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Star Leasing Co. v. Michael's Cooperage Co.

July 13, 2006


The opinion of the court was delivered by: Judge Gregory L. Frost

Magistrate Judge Norah McCann King


This diversity action is before the Court for consideration of Defendant's motion to dismiss (Doc. # 22), Plaintiff's memorandum in opposition (Doc. # 26), and Defendant's reply memorandum (Doc. # 27). For the reasons that follow, the Court finds the motion not well taken.

I. Background

Plaintiff, Star Leasing Company, is an Ohio-based company engaged in the business of leasing semi-trailers. On May 1, 2003, Plaintiff entered into a lease and service agreement with the Illinois-based Defendant, Michael Cooperage Company, Incorporated (now known as Pershing Industries, Incorporated). Pursuant to the lease, Plaintiff supplied Defendant with 117 semi-trailers. In November 2005, however, Plaintiff reportedly learned that Defendant had entered into an agreement to sell its assets to Greif USA, LLC. Consequently, Plaintiff wrote to Defendant demanding adequate assurance that Defendant would continue to perform under their lease. Ohio Revised Code § 1310.40 provides for the right to seek such assurance:

If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable, the insecure party may suspend any performance for which he has not already received the agreed return.

Ohio Rev. Code § 1310.40(B).

Defendant's counsel responded via a letter in which he confirmed the asset sale, but stated that he needed more time to review the lease. No assurance of performance was given. Eight days later, on December 9, 2005, Defendant's counsel informed Plaintiff that Defendant was terminating its existence and desired to return the leased trailers. The companies agreed that Defendant would have until noon on December 13, 2005 to provide Plaintiff with adequate assurance that it would perform under the lease.

That deadline passed without Plaintiff receiving such assurance. Ohio Revised Code § 1310(C) provides that "[a] repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed thirty days after receipt of a demand by the other party." Accordingly, Plaintiff served written notice stating that Defendant was in default of the lease, terminating the lease as of December 18, 2005, and demanding the return of its trailers by December 19, 2005. (Doc. # 12, at 3-4 ¶¶ 15, 18; Doc. # 12, Ex. C, at 1-2.) Plaintiff also filed suit against Defendant in the Franklin County Common Pleas Court. (Doc. # 2.)

Defendant subsequently removed the action to this Court. (Doc. # 1.) Following removal, Plaintiff filed a four-count amended complaint (Doc. # 12). Count One asserts a cause of action for breach of the lease, Count Two asserts a statutory cause of action under Ohio's enactment of the Uniform Commercial Code, Count Three is for replevin of thirty-five specified trailers, and Count Four is for conversion of these trailers. (Doc. # 12, at 7-8.) Defendant has filed a motion to dismiss the amended complaint in its entirety. (Doc. # 22.) The parties have completed briefing the issues involved, and the motion to dismiss is now ripe for disposition.

II. Discussion

A. Standard Involved

Defendant moves to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Dismissal is warranted under that rule " 'only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.' " Sistrunk v. City of Strongsville, 99 F.3d 194, 197 (6th Cir. 1996) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)), cert. denied, 520 U.S. 1251 (1997)). The focus is not on whether Plaintiff will ultimately prevail, but rather on whether he has offered " 'either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.' " Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (quoting Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)).

In making such a determination, the Court must " 'construe the complaint liberally in the plaintiff's favor and accept as true all factual allegations and permissible inferences therein.' " Sistrunk, 99 F.3d at 197(quoting Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir. 1994)). The Court need not, however, accept conclusions of law or unwarranted inferences of fact. Perry v. American Tobacco Co., Inc., 324 F.3d 845, 848 (6th Cir. 2003). The Court may also consider matters of public record, orders, items ...

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