Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Ind.: Sales consultant granted summary judgment on unpaid commissions claims, (Jan 25, 2016)

By Linda O’Brien, J.D., LL.M.

The federal district court in Indianapolis granted summary judgment on a business consulting and sales support provider’s claims against a metal castings manufacturer for unpaid commissions owed under a manufacturer’s sales representative agreement (Broderick Associates, Inc. v. Fansteel, Inc., January 22, 2016, Pratt, T).

Broderick Associates provides business consulting and sales support services. Fansteel manufactures metal castings for the gas turbine, flow control, and industrial original equipment markets. Fansteel’s subsidiary, American Sintered Technologies (ASI), manufactures powder metal component parts for the automotive, hardware, and lawn and garden markets.

In April 2006, Broderick entered into a “manufacturer’s sales representative” agreement to provide sales services to Fansteel and ASI in exchange for commission payments. The agreement established a term for the business relationship, ending in December 2007. Through a series of contract extensions, the agreement continued through December 31, 2013. The agreement terminated by virtue of its expiration in December 2013, and the parties did not execute another contract extension. At the end of 2013, Fansteel and ASI were behind on the commission payments owed to Broderick.

In July 2014, Broderick filed suit against Fansteel and ASI, asserting claims, in part, for breach of contract and violation of the Illinois Sales Representative (ISR) Act based on the unpaid commissions. Before the court was Broderick’s motion for summary judgment on its claims.

Illinois Sales Representative Act. The court determined that the defendants violated the ISR Act. The ISR Act provides that all commissions must be paid within 13 days of when the commissions are due after the termination of a contract. The defendants’ contention that the agreement was terminated for cause and therefore Broderick forfeited all commissions was rejected. The court noted that the defendants owed commissions to Broderick when the agreement was terminated, additional commissions became due after the termination of the agreement, and the defendants failed to pay those commissions to Broderick.

However, Broderick was not entitled to exemplary damages under the ISR Act. Although the defendants knew commissions were due at the time the agreement was terminated, the court explained, there was no evidence that the defendants acted in bad faith or that their failure to pay the commissions was willful and wanton conduct.

Breach of contract. Additionally, the court found that Broderick was entitled to the commission payments due under the agreement and the defendants breached the agreement by failing to pay those commissions. The agreement expired on December 31, 2013, since the parties did not extend its term and the defendants gave no “cause” for the non-renewal until April 2014 when Broderick requested payment of the outstanding commissions.

If Broderick has failed to perform under the agreement during their business relationship, there was no evidence that the defendants scheduled a formal review or requested corrective actions as provided in the agreement. Therefore, the defendants could not subsequently assert non-performance without following the provisions of the agreement governing any non-performance by Broderick, the court concluded.

The case is No. 1:14-cv-01133-TWP-DML.

Attorneys: Julia E. Dimick (Alerding Castor Hewitt LLP) for Broderick & Associates, Inc. Gregory Forrest Hahn (Bose McKinney & Evans, LLP) for Fansteel, Inc. and American Sintered Technologies.

Companies: Broderick Associates, Inc.; Fansteel, Inc.; American Sintered Technologies

Cases: FranchisingDistribution IndianaNews