Murtech Energy Servs., LLC v. Comenco Sys., Inc.
| Decision Date | 24 June 2014 |
| Docket Number | No. 2:13-cv-12721,2:13-cv-12721 |
| Court | U.S. District Court — Eastern District of Michigan |
| Parties | MURTECH ENERGY SERVICES, LLC, Plaintiff, v. COMENCO SYSTEMS, INC., COMENCO (HANGZHOU) ENVIRONMENTAL EQUIPMENT CO., LTD., and RAYMOND HSU, Defendants. |
Hon. Gerald E. Rosen
Presently before the Court are several related motions concerning service of process and jurisdictional issues: (1) Defendants' Motion to Quash Service and for Dismissal for Lack of Personal Jurisdiction (Dkt. # 19); (2) Plaintiff's Motion to Conduct Personal Jurisdiction Discovery (Dkt. # 34); and (3) Defendants' Amended Motion to Quash Service (Dkt. # 37).1 All of these motions have been copiously briefed. Without exhibits, the parties' submissions total over onehundred seventy pages. That number jumps to just under one thousand pages when exhibits are included.2 Having reviewed and considered all of these materials and the entire record of this matter, the Court has determined that the relevant allegations, facts, and legal arguments are adequately presented in these written submissions, and that oral argument would not aid the decisional process. Therefore, the Court will decide these matters "on the briefs." See Eastern District of Michigan Local Rule 7.1(f)(2). The Court's Opinion and Order is set forth below.
Plaintiff Murtech Energy Services, LLC (Murtech) provides a variety of business startup and commissioning, program management, and sales representation services to other companies. (Plf's 2d. Am. Compl., Dkt. # 17, at ¶ 14). Defendant ComEnCo Systems, Inc. (ComEnCo) designs and manufactures custom design industrial processes and HVAC equipment. (Id. at ¶ 16). ComEnCo was one of Murtech's clients -- Murtech provided ComEnCo with sales forecasting, business planning, sales and marketing, and sales representation support. (Id. at ¶ 15). More specifically, Murtech became ComEnCo's exclusive sales representative for Ontario and Michigan in 2008. (Id. at ¶ 19). This salesrepresentative agreement generally provided that ComEnCo would pay Murtech a monthly "support payment," plus sales commissions. (Id.). As part of this agreement, Murtech was to also create and manage a sales representative network to sell ComEnCo's products in six additional states or provinces, as well as in Mexico. (Id. at ¶ 20).
For reasons not important to the instant motions, this business relationship soured. Murtech has now commenced this litigation and claims that Defendants are liable for over $5.7 million in damages. In addition to ComEnCo, Murtech has named two other Defendants: ComEnCo (Hangzhou) Environmental Equipment Company, Ltd. (Hangzhou) and Raymond Hsu (Hsu). Hangzhou is a Chinese Corporation and is ComEnCo's wholly-owned subsidiary. Hsu is ComEnCo's president, and is also a corporate officer of Hangzhou.3 He resides in Toronto and is a Canadian citizen.
Murtech's Second Amended Complaint pleads a variety of causes of action relating to four general issues: Defendants' failure to pay the monthly support payments and commissions; Defendants' failure to cooperate in setting up the sales representative network; Defendants' failure to refer certain sales to Murtech; and Hsu's representations to Murtech that ComEnCo was in financial distress while atthe same time using ComEnco's corporate accounts to fund personal and family expenses. Accordingly, Murtech pleads eight different causes of action against Defendants: Breach of Contract; Action on Account; Breach of Michigan's Sale Representatives' Commissions Act; Tortious Interference with Prospective Economic Advantage; Unjust Enrichment; Fraud/Fraudulent Misrepresentation; Promissory Estoppel; and Piercing of the Corporate Veil.
In lieu of answering Murtech's Complaint, Defendants have filed two related motions. (Dkt. ## 19, 37). First, all three Defendants claim that Murtech has not properly effectuated service. Second, Defendants Hangzhou and Hsu (but not ComEnCo) assert that this Court does not have personal jurisdiction over them. In addition to responding to Defendants' motions, Murtech has also moved to conduct jurisdictional discovery. (Dkt. # 34). As set forth below, this Court finds that Murtech has sufficiently perfected service of process and that limited jurisdictional discovery is appropriate.
It is Murtech's burden to demonstrate proper service. Byrd v. Stone, 94 F.3d 217, 219 (6th Cir. 1996). Murtech initiated this action on June 20, 2013. (Plf's Compl., Dkt. #1). It amended its Complaint on July 2, 2013 in response to this Court's Show Cause Order (Plf's Am. Compl., Dkt. # 7), and again on August 23,2013 by stipulation of the parties. (Plf's 2d. Am. Compl., Dkt. # 17). Murtech attempted to effectuate service on three separate occasions: (1) personally upon Hsu in June 2013 during a previously scheduled meeting between the parties in Troy, Michigan; (2) via international mail in August 2013 to ComEnCo's headquarters in Ontario, Canada; and (3) personally upon Hsu, ComEnCo, and Hangzhou, as well as via mail to the Chinese Central Authority for Hangzhou in November 2013. All three Defendants request that this Court quash these service efforts as improper. They first claim that Murtech accomplished the June 2013 service by trickery -- under the guise of luring Hsu to a meeting in Michigan for no other purpose than service. Defendants further claim that Murtech's second attempt did not comply with the Hague Convention's procedures governing international service of process and that the third should be quashed because the first so tainted every other attempt. As set forth below, the Court is satisfied that Murtech has met its burden to demonstrate proper service. It does so in some detail given that the service issues presented are more nuanced than developed by the parties' respective papers.
Defendants claim that Murtech lured Hsu to Michigan on June 24, 2013 for the sole purpose of effectuating service under the guise of a meeting to discuss outstanding debts related to a project with General Motors. When Hsu arrived atthis meeting -- which Murtech insisted occur in Troy, Michigan instead of their usual meeting place in Windsor, Canada -- he was escorted to a conference room and then served with the Complaint personally and on behalf of both companies. (Ex. A to Defs' Mtn., Dkt. # 19-2, at ¶¶ 9-13). Murtech's counsel then advised Hsu that Murtech would dismiss this litigation in exchange for monetary and other consideration. (Id. at ¶ 14). Unsurprisingly, Murtech vigorously disputes that the meeting was just a ruse to effectuate service and insists the meeting and service was proper. (Exs. 2 & 3 to Plf's Resp., Dkt. ## 27-3, 27-4).
The Sixth Circuit has not addressed the parameters in which a district court should quash a summons on the theory that a plaintiff accomplished service by ruse or trick. Other courts across the country and more specifically, courts in this district, have adopted a "bright-line" rule in situations where one party enters a jurisdiction for the purpose of engaging in settlement discussions or attending a proper business meeting and is then served with process. See, e.g., Voice Sys. Mktg Co. v. Appropriate Tech. Corp., 153 F.R.D. 117 (E.D. Mich. 1994) (Gadola, J.); K Mart Corp. v. Gen-Star Indus. Co., 110 F.R.D. 310 (E.D. Mich. 1986) (Cohn, J.). In K Mart, for example, Judge Cohn noted that judicial economy and good-faith settlement discussions dictate "a flat prohibition on service in such cases unless the plaintiff warns the defendant before he enters the jurisdiction that he may subject himself to process, or else when settlement talks fail the plaintiffmust give the defendant an opportunity to leave the jurisdiction before service is made." 110 F.R.D. at 313. Judge Cohn reasoned as follows:
Such a rule avoids inherently difficult determinations as to who initiated meetings, who relied on statements made by whom, and whether the plaintiff engaged in good faith settlement. Such a bright-line rule promotes good faith settlement, is efficient from a judicial standpoint, and serves to distance the courts from the possibility of trickery. A bright-line rule also obviates a determination of whether the plaintiff intended to file a complaint at the time the parties were arranging the settlement meeting.
Id. In short, such a rule "avoid[s] . . . the unpleasant and often impossible task of judging the inevitable swearing matches about who said what to whom." Id. at 314 (citation omitted).
This last observation especially rings true in this matter as the parties vigorously dispute the facts leading up to the June 24, 2013 meeting. At the least, it is clear that Cliff Murray, one of Murtech's members, emailed Hsu on June 19, 2013 at 5:25pm requesting that the meeting be moved from Windsor, Ontario to Troy, Michigan to accommodate Murtech's travel schedule -- Murtech had scheduled a meeting (possibly at Hsu's request) for earlier that morning with General Motors in Flint. (Ex. B to Defs' Mtn., Dkt. # 19-3). Murtech's counsel filed its eight-count, one-hundred forty paragraph Complaint less than 15 hours later at 8:17 am the very next morning. (Plf's Compl., Dkt. # 1). Murtech provided no warning that it would serve Hsu with process four days later at a meeting its counsel contemporaneously characterized as one "to discuss the statusof the ComEnCo/Murtech contract and past due charges." (Ex. A to Defs' Reply, Dkt. # 28-2). Nor did Murtech afford Hsu an opportunity to leave before service was made. Accordingly, for these reasons and those set forth by Judge Cohn in K Mart, the Court will quash Murtech's June 24, 2013 service.
The Court will not, however, grant Defendants' request to dismiss Murtech's Complaint with prejudice.4 It is this Court's general practice regarding improper...
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