SD Wheel Corp v. Logfret Inc
ORDER signed by Judge William C Griesbach on 5/10/2022 denying 33 Motion to Change Venue; denying 34 Motion to Dismiss Amended Third-Party Complaint. The Court lifts the stay of all deadlines. If the parties believe that additional time is necessary, they may move to extend the deadlines. (cc: all counsel)(Griesbach, William)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
SD WHEEL CORP.,
Case No. 21-C-778
Defendant and Third-Party Plaintiff,
SCHMIDT, PRITCHARD & CO. INC.,
DECISION AND ORDER DENYING MOTION TO CHANGE VENUE AND
MOTION TO DISMISS AMENDED THIRD-PARTY COMPLAINT
Plaintiff SD Wheel Corp. brought this action against Defendant Logfret Inc., asserting
claims of breaches of fiduciary duties, breaches of implied contracts, negligent misrepresentations,
and negligence. On October 26, 2021, Logfret filed a third-party complaint against Third-Party
Defendant Schmidt, Pritchard & Co. Inc. The Court has diversity jurisdiction over this action
pursuant to 28 U.S.C. § 1332. This matter is before the Court on Schmidt Pritchard’s motion to
change venue and motion to dismiss the amended third-party complaint. For the following
reasons, the motions will be denied.
SD Wheel is an Illinois corporation that sells automotive equipment such as wheels, tires,
and lift kits. Compl. ¶¶ 2–3, Dkt. No. 1. SD Wheel imports some of the automotive equipment it
sells from China. Id. ¶ 3. Logfret is a Delaware corporation that offers services in the fields of
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international freight transport, cargo consolidation and de-consolidation, rail freight transport,
project cargo, customs clearance, and warehousing and distribution. Am. 3d Party Compl. ¶ 4,
Dkt. No. 32. Schmidt Pritchard is an Illinois corporation that provides import and export business
services. Id. ¶ 3. On November 12, 2014, SD Wheel executed a Power of Attorney for Customs
and Forwarding Agent (POA) with Logfret. Compl. ¶ 19. Under the POA, Logfret acted as SD
Wheel’s authorized agent to transport and import freight from manufacturers in China. Id. ¶¶ 18–
19. As part of its duties, Logfret pursued refunds for which SD Wheel was eligible. Id. ¶ 21.
In July 2018, the United States imposed tariffs on Chinese imports under the Trade Act of
1974 (Section 301 Tariffs). Id. ¶ 26. In 2019, the Office of the United States Trade Representative
issued a series of lists of goods that would be excluded from the tariffs and were retroactive for
tariffs paid as early as July 2018. Id. ¶ 28. If a company paid a Section 301 Tariff on an item that
was later included on one of the exclusionary lists, the company could seek a duty refund for the
tariff paid. Id. ¶ 29. A company could only seek a duty refund prior to liquidation or within 180
days after the entry had been liquidated. Id. ¶ 31.
Throughout late 2018 and early 2019, SD Wheel imported parts that were subject to the
Section 301 Tariffs and paid tariffs to U.S. Customs for those parts. Id. ¶ 27. On November 19,
2019, SD Wheel representatives sent three emails, labeled “Duty Refund Email #1,” “Duty Refund
Email #2,” and “Duty Refund Email #3,” to Logfret representatives that identified import entries
by container number and provided all necessary documentation to begin the refund process for the
tariffs it paid. Id. ¶¶ 31–32. In all, the emails identified 42 container numbers that corresponded
to 31 entries that were eligible for duty refunds. Id. ¶ 33.
A Logfret representative delivered all three emails to a representative of Schmidt Pritchard,
the broker, by forwarding Duty Refund Email #1 and attaching Duty Refund Email #2 and Duty
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Refund Email #3 to the email and writing “there are three emails with refund requests for the SD
wheels [sic] exempt [C]hina duty taxes[.] Let us know approximate time frame and if you need
further information.” Am. 3d Party Compl. ¶¶ 11–12. Logfret informed SD Wheel that “we have
sent to broker will advise further details as soon as available.” Id. ¶ 13.
SD Wheel received no communications from Logfret for several months regarding the
status of the refunds and contacted Logfret numerous times about the status. Compl. ¶¶ 46–48.
Logfret confirmed that the refunds were submitted and that it would take months to receive the
refunds due to COVID-19. Id. ¶ 47. SD Wheel continued to request statuses for the refunds, but
Logfret did not respond to the requests. Id. ¶¶ 48–58. SD Wheel ultimately learned that Schmidt
Pritchard successfully obtained duty refunds for the containers identified in Duty Email #1. Id.
¶¶ 63–66; Am. 3d Party Compl. ¶ 16. Logfret alleges that Schmidt Pritchard failed to process
refunds for the containers identified in Duty Refund Emails #2 and #3. Am. 3d Party Compl. ¶ 17.
By the time the error was discovered, the entries identified in Duty Refund Emails #2 and #3 were
outside of the protestable period, so SD Wheel could not seek refunds for those entries. Compl.
¶ 67. As a result, SD Wheel lost $306,277.70 in refunds for which it was eligible. Id.
A. Motion to Change Venue
Schmidt Pritchard asserts that Logfret’s amended third-party complaint against it should
be transferred to the United States District Court for the Northern District of Georgia pursuant to
28 U.S.C. § 1404(a). Its motion is premised on a forum selection clause contained in the Customs
Power of Attorney and Acknowledgement of Terms and Conditions of Service agreement Schmidt
Pritchard asserts SD Wheel entered into with it in 2018. Dkt. No. 33-1. While the parties dispute
the applicability of the agreement to this action, there is no dispute that Logfret was not a party to
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the agreement. Because Logfret is not a party to the agreement, it is not bound by the forum
selection clause contained therein, and it properly filed its third-party complaint against Schmidt
Pritchard in this district. Therefore, Schmidt Pritchard’s motion to change venue is denied.
B. Motion to Dismiss
Schmidt Pritchard also moves to dismiss the amended third-party complaint pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure. A motion to dismiss “tests the sufficiency
of the complaint” to state a claim upon which relief can be granted. McReynolds v. Merrill Lynch
& Co., Inc., 694 F.3d 873, 878 (7th Cir. 2012); see also Fed. R. Civ. P. 12(b)(6). When reviewing
a motion to dismiss under Rule 12(b)(6), the court must accept all well-pleaded factual allegations
as true and draw all inferences in the light most favorable to the non-moving party. Taha v. Int’l
Bhd. of Teamsters, Local 781, 947 F.3d 464, 469 (7th Cir. 2020). Rule 8 mandates that a complaint
need only include “a short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). The plaintiff’s short and plain statement must “give the defendant
fair notice of what the claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007). While a plaintiff is not required to plead detailed factual allegations, it
must plead “more than labels and conclusions.” Id. A simple, “formulaic recitation of the elements
of a cause of action will not do.” Id. Instead, a claim must be plausible to survive a motion to
dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). A claim is plausible on its face when “the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. at 663.
1. Breach of Contract Claims
Logfret asserts breach of an express contract and breach of an implied contract claims
against Schmidt Pritchard. To state a claim for breach of contract, a plaintiff must allege the
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existence of a valid contract, the defendant’s breach of the contract, and damages. See Matthews
v. Wis. Energy Corp., 534 F.3d 547, 553 (7th Cir. 2008) (citing Nw. Motor Car, Inc. v. Pope, 51
Wis. 2d 292, 296, 187 N.W.2d 200 (1971)). Logfret alleges that, in March 2015, SD Wheel and
Schmidt Pritchard entered into a Customs Power of Attorney agreement (Schmidt Pritchard POA)
and that, under the agreement, Schmidt Pritchard is empowered to act as a “true and lawful agent”
for SD Wheel for the general purpose of transacting customs business for the benefit of SD Wheel.
Am. 3d Party Compl. ¶ 8. Logfret claims that when it transmitted the Duty Refund Emails to
Schmidt Pritchard, Logfret acted as SD Wheel’s agent pursuant to the Logfret POA, and that
Schmidt Pritchard acted as SD Wheel’s agent pursuant to the Schmidt Pritchard POA and accepted
the duty to process the refund requests. Id. ¶¶ 21–22. It alleges that, by failing to process the
requests in Duty Refund Emails #2 and #3, Schmidt Pritchard breached its agreement with SD
Wheel. Id. ¶ 23. Logfret claims that it suffered damages as a result of the breach. Id. ¶ 24. While
Logfret cannot maintain a breach of contract claim as SD Wheel’s agent against Schmidt Pritchard,
the amended third-party complaint contains sufficient allegations to support Logfret’s own breach
of contract claim.
“The elements of a contract, taught like the ABCs to first-year law students, are offer,
acceptance, and consideration.” Zemke v. City of Chicago, 100 F.3d 511, 513 (7th Cir. 1996).
Logfret alleges that Schmidt Pritchard accepted Logfret’s request to process the duty refund
requests in exchange for compensation for its performance. Id. ¶ 26. Logfret asserts that Schmidt
Pritchard breached the contract with Logfret by failing to process the requests in Duty Refund
Emails #2 and #3 and that Logfret suffered damages as a result. Id. ¶¶ 27–28. Taking Logfret’s
allegations as true, which the Court is required to do at the pleading stage, Logfret has alleged the
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existence of a contract, a breach of that contract, and damages resulting from the breach.
Therefore, Logfret has stated a breach of contract claim against Schmidt Pritchard.
2. Negligence Claim
Logfret asserts that Schmidt Pritchard negligently failed to perform in a reasonable manner.
To state a claim for negligence, a plaintiff must allege “(1) the existence of a duty of care on the
part of the defendant, (2) a breach of that duty of care, (3) a causal connection between the
defendant’s breach of the duty of care and the plaintiff’s injury, and (4) actual loss or damage
resulting from the injury.” Gritzner v. Michael R., 2000 WI 68, ¶ 19, 235 Wis. 2d 781, 611 N.W.2d
906. Schmidt Pritchard asserts that Logfret’s claim must be dismissed because Schmidt Pritchard
only owed a duty to SD Wheel, not to Logfret. Under Wisconsin law, however, everyone “has a
duty to use ordinary care in all of his or her activities, and a person is negligent when that person
fails to exercise ordinary care.” Alvarado v. Sersch, 2003 WI 55, ¶ 14, 262 Wis. 2d 74, 662 N.W.2d
350 (citing Gritzner v. Michael R., 2000 WI 68, ¶¶ 20 & 22, 235 Wis. 2d 781, 611 N.W.2d 906).
“In Wisconsin a duty to use ordinary care is established whenever it is foreseeable that a person’s
act or failure to act might cause harm to some other person.” Id. Logfret alleges that Schmidt
Pritchard owed Logfret a duty to act in accordance with the standard of care for professionals
acting to obtain import duty refunds, that Schmidt Pritchard breached the standard of care by
failing to process the duty refunds requested in Duty Refund Emails #2 and #3, and that Logfret
suffered damages as a result of the breach. Am. 3d Party Compl. ¶¶ 34–36. The Court concludes
that Logfret has stated a negligence claim against Schmidt Pritchard.
Schmidt Pritchard argues in the alternative that, even if it owed a duty to Logfret, the
negligence claim should be dismissed because the transactions between Logfret and Schmidt
Pritchard are governed by Schmidt Pritchard’s Terms and Conditions of Service. The parties
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dispute whether the Terms and Conditions apply in this case. These disputes are better addressed
on summary judgment after the parties have had the benefit of engaging in discovery and the Court
has the benefit of a more complete record. In any event, even if Schmidt Pritchard’s Terms and
Conditions apply here, it would merely limit liability, not bar the claim. In short, Logfret’s
negligence claim will not be dismissed.
3. Contribution Claim
Logfret also asserts that, to the extent it is found liable for any damages suffered by SD
Wheel for the failure to process the duty refund requests, Schmidt Pritchard is liable to Logfret, in
contribution, for those amounts. Am. 3d Party Compl. ¶ 32. Schmidt Pritchard argues that the
claim for contribution must be dismissed because no judgment has been issued or paid by Logfret.
“To facilitate efficiency and eliminate the necessity of additional subsequent litigation,” Wisconsin
courts allow contribution actions “to be considered in the same proceeding involving the
underlying damage claim.” Johnson v. Heintz, 73 Wis. 2d 286, 295, 243 N.W.2d 815, 822–23
(1976) (collecting cases). Logfret has properly asserted a contribution claim in this action.
For these reasons, Schmidt Pritchard & Co. Inc.’s motion to change venue (Dkt. No. 33)
and motion to dismiss the amended third-party complaint (Dkt. No. 34) are DENIED. The Court
lifts the stay of all deadlines. If the parties believe that additional time is necessary, they may
move to extend the deadlines.
SO ORDERED at Green Bay, Wisconsin this 10th day of May, 2022.
s/ William C. Griesbach
William C. Griesbach
United States District Judge
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