R3 Composites Corp. v. G&S Sales Corp.

R3 COMPOSITES CORPORATION, Plaintiff/Counter Defendant, v. G&S SALES CORP., Defendant/Counter Claimant.

Cause No. 1:16-cv-00387-HAB-SLC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA FORT WAYNE DIVISION

February 17, 2021

OPINON AND ORDER

Before the Court is a Motion for Leave to File Supplemental Complaint filed by Plaintiff R3 Composites Corporation ("R3") on July 24, 2020 (ECF 81), requesting leave to file a supplemental complaint (ECF 81-2). Defendant G&S Sales Corporation ("G&S") filed a response and memorandum in opposition on August 7, 2020. (ECF 84, 85). R3 filed a reply on August 14, 2020. (ECF 86). G&S then successfully moved for leave to file a sur-reply (ECF 87, 101), which it did on October 14, 2020 (ECF 102). R3 filed a sur-response on October 21, 2020. (ECF 103). Accordingly, the matter is fully briefed and ripe for adjudication.

Also before the Court is a Motion to Intervene filed by MDG Sales Corporation ("MDG") on August 27, 2020 (ECF 90), requesting the Court's permission to file an intervening complaint against G&S (ECF 90-1). G&S filed a response and memorandum in opposition to MDG's motion on September 7, 2020 (ECF 93, 94), to which MDG filed a reply on September 14, 2020 (ECF 97). Similarly, R3 filed a response to MDG's motion on September 10, 2020 (ECF 96), to which MDG filed a reply on September 17, 2020 (ECF 99). Therefore, the motion to intervene is also fully briefed.

Because the two motions (ECF 81, 90) are interrelated, the Court will resolve them both. For the forgoing reasons, both R3's motion for leave to file a supplemental complaint (ECF 81) and MDG's motion to intervene (ECF 90) will be DENIED.

A. Background

This case arises from a contract dispute regarding sales commissions between R3 and G&S. (ECF 5). The Seventh Circuit Court of Appeals has already detailed much of the factual history relevant to this matter. See R3 Composites Corp. v. G&S Sales Corp., 960 F.3d 935 (7th Cir. 2020). To briefly summarize, though, R3 is a manufacturer of custom fiberglass parts located in Grabill, Indiana. (ECF 5 ¶¶ 1, 5). In late 2010 or early 2011, R3's president approached Steven Stefani to find potential customers for R3. (ECF 85 at 2). Stefani, in turn, contacted a business associate, Mark Glidden. (Id.; ECF 90-1 ¶ 4).

Stefani and Glidden subsequently decided to form G&S—a Michigan corporation—to act as a sale representative for R3. R3 Composites, 960 F.3d at 937. The sole shareholders of G&S were Stefani and his wife—no shares of G&S were ever issued to Glidden. (ECF 85 at 4-5; ECF 85-2 at 2; ECF 93-6 ¶¶ 9-10). Rather, G&S paid Glidden's alleged share of the sales commissions to MDG—a separate Michigan corporation of which Glidden was the sole shareholder and officer. (ECF 81 ¶¶ 21-22; ECF 85 at 7-8; ECF 90 ¶ 7; ECF 93-6 ¶ 15). MDG, though, was automatically dissolved by operation of Michigan law on July 15, 2015, after it failed to file its statutorily required annual reports. (ECF 86 at 3-4; ECF 86-4; ECF 99 at 1-2); see Mich. Comp. Laws § 450.1922. Prior to that, in June 2011, R3 hired Glidden as a plant manager while he was still working with G&S. (ECF 85 at 6). Following a disagreement regarding the amount of commissions owed, the relationship between R3 and G&S broke down, leading to the present suit. R3 Composites, 90 F.3d at 938-39.

On October 21, 2016, R3 filed a declaratory judgment action in the Allen County Circuit Court seeking a determination that it had paid all sales commissions owed to its former sales representative, G&S. (ECF 5). G&S removed the case to this Court on November 14, 2016 (ECF 1), and filed counterclaims for breach of contract, exemplary damages, and fees under the Indiana Sales Commission Act (ECF 3). In August 2018, R3 moved for summary judgment on thirteen distinct issues. (ECF 37). In February 2019, then Chief Judge Theresa Springmann granted summary judgment on one of the issues but denied summary judgment as to the remaining twelve. (ECF 53). Both parties subsequently filed separate motions for reconsideration. (ECF 55, 60). The case was transferred to Judge Holly Brady who ultimately granted R3's motion and entered judgment for R3 on all claims. (ECF 67-69). G&S also filed a motion for leave to file a second amended counterclaim (ECF 57), which Judge Brady denied (ECF 68). After a timely appeal by G&S (ECF 70), however, the Seventh Circuit remanded the matter to this Court finding that the entry of summary judgment was erroneous. R3 Composites, 960 F.3d at 946; (ECF 79).

On June 28, 2019, shortly before G&S appealed Judge Brady's Order, Glidden and R3 entered into a separation agreement wherein Glidden allegedly assigned all of his interests in any recovery derived from this litigation to R3. (ECF 81 ¶¶ 4-5; ECF 81-2 ¶¶ 2-3). R3 now seeks leave to supplement its complaint to assert "the rights of Glidden, as assigned to R3, to receive 50% of any commissions and other recovery obtained by G&S against R3 in this litigation, if any." (ECF 81 ¶ 21). G&S opposes the motion on the grounds that it would unduly delay the resolution of the current lawsuit, and that the additional issues would be moot if R3 were to prevail on its claim. (ECF 85 at 15-16). Specifically, G&S alleges that the proposed supplemental complaint would necessitate additional discovery into the existence and terms ofthe agreement between G&S and MDG or Glidden and would require that MDG or Glidden be added as parties. (Id. at 18-19). G&S further asserts that the motion should be denied because if MDG were to be added as an indispensable party, it would destroy diversity jurisdiction as both G&S and MDG are Michigan corporations. (Id. at 21-25). In its reply, R3 asserts that its motion is timely because the termination agreement—and thus the assignment of Glidden's rights—did not occur until shortly before this case was on appeal. (ECF 86 at 1). Further, R3 asserts that MDG would not be an indispensable party because all proceeds would flow to Glidden as the sole shareholder, and in any event, MDG's interests had already flowed to Glidden as a result of MDG's dissolution under Michigan Law. (Id. at 4-5).

During the pendency of R3's motion, G&S filed a separate declaratory judgment action in Michigan state court (the "Wayne County case") on August 6, 2020, to determine what, if anything, it owes Glidden or MDG. (ECF 95 at 3; see also ECF 94 at 19). Presumably in response to that case, MDG filed its missing reports, renewing its corporate existence under Michigan Law. (ECF 87-1; ECF 87-2; ECF 99 at 1-2; ECF 102 at 1); see Mich. Comp. Laws § 450.1925. G&S subsequently sought (ECF 87) and received the Court's leave to file a sur-reply (ECF 101), informing the Court that MDG had since come back into being (ECF 102).

While G&S's motion for leave to file a sur-reply was pending, MDG filed its motion to intervene asserting that it was in fact owed fifty percent of any damages arising from commissions which might be awarded to G&S in this action. (ECF 90 ¶¶ 5, 9). Pertinently, MDG's proposed complaint seeks a declaratory judgment, and alleges breach of contract and unjust enrichment claims against G&S—not R3. (ECF 90-1). MDG explained that it did not seek leave to intervene sooner because it had assumed that its interests were being adequately represented by G&S. (ECF 90 ¶ 16).

G&S opposes the motion to intervene on the grounds that it is untimely and that any agreement between G&S and Glidden/MDG is factually distinct from the agreement between R3 and G&S. (ECF 94 at 16-17). As to untimeliness, G&S argues that MDG should have been aware that G&S did not believe it owed any sales commissions to MDG years ago. (Id. at 12-13). In particular, G&S points to a November 2017 letter sent from an attorney retained by Glidden, conveying Glidden's belief that he had a personal interest in the litigation and that he likely qualifies as an indispensable party. (ECF 94-14). Additionally, G&S points to its subsequent declaratory judgment action against Glidden in the Eastern District of Michigan in 2017, in which G&S alleged that it did not owe Glidden a share of the sales commissions.¹ (ECF 94 at 15).

R3 also opposes the motion to intervene on the grounds that it is premature until R3 supplements its complaint. (ECF 96 at 1). R3 notes, however, that were it granted leave to file its supplemental complaint it would not oppose the intervention of MDG, nor the remand of the case to the Allen County Circuit Court where it was initially filed. (Id. at 6-7).

In its reply, MDG asserts that its motion is timely because the 2017 case only concerned the rights of Glidden as an individual. (ECF 97 at 1-2). MDG, as a separate entity, was not on notice that its rights were not adequately represented by G&S until the Michigan state case was filed. (Id.). Further, MDG asserts that it would be prejudiced by denial of the motion to intervene because G&S would be able to settle its claims as to R3, without any regard to the rights of MDG. (Id. at 3-4). MDG also contends that Glidden's assignment to R3 does not affect MDG's rights, and that because MDG is now again a corporation in good standing with the state of Michigan, its rights never flowed to Glidden. (ECF 99).

B. Motion to Supplement Complaint

1. Legal Standard

As to the motion to supplement complaint, Federal Rule of Civil Procedure 15(d) provides: "On motion and reasonable notice, the [C]ourt may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." "[D]istrict courts have broad discretion in granting or denying a motion to supplement a complaint under Rule 15(d)." United States v. Indiana, No. 296-CV-095, 2009 WL 3067087, at *3 (N.D. Ind. Sept. 18, 2009). The standard to supplement a complaint under Rule 15(d) is the same as to amend a complaint under Rule 15(a). See Glatt v. Chi. Park Dist., 87 F.3d 190, 194 (7th Cir. 1996)....