Marion T LLC v. Formall Inc., CAUSE NO. 1:12-cv-00456-SLC
| Decision Date | 29 March 2018 |
| Docket Number | CAUSE NO. 1:12-cv-00456-SLC |
| Parties | MARION T LLC, Plaintiff, v. FORMALL INC., Defendant |
| Court | U.S. District Court — Northern District of Indiana |
MARION T LLC, Plaintiff,
v.
FORMALL INC., Defendant
CAUSE NO. 1:12-cv-00456-SLC
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA FORT WAYNE DIVISION
March 29, 2018
OPINION AND ORDER
Plaintiff Marion T, LLC ("Marion T"), filed this suit against Defendant Formall, Inc. ("Formall"), claiming that Formall converted certain spare parts, miscellaneous items, and bus duct owned by Marion T and located in Marion T's facility.1 Formall, in turn, advances a counterclaim of conversion against Marion T, claiming that Formall was the rightful owner of this equipment and that Marion T wrongfully withheld a portion of the bus duct from Formall. On March 30, 2017, the Court entered an Opinion and Order on Formall's motion for summary judgment, identifying the issues that remained for trial: (1) whether Formall removed from the Marion T facility certain spare parts and miscellaneous items that Marion T owned; and (2) whether Formall removed from the Marion T facility a portion of the bus duct that Marion T owned, or conversely, whether Marion T withheld from Formall a portion of the bus duct that Formall owned.
These Findings of Fact and Conclusions of Law follow a three-day bench trial held on
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June 26-28, 2017, on the parties' competing claims of conversion. (DE 116-DE 118). Following the preparation of a transcript (DE 119-DE 121),2 the parties submitted proposed findings of fact and conclusions of law (DE 124-DE 125). Formall timely filed a response (DE 126) to Marion T's proposed findings of fact and conclusions of law. Marion T, however, did not file a response to Formall's proposed findings of fact and conclusions of law, and its time to do so has passed. (See DE 123).
After examining the entire record, considering the arguments of counsel, and determining the credibility of the witnesses, the Court makes the following Findings of Fact and Conclusions of Law in accordance with Federal Rule of Civil Procedure 52(a) based upon a preponderance of the evidence.
Lester Lee ("Lee") was the manager of Marion T at the time of the events pertinent to this suit, and he testified on Marion T's behalf.4 (Tr. 25). Lee, who has a high school
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education, has started and owned more than 100 companies, including Lee's Inns of America, a public company with 400 employees; gold mine operations in Yukon territory; and oil wells in Kentucky. (Tr. 19, 21). Some of his past businesses involved setting up offices internationally, including in Russia. (Tr. 21).
In March 2005, Marion T purchased for one dollar the former "Thompson/RCA" television factory site in Marion, Indiana, including the industrial manufacturing building in which the equipment in dispute was housed.5 (Tr. 22, 32, 44; DE 113 Stip. 1). The site was 62 acres and had over one million square feet under roof. (Tr. 22). Thompson/RCA left everything except patentable items because the equipment and parts had become obsolete.6 (Tr. 22, 28, 44). Marion T's business at the facility consisted of salvaging items from the former operations of Thompson/RCA. (Tr. 44-45).
In December 2008, Marion T entered into a Lease Agreement ("the TriEnda Lease") with TriEnda, LLC ("TriEnda"), a plastic pallet manufacturing company, leasing 183,808 square feet of the Marion T facility to TriEnda for a term of four and a half years. (DE 113 Stip. 4; Ex. 6; Tr. 26-27). TriEnda was the only tenant at the time. (Tr. 239). TriEnda paid $2.50 per square foot per year, received the first six months rent free, and TriEnda was to pay
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the utility bills, the maintenance, the taxes, and any expenditures that the building would need.7 (Tr. 26-27; Ex. 6).
The portions of the TriEnda Lease applicable to this dispute are, in relevant part:
Article 7. CARE OF PREMISES. . . . At the expiration of this Lease or any extensions hereof, Tenant shall surrender the Leased Premises, including any alterations, improvements and/or additions to the Leased Premises made by Tenant which are required to be left at the termination of this Lease . . . .
Article 11. FIXTURES. Any trade fixtures belonging to and installed by Tenant in the Leased Premises prior to or during the term of this Lease, or any extensions hereof, are to be and remain the property of the Tenant, no matter how they may be attached to or incorporated in the Leased Premises, and Tenant shall have the duty to remove same at the termination of this Lease, or any extensions hereof, and to repair, at its own expense, any damage to the Leased Premises caused by the installation or removal of such fixtures. Trade fixtures shall be manufacturing equipment and electrical wiring back to the first junction box or electrical service feed.
Article 12. TENANT IMPROVEMENTS. Tenant may make such alterations to the Leased Premises as necessary for conduct of its business, after submission of plans, specifications and contracts to Landlord. Any existing equipment or metals removed in the course of such improvement shall remain the sole property of Landlord. All improvements (other than trade fixtures) inure to the benefit of Landlord.
(Ex. 6 (emphasis added)).
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TriEnda installed three large thermoformers—two of which were Brown thermoformers—into the leased space at the Marion T facility. (Tr. 107, 266, 272). Thermoformers are very complicated pieces of machinery with anywhere from 5000 to 10,000 parts, components, and pieces. (Tr. 265). Only one other Brown thermoformer of similar size existed in the world. (Tr. 272, 367). Each Brown thermoformer installed at the Marion T facility was roughly the size of a 3000 to 5000 square foot home with a footprint of about 100 feet by 100 feet and 22 feet tall. (Tr. 266).
Thermoforming in general, and the Brown thermoformers in particular, require a lot of power.8 (Tr. 268). Lee testified that the Marion T facility already had three substations, six powerhouses, transformers, and equipment that would service a large voltage and amps, but that TriEnda had additional electrical equipment installed. (Tr. 27-28). In particular, and most relevant to this dispute, Lee testified that TriEnda had bus duct9 installed—which cost $203,000 at the time—to connect the two Brown thermoformers to the building's power source.10 (Tr. 27-28, 67-69, 107, 187). The third thermoformer, a Maac, required wiring, but no bus duct. (Tr. 107, 185-86).
Lee testified that although Marion T still had about 800,000 square feet of its own
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space at its disposal, Marion T stored certain equipment or items of value in an "east parts room" located within the space that it had leased to TriEnda. (Tr. 99-100, 137). Lee stated that he left the items there with TriEnda's permission because the items were out of the way and because it took a while to move some of them out. (Tr. 99-100, 137). However, at the trial between Marion T and TME in 2014 (DE 40), Lee was asked, "Was there was anything besides assets that TriEnda has brought to the facility and in the TriEnda spare part room?" to which, Lee responded, "Well, TriEnda leased it, and TriEnda, I assume, brought the parts there." (Tr. 138).
Jim Jones ("Jones"), Lee's property manager at Marion T, also testified. Jones, who has a high school education, had worked at Thompson/RCA for 27 years until it closed down. (Tr. 203-04). After that, he worked for Marion T, first doing demolition work and later as the site's property manager. (Tr. 204, 206). Jones testified that when TriEnda leased the space in 2007, there were still some "skids that had stuff on it," which included brass valves and similar parts that Marion T had salvaged from the Thompson/RCA operations. (Tr. 251-52). At his deposition, however, Jones testified that the Marion T facility was "[p]retty much vacant" when TriEnda leased the space in 2007, and that there were no equipment or parts left from Thompson/RCA that TriEnda had not used.11 (Tr. 251-52).
TriEnda's business venture eventually failed, and its assets were sold in a secured party
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sale to Spara LLC, which later became known as Lexington Logistics ("Spara/Lexington"). (DE 113 Stips. 2, 3). Spara/Lexington refused to pay rent on the Marion T facility and was later joined as a party to a lawsuit brought against TriEnda. (DE 113 Stip. 3). As part of a plant-wide liquidation, Spara/Lexington contracted TME to sell all of the former TriEnda assets and equipment located in the Marion T facility. (DE 113 Stip. 4). Plastic pallet manufacturing equipment is large and has a limited market. (Tr. 266, 272; DE 113 Stip. 5).
TME eventually purchased the former TriEnda assets from Spara/Lexington for $1.5 million. (DE 113 Stip. 4). TME then worked to find a plastic pallet maker who might buy the former TriEnda assets. (DE 113 Stip. 4). The TriEnda equipment remained in the Marion T facility while TME's owner and president, Donald Kruschke ("Kruschke"), solicited buyers for the equipment. (DE 113 Stip. 4).
In February 2012, Kruschke started negotiating with Formall, a Tennessee-based custom manufacturer specializing in plastic thermoforming, sheet extrusion, metal fabrication, powder coating, and assembly, to purchase a portion of the TriEnda equipment that TME had purchased. (DE 113 Stip. 6; Tr. 272). Formall makes some of the biggest parts of any company in the thermoforming industry. (Tr. 265). Christopher Krohn ("Krohn"), Formall's director of operations, testified on Formall's behalf at the trial.12 (Tr. 260, 269). Formall, which has about 200 employees, is owned by Krohn's family, but Krohn himself has no ownership in the company. (Tr. 260, 269). Krohn has worked for Formall for about 20 years
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