Aioi Seiki, Inc. v. Jit Automation, Inc.
| Decision Date | 20 July 1998 |
| Docket Number | No. CIV. A. 97-40454.,CIV. A. 97-40454. |
| Parties | AIOI SEIKI, INC., Plaintiff, v. JIT AUTOMATION, INC., JIT Automation Corp. and JIT Automation, Inc., Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Dean M. Altobelli, Miller, Canfield, Detroit, MI, Marta A. Manildi, Miller, Canfield, Ann Arbor, MI, for Plaintiff.
Ben T. Liu, Birmingham, MI, Robert M. Kalec, Bingham Farms, MI, for Defendants.
On April 1, 1998 this court entered an order to show cause why the instant complaint should not be dismissed for failure to comply with Fed.R.Civ.P. 69(a). Before the court is the response filed by plaintiff, Aioi Seiki Inc., on April 15, 1998. For the reasons set forth below, this court will dismiss Count I of plaintiff's complaint for failure to comply with Fed.R.Civ.P. 69(a) and Count II of plaintiff's complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6).
Plaintiff, Aioi Seiki, Inc., is a corporation incorporated under the laws of Japan and with its principal place of business in Japan. The instant action involves claims against three separate defendants, JIT Automation, Inc., a Michigan corporation, ("JIT Michigan"), JIT Automation, Corp., an Illinois corporation ("JIT Illinois"), and JIT Automation, Inc., a Canadian corporation ("JIT Ontario"). JIT Michigan and JIT Illinois are both wholly owned subsidiaries of JIT Ontario.
On December 12, 1993 plaintiff entered into an Exclusive Sales Agreement with JIT Michigan which authorized JIT Michigan to become the exclusive distributor in North America of certain of plaintiff's products. A dispute arose out of JIT Michigan's purported breach of the Exclusive Sales Agreement. Plaintiff obtained an arbitration award from the Japan Commercial Arbitration Association ("JCAA") against JIT Michigan in the amount of $1,515,539.80, plus interest.
On September 6, 1996, the clerk of this court entered a judgment confirming the arbitration award. However, the judgment remains unsatisfied. Accordingly, on November 10, 1997, plaintiff filed the instant complaint in an effort to collect on the judgment.
Plaintiff's complaint contains two counts. Count I, which plaintiff characterizes as "Piercing the Corporate Veil," asserts that JIT Michigan and JIT Illinois are "the mere instrumentalities and alter egos of their sole owner and parent, JIT Ontario..." (Pl. comp. at ¶ 20.) Accordingly, plaintiff asks this court for an order declaring that plaintiff can collect on the judgment entered against JIT Michigan from both JIT Ontario and JIT Illinois. Count II, which plaintiff characterizes as a claim for "Tortious Interference with Business Relations," alleges that JIT Ontario and JIT Illinois interfered with plaintiff's business relationship with JIT Michigan. Plaintiff contends that this interference caused JIT Michigan to breach the Exclusive Sales Agreement, resulting in damages to plaintiff. On that basis, plaintiff asks this court to enter a judgment against JIT Ontario and JIT Illinois.
On December 23, 1997, JIT Illinois filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). In its motion to dismiss, JIT Illinois addresses a number of substantive issues related to plaintiff's claims against it. Specifically, JIT Illinois asserts that plaintiff has failed to state a claim against JIT Illinois in Count I because the complaint alleges only that JIT Ontario controls both JIT Michigan and JIT Illinois. Accordingly, JIT Illinois asserts that there is no basis for the claim that plaintiff may pierce the corporate veil to collect from JIT Illinois. JIT Illinois also asserts that plaintiff has failed to state a claim against JIT Illinois in Count II because a claim for tortious interference with a business relationship requires the alleged interferer to be a third party to the underlying relationship. Plaintiff has alleged in its complaint that the three JIT entities acted as a single entity. JIT Illinois argues that if that claim is taken as true, any claim that JIT Illinois is a third party to a relationship between plaintiff and JIT Michigan is flawed.
On April 1, 1998 this court issued an order taking JIT Illinois's December 23, 1997 motion to dismiss under advisement and directing plaintiff to show cause why this case should not be dismissed for failure to comply with Fed.R.Civ.P. 69(a). Upon considering plaintiff's response to the show cause order, this court will dismiss Count I of plaintiff's original action for failure to comply with Fed.R.Civ.P. 69(a) and Count II for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6).
Federal Rule of Civil Procedure 69(a) provides, in relevant part:
Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held...
Fed.R.Civ.P. 69(a)(emphasis added).
Plaintiff asserts that ambiguity exists as to whether this action, which seeks to impose liability on parties not liable with respect to the original judgment, may be properly brought pursuant to a writ of execution under Rule 69. Plaintiff relies upon the Supreme Court's holding in Peacock v. Thomas, 516 U.S. 349, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996), in which the Court refused to extend federal jurisdiction to a separate suit, brought to enforce a judgment. The Court reasoned that the action was supplementary to the previous proceedings and therefore, a federal court could not exercise ancillary jurisdiction over the action.
In this case, plaintiff argues that the Peacock decision creates ambiguity regarding the propriety of bringing an action against defendants not liable on the prior judgment in an ancillary enforcement action pursuant to Rule 69. This court finds plaintiff's argument misplaced. Like the instant action, the action in Peacock involved a separate suit to enforce a previous judgment, which the Court determined to be supplementary to the original action. However, the Peacock court held that courts should not "exercise [supplemental] jurisdiction over proceedings that are entirely new and original." Peacock, 516 U.S. at 358, 116 S.Ct. 862 (citing Krippendorf v. Hyde, 110 U.S. 276, 4 S.Ct. 27, 28 L.Ed. 145 (1884)). Therefore, Peacock essentially precludes federal courts from exercising supplemental jurisdiction in a case like this one. In any case, Peacock provides minimal support for the proposition that an action to pierce the corporate veil, in an attempt to enforce a previous judgment, should not be brought pursuant to Rule 69.
In fact, plaintiff improperly interprets the Court's reference to Rule 69 in Peacock. Plaintiff asserts that the Court's decision classifies piercing the corporate veil in an effort to enforce a previous judgment as a supplementary action over which the court would be barred from exercising ancillary jurisdiction. However, Rule 69 is actually cited as a viable alternative to bringing a separate civil action to enforce a previous judgment. The Court's interpretation of Rule 69 in Peacock actually supports this court's previous inclination that this action need be brought pursuant to Rule 69. The Court noted that "to protect and aid the collection of a federal judgment, the Federal Rules of Civil Procedure provide fast and effective mechanisms for execution." Id. at 359, 116 S.Ct. 862. Accordingly, this court finds plaintiff's reliance on Peacock unavailing.
Next, plaintiff asserts that an order requiring that this action be brought pursuant to Rule 69 must be predicated upon an express determination, by this court, that Michigan law allows a party to pierce the corporate veil in garnishment proceedings.1 Because this court believes that Michigan law permits piercing the corporate veil in a garnishment proceeding, this court will not address the issue of whether such determination is required in this case.
In Dundee Cement Co. v. Schupbach Bros., Inc., 94 Mich.App. 277, 288 N.W.2d 379 (1979), the court ruled, in a garnishment proceeding, that the trial court erred in refusing to hear evidence regarding appropriateness of piercing the corporate veil of the garnishee defendant.2 The fact that the plaintiff in Dundee was entitled to submit evidence regarding piercing the corporate veil in a garnishment proceeding leads this court to the conclusion that Michigan law would allow plaintiff to submit such evidence in a garnishment proceeding in this case. Id.
There is additional support in the Michigan Court Rules for the claim that plaintiffs are allowed to pierce the corporate veil in a garnishment proceeding under Michigan law. Michigan procedural rules governing garnishment proceedings allow plaintiffs to submit evidence regarding the liability of third party garnishee defendants not liable on the original judgment. M.C.R. 3.101(M) states:
(1) If there is a dispute regarding the garnishee's liability or if another person claims an interest in the garnishee's property or obligation, the issue shall be tried in the same manner as other civil actions.
(2) The verified statement acts as the plaintiff's complaint against the garnishee, and the disclosure serves as the answer...
M.C.R. 3.101(M)(emphasis added). The statute sets forth the procedural mechanisms through which courts are to resolve disputes regarding the third-party's liability, including piercing the corporate veil to reach alter ego corporations, within the confines of garnishment proceedings. In summary, this rule, by providing relevant procedural guidelines, supports bringing an action to pierce the corporate veil in a garnishment proceeding.
Plaintiff also contends that if this...
To continue reading
Request your trial
-
Wilson v. Continental Development Co.
...only a third party to a contractual or business relationship may be sued for tortious interference. See Aioi Seiki, Inc. v. JIT Automation, Inc., 11 F.Supp.2d 950, 954 (E.D.Mich.1998); Murphy v. Birchtree Dental, P.C., 964 F.Supp. 245, 250 (E.D.Mich.1997); Reed v. Metro Michigan Girl Scout ......
-
Crystallex Int'l Corp. v. Bolivarian Republic of Venez.
...noting "alternate basis for jurisdiction" based on finding that third party was alter ego of debtor); Aioi Seiki, Inc. v. JIT Automation, Inc. , 11 F.Supp.2d 950, 952-54 (E.D. Mich. 1998) ("An action to pierce the corporate veil is not a new cause of action, but merely a determination of wh......
-
Gallagher v. Persha
...previously recognized. See In re RCS Engineered Prod. Co., Inc., 102 F.3d 223, 226 (C.A.6, 1996), and Aioi Seiki, Inc. v. JIT Automation, Inc., 11 F.Supp.2d 950, 953–954 (E.D.Mich., 1998).But this case is not controlled by that principle, for what is at issue here is how a judgment-plaintif......
-
Watts v. Magic 2 X 52 Mgmt., Inc.
...69 for post-judgment activities that attempt to defeat the claims of a judgment creditor. See, e.g., Aioi Seiki, Inc. v. JIT Automation, Inc., 11 F.Supp.2d 950, 952–53 (E.D.Mich.1998); MCI Telecomms. Corp. v. O'Brien Mktg., Inc., 913 F.Supp. 1536, 1540 (S.D.Fla.1995).[¶ 30]CAROL RONNING KAP......