Indus Concepts and Engineering, L. L. C. v. Miller
2:15-cv-13150
E.D. Mich.Jul 20, 2016Background
- Indus Concepts granted Superb Industries rights under a 2008 Business Alliance Agreement (BAA) and License Agreement to manufacture and sell Indus’s LATTICELL products to customers Indus procured (parties continued the relationship after formal expiration).
- Indus alleges Superb (and its president John Miller) secretly charged customers higher prices than agreed, withheld royalties (~$400,000 alleged for one program), supplied incorrect sales records, and refused document requests.
- Superb allegedly demanded $921,682 from Meridian for “unrecovered capital expenditures” without Indus’s consent; Chrysler then sought cost reductions and ultimately removed the product from programs and refused future selection, harming Indus’s business relationships.
- Indus sued in state court asserting breach of contract (BAA and License), breach of fiduciary duty, unjust enrichment, fraudulent/negligent/silent misrepresentation, and tortious interference; defendants removed and moved to dismiss under Rule 12(b)(6).
- The district court found some contract-based claims plausible (price-negotiation exclusivity, record-production, certain royalty allegations) and dismissed or granted leave to amend others; several tort and individual claims were dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Superb breached BAA by usurping Indus’s exclusive right to negotiate prices | Indus: Section 1 gave Indus exclusive price-negotiation role; Superb charged higher prices without consent | Superb: contract does not grant exclusivity; its actions fall within agreed roles | Court: Plausible allegation of exclusivity; denial of dismissal as to this theory |
| Whether Superb breached duty to negotiate in good faith after program cost-change (Section 2B) | Indus: Chrysler’s cost-reduction request triggered duty to negotiate; Superb refused | Superb: no breach; facts insufficient to show refusal to negotiate in bad faith | Court: Not yet pled with sufficient detail but amendment allowed to try to make claim plausible |
| Whether Superb failed to pay royalties / condition of payment | Indus: License & BAA required regular royalty statements and payments; Superb withheld royalties after overcharging customers | Superb: payments conditioned on Superb’s receipt of customer funds; no withholding if no receipts | Court: Indus plausibly alleges Superb received payments and withheld royalties; leave to amend to specify amounts |
| Whether Superb breached obligation to produce sales/financial records (Section 3) | Indus: repeatedly requested records; Superb sent incorrect records and refused production | Superb: procedural defects in Indus’s requests | Held: Complaint sufficiently alleges breach of the record-production clause; survives dismissal |
| Whether unjust enrichment is available where express contracts exist | Indus: alternatively pleads unjust enrichment for profits from overpricing | Superb: unjust enrichment barred by express contract covering subject matter | Court: May plead unjust enrichment as alternative at this stage because facts about contract applicability remain in dispute |
| Whether fraud/negligent/silent misrepresentation and breach-of-fiduciary-duty claims survive despite contract | Indus: tort claims based on active concealment and misrepresentations about pricing and records | Superb: tort claims merely recast contractual breaches; no separate legal duty | Court: Fraud, negligent and silent fraud claims (Counts V–VII) dismissed as duplicative of contract performance; fiduciary-duty claim dismissed for failure to plead a separate fiduciary relationship |
| Tortious interference with business expectancy (based on overpricing and the $921,682 demand) | Indus: Superb’s actions intentionally caused termination of Indus’s relationships | Superb: actions derived from contract performance; not wrongful per se; no malice alleged | Court: Interference claims based on overpricing dismissed as duplicative; claim tied to the unilateral $921,682 demand not precluded by contract but dismissed for inadequate pleading; leave to amend allowed |
| Personal liability of John Miller | Indus: Miller participated in scheme with Superb to defraud Indus | Superb: corporate officer acts are corporate acts; no individual liability absent personal participation | Court: Claims against Miller dismissed for failure to plead specific, personal wrongful acts; leave to amend granted |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard—distinguish conclusions from factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for Rule 12(b)(6))
- Port Huron Educ. Ass’n v. Port Huron Area Sch. Dist., 550 N.W.2d 228 (Mich. 1996) (contract ambiguity is a question of law; interpretation rules)
- Huron Tool & Eng’g Co. v. Precision Consulting Servs., Inc., 532 N.W.2d 541 (Mich. Ct. App. 1995) (fraud claims that mirror contract breaches do not create independent tort liability)
- Loweke v. Ann Arbor Ceiling & Partition Co., 809 N.W.2d 553 (Mich. 2011) (tort duty distinct from contractual obligations; due-care duties under common law)