United States District Court, W.D. Michigan, Southern Division
Paul L. Maloney Judge
REPORT AND RECOMMENDATION
KENT United States Magistrate Judge
matter is now before the Court on defendant's corrected
combined motion to dismiss or transfer venue (docket no. 12).
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.
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
Id. Both the 1996 Agreement and the 2012 Agreement
provided that the provisions are to be construed in
accordance with Michigan law. Id.
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
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
Id. at PageID.4-5.
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