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International Industrial Contracting Corp. v. Sofir Italia S.R.L.

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

August 16, 2017

INTERNATIONAL INDUSTRIAL CONTRACTING CORPORATION, Plaintiff,
v.
SOFIR ITALIA S.R.L., et al., Defendants.

          OPINION & ORDER GRANTING, IN PART, AND DENYING, IN PART, DEFENDANTS' MOTION FOR PARTIAL DISMISSAL (DKT. 18), AND DENYING DEFENDANT VERGANI'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT (DKT. 23)

          MARK A. GOLDSMITH UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on a motion for partial dismissal filed by Defendants Sofir Italia s.r.l., Alvaro Fregolent, and Marco Vergani (collectively, the “Defendants”) (Dkt. 18), as well as Vergani's separate motion to dismiss or, in the alternative, for summary judgment (Dkt. 23). The issues have been fully briefed, and a hearing was held on August 3, 2017. For the reasons stated below, Defendants' motion is granted, in part, and denied, in part, and Vergani's motion is denied.

         I. BACKGROUND

         In late 2013, Komatsu Ltd., a Japanese manufacturing company, was seeking an American contractor to install its presses in two Chrysler Group LLC plants located in Michigan. Am. Compl. ¶ 8 (Dkt. 16). Komatsu contacted Plaintiff International Industrial Contracting Corporation (“IICC”) and issued an invitation to quote the project, “which included drawings, specifications and ‘other design information' necessary to prepare a quotation for the installation of the Komatsu presses in the Chrysler plants.” Id. ¶¶ 8-9. This “other design information” included a table that indicated “the types and quantities of cables that would have to be pulled and connected in connection with the installation . . . .” Id. ¶ 10.

         In response to Komatsu's invitation, IICC submitted a quotation, to which Komatsu responded via email and provided more detailed information about the presses. Id. ¶¶ 12-13. IICC then revised its quote several times between November 2013 and June 2014. Id. ¶ 14.

         On June 27, 2014, Sofir informed IICC that it was the “supplier” of the Komatsu presses for the project and sent IICC a Request for Quotation (“RFQ”) for installation services. Id. ¶ 18.[1]Attached to the RFQ was a “Technical Specification, ” which stated that it “update[d] and replace[d] completely any previous specification used for preliminary quotation.” Id. ¶ 19. Although the Technical Specification still “referenced several drawings of the Komatsu presses and other documents that were identical to those that had been previously provided to IICC by Komatsu, ” neither the RFQ nor the Technical Specification “included any electrical design drawings or specifications or any tables indicating the types and numbers of cable that would have to be installed on the Project.” Id. ¶¶ 20-21.

         Based on the information provided by Komatsu, as well as Sofir's RFQ, IICC submitted a quotation on July 14, 2014. Id. ¶ 24. Although the quotation was addressed to Komatsu, it was intended for Sofir. Id. Sofir responded by informing IICC that the quotation needed to be submitted to Sofir, and identifying several items that it contested and required further information. Id. ¶ 25. IICC then submitted several revised quotations to Sofir through August 2014. Id. ¶¶ 26-27.

         On October 10, 2014, IICC and Sofir entered into a contract for the installation of the Komatsu presses “in accordance to the Technical Specification.” Id. ¶ 33. According to IICC, the parties' contract consists of five purchase orders, see id., which were attached as an exhibit to the amended complaint, see Purchase Orders, Ex. 6 to Am. Compl. (Dkt. 16-6). At no point between June 2014 and October 2014, however, did Sofir (i) provide IICC with a basis to determine the actual number of cables and connections required for the project, (ii) determine IICC's understanding of the number of cables and connections required for the project, or (iii) inform IICC that the actual number of cables and connections required for the project exceeded the amount extrapolated from the information in a February 2014 email from Komatsu. Am. Compl. ¶¶ 30-32.

         On March 9, 2015, IICC began site preparation for the project. Id. ¶ 35. The first delivery of Komatsu presses arrived in Baltimore, Maryland, on March 28, and the first load from Baltimore arrived at a Chrysler plant on March 31. Id.

         IICC discovered that, as part of its scope of the work, it actually had to pull and connect more than double the number of cables. Id. ¶ 36. Realizing that the number of cables and connections exceeded the amount previously estimated, IICC determined the actual number of cables and connections required for the project and informed Sofir. Id. ¶ 37. The additional cables and connections also required the installation of cable trays that were not included in any of the specifications. Id. ¶ 38. Sofir thereafter approved a number of change orders, including the additional cable trays. Id. ¶ 39. However, despite IICC's repeated requests, Sofir has refused to pay for the installation of the additional cables. Id. ¶ 40. Sofir has also “refused to pay IICC the remaining sums owed to IICC for completed work that was already agreed upon by the parties.” Id. ¶ 41.

         Based on the foregoing allegations, IICC has asserted the following state-law claims in its amended complaint: (i) breach of contract against Sofir; (ii) negligent misrepresentation, innocent misrepresentation, and constructive fraud against Sofir; (iii) abandonment/quantum meruit against Sofir; (iv) violation of the Michigan Building Contract Fund Act (“MBCFA”), Mich. Comp. Laws 570.151 et seq., against Sofir, Fregolent, and Vergani; and (v) both common-law and statutory conversion against Sofir, Fregolent, and Vergani.

         II. STANDARD OF DECISION

         On a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), “[t]he defendant has the burden of showing that the plaintiff has failed to state a claim for relief.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citing Carver v. Bunch, 946 F.2d 451, 454-455 (6th Cir. 1991)), cert. denied, 552 U.S. 1311 (2008). To survive a Rule 12(b)(6) motion, the plaintiff must allege sufficient facts to state a claim to relief above the speculative level, such that it is “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plausibility standard requires courts to accept the alleged facts as true, even when their truth is doubtful, and to make all reasonable inferences in favor of the plaintiff. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Twombly, 550 U.S. at 555-556.

         Evaluating a complaint's plausibility is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. Although a complaint that offers no more than “labels and conclusions, ” a “formulaic recitation of the elements of a cause of action, ” or “naked assertion[s]” devoid of “further factual enhancement” will not suffice, Iqbal, 556 U.S. at 678, it need not contain “detailed factual allegations, ” Twombly, 550 U.S. at 555; see also Erickson v. Pardus, 551 U.S. 89, 93 (2007) (“[S]pecific facts are not necessary . . . .”). Rather, a complaint needs only enough facts to suggest that discovery may reveal evidence of illegality, even if the likelihood of finding such evidence is remote. Twombly, 550 U.S. at 556. Thus, a motion to dismiss “should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Directv, 487 F.3d at 476.

         III. DISCUSSION

         A. Breach of Contract

         To state a claim for breach of contract under Michigan law, IICC must first establish the existence of a valid contract, the elements of which include: “(1) parties competent to contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of agreement, and (5) mutuality of obligation.” Hergenreder v. Bickford Senior Living Grp., LLC, 656 F.3d 411, 417 (6th Cir. 2011) (quoting Hess v. Cannon Twp., 696 N.W.2d 742, 748 (Mich. Ct. App. 2005)).[2]Once a valid contract has been established, IICC must allege the terms of the contract, that Sofir breached those terms, and that IICC suffered damages as a result of the breach. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003); Galeana Telecomms. Invs., Inc. v. Amerifone Corp., 202 F.Supp.3d 711, 721 (E.D. Mich. 2016).

         In the amended complaint, IICC alleges that it entered into a contract with Sofir to install the press lines in accordance with Sofir's specifications. Am. Compl. ¶ 33. IICC further alleges that it performed its obligations under the parties' contract, and that Sofir breached its obligations by “failing to make payments when due and by failing to provide complete, accurate and constructible design documents.” Id. ¶ 44. Sofir also “breached the implied covenant of good faith and fair dealing, ” which IICC claims is part of the parties' contract. Id. ¶ 45.

         Defendants argue that, insofar as IICC is seeking payment for the installation of additional cables, the breach-of-contract claim should be dismissed because the contract was a “fixed-price” contract for the “turn[-]key” installation of the press lines, as opposed to a variable-cost contract. Defs. Mot. at 9, 11. According to Defendants, the contract did not “include any limitations or assumptions regarding the number of cables” required to install the press lines, and, therefore, “IICC assumed the risk that its actual costs may turn out to be higher than anticipated.” Id. at 9. Defendants also argue that this claim cannot be based on IICC's purported reliance on the Komatsu table, because that table was not a part of the contract, and the terms and conditions of the purchase orders contained an integration clause, which confirmed that the purchase orders constituted the “entire agreement between the parties.” Id. at 10.

         In response, IICC contends that the language in the contract is ambiguous, particularly in regard to the word “turnkey.” Pl. Resp. at 12 (Dkt. 21). IICC further claims that the parties' course of performance undermines Sofir's assertion that the parties had a fixed-price contract. Id. at 15. At this pleading stage, the Court agrees with IICC.

         When construing contractual language, the Court must “give effect to the parties' intention at the time they entered into the contract.” Beck v. Park W. Galleries, Inc., 878 N.W.2d 804, 807 (Mich. 2016) (per curiam). Such an undertaking requires the Court to examine the contract's language “according to its plain and ordinary meaning.” Id.; see also Rory v. Cont'l Ins. Co., 703 N.W.2d 23, 28 (Mich. 2005) (“In ascertaining the meaning of a contract, we give the words used in the contract their plain and ordinary meaning that would be apparent to a reader of the instrument.”). If the language is clear and unambiguous, the contract must be interpreted and enforced as written. Beck, 878 N.W.2d at 807; Reardon v. Kelly Servs., Inc., 210 F. App'x 456, 459 n.4 (6th Cir. 2006) (“[A] fundamental tenet of our jurisprudence is that unambiguous contracts are not open to judicial construction and must be enforced as written[.]” (quoting Rory, 703 N.W.2d at 30-31).

         The test for ambiguity under Michigan law is whether (i) “two provisions ‘irreconcilably conflict with each other, '” or (ii) a term is “‘equally susceptible to more than a single meaning.'” RBS Citizens Bank, N.A. v. Purther, 22 F.Supp.3d 747, 752 (E.D. Mich. 2014) (quoting Choates v. Bastian Bros., Inc., 741 N.W.2d 539, 543 (Mich. Ct. App. 2007)). Whether a contract's language is ambiguous is a question of law, while the meaning of ambiguous language remains a question of fact. Id. Further, ambiguity may either be patent or latent. Shay v. Aldrich, 790 N.W.2d 629, 641 (Mich. 2010). The former appears from the face of the document and may not be identified with extrinsic evidence, while the latter “exists when the language in a contract appears to be clear and intelligible and suggests a single meaning, but other facts create the necessity for interpretation or choice among two or more possible meanings.” Id.

         During the hearing, Defendants explained that the phrase “Our Specification N. 01402502 Rev. 2, ” which appears in the purchase orders, see, e.g., Purchase Orders at 2 (em/ecf page), was a reference to the Technical Specification in Sofir's June 27, 2014 RFQ, and acknowledged that those specifications also make up part of the parties' contract. However, those specifications were not attached to the amended complaint, nor were the details or terms of those specifications specifically alleged. Further, while the phrase “turn key” does appear in the purchase orders, that term is not self-explanatory based the language of the purchase orders (which includes both English and Italian). Without further factual development regarding the precise terms of the parties' contract beyond the allegations in the complaint and the attached purchase orders, it would be premature for the Court to rule on Defendants' arguments that the contract was for a fixed-price, thereby precluding IICC's recovery for the installation of additional cables.

         This portion of Defendants' motion is denied.

         B. Constructive Fraud: Negligent and ...


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