Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Mich.: Michigan sales rep law superseded by choice-of-law provision requiring application of Ontario law, (Apr 15, 2016)

A claim by a former independent manufacturer’s representative, that an Ontario-based automotive parts supplier violated Michigan’s Sales Representatives Commission Act (SRCA), was dismissed by the federal district court in Detroit. The court determined that the choice-of-law provision in the parties’ agreement required application of Ontario law (Wallace Sales & Consulting, LLC v. Tuopu North America, Limited, April 12, 2016, Drain, G.).

Wallace Sale & Consulting, LLC was an independent manufacturer’s representative for Tuopu North America, Limited (Tuopu), a supplier of automotive suspension parts. The Manufacturer’s Representative Agreement entered into by the parties provided for: (1) Tuopu’s payment of sales commissions in the event that it terminated the plaintiff “without cause” or “with cause”; and (2) a choice-of-law provision that required that all disputes be governed solely by Ontario, Canada law.

In July 2014, Tuopu terminated its relationship with Wallace without cause. In March 2015, Wallace filed a complaint for breach of contract, violations of Michigan’s SRCA, and seeking a declaratory judgment. Tuopu responded by filing a motion for partial summary judgment with respect to the SRCA claim.

The court first noted that whether or not the plaintiff’s SRCA claim could proceed past summary judgment hinged on whether Ontario or Michigan law applied to the specific claim. In considering whether Ontario or Michigan law should apply, the court determined that, pursuant to the Restatement (Second) of Conflict of Law, Michigan law would apply if: (1) Michigan had a materially greater interest than Ontario in the determination of the issue; and (2) the application of Ontario’s law was contrary to a fundamental policy of Michigan. To make this determination, the court looked the following factors: (1) the place of contracting; (2) the place of negotiation of the contract; (3) the place of performance; (4) the location of the subject matter of the contract; and (5) the domicile, residence, nationality, place of incorporation, and place of business of the parties.

The court found that the location of the subject matter of the contract favored Ontario because: (1) Tuopu’s alleged breach of its duties under the contract occurred in Ontario; (2) all of the plaintiff’s orders were placed with and accepted by the Tuopu in Ontario; and (3) the plaintiff’s commission checks were issued from Ontario.

Furthermore, while the State of Michigan had an interest in ensuring that sales representatives from Michigan were the paid the full commissions to which they were entitled, it was undisputed that Michigan’s public policy favored the enforcement of contractual forum-selection clauses and choice-of-law provisions. Consequently, the court found that, in balancing those two interests, the application of Ontario’s law would be the best way: (1) to protect the justified expectations of the parties; and (2) to make it possible for the parties to foretell with accuracy what would be their rights and liabilities under the agreement.

The case is No. 15-cv-10748.

Attorneys: Kevin P. Albus (Randall J. Gillary, PC) for Wallace Sales & Consulting, LLC. Andrey T. Tomkiw (Tomkiw Mackewich, PLC) and Glenn C. Ross (Clark Hill, PLC) for Tuopu North America, Ltd.

Companies: Wallace Sales & Consulting, LLC; Tuopu North America, Ltd.

Cases: FranchisingDistribution MichiganNews