MAG IAS Holdings v. Rainer Schm�ckle

854 F.3d 894
CourtCourt of Appeals for the Sixth Circuit
DecidedApril 21, 2017
Docket16-1550
StatusPublished
Cited by156 cases

This text of 854 F.3d 894 (MAG IAS Holdings v. Rainer Schm�ckle) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
MAG IAS Holdings v. Rainer Schm�ckle, 854 F.3d 894 (6th Cir. 2017).

Opinion

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

MAG IAS Holdings, Inc. (MAG Holdings) and MAG U.S. Holdings, LLC (MAG US, collectively plaintiffs) appeal the dismissal of their diversity action against Rainer Schmückle for lack of personal jurisdiction. Because plaintiffs have made a prima facie showing that the district court can exercise personal jurisdiction over Schmückle, we reverse and remand the case for further proceedings consistent with this opinion.

I.

A.

During the relevant time period, the MAG Group was an affiliation of entities that together formed a multinational manufacturing-technology company providing production plants and machinery to make engine and chassis parts for the automotive industry. One of these entities was MAG Holdings, a Delaware corporation. MAG Holdings owned a controlling stake in MAG US, a Delaware limited-liability company. MAG US, in turn, owned one-hundred percent of MAG Automotive LLC (MAG Automotive), a Delaware limited lia *897 bility company with its principal place of business in Sterling Heights, Michigan. Through a subsidiary, MAG Holdings also owned a majority stake in MAG IAS GmbH (MAG Germany), a German company. MAG Automotive and MAG Germany have since been sold to the Fair Friend Group, a Taiwanese investment firm.

Moshe Meidar is MAG Holdings’s majority shareholder. He previously served as CEO of the MAG Group. Even after stepping down as CEO, Meidar continued as president of MAG Holdings and chairman of MAG US. In addition to Meidar, the MAG US leadership team included Brian Prina (president) and Robert Dudek (secretary and treasurer). Prina and Du-dek also held positions at MAG Automotive: Prina was president, and Dudek was vice-president of finance. Both Prina and Dudek lived in Michigan and worked at MAG Automotive’s Sterling Heights facility.

Rainer Schmückle is a German citizen living in Germany. From November 2014 until his termination in June 2015, Schmückle served as CEO of the MAG Group and managing director of MAG Germany pursuant to an employment contract.

B.

On August 19, 2015, MAG Holdings and MAG US sued Schmückle in Macomb County Circuit Court for breach of fiduciary duty, professional negligence, waste of corporate assets, unjust enrichment, and tortious interference under Michigan law. Plaintiffs allege that, as CEO of the MAG Group, Schmückle “implemented an elaborate scheme” to engineer a “fire sale” of MAG Group assets for his own personal financial benefit. DE 1-2, State Ct. Compl., Page ID 11-12. They claim that Schmück-le’s conduct injured them and their Michigan-based subsidiary, MAG Automotive.

Schmückle removed the case to the United States District Court for the Eastern District of Michigan. He then filed motions to dismiss for failure to state a claim, lack of personal jurisdiction, and forum non conveniens, along with a declaration disputing many of the jurisdictional facts alleged in the complaint. In response, plaintiffs filed affidavits from Dudek and Prina.

With respect to personal jurisdiction, plaintiffs claim that Schmückle “transacted business within the State of Michigan” and that his “actions and activities led to consequences within the State of Michigan.” Id. at 14. In their complaint and supporting affidavits, plaintiffs make a number of allegations about Schmückle’s tenure at the MAG Group as it relates to his Michigan contacts. Plaintiffs allege that when Schmückle was hired in November 2014, he was given a mandate by the MAG Group’s board of directors to improve the company’s financial situation by identifying and pursuing financing options. They allege that Schmückle’s compensation package provided him an equity bonus upon the sale of MAG Group assets, but not for minority investments or other financing arrangements, and that this led Schmückle to act in his own self-interest instead of acting in the best interests of the company.

Plaintiffs assert that Schmückle was responsible for the “worldwide operations of the MAG Group” — including MAG US and MAG Germany — and that he held himself out as the “Global CEO” of the company. Id. at 16; DE 14, Dudek Aff., Page ID 247. They allege that Prina and Dudek reported directly to Schmückle. Prina claims that he had “ongoing and substantive” contact with Schmückle: that they communicated regularly by email and three to four times a week by phone. DE 15, Prina Aff., Page ID 258.

*898 Plaintiffs further allege a number of ways in which Schmückle was closely involved with, and exercised control over, day-to-day operations at MAG US in Michigan. Specifically, they allege that (1) he was involved in determining facility operations, budgets, work flow, and sales priorities; (2) he charged MAG US a € 1.5 million annual administrative fee used to pay a portion of his salary and expenses; (3) he reallocated work from the “consistently profitable” Michigan facility to the “less-profitable” operations at MAG Germany and negatively affected the profitability of MAG US in Michigan; and (4) he told MAG US leaders to prepare to transfer $10 million to MAG Germany to cover an equity shortfall.

Schmückle allegedly visited Michigan twice during his eight-month tenure as CEO. In December 2014, he spent three days in Michigan meeting with the management team, learning about the Sterling Heights facility, and reviewing historical and projected performance. During that trip, Schmückle allegedly instructed Du-dek and his German counterpart to “transfer a portion of the general administration and [R&D] expenses from the German operations to the Michigan operations.” DE 14, Dudek Aff., Page ID 247. In February 2015, Schmückle allegedly returned to Michigan to meet with executives from the Ford Motor Company, MAG Automotive’s largest client.

Plaintiffs also claim that on June 3, 2015, Schmückle met with Prina, Dudek, Meidar, and others in Frankfurt, Germany, to discuss proposals from outside investors. At that meeting, Schmückle allegedly stated that unless the MAG Group assets were sold, he would force the MAG Group into insolvency, despite warnings from Prina and Dudek that such action would cause irreparable harm to MAG US and MAG Automotive in Michigan. Schmückle’s employment was allegedly terminated the next day.

Finally, beyond his involvement with the MAG Group, plaintiffs allege that Schmückle maintains a residence in Portland, Oregon, and that he sits on the boards of at least three companies based in the United States.

The district court, without holding an evidentiary hearing, granted Schmückle’s motion to dismiss for lack of personal jurisdiction on the grounds that exercising personal jurisdiction over Schmückle would not comport with due process. The court did not decide whether the complaint failed to state a claim or whether the case should be dismissed on forum non conve-niens grounds. Plaintiffs filed a timely notice of appeal.

C.

On September 1, 2015, shortly after the Michigan suit was filed, Schmückle filed a wrongful-termination claim against MAG Germany in the' Ulm Regional Court in Germany. 1

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854 F.3d 894, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mag-ias-holdings-v-rainer-schmckle-ca6-2017.