United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANTS' MOTION TO DISMISS 
HONORABLE STEPHEN J. MURPHY, III UNITED STATES DISTRICT
Motors and the local southeast Michigan utility company
signed a handful of 10-year agreements. But then GM filed for
bankruptcy and production at a specific GM plant ceased-as
did the operations of its power plant. What remains are
environmental hazards and a complex dispute over the meaning
and status of the agreements. The Plaintiffs are RACER
Properties-a successor-in-interest to General Motors
concerned with environmental issues-and Eplet-the
administrative trustee of RACER. Defendants are DTE Energy
Services (DTE) and its wholly owned subsidiary, DTE Pontiac
now move for partial dismissal of the Complaint. For the
reasons below, the Court will grant the motion in part and
deny it in part.
owned a facility in Pontiac, MI called the "Powerhouse,
" that it used to support its nearby assembly plant. In
January 2007, GM entered into four agreements with DTEPN
concerning the Powerhouse: an asset purchase agreement (GM
sold DTEPN assets that were located at the property), a lease
agreement (GM leased the land to DTEPN), a utility services
agreement (DTEPN provided electricity, steam, and compressed
air to GM), and an environmental indemnity agreement (DTEPN
agreed to indemnify GM for claims arising from environmental
laws or release of hazardous materials). Concurrently, DTE
Energy (DTEPN's parent company) executed a Parental
Guaranty "which guarantees all of DTEPN's
obligations under the Utility Services Agreement[.]" ECF
1, PgID 6, ¶ 10.
years into the agreement, however, GM filed for bankruptcy
and sought to reject one of the four Associated Agreements
(the Utility Services Agreement) pursuant to § 365 of
the Bankruptcy Code. Id. at 12, ¶ 32. DTEPN
objected and asked the bankruptcy court to take one of three
actions: (1) deny the motion outright; (2) grant the motion
"subject to the rejection of" two of the other
Associated Agreements (the Asset Purchase and Lease
Agreements); or (3) adjourn the motion hearing to allow the
parties to "negotiate a comprehensive
resolution[.]" ECF 1-3, PgID 55. Eventually the parties
reached an agreement on the matter and in March 2011 the
bankruptcy court entered a stipulated order ("The
Stipulation"). ECF 1, PgID 13-14, ¶ 34-36; see also
ECF 1-3 (the full stipulated order). The Stipulation
established that the Utility Services Agreement, the Asset
Purchase Agreement, and the Lease Agreement constituted
"a single, integrated contract" and that GM was
rejecting the contract, under 11 U.S.C. § 365, as of
January 24, 2011. ECF 1-3, PgID 55.
next six years, DTEPN remained in exclusive possession of the
premises but failed to maintain them. The buildings have
fallen into disrepair and environmental hazards have cropped
up. When the lease finally expired in January 2017, DTEPN
surrendered its keys to RACER, which accepted them. ECF 1,
PgID 7, ¶ 16.
filed suit on May 6, 2017. Defendants filed the instant
motion to dismiss in lieu of an answer.
Court may grant a Rule 12(b)(6) motion to dismiss if the
complaint fails to allege facts "sufficient 'to
raise a right to relief above the speculative level, '
and to 'state a claim to relief that is plausible on its
face.'" Hensley Mfg. v. ProPride, Inc., 579
F.3d 603, 609 (6th Cir. 2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 570 (2007)). The Court views
the complaint in the light most favorable to the plaintiff,
presumes the truth of all well-pled factual assertions, and
draws every reasonable inference in favor of the non-moving
party. Bassett v. Nat'l Collegiate Athletic
Ass'n, 528 F.3d 426, 430 (6th Cir. 2008). If "a
cause of action fails as a matter of law, regardless of
whether the plaintiff's factual allegations are true or
not, " then the Court must dismiss. Winnett v.
Caterpillar, Inc., 553 F.3d 1000, 1005 (6th Cir. 2009).
are eight counts in the Complaint: (I) breach of associated
agreements, (II) breach of guaranty, (III) quantum meruit,
(IV) nuisance, (V) negligence, (VI) statutory waste (MCL
§ 600.2919), (VII) a CERCLA claim (42 USC § 9601),
and (VIII) violation of the Natural Resources and
Environmental Protection Act. DTEPN moves only for the
dismissal of Count I, while DTE Energy moves to dismiss all
claims against it. One of DTE's overarching arguments is
that Plaintiffs have not adequately pled their veil-piercing
theory. Because of its potential to resolve many of the
counts, the Court will first take up the veil-piercing
argument, and then turn to arguments on the remaining counts.
Piercing and DTE's Liability
DTEPN and GM signed the Associated Agreements, but Plaintiffs
seek to hold DTE liable under a veil-piercing theory.
Plaintiffs allege that DTEPN is undercapitalized, is wholly
owned by DTE, and that its membership, management, and
personnel fully overlap with DTE. ECF 1, PgID 24-25, ¶
70. DTE contends that Plaintiff failed to allege that DTE
Energy used the corporate form "to commit a fraud or
wrong" or that Plaintiffs have suffered an "unjust
loss" resulting from abuse of the corporate form. ECF
11, PgID 129.
Michigan law, there is a presumption that the corporate form
will be respected" and thus the corporate veil "may
be pierced only where an otherwise separate corporate
existence has been used to subvert justice or cause a result
that is contrary to some overriding public policy."
Servo Kinetics, Inc. v. Tokyo Precision Instruments
Co., 475 F.3d 783, 798 (6th Cir. 2007) (internal
citations, quotation marks, and alterations omitted). Three
requirements must be met: "(1) the corporate entity was
a mere instrumentality of another entity or individual; (2)
the corporate entity was used to commit a fraud or wrong; and
(3) the plaintiff suffered an unjust loss." Id.
But the abuse of the corporate form must still be present, so
the mere wrongdoing by the subsidiary does not, on its own,
justify piercing the veil. See ITT Corp. v. Borgwarner
Inc., No. 1:05-CV-674, 2009 WL 2242904, at *9 (W.D.
Mich. July 22, 2009) (distinguishing CERCLA cases in which
parent companies depleted funds and acted with the purpose of
avoiding liabilities); see also Servo Kinetics, 475
F.3d at 800 (describing the "valid proposition"
that when a party chooses to contract with a subsidiary
"with knowledge of the subsidiary's separate
corporate existence, " it "cannot later pursue the
parent for the wrongs of the subsidiary.") (citing
City of Dearborn v. DLZ Corp., 111
F.Supp.2d 900, 902 (E.D. Mich. 2000)).
analysis is fact specific, and the facts here are telling.
When GM entered into its agreement with DTEPN alone, it knew
full well it was dealing with a subsidiary: part of the deal
required DTE to sign a parental guaranty. See ECF 1, PgID 6,
¶ 10. In the Complaint, Plaintiffs make various
allegations about the similarities between the Defendants,
but never allege that DTE used the corporate form to avoid
its obligations or to commit a fraud or wrong. Rather, the
Complaint hinges on DTEPN's failure to fulfill its duties
under the Associated Agreements, and Plaintiffs now wish to
hold DTE accountable for those duties. The corporate veil is
made of tougher cloth than this. Because Plaintiffs have
failed to allege that DTE has used the corporate form to
commit a fraud or wrong, they have failed to plead a
veil-piercing theory of liability.
Counts I, III, and V will be dismissed as to DTE.
Count I - Breach of Associated Agreements
asserts that GM's rejection of the Associated Agreements
during the bankruptcy proceedings freed them from the
obligation to perform. Although DTEPN begins by conceding
that the rejection "did not, by itself, result in a
termination of the agreements, " it argues that the
rejection "qualified as a 'substantial breach'
under Michigan law" which deprived DTEPN of the benefit
of its bargain and thus allowed DTEPN "to rescind the
Rejected Agreements and avoid any further responsibility to
perform going forward." ECF 11, PgID 122-24. Plaintiffs
insist that DTEPN misinterprets the Bankruptcy Code and
Michigan law, and that by remaining in possession of the
premises, DTEPN continued to be bound by the terms of the
Bankruptcy Rejections (11 U.S.C. § 365)
365 of the Bankruptcy Code governs "executory contracts
and unexpired leases" entered into by the bankrupt
debtor. Subject to certain exceptions, and only with the
court's approval, a bankruptcy trustee may "assume
or reject any executory contract or unexpired lease of the
debtor." 11 U.S.C. § 365(a). Pursuant to subsection
(g), when a trustee rejects an unexpired lease, the lease is
neither terminated nor abandoned- the trustee has simply
breached the terms of the lease. In re Palace
Quality Servs. Indus., Inc., 283 B.R. 868, 886 (Bankr.
E.D. Mich. 2002) (citing Miller v. Chateau Cmtys., Inc.
(In re Miller), 282 F.3d 874, 877 (6th Cir. 2002)). The
breach is then treated as if it "took place immediately
prior to the filing of the bankruptcy petition." In
re Miller, 282 F.3d at 877 (citing 11 U.S.C. §
365(g)(1)). As a result, the non-debtor becomes an unsecured
creditor with a pre-petition claim for damages. Id.
(h) specifically concerns leases of real property. Under it,
"[i]f the trustee rejects an unexpired lease of real
property under which the debtor is the lessor" and