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Hastings Fiber Glass Products, Inc. v. Enlace Mercantil Internacional, Inc.

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

March 7, 2017

HASTINGS FIBER GLASS PRODUCTS, INC., Plaintiff,
v.
ENLACE MERCANTIL INTERNACIONAL, INC., Defendant.

          Hon. Paul L. Maloney Judge

          REPORT AND RECOMMENDATION

          RAY KENT United States Magistrate Judge

         This matter is now before the Court on defendant's corrected combined motion to dismiss or transfer venue (docket no. 12).

         I. Background

         This matter involves a commercial dispute between plaintiff Hastings Fiber Glass Products, Inc. (“Hastings”) and defendant Enlace Mercantil Internacional, Inc. (“Enlace”). Hastings seeks a declaratory judgment arising from the following allegations. Hastings manufactures “hot line tools” and equipment for use in the construction and maintenance of power grid systems in the United States and other places, including Puerto Rico. Compl. (docket no. 1, PageID.2). Enlace is a telecommunications equipment and systems company primarily involved in business-to-business sales. Id. at PageID.3.

         On October 18, 1996, Hastings and Enlace entered into a written Foreign Distributor Agreement (the “1996 Agreement”) in which Hastings granted Enlace the exclusive right to distribute Hastings' products in Puerto Rico. Id. On March, 19, 2012, Hastings tendered to Enlace a signed and updated Foreign Distributor Agreement (the “2012 Agreement”) in which Hastings again granted Enlace the exclusive right to distribute Hastings' products in Puerto Rico. Id. Although Enlace never signed the 2012 Agreement, Enlace was on notice of this new agreement. Id. In this regard, Hastings further alleged:

14. Despite the fact that Enlace failed to deliver a properly executed copy of the 2012 Agreement to Hastings, Hastings conducted business under the 2012 Agreement under the belief that it was fully enforceable between the parties. However, if Enlace never executed the 2012 Agreement, Hastings and Enlace continued to conduct business consistent with the terms of the 1996 Agreement until January 12, 2015, when Hastings notified Enlace that it intended to maintain the discount and payment structure in place at that time, but would permit other distributors to bid on product quotes requested by the Puerto Rico Electric Power Authority (“PREPA”).

Id. Both the 1996 Agreement and the 2012 Agreement provided that the provisions are to be construed in accordance with Michigan law. Id.

         The heart of the dispute is Hastings' decision to terminate Enlace's distributorship agreement(s) as set forth in ¶¶ 16-22 of the complaint which alleged:

16. Article II, Section 3 of the 1996 Agreement and 2012 Agreement provided that Hastings could terminate the Agreement immediately based on a number of triggering events including, but not limited to, a material breach by Enlace of any covenant of the agreement.
17. Article IV, Section 1 of the 1996 Agreement and 2012 Agreement provided, in pertinent part, that Enlace was obligated “to use its best efforts to develop demand for, and actively promote the sale of [Hastings'] products within the designated territory. [Enlace] agrees to identify itself clearly as the distributor of [Hastings'] products in business listings, directories, and advertisements.”
18. On January 9, 2015, Hastings conducted a 2014 year-end review of Enlace's performance in the Puerto Rican territory and concluded that Enlace was not actively promoting Hastings' products. In addition, although Hastings repeatedly requested Enlace to specify the Hastings brand to potential customers, it failed to do so. Hastings was also frustrated by Enlace's repeated failures to pay for product purchases on a timely basis as required by the contract between the parties. Each of these failures by Enlace, whether standing alone or in concert, constituted a material breach of the contract between the parties.
19. As a result, Hastings notified Enlace on January 12, 2015 that it was terminating the parties' exclusive contract as more fully set forth in paragraph 14 above.
20. Enlace never responded to Hastings' decision to terminate the exclusive arrangement, despite Hastings' invitation to discuss it in the termination notice.
21. Thereafter, and without any objection by Enlace, Hastings allowed other distributors, in addition to Enlace, to bid on requests for product purchases by PREPA.
22. On January 18, 2016, over one year after Hastings notified Enlace that it would permit other distributors to purchase products for sales to PREPA, Enlace accused Hastings of actively violating the parties' exclusive relationship and threatened to bring suit against Hastings if it did not immediately cease and desist from conducting business with other distributors seeking to sell Hastings' products in Puerto Rico.

Id. at PageID.4-5.

         Hastings seeks the following relief from this Court:

A. Declare that Hastings is not in an exclusive distributorship relationship with Enlace because it rightfully terminated the 1996 Agreement and/or 2012 Agreement pursuant to Article II, Section 3 of either the 1996 Agreement and/or the 2012 Agreement;
B. Declare that Hastings shall not be held responsible for any claimed losses or damages incurred by Enlace as a result of any past or future sales of product to competing ...

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