Forefront Machining Techs. v. SARIX SA

• Decision Date: 18 February 2020
• Docket Number: Case No. 3:19-cv-383
• Parties: FOREFRONT MACHINING TECHNOLOGIES, INC., Plaintiff, v. SARIX SA, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

FOREFRONT MACHINING TECHNOLOGIES, INC., Plaintiff, v. SARIX SA, et al., Defendants.

Case No. 3:19-cv-383

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON

February 18, 2020

Judge Thomas M. Rose

ENTRY AND ORDER GRANTING, IN PART, AND DENYING, IN PART, DEFENDANT ALOUETTE TOOL COMPANY LTD.'S REQUEST FOR HEARING ON ORDER OF ATTACHMENT AND MOTION TO DISCHARGE ATTACHMENT (DOC. 5)

Pending before the Court is the Motion to Discharge Attachment (Doc. 5) (the "Motion") filed by Defendant Alouette Tool Company Ltd. ("Alouette").¹ Plaintiff Forefront Machining Technologies, Inc. ("Forefront") filed a memorandum opposing the Motion (the "Response"). (Doc. 8; see also Doc. 1-5 at PAGEID # 356-369.) Alouette filed a reply brief in support of the Motion (the "Reply"). (Doc. 9.) On January 6, 2020, Defendant Silfex, Inc. ("Silfex") filed a Notice of Amounts Owed to Defendant Alouette Tool Company.² (Doc. 13.) Also, on January 6,2020, the Court issued a document identifying questions or areas that it wanted the parties to address either at the evidentiary hearing or in evidentiary submissions made prior to the hearing.³ (Doc. 14.) On January 22 and February 3, 2020, the Court held an evidentiary hearing on the Motion. On January 31, 2020, Alouette submitted a stand-alone affidavit of David Brogan, Alouette's President ("Mr. Brogan"). (Doc. 23.) On February 10, 2020, Forefront and Alouette each filed post-hearing briefs. (Docs. 30 and 31.) The Motion is fully briefed and ripe for review.

For the reasons discussed below, the Court GRANTS, IN PART, AND DENIES, IN PART, the Motion. The Court denies Alouette's request to discharge the attachment, but grants Alouette's alternative request to modify the Attachment Order. The Court modifies the Attachment Order as set forth in the Conclusion section, below.

I. BACKGROUND

Forefront alleges in its Verified Complaint ("Complaint") that, in or around February of 2015, it entered into an oral agreement with SARIX and Alouette. (See Doc. 4.) The alleged agreement included that SARIX and Alouette would pay Forefront a commission of 10% upon any sales made as a result of Forefront's efforts, contacts, knowledge, and labor. (Id.) Forefront alleges that it performed under the agreement, securing Silfex as a customer for SARIX and Alouette and procuring the sales of at least 23 machines to Silfex. (Id.) However, according to Forefront, SARIX and Alouette failed to pay all of the amounts owed.

A letter on SARIX letterhead dated February 2, 2017 from SARIX and Alouette to Paul Nold of Forefront (the "Termination Letter") states:

Dear Mr. Nold,

We would like to clarify the relationship between Sarix and your company, as discussed during the last meeting of our visit in December 2016 and agreed betweenSarix and Alouette Tool Inc. as follows.

Forefront Inc. and Paul Nold are no longer representative [sic] of Sarix in the Ohio area.

Alouette Tools is Sarix [sic] sole agent in the United States.

Alouette Inc recognize [sic] to Paul Nold, for the acquisition of the Silfex purchase order following [sic] commissions

for machine #3 - 10% of the order amount

for machine #4 and 5 - 8% of the order amount

for machine #6 to #13 - a finder fee of 3% of the order amount

These commissions are due when each machine has been completely paid by the customer.

Commissions for machine #1 and #2 have already been paid.

...

No further business is planned between Paul Nold / Forefront and Alouette / Sarix.

We remain at your disposal for any additional information that may be needed. We thank you very much for the cooperation. ....

(Defendant's Exhibit 10.) The Termination Letter is signed by SARIX representatives and Mr. Brogan (from Alouette). (Id.) Approximately two-and-a-half years later, on September 18, 2019, Forefront's counsel sent a letter to representatives for SARIX and Alouette demanding payment for commissions allegedly owed to Forefront (the "Demand Letter"). (Defendant's Exhibit 7.) Forefront argues that, as a matter of Ohio law, the unilateral termination shown in the Termination Letter does not release SARIX and Alouette from their obligation to pay Forefront the commissions it (allegedly) earned⁴ and that their failure to pay Forefront violates Ohio statutory and common law. (See Doc. 4.)

The Complaint alleges six causes of action against SARIX and Alouette: (1) violation of Ohio Revised Code ("O.R.C.") § 1335.11; (2) breach of contract; (3) promissory estoppel; (4) unjust enrichment; (5) equitable lien (also against Silfex); and (6) declaratory judgment (also against Silfex). (Doc. 4.) Forefront acknowledged to the State Court that Silfex is merely "a nominal defendant in this action solely for purposes of attaching money that may become due and owing to Defendant" SARIX. (Doc. 6 at PAGEID # 670.)

On November 1, 2019, Forefront filed the Complaint, along with a motion for pre-judgment attachment, in the Montgomery County Court of Common Pleas. (Doc. 4; Doc. 1-4 and 1-5 at PAGEID # 291-326.). Attached to the motion for pre-judgment attachment was an Affidavit from Paul Nold, Forefront's President ("Mr. Nold"). (Doc. 1-4 at PAGEID # 307-26.) That same day, Hon. Dennis J. Adkins of the Montgomery County Court of Common Pleas entered an Order granting Forefront's motion for pre-judgment attachment (the "Attachment Order"). (Doc. 1-5 at PAGEID # 327-330.) The Attachment Order was entered ex parte, without providing prior notice to the Defendants or conducting a hearing. It states, in part, the following:

Upon consideration of Plaintiff's Motion for Pre-judgment Attachment, with affidavits attached, and pursuant to Ohio Revised Code § 2715.45, and for good cause shown, the Court hereby finds that there is probable cause to support Plaintiff's Motion for Pre-judgment Attachment and that Plaintiff will suffer irreparable injury if the Order for Pre-Judgment Attachment is delayed until the Defendants against whom the motion has been filed have been given the opportunity for a hearing. ... Any authorized levying officer ... shall attach the following property of the Defendants: moneys in the possession or control of Silfex, Inc., located at 950 South Franklin St. Eaton, Ohio 45320, that is or will be due to be paid to SARIX and/or Alouette for the purchase of SX200L machinetool Nos. 20 through 23. Such officer shall attach this property by delivering a copy of the Order to Silfex. Silfex may deliver the attached proceeds to the Court as they become due to be held in escrow or Silfex may hold those proceeds in escrow itself until further order of This Court. ... The property subject to this Order of pre-judgment attachment can be recovered by the Defendants by the filing of a bond pursuant to Ohio Revised Code § 2715.10 or 2715.26. Plaintiff is not required to file a bond in this case because the Defendants against whom the motion has been filed are not residents of this state and are foreign corporations.

(Doc. 1-5 at PAGEID # 327-30.)

Thus, the Attachment Order does not specify a dollar figure for attachment, but rather attaches all "moneys" in the possession or control of Silfex due, or will be due, to be paid to SARIX and/or Alouette for the purchase of Machines 20, 21, 22, and 23.⁵ According to Silfex's January 6, 2020 Notice, that is equivalent to $1,212,963.80. (Doc. 13.)

On November 3, 2019, counsel for Forefront filed a Praecipe asking the Clerk of the Court for the Montgomery County Court of Common Pleas to issue to the Defendants copies of Forefront's motion for pre-judgment attachment (with its attached affidavit), the Attachment Order, and a notice that an order of attachment was issued and defendants had the right to a hearing on the matter. (Doc. 1-5 at PAGEID # 336-38.) On November 4, 2019, that Clerk of the Court issued a Notice and Request for Hearing Form. (Doc. 1-5 at PAGEID # 331-35.) On November 13, 2019, Alouette filed the Motion in State Court. (Doc. 5.) On December 3, 2019, after the State Court had set a hearing, but before ruling on the Motion, Alouette removed the case to this Court.⁶ (Doc. 1.)

Alouette attached affidavits from Mr. Brogan (its President) to the Motion and the Reply. (Doc. 5 at PAGEID # 667-668; Doc. 9-1 at PAGEID # 696-97.) Mr. Brogan testified that Alouette is a distributor for SARIX in the United States. (Doc. 5 at PAGEID # 667.) His affidavits demonstrate that Alouette is a relatively small entity with "average annual revenue from sales within the United States rang[ing] from $3.5 million to $5.5 million," liquid assets in the U.S. in excess of $300,000, and total assets in the U.S. in excess of $800,000. (Id. at PAGEID # 668.) Silfex's January 6, 2020 Notice states that, once Silfex receives and accepts all of the machines, itwill owe a total of $1,212,963.80 to be paid "to Alouette." (Doc. 13.)

II. ANALYSIS

In the Motion, Alouette requests that the Court discharge or modify the Attachment Order. (Doc. 5 at PAGEID # 658.) Alouette argues that the Attachment Order should be discharged or modified for two reasons: (1) Forefront does not face a threat of irreparable harm; and (2) Forefront has not demonstrated probable cause for the attachment. (Id.) Conversely, Forefront argues that the Attachment Order should remain in place, as is. (Doc. 8 at PAGEID # 673.)

A. Standards for Discharging or Modifying an Attachment Order

Federal Rule of Civil Procedure 64 provides, in part, that, "[a]t the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment." FED. R. CIV. P. 64.⁷ "Ohio permits attachment against a defendant's property 'in a civil action for the recovery of money, at or after its commencement,' upon any of the grounds specified in" O.R.C. § 2715.01. Swartz v. Di Carlo, No. 1:12CV3112, 2014 WL 1493352, 2014 U.S. Dist. LEXIS 51933, at *3 (N.D. Ohio April 15, 2014) (quoting O.R.C. §...