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Thomas v. Khrawesh

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

September 27, 2017



          STEPHEN J. MURPHY, III United States District Judge

         Plaintiff Lynnette Thomas brought suit to enforce a judgment she received in a previous case, Thomas v. Athlete's Foot, Case No. 10-cv-12558. Plaintiff was unable to collect on her earlier judgment because Defendant Edwan Khrawesh dissolved the corporation[1] that was the defendant to the original action. Now before the Court is Plaintiff's Motion for Summary Judgment. The Court has reviewed the briefs, and finds that a hearing is unnecessary. See E.D. Mich. LR 7.1(f). For the reasons listed below, the Court will grant Plaintiff's Motion for Summary Judgment.


         Plaintiff's action stems from a previous case, Thomas v. Athlete's Foot, Case No. 10-cv-12558 (the "Original Case"). In the Original Case, Plaintiff sued her corporate employer, Detroit Sport Foot, for sexual harassment, hostile work environment, and retaliation under Title VII of the Civil Rights Act of 1964 and Michigan's Elliott-Larsen Civil Rights Act. ECF 14-23, PgID 340. Detroit Sport Foot initially participated in the litigation, but stopped after Plaintiff's action survived a motion for summary judgment. Id. The Court then entered default judgment against Detroit Sport Foot and awarded Plaintiff damages, fees, and costs in the amount of $105, 512.50. Thomas v. Athlete's Foot, Case No. 10-cv-12558, ECF 34. Plaintiff was unable to collect on the judgment, however, because Detroit Sport Foot dissolved. Id., ECF 39; ECF 14-17.

         Plaintiff then filed a motion to pierce Detroit Sport Foot's corporate veil and proceed against its owner: Defendant Edwan Khrawesh. ECF 14-3. Attorney Edward Ewald appeared "to represent the legal interests of Edwan Khrawesh, " ECF 14-26, and filed a response to Plaintiff's motion, Athlete's Foot, ECF 52. The Court carefully considered both parties' briefs and concluded that Plaintiff suffered an unjust injury from Defendant's abuse of the corporate privilege. ECF 14-23, PgID 347. But there was a technicality that prevented the Court from granting Plaintiff's motion: Defendant was not named a defendant to the Original Case. ECF 14-25. Consequently, the Court denied Plaintiff's motion and retained exclusive jurisdiction. Id. Plaintiff then brought suit to enforce the judgment. ECF 1.


         The Court must grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party must identify specific portions of the record "which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met its burden, the non-moving party may not simply rest on the pleadings, but must present "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R.Civ.P. 56(e)).

         A fact is material if proof of that fact would establish or refute an essential element of the cause of action or defense. Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984). A dispute over material facts is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a motion for summary judgment, the Court must view the facts and draw all reasonable inferences "in the light most favorable to the nonmoving party." 60 Ivy St. Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987).


         I. Plaintiff may proceed with her cause of action.

         The Court may enter judgment only if there is a proper cause of action before it. Plaintiff brings an "action to pierce the corporate veil, " ECF 1, which is traditionally an equitable remedy rather than an independent cause of action. See Brennan v. Nat'l Action Fin. Servs., Inc., No. 12-cv-10551, 2012 WL 3888218, at *3 (E.D. Mich. Sept. 7, 2012) (citing In re RCS Engineered Prods. Co., 102 F.3d 223, 226 (6th Cir. 1996)). The Court raised this issue at the Rule 16 Scheduling Conference, yet both parties neglected to address it in their briefs. After careful consideration of this nearly fatal flaw, the Court finds that Plaintiff may proceed.

         The action is premised on diversity, so the Court must determine if federal or state law governs the question of whether Plaintiff's claim is a proper cause of action. See Erie R. R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Courts typically "look to local law to find the cause of action." Ragan v. Merch. Transfer & Warehouse Co., 337 U.S. 530, 533 (1949). The Court therefore finds that state law governs.

         The Court next must determine which state's law to apply. The Court is located in Detroit, so Michigan's choice of law principles govern the analysis. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (federal courts apply choice of law principles of the state where the federal court is located). "Michigan choice of law principles provide that Michigan law applies absent a rational reason-such as another State's interest-to apply other law." Daimler-Chrysler Servs. N. Am., LLC v. Summit Nat., Inc., 289 F.App'x 916, 921 (6th Cir. 2008) (citing Sutherland v. Kennington Truck Serv., Ltd., 454 Mich. 274, 285-87 (1997)). Additionally, "Michigan choice of law provisions favor allowing Michigan residents to bring suit in Michigan courts under Michigan law." Gass v. Marriott Hotel Servs., Inc., 558 F.3d 419, 425 (6th Cir. 2009) (citing Olmstead v. Anderson, 428 Mich. 1, 23-27 (1987)). Here, Plaintiff is a resident of Michigan, Detroit Sport Foot was incorporated in Michigan, [2] and the underlying events occurred in Michigan. ECF 1, PgID 2. Michigan law must apply.

         Finally, the Court finds that Michigan law permits Plaintiff to proceed on a claim to pierce the corporate veil. Under Michigan law, "piercing the corporate veil is merely a remedy to be applied in certain limited circumstances, " rather than an independent cause of action. Gallagher v. Perhsa, 315 Mich.App. 647, 661 (2016). Michigan courts, however, allow plaintiffs to proceed without a separate cause of action when "there already exists a judgment based on one or more causes of action." Id. Specifically, "when a judgment already exists against a corporate entity, an additional cause of action is not needed to impose liability against a shareholder or officer if a court finds the necessary facts to pierce the corporate veil." Id. at 665. Here, Plaintiff already has a judgment against Defendant's dissolved corporation, Athlete's Foot, Case No. 10-12558, ECF 34, and the ...

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