United States District Court, E.D. Michigan, Southern Division
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION TO DISMISS (DOC. 17)
CARAM STEEH UNITED STATES DISTRICT JUDGE
diversity case, plaintiff Indusource, Inc.
(“Indusource”), alleges breach of contract
arising out of its exclusive distribution agreement in a five
state territory with defendant Sandvik Tooling France S.A.S.,
formerly known as Safety S.A.S. (“Safety” or
“Sandvik Tooling”), by which it marketed and sold
Safety's tools used in industrial metal cutting.
Indusource has also named as defendants parent company
Sandvik AB, and another of its subsidiaries, defendant
Sandvik, Inc., for breach of contract under the doctrine of
piercing the corporate veil, and for tortious interference
with contractual relations. Now before the court is defendant
Sandvik AB and Sandvik, Inc.'s (collectively
“defendants”) motion to dismiss for failure to
state a claim and for lack of personal jurisdiction.
Defendant Sandvik Tooling has filed an Answer and has not
joined in the motion to dismiss. Oral argument was heard on
October 20, 2016. For the reasons set forth below,
defendants' motion to dismiss shall be denied in part as
to the breach of contract claim and granted in part as to the
tortious interference with contractual relations claim.
the court is deciding a motion to dismiss, the facts set
forth below are those alleged in the First Amended Complaint.
Indusource is a Michigan corporation with its principal place
of business in Michigan. Defendant Sandvik Tooling is a
French company with its principal place of business in
France. Defendant Sandvik AB is a Swedish company and is a
high-tech and global engineering group. Defendant Sandvik,
Inc. is a Delaware corporation with its principal place of
business in New Jersey. Sandvik Tooling and Sandvik Inc. are
subsidiaries of Sandvik AB and are 100 percent owned and
controlled by Sandvik AB. Indusource alleges that Sandvik AB
operates its subsidiaries Sandvik Tooling and Sandvik, Inc.
as mere instrumentalities through which it conducts its
global operations. Throughout the First Amended Complaint and
in its response to defendants' motion to dismiss,
Indusource refers to all three defendants collectively as
“Sandvik.” When relying on plaintiff's
nomenclature, the court shall do the same.
The Wholesale Agreement
July, 2010, Indusource and Safety entered into a Wholesale
Agreement by which Indusource would distribute, sell, and
market Safety products in a five-state territory comprised of
Michigan, Ohio, Indiana, Kentucky, and Tennessee. The
Wholesale Agreement provides:
Safety reserves the right to initiate new distribution in the
agreed Territory. Safety shall direct any new distributor in
the Territory to Indusource to purchase Safety Products.
Indusource shall execute sales and marketing of Safety
Products to any distributor in the Territory, including to
distributors referred, recommended, or directed to Indusource
by Safety. All distribution business will be directed and
invoiced through Indusource as the single Safety Territory
(Wholesaler Agreement, ¶ 2). After an automatic
five-year extension applied because Indusource met sales
targets for 2010 to 2011, the contract now runs until
December 31, 2016.
2012, Safety merged with Impero and Pramet to form
Impero-Pramet-Safety, known as “IPS.” Around this
same time Safety merged with another subsidiary of Sandvik
AB, Sandvik Tooling France. In 2014, IPS merged with Dormer
Tools to create Dormer-Pramet. Indusource claims that it then
learned that “Sandvik” decided to sell its
products covered by the Wholesale Agreement exclusively under
the Dormer-Pramet brand.
Alleged Breach of the Wholesale Agreement
further alleges that many of the products sold under the
Dormer-Pramet brand are identical to Safety-branded products
covered by the Wholesale Agreement. As of April 1, 2015,
Indusource claims that “Sandvik” had begun
selling Dormer-Pramet brand products identical to
Safety-branded products covered by the Wholesale Agreement.
Indusource claims that “Sandvik” has distributed
Dormer-Pramet products in Indusource's territory through
125 distributors, but has not directed or invoiced this
business through Indusource. In their motion to dismiss,
defendants claim that the Wholesale Agreement limits
Indusource's rights only to products “in the
current Safety literature” in July 2012, before the
Dormer-Pramet line was in existence.