Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION: Independent sales rep’s termination claim proceeds, bonus claim fails, (Dec 16, 2013)

An independent sales representative’s contract claim based on its termination could proceed against a heating, ventilation, and air conditioning (HVAC) firm, but its claim for recovery of past bonuses could not, the federal district court in Detroit has ruled (Kolpacke v. Moore Sales Corp., December 12, 2013, Borman, P.).

Patrick Kolpacke, a resident of Michigan, was a sales representative for Moore Sales Corp., a Vincennes, Indiana, firm that represents manufacturers in the HVAC business. He initially worked as an employee, starting on January 19, 2009. In August 2009, Kolpacke became an independent contractor, at the direction of Moore. As a result of this change, his salary increased from $45,000 to $60,000, and a bonus structure that was part of his original employment terms remained in place. Kolpacke’s territory increased beyond Michigan to include northern Ohio, western West Virginia, and the Pittsburgh, Pennsylvania area.

The bonus structure, although unchanged, was reflected in a Second Bonus Document provided by Moore sometime between June 26, 2009 and August 2009. Moore also sent Kolpacke a sales representative agreement during that same time period. Kolpacke signed the agreement and mailed it back to Moore, as directed. Moore never signed a copy of the agreement and Kolpacke’s signed copy was never produced.

Leondis Moore, founder and principal of Moore Sales Corp., testified that the bonus structure set a baseline of $2,800,000 for Kolpacke’s territory and required the rep to make a million more in sales to qualify for a bonus. Kolpacke first testified that he did not recall what the baseline was for existing sales and later stated that it was $215,988, the sales figures for 2008. More contended that the true sales figure for 2008 was $1,737,050.

Kolpacke further asserted that the bonus structure was cumulative and that he was due a $10,000 bonus for raising his sales more than $1.5 million. He argued that his 2009 and 2010 sales had to be added together and that he was entitled to a $65,000 bonus for 2010 for increasing sales more than $3.5 million. Finally, Kolpacke testified that he was entitled to a $137,748 bonus for 2011 because his aggregate sales from 2009 through 2011, less the baseline, was $6,436,802. Although the bonus structure did not supply a rate for bonuses this high, Kolpacke calculated a bonus of $11,562 for each additional $500,000 in sales.

On July 18, 2012, Moore provided Kolpacke with a notice, stating that he was terminated immediately but would be compensated for the next 30 days, as per the parties’ agreement. Kolpacke received a termination notice by certified mail, stating that Moore expected “compliance with the Sales Representative Agreement entered into when you commenced employment.” At that point, Kolpacke started his own independent sales representative firm and notified his customers of this change. On August 6, 2012, Kolpacke received a letter from Moore’s attorney, demanding compliance with the non-competition terms of the sales representative agreement.

Kolpacke filed a complaint against Moore on October 31, 2012, alleging breach of the sales representative agreement regarding his termination and breach of the bonus agreement for nonpayment. Moore moved for summary judgment.

Sales representative agreement. Moore contended that the sales representative agreement was not binding because it was unsigned. However, the court found this argument unpersuasive. Under Indiana law, signing an agreement is not required; only some form of asset is necessary. Looking at the record in a light most favorable to Kolpacke, the court found that Kolpacke’s testimony that he signed the agreement and mailed it back to Moore was sufficient to raise an issue of fact as to the existing of an agreement.

Kolpacke’s allegations that Moore failed to give 30 days’ notice of termination and failed to make the last two sales payments was not directly addressed by Moore, other than arguing that the sales representative agreement was not binding and acknowledging that this was not the main thrust of Kolpacke’s claims.

Looking at the record in a light most favorable to Kolpacke, the court found clear evidence that Moore acquiesced to the terms of the sales representative agreement through its conduct—both by paying and accepting Kolpacke’s services as an independent contractor as well as by attempting to enforce the agreement after terminating the relationship.

The court further found that Kolpacke alleged sufficient facts to establish a genuine issue of material fact regarding Moore’s breach of the termination provision of the sales representative agreement.

Bonus structure. According to the court, the “real meat of this contract dispute” was whether Moore breached an agreement regarding the bonuses Kolpacke claimed. Moore argued that the bonus structure was a separate agreement from the sales representative agreement and that the two could not be “conflated together,” because (1) they did not refer to each other and (2) the bonus structure was presented six months before the sales representative agreement. Kolpacke conflated the two documents together “without any reasoning or explanation,” the court stated.

The court first found that the entire bonus structure was not incorporated into the sales representative agreement because the contract referenced only one provision of the structure. The rest of the second bonus document was therefore “foreign” to the sales representation agreement.

Kolpacke further alleged that the bonus structure was a separate agreement. Since the language was ambiguous, the court should turn to extrinsic evidence to interpret it, he argued. However, the court found that there was no meeting of the minds between the parties regarding the bonus agreement. The document was missing critical essential elements, such that the court could not find a binding contract regarding a bonus.

“In the present case, Plaintiff cannot show that there was ever any agreement between the parties regarding the baseline amount for determining the bonus amount or the structure of the bonuses (annual versus cumulative).”

For these reasons, the court granted the motion for summary judgment to the extent that no valid contract existed regarding the bonuses and denied the motion for summary judgment regarding the breach of contract on the termination provision of the sales representative agreement.

The case is No. 12-13405.

Attorneys: Kevin P. Albus (Randall J. Gillary Associates) for Patrick Kolpacke. Dean F. Pacific (Warner Norcross and Judd LLP) for Moore Sales Corp.

Companies: Moore Sales Corp.

Cases: FranchisingDistribution MichiganNews