Live Cryo LLC v. CryoUSA Import and Sales, LLC
2:17-cv-11888
E.D. Mich.Sep 15, 2017Background
- Live Cryo, LLC (Michigan) bought cryotherapy chambers and entered a written “Distribution Agreement” and separate Purchase Agreements with CryoUSA entities (Texas) in 2016; disputes arose over machine performance and sales projections.
- Plaintiff sued in Michigan federal court alleging MFIL violations, fraud (several varieties), tortious interference, breach of warranty, breach of contract, promissory estoppel, and unjust enrichment; Cryo Import filed a related suit in Dallas state court three days earlier.
- The Agreements contain Texas choice-of-law clauses and forum-selection clauses naming Dallas courts; plaintiff alleges the relationship was a franchise and invokes the Michigan Franchise Investment Law (MFIL), which voids forum-selection provisions in franchise documents.
- The court treated defendants’ motion to dismiss against plaintiff’s First Amended Complaint on the merits and addressed choice-of-law/forum clause enforceability, pleading sufficiency under Rules 8/9(b), the economic-loss doctrine, and Colorado River abstention.
- Court dismissed Counts I–VII (MFIL and tort claims) and Counts X–XI (quasi-contract) with prejudice for failure to state a claim, but denied dismissal as to Counts VIII–IX (breach of warranty and breach of contract), which remain pending.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for contract vs. tort claims | Agreements’ Texas choice-of-law should not bar Michigan law for statutory/tort claims tied to pre-contract statements | Enforce Texas choice-of-law and apply it to all claims | Texas law governs contractual claims; Michigan law governs tort and quasi-contract claims because clause is limited to contracts |
| Enforceability of forum-selection clauses (Dallas) given MFIL | Relationship is a franchise; MFIL §445.1527(f) voids venue provisions for franchises so clause unenforceable | Parties are distributor, not franchisee; forum clause should be enforced | Fact question exists whether relationship is a franchise; Michigan’s policy favors non-enforcement here — forum clause not enforced and case may proceed in Michigan |
| Sufficiency of MFIL/fraud claims (Rule 9(b)) | Misrepresentations (earnings projections, machine performance) induced reliance and violate MFIL and fraud standards | Claims are speculative future projections/puffery, pleaded against multiple defendants (impermissible group pleading), and fail Rule 9(b) particularity | MFIL and common-law fraud claims dismissed: group pleading, forward-looking projections/puffery not actionable, economic-loss overlap with contracts, and reliance unreasonable given integration clauses |
| Tortious interference and quasi-contract claims | Tort and unjust enrichment/promissory estoppel available alongside contract/warranty claims | Contract and warranty govern; economic-loss doctrine and existence of express agreements bar tort and quasi-contract recovery | Tortious interference and quasi-contract claims dismissed: barred by economic-loss doctrine and preclusive effect of express agreements |
| Colorado River abstention (Texas parallel suit) | Defendants: Texas suit precedes this case; federal court should abstain in favor of Texas forum | Plaintiff: MFIL bars enforcement of forum clause; Michigan interest strong; cases filed nearly simultaneously | Abstention denied: suits not parallel (different parties), balancing factors favor exercising federal jurisdiction; breach claims proceed here |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (Rule 8 pleading standards and plausibility)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (federal courts in diversity apply forum state choice-of-law rules)
- Moses v. Bus. Card Express, Inc., 929 F.2d 1131 (6th Cir.) (scope of contractual choice-of-law clauses may extend to tort claims in some circumstances)
- Banek Inc. v. Yogurt Ventures USA, Inc., 6 F.3d 357 (6th Cir.) (choice-of-law clause applied to fraud where tort claims were closely related to the agreement)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (framework for abstention where parallel state proceedings exist)
- Romine v. Compuserve Corp., 160 F.3d 337 (6th Cir.) (definition and treatment of parallel actions for Colorado River analysis)
- PaineWebber, Inc. v. Cohen, 276 F.3d 197 (6th Cir.) (enumeration of factors for Colorado River abstention)
- Hi-Way Motor Co. v. Int’l Harvester Co., 398 Mich. 330 (Mich.) (future promises/puffery not actionable as fraud)