541 F. App'x 549
6th Cir.2013Background
- C.T. Charlton & Associates (CTC) was TracRac’s sales representative in Michigan under a contract (2004) that continued to entitle CTC to commissions after termination; TracRac stopped timely paying and accrued ~$150,000 in unpaid commissions.
- TracRac negotiated an asset sale of substantially all assets to Thule, Inc. for cash (effective Oct. 29, 2010); the asset-purchase agreement expressly excluded accrued sales commissions and released Thule from liability for Charlton’s claims.
- After purchase Thule continued TracRac’s business and brand; TracRac wound down and dissolved within months. The acquisition was public and Thule notified suppliers, retailers, and sales reps.
- CTC sued Thule (diversity jurisdiction) asserting successor liability and unjust enrichment/quantum meruit for unpaid and prospective commissions; the district court granted summary judgment for Thule.
- The Sixth Circuit affirmed, holding Michigan’s traditional rule against successor liability applies to arm’s-length cash asset purchases absent narrow exceptions, and that unjust enrichment failed because Thule purchased the benefit from TracRac.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Thule is successor liable for TracRac’s unpaid commissions | Apply Turner/"continuity of the enterprise" doctrine because business continuity continued so Thule should inherit liabilities | Traditional rule: arm’s-length cash asset purchaser does not assume predecessor liabilities; Turner limited to products-liability (and similar) contexts | Traditional rule applies; no successor liability because no narrow exception (common ownership, fraud, implied assumption, de facto merger, or mere continuation) was met |
| Whether Turner/"continuity of the enterprise" doctrine applies outside products-liability | Turner should apply because Thule continued the enterprise and operations, so policy justifies shifting liability | Turner is a tort/products-liability doctrine driven by public-safety and risk-allocation policies and should not expand ordinary commercial liability | Turner is limited to products-liability (and select statutory contexts); its policy rationales do not justify expansion here |
| Whether the transaction falls within narrow exceptions (e.g., mere continuation, implied assumption, fraud) | Facts show continuity of operations and public continuation, so exception(s) apply | No common ownership, no fraud, no implied assumption, purchase was an arms-length cash deal; successor did not assume liabilities | Exceptions not satisfied; CTC failed to show the indispensable elements (like common ownership) or other grounds for successor liability |
| Whether Thule was unjustly enriched / quantum meruit applies | Thule benefitted from CTC’s sales efforts and should pay for unpaid and future commissions | Thule paid TracRac for assets in a cash deal; any benefit was purchased from TracRac, and existence of express contract weighs against imposing restitution on Thule | Unjust enrichment/quantum meruit fails: benefit was paid for by Thule (via TracRac) and recovery via unjust enrichment is inequitable given express contract and available recourse against TracRac |
Key Cases Cited
- Turner v. Bituminous Cas. Co., 244 N.W.2d 873 (Mich. 1976) (creates/expands "continuity of the enterprise" doctrine in products-liability context)
- Foster v. Cone-Blanchard Mach. Co., 597 N.W.2d 506 (Mich. 1999) (reaffirms traditional successor-liability rule and enumerates narrow exceptions)
- Craig ex rel. Craig v. Oakwood Hosp., 684 N.W.2d 296 (Mich. 2004) (declines to extend Turner beyond products-liability/where its policies apply)
- Starks v. Mich. Welding Specialists, Inc., 722 N.W.2d 888 (Mich. 2006) (reaffirms limits on expanding Turner; traditional rule applies for asset purchases)
- City Mgmt. Corp. v. U.S. Chem. Co., 43 F.3d 244 (6th Cir. 1994) (interprets Michigan law to limit continuing-enterprise doctrine to products-liability cases)
- Morris Pumps v. Centerline Piping, Inc., 729 N.W.2d 898 (Mich. Ct. App. 2006) (discusses unjust enrichment where an express contract between parties is relevant to restitution claims)