PRODUCT SOLUTIONS INTERNATIONAL, INC., Plaintiff, vs. P.B. PRODUCTS, LLC d/b/a ORGO and EVERYTHING ORGO, ALDEZ CONTAINERS, LLC, DIANE PATTISON COPEK and MICHAEL J. BYRNE, Defendants.
Civil Action No. 19-CV-12790
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
HON. BERNARD A. FRIEDMAN
June 12, 2020
This matter is presently before the Court on defendants’ motion to dismiss for failure to state a claim [ECF No. 5]. Plaintiff has responded and defendants have replied. Pursuant to
This is a breach of contract case. Plaintiff Product Solutions International, Inc. (“PSI“) filed a seven count complaint against defendants P.B. Products, LLC d/b/a ORGO and Everything Orgo (collectively, (“Orgo“) and individuals Diane Pattison Copek (“Copek“) and Michael Byrne (“Byrne“), as well as Aldez Containers, LLC (“Aldez“). PSI alleges that it entered into a contract with defendants in which PSI acted as a middle man between Orgo and a factory in China regarding the manufacture of certain bags on which Orgo holds the patent (“Orgo bags“). The crux of PSI‘s claim is that defendants did not order all of the Orgo bags described in a purchase order which provided for the purchase of 100,000 Orgo bags. Instead, PSI alleges that defendants purchased far less than 100,000 Orgo bags, leaving PSI obligated
The pertinent background facts are as follows: On January 25, 2016, Orgo issued a “Purchase Order” to PSI for “100,000 pieces” (Orgo bags) at a price of $8.76 each. The Purchase Order provided that the Orgo bags were to be “released as requested in sea container quantities per release.” (ECF No. 1, PageID.65) The Purchase Order also provided that product was to be shipped to Orgo, care of Aldez, but made no other reference to Aldez. Over the next two years, Orgo issued four additional “Purchase Orders” and PSI issued invoices for Orgo bags in the following quantities:
| Date | Invoice Number | Units (number of bags) |
|---|---|---|
| February 17, 2016 | 3358 | 11,088 |
| June 8, 2016 | 3403 | 11,232 |
| August 9, 2016 | 3406 | 11,232 |
| August 15, 2017 | 3506 | 4,752 |
Orgo paid each of these invoices in full. Orgo did not order any additional Orgo bags from PSI. The Purchase Orders listed above amounted to a total purchase of 32,297 Orgo bags, well below the 100,000 Orgo bags that PSI believes defendants are obligated to purchase.
To survive a motion to dismiss, “a complaint must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.‘” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
Defendants first argue that PSI‘s tort claims must be dismissed. Pursuant to the economic loss doctrine, Michigan courts deny tort claims where only economic loss is sustained. Cargill, Inc. v. Boag Cold Storage Warehouse, Inc., 71 F.3d 545 (6th Cir. 1996). The rule is that where the relationship between the parties is contractual, and where no personal injury or damage to property has occurred, the buyer‘s rights are limited to those provided by the Uniform Commercial Code. McGhee v. General Motors, 296 N.W.2d 286, 291 (Mich. App. 1980). Under this doctrine, “[w]here a purchaser‘s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.” Neibarger v. Universal Coops., Inc., 486 N.W.2d 612, 615 (Mich. 1992). The Neibarger Court further explained, “If a commercial purchaser were allowed to sue in tort to recover economic loss, the UCC would be rendered meaningless and contract law would drown in a sea of tort.” Id. at 618.
The ‘fraud in the inducement’ exception applies only where the fraud in question is extraneous to the contract. A fraud is interwoven with the breach when the misrepresentations alleged by plaintiff relate solely to the quality and characteristics of defendant‘s product. In those cases, the misrepresentations relate to the breaching party‘s performance of the contract, and do not give rise to an independent cause of action in tort.
Wright Tool Co. v. Chemchamp North American Corp., 185 F. Supp. 2d 781, 784 (E.D. Mich. 2002). The fraud in the inducement exception is limited to claims of misrepresentation regarding matters other than the quality or character of the goods sold. Huron Tool and Eng‘g Co. v. Precision Consulting Servs., Inc., 209 Mich. App. 365, 373 (1995).
Defendants correctly argue that the economic loss doctrine bars PSI‘s tort claims. PSI does not identify any duty separate and distinct from the parties’ agreement. While PSI alleges that defendants made misrepresentations and acted fraudulently, all of the allegations center on defendants’ failure to purchase a total of 100,000 Orgo bags. Defendants’ alleged obligation is a contractual duty relating to the character of goods sold, i.e., the quantity. Nothing in the complaint alleges any duty apart from contract. Therefore, PSI‘s tort-based fraud claims must be dismissed. Therefore, Counts III (Fraud), Count IV (Silent Fraud); Count V (Negligent Misrepresentation); and Count VI (Innocent Misrepresentation) must be dismissed. Although defendants argue that Count II (promissory estoppel) must also be dismissed, the Court will separately address that claim below.
Defendants next argue that PSI has failed to plead plausible claims against the
Further, although PSI names Aldez as a party, the complaint alleges no facts asserting any duty owed or any breach by Aldez. The complaint does not allege that Aldez was
Defendants next argue that PSI has failed to state a claim for breach of contract because the purchase order on which they rely, which calls for the sale of 100,000 Orgo bags, was a “blanket purchase order” which does not give rise to a contractual obligation. As the Sixth Circuit has explained,
[a] blanket purchase order does not oblige [the seller] to manufacture or ship any parts. That obligation arises when [the buyer] issues what is known as a shipment, production, or release order that would issue against the blanket purchase order. Blanket purchase orders can last for some time, while shipment orders are issued against them.
Detroit Radiant Prods. Co. v. BSH Home Appliances Corp., 473 F.3d 623, 631 (6th Cir. 2007) (quoting Urban Assocs. v. Standex Elecs., Inc., No. 04-40059, 2006 WL 250020 at *1 (E.D. Mich. Jan. 30, 2006)). The problem for defendants, however, is determining whether the purchase order which provides for the purchase of 100,000 Orgo bags is a blanket purchase order is a fact intensive exercise which cannot be undertaken on a motion to dismiss. Indeed, the cases on which defendants rely did not resolve this issue on motions to dismiss. Detroit Radiant, supra, was an appeal following a bench trial. Urban Assocs., supra, was a summary judgment decision. Similarly, Warren Indus., Inc. v. PMG Indiana Corp., No.13-13026, 2014 WL 12585775 (E.D. Mich. Nov. 25, 2014), was a summary judgment decision. Although defendants spend a good deal of time arguing that the purchase order for the 100,000 Orgo bags was a blanket purchase order because it was not as detailed as the subsequent purchase orders, the issue is whether PSI has alleged a plausible claim for breach of contract for the purchase of 100,000 Orgo bags. It has. Whether the purchase order on which it bases its claim for breach
As to PSI‘s claim for promissory estoppel, “[w]here an express contract to which plaintiff was a signatory governs the premise of the alleged unjust enrichment, like promissory estoppel, [the complaint] is subject to dismissal for failure to state a claim.” DBI Investments, LLC v. Blavin, No. 13-CV-13259, 2014 WL 902866, at *6 (E.D. Mich. Mar. 7, 2014) (citing Martin v. E. Lansing Sch. Dist., 483 N.W.2d 656, 661 (Mich. Ct. of App. 1992), and Convergent Grp. Corp. v. Cnty. of Kent, 266 F. Supp. 2d 647, 661 (W.D. Mich. 2003)).
Here, however, PSI has pled promissory estoppel as an alternative to its breach of contract claim for the 100,000 Orgo bags.
A party may set forth two or more statements of a claim . . . alternatively or hypothetically, either in one count . . . or in separate counts . . . . When two or more statements are made in the alternative and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements. A party may also state as many separate claims . . . as the party has regardless of consistency. . . .
PSI has pled in the alternative; either there is an express contract for the purchase of 100,000 Orgo bags or PSI is entitled to a quasi-contractual remedy of promissory estoppel. PSI is permitted to plead both at this early stage. See Ajuba Int‘l, L.L.C. v. Saharia, 871 F. Supp. 2d 671 (E.D. Mich. 2012); Detroit Tigers, Inc. v. Ignite Sports Media, LLC., 203 F. Supp. 2d 789, 798 (E.D. Mich. 2002). Therefore, Count II is permitted to go forward at this time.
Finally, defendants did not provide any argument as to PSI‘s claim under Count
Accordingly,
IT IS ORDERED that defendants’ motion to dismiss is granted in part and denied in part as follows: PSI‘s claims against Copek, Byrne, and Aldez are dismissed. Counts III, IV, V, and VI are dismissed. Counts I, II, and VII remain against Orgo only.
s/Bernard A. Friedman
BERNARD A. FRIEDMAN
SENIOR UNITED STATES DISTRICT JUDGE
Dated: Dated June 12, 2020
Detroit, Michigan