United States District Court, E.D. Michigan, Southern Division
OPINION & ORDER GRANTING DEFENDANTS' MOTIONS
FOR SANCTIONS (Dkts. 163, 165) AND DISMISSING PLAINTIFF'S
CLAIMS WITH PREJUDICE
A. GOLDSMITH United States District Judge.
matter is before the Court on Defendants' respective
motions for sanctions (Dkts.163, 165). Defendants contend
that Plaintiff Plastech Holding Corporation
(“PHC”) engaged in bad-faith conduct by
fabricating evidence and submitting it to this Court as an
exhibit to the first and second amended complaints. A hearing
on these motions was held on March 17, 2017. For the reasons
stated below, the Court grants the motions and dismisses
PHC's claims with prejudice.
a corporation that imports, distributes, and develops
products for motor vehicles. 3d Am. Compl. ¶ 20 (Dkt.
113). According to PHC, it began working with Defendant JAC
Motors,  a Chinese original equipment manufacturer
of automobiles, in 2009, to assist JAC Motors in readying
passenger vehicles for distribution and sale in the United
States. Id. ¶¶ 21, 25.
alleges that it and JAC Motors executed a Framework Agreement
on October 27, 2010, which gave PHC the exclusive right to
distribute JAC Motors' passenger vehicles in the United
States. Id. ¶¶ 29-31. Along with its first
amended complaint (Dkt. 26), which was filed on December 12,
2014, PHC filed a purportedly signed version of that
Framework Agreement as an exhibit under seal. See
Framework Agreement, Sealed Ex. A to 1st Am. Compl. (Dkt.
27). Shortly thereafter, on February 11, 2015, PHC filed its
second amended complaint (Dkt. 35), which attached that
signed version of the Framework Agreement again, this time
unsealed, see Framework Agreement, Ex. A to 2d Am.
Compl. (Dkt. 35-1), asserting that it was a “true and
correct copy of the [Framework] Agreement, ” 2d Am.
Compl. ¶ 29.
parties also executed a Framework of Cooperation Agreement
(“Cooperation Agreement”) on the same day as the
Framework Agreement, see Cooperation Agreement, Ex.
17 to JAC Motors Mot. for Sanctions (Dkt.
163-18). In January 2011, Julie Brown, PHC's
founder and former chief executive officer, traveled to
Hefei, China, where the parties executed a Supplementary
Agreement. See Supplementary Agreement, Ex. 16 to
JAC Motors Mot. (Dkt. 163-17). Later actions by Ms. Brown,
who died in January 2016, figure prominently in the
disposition of this case.
initiated this action on October 21, 2014 against only
Defendants WM GreenTech Automotive Corporation, GreenTech
Automotive Corporation, and GreenTech Automotive, Inc.
(collectively referred to as “GreenTech”),
asserting claims for tortious interference, civil conspiracy,
and unjust enrichment, based on GreenTech allegedly having
entered into a distribution agreement with JAC Motors despite
knowing that PHC had an exclusive relationship with JAC
Motors. See generally Compl. (Dkt. 1). JAC Motors
then sought to intervene in this matter and, following a
telephonic status conference with the Court, the parties
agreed to PHC filing its second amended complaint, which
named JAC Motors as a defendant. See Plastech Holding
Corp. v. WM GreenTech Auto. Corp., No. 14-cv-14049, 2016
WL 3536749, at *1 (E.D. Mich. June 29, 2016).
two years after the filing of the initial complaint and
nearing the end of discovery, see 6/16/2016 Order at
2 (Dkt. 99) (fact discovery to be completed by September 26,
2016), PHC filed a third amended complaint on September 22,
2016. That pleading removed the Framework
Agreement as an exhibit and alleged that JAC Motors
“kept the signed copy of the [Framework] Agreement and
PHC does not have an executed copy of the Agreement.”
3d Am. Compl. ¶ 29. Prior to that filing, counsel for
PHC emailed the proposed third amended complaint to counsel
for Defendants, asking them to “please let us know
whether you'll consent to PHC's filing the attached
complaint, or plan to contest the filing . . . .”
9/9/2016 Email, Ex. 3 to Pl. Resp. to JAC Motors Mot. for
Sanctions (Dkt. 194-5). That email did not explain why PHC
was removing the Framework Agreement as an exhibit. Nor did
it suggest that there were any irregularities with its signed
version of the Framework Agreement, which PHC had previously
November 2016, following the depositions of James Brown (Ms.
Brown's husband and PHC's current chief executive
officer) and Kerrie Mitchell (PHC's former chief
information officer), Defendants claim they have discovered
that the signed Framework Agreement PHC relied on in this
case was fabricated. This revelation formed a significant
portion of Defendants' motions for summary judgment, as
well as their motions for sanctions.
fabrication, which PHC acknowledges, is established by the
following record evidence in this case. On August 29, 2011,
Judy Hayes (PHC's office manager) emailed Mitchell two
documents. The first document is the last page of an unknown
agreement that contained signatures from JAC Motors and PHC,
while the second document was a copy of the last page of the
Framework Agreement without signatures. 8/29/2011 Email from
Hayes to Mitchell, Ex. 5 to JAC Motors Mot. for Sanctions, at
2 (cm/ecf page) (Dkt. 163-6) (PDF attachments to email are
entitled, “JAC Motors.pdf” and “JAC Motors
(no signatures).pdf”).During her deposition, Mitchell
testified that she electronically copied the signatures from
the first document and pasted them into the second document.
Mitchell Dep. Tr., Ex. 15 to JAC Motors Mot. for Summ. J., at
30-31 (Dkt. 144-16). According to Mitchell, Ms. Brown asked
Mitchell to create this new document with signatures because
Ms. Brown “wanted to have a nice, clean document to
show the dealers and help increase creditability
[sic].” Id. at 26-27.
then emailed the newly created document with the copied
signatures to Hayes, see 8/29/2011 Email from
Mitchell to Hayes, Ex. 6 to JAC Motors Mot. for Sanctions, at
2 (cm/ecf page) (Dkt. 163-7) (attachment entitled, “JAC
Motorsmerged.png, ” and asking Hayes, “Can you
print this out - see how it looks?”), who then emailed
a copy of the entire Framework Agreement, which incorporated
the newly created signature page, to Mr. Brown and Mitchell
later that same day, see 8/29/2011 Email from Hayes
to Mr. Brown & Mitchell, Ex. 7 to JAC Motors Mot. for
Sanctions (Dkt. 163-8) (PDF attachment entitled,
“Framework Agreement - JAC Motors & Plastech
Holding Co. (Oct. 27, 2010).pdf”).
Motors states that PHC emailed the fabricated document to
third parties as proof of the alleged exclusive relationship
and “gain credibility, potential financing, and dealer
relationships. . . .” JAC Motors Mot. for Summ. J. at
15 (Dkt. 144) (citing 11/9/2013 Email, Ex. 12 to JAC Motors
Mot. for Summ. J. (Dkt. 144-113); 7/2/2014 Email, Ex. 13 to
JAC Motors Mot. for Summ. J. (Dkt. 144-14); 8/21/2013 Email,
Ex. 14 to JAC Motors Mot. for Summ. J. (Dkt. 144-15));
see also id. at 7 (stating that the purpose of the
“prettied-up” document was for PHC “to gain
credibility and induce dealers to make investment and
distribution decisions regarding the sale of JAC
Motors['] vehicles in the United States”). PHC has
not denied that. See PHC Resp. to JAC Motors Mot.
for Summ. J. at 6 (Dkt. 171).
this fabricated document, later attached to the pleadings in
this action, that forms the basis for dismissal of this case.
courts have the inherent authority to sanction bad-faith
conduct, as well as conduct that is “tantamount to bad
faith.” Metz v. Unizan Bank, 655 F.3d 485, 489
(6th Cir. 2011) (citing Chambers v. NASCO, Inc., 501
U.S. 32, 45-46 (1991); Railway Express, Inc. v.
Piper, 447 U.S. 752, 767 (1980)); see also First
Bank of Marietta v. Hartford Underwriters Ins. Co., 307
F.3d 501, 511-512 (6th Cir. 2002). Bad faith, in turn, is
associated with conduct that is intentional or reckless.
See Schafer v. City of Defiance Police Dep't,
529 F.3d 731, 737 (6th Cir. 2008); United States v.
Wheeler, 154 F.Supp.2d 1075, 1078 (E.D. Mich. 2001)
(sanctions under court's inherent authority warranted for
reckless or bad-faith conduct, and defining
“recklessness” as “highly unreasonable
conduct which is an extreme departure from the standards of
ordinary care, ” such that it is “more than mere
negligence but less than intent”); accord Long v.
Steepro, 213 F.3d 983, 987 (7th Cir. 2000). A party may
act in bad faith, for example, if it files a frivolous suit
with an improper motive, or if it commits a fraud on the
court. Williamson v. Recovery Ltd. P'ship, 826
F.3d 297, 301-302 (6th Cir. 2016); see also
Chambers, 501 U.S. at 45-46 (court may impose sanctions
if it finds that “fraud has been practiced upon it, or
that the very temple of justice has been defiled”);
Murray v. City of Columbus, Ohio, 534 F. App'x
479, 484 (6th Cir. 2013) (Bad faith “includes
situations where fraud has been practiced upon the court and
where a party shows bad faith by delaying or disrupting the
party has engaged in bad-faith conduct, appropriate sanctions
may include the imposition of attorney's fees or the
dismissal of the party's claims. Murray, 534 F.
App'x at 484. Although the Sixth Circuit has repeatedly
emphasized that the court's inherent power to sanction
“must be exercised with restraint and discretion,
” the exercise of such authority is “particularly
appropriate for impermissible conduct that adversely impacts
the entire litigation.” Id.; see also
First Bank of Marietta, 307 F.3d at 516 (same).
Dismissal of an action may be an appropriate sanction when a
party has committed a fraud on the court, even if the party
has an otherwise meritorious case. See, e.g.,
Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 782
(7th Cir. 2016), petition for cert. filed, No.
16-1418 (U.S. May 30, 2017); Vargas v. Peltz, 901
F.Supp. 1572, 1582 (S.D. Fla. 1995).
is a split in the circuits concerning whether fraud on the
court must be proven by clear and convincing evidence or by a
preponderance of the evidence. Compare Ramirez, 845
F.3d at 778 (“[U]nless the governing statute . . .
specifies a higher burden, or the Constitution demands a
higher burden because of the nature of the individual
interests at stake, proof by a preponderance of the evidence
will suffice. . . . [T]he inherent authority to impose
sanctions for litigation misconduct is judicially derived and
specifies no particular standard of proof. . . . [And] [t]he
interests implicated by dismissal of a suit as a sanction for
misconduct occurring in civil litigation (including
discovery) are not so important as to demand that the facts
underlying the dismissal be established by clear and
convincing evidence.”), with Shepherd v. Am. Broad.
Cos., Inc., 62 F.3d 1469, 1476-1478 (D.C. Cir. 1995)
(requiring clear and convincing evidence), and Aoude v.
Mobil Oil Corp., 892 F.2d 1115, 1118 (1st Cir. 1989)
the Sixth Circuit has not expressly addressed this particular
issue, it appears as though it would likely not require the
higher burden of clear and convincing proof. See
Williamson, 826 F.3d at 302 (holding that the test used
to decide whether a judgment should be vacated for fraud on
the court under Rule 60, which requires clear and convincing
evidence, “is not applicable in this case because this
case involves a court's inherent power to sanction”
for bad-faith conduct); but see In re Nat'l Century
Fin. Enters., Inc. Fin. Inv. Litig., No. 2:03-md-1565,
2009 WL 87618, at *2 (S.D. Ohio Jan. 8, 2009) (Abel, M.J.)
(stating, without ...