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Eco Heating Systems v. Hamilton Engineering, Inc.

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

May 5, 2017




         I. Introduction

         This is an action to recognize and enforce a foreign money judgment under Michigan's Uniform Foreign-Country Money Judgment Recognition Act, M.C.L. § 691.1131. Plaintiff ECO Heating Systems Groningen, B.V. (ECO), a Dutch company located in the Netherlands, had a contract with defendant Hamilton Engineering, Inc. (Hamilton) under which ECO supplied Hamilton with heat engines for the North American market. After Hamilton failed to pay for the engines, ECO sued Hamilton in the Netherlands and obtained a judgment by default in the amount of EUR 1, 006, 013.32 plus 5% interest, costs of EUR 7, 156.29 plus 8.05% interest, and additional costs of EUR 199 plus 8.05% interest.

         ECO then filed suit in federal court, invoking diversity jurisdiction, seeking to enforce the judgment. Hamilton counterclaimed, claiming that ECO breached the contract essentially by supplying a defective product.

         Before the Court is ECO's motion for summary judgment, contenting that the judgment is valid and Hamilton's counterclaim fails because it is either barred by the statute of limitations or fails on the merits. Hamilton says that the judgment is invalid because (1) the Dutch court lacked personal jurisdiction and (2) the parties agreed to arbitration. Hamilton also says its counterclaim is viable. (Doc. 37).

         The motion is fully briefed. See Docs. 31, 37, 40. The Court heard oral argument after which it received supplemental briefs. See Docs. 42, 43, 44, 45. The matter is now ready for decision. For the reasons that follow, ECO's motion will be granted. The judgment will be recognized and Hamilton's counterclaim will be dismissed.

         II. Procedural History

         ECO filed the complaint seeking to enforce the judgment. (Doc. 1). Hamilton filed an answer and affirmative defenses (Doc. 7) and a counterclaim (Doc. 8) asserting a single claim for breach of contract.

         Shortly after these filings, ECO filed a motion for judgment on the pleadings, essentially presenting the same arguments raised in the instant summary judgment motion, i.e. the judgment is valid and must be enforced and Hamilton's counterclaim must be dismissed. (Doc. 11). Hamilton, responded, also with similar arguments to defeat summary judgment, i.e. the judgment is void and its counterclaim is properly before the Court. (Doc. 13). The Court held a hearing on the motion on April 5, 2016. (Doc. 24). After argument, the Court agreed to the motion hearing over for two weeks in the hope that the parties would resolve the matter. That unfortunately did not happen.

         In June of 2016, the Court was informed that ECO would be withdrawing the motion for judgment on the pleadings. The Court then set a status conference. Prior to the conference, counsel for ECO was replaced with new counsel. See Doc. 23. ECO, through new counsel, withdrew the motion for judgment on the pleadings. (Doc. 25). It is not clear whether new counsel for ECO and counsel for Hamilton engaged in meaningful settlement discussions.

         Thereafter, ECO filed the instant motion for summary judgment. (Doc. 31).

         III. Factual Background

         Although the parties disagree on many facts, the relevant facts are largely undisputed and are gleaned from the Joint Statement of Facts (Doc. 40).

         A. The Parties and the Working Agreement

         ECO, located in the Netherlands, designs and manufactures heat engines that are used in commercial water heaters and boilers. Hamilton, a Michigan company located in Livonia, sells water heaters and boilers to customers in the North American market.

         In 2003, Hamilton's President and CEO, Jeff Deal (Deal) was first informed of the existence of ECO through Charles Fenner. Fenner was the salesperson for Giannoni France, the heat exchanger supplier to ECO. Fenner introduced Deal to ECO because Hamilton was looking for sources of supply outside the United States.

         In February, 2004, Deal met ECO at a trade fair in Utrecht, the Netherlands. After meeting at the trade fair, Deal visited ECO's facility in the Netherlands to learn about ECO and its products.

         While back in the United States, Deal sent an email to ECO with specifications for product design and controls, and asked ECO to provide estimates on five different models of heat engines for sale in the North American market.

         After continued discussions with ECO over email, Deal visited ECO in the Netherlands a second time.

         After this second visit, Deal sent an email recapping the meeting and outlining various proposed terms for the business relationship between Hamilton and ECO.

         Deal visited ECO in the Netherlands in November of 2004. During this visit, the parties continued their discussions regarding the sale of heat engines to Hamilton, and discussed the terms of a working agreement to govern their relationship. Deal also participated in several technical meetings with ECO.

         In January of 2005, ECO and Hamilton entered into a Working Agreement. The Working Agreement was drafted by ECO in the Netherlands and ECO signed it in the Netherlands. It was then sent, presumably via email, to Deal. Deal signed it on behalf of Hamilton in Michigan.

         Under the Working Agreement, ECO agreed to supply heat engines to Hamilton in exchange for compensation. Specifically, ECO agreed to supply heat engines on demand and Hamilton agreed to purchase 7500 units (within a three year period) at the prices listed on Appendix B to the Working Agreement. The three years could also be extended. The heat engines supplied by ECO contained heat exchangers made by Giannoni.

         Hamilton was invoiced in Euros. Hamilton paid ECO by remitting payment in dollars to ECO's bank in the Netherlands. ECO's bank in the Netherlands exchanged the dollar payments from Hamilton in Euros in accordance with the Working Agreement.

         Under the Working Agreement, any disputes between ECO and Hamilton were to be resolved as follows:

As good partners, Hamilton and [ECO] should settle disputes themselves. In the case parties cannot handle a dispute, the issue shall be settled face to face with Mr. Charles Fenner as an arbitrator. Swiss law is applicable to this working agreement.

         The Working Agreement does not specify jurisdiction or venue for any such arbitration. The Working Agreement also does not specify what happens if Fenner is unable or refuses to arbitrate any dispute.

         ECO says that after the Working Agreement was in place, Deal “made multiple trips to the Netherlands from 2004 to 2013.” Hamilton disputes this and says Deal's in-person visits to the Netherlands were not frequent. In his affidavit, Deal says that face-to-face meetings took place in many countries, as follows (1) the United States, Michigan (10 or more times), New York (3 times), and Las Vegas (1 time); and (2) Germany (4-5 times); (3) Italy (2 times); (4) France (3 times).

         Meanwhile in October 2008, the parties extended the Working Agreement. In a Second Working Agreement, which was Hamilton also agreed to a payment plan for outstanding invoices. It does not contain a provision for dispute resolution and appears to be more a draft working agreement.

         In November 2009, the parties signed a Third Amendment to the Working Agreement. It has mostly to do with warehousing - Hamilton would transfer ownership of a stock of ECO's heat engines to ECO and the heat engines would be held by ECO in a warehouse in Michigan.

         Meeting notes in the record indicate that Deal had meetings with ECO in the Netherlands after the Working Agreement was entered on the following approximate dates: (1) October 19, 2006, (2) July 25, 2007, (3) September 24, 2008, (4) November 2008, (5) March 11, 2009, (6) May 4, 2010, (7) December 6, 2011, (8) October 30, 2012, (9) November 9, 2013. The latter meetings often discussed Hamilton's failure to make payments due to ECO. The 2013 meeting focused on winding down the parties' relationship.

         B. The Relationship Sours/Arbitration

         At some point after the Working Agreement was in place, the parties' relationship soured. ECO says that Hamilton failed to make payments as directed. Hamilton does not deny it failed to make payments but says it is entitled to a set-off for any damages in light of the defective nature of ECO's product.

         ECO says that it tried many times and for a long time to reach a deal with Hamilton on a fixed back pay plan, but no agreement could be reached. In a further effort to resolve the dispute, ECO-through its lawyer-contacted Fenner to arbitrate the dispute. Fenner, however, refused to arbitrate and told ECO that his personal friendship with Deal kept him from being an impartial arbitrator.

         It then appears that the parties discussed alternative means for arbitration. The record contains two letters from Hamilton's counsel to ECO's counsel in the Netherlands, dated October 21, 2014 and October 28, 2014. From a review of these letters, it can be gleaned that ECO initially refused to arbitrate because Fenner was not available. ECO later proposed that the parties submit their dispute to ICC Arbitration or the Dutch Civil Court. Hamilton did not agree to ICC Arbitration because of ECO's prior refusal and the cost of such arbitration. Hamilton also objected to having the dispute resolved in a Dutch Civil Court due to jurisdictional concerns. Hamilton did, however, agree to submit to the jurisdiction of the federal district court in this district. Hamilton also offered to engage in settlement negotiations with ECO's principal, the parties' attorneys, and “the Bank representative who controls Hamilton's finances and ability to disseminate payments.” ECO apparently did not agree to Hamilton's proposals.

         Hamilton's counsel, in an October 2014 letter sums up what appears to be the final correspondence before litigation. After stating that Hamilton will submit a final written settlement offer, the letter goes on:

Hamilton is frustrated by ECO's constantly changing position regarding the appropriate venue for adjudication of the parties' dispute as well as its refusal to participate in a final settlement conference . . . . ECO has always contended that the parties are not obligated to submit this dispute to ICC arbitration because Mr. Fenner is not qualified to hear the case, has a conflict, and is not willing to arbitrate it. In addition, ECO repeatedly stated, in writing, that it intended to initiate a civil action against Hamilton in Michigan if the case did not settle. Now, contrary to ECO's prior position memorialized in writing on a myriad of occasions, ECO contends that either a Dutch court of ICC arbitrations, rather than a civil action in Federal Court in Michigan, is the appropriate venue to resolve the parties' dispute. As confirmed in my October 21, 2014 correspondence, Hamilton will not, and is not required to, submit the dispute to the ICC arbitration and will never consent to the jurisdiction of or participate in a legal proceeding before a Dutch Court.

         C. ECO sues Hamilton in the Netherlands

         At some point after this correspondence, ECO contacted a Swiss lawyer to advise which court would have jurisdiction in this situation based on Swiss international private law because Swiss law applies to the Working Agreement. ECO concluded that based on Swiss law, because none the parties were linked to Switzerland, the Swiss courts did not have jurisdiction, and jurisdiction would have to be determined by ...

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