INTERNATIONAL SPORTS MARKETING INC V SAATCHI & SAATCHI N AM INC
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STATE OF MICHIGAN
COURT OF APPEALS
INTERNATIONAL SPORTS MARKETING,
INC.,
UNPUBLISHED
December 3, 2002
Plaintiff-Appellee/CrossAppellant/Cross-Appellee,
v
SAATCHI & SAATCHI NORTH AMERICA,
INC., formerly known as SAATCHI & SAATCHI
ADVERTISING, INC.,
Defendant-Appellant/CrossAppellee/Cross-Appellant,
and
CORDIANT, PLC, formerly known as SAATCHI
& SAATCHI, PLC; CORDIANT COMPTON
WORLDWIDE, formerly known as SAATCHI &
SAATCHI COMPTON WORLDWIDE, INC.;
CORDIANT HOLDING, INC., formerly known as
SAATCHI & SAATCHI HOLDINGS, INC.; and
SAATCHI
&
SAATCHI
WORLDWIDE
ADVERTISING, INC.,
Defendants/Cross-Defendants/CrossAppellees/Cross-Appellants,
and
KALEIDOSCOPE HOLDINGS, INC.,
Defendant/CrossPlaintiff/Appellee/CrossAppellee/Cross-Appellant,
and
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No. 225928
Wayne Circuit Court
LC No. 96-630194-CK
KALEIDOSCOPE ENTERTAINMENT, INC., and
LIFESTYLE MARKETING GROUP, INC., also
known as LIFESTYLE MARKETING GROUP,
Defendants/Appellees/CrossAppellees,
and
DONALD
R.
ROTHENBERG,
DIXON
and
MARK
Defendants/CrossPlaintiffs/Appellees/CrossAppellees,
and
VENTURA ENTERTAINMENT GROUP, LTD,
also known as VENTURA HOLDINGS,
Defendant/Appellee/Cross-Appellee.
Before: White, P.J., and Neff and Jansen, JJ.
PER CURIAM.
Defendant Saatchi & Saatchi North America, Inc. (“Saatchi”) appeals as of right from the
March 17, 2000, order denying Saatchi’s motion to set aside the April 28, 1995 default judgment
in the amount of $21,000,000 entered in favor of plaintiff International Sports Marketing
(“ISM”) against Lifestyle Marketing Group (“LMG”), a former unincorporated division and
assumed name of Saatchi registered in the state of New York; directing Saatchi to indemnify
LMG for the amount of the default judgment; and holding Saatchi liable to plaintiff ISM for the
default judgment. Plaintiff ISM has filed a cross claim of appeal challenging the trial court’s
order that dismissed plaintiff’s remaining claims against the other defendants and its alternative
theories against Saatchi. Defendant Kaleidoscope Holdings, Inc. (“Kaleidoscope”) has also filed
a cross claim of appeal asserting that the trial court’s order should not be interpreted as a
dismissal on the merits of Kaleidoscope’s cross claim against Saatchi asserting indemnity rights.
The Cordiant group of defendants have also filed a cross claim of appeal asserting that the trial
court erred in denying their motion for summary disposition for lack of personal jurisdiction and
that the trial court did not err in dismissing the cross claims of defendants Kaleidoscope, Donald
Dixon, and Mark Rothenberg against Saatchi and the Cordiant group of defendants. We now set
aside the default judgment and dismiss all the defendants from this case.
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This is the second time that this Court has had occasion to address plaintiff’s complaint
filed in Wayne Circuit Court on July 16, 1992 alleging tortious interference with a business
relationship and civil conspiracy arising from its attempt to market a commemorative coin series
depicting Greg Louganis in conjunction with the 1988 Summer Olympics. Among the named
parties in plaintiff’s complaint were Saatchi and LMG, the latter of which was identified by
plaintiff in its complaint as “a subsidiary of Defendant Saatchi & Saatchi whose business
activities include corporate sponsorship programs and athlete representation.” In fact, LMG was
an unincorporated division and an assumed name of Saatchi, which had filed a certificate of
assumed name in the State of New York in July of 1990, stating that any action against LMG
should be served on Saatchi. However, prior to plaintiff’s lawsuit, Saatchi sold the name and
assets of LMG to Kaleidoscope in March of 1992.1 LMG was then incorporated by
Kaleidoscope as a subsidiary under the name of Lifestyle Marketing Group, Inc. (“LMG, Inc.”),
until it was purchased by Ventura Entertainment Group, Ltd. on December 1, 1994. The March
1992 sale of LMG by Saatchi to Kaleidoscope contained an indemnity agreement stating that
“Saatchi & Saatchi will indemnify and hold Kaleidoscope harmless for any claim resulting from
any acts or allegations relating to the activities of LMG prior to the date of closing [March 31,
1992]” and that “Kaleidoscope will indemnify and hold Saatchi & Saatchi harmless for any
claim resulting from any acts or allegations relating to activities of LMG after the date of
closing.”
Plaintiff served its complaint against Saatchi on the latter’s registered agent in New York
City on October 8, 1992. Although plaintiff was put on notice based upon public records that
LMG was an assumed name of Saatchi in the State of New York, and thus not a separate
corporate entity, plaintiff did not serve its complaint against LMG on Saatchi. Rather, plaintiff
served Mark Rothenberg personally at LMG Inc.’s offices also in New York City on September
16, 1992 with a summons addressed to LMG. In response to plaintiff’s complaint, Saatchi
moved to dismiss the suit against it in November of 1992. However, according to Saatchi, it did
not include LMG in its dismissal motion because it had not been served with the summons for
LMG.2
On December 2, 1992, the Wayne Circuit Court granted summary disposition in favor of
Saatchi and several other defendants, finding that plaintiff failed to state a claim in its complaint
that Saatchi and these other defendants tortiously interfered with plaintiff’s commemorative coin
project.3 Nevertheless, two weeks after the trial court dismissed Saatchi from the case, plaintiff
filed a notice of default on December 17, 1992 for LMG’s failure to answer the complaint.
1
Although Saatchi sold LMG to Kaleidoscope in March of 1992, it did not file a certificate of
discontinuance of assumed name with regard to LMG until May 10, 1995.
2
Notwithstanding that Saatchi was not served with the summons addressed to LMG, Saatchi was
apprised by plaintiff’s complaint that its assumed name, LMG, was also being sued. Thus,
Saatchi’s failure to include LMG in its dismissal motion cannot be attributed solely to plaintiff’s
failure to serve it with the summons for LMG. Because LMG had not been formally dismissed
from the case, plaintiff proceeded with its default and default judgment actions against LMG.
3
The defendants that were dismissed were Saatchi, Impel Marketing, and the Howard Marlboro
Group. Other defendants, including LMG, were not dismissed, and thus the case remained open
in the trial court.
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Eventually, more than two years later, on February 23, 1995, plaintiff filed a motion for entry of
default judgment against LMG. On April 28, 1995, the trial court entered an order of default
judgment against LMG only in the amount of $21,000,000 plus interest. However, because
Saatchi had been previously dismissed from the case, counsel for Saatchi did not attend the
hearing on the entry of the default judgment against LMG. At the hearing, it was made clear that
the default judgment was being entered against LMG, as a division of Saatchi, and not against
LMG, Inc., the entity actually served.
On May 12, 1995, plaintiff then filed its claim of appeal from the grant of summary
disposition entered about two and one-half years earlier by the Wayne Circuit Court on
December 2, 1992. On appeal to this Court, the circuit court’s order was affirmed in part, and
reversed in part regarding the tortious interference with a business relationship and civil
conspiracy claims against Impel Marketing only. International Sports Marketing, Inc v Saatchi
& Saatchi, et al., unpublished opinion per curiam of the Court of Appeals, issued July 30, 1996
(Docket No. 185792). The Michigan Supreme Court subsequently denied plaintiff’s application
for leave to appeal. International Sports Marketing, Inc v United States Olympic Committee, 456
Mich 895 (1997).4
On July 31, 1996, the day after this Court affirmed the circuit court’s dismissal of Saatchi
from the case, plaintiff filed the present action against Saatchi to enforce the default judgment
pursuant to MCR 2.621. Plaintiff and Saatchi filed cross-motions for summary disposition. In a
written opinion and order dated March 24, 1997, the trial court, in pertinent part, denied
plaintiff’s motion for summary disposition, but granted Saatchi’s motion for summary
disposition, finding that Saatchi was not liable for LMG’s allegedly tortious conduct.
Plaintiff subsequently moved for reconsideration and for summary disposition.
Kaleidoscope moved for summary disposition as well, while Saatchi filed for entry of an order of
dismissal under the seven-day rule, moved for summary disposition or, alternatively, for relief
from judgment. In an opinion and order entered on February 11, 1998, the trial court found that
Saatchi could be held liable under the indemnity agreement with Kaleidoscope for LMG’s
conduct. The trial court also found that Kaleidoscope could be liable under a successor liability
theory and under the same indemnity agreement. With regard to LMG, the trial court found that
plaintiff could pierce the corporate veil, but not with respect to Dixon and Rothenberg. Most
significantly, the trial court found that LMG failed to defend in the underlying action when the
default judgment was entered so that it could not now escape liability. Therefore, the trial court
concluded that Saatchi and Kaleidoscope were liable for LMG’s debt under the indemnity
agreement. Ultimately, the trial court decided not to set aside the default judgment against LMG,
that Saatchi was liable for the default judgment against LMG pursuant to the terms of the
indemnity agreement because the allegations in the complaint were for conduct that occurred
4
The parties also note that plaintiff filed a complaint in Iowa in September 1993 against some of
the same defendants involved in the 1992 action in the Wayne Circuit Court involving essentially
the same allegations as well. These defendants’ motions for summary judgment were granted
by the Iowa trial court on September 27, 1995 and subsequently affirmed by the Iowa Court of
Appeals and Iowa Supreme Court, respectively.
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when LMG was part of Saatchi, and that Kaleidoscope and the Cordiant defendants were not
liable for LMG’s debt.
Saatchi then moved for reconsideration, which the trial court denied in an opinion and
order dated February 15, 2000. In addition, the trial court rejected Saatchi’s argument for setting
aside the default judgment, once again finding that Saatchi was liable, under the indemnity
agreement with Kaleidoscope, for LMG’s allegedly tortious conduct. The trial court also
dismissed “[a]ll other claims by the parties against one another.” The final judgment was entered
on March 17, 2000, denying Saatchi’s motions to set aside the default judgment, for
reconsideration, for additional findings and amendment, and to require plaintiff to post bond for
costs. The trial court’s order also required Saatchi to indemnify LMG for the default judgment,
making Saatchi liable to plaintiff for the default judgment in the amount of $21,000,000.
On appeal, Saatchi argues that the trial court abused its discretion by failing to set aside
the default judgment in its February 15, 2000 order in which the court denied Saatchi’s motion
for reconsideration to set aside the default judgment. MCR 2.603(D)(1) provides:
A motion to set aside a default or a default judgment, except when grounded on
lack of jurisdiction over the defendant, shall be granted only if good cause is
shown and an affidavit of facts showing a meritorious defense is filed.
Saatchi argues that the default judgment should be set aside because the trial court never
obtained jurisdiction over LMG since plaintiff failed to serve Saatchi with the summons and
complaint for LMG. However, even assuming that jurisdiction existed, Saatchi contends that,
under Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich 219, 233-34; 600 NW2d 638
(1999), there was good cause and a meritorious defense to set aside the default judgment in view
of the numerous procedural irregularities in this case and the failure of plaintiff to state
cognizable claims for tortious interference with a business relationship or civil conspiracy or to
adduce facts in support of such claims. Given plaintiff’s failure to state or support its claims,
Saatchi further contends that the failure to set aside the default judgment would result in manifest
injustice, citing this Court’s recent decision in White v Busuitso, 230 Mich App 71, 78; 583
NW2d 499 (1998), where we held that “manifest injustice requiring a default judgment to be set
aside occurs where the plaintiff failed to state a claim upon which relief can be granted.”
In this case, we agree with Saatchi that the trial court erred in failing to set aside the
default judgment. We note that an unincorporated division of a corporation does not have
independent legal existence, but may be sued only through the corporation of which it is a part.
See 1 W. Fletcher, Cyclopedia of the Law of Private Corporations § 25 at 484 (perm. ed. rev.
1999)(“Unincorporated departments or parts of a corporation are not entities separately
considered.”); Reines Distributors, Inc v Admiral Corp, 256 F Supp 581, 583 (SD NY 1966)
(noting that “[u]nlike the relation between a subsidiary and a parent, the nexus between a
division of a corporation and the corporation has no legal significance”); Main Street
Development v DeMicco, 248 Ill App 3d 392, 397; 618 NE2d 442, 445; 187 Ill Dec 851, 854
(1993) (noting that the term ‘division of’ has no legal significance”). At all times relevant for the
purpose of plaintiff’s complaint, LMG was an unincorporated division and assumed name of
Saatchi, which was the proper corporate party in plaintiff’s suit against LMG. As a result, LMG
was not capable of being sued in its own right and could not be joined in an action against
Saatchi. See Sheldon v Kimberly-Clark Corp, 111 AD2d 912; 490 NYS2d 810 (1985) (affirming
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in a memorandum opinion the lower court’s order denying leave to enter a default judgment and
dismissing the plaintiff’s action, finding that because the unincorporated division of the
defendant corporation “is not a jural entity amenable to suit in its own right, its joinder herein
was improper and its failure to answer the complaint cannot, therefore, give rise to a default in
appearance”) Thus, any claim against LMG as a division of Saatchi was dismissed when Saatchi
was dismissed from the case pursuant to the December 2, 1992 order granting Saatchi’s motion
for summary disposition. This being so, the default judgment obtained by plaintiff against LMG
as a division of Saatchi was void ab initio. Accordingly, we vacate the default judgment, the
orders requiring Saatchi to indemnify LMG and to pay plaintiff ISM for the default judgment,
and hereby dismiss all the defendants from the case.
Reversed.
/s/ Helene N. White
/s/ Janet T. Neff
/s/ Kathleen Jansen
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