforts - to send solicitations for subscriptions; rather, C2B
agreed to solicit subscribers for NYT by placing subscription
advertisements for NYT in designated locations, and to forward
responses to the advertisements. Whereas the provider in Big Farmer
sold personal information it had compiled, C2B merely promised to
transmit information from customers of C2B’s marketing partners who
choose to provide the information through the pop up ads. In our view,
C2B thus agreed to provide a service for NYT. That NYT paid a fee for
each submission does not establish that the submissions constituted
“goods.”
Id. at 19-20.
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The Court finds that the present circumstance more closely resembles that described in
Wall Street Network in that J&M did not obtain information on its own, but instead transmitted to TLC
information, within certain parameters, gathered by others. In this respect, J&M offered a service, the
ability to work with certain lead generators to procure certain information. Even if the information in
question fits within the definition of a good, TLC’s ultimate purpose here was to engage J&M to provide
a service. This conclusion is further supported by the fact the Lead Agreement characterizes the
agreement as one for the provision of services. (Dkt. #89, Exhibit 3 at 1). The Court concludes,
therefore, that the UCC has no applicability in this matter. Accordingly, Plaintiff J&M’s motion for
summary judgment as to its UCC claims is denied.
3.
Complaint on Account and Breach of Contract
These claims both concern TLC’s actions following the execution of the Settlement
Agreement. Specifically, J&M alleges that despite continuing to fulfill its contractual obligations
following the execution of the Settlement Agreement, TLC refused to fully pay the amounts owing for
such. These claims concern the amounts owing for March and April 2012. With respect to March, J&M
alleges that it billed TLC $425,385.03 of which TLC paid $226,782.48 leaving an unpaid balance of
$198,602.55. J&M further alleges that it billed TLC $136,908.52 for services performed in April, none
of which was paid. Thus, J&M alleges that TLC has failed to pay $335,511.07 for services performed
pursuant to the Settlement Agreement.
TLC does not dispute that it failed to pay the amounts in question, but asserts that it was
not required to pay the amounts in question because J&M breached both the Lead Agreement and the
Settlement Agreement by submitting invalid leads. TLC asserts that it rejected many of the leads
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provided during the relevant time period because they were “from unauthorized, unaccepted and
terminated sources.” TLC asserts that it rejected other leads because they were “misclassified” (i.e.,
billed according to the incorrect JM code). J&M does not dispute that TLC rejected certain leads during
the time period in question, but instead argues that TLC lacked any legitimate basis for rejecting the
leads in question.
However, there exist factual disputes concerning both the methodology by which the JM
codes were established as well as whether J&M submitted invalid leads. Accordingly, summary
judgment as to these claims is not appropriate at this juncture as there remain unresolved factual disputes
regarding whether there existed a legitimate basis for TLC to reject the leads in question.
4.
Unjust Enrichment
As discussed above, TLC rejected (and refused to pay for) many leads provided by J&M
following the execution of the settlement agreement. TLC did not return these rejected leads to J&M,
however, but instead sold them to end users. J&M asserts that permitting TLC to reject a lead, thereby
evading payment, only to sell such to an end user constitutes unjust enrichment.
To prevail on a claim of unjust enrichment, J&M must establish “the receipt of a benefit”
by TLC which is “inequitable [for TLC to] retain.” Affinity Resources, Inc. v. Chrysler Group, LLC,
2013 WL 5576111 at *8 (Mich. Ct. App., Oct. 10, 2013). The “key consideration” is whether TLC’s
“retention of the benefit would be unjust as between the parties.” The test to determine whether the
retention of a benefit is unjust as between two parties “depends on a reasonable person standard:
whether ‘reasonable men in like situation as those who received and are benefited. . .naturally would
and ought to understand and expect compensation was to be paid.” Id.
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TLC responds, however, that under Michigan law, if one party breaches a contract it
cannot later bring an action against the other party for a subsequent breach. (Dkt. #89 at 20). TLC
argues that pursuant to this authority, J&M has forfeited its breach of contract claims because such arose
subsequent to the conduct giving rise to TLC’s breach of contract claims. The general rule under
Michigan law is that “the party committing the first substantial breach of contract cannot maintain an
action against a party for failure to perform.” Hospitalists of Northwest Michigan, P.L.C. v. Fischer,
2013 WL 5576096 at *7 (Mich. Ct. App., Oct. 20, 2013) (emphasis added). However, there exist factual
disputes concerning whether J&M committed breach of contract and, moreover, whether any such
breach is sufficiently substantial to invoke this rule. Accordingly, summary judgment as to this
particular claim is not appropriate at this juncture.
II.
TLC’s Motion for Summary Judgment
TLC asserts the following claims in its amended counter-complaint: (1) breach of
contract; (2) unjust enrichment; (3) fraudulent misrepresentation; and (4) attorney fees. (Dkt. #70).
TLC moves for summary judgment as to all claims.
1.
Attorneys’ Fees
Both the Lead Agreement and Settlement Agreement contain provisions authorizing the
“prevailing party” to recover “reasonable attorneys’ fees, costs and necessary disbursements” incurred
in pursuit of legal action “to enforce the terms” of the agreement in question. Because TLC is not, at
this juncture, a prevailing party, its motion for summary judgment on the subject of attorneys’ fees is
denied.
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2.
Breach of Contract
TLC alleges that J&M breached the Lead Agreement and the Settlement Agreement
through the following actions: (1) failing to provide valid leads; (2) failing to properly differentiate the
source of the leads submitted by using incorrect JM/campaign codes; (3) offering and/or selling leads
to third parties which were not first offered to TLC; (4) offering and/or selling leads to third parties
which had already been sold to TLC.
A.
Failing to Provide Valid Leads
The Lead Agreement provides that TLC will pay J&M for “valid Leads” pursuant to the
pay structure incorporated into the Lead Agreement as Exhibit A. (Dkt. #89, Exhibit 3 at ¶ 6). The
contract defines a lead as “valid” only if it satisfies eleven distinct criteria, one of which is that the lead
“is not rejected by” TLC which “may reject a Lead at any time for any reason or no reason at all.” (Dkt.
#89, Exhibit 3 at ¶ 4). The contract further provides that “Leads which are not valid. . .may NOT be
replaced, and any payment made will immediately be refunded.” (Dkt. #89, Exhibit 3 at ¶ 5).
Moreover, TLC “may, at its option, cancel, rescind or otherwise nullify [the contract] if [J&M] fails to
comply with” this particular provision. (Dkt. #89, Exhibit 3 at ¶ 5).
On December 21, 2011, David McFarland, CEO of TLC, sent to Lowell Bloodworth, an
official with J&M, an email directing J&M to “make sure we (TLC) are not receiving indirectly from
any of the companies/people” listed in the email, to which Bloodworth responded, “will do.” (Dkt.
#117, Exhibit 9). One of the companies identified in this email was Adaroo. (Dkt. #117, Exhibit 9).
Bloodworth acknowledged receipt of this email during his deposition. (Dkt. #89, Exhibit 4 at 248).
There exists, however, a factual dispute as to the meaning of Bloodworth’s statement, “will do.”
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Bloodworth testified that when he said, “will do,” he really meant that he would simply contact Adaroo
to “make sure that [its] sources and [its] suppliers are sending good lead traffic.” (Dkt. #89, Exhibit 4
at 265-66). TLC, on the other hand, interpreted Bloodworth’s comment as signaling that J&M would
discontinue forwarding to TLC leads from Adaroo. This factual dispute is sufficient to preclude
summary judgment as to this claim. TLC has also failed to demonstrate the absence of a factual dispute
regarding its allegation that J&M, subsequent to December 20, 2011, continued to forward Adaroogenerated leads, but disguised this by assigning different JM codes (or campaign codes) to such leads.
Thus, TLC’s motion for summary judgment is denied as to this particular claim.
B.
Failing to Properly Differentiate the Source of Certain Leads
The Lead Agreement provides that TLC shall pay J&M “for valid Leads, based on the
price indicated in Exhibit A, within thirty (30) days of billing date.” (Dkt. #89, Exhibit 3 at ¶ 6).
Exhibit A to the Lead Agreement provides that J&M agrees to sell to TLC “exclusive insurance sales
Leads” at the rates detailed therein. (Dkt. #89, Exhibit 3 at Exhibit A). The price of a particular lead
is a function of three variables: (1) the state in which the lead resides; (2) the time of day that the lead
was generated; and (3) the source of the lead (i.e., the method by which the lead was generated and/or
the identity of the generator). On Exhibit A to the Lead Agreement, the source of the lead is identified
by reference to an alpha-numeric code (the JM number) developed by the parties. The leads generated
by different generators and/or through different generation methods were to be assigned a different JM
number (also referred to by the parties as a “campaign code”). This system was necessary because the
quality and, therefore, value of leads differed due to the source, location, and method utilized to obtain
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such. The parties have failed, however, to present evidence concerning the methodology by which these
JM/campaign codes were calculated and/or assigned.
In addition to alleging that J&M breached the contract by continuing to forward leads
generated by “rejected” sources, TLC asserts that J&M breached the contract by incorrectly identifying
the source of these invalid leads. TLC alleges that J&M knowingly assigned the leads from rejected
sources to incorrect JM/campaign codes in an effort to disguise the fact that it was continuing to supply
TLC with leads generated from rejected sources. However, because there exist factual disputes
concerning the methodology by which the JM/campaign codes were calculated and/or assigned and, by
extension, whether J&M’s actions in this regard violate the contracts in question, summary judgment
as to this claim is not appropriate at this juncture.
C.
Offering/Selling Leads to Third Parties without First Offering such to TLC
In its motion for summary judgment, TLC does not address this particular breach of
contract theory. Having failed to demonstrate the absence of a genuine factual dispute regarding such,
TLC’s motion for summary judgment is denied as to this particular theory.
D.
Offering/Selling Leads which had Already been Sold to TLC
In its motion for summary judgment, TLC does not address this particular breach of
contract theory. Having failed to demonstrate the absence of a genuine factual dispute regarding such,
TLC’s motion for summary judgment is denied as to this particular theory.
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3.
Unjust Enrichment and Fraudulent Misrepresentation
TLC alleges that beginning no later than December 2011, J&M misrepresented that the
leads it provided to TLC were valid as defined by the Lead Agreement.
Based on these
misrepresentations, TLC paid J&M according to the terms of their agreement. According to TLC,
however, these leads (or at least a certain number thereof) were invalid. TLC asserts that J&M engaged
in fraudulent misrepresentation and, furthermore, that it constitutes unjust enrichment for J&M to retain
payment for such invalid leads.
a.
Unjust Enrichment
In its amended counter-complaint, TLC alleges that “[i]t would be inequitable for J&M
to retain the compensation paid to it by TLC when it has failed to provide valid leads.” TLC further
asserts that “[a]s a result, J&M has been unjustly enriched and should be required to reimburse TLC for
the payments made.” As discussed herein, there exist factual disputes as to whether J&M supplied TLC
with invalid leads. Accordingly, summary judgment as to this claim is not appropriate at this juncture.
b.
Fraudulent Misrepresentation
In its amended counter-complaint, TLC alleges that J&M “misrepresented to TLC that
it was providing valid leads to TLC.” TLC alleges that J&M made these representations with
knowledge of their falsity and with the intent that TLC rely on such. TLC alleges that it “did in fact rely
on the misrepresentations to its detriment.” In its motion for summary judgment, TLC alleges that J&M
misrepresented the “source and quality” of the leads it provided.
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To prevail on this claim, TLC must establish the following elements: (1) J&M made a
material representation; (2) the representation was false; (3) J&M knew the statement was false or made
it recklessly without regard for its truth; (4) J&M intended for TLC to rely on the representation; (5)
TLC did rely on the representation; and (6) TLC suffered damages. See Vandenbrink v. Miller, 2013
WL 1776428 at *3 (Mich. Ct. App., Apr. 25, 2013). An action for fraudulent misrepresentation “must
be predicated upon a statement relating to a past or an existing fact.” T & K Fiberglass, Inc. v. Avalon
& Tahoe, Inc., 2007 WL 101769 at *4 (Mich. Ct. App., Jan. 16, 2007). Future promises “are contractual
and do not constitute fraud.” Id. An exception to this latter rule exists, however, if a promise is made
in bad faith without the intention, at the time the promise is made, to perform the promise. Id.
Furthermore, a plaintiff’s reliance on the alleged false statement must have been reasonable. Id.
TLC alleges that J&M made the following false representations: (1) J&M represented
that it would discontinue sending leads from Adaroo, but nevertheless continued to do so; (2) J&M
misrepresented the JM/campaign codes applicable to certain leads so as to “affect the price it received;”
and (3) J&M “misrepresented the source of leads and sold leads to TLC from suppliers which had not
been authorized and for which no price had been negotiated.”
As previously discussed, there exists a factual dispute as to whether J&M represented
that it would discontinue selling to TLC leads generated by Adaroo. Likewise, as noted above, there
exist factual disputes regarding the methodology by which the JM/campaign codes were to be calculated
and/or assigned. Finally, TLC has failed to demonstrate the absence of a factual dispute concerning
whether J&M misrepresented the source of any of the leads in dispute. Accordingly, TLC’s motion for
summary judgment is denied as to this claim.
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CONCLUSION
For the reasons articulated herein, Plaintiff J&M’s Motion for Summary Judgment, (dkt.
#93), and Defendant/Counter-Plaintiff TLC’s Motion for Summary Judgment, (dkt. #88), are both
denied. An Order consistent with this Opinion will enter.
Date: May 29, 2014
/s/ Ellen S. Carmody
ELLEN S. CARMODY
United States Magistrate Judge
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