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Union Commercial Services Ltd. v. FCA International Operations LLC

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

November 10, 2016

Union Commercial Services Limited, Plaintiff,
FCA International Operations LLC and FCA U.S. LLC, Defendants.

          Stephanie Dawkins Davis Mag. Judge.


          JUDITH E. LEVY United States District Judge.

         This case is currently before the Court on defendants' motion to dismiss Counts II-XII of plaintiff's complaint.[1] (Dkt. 9.) On March 14, 2016, plaintiff filed a complaint against defendants alleging two counts of breach of contract, promissory estoppel, tortious interference with business relations, four counts of civil RICO violations, and a Lanham Act violation. (Dkt. 1.) On April 21, 2016, defendants filed a motion to dismiss all counts except Count I, a breach of contract claim. (Dkt. 9.) For the reasons set forth below, the Court grants defendants' motion to dismiss Counts II-XII.

         I. Background

         Plaintiff is a commercial entity organized under the laws of the Cayman Islands, and owned by Angolan residents Joao M. Varvalho, Joao Carlos Varvalho, and Sandra Maria Goncalves. (Dkt. 1 at 1.) It has sold Chrysler, Dodge, and Jeep motor vehicles and parts in the Republic of Angola since 1988. (Id. at 4.) In 2006, plaintiff entered into a distributorship agreement (Agreement) with Chrysler International Corp. to sell these products in the Republic of Angola. After Chrysler emerged from bankruptcy, defendant FCA U.S. LLC (FCA US) assumed the agreement, and then assigned it to defendant FCA International Operations LLC (FCA International). (Id. at 4-5.) The parties operated under this Agreement for seven years. (Id. at 5.)

         Plaintiff alleges that the breakdown of its business relationship with defendants occurred when defendants began bribing Angolan government and military officials to obtain an improper advantage in the Angolan auto market. (Id. at 17-18.) Specifically, in 2010, defendants allegedly began working with Grupo Auto-Star S.A. (Auto- Star), an Angolan auto distributor owned by Persons A, B, and C, and other members of the Angolan government and military. (Id. at 10.) Persons A, B, and C are allegedly high-ranking members of the Angolan government, and plaintiff alleges it would be unsafe to reveal their identities. (Id. at 10 n.3.) By 2011, defendants were shipping Chrysler products to Auto-Star even though Auto-Star was not an authorized distributor of these products. (Id. at 18-19.)

         In February 2011, Auto-Star allegedly approached plaintiff about acquiring an ownership interest in plaintiff. (Id. at 13.) Plaintiff refused the offer, purportedly because Article 13.6 of the Agreement prohibited plaintiff from being owned, in whole or in part, by a foreign government. (Id. at 14.) Two years later, in 2013, plaintiff notified defendant FCA International that Auto-Star was purchasing and selling Chrysler products in the Republic of Angola without authorization. (Id. at 15.) FCA International denied knowledge of these alleged sales, yet, on July 30, 2013, sent plaintiff a notice to terminate the Agreement, effective August 31, 2014. (Id. at 15-16.)

         After the Agreement was terminated, plaintiff lost its right to sell Chrysler, Dodge, and Jeep products in the Republic of Angola. Plaintiff filed this complaint, alleging that defendant FCA International's behavior breached two provisions of the Agreement; tortiously interfered with its business relations; should be held liable under the doctrine of promissory estoppel; and constitutes an act of unfair competition under section 1126 of the Lanham Act. Plaintiff also claims that the acts of both defendants constitute a pattern of racketeering in violation of the RICO statute, 18 U.S.C. §§ 1962(a)-(d).

         II. Legal Standard

         When deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a court must “construe the complaint in the light most favorable to the plaintiff and accept all allegations as true.” Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plausible claim need not contain “detailed factual allegations, ” but it must contain more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A well pleaded complaint may proceed even if it appears that a recovery is very remote and unlikely.” Id. at 556 (internal quotation marks omitted). But, a plaintiff must plead facts sufficient to “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 369 (6th Cir. 2011).

         III. Analysis

         For the reasons set forth below, the Court will grant defendants' motion to dismiss Counts II-XII.

         A. Count II

         Plaintiff has alleged that defendant FCA International violated the implied covenant of good faith and fair dealing, and thereby breached Article 13.6 of the Distributorship Agreement, which requires plaintiff to comply with, inter alia, the Foreign Corrupt Practices Act (FCPA). (Dkt. 1-1 at 21.) Specifically, plaintiff claims that FCA International not only failed to comply with or make efforts to comply with the FCPA, but also that FCA International violated this statute by conspiring with Auto-Star to bribe Angolan officials.

         Under Michigan law, a breach of the implied covenant of good faith and fair dealing may be invoked as a breach of contract claim when one party “makes its performance a matter of its own discretion.” Stephenson v. Allstate Ins. Co., 328 F.3d 822, 826 (6th Cir. 2003). “Discretion arises when the parties have agreed to defer decision on a particular term of the contract, ” id., or “omits terms or provides ambiguous terms.” Wedding Belles v. SBC Ameritech Corp., Inc., Case No. 250103, 2005 WL 292270, at *1 (Mich. App. Feb. 8, 2005). “Whether a performance is a matter of a party's discretion depends on the nature of the agreement.” ParaData Comp. Networks, Inc. v. Telebit Corp., 830 F.Supp. 1001, 1005 (E.D. Mich. 1993). A party may not invoke the implied covenant of good faith and fair dealing to override express contract terms.” Stephenson, 328 F.3d at 826; Gen. Aviation v. Cessna Aircraft Co., 915 F.2d 1038, 1041 (6th Cir. 1990).

         Plaintiff has failed to state a claim for breach of contract for several reasons. First, the text of Article 13.6 is primarily directed at plaintiff's obligations, not defendant, and speaks in mandatory, rather than discretionary, terms. At most, plaintiff may have an argument that Article 13.6(1) is subject to the implied covenant of good faith and fair dealing because it refers to “Chrysler or any DaimlerChrysler Group Company's efforts to comply” with the FCPA. (Dkt. 1-1 at 21- 22.) Under a generous reading of the provision, the “efforts to comply” language may suggest that FCA International's performance was within its discretion and therefore that the implied covenant of good faith and fair dealing applies. See ParaData Comp. Networks, Inc., 830 F.Supp. at 1006 (holding that “duty of best efforts” is an example of discretionary language that would permit a party to invoke the implied covenant of good faith and fair dealing).

         However, plaintiff has failed to sufficiently plead that FCA International breached any part of Article 13.6 by violating the FCPA by engaging in bribery. Plaintiff has pled only “upon information and belief”[2] that defendants were involved in bribery, and has not provided any of the necessary information or context for its belief other than reference to public media reports and investigations into the auto industry for corruption in countries other than the Republic of Angola. Generalizations and evidence of corruption in other instances cannot serve to sufficiently allege that FCA International is liable in this specific case. See Leapers, Inc. v. First Quality Distrib., Inc., Case No. 11-15058, 2012 WL 1714938, at *9 (E.D. Mich. May 15, 2012) (stating that even where courts have permitted parties to plead “upon information and belief, ” the ...

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