Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Manufacturer representative's lawsuit against former client for payment of commissions dismissed, (Jun 24, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

"Had the Court not raised the Contract’s arbitration provision at oral argument, the Court question[ed] whether [the manufacturer's representative] would have ever raised it."

The federal district court in Camden, New Jersey has dismissed a lawsuit by a manufacturer's sales representative for commissions allegedly earned following the continued conduct of the representation arrangement with a precision aerospace parts manufacturer after the contract's stated expiration date. The court dismissed the representative's motion to compel arbitration, and granted the manufacturer's motions to dismiss the representative's breach of express contract, good faith and fair dealing covenant breach, and implied contract breach claims. The court further ruled that the representative's quasi-contract claim could not stand because there had been a contract, and that a grant of declaratory judgment would serve no useful purpose to the parties. The court granted the representative leave to replead in order to cure the deficiencies in its pleadings (LeMire Associates v. Howmet Aerospace, Inc., No. 1:23-cv-01345-RMB-EAP (D.N.J. June 17, 2024)).

Lemire Associates (Lemire) is a manufacturer's representative whose clients are precision fabrication firms that manufacture their products to the customers' specifications. In April 2017, Lemire entered into a contract with Howmet Aerospace, Inc. (Howmet), a manufacturer of machined parts, castings, and fasteners for the aerospace industry, whereby Lemire would receive a commission on the sales of Howmet's products it arranged. The contract specifically stated that Lemire would earn its commission on any given invoice upon "full, final, and complete payment" to Howmet, and commissions would be paid to Lemire by the end of the month following the month in which the commission is earned.

The written contract specified a three-year term, extendable by the if so agreed in writing; the contract also provided that Howmet could terminate the contract at will by giving Lemire 180-days written notice. Any rights of the parties that had accrued before the contract's termination would not be impaired or altered by the termination. The contract contained an arbitration clause of broad scope.

Inasmuch as the specified termination date of April 2020 occurred during the COVID-19 pandemic, Lemire and Howmet continued to conduct business as though the contract remained operative so as to sustain business.

In August 2022, Howmet informed Lemire that it intended to terminate the contract, and a week later, Howmet served notice upon Lemire that it regarded the contract as being no longer in effect following the April 2020 specified termination date and was terminating the contract "effective immediately" notwithstanding the 180-day termination provision. At that time, there were orders which, under the terms of the contract when it was in effect, would likely have given rise to more than $1 million in commissions for Lemire following "full, final, and complete payment" during the 180-day period following the termination.

After unsuccessful attempts to resolve its differences with Howmet, Lemire attempted to initiate arbitration, but Howmet refused, contending that the contract, and therefore, the arbitration provision, was no longer in effect. Lemire filed suit in a New Jersey state court; the case was then removed to the federal district court.

Arbitration. The court denied Lemire's motion to compel arbitration. Lemire's filing in the New Jersey state court made no mention of the contract's arbitration provision (although there was a copy of the contract in the record), and in fact certified to the state court that there was no arbitration proceeding in progress or contemplated. Even after the case was removed to federal court, Lemire made no mention of the arbitration provision. Lemire's filing of its contractual claims lawsuit against Howmet was antithetical to a motion to compel arbitration; the court accordingly denied Lemire's motion to compel arbitration.

Contract-condition precedent. The court granted Howmet's motion to dismiss Lemire's breach of express contract claim. The contractual provision that Lemire's commissions would accrue upon "full, final, and complete payment" to Howmet of its invoices was a condition precedent to Lemire's right to commissions. Lemire's allegations that the deals it arranged for Howmet would likely be paid during the 180-day termination notice period fell short of an allegation that the condition precedent of actual payment by the customers had been satisfied.

The court also denied Lemire's breach of the implied covenant of good faith and fair dealing claim. Such a claim is not duplicative of the breach of contract claim in sales commissions contracts because the implied covenant covers activity after the contract ceases to be in effect. But in this case, the implied covenant was based upon the condition precedent of "full, final, and complete payment," which Lemire failed to plausibly plead.

Similarly, the court denied Lemire's breach of implied contract claim. While the continued dealings between Lemire and Howmet after the April 2020 nominal contract expiry were sufficient to show an implied contract, the terms of the implied contract are the same as those of the contract that effectively being extended – and those terms include the condition precedent of "full, final, and complete payment" to Howmet, which was not pleaded.

The Case is No. 1:23-cv-01345-RMB-EAP.

Judge: Bumb, R.

Attorneys: Ryan Milun (Milun Law Firm, LLC) for LeMire Associates. John P. Johnson, Jr. (Cozen O'Connor P.C.) for Howmet Aerospace, Inc. and RTI Remmele Engineering, Inc.

Companies: LeMire Associates; Howmet Aerospace, Inc.; RTI Remmele Engineering, Inc.

Cases: FranchisingDistribution NewJerseyNews