J.L. Lewis & Assocs. v. Magna Mirrors of Am., Inc.

• Docket Number: 347057
• Decision Date: 21 December 2021
• Parties: J.L. LEWIS & ASSOCIATES, INC., Plaintiff-Appellant, v. MAGNA MIRRORS OF AMERICA, INC., and MAGNA MIRROR SYSTEMS MONTERREY S.A. DE C.V., Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

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J.L. LEWIS & ASSOCIATES, INC., Plaintiff-Appellant, v. MAGNA MIRRORS OF AMERICA, INC., and MAGNA MIRROR SYSTEMS MONTERREY S.A. DE C.V., Defendants-Appellees.

No. 347057

Court of Appeals of Michigan

December 21, 2021

UNPUBLISHED

Oakland Circuit Court LC No. 2017-161227-CB

Before: Riordan, P.J., and O'Brien and Swartzle, JJ.

ON REMAND

PER CURIAM

This case is before us on remand by our Supreme Court.^[1] Previously, we reversed the trial court's grant of summary disposition in favor of defendants, Magna Mirrors of America, Inc., and Magna Mirror Systems Monterrey S.A. de C.V. (collectively "Magna"), and against plaintiff J.L. Lewis &amp Associates, Inc., on both of plaintiff's breach-of-contract claims. In addition, we affirmed the trial court's grant of summary disposition in favor of Magna on plaintiff's statutory-conversion claim. For the reasons set forth below, we once again affirm the trial court's grant of summary disposition in favor of Magna on plaintiff's statutory-conversion claim and reverse the trial court's grant of summary disposition in favor of Magna on plaintiff's breach-of-contract claim concerning fraudulent concealment. However, on reconsideration, we now affirm the trial court's grant of summary disposition in favor of Magna on plaintiff's breach-of-contract claim concerning ownership of the patent at issue. Accordingly, we remand to the trial court for further proceedings as to plaintiff's breach-of-contract claim concerning fraudulent concealment.

I. FACTS AND PROCEEDINGS

In our previous opinion, we set forth the pertinent facts about this case:

Jimmie Lewis is the founder and owner of plaintiff, and alleged below that he is the inventor of what he referred to as the "Extendable Rearview Mirror," for which Lewis owned a number of patents. Lewis engaged in a license agreement whereby Magna was given the exclusive right to develop, manufacture, and sell the Extendable Rearview Mirror, and in exchange, Lewis would receive quarterly royalties on the sales. Under the terms of the license agreement, Magna was required to inform Lewis of any improvements made to the Extendable Rearview Mirror during the life of the license agreement so that Lewis could pursue patent protection of the improvements. Lewis eventually assigned his patents and his rights under the license agreement to plaintiff.

In 2017, the original patents expired and thereafter, in May 2017, Magna stopped making installment payments under the license agreement. Plaintiff does not contest that subsequent to the expiration of the patents, plaintiff was no longer owed royalties on sales pertaining to them. Plaintiff alleges however, that around that time, plaintiff discovered that Magna obtained a patent in 2009-U.S. Patent No. 7, 490, 946 (the '946 Patent)-"which built upon the concepts of the [Extendable Rearview] Mirror." Thereafter, in October 2017, plaintiff filed a complaint for breach of contract, common-law conversion, and statutory conversion.

Plaintiff contended that, under the terms of the license agreement, the '946 Patent automatically belonged to plaintiff when the patent issued in 2009 and became subject to the terms of the license agreement. Therefore, although plaintiff's underlying patents had expired, plaintiff was still owed quarterly royalties on sales pertaining to the '946 Patent and the failure of Magna to pay those royalties constituted a breach of contract. Plaintiff also alleged that Magna breached the license agreement by failing to inform plaintiff of the '946 Patent and related improvements to the Extendable Rearview Mirror sooner. Lastly, plaintiff claimed common-law conversion and statutory conversion for Magna's development of the improvements and filing of the '946 Patent without plaintiff's knowledge or consent, and for Magna's subsequent failure to pay royalties on the patent.

Magna filed for summary disposition pursuant to MCR 2.116(C)(7) and (C)(8). First, Magna claimed that the breach-of-contract claims were barred by the statute of limitations under MCR 2.116(C)(7). Magna argued that, with respect to the breach-of-contract claim for failing to inform plaintiff of improvements to the Extendable Rearview Mirror, to the extent that the breach occurred at all, it occurred at the latest when Magna filed for the '946 Patent in 2009. Because breach-of-contract claims are subject to a six-year statutory limitation period, that breach-of-contract claim was barred. With respect to the breach-of-contract claim for failure to pay royalties on the '946 Patent, Magna argued that plaintiff also failed to bring a suit to establish ownership of the '946 Patent within the statutory limitation period. Magna contended that plaintiff was time-barred from claiming ownership of the patent, and therefore could not claim that it was owed royalties for sales related to it. Next, Magna contended that plaintiff failed to allege actionable claims of common-law conversion and statutory conversion under MCR 2.116(C)(8). Specifically, Magna contended that, under Michigan law, actions in tort must be supported by legal duties independent from those arising out of contract. Magna contended that plaintiff's conversion claims were essentially breach-of-contract claims by another name.

Plaintiff responded that, with respect to the breach-of-contract claim for Magna's failure to pay royalties on the '946 Patent, plaintiff was not required to bring any action to establish ownership over the patent. Plaintiff contended that, under the terms of the license agreement, the patent was automatically assigned to plaintiff when it was issued. With respect to the breach-of-contract claim for Magna's failure to inform plaintiff of the alleged improvements to the Extendable Rearview Mirror, plaintiff contended that the statute of limitations period had been tolled by Magna's fraudulent concealment of the claim. Plaintiff noted that, although fraudulent concealment ordinarily must be supported by affirmative acts or misrepresentations, in this case, Magna owed a fiduciary duty to plaintiff to inform plaintiff of the improvements and the failure of Magna to do so constituted fraud. With respect to the conversion claims, plaintiff conceded that the common-law conversion claim was not supported by a duty distinctive from the obligations arising out of the license agreement, and agreed to dismissal of the claim. However, plaintiff argued that the same did not apply to the statutory conversion claim because statutory conversion is intended to provide cumulative remedies to other remedies available at law.

The trial court sided with Magna. The court held that the license agreement was insufficient to create an automatic transfer of the '946 Patent to plaintiff. Therefore, because the original breach of contract for failure to inform plaintiff of the alleged improvements occurred in 2009, and because plaintiff failed to bring a suit to claim ownership of the patent within the statutory limitation period following that alleged breach, both of plaintiff's breach-of-contract claims were barred by the statute of limitations. The trial court disagreed with plaintiff that the statutory limitation period was tolled by fraudulent concealment because plaintiff failed to establish that Magna had a fiduciary duty to inform plaintiff of the alleged improvements to the Extendable Rearview Mirror or the resulting patent. With respect to the conversion claims, the trial court agreed with Magna that plaintiff failed to establish any duty arising in tort separate and distinct from the duties that arose out of the license agreement. The trial court dismissed plaintiff's breach-of-contract claims under MCR 2.116(C)(7), and dismissed plaintiff's conversion claims under MCR 2.116(C)(8). [JL Lewis & Assoc, Inc v Magna Mirrors of Am, Inc, unpublished per curiam opinion of the Court of Appeals, issued April 23, 2020 (Docket No. 347057), at 1-3.]

Plaintiff appealed to this Court, and we reversed the trial court's dismissal of plaintiff's breach-of-contract claims but affirmed its dismissal of plaintiff's statutory-conversion claim.^[2] Id. at 1. With regard to the breach-of-contract claim for Magna's failure to pay royalties on sales pertaining to the '946 Patent, we concluded in Section II.A that "the trial court erred in determining that plaintiff was required to take some sort of legal action to assert an ownership in the '946 Patent" because "transfer of title in the patent and the underlying property interests occurred by operation of law when the invention was made and the patent was filed." Id. at 6. With regard to the breach-of-contract claim for Magna's failure to inform plaintiff of the alleged improvements to the Extendable Review Mirror, we concluded in Section II.B that "further factual development could provide a basis for plaintiff to establish that fraudulent concealment occurred," and as a result, plaintiff could maintain its claim notwithstanding that the alleged breach occurred when Magna acquired the '946 Patent in 2009. Id. at 7, 11. Finally, with regard to the statutory-conversion claim, we concluded in Section III that the trial court correctly dismissed the claim because "plaintiff did not allege any duty arising separately from plaintiff and Magna's contractual relationship." Id. at 12.

Magna sought reconsideration, which we denied. JL Lewis & Assoc, Inc v Magna Mirrors of Am, Inc, unpublished order of the Court of Appeals, entered July 21, 2020 (Docket No. 347057). Magna then sought leave to appeal in our Supreme Court, and that Court remanded this case to us for reconsideration:

On order of the Court, the application for leave to appeal the April 23, 2020 judgment of the Court of Appeals is considered and, pursuant to MCR 7.305(H)(1), in lieu of

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