Implement Service, Inc. v. Tecumseh Products Co.

• Decision Date: 14 December 1989
• Docket Number: No. IP 88-849-C.,IP 88-849-C.
• Citation: 726 F. Supp. 1171
• Parties: IMPLEMENT SERVICE, INC., Plaintiff, v. TECUMSEH PRODUCTS COMPANY, H.R.R. Zimmerman Company, Andy W. Zimmerman and Donald Struck, Defendants.
• Court: U.S. District Court — Southern District of Indiana

726 F. Supp. 1171

IMPLEMENT SERVICE, INC., Plaintiff, v. TECUMSEH PRODUCTS COMPANY, H.R.R. Zimmerman Company, Andy W. Zimmerman and Donald Struck, Defendants.

No. IP 88-849-C.

United States District Court, S.D. Indiana, Indianapolis Division.

December 14, 1989.

COPYRIGHT MATERIAL OMITTED

Jonathan R. Builta, Sansberry, Dickman, Freeman & Builta, Anderson, Ind., for plaintiff.

Robert D. Kreisman, Kreisman and Rakich, Chicago, Ill., Richard Rocap, Rocap, Witchger & Threlkeld, Indianapolis, Ind., John A. Farr, Jr., Busby, Austin, Cooper & Farr, Anderson, Ind., for defendants.

ENTRY GRANTING DEFENDANTS' 12(b)(6) MOTION TO DISMISS AND MOTION FOR SUMMARY JUDGMENT

TINDER, District Judge.

This cause comes before the court on two motions. The defendants H.R.R. Zimmerman Company, Andy W. Zimmerman, and Donald Struck have moved to dismiss the complaint on grounds that it fails to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The defendant Tecumseh Products Company has moved for summary judgment pursuant to Rule 56.

A. Basis for Subject Matter Jurisdiction

This suit originated in an Indiana state court—the Madison County Superior Court. All of the defendants, except for Donald Struck, filed a petition for removal to federal court pursuant to 28 U.S.C. § 1441. Removal of a civil action which is based on state law is permitted under § 1441 only if there is complete diversity between the parties and no properly joined defendant is a citizen of the state in which the action is brought. Because one of the defendants, Donald Struck¹, is a citizen of the state of Indiana, removal would not be proper unless Struck had been improperly joined as a party defendant.

The remaining defendants assert in the verified petition for removal that Struck is an improperly-named defendant. In support of this assertion, they refer the court to the affidavit of Andy Zimmerman. According to Mr. Zimmerman, Donald Struck is an employee of Industrial Engine & Parts Division of H.R.R. Zimmerman. As an employee, Struck lacked the authority to enter into or cancel distributorship agreements on behalf of the company and did not participate in making these decisions. Because Struck played no role in the activities that gave rise to this lawsuit, he is an improperly joined defendant who should be dismissed from the case. The plaintiff concedes that Struck is not a proper party defendant. Plaintiff's Brief in Opposition to Motion to Dismiss, at 22.

As a result, this case is dismissed against Donald Struck. Following this dismissal, complete diversity exists between the parties and none of the defendants are citizens of Indiana, thereby conferring subject matter jurisdiction on this court. The removal of the suit to federal court under § 1441 was proper.

B. Factual and Procedural Background

The plaintiff, Implement Service, Inc. ("Implement Service"), is an Indiana corporation engaged in the wholesale and retail sale and service of lawn and garden equipment. As a substantial part of its business, Implement Service sells and services small engines and small engine parts.

Defendant Tecumseh Products Company ("Tecumseh") is a Wisconsin corporation that is one of three major American manufacturers of small engines and parts. To market and sell its products across the United States, Tecumseh enlists companies to serve as central warehouse distributors (CWD). Defendant H.R.R. Zimmerman Company ("H.R.R. Zimmerman") is one of these CWD's, serving the state of Indiana. As part of its distribution network, H.R.R. Zimmerman enters into agreements with retailers throughout the state of Indiana to provide them with Tecumseh products for sale to the public. These retailers become "Authorized Service Distributors" (ASD) for Tecumseh products. In turn, an ASD may enlist other retailers to serve as Registered Service Dealers (RSD).

Approximately nine years ago, Implement Service entered into a written agreement with H.R.R. Zimmerman to become an ASD. On May 27, 1988, Andy W. Zimmerman, the general manager of Industrial Engine & Parts, a division of H.R.R. Zimmerman, notified Implement Service that its ASD contract was being terminated effective thirty days later on June 27, 1988.

On June 27 or June 29, 1988,² Implement Service filed a complaint in the Madison County Superior Court seeking to prevent its termination as an ASD. The complaint was in three counts. Count I alleged deceptive franchise practices on the part of the defendants in violation of Ind.Code Ann. § 23-2-2.7-1(7) & 23-2-2.7-1(8) (Burns 1984 & 1989 Supp.), and sought an injunction against those practices. Count II alleged a bad faith termination of the plaintiff's franchise agreement in violation of the common law of the state of Indiana and sought an injunction against its termination. Count III alleged the defendants were illegally discriminating against the plaintiff in violation of the Ind.Code Ann. § 23-2-2.7-2 (Burns 1989 Supp.), and sought an injunction against this discrimination. Pursuant to plaintiff's motion, the Madison County Superior Court issued a temporary restraining order to prevent the termination of the plaintiff as an ASD for Tecumseh products.

On July 25, 1988, defendants Tecumseh, H.R.R. Zimmerman and Andy Zimmerman filed a verified petition for removal of the case from state court to federal court in the Southern District of Indiana. Tecumseh answered the complaint on August 16, 1988 by way of general admissions and denials and with the affirmative defense that there was no privity of contract between Implement Service and itself. Defendants H.R.R. Zimmerman, Andy Zimmerman and Donald Struck have filed a motion to dismiss for failure to state a claim upon which relief can be granted. Tecumseh has moved for summary judgment. The plaintiff opposes both the motion to dismiss and the summary judgment motion.

C. 12(b)(6) Motion to Dismiss

The standard by which this court evaluates a motion to dismiss is clear. A Rule 12(b)(6) motion admits the well-pleaded allegations of the complaint but denies their legal sufficiency. Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976). Dismissal for failure to state a claim is appropriate where a review of the complaint, taking all factual allegations in the complaint as true, reveals that no viable cause of action exists. Greene v. Finley, 749 F.2d 467, 468 (7th Cir.1984). "If a plaintiff ... pleads facts and the facts show that he is entitled to no relief, the complaint should be dismissed. There would be no point in allowing such a lawsuit to go any further; its doom is foretold." American Nurses' Ass'n v. Illinois, 783 F.2d 716, 727 (7th Cir.1986).

Importantly, however, the court is not required to accept as true any legal conclusions or conclusory allegations that are unwarranted by the pleaded facts. Murray v. City of Milford, Conn., 380 F.2d 468 (2d Cir.1967). The mere assertion of a right to recovery by the plaintiff is not enough to avoid a motion to dismiss if the facts pleaded are legally insufficient. See, e.g., Wright & Miller, 5 Fed.Prac. & Proc. § 1357, at 596-97 (1969).

Normally, a motion to dismiss is decided only on the basis of the pleadings, without recourse to evidentiary support. In this case, however, the plaintiff has attached two documentary exhibits to its complaint and one to its Brief in Opposition to the Motion to Dismiss and the defendant has attached several documentary exhibits to its Verified Petition for Removal.

In Beam v. IPCO Corp., 838 F.2d 242 (7th Cir.1988), the Seventh Circuit stated that:

if matters outside the pleadings are presented to and not excluded by the court in connection to a motion to dismiss for failure to state a claim, the district court is required to treat the motion to dismiss as a summary judgment motion. Failure to make this conversion and to provide litigants with appropriate notice to permit supplementation of the record can constitute reversible error.

Id. at 244 (citations omitted).

Not all "matters outside the pleadings" raise the Beam red flag, however. Documentary exhibits attached to the plaintiff's complaint—in this case, a copy of the distribution agreement and the letter of termination—pose no problem under Rule 12(b)(6) because a district court is entitled to consider exhibits attached to the complaint as part of the pleadings. Griswold v. E.F. Hutton & Co., 622 F.Supp. 1397, 1402-03 (N.D.Ill.1985). The defendants' submission of documentary exhibits, likewise, poses few problems. Two of the exhibits attached to the defendants' Verified Petition for Removal are copies of the exhibits that plaintiff attached to its complaint. Many others are copies of papers filed in the case while it was still in the state court. These filings are public records which may properly be considered by the court on a motion to dismiss. Wright & Miller, 5 Federal Practice & Proc. § 1357, p. 593 (1969). The affidavit of Andy W. Zimmerman is the only exhibit that cannot be considered on a 12(b)(6) motion without first converting the motion to dismiss into a motion for summary judgment pursuant to Beam. Because of this, the court has excluded Zimmerman's affidavit from consideration with respect to this motion.

The court, having reviewed the briefs submitted by the parties, the pleadings in the case (including the documentary exhibits which properly may be considered), and being duly advised, hereby GRANTS defendants' Motion to Dismiss with respect to all three counts of plaintiff's complaint.

1. Count I—Deceptive Franchise Practices

Count I of the complaint alleges that the ASD agreement between the plaintiff and H.R.R. Zimmerman contains provisions that are illegal under the Indiana Deceptive Franchise Practices Act. Specifically, the agreement contains a clause that purports to authorize H.R.R. Zimmerman, as the CWD, unilaterally to terminate the agreement with...