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Mikron Digital Imaging, Inc. v. Omega Medical Imaging, Inc.

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

January 26, 2017

MIKRON DIGITAL IMAGING, INC., Plaintiff,
v.
OMEGA MEDICAL IMAGING, INC., OMEGA MEDICAL IMAGING, LLC, Defendants.

          ORDER GRANTING DEFENDANT'S MOTION TO DISMISS [#11]

          Denise Page Hood Chief Judge

         I. BACKGROUND/FACTS

         Plaintiff Mikron Digital Imaging, Inc. (“Mikron”) commenced this action on August 30, 2016. On September 27, 2016, Mikron filed a First Amended Complaint against Defendants Omega Medical Imaging, Inc. (“Omega Inc.”) and Omega Medical Imaging, LLC (“Omega LLC”) (collectively “Omega”), which Mikron alleges are alter egos of one another, alleging breach of contract (Count I), tortious interference with business relationships and expectancies (Count II), unjust enrichment (Count III), fraud by misrepresentation and concealment (Count IV), statutory and common-law conversion (Count V), and successor liability / de facto merger / fraudulent transfer (Count VI). (Doc # 6) On October 25, 2016, Defendant Omega LLC filed a Motion to Dismiss. (Doc # 11). Mikron filed a Response on November 18, 2016. (Doc # 14)

         The facts alleged in the First Amended Complaint are as follows. Mikron is a Michigan corporation that sells, installs, and services medical imaging equipment in the Midwest. (Doc # 6, Pg ID 29) Omega Inc. is a now defunct Florida corporation that manufactured and distributed medical imaging equipment. Id. at 26-27. In 2010, Mikron and Omega Inc. entered into a Dealership Agreement (“Agreement”), identifying Mikron as the Dealer, under which Mikron would sell Omega products in Michigan and northern Illinois. Id. at 26; Doc # 9, Pg ID 47. The Agreement provides: “This agreement shall automatically terminate exactly one year from the date of the last person or entity to sign this agreement. At the termination of the Agreement and every year following the termination, DEALER may opt for a one-year extension if all sales goals are met and their account is current.” (Doc # 9, Pg ID 47) The Agreement assigned Mikron a particular territory and stated: “OMEGA agrees not to appoint any other dealer in the territory as long as DEALER meets or exceeds the minimum annual sales performance of complete systems as detailed below.” Id. The Agreement required Mikron to sell one system in the first year, two systems in the second year, and two systems in the third year. Id. The Complaint alleges that the Agreement was perpetually renewable each year on the condition that Mikron met or exceeded sales goals, and that Omega Inc. could not unilaterally terminate the Agreement at its discretion. Id. at 30.

         Omega LLC is a Florida company that manufactures, markets, and sells its medical imaging equipment in the United States and abroad. (Doc # 6, Pg ID 27) The Complaint alleges that some months after the execution of the Agreement between Mikron and Omega Inc., the officers of Omega Inc. voluntarily dissolved the company and transferred all of its business interests, including the Agreement with Mikron, to Omega LLC. Omega LLC administered the Agreement and enjoyed the benefits of the Agreement for approximately five years. Id. at 26-27. The operations of Omega Inc. and Omega LLC were carried out at the same address in Florida, “and there was a complete continuity of enterprise between the two entities.” Id. at 29. Omega LLC allegedly failed to disclose to Mikron the transfer of the Agreement from Omega Inc. to Omega LLC until after the filing of this lawsuit. Id. at 35.

         In 2015, Omega LLC allegedly demanded that Mikron enter into a new agreement under which Mikron would pay substantial additional fees to Omega LLC in contravention of the 2010 Agreement. Id. at 31. Mikron refused to enter into the new proposed agreement. Id. By this point, Mikron had allegedly invested heavily in the development of a substantial customer base for Omega products. Id. at 30. Omega LLC allegedly has access to Mikron's customer lists and confidential business processes and methods. Id. at 37. The Complaint alleges that after Mikron refused to enter into the new proposed agreement, Omega LLC threatened to call customers directly and to interfere with Mikron's ongoing business relationships and service contracts with Mikron's customers. Id. at 31. Omega LLC has allegedly “converted at least one account in Illinois, and possibly others.” Id. On August 4, 2016, Omega LLC issued a letter of termination of the Agreement allegedly failing to cite any valid justification. Id. Omega LLC has also allegedly worked with another dealer to sell products inside Mikron's exclusive territory. Id. The Complaint alleges that “Mikron fully performed its obligations under the Dealership Agreement.” Id. at 32.

         The Complaint alleges that Omega played a corporate shell game in order to insulate themselves from liability under the Agreement. Id. at 30. Omega allegedly concealed from Mikron that Omega Inc. was dissolved and insolvent, and Omega LLC carried on performance under the Agreement for years until it wrongfully terminated the Agreement in bad faith, and then disavowed responsibility under the Agreement. Id. at 36. Mikron alleges that Omega usurped the fruits of Mikron's performance with the intention to squeeze Mikron out of the marketplace and withhold the consideration that Mikron was owed under the Agreement. Id. at 28, 32.

         II. ANALYSIS

         A. Standard of Review

         Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for a motion to dismiss for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). This type of motion tests the legal sufficiency of the plaintiff's complaint. Davey v. Tomlinson, 627 F.Supp. 1458, 1463 (E.D. Mich. 1986). When reviewing a motion to dismiss under Rule 12(b)(6), a court must “construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.” Directv Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). A court, however, need not accept as true legal conclusions or unwarranted factual inferences.” Id. (quoting Gregory v. Shelby Cnty., 220 F.3d 443, 446 (6th Cir. 2000)). “[L]egal conclusions masquerading as factual allegations will not suffice.” Edison v. State of Tenn. Dep't of Children's Servs., 510 F.3d 631, 634 (6th Cir. 2007). As the Supreme Court has explained, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level… .” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted); see LULAC v. Bresdesen, 500 F.3d 523, 527 (6th Cir. 2007). To survive dismissal, the plaintiff must offer sufficient factual allegations to make the asserted claim plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. at 678 (internal citations and quotations omitted). The court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint may also be taken into account. Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001).

         B. Breach of Contract Claim (Count I)

         Omega LLC argues that Count I should be dismissed because Omega did not have a valid contract with Mikron, and Omega did not breach the contract with Mikron. Omega LLC argues that Mikron had not actually met its sales goals or opted to extend the Agreement, and Mikron's sole allegation that it “fully performed its obligations” without a valid explanation is not sufficient to survive a Motion to Dismiss. Omega LLC further argues that it did not wrongfully terminate the Agreement because there was no valid agreement between the parties at the time that Omega LLC terminated its relationship with Mikron.

         Mikron argues that its allegations of the existence of a valid and binding contract and of Mikron fully performing its obligations under the contract are enough to state a valid breach of contract claim. Mikron asserts that Omega breached the valid Agreement when it wrongfully terminated the Agreement without valid justification.

         To state a claim for breach of contract in Michigan, a plaintiff must allege: (1) the existence of a valid contract, (2) the terms of the contract, (3) breach of the contract, and (4) an injury caused by the breach. See Webster v. Edward D. Jones & Co., L.P., 197 F.3d 815, 819 (6th Cir. 1999). In Michigan, the paramount goal when interpreting a contract is to give effect to the intent of the contracting parties. Old Kent Bank v. Sobczak, 243 Mich.App. 57, 63-64 (2000). The court is to read the agreement as a whole and attempt to apply the plain language of the contract itself. Id. If the intent is clear from the language of the contract itself, there is no place for further construction or interpretation of the agreement. Farm Bureau Mut. Ins. Co. v. Nikkel, 460 Mich. 558, 566 (1999). A contract provision that is clear and unambiguous must be “taken and understood in [its] plain, ordinary, and popular sense.” Mich. Mut. Ins. Co. v. Dowell, 204 Mich.App. 81, 87 (1994). “Express provisions for termination govern a contract and courts cannot create a contractual liability where the express intent of the parties was to terminate the agreement upon a given condition.” E3A v. Bank of America, N.A., No. 13-10277, 2013 WL 1499560, at *2 (E.D. Mich. Apr. 11, 2013).

         Turning to the Agreement in this case, attached to the Complaint, Section 1.1 expressly states that the Agreement automatically terminated exactly one year from the date of the last person or entity to sign the Agreement. (Doc # 9, Pg ID 47). The date appearing on the signature page is “10/5/10.” Id. at 51. Under the aforementioned clear and unambiguous provision, the Agreement automatically terminated one year later, on 10/5/11. Section 1.1 of the Agreement then expressly provides that “[a]t the termination of the Agreement and every year following the termination, [Mikron] may opt for a one-year extension if all sales goals are met and their account is current.” Id. at 47. Under this clear and unambiguous provision, Mikron had the option of extending the Agreement each year if all sales goals were met and Mikron's account was current. The Complaint does not allege that Mikron met the unambiguous contractual conditions, namely that Mikron met all sales goals and that Mikron's account was current. Mikron has failed to allege any facts from ...


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