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deducting payments already made before calculating prejudgment interest
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97-CV-0679E(Sr)
March 12, 2001
MEMORANDUM and ORDER
Plaintiffs R. B. Williams Holding Corp. ("Williams Corp.") and West Empire Associates, Inc. ("West Empire") filed suit against Ameron International Corporation ("Ameron") alleging that Ameron had breached its obligation to pay them a commission for their efforts in introducing Ameron's Protective Coatings Division's Contract Management Service ("CMS") to the Buffalo and Fort Erie Peace Bridge Authority ("the Authority"), which they allege resulted in Ameron's acquisition of the contract to remove the lead paint from and apply a new coating to the Peace Bridge ("the bridge"). The plaintiffs raise four causes of action in their complaint — viz., (1) breach of contract, (2) quantum meruit, (3) unjust enrichment and (4) breach of the implied covenant of good faith and fair dealing. Williams Corp. and West Empire are incorporated in and have their principal places of business in New York, Ameron is incorporated in Delaware and has its principal place of business in California, the amount in controversy exceeds $75,000 and this Court accordingly has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332. Ameron moved for summary judgment August 31, 1998 and the plaintiffs cross-moved for summary judgment October 2, 1998 pursuant to Rule 56 of the Federal Rules of Civil Procedure ("FRCvP"). Plaintiffs thereafter amended their complaint and, subsequent to Ameron's answer thereto, submitted supplemental affidavits and memoranda of law regarding renewed summary judgment motions which were argued and submitted January 21, 2000. Both parties contend that there is no genuine issue of material fact and accordingly have submitted only statements of undisputed facts in support of their respective motions.
Ameron has, however, submitted Objections to Statements made in Plaintiffs' Statement of Undisputed Facts.
The Authority is the entity responsible for the bridge. Its Capital Project Manager is in charge of maintenance projects for the bridge. Elwood Dep. at 11-16. Clifford Elwood had been hired by the Authority December 1991 to replace Charles Walters as its Capitol Project Manager after "shadowing" him to learn the position because Walters was going to retire in a year. Id. at 10-11, 14. In 1992 the Authority decided to investigate a new procedure for painting the bridge and for complying with new laws and regulations regarding lead abatement. Id. at 23. They decided to use a coating management system, but had not decided on a specific company therefor. Id. at 48-49.
The position had been entitled "General Superintendent."
Robert B. Williams is the sole shareholder, officer and director of Williams Corp. which, from 1983 to 1994, had been known as Caton-Hendler Paint Company, Inc. Williams Aff. ¶ 1. Williams Corp. operated a retail paint and supply business and a related industrial/commercial paint wholesale business. Id. at ¶ 4. Williams Corp. was the exclusive distributor of the products of Brunning Paint Company which had become a distributor of Ameron's products, with the result that Williams Corp. was a distributor for Ameron's products in Western New York. Id. at ¶¶ 7-8. While Williams Corp. did not have a written contract with Ameron, its status as an Ameron distributor is memorialized in an undated letter from L. E. Marquez, Ameron's Distributor Sales Manager. Atty. Henry Aff. Ex. E (Marquez Letter). Williams Corp. sold paint and other coating products to the Authority. Williams Aff. ¶ 9. Through the sale of products to the Authority, Williams Corp. became familiar with the Authority's coating needs and developed a relationship with Walters and Elwood, who successively were responsible for the bridge's maintenance. Id. at ¶¶ 11-12. The Authority usually re-coated a portion of the bridge each year and performed general maintenance and remedial work using paint and coating products purchased from various local companies, including Brunning's and Ameron's coating products purchased from and through Williams Corp. Elwood Dep. at 59-60; Williams Aff. ¶¶ 14-15. Williams Corp. received a commission from either Brunning or Ameron, respectively, based on its sale of either's products to the Authority. Williams Aff. ¶ 15. The Authority ceased purchasing paint and coating products from Williams Corp. and other local companies upon its decision — as noted hereinbelow — to switch to a coating management system. Elwood Dep. at 59-60; Williams Dep. at 42.
In 1994 Mr. Williams sold Caton-Hendler Paint Company, although he specifically retained his rights in and to the Peace Bridge contract. Williams Dep. at 14.
In late 1991 or early 1992 Williams learned, when his advice had been sought as to the available methods, that the Authority was considering re-coating the entire bridge. He recommended Ameron's CMS with which he had become familiar based upon promotional materials he had received from Ameron as a distributor. Williams Aff. at ¶¶ 16-19. The CMS program offers a customer a single-source coating service for major projects whereby Ameron provides full-time supervision of any such project, prepares the surface, provides the materials and applies them. Simmons Aff. ¶ 3. Prior to his discussions with Williams, neither Elwood nor the Authority had been aware of such CMS and had not personally dealt with any Ameron representative, although Elwood had heard of Ameron's products due to its involvement in the construction industry wherein Ameron specializes in concrete and piping in addition to coatings. Elwood Dep. at 24-27, 45. Williams contacted Peter R. Badger, the President of West Empire which was Ameron's manufacturer's representative ("mfr's rep") for Western New York, to inform him that the Authority was considering stripping the lead paint from and re-coating the bridge and to arrange a meeting with Ameron's representatives. Williams Aff. ¶ 20; Badger Aff. ¶ 4,7. Williams knew Badger because, as a distributor of Ameron products, he had been a customer of West Empire. Badger Dep. at 25.
A company's mfr's rep is an independent sales entity and bears all of its own expenses in return for a commission on products sold within its territory. Badger Dep. at 11-12. West Empire so represents several companies. Id. at 12. From April 1991 — when it and Ameron entered into a Manufacturer's Representative Agreement ("MRA") — until December 1992, West Empire was Ameron's sole mfr's rep in Western New York. Badger Aff. ¶ 3; Ex. A in Supp. of Pls.' Mot. for Summ. Jdgmt. (MRA ¶ 8). By the MRA, West Empire was given the authority and privilege to sell products for the account of Ameron and to provide service in connection therewith, although West Empire had no right, authority or power to enter into contracts or make commitments or incur liability of any kind in the name of or on behalf of Ameron or to bind Ameron in any respect whatsoever. The pertinent language of the MRA governing West Empire's compensation by Ameron stated:
"*** Ameron shall pay Representative, as Representative's sole compensation hereunder, the commission shown on Representative's Commission Schedule on all sales of the Products delivered to customers within the Territory. Representative shall be entitled to commissions only out of funds actually received by Ameron in payment for the Products sold pursuant to this Agreement in amounts proportionate to the applicable rates set forth in the Schedule. ***" MRA ¶ 12.
Badger states that his commissions for the sale of Ameron products ranged from 6% to 30% depending on the product and the price. Badger Supp. Aff. ¶ 3.
James B. Simmons is Ameron's CMS Manager and National Engineering Sales Manager. Simmons Dep. at 10. He is in charge of CMS. Id. at 12. On December 6, 1991 Simmons sent a memorandum to Ameron's mfr's reps regarding incentives under CMS. Id. at 37-38. The purpose of such was to encourage the mfr's reps to sell and promote CMS in 1992. Id. at 48-49. The incentive under CMS is in lieu of the standard commission for products sold because there is no specific product sale in a CMS arrangement. Id. at 88-90. As a mfr's rep, Badger would have received a copy of such memorandum. Simmons Dep. at 37-38. Badger states that he first learned about CMS from this memorandum. Badger Dep. at 64. The memorandum states:
"While conducting a year end analysis for the CMS group I stumbled upon what must be the best (unintentionally) kept secret of 1991. Larry Hurst, the Senior Projects Estimator for CMS, conducted a 'what if' examination of the CMS incentive plan. He compared the standard CMS project incentive (2% of the total contract value) to commissions that would have been earned by an 8% rate paid on products only. Data averaged from 20 projects bid by CMS in 1991 indicated the standard CMS incentive would produce over 46% more gain than the commission on products only! This can vary from project to project depending on the ratio of labor and equipment to material but in the vast majority of instances the CMS incentive produced significantly more revenue! CMS has had an excellent FY 1991 and expects a better 1992. Take this opportunity to participate and enhance your profitability in the new year!" Ex. C in Supp. of Pls.' Mot. for Summ. Jdgmt. (Simmons Dec. 6, 1991 Memo).
Badger states that, pursuant to this memorandum, he believed that the standard commission for products sold under CMS was 8% and that the 2% incentive was also available but in lieu of the 8% commission. Badger Sup. Aff. ¶ 4-5. The information contained in this memorandum was obtained from the 1991 CMS Incentive Program. Simmons Dep. at 43. Such states in pertinent part that mfr's reps
"may earn 2.0% of the Contract Value of a Contract Services Project which is brought to the Contract Services Group and is won by the Group. The 2% will be paid 15 days after the end of the month that the Customer is actually billed. The project must be unknown to the Contract Services Group and some limited involvement may be required by the sales force. The Contract Services Manager will determine if a representative is qualified for the incentive and instruct the Controller to set up for payment." Ex. O in Supp. of Pls.' Mot. for Summ. Jdgmt. (1992 CMS Incentive Program at 1).
This information is taken from the 1992 CMS Incentive Program because the 1991 CMS Incentive Program was not provided; however, the 1992 CMS Incentive Program states that, other than a provision regarding flooring, the "rest of last year's [CMS Incentive Program] remains identical to the prior year's Plan." Ex. O in Supp. of Pls.' Mot. for Summ. Jdgmt. (1992 CMS Incentive Program at 1).
A Distributor may "earn 2.0% under the same program as mfr's rep. If a Distributor receives credit, then the sales rep or mfr's rep will receive 0.5% and the sales manager will receive 0.5%. If there is no sales rep or mfr's rep, the sales manager will still be limited to the 0.5% payout." Ibid. The 1991 CMS Incentive Program is limited by a clause stating that
"[p]articipants must be representatives of Ameron at the time the payment is due. No payment will be made to employees who are terminated, or who voluntarily leave the Company prior to the payout date. As with all Ameron Incentive Plans, Management reserves the authority to adjust an award calculation to reflect windfalls, anomalies within the market, or as a judgment relative to an individual's overall performance, not simply sales performance." Id. at 2.
Simmons does not know whether the 1991 CMS Incentive Program was ever distributed to mfr's reps — Simmons Dep. at 85 — and Badger states that he was not aware of the existence of the 1991 CMS Incentive Program or any terms thereof, beyond what was referenced in Simmons' memorandum and that he first learned of its existence through discovery in this action. Badger Aff. ¶ 23.
Elwood was introduced to Badger by Williams. Elwood Dep. at 28; Badger Dep. at 26. Badger told Elwood that Ameron's CMS would meet the Authority's needs. Elwood Dep. at 28. Williams and Badger first met with Elwood and Walters at the bridge on May 18, 1992. Id. at 28-29; Badger Dep. at 26. During this meeting Badger and Williams explained Ameron's CMS to Elwood and Walters. Badger Dep. at 28. Badger and Williams met again with Elwood and Walters May 28, 1992 and Badger gave them a copy of Ameron's CMS brochure. Id. at 33-34. After meeting with the Authority, Badger contacted Ameron and spoke to Thomas Dickerson (Ameron's Northeastern regional manager), James Dworchak (an employee of Ameron's mfr's rep. Induso) and Ed Jarrett (an Ameron sales representative) regarding the bridge project. Id. at 34-37; Badger Aff. ¶ 11. Badger first spoke to Dickerson about the December 6, 1991 memorandum and the CMS program in relation to the project after the May 18, 1992 meeting. Badger Dep. at 28-30, 35-36. Dickerson did not tell him anything other than what was in the memorandum, except that Badger could make more under it than through a commission for the direct sale of the products; however, Badger was already familiar with the CMS based upon a brochure regarding such published by Ameron, which brochure he had ordered after receiving the memorandum. Id. at 30-33, 70-72. This brochure addresses issues for the prospective customer; it does not address the duties of or incentives to mfr's reps. Henry Aff. Ex. N (Ameron CMS brochure). Dickerson neither told Badger that the incentive program changed on a yearly basis nor explained the requirements to receive the 2% commission. Badger Dep. at 72. Badger did not request a copy of the CMS Incentive or inquire about the requirements to receive the 2% commission, because he thought that he understood the terms of the CMS Incentive Program based on the December 6, 1991 memorandum. Id. at 72-73. However, Badger also states that this memorandum only "briefly outlined the program." Id. at 28. Badger then spoke to Dworchak about the instant project and another bridge project on which Ameron was working. Id. at 36-37. Badger next spoke to Jarrett. Id. at 35-36. At Jarrett's request, Badger sent him a memorandum regarding Williams' and his discussions with Elwood and Walters about the bridge project. Badger Dep. at 37-38; Ex. B in Supp. of Pls.' Mot. for Summ. Jdgmt. (Williams Letter of May 21, 1992). When discussing the bridge project, Jarrett told Badger that the project might be suitable for the CMS program. Badger Dep. at 65-66.
Badger first spoke to Simmons sometime between March 28 and June 11, 1992, having been referred to him by Jarrett. Id. at 39. Simmons states that he had already learned of the project and of Badger's involvement with it through Dworchak who, in turn, had learned of the project from Badger. Simmons Dep. at 17-24, 76; Simmons Aff. ¶ 4. Elwood was first introduced to Simmons by either Badger or Williams. Elwood Dep. at 29, 49. On June 11, 1992 Badger, Williams, Elwood and Walters met with Simmons at the bridge. Badger Dep. at 34-36, 40; Williams Aff. at ¶ 21; Simmons Aff. ¶ 5. Simmons was there at the request of Williams and Badger to give a presentation to Elwood and Walters on the CMS. Williams Dep. at 32-33. Badger had informed Williams of the incentive program after being contacted by Williams and they had, during the June 11, 1992 meeting at the bridge, reached an agreement to split the 2% incentive equally and had informed Simmons thereof. Badger Aff. ¶ 14, 28; Badger Dep. at 66-68. Simmons told Badger that the incentive program under the CMS program was better for mfr's reps than receiving a commission from the direct sale of coating products. Badger Dep. at 68; Williams Aff. ¶ 29. This agreement to split was memorialized in a letter from Badger to Williams dated June 12, 1992, at which time — Badger "believes" — he also gave Williams a copy of the December 6, 1991 memorandum from Simmons. Badger Dep. at 66-68, 75. Badger sent a copy of this letter to Simmons and thereafter spoke to him about the commission-splitting agreement with Williams. Id. at 69-70. Williams states that Badger told him that he had been informed by Simmons that the only way CMS would work would be if they accepted the 2% deal on the entire contract rather than selling the coatings as a distributor. Williams Dep. at 57-58.
Badger had several telephone conversations with representatives of the Authority and Ameron between June and September 1992. Badger Dep. at 41-46. Pursuant to the June 11, 1992 meeting, Ameron prepared and submitted a proposal regarding the bridge project to the Authority September 1, 1992. Simmons Aff. ¶ 6; Henry Aff. Ex. C (Ameron September 1, 1992 Proposal). Such proposal, although very preliminary, addressed the concerns of the Authority and was favorably received. Badger Dep. at 46-47. Badger and Williams did not assist Simmons in preparing the proposal other than through the information they had already supplied to Jarrett and Simmons. Id. at 43-44; Simmons Aff. ¶ 6. The Authority subsequently requested that a small portion of the bridge be coated using Ameron's program to test its suitability for the project. Williams Aff. ¶ 23; Simmons Aff. ¶¶ 6-7. Simmons wrote to Badger September 4, 1992 to inquire whether Badger was able to do any test patches on the bridge using Ameron's products. Henry Aff. Ex. C (Simmons Letter of September 4, 1992). Williams provided Ameron with the formula for the coloration of the coating to be used in the sample test. Williams Dep. at 28-29; Simmons Aff. ¶ 8. On September 8, 1992 Badger spoke with Simmons regarding Ameron's proposal for the project and Simmons instructed Badger to keep in close touch with Walters and to find out how he felt about the proposal. Badger Dep. at 44-46. On September 25, 1992 Badger and Williams met Elwood at the bridge along with John Pfeffer, a technical support representative from Ameron. Id. at 47-48. During this meeting, an agreement was reached that Badger and Pfeffer would conduct the sample test on a ten-foot square panel of the bridge October 5 and 6, 1992. Id. at 50-53. Badger and Pfeffer removed the old coating from such test area and applied a first coat October 5 and then applied a top coat October 6. Id. at 51-53. Williams and Elwood were also present during the sample test and, after a discussion on October 6, 1992, it was agreed that the Authority would evaluate the sample test in the coming Spring, after the coating had been subjected to a Winter. Id. at 51-54. The Authority paid Ameron approximately $15,000 for the sample test. Simmons Dep. at 94. On October 20, 1992 West Empire was terminated as an Ameron mfr's rep effective in sixty days and Badger ceased to be involved in the bridge project other than by speaking with Williams to remain abreast of its progress. Badger Dep. at 54-56; Ex. I in Supp. of Pls.' Mot. for Summ. Jdgmt. (October 20, 1992 Termination Letter). Williams remained an Ameron distributor until early 1994 and continued to have telephone conversations and meetings with the Authority and Ameron relating to the project. Williams Aff. ¶¶ 24-25.
After the successful completion of the sample test, the Authority in December 1992 commissioned Ameron to conduct a feasibility study regarding re-coating the entire bridge. Badger Dep. at 57; Elwood Dep. at 32-33; Simmons Aff. ¶ 8. Badger neither participated in the study nor was contacted by Ameron for additional information or assistance during it. Badger Dep. at 57-59. In the Spring of 1993 Ameron made a formal presentation to the Authority on the feasibility study it had conducted. Simmons Aff. ¶ 9. At the conclusion of this study, the Authority drew up a contract and sought bids for the project from Ameron and two competing companies. Elwood Dep. at 34-35. West Empire was not involved in Ameron's bid submission, did not provide additional information to Ameron regarding its bid and did not perform any work on the bid itself. Badger Dep. at 59-61; Simmons Aff. ¶ 12. All three bids were higher than the Authority had expected and it therefore decided to conduct a pilot project in 1994 to test the re-coating project on two additional areas of the bridge. Elwood Dep. at 35-36; Simmons Aff. ¶ 13. The purpose thereof was to ensure that the work would be satisfactory before committing to do the entire bridge. Elwood Dep. at 53-55; Simmons Aff. ¶ 20. All three companies submitted bids for the pilot project and for the contract and Project No. 93CP-1 totaling $2,534,000 was awarded to Ameron February 14, 1994. Elwood Dep. at 35-36; Simmons Aff. ¶ 13, 15; Ex. M in Supp. of Def.'s Mot. for Summ. Jdgmt. (Project No. 93CP-1 Contract). The total cost of the Ameron products for the pilot project was $37,807. Badger Sup. Aff. Ex. A. Neither Williams Corp. nor West Empire assisted Ameron in the preparation of the bid for the pilot project. Simmons Aff. ¶ 13-14. The Authority's intention was to award Ameron the contract to finish the bridge if its work during the pilot project was satisfactory — Elwood Dep. at 55 — however, Ameron states that it was never advised that successful completion of the pilot program would lead to such a contract. Simmons Dep. at 108-109. Ameron began and completed the pilot project in 1994 whereupon the Authority negotiated with Ameron to complete the remainder of the bridge. Elwood Dep. at 36-37. On April 7, 1995 the Authority awarded Ameron the contract, Project No. 95CP-1, totaling $19,590,324. Id. at 38-39; Simmons Aff. ¶ 22; Ex. P in Supp. of Def.'s Mot. for Summ. Jdgmt. The total value of Ameron products used to finish the project was $323,309. Badger Supp. Aff. Ex. B. Neither Williams nor Badger was involved in the negotiations between the Authority and Ameron for the pilot program or for the completion of the remainder of the bridge. Elwood Dep. at 57-58; Simmons Aff. ¶ 21. Before the Authority had awarded Ameron the contracts for the pilot project and to finish the remainder of the bridge, the 1992 CMS Incentive Program had been replaced by the 1994 version which differed significantly. Ex. O in Supp. of Pls.' Mot. for Summ Jdgmt. The 1994 version stated in relevant part that mfr's reps
"may earn 2.0% of the Contract Value of a Contract Services days after the end of the month that the Customer pays Ameron. The project must be unknown to the Contract Services Group and the Representative must have demonstrated his involvement in securing the project. The Contract Services Manager will determine if a representative is qualified for the incentive and instruct the Controller to set the incentive payout." Ex. O in Supp. of Pls.' Mot. for Summ. Jdgmt. (1994 CMS Incentive Program at 1).
Distributors may "earn 1.5% under the same program as representatives above. If a Distributor receives credit, then the Sales or Manufacturer's Representative will receive 0.5% and the Sales Manager will receive 0.5%. If there is no Sales or Manufacturer's Representative, the Sales Manager will still be limited to the 0.5% payout." Ibid.
"Since CMS projects vary greatly in scope and competitive conditions, management reserves the right, at their sole discretion, to modify the above guidelines to reflect those conditions. The CMS incentive is paid on the base contract only. Additional contracts or 'Extra' work awarded to CMS after the original base contract is signed will not be eligible for an incentive payout. The maximum incentive allowable for any one project is $40,000. The Division President may waive this restriction if warranted due to extraordinary circumstances." Ibid.
"As with all Ameron Incentive Plans, Management reserves the right to adjust an award calculation to reflect windfalls, anomalies within the market, or as a judgment relative to an individual's overall performance, not simply contract awards and performance." Id. at 2.
Simmons states that, as Contract Sales Manager, it is his responsibility to determine if a party is eligible for an incentive payment. Simmons Aff. ¶ 17. If he is informed by the Controller that the mfr's rep is still affiliated with Ameron at the time the contract is signed, he then subjectively determines if the mfr's rep is entitled to an incentive of up to 2%. Simmons Dep. at 57-64; Simmons Aff. ¶ 17. He has discretion to award the mfr's rep less than a 2% incentive based upon the clause in the CMS Incentive Program which states that, "[a]s with all Ameron Incentive Plans, Management reserves the authority to adjust an award calculation to reflect windfalls, anomalies within the market, or as a judgment relative to an individual's overall performance, not simply sales performance." Simmons Dep. at 66-67. He states that West Empire did not receive an incentive under the CMS Incentive Program for the pilot project because it was no longer a mfr's rep at the time the contract was signed and, therefore, was not eligible for an incentive. Id. at 63-68; Simmons Aff. ¶ 18. Ameron paid Williams Corp. an incentive of $13,422.56 purportedly representing 0.5% of the value of the pilot project. Williams Aff. ¶ 35. Simmons states that Williams Corp. was paid such for its "efforts in identifying the project" because it had still been an Ameron distributor at the time that contract was signed. Simmons Dep. at 92-93; Simmons Aff. ¶ 19. He states that the determinative factors were Williams Corp.'s "initial introduction of Ameron to the Peace Bridge, Williams' attendance at meetings in the Summer and Fall of 1992 and his involvement in the test application in October, 1992," along with his "lack of participation in the engineering study, the two bids that were submitted to the Peace Bridge and his lack of participation in [the] negotiation phase of the contract." Simmons Aff. ¶ 19. Further, neither West Empire nor Williams Corp. was paid an incentive for Project No. 95CP-1 to finish the remainder of the bridge because neither of them had then had a relationship with Ameron and, in addition, Williams Corp. would not have been paid an incentive even if it had still been an Ameron distributor because it was entitled to an incentive only on the base contract and Project No. 95CP-1 was an additional contract arising from the base contract. Id. at ¶ 24. The work on the bridge had been separated into two contracts at the request of the Authority. Simmons Dep. at 108-109. Although Ameron had also been compensated approximately $15,000 for the sample test it conducted on the bridge, Simmons believes that no incentive payments were made for such. Id. at 94.
The pilot project was for a total of $2,534,000 and therefore the $13,422.56 incentive payment to Williams is modestly greater than 0.5% of the value of that contract.
Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FRCvP 56(c). The party moving for summary judgment bears the burden of demonstrating the "lack of a genuine, triable issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). A fact is material if it "might affect the outcome of the suit under the governing law" and is genuine if it "is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When a motion for summary judgment has been made, the facts must be viewed in the "light most favorable to the opposing party." Adickes v. Kress Co., 398 U.S. 144, 157 (1970). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment ***." Anderson, at 247-248. "If the [non-moving party's] evidence is merely colorable *** or is not significantly probative ***, summary judgment may be granted." Id. at 249-250. "Summary judgment is proper when reasonable minds could not differ as to the import of the evidence before the court." Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990).
As is evident from the above, it is not the facts of this case which are in dispute but rather whether plaintiffs are thereupon entitled to an incentive or commission. In their complaint, plaintiffs raise causes of action based on both breach of contract and unjust enrichment/quantum meruit. While a plaintiff may plead such alternative causes of action, they are mutually exclusive. City of Yonkers v. Otis Elevator Co., 844 F.2d 42, 48 (2d Cir. 1988). A "quasi-contractual obligation is one imposed by law where there has been no agreement or expression of assent, by word or act, on the part of either party involved." Bradkin v. Leverton, 26 N.Y.2d 192, 196 (1970). Claims for the "non-contractual, equitable remedies" of unjust enrichment/quantum meruit "are inapplicable if there is an enforceable contract governing the subject matter." R. B. Ventures, Ltd. v. Shane, 112 F.3d 54, 60 (2d Cir. 1997). "Not only is the production of a written agreement unnecessary, '[t]he prerequisite for [a quasi contract] is that there be no express agreement dealing with the same subject matter.'" Tower Inter., Inc. v. Caledonian Airways, Ltd., 969 F. Supp. 135, 138 (E.D.N.Y. 1997) (quoting J. J. Studley, Inc. v. New York News, Inc., 70 N.Y.2d 628, 629 (1987)). "When no agreement, express or implied, governs the parties' behavior, a plaintiff may recover in quasi-contract against a defendant who 'received a benefit from the plaintiff's services under circumstances which, in justice, preclude him from denying an obligation to pay for them.'" New Spectrum Realty Services, Inc. v. Nature Co., 42 F.3d 773, 777 (2d Cir. 1994). Under the statute of frauds an agreement to pay a finder's or broker's fee must be in writing and this requirement may not be overcome through an action for unjust enrichment/quantum meruit. Bradkin, at 198-199; N.Y. Gen. Oblig. Law § 5-701(a)(10); Ellis v. Provident Life Accident Ins. Co., 3 F. Supp.2d 399, 412 (S.D.N.Y. 1998). "'[C]ontracts required to be evidenced by writing include a contract or agreement for the compensation of a business broker for acting as a "finder", "originator" or "introducer," or for assisting in the negotiation or consummation of the transaction, and that the requirement cannot be avoided by an action for compensation in quantum meruit.'" Minichiello v. Royal Business Funds Corp., 18 N.Y.2d 521, 525 (1966). The statute of frauds applies to claims for commissions under quantum meruit to "protect businessmen from a claim for a finder's fee not supported by written evidence." Seven Star Shoe Co. v. Strictly Goodies, Inc., 628 F. Supp. 1237, 1240 (S.D.N.Y. 1986) (citing Klein v. Smigel, 44 A.D.2d 248 (1st Dep't 1974, aff'd 36 N.Y.2d 809 (1975)). It is undisputed that there were contracts between the parties which governed their relationship in general — e.g., the MRA — and the payment of an incentive in particular — viz., the CMS Incentive — Program/Simmons's December 6, 1991 memorandum. Def.'s Statement of Undisputed Facts ¶¶ 7, 16; Pls.' Statement of Undisputed Facts ¶¶ 16, 17. Accordingly, summary judgment will be granted in favor of defendant, dismissing plaintiffs' second and third causes of action for quantum meruit/unjust enrichment respectively because both parties concede that the payment of an incentive or commission is governed by written contracts and because, in the absence of such a written contract, the plaintiffs' claims would be barred by the statute of frauds. This Court will therefore proceed to determine whether either party is entitled to summary judgment based upon the plaintiffs' breach of contract claim.
Quoting 1964 N.Y. Legis. Doc., No. 65(F).
Whether plaintiffs — or either of them — satisfied their obligations to earn an incentive "calls for an interpretation of the contract and constitutes a question of law." Kayfield Construction Corp. v. United States, 278 F.2d 217, 218 (2d Cir. 1960). "In determining a motion for summary judgment involving the construction of contractual language, a court should accord that language its plain meaning giving due consideration to 'the surrounding circumstances [and] apparent purpose which the parties sought to accomplish.'" Cable Science, at 151(quoting Atwater Co. v. Panama R.R. Co., 246 N.Y. 519, 524 (1927)). Under New York law, "whether a contract is ambiguous is a matter of law for the court to decide ***." Readco, Inc. v. Marine Midland Bank, 81 F.3d 295, 299 (2d Cir. 1996).
"A term is ambiguous when it is capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business. Conversely, contract language is not ambiguous if it has a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion." Curry Road Ltd. v. K Mart Corp., 893 F.2d 509, 511 (2d Cir. 1990).
Internal citations and quotation marks omitted.
"A contract is ambiguous where reasonable minds could differ on what a term means, but no ambiguity exists where the alternative construction would be unreasonable." Readco, at 299. "Where there are alternative, reasonable constructions of a contract, i.e., the contract is ambiguous, the issue 'should be submitted to the trier of fact.'" K. Bell Associates, Inc. v. Lloyd's Underwriters, 97 F.3d 632, 637 (2d Cir. 1996) (quoting Consarc Corp. v. Marine Midland Bank, 996 F.2d 568, 573 (2d Cir. 1993)). However, for a contract to be truly ambiguous, both interpretations must be reasonable and "where consideration of the contract as a whole will remove the ambiguity created by a particular clause, there is no ambiguity." Readco, at 300. The "objective of contract interpretation is to give effect to the expressed intentions of the parties." Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir. 1985). An "interpretation that gives a reasonable and effective meaning to all the terms of a contract is generally preferred to one that leaves a part unreasonable or of no effect." Ibid. However, construction of a contractual clause which would produce an unreasonable result by placing one party at the mercy of the other is against the general policy of the law. Mandelblatt v. Devon Stores, Inc., 132 A.D.2d 162, 167 (1st Dep't 1987). If the contract is "capable of only one reasonable interpretation, i.e., is unambiguous," it must be interpreted as such. K. Bell, at 637.
Internal citations omitted.
"Language whose meaning is otherwise plain is not ambiguous merely because the parties urge different interpretations during the litigation. *** The court should not find the language ambiguous on the basis of the interpretation urged by one party, where that interpretation would 'strain the contract language beyond its reasonable and ordinary meaning.'" Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990).
Quoting Bethlem Steel Co. v. Turner Construction Co., 2 N.Y.2d 456, 459 (1957).
Even when the meaning of a contract is ambiguous, it is still determined by the court "if there is no extrinsic evidence as to the agreement's meaning ***." Revson v. Cinque Cinque, P.C., 221 F.3d 59, 66 (2d Cir. 2000). When the contract and the inferences to be drawn therefrom are unambiguous, the court construes the contract as a matter of law and should grant summary judgment accordingly. Cable Science, at 151. With the above principles in mind, this Court addresses the plaintiffs' first cause of action — i.e., breach of contract.
Plaintiffs allege that their efforts in introducing Ameron to the Authority led to the Authority's award to Ameron of the contract to strip the lead paint from and re-coat the bridge and that Ameron breached its obligation to pay them a 2% incentive on the total contract value under the CMS Incentive Program or, alternatively, an 8% commission on the products used for the project under the MRA. Ameron states that it did not breach any agreement with the plaintiffs and has moved for summary judgment dismissing this claim on four grounds — viz., (1) that plaintiffs were not the procuring cause of Ameron's contract with the Authority, (2) that plaintiffs are bound by the restrictions in the 1994 CMS Incentive Program, (3) that it has discretion regarding whether to award an incentive and (4) that it has discretion whether to award a commission for the sale of products to a reserved account. Plaintiffs counter that they are entitled to summary judgment on this claim because they were the procuring cause of Ameron's contract with the Authority and are not bound by the restrictions in either version of the CMS Incentive Programs.
Both parties seek summary judgment on whether the plaintiffs were the procuring cause of Ameron's contract with the Authority. Ameron argues that plaintiffs were not such because their involvement with this project ended in December 1992 when it terminated West Empire's MRA. Def.'s Mem. of Law in Supp. of Mot. for Summ. Jdgmt. at 8. Plaintiffs counter by stating that, as a mfr's rep, West Empire's duty was "to introduce Ameron's products and services to potential clients," not to negotiate contracts for Ameron, and, accordingly, that they had fulfilled their responsibility and earned the 2% commission before West Empire had been terminated by Ameron as a mfr's rep in December 1992. Badger Aff. ¶¶ 24-25. However, before determining whether plaintiffs were the procuring cause of Ameron's contract for the project, it must be determined which, if either, version of the CMS Incentive Program — the 1992 version or the 1994 version — applies to the award of an incentive.
Ameron states that any award of an incentive to plaintiffs is governed by the 1994 CMS Incentive Program because such was in effect at the time it was awarded the contract for the project. Def.'s Mem. of Law in Supp. of Mot. for Summ. Jdgmt. at 3. Such limits Ameron's liability to pay an incentive in four additional ways not present in the 1992 CMS Incentive Program — viz., (1) by requiring the representative to demonstrate his involvement in securing the project, (2) by giving Ameron the sole discretion to modify the guidelines for the incentive payments, (3) by limiting the incentive payment to the base contract only and (4) by imposing a cap of $40,000 on the incentive. Plaintiffs argue that they are not bound by the limitations in either version of the CMS Incentive Program because they did not have notice of such but rather were acting pursuant to Simmons's December 7, 1991 memorandum. Pls.' Mem. of Law in Supp. of Mot. for Summ. Jdgmt. at 10-11.
Ameron's reliance on the 1994 CMS Incentive Program is misplaced. This version did not come into effect until after the plaintiffs' relationship with Ameron had ceased and, because it never was in effect during the parties' relationship, Ameron cannot rely on it to limit its liability to pay the plaintiffs an incentive or commission allegedly already earned. Accordingly, the 1994 CMS Incentive Program is irrelevant and any obligation by Ameron to pay an incentive or commission to plaintiffs will be determined based upon the agreements in effect between the parties during their relationship. However, it remains to be determined whether plaintiffs are bound by the limitations in the 1992 CMS Incentive Program.
Badger states that he never received a copy of the 1992 CMS Incentive Program, that he was never told about it by anyone at Ameron and that he first learned that this document existed through discovery in this case. Badger Dep. at 72-74; Badger Aff. ¶ 23. Ameron has not provided any evidence in contradiction to this assertion and, indeed, Simmons states that he does not even know that Ameron ever distributed this document to its mfr's reps. Simmons Dep. at 85. However, due to the references in Simmons's December 6, 1991 memo to the "CMS incentive plan," the fact that the memo does not contain the material terms of the plan and that Badger admits that this memo only "briefly outlined the program" — Badger Dep. at 28 ___, this Court holds that plaintiffs had a duty to obtain a copy of the 1992 CMS Incentive Program or to inquire about the requirements to receive an incentive rather than to rely on the mere mention of the existence and benefits of the incentive plan in the December 6, 1991 memorandum. Therefore, whether plaintiffs were the procuring cause of Ameron's contract for the project will be determined according to the criteria of the 1992 CMS Incentive Program.
Pursuant to such, there are four criteria that must be satisfied in order for plaintiffs to earn an incentive — viz., (1) plaintiffs must have brought a project suitable for Ameron's CMS program to the attention of Ameron's Contract Services Group, (2) such project must have earlier been unknown to the Contract Services Group, (3) plaintiffs must have had a degree of involvement in the project as thereafter requested by Ameron and (4) Ameron must have been awarded the contract for the project. Upon the satisfaction of these four criteria, plaintiffs would be entitled to an incentive. Plaintiffs claim that all four conditions were met, that they have satisfied their obligations and, accordingly, that they were the procuring cause of Ameron's award of the bridge contract and are entitled to an incentive.
It appears that the parties have relied so heavily on the not particularly applicable law regarding the issue of when a party is the procuring cause of a contract due to a clause in the Complaint stating that the "efforts of Mr. Williams and Mr. Badger were the 'procuring cause' of the award of the Peace Bridge Project to Ameron." Amend. Compl. ¶ 13.
Under New York law a party is the procuring cause of a contract when he is employed to make a sale and makes such sale "either directly, or as its efficient and producing cause." Sibbald v. The Bethlehem Iron Company, 83 N.Y. 378, 380 (1881). To be the procuring cause, "there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consumption" — although the broker need not be the "dominant force in the conduct of the ensuing negotiations or in the completion of the sale." Greene v. Hellman, 51 N.Y.2d 197, 206 (1980). Whether a party is a procuring cause of a contract generally arises as an issue where such party is a broker — i.e., "an agent employed to make bargains and contracts between other persons in matters of trade, commerce or navigation for a compensation commonly called brokerage." Sibbald, at 381 (quoting Story on Agency, § 28, p. 25). The "duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not accrue." Id. at 382; New Spectrum, at 776 (broker was procuring cause and earned commission where terms of lease reflected the location, duration and rent that broker had communicated). "[U]ntil the broker has faithfully discharged the obligation assumed in the contract with his principal, he is not entitled to his agreed commission, and that obligation is fulfilled only when he produces a party ready to make the purchase at a satisfactory price." Sibbald, at 382. A broker earns his commission when he produces to his principal a party with whom the principal is satisfied and is ready to make a purchase at a satisfactory price; the broker is not however required to be "a present and an active participator in the agreement of buyer and seller when that agreement is actually concluded [and] may just as effectually produce and create the agreement, though absent when it is completed and taking no part in the arrangement of its final details," and, when the broker does such, he is considered to have been the procuring cause of the contract and is entitled to a commission. Ibid. If a broker does not participate in the negotiations, he must at least show that he created an amicable atmosphere in which negotiations went forward or that he generated a chain of circumstances which proximately led to the sale. Generally, whether a broker is the procuring cause of a contract, is a question of fact.
The MRA states that it is governed by California law. However this choice-of-law provision is not present in any of their other agreements, including the 1992 CMS Incentive Program which is the agreement most applicable to this action and both parties have relied exclusively on New York law in their briefs; accordingly they have waived any issue regarding the California choice-of-law clause in the MRA and New York law is applied by this Court.
Ameron cites Greene v. Hellman, 51 N.Y.2d 197 (1980), for the proposition that plaintiffs were not the procuring cause of its contract for the bridge project because "[i]t has long been recognized that a broker ***, does not automatically without more make out a case for commissions simply because he initially called the property to the attention of the ultimate purchaser." Def.'s Mem. of Law in Supp. of Mot. for Summ. Jdgmt. at 9 (quoting Greene at 205). However, in Greene the plaintiff who claimed a broker's commission had not been employed as a broker by his alleged principal and, not only were the would-be-broker's negotiations not successful, they had not been authorized; in accordance with the factual background of this case and after re-inserting the portion of the quotation that Ameron omitted, the sentence reads that "[i]t has long been recognized that a broker, save when he enjoys a special agreement to the contrary, does not automatically and without more make out a case for commissions simply because he initially called the property to the attention of the ultimate purchaser." Greene, at 205 (emphasis added).
Plaintiffs did in fact have a special agreement with Ameron relating to the payment of an incentive or commission. Furthermore, they are not properly considered brokers, in that the requirement for them to earn an incentive under the 1992 CMS Incentive Program was to bring to the Contract Services Group an unknown, suitable project and to assist Ameron in securing it — if requested. None of the agreements between the parties cloaked plaintiffs with the authority to negotiate a contract with the Authority on Ameron's behalf. Indeed, the MRA specifically stated that West Empire had "no right, authority or power to enter into contracts or commitments or incur liability of any kind in the name of or on behalf of Ameron or to bind Ameron in any respect whatsoever." Ex. A in Supp. of Pls.' Mot. for Summ. Jdgmt. Defendant also recognizes that "the relationship between Ameron and R. B. Williams and/or West Empire is not strictly considered a broker-like agreement (in that the plaintiffs were not 'agents' of Ameron employed to solicit business) ***." Mem. of Law in Supp. of Def.'s Mot. for Summ. Jdgmt. at 15. In further support of the conclusion that plaintiffs would earn an incentive by bringing a suitable, unknown project to Ameron's attention and helping to secure it rather than by negotiating the contract on Ameron's behalf, Ameron awarded Williams Corp. an incentive for its effort in identifying the pilot project even though it specifically noted that Williams Corp. had played no part in Ameron's negotiations with the Authority. Accordingly, the incentive under the 1992 CMS Incentive Program is more properly characterized as a finder's fee than as a brokerage fee. A finder is differentiated from a broker based on the "quantity of services provided by each. It is possible for a finder to accomplish his service by making only two phone calls and, if parties later conclude a deal, he is entitled to his commission." Minichiello v. Royal Business Funds Corp., 18 N.Y.2d 521, 527 (1966).
It should be noted that N.Y. Gen. Oblig. Law § 5-701(a)(10) (Agreements required to be in writing) states that "'[n]egotiating' includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction."
The 1992 CMS Incentive Program states that a mfr's rep "may earn 2.0% of the Contract Value of a Contract Services Project which is brought to the Contract Services Group and is won by the Group." Furthermore, "the project must be unknown to the Contract Services Group and some limited involvement may be required by the sales force." In accordance with this language, Ameron states that the goal of the CMS Incentive Program was to "provide a bonus to representatives who brought projects to the attention of the CMS group and assisted it in securing the project." Sup. Mem. of Law in Supp. of Def.'s Mot. for Summ. Jdgmt. at 4. As the facts above indicate, plaintiffs brought the bridge project to the attention of Ameron's CMS Group — the Authority had not been familiar with Ameron's CMS program until Badger and Williams had introduced it to Elwood, Elwood Dep. at 24-27, 45 — and Badger first introduced Ameron to the Authority. Simmons Dep. at 17-24. Further, plaintiffs had some involvement in assisting Ameron to secure this project because, as stated by Simmons, plaintiffs, inter alia, participated in the June 11, 1992 meeting at the Peace Bridge — Simmons Aff. ¶ ~5 — and supplied Ameron with the formula for the bridge's color. Simmons Aff. ¶ 8. Notably, the record is devoid of any indication that Ameron was refused any assistance it requested from plaintiffs; to the contrary, the record indicates that plaintiffs did everything Ameron asked of them. Finally, it is uncontested that Ameron was awarded the contract for the bridge project.
Accordingly, it is established that (1) plaintiffs brought the bridge project to the attention of Ameron's Contract Services Group, (2) the bridge project had been theretofore unknown to Ameron, (3) plaintiffs had some limited involvement in Ameron's acquisition of the bridge project and (4) Ameron was awarded the contract for the bridge project. Therefore plaintiffs have satisfied the requirements under the 1992 CMS Incentive Program to receive an incentive. This conclusion is given further support by the fact that Ameron paid Williams Corp. an incentive for its efforts (which were identical to West Empire's) in identifying the bridge project and stated that West Empire would also have been given an incentive if it had still been a mfr's rep at the time the Authority awarded Ameron the contract for the project. Simmons Dep. at 64-67. Ameron cannot at once award Williams Corp. an incentive based upon its identification of the project and simultaneously state that West Empire would also have been entitled to an incentive had it still been a mfr's rep but then argue that plaintiffs were not the procuring cause (under the requirements of the 1992 CMS Incentive Program) of its being awarded the contract. Accordingly, plaintiffs will be granted summary judgment that they were the procuring cause of Ameron's contract for the Peace Bridge project.
Ameron has also argued that it has discretion regarding whether or not to award an incentive based on the clause in the 1992 CMS Incentive Program which states that, "[a]s with all Ameron Incentive Plans, Management reserves the authority to adjust an award calculation to reflect windfalls, anomalies within the market, or as a judgment relative to an individual's overall performance, not simply sales performance." Simmons Dep. at 66-67; Mem. of Law in Supp. of Def.'s Mot. for Summ. Jdgmt. at 12. Ameron has not submitted any evidence however, that the incentive would result in a windfall to plaintiffs, that there were anomalies within the market or that plaintiffs' overall performance as opposed to their sales performance was anything less than satisfactory. Indeed, the only reason Simmons states that Williams Corp.'s incentive payment was only 0.5% for the pilot project was that it did not participate in the engineering study, the preparation of the two bids that were submitted to the Authority and the actual negotiation of the contract. Simmons Aff. ¶ 19. There is nothing in the record however to indicate that Ameron ever requested and was refused Williams Corp.'s assistance in these areas and Ameron had already terminated its MRA before such events occurred. Accordingly the proper incentive under the 1992 CMS Incentive Program is 2% of the contract value of the Contract Services Project.
Ameron also argues that the incentive was only for the pilot project. While Ameron relies on the inapplicable 1994 CMS Incentive Program for the proposition that the pilot project was the base contract and the completion of the remainder of the bridge was an additional contract not subject to the incentive, it apparently argues that there were two separate projects. This contention is incorrect. The Authority planned to re-coat the entire bridge and that was the project that plaintiffs brought to Ameron. There were not two separate projects; the Authority broke the single project up into two contracts because the bids submitted were higher than it had anticipated and it accordingly wished to make sure that Ameron would satisfactorily perform the project before it committed itself to having Ameron complete the entire bridge. The intention of the Authority was to award Ameron the contract to finish re-coating the remainder of the bridge if its work was satisfactory. Such prefatory decision by the Authority before committing itself to have the entire bridge re-coated by Ameron does not in and of itself bifurcate the single project. Accordingly, the pilot project and the ensuing completion are one project for purposes of the incentive program.
Ameron's final contention is that it does not have to pay an incentive to the plaintiffs based upon the clause in the 1992 CMS Incentive Program stating that "[p]articipants must be representatives of Ameron at the time the payment is due. No payment will be made to employees who are terminated, or who voluntarily leave the Company prior to the payout date." This clause appears to be the primary — if not the sole — reason that Ameron did not pay Williams Corp. an incentive on the contract price to finish re-coating the bridge or any incentive whatsoever to West Empire. In addressing this issue it is appropriate to consider plaintiffs' fourth cause of action for breach of the implied covenant of good faith and fair dealing relating to Ameron's termination of its MRA. This is not a cause of action in and of itself but rather a theory of recovery under the breach of contract claim. Plaintiffs state that
"Ameron terminated its Exclusive Manufacturer's Representative Agreement with West Empire in October, 1992, in bad faith and in an effort to renege on its contractual obligation to pay the incentive or commissions earned by Mr. Williams and Mr. Badger on the Peace Bridge project. Ameron's termination of said Agreement was willful and malicious. By such conduct, Ameron breached its duty at law to deal with Mr. Williams and Mr. Badger fairly and in good faith with respect to their efforts on behalf of Ameron in connection with the Peace Bridge Project." Am. Compl. ¶¶ 39-41.
The MRA simply stated that "[t]his Agreement shall continue in effect until terminated *** [by] either party on sixty (60) days' notice in writing given by registered mail or by personal delivery to the other party ***." Henry Aff. Ex. K (MRA ¶ 16(a)). Under New York law there is an implied covenant of good faith and fair dealing in every contract — Travellers Intern., A.G. v. Trans World Airlines, 41 F.3d 1570, 1575 (2d Cir. 1994) — "unless there is an inconsistency between the covenant and the other terms of the contractual relationship." Readco, at 300.
"The law contemplates fair dealing and not its opposite. Persons invoking the aid of contracts are under implied obligation to exercise good faith not to frustrate the contracts into which they have entered. The rule is grounded in many cases that in every contract there is an implied undertaking on the part of each party that he will not intentionally and purposely do anything to prevent the other party from carrying out the agreement on his part." Grad v. Roberts, 14 N.Y.2d 70, 75 (1964).
When a contract contains a clause allowing it to be terminated upon written notice, such unlimited power of termination is not curtailed by a requirement that it be done good faith. Joseph Victori Wines v. Vina Santa Carolina S.A., 933 F. Supp. 347, 353 (S.D.N.Y. 1996); Alco Standard Corp. v. Schmid Bros., Inc., 647 F. Supp. 4, 7 (S.D.N Y 1986). Accordingly, Ameron did not have to have acted in good faith in terminating West Empire as a mfr's rep. However, plaintiffs do not contest Ameron's termination of West Empire's MRA itself; rather they contest Ameron's not paying them, based on the termination of that agreement, an incentive.
Good faith is required when a principal terminates a broker with the result that the broker is thereby deprived of his commission. Sibbald, at 384. Even where the right of a principal to terminate the authority of his broker is absolute and unrestricted, he may not do so in bad faith as a mere excuse not to pay the commission, such as by terminating the broker in the "midst of negotiations instituted by the broker, and which were plainly and evidently approaching success" in order to conclude the contract without the broker's aid and thereby avoid paying the broker the commission which was about to be earned. Ibid. Under the implied covenant of good faith "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract ***." Kirke La Shelle Co. v. Armstrong Co., 263 N.Y. 79, 87 (1933). "[W]here a party's acts subsequent to performance of the contract so directly destroy the value of the contract for another party that the acts may be presumed to be contrary to the intentions of the parties, the implied covenant of good faith may be implicated." M/A-Com Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990). "Thus when the literal meaning of contract language cannot reasonably have reflected the parties' contemplation, the language must be given its reasonable, rather than literal application." Greenwich Village Associates v. Salle, 110 A.D.2d 111, 114 (1st Dep't 1985).
Ameron did not pay plaintiffs an incentive due to its termination of the MRA and based upon the clause in the 1992 CMS Incentive Program stating: "Participants must be Representatives of Ameron at the time the payment is due. No payment will be made to employees who are terminated, or who voluntarily leave the Company prior to the payout date." Ex. 0 in Supp. of Pls.' Mot. for Summ. Jdgmt. The 1992 CMS Incentive Program stated that the "2.0% will be paid 15 days after the end of the month that the Customer is actually billed" Ibid. Preliminarily, the Court notes that the clause stating that "[n]o payment will be made to employees who are terminated, or who voluntary leave the Company prior to the payout date" is inapplicable to West Empire because, pursuant to the MRA, "Representative is not, and shall not under any circumstances be considered to be, an employee of Ameron." Ex. A in Supp. of Pls.' Mot. for Summ. Jdgmt. (MRA). The issue to be resolved is whether the clause stating that "[p]articipants must be Representatives of Ameron at the time the payment is due" — when read in conjunction with the clause stating that the "2.0% [incentive] will be paid 15 days after the end of the month that the Customer is actually billed" — negates the obligation of Ameron to pay plaintiffs an incentive. Ex. O in Supp. of Pls.' Mot. for Summ. Jdgmt. (1992 CMS Incentive Program). The Court holds that it does not. While Ameron is correct that it could terminate West Empire as a mfr's rep and that it need not do so in good faith, doing so does not absolve it of its obligation to pay an earned incentive. Plaintiffs had already done everything required of them to earn the incentive pursuant to the 1992 CMS Incentive Program and, assuming that Ameron was thereafter awarded the contract, they had to wait only until fifteen days after the end of the month in which Ameron billed the Authority to receive their incentive. Under Ameron's interpretation of this clause it "would be free to cause willful injury" to plaintiffs by terminating West Empire's MRA after plaintiffs had fully performed their obligations but before Ameron had received payment from the Authority; such a "construction appears unreasonable and would produce an inequitable result which should not be presumed by the court to be what the parties intended." Mandelblatt, at 167. Reading the parties' agreement as a whole, it is unreasonable to conclude that they intended to enter into an agreement whereby plaintiffs could fully perform all of their requirements to earn an incentive but that defendant could then unilaterally avoid paying such simply by terminating West Empire's MRA before the payment date had arrived. The only reasonable way to construe the above language is to hold that payment was due when plaintiffs had performed their end of the bargain subject to divestiture should Ameron ultimately not be awarded the contract. Reading the 1992 CMS Incentive Program in this manner is the only reasonable way to give full effect to the above clauses without coming to the unreasonable conclusion urged by Ameron that would place plaintiffs at its mercy. Accordingly, this Court holds that payment of the two-percent incentive was due plaintiffs when they had fulfilled their obligations under the 1992 CMS Incentive Program and that this incentive was to be paid to plaintiffs fifteen days after the end of the month in which the Authority was billed. Having ruled that plaintiffs are entitled to summary judgment on their breach of contract claim relating to the payment of a 2% incentive, their alternative claim for an 8% commission for the sale of the Ameron products used in the project need not be addressed.
The contract value of the pilot project, signed February 14, 1994, was $2,534,000, the value of the contract to finish re-coating the bridge, signed April 7, 1995, was $19,590,324; therefore the total contract value of the Peace Bridge project was $22,124,324. Plaintiffs are entitled to an incentive of 2% of the contract value of the project which equates to $442,486.48. The $13,422.56 incentive already received by Williams Corp. must be subtracted from this amount, which reduces it to $429,063.92. Insofar as this breach of contract action is brought pursuant to diversity jurisdiction, the award of prejudgment interest is governed by New York law. Adams v. Linblad Travel, Inc., 730 F.2d 89, 93 (2d Cir. 1984); Terwilliger v. Terwilliger, 206 F.3d 240, 249 (2d Cir. 2000). Under New York law, prejudgment "[i]nterest shall be recovered upon a sum awarded because of a breach of performance of a contract ***." N.Y. C.P.L.R. 5001(a).
"Interest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date." N.Y. C.P.L.R. 5001(b).
Pre-judgment interest is calculated at the rate of nine percent per annum. N.Y. C.P.L.R. 5004. Such interest is not compounded. Long Playing Sessions v. Deluxe Labs, 129 A.D.2d 539, 540 (1st Dep't 1987). Plaintiffs are therefore entitled to pre-judgment interest in the amount of nine percent per annum beginning when their cause of action against defendant for breach of contract accrued. Plaintiffs' causes of action accrued at two separate times when Ameron failed to pay them their incentive as it became due, first in March 15, 1994 — fifteen days after the end of the month in which the contract for the pilot project was signed — and second in May 15, 1995 — fifteen days after the end of the month in which the contract to finish the remainder of the bridge project was signed. As the nine percent pre-judgment interest is awarded per annum under New York law, plaintiffs are entitled to six years' interest on the $37,257.44 incentive still owed for pilot project ($50,680 minus the $13,422.56 incentive already paid to Williams), equaling $20,119.02 and five years' interest on the $391,806.48 incentive for the contract to finish the remainder of the Peace Bridge project equaling $176,312.91 for a total of $196,431.93 in pre-judgment interest. Finally, this Court notes that, while the incentive is awarded to West Empire pursuant to the MRA and the 1992 CMS Incentive Program, this Court is cognizant of the contract between West Empire and Williams Corp. to split this incentive equally.
Accordingly it is hereby ORDERED that defendant's motion for summary judgment dismissing the plaintiffs' second and third causes of action for quantum meruit and unjust enrichment respectively is granted and in all other respects is denied, that the plaintiffs' motion for summary judgment on their breach of contract claim is granted, that Ameron shall pay West Empire an incentive of $625,495.85 and that this case shall be closed in this Court.