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LEI Packaging, LLC v. Emery Silfurten Inc.

United States District Court, D. Minnesota

March 22, 2017

LEI Packaging, LLC, Plaintiff,
v.
Emery Silfurtun Inc., Samey ehf, and Hedinn Ltd., Defendants.

          Sarah A. Horstmann, Esq., Maslon LLP, Minneapolis, MN, on behalf of Plaintiff.

          Matthew A. Lee, Esq., Quinn Emanuel Urquhart & Sullivan, New York, NY, and Randi J. Winter, Esq., Felhaber Larson, Minneapolis, MN, on behalf of Defendant Hedinn Ltd.

          MEMORANDUM OPINION AND ORDER

          ANN D. MONTGOMERY U.S. DISTRICT JUDGE

         I. INTRODUCTION

         This matter is before the undersigned United States District Judge for a ruling on the damages claim of Plaintiff LEI Packaging, LLC (“LEI”) after being granted Default Judgment against Defendant Samey ehf (“Samey”) [Docket No. 135]. Defendant Hedinn Ltd. (“Hedinn”), who is still actively defending in this case, filed a Response [Docket No. 147]. For the reasons stated below, LEI's request for damages as to Samey is denied as premature.

         II. BACKGROUND

         A. Parties, the Machine, and the Machine Agreement

         This dispute concerns contracts for the purchase of a Rotary Quattro TO Pulp Moulding Machine (the “Machine”), which was designed to be capable of producing 7, 200 egg cartons per hour. On January 22, 2014, LEI, a Minnesota manufacturer and seller of molded pulp packaging products, including egg cartons and trays, agreed to pay Emery Silfurtun Inc. (“Emery”) $4, 509, 858 to design, construct, and install the Machine. Second Am. Compl. [Docket No. 66] ¶¶ 1, 7, Ex. A (“Machine Agreement”). Emery, a Canadian company, and LEI are the only signatories to the Machine Agreement.

         Emery in turn contracted with Samey and Hedinn (collectively, the “Icelandic Defendants”) to assist in fulfilling its obligations under the Machine Agreement. Id. ¶¶ 19, 27; Lee Decl. [Docket No. 82] Ex. 1 § 1.0, Ex. 2 § 1.0 (collectively, the “Icelandic Contracts”). The Second Amended Complaint alleges that Samey agreed to provide project management and testing services, assume responsibility over the Machine's electrical and automation parts, and source and order several major Machine components. Second Am. Compl. ¶ 21. Hedinn's role was to build steel constructions and to provide steel materials for the Machine's construction. Id. ¶ 29.

         Machine design and manufacture started in January 2014, and installation began in September 2014. Id. ¶¶ 35, 40. The Icelandic Defendants spent considerable time in Minnesota working on the Machine. Id. ¶¶ 41, 43.

         Sometime thereafter, LEI identified a number of problems with the Machine. These problems included the inability of the Machine to produce the promised 7, 200 egg cartons per hour, the poor quality of the finished product, and individualized issues with specific Machine components, such as the Machine's rotor, robotic transfer system, dryer, and hot press. Id. ¶¶ 47, 48. On March 16, 2015, LEI and Emery entered into an “agreement in order to remedy faults and design flaws that have emerged post installation of the Emery Silfurtun Quattro egg carton production line at LEI Packaging.” Compl. [Docket No. 1-1] Ex. B (“Modification Agreement”). The Icelandic Defendants are not parties to the Modification Agreement.

         B. Procedural History

         On May 11, 2015, citing diversity jurisdiction, Emery removed the original Complaint from Minnesota state court to federal court. 28 U.S.C. § 1332. On July 17, 2015, the Icelandic Defendants filed a Motion to Dismiss [Docket No. 18], which was later withdrawn after LEI filed an Amended Complaint [Docket No. 30]. On August 21, 2015, LEI and Emery stipulated [Docket No. 32] to arbitrate their claims and to stay the litigation between themselves. That same day, the Icelandic Defendants renewed their Motion to Dismiss [Docket No. 34]. On September 3, 2015, LEI filed a Motion to Compel the Icelandic Defendants to Arbitrate [Docket No. 41]. The Icelandic Defendants' Motion to Dismiss and LEI's Motion to Compel were both denied by Order [Docket No. 56] dated December 22, 2015. On February, 23, 2016, LEI filed its Second Amended Complaint, the operative complaint in this action.

         On March 15, 2016, the Icelandic Defendants again moved to dismiss [Docket No. 79], arguing that the Second Amended Complaint suffered from jurisdictional and venue defects, while also not stating plausible third-party beneficiary and implied warranty ...


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