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Barrette Outdoor Living, Inc. v. Michigan Resin Representatives

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

December 24, 2014

BARRETTE OUTDOOR LIVING, INC., Plaintiff,
v.
MICHIGAN RESIN REPRESENTATIVES, JOHN H. LEMANSKI, JR., LISA WELLS a/k/a LISA LEMANSKI, TAMARA TURNER, Defendants.

OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR SANCTIONS AGAINST DEFENDANT LISA WELLS FOR DESTRUCTION OF EVIDENCE [#159] AND DENYING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANT JOHN H. LEMANSKI, JR. [#181]

GERSHWIN A. DRAIN, District Judge.

I. INTRODUCTION

On July 29, 2011, Plaintiff, Barrette Outdoor Living, Inc. ("Barrette Outdoor" or "Barrette") filed the instant action. Dkt. No. 1. In its Complaint, Plaintiff alleged 11 counts of misconduct against Defendants. All of Plaintiff's claims originate from an alleged pass-through scheme, in which Defendants acted as conduits for the sale and distribution of plastic resin. Plaintiff alleges that Defendants up-charged its company in excess of $400, 000.

On October 3, 2014, the immediate civil action was reassigned to this Court. This action has a long and contentious procedural history. Several points in procedural history are important to note. First, in its Response to Defendants' Motion to Dismiss [#11], entered on September 12, 2011, Barrette stipulated to a dismissal of Count V of the Complaint. Count V represented Plaintiff's claim for inducement of breach of fiduciary duty against Defendants Michigan Resin Representatives ("MRR"), Lisa Wells ("Wells"), and Tamara Turner ("Turner"). In addition, on March 22, 2012, Defendant John Lemanski ("Lemanski") filed a counterclaim for breach of contract. On June 14, 2013, the Court entered an Order granting Plaintiff's Motion for Summary Judgment [#80] as to Defendants' counterclaim. Dkt. No. 132.

Presently before this Court are Plaintiff's Motions for Sanctions Against Defendant Lisa Wells for the Intentional Destruction of Evidence [#159] and for Default Judgment Against Defendant John Lemanski [#181]. Both Motions were fully briefed.[1] On December 8, 2014, this Court conducted a hearing on both Motions.

For the reasons that follow, the Court will DENY Plaintiff's Motion for Sanctions Against Defendant Lisa Wells for Destruction of Evidence [#159]. The Court will also DENY Plaintiff's Motion for Default Judgment Against Defendant John Lemanski [#181].

II. FACTUAL BACKGROUND

A. Facts

Plaintiff, Barrette Outdoor, is an Ohio corporation, engaged in the production and distribution of vinyl lattice. In order to manufacture its products, Plaintiff purchases plastic resin. Plaintiff-company fits the resin into molds to make products such as fencing and sheds.

Resin is a commodity for which prices can fluctuate as frequently as day-to-day. The market price of resin is determined by soliciting bids from producers and distributors. Barrette Outdoor is a participant in this market and purchases about 25 million pounds of Resin per year.

On October 29, 2007, Plaintiff hired Defendant, John H. Lemanski, Jr. to work at Barrette's office facilities in Flint, Michigan. Lemanski was a senior buyer at the company. In this position, Barrette Outdoor claims that Lemanski was responsible for Barrette Outdoor's resin purchasing operation. Specifically, Plaintiff contends that Defendant Lemanski was responsible for ensuring that Barrette paid no more than the lowest amount possible for resin.

On February 4, 2010, Plaintiff claims that Defendants Wells and Turner formed Michigan Resin Representatives, LLC; Wells and Turner owned and operated the company. Wells is Defendant Lemanski's sister; Turner and Wells, at the time of MRR's formation, were roommates. Neither Wells nor Turner had experience in either sales or the resin industry. MRR's principal place of business is Canton, Michigan.

Before placing a resin order, Plaintiff further contends that Lemanski was obligated to obtain approval from the general manager of Barrette's Flint facility. In requesting approval, Lemanski was required to inform the general manager of the quantity, price, and supplier of the resin being ordered. Plaintiff claims that the general manager and Barrette relied on Lemanski's representations that the resin prices were of fair-market value.

Resin Distribution Inc. ("RDI") is a Massachusetts distribution company that sells resin. Plaintiff has been purchasing resin from RDI since 2005. Plaintiff alleges that at Defendant Lemanski's direction, [2] from February 11, 2010 through April 20, 2011, MRR purchased resin from RDI at fair-market prices. Plaintiff alleges that MRR then resold the resin, purchased from RDI, at above-market prices to Barrette Outdoor.

Plaintiff further claims that MRR never expended its own funds as a result of any of these transactions. Instead, the transactions were structured so that Plaintiff first paid MRR before MRR paid RDI.[3] In addition, MRR's only supplier throughout the course of its existence was RDI. Likewise, MRR's only purchaser throughout the course of is existence was Barrette Outdoor. At no time did Defendant Lemanski disclose to Barrette that MRR was, in part, controlled by his sister, Defendant Wells. Plaintiff further maintains that the only Barrette representative with whom MRR contracted was Defendant Lemanski. On June 14, 2011, Barrette eliminated Lemanski's position and terminated Lemanski. Subsequent to Lemanski's termination, Barrette uncovered evidence that Lemanski was involved in a fraudulent pass-through scheme.

Plaintiff argues, in 10 separate counts, that Defendants should be found liable for this alleged fraudulent pass-through scheme. Plaintiff specifically contends that in order to obtain authorization for the MRR purchase orders, Lemanski falsely represented to his supervisors that MRR's inflated charges, over the course of 14 transactions, were of fair-market prices. In ...


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