Carhartt, Inc. v. Innovative Textiles, Inc., Case No. 17–cv–13604
| Decision Date | 11 June 2018 |
| Docket Number | Case No. 17–cv–13604 |
| Citation | 323 F.Supp.3d 917 |
| Parties | CARHARTT, INC., Plaintiff, v. INNOVATIVE TEXTILES, INC., Defendant/Third–Party Plaintiff, v. Gentry Mills, Inc., Third–Party Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Erin M. Pawlowski, Carhartt, Inc., Dearborn, MI, John B. Dolan, Dickinson Wright, Troy, MI, Salina M. Hamilton, Dickinson Wright PLLC, Detroit, MI, for Plaintiff.
Colleen H. Burke, David C. Anderson, Eric M. Kociba, Collins Einhorn Farrell PC, Southfield, MI, for Defendant.
After Carhartt, Inc. found out that its fire resistant garments containing Innovative Textiles, Inc.'s ("ITI") fire resistant fabric were not actually fire resistant, Carhartt sued ITI. Carhartt brings claims for breach of contract, negligence, and other theories against ITI, alleging that ITI's decision to change the fibers it incorporated into its fire resistant fabric from an industry standard fiber to a new, untested competitor caused the defect in Carhartt's products. ITI then filed a third-party complaint against Gentry Mills, Inc. ("GMI"), a subcontractor involved in ITI's fabric production business.
ITI alleges that GMI is responsible for the defects in the products that it sold to Carhartt because "[a]ll of the fabric Carhartt contends was defective was dyed, treated, finished, and tested by GMI before it was ultimately supplied to Carhartt." (Dkt. 8 at 3.) ITI brings five counts against GMI: breach of contract (Count I), breach of express warranty (Count II), breach of implied warranty (Count III), common law indemnity (Count IV), and implied contractual indemnity (Count V).
GMI now moves to dismiss the third-party complaint. This matter was fully briefed by the parties, and, pursuant to Local Rule 7.1 the Court determines that no hearing is necessary.
When deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court must "construe the complaint in the light most favorable to the plaintiff and accept all allegations as true." Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A plausible claim need not contain "detailed factual allegations," but it must contain more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
ITI argues that North Carolina law should apply to the allegations in its third-party complaint, and, although GMI did not affirmatively raise this issue, it appears not to contest it.
When a Michigan federal court exercises jurisdiction based on the diversity of the parties, the "conflict of laws rules to be applied by the federal court in [Michigan] must conform to those prevailing in [Michigan's] state courts." See Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In actions based in contract, Michigan courts apply §§ 187 and 188 of the Second Restatement of Conflict of Laws. Chrysler Corp. v. Skyline Indus. Servs., Inc. , 448 Mich. 113, 124, 528 N.W.2d 698 (1995). Where the parties have not agreed upon the applicable law, § 188 dictates that courts apply "the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties." Restatement (Second) of Conflict of Laws § 188(1) (1971) ; see also Chrysler Corp. , 448 Mich. at 128, 528 N.W.2d 698. The state with the most significant relationship to the transaction and parties is determined by looking to "(a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties." Restatement § 188(2).
Though this action is in a Michigan federal court, North Carolina has the most significant relationship to the transaction and the parties.1 Both parties are North Carolina corporations, and they each maintain their principal place of business there. (Dkt. 8 at 1–2.) Though the third-party complaint does not contain detailed factual allegations about the interactions between the parties, it is reasonable to assume that because they are both headquartered in North Carolina, "the place of contracting, place of negotiation of the contract, place of performance, and location of the subject matter of the contract" are all North Carolina. See Restatement § 188(2)(a)-(d) (internal formatting altered).
In addition, none of the § 188 factors indicate that Michigan has an interest in applying its law to this case. This action is in Michigan court by operation of a choice of forum clause in the agreement between Carhartt and ITI. (Dkt. 1–2 at 15.) That clause has no bearing on the relationship between ITI and GMI, and there is nothing else about the parties' relationship that indicates they would reasonably expect to litigate pursuant to Michigan law.
For these reasons, North Carolina law applies to the allegations in the third-party complaint.
The first count of ITI's complaint is for breach of contract. It alleges that "GMI breached its contractual obligations to ITI to provide goods and services in accordance with ITI's purchase orders and industry standards." (Dkt. 8 at 3.)
Under North Carolina law, a party alleging breach of contract must demonstrate "(1) the existence of a valid contract and (2) breach of the terms of the contract." Martinez v. Univ. of N. Carolina , 223 N.C. App. 428, 432, 741 S.E.2d 330 (2012) (quoting Long v. Long , 160 N.C. App. 664, 668, 588 S.E.2d 1 (2003) ).
ITI fails to allege sufficient facts to sustain its breach of contract claim. First and foremost, ITI does not allege the existence of a contract. The third-party complaint's only mention of a contract between ITI and GMI is the language quoted above, alleging that "GMI breached its contractual obligations to ITI." (Dkt. 8 at 3.) There is no explanation, for example, of when the contract was formed, who the parties are, or whether it was oral or written. Absent such information, the third-party complaint contains only "labels or conclusions," Twombly , 550 U.S. at 555, 127 S.Ct. 1955, insufficient to state "a claim to relief that is plausible on its face." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.2
Second, even if this mention of a contract between the parties were a sufficient allegation of the existence of a contract, the third-party complaint says nothing about the obligations of the parties under the contract, or how GMI breached those obligations. ITI argues the third-party complaint "included allegations that [ITI] contracted with [GMI] to ‘dye[ ], treat[ ], finish[ ] and test[ ]’ the fabric it subsequently provided to Carhartt." (Dkt. 29 at 15.) However, there are no allegations of a contract for those services in the complaint. ITI cites ¶ 7 of the complaint as a description of the parties' contractual obligations, but that paragraph only describes the services GMI provided ITI. It does not mention a contract, nor does it state what the contract required.
Third, if the Court were to assume that the contract obligated GMI to "dye[ ], treat[ ], finish[ ] and test[ ]" ITI's fabric, the complaint still does not explain how GMI breached the contract. ITI alleges that GMI serviced "[a]ll of the fabric Carhartt contends was defective" and that it "was relying on GMI's skill and judgment to select and furnish goods and services suitable for ITI's fabric." (Dkt. 8 at 3.) But these allegations are not sufficiently specific to "give the defendant fair notice of what the claim is." See Twombly, 550 U.S. at 555, 127 S.Ct. 1955. The third-party complaint does not apprise GMI of what it did to cause the fabric to be defective, or even if the defect was caused by GMI's services. Instead, the complaint only informs GMI that it treated the defective fabric.
Because the third-party complaint fails to allege the existence of a contract, the terms of the contract, and the manner in which it was breached, the third-party complaint contains only "a formulaic recitation of the elements of a cause of action" for breach of contract. See Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Accordingly, Count I of the third-party complaint is dismissed.
ITI's second set of claims is for breach of warranty. It alleges that if ITI is found liable to Carhartt, GMI breached both express and implied warranties. GMI allegedly breached an express warranty that the "fabric [GMI] dyed, treated, finished, and tested met industry standards, including flammability specifications." (Dkt. 8 at 4.) It allegedly breached an implied warranty of "merchantability and fitness for a particular purpose by provid[ing] goods and services that were neither merchantable nor fit for their particular purpose." (Dkt. 8 at 5.)
GMI argues that ITI's breach of express warranty count should be dismissed because the third-party complaint contains insufficient factual allegations to state a claim, and, even if it did, GMI only provided services to ITI, not goods. ITI responds by arguing that ITI provided goods and pleaded sufficient facts to state a claim for breach of express warranty.
Under North Carolina law, a breach of express warranty claim requires the plaintiff to demonstrate "(1) an express warranty as to a fact or promise relating to the goods, (2) which was relied upon by the plaintiff in making his decision to purchase, (3) and that this express warranty was...
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