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English Mountain Spring Water Co., Inc. v. Aidco International

May 30, 2008


The opinion of the court was delivered by: Thomas W. Phillips United States District Judge



This matter is before the court on plaintiff/counter-defendant English Mountain Spring Water Company, Inc.'s motion to dismiss defendant's counterclaim [Doc. 13]. For the reasons that follow, plaintiff/counter-defendant's motion is DENIED.


This action involves a dispute over the alleged failure of a piece of automated water bottling equipment. Plaintiff/counter-defendant English Mountain Spring Water Company, Inc. ("English Mountain") operates a water bottling facility in Dandridge, Tennessee. English Mountain alleges that it executed a sales contract with defendant/counter-plaintiff AIDCO International, Inc. ("AIDCO")to purchase the RoboticStar Six Axes KR 360 (the "RoboticStar"). The day after installation, English Mountain alleges, the RoboticStar failed to perform. Despite AIDCO's repair attempts, the RoboticStar never operated to English Mountain's satisfaction; English Mountain alleges this failure has caused it to lose customers and profits, as well as to incur great expense, both in repairing the equipment and in hiring additional laborers to replace the automated system.

AIDCO, to the contrary, alleges that its President and CEO knew the founder of English Mountain and pursuant to this relationship, AIDCO and English Mountain agreed to a "joint venture" or "quasi-partnership" arrangement. Under this agreement, AIDCO would supply English Mountain with equipment, labor, and materials either free of charge or at reduced rates. AIDCO alleges that in return the parties agreed to jointly develop and test certain new innovations of AIDCO, and AIDCO would also provide English Mountain with labor, training, and supervision. For example, as AIDCO alleges, it loaned funds to English Mountain for the down payment on a lease for the RoboticStar, pursuant to this "quasi-partnership" agreement. According to AIDCO, English Mountain failed to uphold the agreement by damaging the AIDCO equipment and machinery through "misuse and outright abuse" and by further breaching and repudiating the parties' agreements.

Plaintiff initially brought this suit in the Circuit Court for Jefferson County, Tennessee, alleging breach of contract and warranty and violations of the Tennessee Consumer Protection Act. Defendant AIDCO subsequently removed to this court on the basis of diversity jurisdiction. This court having denied AIDCO's motion to dismiss or, alternatively, for transfer of venue [Doc. 9], AIDCO filed its answer, in which it also alleged counterclaims against English Mountain on five counts.


When considering a motion to dismiss under Rule 12(b)(6) for "failure to state a claim upon which relief can be granted," Fed. R. Civ. Pro. 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." DIRECTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). The court, however, "need not accept as true legal conclusions or unwarranted factual inferences." Id. (quoting Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000)). Counter-defendant's motion may only be granted if, after assuming all allegations are true, counter-plaintiff fails "to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007).


A. Governing Law

Although not specifically raised by English Mountain in its motion to dismiss, governing law is at issue in this case. AIDCO specifically noted this dispute in its response, [Doc. 15 at 6-7], citing the contract underlying this dispute and a choice-of-law provision therein denoting Michigan as the governing law. Although AIDCO primarily uses Michigan law in its response brief, AIDCO submits that as it has stated a claim under either Tennessee or Michigan law, the dispute is irrelevant to the instant motion. English Mountain failed to respond to this matter in its reply brief; however, it consistently argues the legal issues under Tennessee law.

After a request from the court, the parties submitted additional briefs regarding governing law [Docs. 18 and 19]. Plaintiff/counter-defendant English Mountain argues that Tennessee law should apply, despite the choice-of-law provision in the underlying contract, as the counterclaims alleged by defendant/counter-plaintiff AIDCO arise separately therefrom. English Mountain further argues, however, that regardless of whether Tennessee or Michigan law applies, the same result follows: AIDCO's counterclaims must fail. AIDCO in turn argues that Michigan law governs, ...

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