46 F.4th 454
6th Cir.2022Background
- PSI (Massachusetts) assisted P.B. Products (Michigan) to design and manufacture the "Orgo Bag"; large projected orders fell through and PSI incurred $506,129.44 in losses when P.B. Products failed to accept goods.
- In 2019 PSI sued P.B. Products, its principals (Copek and Byrne), and Aldez (a shipping company) alleging contract and tort claims; the 2019 complaint contained no factual allegations showing Aldez owed a duty or breached a contract.
- The district court dismissed Copek, Byrne, and Aldez for failure to state a claim but allowed claims against P.B. Products to proceed; PSI did not amend the complaint as to Aldez.
- In 2021 PSI filed a new suit against Aldez alone asserting breach of contract, promissory estoppel, and UCC non-acceptance based on the same facts but seeking to pierce the corporate veil to hold Aldez liable.
- Aldez moved to dismiss on res judicata and Rule 12(b)(6) grounds; the district court dismissed the 2021 suit as barred by res judicata. PSI appealed.
- The Sixth Circuit held that Michigan preclusion law (per Semtek/Taylor) applied; res judicata did not bar the 2021 suit because the 2019 dismissal was not a final disposition of all claims, but the 2021 complaint nevertheless failed under Rule 12(b)(6) because it alleged no factual basis for Aldez’s liability and veil piercing is a remedy, not an independent cause of action under Michigan law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for preclusion | Federal res judicata principles govern successive diversity suits | Michigan res judicata law should apply | Michigan law applies (Semtek/Taylor controlled; Rawe was superseded) |
| Whether res judicata bars 2021 suit | 2021 suit is different because it seeks veil piercing/vicarious liability | Claims arise from same facts and could have been decided earlier | Res judicata did not apply: prior dismissal of Aldez was not a final decision disposing of all claims |
| Sufficiency of the 2021 complaint under Rule 12(b)(6) | Complaint alleges Aldez is alter ego/agent of P.B. Products; thus states claims | Complaint lacks factual allegations tying Aldez to the alleged contract or misconduct | Complaint fails to state a claim; dismissal proper under Rule 12(b)(6) |
| Availability of veil piercing as independent claim | Veil piercing is a proper way to hold Aldez liable in a standalone action | Veil piercing is a remedy, not a separate cause of action; cannot obtain it absent a judgment against the primary defendant | Veil piercing is a remedy, not a cause of action under Michigan law (Gallagher); PSI cannot preemptively obtain it here |
Key Cases Cited
- Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001) (federal courts in diversity incorporate state preclusion rules unless incompatible with federal interests)
- Taylor v. Sturgell, 553 U.S. 880 (2008) (reinforces Semtek on preclusion in diversity cases)
- Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521 (6th Cir. 2006) (prior Sixth Circuit decision applying federal res judicata principles in successive diversity suits)
- Adair v. State, 680 N.W.2d 386 (Mich. 2004) (elements of Michigan res judicata)
- Gallagher v. Persha, 891 N.W.2d 505 (Mich. Ct. App. 2016) (piercing the corporate veil is a remedy, not a separate cause of action)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for plausibility under Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim for relief)