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Indusource, Inc. v. Sandvik Tooling France S.A.S.

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

October 25, 2016

INDUSOURCE, INC., Plaintiff,
v.
SANDVIK TOOLING FRANCE S.A.S., f/k/a Safety S.A.S., SANDVIK, INC., and SANDVIK AB, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS (DOC. 17)

          GEORGE CARAM STEEH UNITED STATES DISTRICT JUDGE

         In this 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.

         I. Background

         Because the court is deciding a motion to dismiss, the facts set forth below are those alleged in the First Amended Complaint.

         A. The Parties

         Plaintiff 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.

         B. The Wholesale Agreement

         In 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.

(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.

         C. Corporate Restructuring

         In 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.

         D. Alleged Breach of the Wholesale Agreement

         Indusource 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.

         E. Defendants' ...


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