The opinion of the court was delivered by: Honorable Patrick J. Duggan
At a session of said Court, held in the U.S. District Courthouse, Eastern District of Michigan, on March 31, 2010.
PRESENT: THE HONORABLE PATRICK J. DUGGAN U.S. DISTRICT COURT JUDGE
On May 26, 2009, Tool-Plas Systems, Inc. ("TPS"), filed this lawsuit alleging, among other things, that Camaco, LLC ("Camaco"), breached a contract between the parties and owes TPS $138,796. On June 15, 2009, Camaco filed an answer with affirmative defenses to Plaintiff's complaint. At that time, Camaco also filed six counterclaims against TPS. Presently before the Court is a Motion to Substitute Proper Party filed by TPS on December 22, 2009. The motion has been fully briefed and, pursuant to Eastern District of Michigan Local Rule 7.1(f)(2), the Court dispensed with oral argument on March 29, 2010. For the reasons set forth below, the Court grants TPS's motion.
I. Factual and Procedural Background
This case arises from an arrangement between the parties by which Camaco agreed to purchase three stamping dies produced by TPS. Camaco uses the dies to make seating components for Ford vehicles. On August 22, 2008, the parties entered into a written agreement requiring Camaco to pay TPS $668,510 for the three dies and providing that there would be "no set-offs or deductions other than those already identified" in a document attached to the agreement. (Compl. Ex. A.) Camaco ultimately paid TPS $529,714, leaving a balance on the contract of $138,796. TPS filed the present suit to recover that amount. Specifically, TPS's complaint alleges a breach of contract and conversion by Camaco. In addition to damages, TPS seeks judicial foreclosure, injunctive relief, and declaratory judgment.
Meanwhile, Camaco asserts that it was entitled to withhold $138,796 from TPS because one of the dies, the D1116 die, was delivered in a defective and deficient condition. Camaco alleges that it notified TPS of the deficiency but that TPS technicians could not make the necessary repairs. Camaco asserts that it paid another supplier, Uelner Precision Tools & Dies ("Uelner"), $138,796 to repair the die. Based on these allegations and other expenses allegedly incurred by Camaco during TPS's production of the D1116 die, Camaco responded to Plaintiff's complaint with an answer and several counterclaims. Specifically, Camaco alleges a breach of contract, breach of an express warranty, breach of an implied warranty of merchantability, breach of an implied warranty of fitness for a particular purpose, and unjust enrichment. Camaco seeks both damages and declaratory judgment. In November 2009, the Court granted Camaco leave to amend its counterclaims to include additional damage claims that arose after its original filing.
In December 2009, TPS filed the present motion to substitute Toolplas Systems, Inc. ("NewCo") for itself as the real party in interest in this litigation. In September 2008, TPS entered receivership in the Canadian courts. As part of that proceeding, NewCo purchased TPS's assets and name. When plaintiff's counsel filed the present lawsuit in May 2009, he mistakenly filed it in the name of TPS rather than NewCo. TPS now alleges that NewCo is the real party in interest in terms of enforcing the August 22, 2008, settlement agreement and seeks to substitute NewCo as plaintiff. Camaco opposes the motion. Camaco instead requests that the Court add NewCo as an additional plaintiff and counter-defendant, grant Camaco leave to file and amended counterclaim naming both TPS and NewCo, and re-open discovery.
II. Substitution of Parties
Pursuant to the Federal Rules of Civil Procedure, every "action must be prosecuted in the name of the real party in interest." Fed. R. Civ. P. 17(a)(1). "[T]he real party in interest is the person who is entitled to enforce the right asserted under the governing substantive law." Certain Interested Underwriters at Lloyd's, London, England v. Layne, 26 F.3d 39, 42-43 (6th Cir. 1994). Even so, "[t]he court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action." Fed. R. Civ. P. 17(a)(3). In deciding whether to allow a real party in interest to substitute into an action for the named plaintiff, the Court considers whether there has been an honest mistake as opposed to tactical maneuvering, unreasonable delay, or undue prejudice to the non-moving party. See Esposito v. United States, 368 F.3d 1271, 1275-76 (10th Cir. 2004); Jordan v. Fox, Rothschild, O'Brien, & Frankel, 20 F.3d 1250, 1278 (3d Cir. 1994).
A. Real Party in Interest
Camaco first opposes TPS's motion on grounds that TPS presents insufficient evidence to establish that NewCo is, in fact, the real party in interest. Attached to TPS's motion is the Canadian court's order approving NewCo's purchase of TPS's "Assets as defined in the Offer." (TPS's Mot. Ex. B.) Camaco argues that, because "the Offer" is not included as an exhibit, it is unclear whether TPS's rights under the August 22, 2008, settlement agreement-the agreement TPS seeks to enforce in this lawsuit-transferred to NewCo as an asset. Furthermore, Camaco asserts that any purported transfer between TPS and NewCo may be barred by an anti-assignment clause contained in a contract between the parties. In response, TPS maintains that NewCo purchased all of TPS's assets and that there is no anti-assignment clause in the August 22, 2008, settlement agreement.
Having reviewed the relevant documents, the Court concludes that the record evidence sufficiently supports TPS's request for substitution. Despite Camaco's assertion to the contrary, the Court has been unable to locate an anti-assignment clause in the settlement agreement.*fn1 And while the Canadian court order does not use the term "all assets," the tenor of that order suggests that NewCo purchased all of TPS's assets.*fn2
Furthermore, if NewCo did not purchase TPS's rights in the settlement agreement, TPS would only be prejudicing its own interests in seeking substitution of NewCo. Under these facts, the Court is ...