Ultra Mfg. v. Williamston Prods.
| Decision Date | 14 April 2022 |
| Docket Number | 21-12223 |
| Parties | ULTRA MANUFACTURING LIMITED, and ULTRA MANUFACTURING SA DE C.V., Plaintiffs/Counter Defendants, v. WILLIAMSTON PRODUCTS, INC., WPI DE MEXICO LLC, MICHAEL C. AZAR, and JACK FEDORCHAK, Defendants/Counter Claimants, v. FLAGSTAR BANK, Intervenor Defendant/Counter Claimant. |
| Court | U.S. District Court — Eastern District of Michigan |
Michael C. Azar and Jack Fedorchak ask to be dismissed from this larger dispute between various corporations and a bank. They explain that they are officers of the defendant corporations Williamston Products, Inc. and WPI de Mexico, LLC (collectively “WPI”), and that there are only two claims against each of them-for common law and statutory conversion. They believe this Court lacks subject-matter jurisdiction over the conversion claims and that Ultra Manufacturing Limited and Ultra Manufacturing SA de C.V. (collectively referred to as “Mitchell”) have failed to state a claim against them.
Because the Court disagrees with the officers on both counts, their motion to dismiss is denied.
Before their business relationship crumbled, WPI and Mitchell were part of the supply chain of various Ford automobiles. (See ECF No. 1, PageID.2.) In particular, WPI was the exclusive manufacturer of certain parts. (Id. at PageID.6.) And Mitchell used WPI's parts to produce assemblies, or semi-complete components of the car. (Id. at PageID.7.) Mitchell then sold those assemblies to Ford. (Id.)
As part of this arrangement, Mitchell provided WPI with the tooling required to manufacture the parts Mitchell needed. (See ECF No. 1, PageID.6.) And the parties executed an agreement that confirmed that Mitchell maintained exclusive ownership of the tooling and could demand it back at any time. (ECF No. 1-4, PageID.54 ( ).)
Mitchell and WPI's relationship faltered in the summer of 2021. WPI apparently suffered severe financial difficulties and defaulted on its loan obligations to Flagstar Bank. (See ECF No. 1, PageID.7.) So in June 2021-and with Flagstar's blessing-Mitchell and WPI entered into an accommodation agreement. (Id.; see also ECF No. 1-6.) The agreement required WPI to continue producing parts for Mitchell through September 30, 2021, in exchange for additional funds. (ECF No. 1, PageID.7.)
Unfortunately, the accommodation agreement ultimately failed, too. Mitchell says that, on September 17th and 18th, WPI and the officers refused to release the promised parts unless Mitchell paid a roughly $350, 000 “hostage payment, ” which was “not permitted or required” under the accommodation agreement. .) Mitchell alleged that these funds would be used as severance payments for WPI's Mexican workforce and to generally meet costs as Flagstar withdrew from its relationship with WPI. (Id. at PageID.13.)
By September 20, Mitchell had had enough. It sent the officers a letter demanding-by 2 p.m. that day-immediate release of the finished parts and a commitment to finish the final days of production required under the accommodation agreement. (ECF No. 1, PageID.15; ECF No. 1-9.) And, if they would not agree to those terms, Mitchell said it “demand[ed] immediate release of its tooling” that day. (ECF No. 1-9, PageID.133-134.)
Apparently hearing nothing in response, Mitchell filed this lawsuit against WPI and the officers the following day. (ECF No. 1.) It also sought an emergency temporary restraining order seeking both the finished parts and the tooling. (See ECF Nos. 1, 2.) In time, the parties resolved the emergency motion by stipulation. (ECF No. 27.) WPI promised to release all of the parts and tooling in exchange for dismissal of the claims against the officers. (Id. at PageID.724.)
But Mitchell never got all of its tooling back. (ECF No. 30, PageID.738-739; ECF No. 38, PageID.896-898.) The parties dispute what happened. The officers say that when Mitchell came to pick up the tooling, it did not have enough space on its trucks for the final two pieces, essentially abandoning them. (ECF No. 30, PageID.738.) Mitchell says that WPI and the officers refused to release the final two pieces of tooling until Mitchell made the hostage payment. (ECF No. 38, PageID.896-898.) For now, it suffices to say that-for whatever reason-Mitchell does not have all of its tooling, so the officers cannot be dismissed based on the stipulation.
So, seeking the same ends by different means, the officers filed this motion to dismiss. (See ECF No. 30.) Their motion makes three arguments: (1) that the Court lacks subject-matter jurisdiction because Mitchell's injury (i.e., the loss of its tooling) was self-inflicted and so is not “fairly traceable” to the officers as is required for Article III standing; (2) that the Court lacks subject-matter jurisdiction because the tooling was seized by the workers when WPI's Mexican plant closed down, making this dispute moot; and (3) that Mitchell failed to state a claim for statutory or common law conversion against them. (ECF No. 30, PageID.741-746.)
The parties have provided substantial briefing that enables resolution of the motion without the need for further argument. See E.D. Mich. LR 7.1(f). For the reasons that follow, the motion to dismiss the officers is denied. (ECF No. 30.)
The Court begins, as it must, with the officers' attack on its subject-matter jurisdiction. Am. Telecom Co. v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007) (“Subject matter jurisdiction is always a threshold determination.”).
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) “may either attack the claim of jurisdiction on its face or it can attack the factual basis of jurisdiction.” Crugher v. Prelesnik, 761 F.3d 610, 613 (6th Cir. 2014) (citing Golden v. Gorno Bros., Inc., 410 F.3d 879, 881 (6th Cir. 2005)). A facial attack tests the pleading's sufficiency, not the veracity of its allegations. Stout v. United States, 721 Fed.Appx. 462, 465 (6th Cir. 2018). But a factual challenge requires the district court to “weigh the evidence and the plaintiff has the burden of proving that the court has jurisdiction over the subject matter.” Bowers v. Wynne, 615 F.3d 455, 457 (6th Cir. 2010) (citing Golden, 410 F.3d at 887). In such a case, the “court has broad discretion with respect to what evidence to consider in deciding whether subject matter jurisdiction exists, including evidence outside of the pleadings, and has the power to weigh the evidence and determine the effect of that evidence on the court's authority to hear the case.” Cartwright v. Garner, 751 F.3d 752, 759-60 (6th Cir. 2014) (citing United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994)).
Because the officers cite their own declarations, they appear to be making a factual attack. (ECF No. 30, PageID.745; see also ECF Nos. 30-2, 30-3.) But even assuming a factual attack, Mitchell has met its burden of establishing that the Court has subject-matter jurisdiction.
The officers say Mitchell lacks standing to pursue its claims against them, and that its claims are now moot because the tooling has been seized by WPI's workers and is no longer in WPI's possession. The Court will take each argument in turn.
To bring a case in federal court under Article III of the Constitution, a plaintiff must have standing. See Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). Standing requires, among other things, that the plaintiff has suffered an injury that is “fairly traceable to the challenged conduct of the defendants.” Ass'n of Am. Physicians & Surgeons v. United States Food & Drug Admin., 13 F.4th 531, 537 (6th Cir. 2021). More specifically, traceability requires a “causal connection between the injury and the conduct complained of.” Glennborough Homeowners Ass'n v. United States Postal Serv., 21 F.4th 410, 416 (6th Cir. 2021).
At the pleading stage, this burden is “relatively modest” and “harms that flow indirectly from the action in question can be said to be fairly traceable to that action for standing purposes.” See Buchholz v. Meyer Njus Tanick, PA, 946 F.3d 855, 866 (6th Cir. 2020) (internal quotation marks omitted). Even so, a “self-inflicted injury, by definition, is not traceable to anyone but the plaintiff.” Id. But an injury is considered self-inflicted “only when the injury is so completely due to the plaintiff's own fault as to break the causal chain.'” Krueger v. Experian Info. Sols., Inc., No. 20- 2060, 2021 WL 4145565, at *2 (6th Cir. Sept. 13, 2021) (quoting Buchholz, 946 F.3d at 866).
Mitchell has satisfied its “relatively modest” burden here. See Buchholz, 946 F.3d at 866. As to the challenged conversion claims, the complaint says that Mitchell had a right to immediate possession of its tooling, demanded the tooling from WPI and the officers, and that WPI and the officers refused to release it. (ECF No. 1, PageID.21.) That is enough to create the necessary causal link between Mitchell's injury (the loss of the tooling) and the officers' alleged wrongful conduct (failing to return or withholding the tooling despite Mitchell's demand and, later, this Court's order).
Resisting this conclusion, the officers ask this court to dismiss the claims against them based on their version of the facts that Mitchell's injury is “entirely of its own making.” (ECF No. 30, PageID.745.) And, referencing their own declarations, the...
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