Summary
In S2 Yachts, Chief Judge Jonker was confronted with a very similar question regarding the applicability of the Dominican Republic's Law 173 to an agreement between a Michigan-based supplier and a Dominican distributor and that contained a Michigan choice-of-law provision.
Summary of this case from Wahl Clipper Corp. v. Plaza Lama, S.A.Opinion
CASE No. 1:18-CV-389
2019-09-18
S2 YACHTS, INC., Plaintiff/Counter-Defendant, v. ERH MARINE CORP., Defendant/Counter-Claimant.
Raechel T.X. Conyers, Honigman Miller Schwartz and Cohn LLP, Detroit, MI, Jeffrey D. Smith, Honigman Miller Schwartz and Cohn LLP, Kalamazoo, MI, for Plaintiff/Counter-Defendant. Carina Marie Kraatz, John M. Sier, Hassan Ali Zaarour, Kitch Drutchas Wagner Valitutti & Sherbrook PC, Detroit, MI, for Defendant/Counter-Claimant.
Raechel T.X. Conyers, Honigman Miller Schwartz and Cohn LLP, Detroit, MI, Jeffrey D. Smith, Honigman Miller Schwartz and Cohn LLP, Kalamazoo, MI, for Plaintiff/Counter-Defendant.
Carina Marie Kraatz, John M. Sier, Hassan Ali Zaarour, Kitch Drutchas Wagner Valitutti & Sherbrook PC, Detroit, MI, for Defendant/Counter-Claimant.
OPINION AND ORDER
ROBERT J. JONKER, CHIEF UNITED STATES DISTRICT JUDGE INTRODUCTION
S2 Yachts, Inc. ("S2 Yachts") started selling its boats through a dealer, ERH Marine Corp. ("ERH Marine"), or its predecessors, in the Dominican Republic about twenty years ago. The relationship ebbed and flowed over the years through different contractual iterations. Ultimately, S2 Yachts decided not to renew the relationship.
When S2 Yachts told ERH Marine that it would not renew, ERH Marine invoked Law 173, a dealer protection statute in the Dominican Republic. The statute provides that foreign suppliers who terminate, or fail to renew, agreements without cause must pay substantial indemnity fees to the Dominican Republic dealers. S2 Yachts says Law 173 does not apply because the parties chose Michigan law, not the law of the Dominican Republic. Moreover, S2 Yachts says that Law 173 was modified by DR-CAFTA so that even under Dominican Republic law, S2 Yachts was within its rights. This is the main issue that divides the parties. ERH Marine also has asserted a separate breach of contract and business defamation counterclaim on some discrete disputes.
The parties have filed competing motions for summary judgment on all claims and counterclaims. The Court heard argument on the motions on September 4, 2019 and thereafter took the matter under advisement. For the reasons that follow, the Court concludes that the parties' choice of Michigan law is enforceable under a conflict of laws analysis, so Law 173 does not apply to the parties' agreements. Moreover, even if it did, the Court concludes that DR-CAFTA modified it to permit nonrenewal in this case. Genuine issues of material fact remain, however, with respect to some discrete issues in ERH Marine's breach of contract counterclaims. The business defamation claim fails as a matter of law under the economic loss doctrine.
FACTUAL BACKGROUND
S2 Yachts designs and manufactures boats to sell at wholesale prices to independent marine dealers. It maintains its principal place of business in Holland, Michigan (Am. Compl. ¶¶ 1, 7, ECF No. 7, PageID.54-55) and it does business under various trade names for its brands. Two of those brands, the Pursuit Boats and Tiara Yachts brands, are at issue here. The Pursuit Boats brand targets the offshore fishing boat market, and the Tiara Yachts brand targets the yachting and cruising boat market. (Slikkers Decl. ¶ 5, ECF No. 80-2, PageID.1368).
In 1999, Eudaldo Hernandez, who later became the head of ERH Marine, reached out to S2 Yachts to establish a business relationship: namely, a dealership arrangement in which Mr. Hernandez would sell S2 Yachts' boats in the Dominican Republic. The parties then reached an agreement for Mr. Hernandez to sell the Pursuit Boats brand. They reduced their agreement into writing to cover that brand's 2001 model year. (Pursuit Boats Dealer Agreement Model Year 2001, ECF No. 80-3, PageID.1370). As time went on, Mr. Hernandez also began selling another brand of S2 Yachts' boats, the Tiara Yachts brand, in the Dominican Republic. According to ERH Marine it began selling the Tiara Yachts brand as early as model year 2001, though it appears to agree with S2 Yachts that a dealership agreement for this brand was not signed until November 2002 for the 2003 model year. (ECF No. 80-9, PageID.1407; ECF No. 110-6, PageID.4486). Thereafter S2 Yachts and Mr. Hernandez (and eventually the defendant company, ERH Marine) continued to do business with each other through the Pursuit Boats and Tiara Yachts' 2018 model year.
The model year for both the Pursuit Boats and Tiara Yachts brand began approximately in August of the preceding calendar year, and ended approximately in July of the calendar year.
During this time the parties often, though not always, signed new agreements for the upcoming model year. These agreements either were renewed dealership agreements with similar boilerplate, or one-page extensions of the previous agreements to cover the next model year. When no renewal agreements or extensions were filed, it appears the parties operated under implied extensions. The last full agreement signed for the Pursuit Boats brand related to its 2015 model year. (2015 Model Year Pursuit Boats Agreement, ECF No. 110-4, PageID.4467). The last full agreement signed for the Tiara Yachts brand related to its 2017 model year. (2017 Model Year Tiara Yachts Agreement, ECF No. 110-7, PageID.4585). Thereafter the parties signed renewals, or operated under implied extensions, to cover the 2018 model year.
In November 2017 and January 2018, approximately seven months before the end of the 2018 model year, both Pursuit Boats and Tiara Yachts informed ERH Marine that the dealer agreements would not be renewed beyond the close of the 2018 model year on July 31, 2018. (ECF No. 110-47, PageID.4839; ECF No. 110-26, PageID.4727). Then, in February 2018, Counsel for ERH Marine and S2 Yachts exchanged a series of messages relating to S2 Yacht's nonrenewal notice. ERH Marine stated that S2 Yachts' nonrenewal of the Pursuit Boats and Tiara Yachts dealer agreements, without cause, violated the Dominican Republic's Law No. 173 of Apr. 6, 1966, G.O. No. 8979 ("Law 173"). Articles 2 and 3 of Law 173 provide that, notwithstanding any contractual clause to the contrary, a dealer agreement with a foreign supplier or licensor (such as S2 Yachts) "may not terminate nor refuse to renew the agreement at the termination date, unless a Just Cause exists." Law 173 Art. 2 (ECF No. 110-59, PageID.4889). Those articles further provide that a licensee "shall have the right to bring a claim against the Licensor in case of the licensee's ... unilateral refusal to renew said agreement without a just cause." (Id. at Art. 3).
S2 Yachts resisted ERH Marine's arguments. It responded that ERH Marine had not complied with the strict registration requirements to realize the protections of Law 173 in the first place and, furthermore, an intervening free trade agreement signed by the Dominican Republic now allows for the natural expiration of certain agreements. Central America-Dominican Republic-United States Free Trade Agreement, Annex 11.13 § B.1.(a)-(g), 119 Stat. 462, available at https://ustr.gov/sites/default/files/uploads/agreements/cafta/asset_upload_file7_3931.pdf (eff. Mar. 1, 2007 in the Dominican Republic) (hereinafter DR-CAFTA). This argument went hand in hand with S2 Yachts' overarching argument that the parties' contractually agreed choice of law in this case, Michigan, was enforceable.
PROCEDURAL HISTORY
On April 9, 2018, S2 Yachts filed suit in this Court, seeking declaratory relief that Law 173 does not apply to the Pursuit Boats and Tiara Yachts agreements and that S2 Yachts has fully complied with its obligations under the two agreements. (ECF No. 7). After the Court denied a defense motion to dismiss under the doctrine of forum non conveniens, Colorado River abstention, and Brillhart discretion, (ECF No. 39), ERH Marine filed its own counterclaim for declaratory relief in its favor, and additional alternative claims for Breach of Contract (Count IV) and Business Defamation (Count V), if the Court goes with Michigan law.
S2 Yachts (ECF No. 79) and ERH Marine (ECF No. 83) have both filed motions for summary judgment under Rule 56. S2 Yachts has also filed three discovery motions seeking to exclude certain expert testimony on damages and the declarations of three individuals. The Court heard argument on the motions on September 4, 2019 and thereafter took the motions under advisement. The matter is ready for decision.
LEGAL STANDARDS
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252, 106 S.Ct. 2505. In deciding a motion for summary judgment, the court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when " ‘the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.’ " Agristor Fin. Corp. v. Van Sickle , 967 F.2d 233, 236 (6th Cir. 1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).
When cross-motions for summary judgment are filed, the court must "evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Taft Broad. Co. v. United States , 929 F.2d 240, 248 (6th Cir. 1991) (quoting Mingus Constructors, Inc. v. United States , 812 F.2d 1387, 1391 (Fed. Cir. 1987) ). Both sides also move for summary judgment on claims (S2 Yachts) or counterclaims (ERH Marine) on which they have the burden of proof. "[I]f the moving party also bears the burden of persuasion at trial, the moving party's initial summary judgment burden is ‘higher in that it must show that the record contains evidence satisfying the burden of persuasion and that the evidence is so powerful that no reasonable jury would be free to disbelieve it.’ " Cockrel v. Shelby Cnty. Sch. Dist., 270 F.3d 1036, 1056 (6th Cir. 2001) (quoting Moore's Federal Practice ).
DISCUSSION
1. Michigan Law Controls
A. General Principles
The parties first ask the Court to make the call on whether Dominican Republic law (namely Law 173) or Michigan law applies to the Pursuit Boats and Tiara Yachts dealer agreements. The Pursuit Boats agreement provides "[t]his Agreement will be governed by and interpreted and construed in accordance with the laws of the State of Michigan, USA, excluding principles of conflicts of law and excluding the United Nations Convention for the International Sale of Goods." (2015 Model Year Pursuit Boats Agreement § XII (ECF No. 110-4, PageID.4471)). The Tiara Yachts agreement is substantially similar and states "[t]his Agreement will be governed by and interpreted and construed in accordance with the laws of the State of Michigan, excluding principles of conflicts of law." (2017 Model Year Tiara Yachts Agreement § XII, ECF No. 110-7, PageID.4592).
Neither side provides a textbook analytical roadmap for making this determination. In large part this appears to be because few courts in the United States have been asked to evaluate Law 173. However, other courts asked to examine dealer protection statutes in other jurisdictions, such as Puerto Rico, against choice of law provisions calling for the application of the law of a domestic jurisdiction have almost uniformly applied the Restatement (Second) of Conflict of Laws of Laws. See, e.g., Beatty Caribbean, Inc. v. Viskase Sales Corp., 241 F. Supp. 2d 123 (D.P.R. 2003) ; S. Int'l Sales Co. v. Potter & Brumfield Div. of AMF Inc., 410 F. Supp. 1339, 1341 (S.D.N.Y. 1976) ; Bausch & Lomb Inc. v. Fusion Consulting Grp., Inc., No. SACV 13-00776-CJC (JPRX), 2014 WL 11858167 (C.D. Cal. Mar. 20, 2014) ; Advance Exp., Inc. v. Medline Indus., Inc. , No. CV 06-1527 (JAF), 2006 WL 8451089 (D.P.R. July 20, 2006). And both sides in this case have discussed the Restatement's approach. (See S2 Yacht's Reply Brief, ECF No. 114, PageID.5289-5290; ERH Brief in Support, ECF No. 84, PageID.1907). The Court is satisfied, therefore, that the Conflict of Laws analysis provides the proper framework for evaluating motions with respect to the application of Law 173.
Generally, in a diversity action for breach of contract, courts enforce the parties' contractual choice of forum and governing law. See Carnival Cruise Lines, Inc. v. Shute , 499 U.S. 585, 596, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Here the Agreements unequivocally select Michigan law. (2015 Model Year Pursuit Boats Agreement § XII (ECF No. 110-4, PageID.4471); 2015 Model Year Pursuit Boats Agreement § XII (ECF No. 110-4, PageID.4471)). ERH Marine, however, argues that despite the presence of a Michigan choice of law provision in the Pursuit Boats and Tiara Yachts agreements, Law 173 applies to invalidate any decision by S2 Yachts to let the agreements expire by their terms.
To be sure, the First Amended Complaint in this action seeks declaratory judgments and asserts that subject matter exists under 28 U.S.C. § 1331 as a federal question relating to DR-CAFTA. The reference to DR-CAFTA is part of S2 Yacht's defense to ERH Marine's claim alleging breach of contract. Some courts have questioned whether this is enough to confer federal question jurisdiction. See Swift Spinning, Inc. v. Mercados Internacionales, S.A. , No. 07-22168-CIV, 2008 WL 11417687, at *6 (S.D. Fla. Mar. 7, 2008) ("Count I of the Complaint is in essence a choice-of-law argument. The coercive action Mercados could assert against Swift is one for breach of contract. CAFTA is merely part of Swift's defense in a suit alleging breach of contract – CAFTA is not the basis under the which the coercive claim would arise under"). The Court is satisfied that even if this is not enough to amount to federal question jurisdiction in this case, the Court plainly has subject matter jurisdiction under 28 U.S.C. § 1332. The diversity of citizenship between the parties is a matter of record, and the amount in controversy easily exceeds $75,000. Moreover, whether jurisdiction is based on federal question or diversity jurisdiction, the legal analysis here is the same. Both the federal common law and Michigan follow the Restatement. Compare Med. Mut. of Ohio v. deSoto, 245 F.3d 561, 570 (6th Cir. 2001) (adopting Restatement as matter of federal common law), with Chrysler Corp. v. Skyline Indus. Servs., Inc., 448 Mich. 113, 528 N.W.2d 698, 702 (1995) (adopting Restatement as matter of Michigan law).
In diversity actions, a federal court applies the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Here the forum state is Michigan, and both parties agree that the Court should look to Michigan's conflict of law rules to determine whether Michigan or Dominican Republic law governs this action. (ECF No. 110, PageID.4395; ECF No. 114, PageID.5289). Courts in Michigan have adopted the approach set forth in the Restatement (Second) of Conflict of Laws. See Chrysler Corp. v. Skyline Indus. Servs. , 448 Mich. 113, 126-27, 528 N.W.2d 698 (1995). The general rule of the Restatement is to respect and honor the parties' contractual choice of law.
Section 187(2) establishes the usual basis for analysis:
The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
Restatement (Second) Conflict of Laws § 187(2) (1971)
B. The Dominican Republic's Interest is Not Materially Greater than Michigan's Interest.
Michigan plainly has a substantial relationship to the parties and neither side argues otherwise. S2 Yachts is located in Michigan, and the contracting parties had a reasonable basis for choosing Michigan law. S2 Yachts, with authorized dealerships across multiple jurisdictions, desired certainty and uniformity in defending itself in potential suits from those dealers. Cf. Stryker Corp. v. Ridgeway , No. 1:13-CV-1066, 2015 WL 5682317, at *5 (W.D. Mich. Sept. 21, 2015) (Michigan employer with employees across the country had reasonable basis for choosing Michigan law). The only potential barrier to application of Michigan law, then, is under Section 187(2)(b), if Michigan law contravenes the fundamental public policy of a jurisdiction with a materially greater interest.
In Michigan, "as a general rule, courts must provide competent parties the ‘utmost liberty’ to engage in contractual relations." Morris & Doherty, P.C. v. Lockwood , 259 Mich. App. 38, 54, 672 N.W.2d 884, 893 (Mich. App. 2003). ERH Marine avers that because Law 173 generally prohibits foreign suppliers from unilaterally failing to renew dealer agreements without cause, application of Michigan law would violate fundamental Dominican Republic public policy. But even if this is true, it is not dispositive because Michigan courts would only apply Dominican Republic law if those courts determined that the Dominican Republic has a materially greater interest than Michigan in the determination of the contractual issues. On this record, the Court is satisfied that the Dominican Republic does not have a materially greater interest than Michigan in application of its law to the contract.
There is no question that Michigan has an interest in "the determination of the particular issue." S2 Yachts is a Michigan corporation, with its principal place of business here in the Western District of Michigan. Furthermore, "Michigan has an interest in assuring that its citizens receive the contractual benefits for which they negotiated...." Johnson v. Ventra Grp., Inc. , 191 F.3d 732, 739 (6th Cir. 1999) (citing Meijer Inc. v. General Star Indem. Co. , 826 F. Supp. 241, 246 (W.D. Mich. 1993). This includes an interest in ensuring its citizens aren't bound for an indefinite period to agreements that do not provide for such long lasting relationships. And Michigan surely has an interest in protecting S2 Yachts, a Michigan company, from the possible economic loss that may result from extending its obligations into unanticipated periods.
The understandable interest of the Dominican Republic in protecting its domestic dealers is real, to be sure. But nothing makes it materially greater than Michigan's interests. And, "[a]bsent such evidence that" the Dominican Republic's "interest was not just greater but materially greater, there is no reason to disturb the parties' choice of Michigan law." Stone Surgical, LLC v. Stryker Corp. , 858 F.3d 383, 391 (6th Cir. 2017).
C. DR-CAFTA Permits Natural Expiration Anyway
Even if the Dominican Republic does have a materially greater interest (which the Court does not believe it does), the Court is not inclined to believe that application of the parties' choice of law would be contrary to a fundamental public policy of the Dominican Republic. To be sure, the Dominican Republic may consider Law 173 as a law of "public order." According to the opinion of one of ERH Marine's experts this means "that [Law 173] will supersede any contractual clause which directly or indirectly limits the duration of the contract or the agent's rights not to be terminated unilaterally without just cause." (ECF No. 110-66, PageID.5016). But Law 173 has its limits. And more importantly, after DR-CAFTA it is plain that the Dominican Republic does not completely prohibit clauses permitting foreign suppliers to let dealer agreements expire by their terms.
Law 173 is designed to prevent an arbitrary and unilateral termination of dealership agreements once the Dominican Republic dealer "successfully developed a market" in the Dominican Republic for the foreign supplier's products. See Beatty Caribbean, Inc. v. Viskase Sales Corp., 241 F. Supp. 2d 123, 129 (D.P.R. 2003) (discussing similar dealer protection statute in Puerto Rico); Civil Chamber, S.C.J., 26 Aug. 2015, American Sportswear, S.A., Tommy Hilfiger Licensing, Inc. and Inversiones Max, S.A. v. Helade, S.A., B.J. (No. 2006-302) (available at ECF No. 110-62). Under Law 173, a party who unilaterally fails to renew a covered agreement must pay an indemnity to the affected company in the Dominican Republic which, ERH Marine contends, amounts to $8,778,476.97. (Am. Counterclaim ¶ 68, ECF No. 50, PageID.771).
The potential overreach of Law 173 was a stated concern that, at least in part, drove DR-CAFTA. For example, a 2006 National Trade Estimate Report on Foreign Trade Barriers from the United States Trade Representative, from before DR-CAFTA took effect in the Dominican Republic, stated that:
U.S. companies have expressed concern that the Dominican Dealer Protection Law 173, which applies only to foreign suppliers, makes it extremely difficult to terminate contracts with local agents or distributors without paying exorbitant indemnities. Under the existing system, foreign firms may be tied to exclusive or inefficient distributor arrangements.
Several U.S. companies have lost lawsuits brought under this law and have suffered significant financial penalties. By limiting the ability of a foreign firm to change its local agent without severe penalties and compensation, this law has had a negative impact on market access and on consumer welfare. CAFTA-DR requires the Dominican Republic to change this dealer protection regime to provide more freedom to contract the terms of commercial relations and to encourage the use of arbitration to resolve disputes between parties to dealer contracts.
2006 National Trade Estimate Report on Foreign Trade Barriers, United States Trade Representative, https://ustr.gov/archive/Document_Library/Reports_Publications/2006/2006_NTE_Report/Section_Index.html.
DR-CAFTA now provides that the Dominican Republic "shall not apply Law No. 173 to any covered contract signed after the date of entry into force of this Agreement unless the contract explicitly provides for the application of Law No. 173[.]" DR-CAFTA, supra, at Annex 11.13 § B(1). Instead, the Dominican Republic agreed, inter alia , to "treat the covered contract in a manner consistent with ... the principle of freedom of contract" and to "treat the termination of the covered contract, either on its termination date ... as just cause for a goods or service supplier to terminate the contract or allow the contract to expire without renewal[.]" Id. at Annex 11.13 § B(1)(b),(c).
But ERH Marine says this is not one of those cases where Annex 11.13 § B(1) of DR-CAFTA, is implicated and instead avers that Section (B)(2) of the agreement applies. That section provides for certain circumstances under which Law 173 does apply to a covered contract including, inter alia , "because the contract was signed before the entry into force of this Agreement." DR-CAFTA, supra, at Annex 11.13 § B(1). Here, ERH Marine contends this is the operative section because it registered its established business relationship with S2 Yachts in 2003, well before DR-CAFTA was signed. Furthermore, ERH Marine contends that its registration contains no expiration date, and that the registration encompassed its entire relationship with S2 Yachts.
Assuming, without deciding, that all this is so, ERH Marine's argument fails because ERH Marine in fact did agree to terminate those agreements. ERH Marine repeatedly emphasizes that under Law 173, S2 Yachts could not unilaterally decide not to renew the agreements. Even when viewed in the light most favorable to ERH Marine, however, the summary judgment record demonstrates that both the Pursuit Boats and Tiara Yachts agreements were renewed at least once via a full agreement following the implementation of DR-CAFTA. And in those agreements, S2 Yachts and ERH Marine together agreed that the new agreement "supersedes all other agreements of any nature and contains the entire agreement between the parties with respect to its subject matter. There are no other agreements, understandings, representations or warranties between the parties relating to the subject matter of this Agreement." (See, e.g., 2015 Pursuit Boats Agreement § XIII, (ECF No. 110-4, PageID.4471)).
S2 Yachts strongly disputes ERH Marine's contention that it properly registered its entire business relationship with S2 Yachts in the Dominican Republic.
In other words, rather than a unilateral termination, the parties mutually agreed that the previous agreements would end. ERH Marine points to nothing in Law 173 that would prohibit this joint agreement. New agreements were then signed, after DR-CAFTA, and S2 Yachts subsequently chose not to renew the agreements. DR-CAFTA now expressly permits a contract between a foreign supplier and a Dominican Republic dealer to expire without renewal, in as much as the expiration amounts to just cause for the contract's termination. See DR-CAFTA, Annex 11.13 § B(1)(c). Accordingly, the Court holds the parties' contractual choice of law clause is binding and Michigan law, not Dominican Republic Law, governs the Pursuit Boats and Tiara Yachts agreements. But even if Law 173 applies, the parties' mutual agreement after DR CAFTA's modification would lead to the same result.
The Court observes that Section B(1)(e)(i) of Annex 11.13 appears to provide for an indemnification fee based on economic damages, rather than the statutory formula, where a covered contract signed after DR-CAFTA's implementation contains no indemnification provision. Neither side argues this section would be implicated for a contract that is permitted, after DR-CAFTA, to expire by its terms and the Court need not speculate. This dispute is only whether ERH Marine is entitled to damages under Law 173, not whether any separate provision of DR-CAFTA provides for damages.
For this reason, S2 Yachts was within its rights to let both agreements expire by their terms without renewals, and ERH Marine is entitled to no relief under Law 173 based on the non-renewal.
2. The Breach of Contract Counterclaims under Michigan Law
Count IV of ERH Marine's Amended Counterclaim contends that under Michigan law S2 Yachts has breached both the Tiara Yachts and the Pursuit Boats agreements. The alleged breaches that ERH Marine lists are: (A) S2 Yacht's allowance of other S2 Yachts dealers to distribute the same products in ERH Marine's area of primary responsibility ("APR" or Dominican Republic); (B) S2 Yachts' prohibition of ERH Marine from attending a 2018 Miami International Boat Show as a Pursuit Boats Dealer; (C) S2 Yachts' failure to complete orders and failure to assist in the proper service of ERH Marine's customers; and (D) S2 Yachts' failure to build marine vessels to specification and return unused deposits. (See Am. Counterclaim ¶ 75, ECF No. 50, PageID.772).
"Under Michigan law, the elements of a breach of the contract claim are: (1) the existence of a contract between the parties, (2) the terms of the contract require performance of certain actions, (3) a party breached the contract, and (4) the breach caused the other party injury." Burton v. William Beaumont Hosp. , 373 F. Supp. 2d 707, 718 (E.D. Mich. 2005) (citing Webster v. Edward D. Jones & Co., L.P. , 197 F.3d 815, 819 (6th Cir. 1999) ).
Both sides move for summary judgment in their favor on the breach of contract counterclaim. For the reasons that follow, the Court concludes that ERH Marine has not demonstrated it is entitled to summary judgment on its breach of contract counterclaims. With respect to S2 Yachts' motion, the Court concludes some of its theories of breach fail under Rule 56 review. Issues of fact, however, preclude summary judgment on other theories.
A. Area of Primary Responsibility
Section I of the Pursuit Boats and Tiara Yachts agreements appointed ERH Marine as an authorized dealer for the sale of the Pursuit Boats and Tiara Yachts product lines within an "area of primary responsibility" that was defined elsewhere in the agreement as the Dominican Republic. In the same section, Pursuit Boats and Tiara Yachts agreed "that it will not appoint another authorized dealer of [the Pursuit Boats and Tiara Yachts product line] in the APR during the term of this agreement." (2015 Model Year Pursuit Boats Agreement § I (ECF No. 110-4, PageID.4467); 2017 Model Year Tiara Yachts Agreement § I, (ECF No. 110-7, PageID.4592)). David Slikkers, a director of government relations at S2 Yachts, testified during his deposition that an APR "establishes the fence, or the boundary, of a dealer's selling area." (Slikkers Dep. 42-43, ECF No. 89, PageID.2178).
ERH Marine contends that S2 Yachts violated the agreements with respect to both Pursuit Boats and Tiara Yachts by allowing other dealers to sell S2 Yachts' products in the Dominican Republic. (ECF No. 84, PageID.1911-12; ECF No. 110, PageID.4400-4402). The only record material cited by ERH to establish its alleged breach is a January 15, 2018 email sent by the head of ERH Marine, Eduardo Hernandez, to Mark Taiclet, a Pursuit Boats sales director. In his email, Mr. Hernandez listed approximately seven asserted territory violations where, he said, a S2 Yachts dealer or broker sold a Pursuit or Tiara Yachts boat to a Dominican Republic customer. (ECF No. 88, PageID.2067-68).
While the letter states that supporting documents are attached to the letter, none of those supporting documents are included in the summary judgment record; and the letter from Mr. Hernandez itself is unquestionably inadmissible hearsay when offered against S2 Yachts. The Sixth Circuit Court of Appeals has stated that while "[t]he submissions by a party opposing a motion for summary judgment need not themselves be in a form that is admissible at trial ... the party opposing summary judgment must show that [it] can make good on the promise of the pleadings for laying out enough evidence that will be admissible at trial to demonstrate that a genuine issue on a material fact exists, and that a trial is necessary." Alexander v. CareSource , 576 F.3d 551, 558 (6th Cir. 2009). Cases from the Sixth Circuit had a "repeated emphasis that unauthenticated documents do not meet the requirements of Rule 56(e)." Id. Here, there is no affidavit or other record that would establish these breaches. The Court concludes ERH Marine is not entitled to summary judgment in its favor on this theory of breach.
That still leaves the question of whether S2 Yachts has demonstrated it is entitled to summary judgment on this theory. Its primary argument in favor of dismissal is that ERH Marine is simply mistaken that it had an exclusive right to sell Pursuit Boats and Tiara Yachts in the Dominican Republic. S2 Yachts points out that both agreements with ERH Marine provide that "[n]othing herein shall be construed as prohibiting the Dealer from selling the Products to customers residing outside the dealer's area(s) of primary and secondary responsibility who, on their own, visit the dealership and seek to purchase Products from Dealer." (2015 Model Year Pursuit Boats Agreement § V, ECF No. 110-4, PageID.4469, 2017 Model Year Tiara Yachts Agreement § V, ECF No, 110-7, PageID.4587). The Tiara Yachts agreement further contained a provision stating that on the occasion the Dealer sold a product to a customer residing outside the Dealer's APR, the dealer "will be required to pay a customer support fee to the affected dealer" (2017 Model Year Tiara Yachts Agreement § V, ECF No, 110-7, PageID.4587).
The implication from S2 Yachts appears to be that other dealers and brokers had agreements with similar boilerplate to the ERH Marine agreements that provided those dealers and brokers could sell to outside customers (such as those residing in ERH Marine's APR) and, at least for the Tiara Yachts agreements, they would have to pay a customer support fee. In other words, S2 Yachts implies that ERH Marine's argument only raises possible breaches committed by other S2 Yachts dealers, not a breach by S2 Yachts. This argument is not expressly stated. Still, there is some force to this implication. Indeed, there are several entries on Mr. Hernandez's January 15th letter where Mr. Hernandez states "ERH was compensated with a 2% service fee" and later states in his message that "despite the fact that we have had our territory violated on several occasions, all cases were settled." (ECF No. 88, PageID.2068-2069). More importantly, the Court is satisfied that there is simply nothing to bring to trial on this theory of breach. ERH Marine contends that S2 Yachts breached its agreement not to appoint another authorized dealer in ERH Marine's APR. ERH Marine has pointed to nothing admissible in the record that would create a genuine issue of material fact that S2 Yachts did breach the agreements by appointing other authorized dealers (either expressly or implicitly through its alleged failures to police the boundaries) in the Dominican Republic. Accordingly, S2 Yachts is entitled to summary judgment on this theory of breach.
B. Miami Boat Show
In its next theory of breach, ERH Marine contends that after S2 Yachts decided not to renew the dealer agreement beyond the 2018 model year, it decided not to permit ERH Marine to staff the Pursuit Boats booth at a February 2018 boat show in Miami, even though ERH Marine had the contractual right to attend.
The record shows that on November 17, 2017, Mark Taiclet sent a "Non-Renewal Notice" of the Pursuit Boats agreement to ERH Marine. The letter specifically stated that ERH Marine would remain a Pursuit Boats dealer through the remainder of the 2018 model year, but Pursuit Boats would not renew the agreement after the agreement for the 2018 model year expired. (ECF No. 110-47, PageID.4839). Following the nonrenewal notice, on January 17, 2018, Mr. Taiclet reached out to Mr. Cristian Hernandez, ERH Marine's Vice President of Sales to inquire if ERH Marine still planned on having its sales staff participate in the Pursuit Boats booth during the February 2018 international boat show in Miami. (ECF No. 110-38, PageID.4793). Mr. Hernandez confirmed ERH Marine's participation the same day. (Id. ). But on January 29, 2018, around the time that Tiara Yachts told ERH Marine it would not renew the agreement beyond the 2018 model year, Mr. Taiclet sent a letter to ERH Marine stating that "In light of the decision that Pursuit Boats ... will not be renewing ERH Marine Corp.'s dealer agreement ... together with the associated challenges to our business relationship as it winds down, we have determined that ERH should not participate or attend as a Pursuit Boats dealer in our Miami International Boat Show display this year. (ECF No. 92, PageID.2660).
"Generally, a party breaches a contract if it fails to perform a duty, promise, or obligation under the contract." Consoer Townsend Envirodyne Engineers Inc. v. City of Grand Rapids , No. 283563, 2009 WL 3013258, at *5 (Mich. Ct. App. Sept. 22, 2009). ERH Marine contends that Pursuit Boats violated its dealership agreement because, "[p]ursuant to Exhibit B of the latest Pursuit Boats Dealer Agreement, ERH had the contractual right to attend the Miami International Boat Show." (ECF No. 113-1, PageID.5272). That Exhibit says nothing about a Miami boat show, however the previous exhibit, Exhibit A, to the 2015 Model Year Pursuit Boats Agreement lists, under "Dealer Participation Commitment," a "Miami Boat Show, Ft. Lauderdale Boat Show." (ECF No. 110-4, PageID.4473). Furthermore, in Section IV.B. of the document, Pursuit Boats agreed to "provide reasonable levels of marketing support as deemed appropriate by Pursuit, including product literature, support for international boat shows and Dealer-sponsored special events, and other appropriate activities." (2015 Model Year Pursuit Boats Agreement § IV.B, ECF No. 110-4, PageID.4468).
The fact that marketing support was to be determined "as appropriate" by Pursuit Boats alone precludes summary judgment in favor of ERH Marine. The Court is also satisfied that ERH Marine cannot show that S2 Yachts failed to perform a duty, promise, or obligation under the contract with respect to the boat show. Exhibit A to the agreement notes that the commitment being made was by ERH Marine, not by Pursuit Boats or S2 Yachts. In other words, there was no contractual right for ERH Marine to attend the boat show; rather there was only an obligation that ERH Marine agreed to perform and plainly ERH Marine cannot demonstrate S2 Yachts breached the Pursuit Boats agreement by excusing ERH Marine from one of its contractual obligations.
C. Failure to Complete Orders and Failure to Assist ERH Marine Customers.
Section VI of the Pursuit Boats and Tiara Yachts agreements both provided that orders were to be submitted in a manner prescribed either by the dealer manual or by the manufacturer. (2015 Model Year Pursuit Boats Agreement § V, ECF No. 110-4, PageID.4469, 2017 Model Year Tiara Yachts Agreement § V, ECF No, 110-7, PageID.4587). In the next theory of breach, ERH Marine contends that S2 Yachts failed to fulfill its contractual obligations to deliver two S368 boats that ERH Marine ordered for its customers.
The record shows that on July 5, 2017, Cristian Hernandez sent an order for two Pursuit Boats S368 models to Ms. Becky Check, a Pursuit Boats Sales Coordination manager. (ECF No. 88, PageID.2082). The email requested a February 2018 completion date, and attached one-page order forms for each of the S368 models setting out certain details, such as engine type, lighting, color, and such. (Id. at PageID.2084 & 2085). Mr. Hernandez also sent the order to Les Ares, a Pursuit Boats business development manager. Mr. Ares responded on July 6, 2017. His message thanked Mr. Hernandez for the orders and stated "as discussed, we will work with you to assist with the boat volume and trades you had to take in. I will get with Becky this morning and get the orders in. (ECF No. 88, PageID.2076).
It also placed an order for the next model up, a S408. No party disputes that this boat was delivered and accepted by ERH Marine.
After several months during which nothing more appears to have been communicated to ERH Marine about the S368 orders, and as the requested completion date approached, Cristian Hernandez sent an email to Ms. Check on January 10, 2018 that asked for an update on the status of the boats. (ECF No. 88, PageID.2088). Ms. Check responded that the S368s were not yet scheduled for production because of fewer than expected production slots. (ECF No. 88, PageID.2087). When Mr. Hernandez requested clarification, Mark Taiclet followed up on two occasions by saying that S2 Yachts did not have sufficient production capacity to complete the S368s during the 2018 model year. Mr. Taiclet also stated that since the ERH Marine agreement would not be renewed, if ERH Marine wanted to schedule the S368s for production in 2019, ERH Marine would have to complete separate non-dealer agreements. (ECF No. 110-33, PageID.4758; ECF No. 110-27, PageID.4729).
The following month, however, S2 Yachts told ERH Marine that there may be an opportunity to build both the S368s within the 2018 model year. (ECF No. 107-7, PageID.4286). Mr. Taiclet stated that in order to schedule the boats for production, Pursuit Boats needed copies of the retail contracts with the customer names and signatures, order specifications, and a 25% deposit on both boats no later than the close of business on March 2, 2018. (ECF No. 107, PageID.4286). Other messages were sent through April and May of 2018. ERH Marine does not dispute that it never verified the orders for the S368s. During his deposition Mr. Edualdo Hernandez testified that though Pursuit Boats had offered to build the S368s in the summer of 2018, he said no because he no longer trusted S2 Yachts. (Hernandez Dep. 41-42, ECF No. 80-49, PageID.1728-1729).
The record contains a much more detailed narrative of the back and forth between the parties with respect to the orders for the S368s, but for present purposes it is sufficient to say that the above discussion reflects a factual dispute with respect to this theory of breach that will need to be sorted out at trial. S2 Yachts says that external constraints led to delays in its production schedule, and that it acted under the sole discretion granted in Section VII of the dealer agreement to allocate the production among its dealers and customers. When an opportunity arose to complete the projects earlier than it thought, it offered to build the S368s within the model year. ERH Marine then refused to proceed with its orders. An evidentiary basis exists for this narrative.
For its part, ERH Marine contends that S2 Yachts had been trying to "build as case" to terminate the agreements since at least 2014 (see ECF No. 110-23, PageID.4706) and acted in bad faith by manipulating its schedule and failing to place the S368 Orders into production at all once it decided to terminate the agreements. There is an evidentiary basis for this argument too. Accordingly, neither party is entitled to summary judgment on this theory of breach.
This theory, which relates to orders for Pursuit Boats models, does not establish a basis for breach of the Tiara Yachts agreement. The Court is also satisfied that a related theory of breach in ERH Marine's counterclaim must be dismissed. ERH contends that S2 Yachts failed "to assist in the proper service of ERH's customers." (Am. Counterclaim ¶ 75, ECF No. 50, PageID.772). ERH Marine fails to point to a contractual obligation in either the Pursuit Boats or the Tiara Yachts agreements that S2 Yachts breached with respect to this theory. Indeed, there is no development of this claim at all. There is nothing to this theory, then, to bring to trial.
D. Failure to Build Orders to Specification and Return Unused Deposits.
In its next theory of breach, ERH Marine contends that S2 Yachts breached the Pursuit Boats agreement by failing to deliver a DC 295 model to specification. S2 Yachts avers that ERH Marine effectively abandoned the order. Exhibits in the summary judgment record reflect that on October 2, 2017, Cristian Hernandez asked Ms. Check when S2 Yachts had the next available slot for a DC 295. Ms. Check responded that the company had a slot for completion of a DC 295 in early February. (ECF No. 110-43, PageID.4808). Mr. Hernandez then asked when production would begin and when the deposit would be due. Ms. Check responded that the deposit would likely be due in late December or early January. On October 6, 2017, Mr. Hernandez sent Mr. Ares an email and Order for the DC 295. (ECF No. 110-43, PageID.4807).
On February 27, 2018, Mark Taiclet emailed ERH Marine regarding the order. He noted that the DC 295 was ordered with the standard gray colored engines, but the standard engines were not available. Instead, he stated the DC 295 would be equipped with white painted engines. These were the new Yamaha factory painted versions and were, Mr. Taiclet said, the only option to ship the order on time. Mr. Taiclet asked ERH Marine to confirm the change, and he stated that Pursuit Boats would not charge the extra cost for the white option. If the customer wanted the gray engines, Mr. Taiclet wrote that he would have to get back ERH Marine with a new shipping date. (ECF No. 110-49, PageID.4854). (ECF No. 110-49, PageID.4853).
It appears that a few days earlier ERH had been cc'd on an email from Pursuit Boats president that Pursuit Boats was experiencing delays with Yamaha engines. (ECF No. 80-24, PageID.1591).
After further communications went unanswered, Mr. Taiclet sent a letter dated March 14, 2018 to ERH Marnie regarding the pending order. He noted the DC 295 was ready for shipment, but ERH Marine had not made final payment. Mark noted that based on the non-response, S2 Yachts was prepared to cancel the order (which would result in a forfeiture of 10% of the price, deducted from the deposit). The remainder of the deposit would be released as a credit or refund. Mr. Taiclet noted that Pursuit Boat's plan was to cancel the order if final payment was not made by Friday March 16, 2018. (ECF No. 80-28, PageID.1599).
Two days later, ERH Marine's legal counsel sent a letter via email to Mr. Taiclet. The letter stated that counsel for ERH Marine "wanted to clear out the situation of the orders, so that [Mr. Eudaldo and Mr. Cristian Hernandez's] silence is not used as consent." (ECF No, 110-51, PageID.4860). Counsel for ERH Marine further requested that "all orders that are still in process should be carried out as originally agreed amongst both parties, with no modifications, in order to avoid more disturbances than those that have already been caused. We want to make it very clear that ERH's personal silence is not to be used as consent to take any action[.]" (ECF No. 110-51, PageID.4860). The letter contains no mention of any payment. On March 23, 2018 (a week after the 16th), Mark Taiclet told Becky Check and Les Ares to "find a new home for the ERH DC 295." (ECF No. 110-52, PageID.4862).
"The abandonment of a contract is a matter of intention to be ascertained from the facts and circumstances surrounding the transaction from which the abandonment is claimed to have resulted." Liberty Mut. Ins. Co. v. City of Dearborn, No. 11-13605, 2013 WL 6241585, at *25 (E.D. Mich. Dec. 3, 2013) (quoting Asphalt Solutions Plus, LLC v. Associated Constr. of Battle Creek, Inc., 301136, 2011 WL 6187043, at *2 (Mich. Ct. App. Dec. 13, 2011) ) "Abandonment of a contract may be inferred from the conduct of the parties and the attendant circumstances. A contract will be treated as abandoned when acts of one party, inconsistent with the existence of a contract, are acquiesced in by the other party." Id. (internal quotation marks and citation omitted).
"An abandonment of a contract need not be express but may be inferred from the conduct of the parties and the attendant circumstances. A contract will be treated as abandoned when acts of one party, inconsistent with the existence of the contract, are acquiesced in by the other part." Dault v. Schulte , 31 Mich. App. 698, 701, 187 N.W.2d 914 (1971). "A party displays intent to abandon if it ‘positively and absolutely refuses to perform the conditions of the contract, such as a failure to make payments due, accompanied by other circumstances, or where by [its] conduct [it] clearly shows an intention to abandon the contract.’ " Liberty Mut. Ins. Co. , 2013 WL 6241585, at *26 (quoting Interior/Exterior Specialist Co. v. Devon Indus. Grp., LLC , 2776620, 2009 WL 49616, at *5 (Mich. Ct. App. Jan. 8, 2009).
Viewed in the light most favorable to ERH, the Court is satisfied that a factual dispute exists with respect to abandonment. S2 Yachts' position is that it never heard a response back from ERH Marine on its repeated inquiries towards how ERH Marine would like to move forward. This included a March 9, 2018 message in which Pursuit Boats told ERH Marine the originally ordered gray engines could be installed on the DC 295 (ECF No. 110-49, PageID.4852). S2 Yachts then gave ERH Marine a deadline of March 16, 2018 to make a payment on the DC 295. Only a message from ERH Marine's counsel was received. While that message instructed that the pending order go forward, no mention of the payment for delivery was made. A factual basis exists for ERH Marine's abandonment on this order.
There is also, however, a factual basis for ERH Marine's argument that by this time the business relationship between S2 Yachts and ERH Marine was effectively over and had been replaced by posturing for purposes of litigation, rather than good faith dealings. This theory overlaps ERH Marine's theory with respect to the S368s, and includes its contention that S2 Yachts improperly kept the deposit for a boat that it never delivered. All this will need to be sorted out at trial.
E. Breach of Contract – Conclusion
For the reasons detailed above, the Court finds that neither party has met its summary judgment burden with respect to several theories of breach contained in ERH Marine's breach of contract counterclaim. The claims with respect to order for S368s and order for a DC 295 will move forward. All other specific breach of contract counterclaim theories fail as a matter of law.
3. Business Defamation Claim
In its final counterclaim, ERH Marine contends S2 Yachts committed the tort of business defamation during the February 2018 Miami boat show. It contends that after Pursuit Boats told ERH Marine that the S368s could not be completed in the 2018 model year, ERH Marine told its two S368 customers in January 2018 that Pursuit Boats canceled the dealership agreements and could not build the customers' orders in the 2018 model year. They could be built in 2019, but only under different terms (which ERH says would have been a higher cost). Both S368 customers apparently went to the February 2018 boat show in Miami where they spoke with Les Ares and inquired into their orders. According to ERH Marine, Mr. Ares falsely told the customers that ERH Marine had never placed the orders for the S368s nor had it paid any deposits and these statements had reverberating negative consequences towards its business reputation in the Dominican Republic. S2 Yachts contends this claim must be dismissed under the economic loss doctrine. The Court agrees.
The economic loss doctrine is a judicially created limitation on tort actions that seek to recover economic damages resulting from commercial transactions. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc. , 276 F.3d 845, 848 (6th Cir. 2002) (citing Frumer & Friedman, Products Liability, § 13.11[1] (2000)). The doctrine is essential to avoid "contract law ... drown[ing] in a sea of tort." East River S.S. Corp. v. Transamerica Delaval, Inc. , 476 U.S. 858, 866, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). Generally, it provides that economic losses that relate to commercial transactions are not recoverable in tort. The Michigan Supreme Court first adopted the economic loss doctrine in Neibarger v. Universal Coop., Inc. , holding that "[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.’ " 439 Mich. 512, 486 N.W.2d 612 (1992). Since Neibarger , Michigan courts have applied the economic loss doctrine in a variety of commercial contexts to bar recovery in tort for when damages are recoverable through contract claims. See Ivie v. Diversified Lending Grp., Inc., No. 1:09-CV-751, 2011 WL 996112, at *4 (W.D. Mich. Mar. 17, 2011) (collecting cases and holding "[t]he economic loss doctrine bars a party from recovering in tort economic losses suffered because of a breach of duty assumed only by contract."). The Court concludes that where the asserted damages are allegedly sustained by commercial businesses; the contracts were entered into for commercial purposes; the claimed losses are economic in nature; and the facts underlying the parties' tort and contract claims are not separate and distinct, the Michigan Supreme Court would likely use the economic loss doctrine to bar the tort claims. See Stryker v. Siroonian , No. 1:15-cv-1161 (W.D. Mich. filed Mar. 6, 2018). This Court draws support for its holding from what the Michigan Supreme Court has already done in defining an economic loss doctrine broader than that of other states.
The tort counterclaim asserted by ERH Marine is inextricably tied to its contractual relationship with S2 Yachts and the Pursuit Boats brand. While ERH Marine maintains that its claim is premised on an independent harm in its relationship with its customers and business community in the Dominican Republic, this harm is fixed to the asserted violations of the terms and conditions that, ERH Marine says, permitted it to order boats in a usual manner from S2 Yachts during the 2018 model year. Consequently, the economic loss doctrine bars this tort claim. Any recovery for ERH Marine must be in the contract theory regarding the two S368s.
4. S2 Yachts' Discovery Motions.
In June 2019, S2 Yachts filed three discovery motions relating to ERH Marine's expert testimony and reports, as well as with respect to three declarations that ERH Marine seeks to use in support of its positions.
In the first two motions (ECF No. 63 & 71) S2 Yachts seeks to exclude the testimony, opinions, and supplemental report from ERH Marine's damages expert, Richard Troncoso on the grounds that the supplemental report is untimely, and the report and other materials from Mr. Troncoso all fail to meet the disclosure requirements of Fed. R. Civ. P. 26(a)(2)(B) ; the requirements of Fed. R. Evid. 702 ; and principles of Daubert . ERH Marine opposes these motions (ECF No. 67 & 101) and insists that the requirements of all relevant rules and deadlines to admit the expert testimony has been met. This lawsuit is currently scheduled for a bench trial, and the Court is satisfied that these arguments are best heard in the context of the FPTC and trial process. The damages theories for ERH Marine will have to be adapted, in any event, to link to only the claims still advancing to trial. So many of the proposed theories will be irrelevant at this time.
With respect to the third motion, S2 Yachts seeks to exclude the declarations of three individuals that were not provided to it until June 21, 2019 even though discovery had closed on May 30, 2019. (ECF No. 75). ERH Marine response avers that it timely supplemented its disclosures when it learned S2 Yachts did not have the declarations, and any disclosure was harmless since, it says, S2 Yachts was aware of the witnesses and subject matter of the declarations while discovery was still open. ERH Marine has not persuasively demonstrated, however, why these materials—which appear to have been signed in March of 2019—were not turned over until after discovery was closed. Accordingly, the Court grants this motion and strikes the three declarations.
The Court discerns little prejudice, furthermore, with respect to ERH Marine. The declaration of Hipolito Salvador Herrera Vasalio, for example, relates solely to ERH Marine's counterclaim for business defamation that the Court has dismissed in this Opinion and Order. (ECF No. 76-1). The remaining declarations are from the ERH customer for the DC 295 (Hatuey de Camps Garcia Decl. ECF No. 76-3) and one of the customers for the S368 order (Antonio Alberto Caceres Ricart Decl. ECF No. 76-2). Here too the declarations relate to the business defamation claim. While these declarations also relate to the breach of contract counterclaims that remain in the case, ERH Marine has an independent basis in the record to advance its theories of breach as to both orders. Furthermore the relationship between ERH Marine and S2 Yachts, as well as the terms and conditions of the Pursuit Boats dealer agreement is more important to the breach of contract claim than the relationship between ERH Marine and its customers in any event.
CONCLUSION
ACCORDINGLY, IT IS ORDERED that:
1. Plaintiff/Counter-Defendant S2 Yachts' Motion for Sanctions (ECF No. 75) which seeks to exclude the declarations of Hipolito Salvador Herrera Vasalio, Hatuey de Camps Garcia, and Antonio Alberto Caceres Ricart is GRANTED.
2. Plaintiff/Counter-Defendant S2 Yachts' Motion to Strike (ECF No. 63) and Motion to Exclude Opinions and Testimony (ECF No. 71) are DISMISSED WITHOUT PREJUDICE.
3. Defendant/Counter-Claimant ERH Marine's Motion for Summary Judgment (ECF No. 83) is DENIED.
4. Plaintiff/Counter-Defendant S2 Yachts' Motion for Summary Judgment (ECF No. 79) is GRANTED to the extent detailed in this Opinion and Order.
5. The Parties' Choice of Law of Michigan in the Pursuit Boats and Tiara Yachts agreement is enforceable under the Restatement (Second) of Conflict of Laws and accordingly Dominican Republic Law 173 does
not apply to the parties' agreements. But even if Law 173 did apply, the parties' mutual agreement after DR-CAFTA to permit expiration after a stated term would lead to the same substantive result in favor of S2 Yachts on the non-renewal issue. Counts 1 and II of the Amended Complaint and Amended Counterclaim are adjudicated accordingly.
6. Counts III and IV of the Amended Counterclaim (ECF No. 50) are DISMISSED with prejudice.
7. The remaining contract matters from ERH Marine's Counterclaim, as detailed in this opinion, will go forward to a bench trial.