GL Industries of Michigan v. Forstmann-Little

• Decision Date: 14 January 1991
• Docket Number: No. NA90-96-C.,NA90-96-C.
• Citation: 800 F. Supp. 695
• Parties: GL INDUSTRIES OF MICHIGAN, INC., d/b/a United Plastics Company, and George Levy, Plaintiffs, v. FORSTMANN-LITTLE, F.L. Industries, F.L. Plastics Co., Inc., and ITT Corporation, Defendants.
• Court: U.S. District Court — Southern District of Indiana

800 F. Supp. 695

GL INDUSTRIES OF MICHIGAN, INC., d/b/a United Plastics Company, and George Levy, Plaintiffs, v. FORSTMANN-LITTLE,¹ F.L. Industries, F.L. Plastics Co., Inc., and ITT Corporation, Defendants.

No. NA90-96-C.

United States District Court, S.D. Indiana, New Albany Division.

January 14, 1991.

Jared P. Buckley, Scott W. Rooney, Charfoos & Christensen, P.C., Detroit, Mich., Steven Robison, Montgomery, Elsner & Pardieck, Seymour, Ind., for GL Industries.

Kenneth W. Maher, Michael O. Ellis, Cromer, Eaglesfield & Maher, Indianapolis, Ind., Allen Kezbom, Jane Wasman, Joel Herz, Fried, Frank, Harris, Shriver & Jacobson, New York City, for Forstmann-Little, F.L. Industries and F.L. Plastics.

William C. Barnard, Frank J. Deveau, Donald C. Biggs, Sommer & Barnard, Indianapolis, Ind., for ITT Corporation.

BARKER, District Judge.

Plaintiffs GL Industries and George Levy filed a complaint against defendants Forstmann Little & Co. ("Forstmann Little"), F.L. Industries (FLI) and F.L. Plastics Co., Inc. ("Plastics") (collectively, the "FL defendants"), and ITT Corporation ("ITT") on June 27, 1990, in the Jackson County Circuit Court. This lawsuit was removed to federal court on July 20, 1990. Currently before the court are the following motions: a motion to dismiss filed by defendant Forstmann Little on August 27, 1990, a motion to dismiss filed by the FL defendants on August 27, 1990, motions to strike a jury demand and to dismiss filed by ITT on September 10, 1990, and plaintiffs' motion to amend their complaint, filed October 29, 1990.

I. Background

According to the complaint, plaintiff G.L. Industries is a Michigan corporation whose C.E.O. is plaintiff George Levy, a Michigan resident. United Plastics Company, also a Michigan corporation, operates facilities in Medora, Indiana, and Bainbridge, Georgia, and is in the business of manufacturing plastic molding parts. G.L. Industries bought the Medora and Bainbridge facilities, assets of United Plastics Company, from the FL defendants by an Asset Purchase Agreement (the "Agreement") on or about June 26, 1986. The negotiations preceding this sale apparently began in April, 1986. Affidavit of George Levy, p. 1.

The complaint alleges that these Medora and Bainbridge facilities were under the exclusive control of the FL defendants as well as Plastics' parent company, defendant Forstmann Little, from June 26, 1985, to June 26, 1986. Complaint, para. 11. Prior to June 26, 1985, the facilities were under the control of defendant ITT. Complaint, para. 12.

Forstmann Little and the FL defendants paint a different picture of the relationship between the defendants. Forstmann Little submitted the affidavit of Louis D. Mattielli, vice president and general counsel of FLI. Mattielli testified that FLI is a wholly-owned subsidiary of FL Industries Holdings, Inc. ("FLI Holdings"), a closed corporation formed in 1985 "whose sole asset was FLI and whose shareholders were two New York general partnerships and a foreign corporation." Mattielli Affidavit, p. 2. FLI acquired various assets, including the Medora manufacturing facility, from ITT on June 28, 1985, and placed those assets in a wholly-owned subsidiary which FLI named "United Plastics Company, Inc." ("UPC") Id. UPC remained a subsidiary of FLI until June 25, 1986. Id. On that date, UPC's assets, including its name, were sold to plaintiff G.L. Industries. Id. With the sale of the assets, UPC's name was changed to FL Plastics Co., Inc. (the defendant Plastics). Id. Plastics "remained in existence as a wholly-owned subsidiary of FLI to retain any residual assets and liabilities of UPC not sold to GL Industries." Id. Mattielli also states that Plastics was dissolved in October, 1989, with FLI succeeding to its liabilities. Id. at p. 3. Mattielli denies that Forstmann Little was ever the parent of or ever had any ownership interest in FLI, Plastics, or UPC. Id. See also Defendant Forstmann Little & Co.'s Memorandum of Law in Support of Motion to Dismiss, p. 4.

Count I of the plaintiffs' complaint is titled "General Allegations." In addition to various pieces of background information, this count contains allegations that each of the defendants caused environmental contamination at the Medora and Bainbridge facilities which eventually resulted in the shutdown of those facilities with resulting economic losses to the plaintiffs. The plaintiffs also allege in this count that the fraudulent misrepresentations of Forstmann Little and the FL defendants caused the plaintiffs to spend substantial amounts of money in remedying environmental conditions at the facilities and to shutdown these facilities because of unspecified economic conditions known to these defendants prior to the sale to the plaintiffs. This count also charges ITT with having failed to alert "prospective purchasers" of the extent of environmental contamination of the facilities. Complaint, para. 19. Paragraph twenty of the complaint states:

"That the fraudulent misrepresentations on the part of the Defendants ... have resulted in intentional interference of business relationships and business expectancy on the part of the Plaintiffs, ... and that such fraudulent misrepresentations have resulted in severe and permanent economic damage to said Plaintiffs...."

Count II of the complaint names FLI and Forstmann Little as parties to the June 26, 1986 Agreement to sell the UPC assets. The plaintiffs allege that the Agreement included provisions whereby FLI, Plastics, and Forstmann Little agreed to indemnify the plaintiffs for all environmental costs they incurred. The plaintiffs claim they have incurred and will in the future continue to incur such costs, for which they seek indemnification under the Agreement.

Count III charges Forstmann Little and the FL defendants with having fraudulently misrepresented to the plaintiffs the extent of environmental contamination at the Medora facility and the clean-up costs. This count also contains allegations that these same defendants misrepresented in some way the state of manufacturing contracts for goods at the Medora and Bainbridge facilities. The plaintiffs claim that as a result of these defendants' misrepresentations and contamination of the Medora facility, the Medora facility is unmarketable, and the Bainbridge facility apparently was sold at "substantial loss." Complaint, para. 33.

Count IV is a RICO count, charging all of the defendants except for ITT with conducting a scheme of fraudulent misrepresentation by means of mail, wire, and interstate commerce in order to sell to the plaintiffs the defective assets of UPC.

Count V is directed at defendant ITT and charges that defendant with fraud for failing to inform "prospective purchasers" about the extent of environmental contamination at the Medora facility, and possibly at the Bainbridge site, although this is unclear from the complaint. Complaint, para. 46. The plaintiffs claim to have relied upon these fraudulent omissions in their purchase of the two facilities, to their detriment.

Count VI seeks recovery under § 107 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9607, for response costs expended for the environmental contamination at the Medora facility from ITT. Likewise, Count VII is also a CERCLA recovery action, with this count naming the FL defendants.

Counts VIII and IX are both captioned "Business Expectation and Reputation Loss as Against Defendant, F.L. Industries, Inc.," although each count names Plastics as well as FLI. Count VIII alleges that false statements made to GL Industries by these defendants resulted in false future business expectations on the part of GL Industries, causing GL Industries to suffer economic loss, damage to its business reputation, and damage to "its expectation of future profitability in business ventures...." Complaint, para. 60. Count IX makes the same allegations of misconduct, here detrimentally relied upon by plaintiff George Levy. The plaintiffs end their complaint with a jury demand.

The plaintiffs have withdrawn Counts IV (the RICO count) and IX (Levy's business expectations, etc.). Plaintiffs' Response to F.L. Defendants' Motion to Dismiss, p. 2. The court notes that the plaintiffs added a qualification in their accompanying brief that such withdrawal was with respect to the FL defendants. Plaintiffs' Memorandum of Law in Support of Response to F.L. Defendants' Motion to Dismiss, p. 2. However, Forstmann Little is not named in Count IX of the complaint, and the plaintiffs refer to the RICO count as having been withdrawn in their Brief in Support of Plaintiffs' Response to Defendant, Forstmann-Little sic & Co.'s Motion to Dismiss, p. 16. Accordingly, the court finds that these counts are withdrawn entirely.

II. Discussion

In reviewing the various motions to dismiss, the court will accept as true all well-pleaded facts. However, the court "will not strain to find inferences favorable to the plaintiffs" which are not contained within the complaint. Coates v. Illinois State Board of Educ., 559 F.2d 445, 447 (7th Cir.1977). Moreover, "merely stating ... conclusions ... does not make the allegations in the complaint sufficient. The plaintiffs' characterization of events must be consistent with the facts alleged in the complaint." Jones v. Lampe, 845 F.2d 755, 758 (7th Cir.1988).

A. Motions of Defendant ITT

ITT has moved to strike the plaintiffs' jury demand with respect to count VI of the complaint, which seeks recovery of response costs under CERCLA § 107. Numerous cases cited by ITT support the proposition that the relief provided for in CERCLA § 107 is equitable in nature as a consequence of which there is no entitlement to a jury: United States v. Northernaire Plating Co., 685 F.Supp. 1410, 1413 (W.D.Mich.1988), aff'd 889 F.2d 1497 (6th Cir.1989), cert. denied, 494 U.S. 1057, 110 S.Ct. 1527, 108 L.Ed.2d 767; Wehner v. Syntex Corp., 682 F.Supp. 39,...