Steelcase, Inc. v. Mar-Mol Co., Inc.

• Decision Date: 30 April 2002
• Docket Number: Case No. 1:01-CV-678.
• Citation: 210 F.Supp.2d 920
• Parties: STEELCASE, INC., Plaintiff, v. MAR-MOL CO., INC., et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

Page 920

210 F.Supp.2d 920

STEELCASE, INC., Plaintiff, v. MAR-MOL CO., INC., et al., Defendants.

Case No. 1:01-CV-678.

United States District Court, W.D. Michigan, Southern Division.

April 30, 2002.

Jon G. March, William M. Hohengarten, Washington, DC, for Plaintiff.

J. Terrance Dillon, Grand Rapids, MI, Jonathan P. Graham, Washington, DC, for Defendants.

OPINION

QUIST, District Judge.

Plaintiff, Steelcase, Inc. ("Steelcase"), has sued Mar-Mol Co., Inc. ("Mar-Mol"), Vensavin, S.A. ("Vensavin"), and Savin Dominicana, C.X.A. ("Savin" and collectively with Mar-Mol and Vensavin the "Dealer Defendants"), Steelcase's former dealers in Puerto Rico, Venezuela, and the Dominican Republic; Hector Martinez Ramirez ("Martinez"), the chief executive officer and majority shareholder of each of the Dealer Defendants; and Grupo H.M. Corp. ("Grupo"), a corporation which, Steelcase alleges, is controlled by Martinez and exercises dominion and control over the business and affairs of the Dealer Defendants. Steelcase alleges claims for conversion, unjust enrichment, accounting/equitable tracing, breach of contract/price of goods, and breach of agreement to pay. Steelcase also requests a declaratory judgment confirming that it is entitled to terminate its dealer relations with the Dealer Defendants. Steelcase's claims arise, at least in part, out of an alleged scheme by Defendants to steal funds belonging to Steelcase by operation of assignment of various purchase orders. Now before the Court are Defendants' motion for judgment on the pleadings for lack of personal jurisdiction and improper venue or, alternatively, motion to transfer venue pursuant to 28 U.S.C. § 1404(a) and Steelcase's motion for leave to amend its complaint.

Facts and Procedural History

Steelcase is a Michigan corporation with its principal place of business in Grand Rapids, Michigan. Steelcase's primary business is the manufacture and sale of office furniture. Steelcase sells its products throughout the world through a network of independent dealers assigned to specified geographic areas. The dealers purchase products from Steelcase and resell them to end-customers. Mar-Mol is a Puerto Rico corporation and has been Steelcase's dealer for the geographic area of Puerto Rico since 1977. Vensavin is a Venezuela corporation and has been a Steelcase dealer for the geographic area of Venezuela since 1993. Savin is a Dominican Republic corporation and has been a Steelcase dealer for the geographic area of the Dominican Republic since 1996. Martinez is a resident of Puerto Rico, and Grupo is a Puerto Rico corporation. The place of incorporation of each corporate defendant is also its principal place of business.

In the early 1990's, Mar-Mol accumulated a substantial past-due balance on purchases of office furniture from Steelcase. On or about October 7, 1994, in order to address Mar-Mol's mounting debt, Steelcase and Mar-Mol entered into a work-out agreement which provided for an extended payment plan evidenced by several promissory notes secured by liens on all of Mar-Mol's assets. The work-out agreement provided that it was governed by Puerto Rico law. To prevent Mar-Mol from building up additional debt, Steelcase adopted new credit terms which required Mar-Mol to either: (a) pay 50% of the cost of the goods with the purchase order and the remaining 50% prior to shipment; or (b) assign to Steelcase the end-customer's purchase order, including all of Mar-Mol's rights under the purchase order.

Since 1997, Mar-Mol has guaranteed the majority of its purchases by assigning the purchase orders to Steelcase. The process of assignment begins when Mar-Mol's end-customer places a purchase order with Mar-Mol for Steelcase products. Mar-Mol then assigns the purchase order, including its right to payment, to Steelcase. The end-customer consents to the assignment, and the assignment documentation states that the end-customer should make payment to Steelcase. Steelcase then enters the assigned purchase order as an account receivable from the end-user. Because Steelcase's invoices are designed for billing dealers rather than distributors, Steelcase delivers its invoice to Mar-Mol and Mar-Mol acts on Steelcase's behalf to collect the payment from the end-customers. After receiving the invoice from Steelcase, Mar-Mol sometimes creates and delivers to the end-customer a summary invoice which directs that payment should be made to Steelcase. For its part, Mar-Mol receives a commission from Steelcase upon receipt of payment from the end-customer.

In spite of the assignment mechanism designed to avoid the build-up of substantial receivables from Mar-Mol to Steelcase, as of October 16, 2001, Mar-Mol's receivables account was $6,896,627. Steelcase alleges that it has discovered the reason Mar-Mol's unpaid receivables are so high: Mar-Mol has been collecting and retaining some or all of the amounts due on the purchase orders assigned to Steelcase while at the same time representing to Steelcase that it would seek to collect those receivables, despite its knowledge that the end-customers had already paid those amounts. An example cited by Steelcase in its complaint is the Atento de Puerto Rico ("Atento") account. Atento placed a purchase order with Mar-Mol in the amount of $460,000 on October 1, 1999, for Steelcase goods. The terms of the purchase required a 35% payment at the time the order was placed and payment of the remaining 65% within 60 days. Pursuant to the established procedure, Mar-Mol assigned the purchase order to Steelcase and notified Atento of the assignment. Steelcase filled the Atento order, prepared invoices to Atento for the order, and sent the invoices to Mar-Mol for collection from Atento. Steelcase alleges that Mar-Mol then prepared invoices in its own name directing Atento to make payment directly to Mar-Mol rather than Steelcase, as required by the assignment documentation. On or about October 4, 1999, Atento sent a check in the amount of $161,000 payable to Mar-Mol for the 35% deposit, which Mar-Mol endorsed over to Vensavin. On October 7, 1999, the check was deposited into Vensavin's account, and that same day, Vensavin issued a check to Steelcase in the amount of $100,000 to be applied to amounts Vensavin owed Steelcase for purchases by its end-customers. Also on that day, Vensavin issued a second check to Steelcase in the amount of $50,000. Mar-Mol directed Steelcase to apply $30,372.47 of that amount to its account for excise taxes on goods shipped to Puerto Rico and the remainder ($19,627.53) to the assigned Atento account. Mar-Mol subsequently received and retained three additional checks payable to Mar-Mol from Atento totaling $294,531.99. In October 2001, Atento sent Mar-Mol an additional check for $11,763.26 for the remaining balance of the purchase order, which Mar-Mol remitted to Steelcase. Thus, of the $460,000 Mar-Mol received on the assigned Atento purchase order, Steelcase received only $31,390.79. Steelcase alleges that the Atento account represents only one of several instances where Mar-Mol has converted funds belonging to Steelcase.

Steelcase filed this case on October 19, 2001. In Counts I though III, Steelcase asserts claims for conversion, unjust enrichment, and accounting/equitable tracing for recovery of amounts Mar-Mol allegedly received under the assigned purchase orders. In Count IV, Steelcase asserts a claim against Mar-Mol, Vensavin, and Savin for breach of contract to recover amounts due on goods sold by Steelcase to those Defendants in addition to the amounts received on the assigned purchase orders. Count V alleges a claim against Mar-Mol for breach of its agreement to reimburse Steelcase for funds advanced for excise taxes. Finally, in Count VI, Steelcase seeks a declaratory judgment confirming its right to terminate the Dealer Defendants.

On November 26, 2001, the Court held a hearing on Steelcase's emergency motion for preliminary injunction and expedited discovery. Steelcase's representatives attended the hearing in person and Martinez, represented by attorney Jose Hernandez Mayoral ("Hernandez"), attended by telephone. Before reaching the merits, the Court inquired about the basis for personal jurisdiction. Steelcase's counsel responded by pointing to various documents, including agreements, minutes of meetings in Michigan, and affidavits, as providing a basis for personal jurisdiction over Defendants in this Court. (11/26/01 Hr'g Tr. at 6-10.) Hernandez did not argue that there was no basis for personal jurisdiction over Defendants. He did argue, however, that venue was improper and indicated that Defendants would be filing motions to dismiss for improper venue or to transfer venue based upon the convenience of the parties and witnesses. (Id. at 6, 12.) Following the hearing, Martinez filed a motion to dismiss or transfer for improper venue and the Dealer Defendants and Grupo filed a separate motion to transfer venue. The Court ultimately struck both motions because Martinez filed his motion pro se and attempted to represent the corporate defendants after representing to the Court that attorney Hernandez would be appearing for all Defendants. Thereafter, Defendants retained their present counsel, and the Court allowed Defendants to file their answer. Defendants then filed the instant motion in which they request that the Court dismiss this case for lack of personal jurisdiction and/or improper venue, or, in the alternative, to transfer the case pursuant to 28 U.S.C. § 1404(a).

Discussion

I. Personal Jurisdiction¹

Defendants contend that this case must be dismissed because the Court lacks personal jurisdiction. Defendants assert that jurisdiction is lacking because they have not purposefully availed themselves of the privilege of acting in Michigan, Steelcase's claims do not arise from Defendants' activities in Michigan, and it would unreasonable for the Court to exercise jurisdiction over Defendants in light...