Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION —M.D. Pa.: Fact issues preclude judgment in sales representatives’ contract claim against equine products maker, (Jan 15, 2015)

By Linda O’Brien, J.D., LL.M.

A magistrate judge in the federal district court in Harrisburg, Pennsylvania has denied cross-motions for summary judgment on two former independent sales representative’s breach of contract claims against an equine products manufacturer over unpaid sales commissions. However, the plaintiffs’ claim for tortious interference with contractual relationships was dismissed for insufficient evidence (Wells v. JPC Equestrian, Inc., January 13, 2015, Carlson, M.).

Since 1992, Varun Sharma operated JPC-India, a business in India which manufactured and sold riding apparel and equine products worldwide. In 2002, Sharma established JPC Equestrian, Inc. in Pennsylvania, which purchased inventory from JPC-India and sold the products to retail customers. Most JPC sales were made through independent contractor sales representatives, who were compensated on a commission-only basis. The remaining sales, known as “house accounts,” were made through the company customer service department.

In 2002, Joe Pete Wells and Les Krutoff met Sharma at a trade show and agreed to become independent sales representatives for JPC. Wells and Krutoff signed a “sales representation agreement” providing that Wells and Krutoff would (1) be paid a 10 percent commission on total net payable invoices on sales made by the company and which resulted from their introductions, (2) bear their own expenses, and (3) not work for a JPC competitor while serving as a representative. After JPC failed to pay a 10 percent commission on certain accounts, paid no commissions on house accounts, and sold directly to a number of customers, Wells and Krutoff filed suit against JPC and Sharma, alleging breach of contract and tortious interference with contractual relations. The parties filed cross-motions for summary judgment.

Breach of contract claim. The magistrate judge determined that disputed issues of remained with respect to the plaintiffs’ breach of contract claim. A party prosecuting a claim for breach of contract must prove: (1) the existence of a contract; (2) a breach of duty imposed by the contract; and (3) resultant damages. With respect to the sales representation agreement, it was undisputed that Sharma prepared the document and sent it to each plaintiff for signature. It was also undisputed that no copy of the agreement was produced with the signatures of all parties.

Neither party was entitled to summary judgment based upon pre- and post-contracting conduct, the court found. The parties disputed whether (1) there were substantive discussions about the terms of the agreements, (2) the agreements were signed by either the plaintiffs or Sharma, and (3) the plaintiffs insisted upon a ten percent commission on all sales. Moreover, there were material factual disputes as to whether the parties’ failure to strictly comply with the terms of the agreement was a breach or a waiver of the contract. Thus, summary judgment in favor of either party was inappropriate on the question of whether the parties entered into a binding agreement and, if so, what the scope of the terms were.

Tortious interference claim. The court found that there was insufficient evidence to support the plaintiffs’ tortious interference claims. The plaintiffs contended that Sharma diverted sales in the plaintiffs’ territories from JPC to JPC-India, thereby depriving the plaintiffs of sales commissions. However, the plaintiffs presented no evidence that Sharma, acting on behalf of JPC-India, intentionally interfered with an actual contractual relationship between the plaintiffs and JPC or interfered with that contract by negotiating sales on behalf of JPC-India that may have impacted the plaintiffs’ ability to earn commissions. Thus, the defendants were entitled to summary judgment on this claim, the court concluded.

The case is No. 3:13-CV-2575.

Attorneys: Erin Ann Brennan (Oliver, Price & Rhoads) for Joe Pete Wells. Elizabeth A. Maguschak (McNees Wallace & Nurick LLC) for JPC Equestrian, Inc.

Companies: JPC Equestrian, Inc.

Cases: FranchisingDistribution PennsylvaniaNews