Opinion
Civil No. 99-1520 (RHK/JMM)
February 5, 2001
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER FOR JUDGMENT
The above-captioned matter came on for trial before the undersigned on January 3 and 4, 2001. Plaintiff Tile By Design was represented by Karl L. Cambronne, Chestnut Cambronne, P.A., 3700 Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402. Defendant Caesar Ceramics USA, Inc. was represented by Diana Young Morrissey, Faegre Benson LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota 55402-3901. At the conclusion of the trial, the Court rendered its decision, determining that Defendant had breached its contract with the Plaintiff The Court, however, did not determine whether the Palintiff was entitled to damages. The Court directed counsel for Plaintiff to submit proposed Findings of Fact and Conclusions of Law and directed both parties to submit supplemental memoranda on the issue of damages. Following such submissions, the parties made further efforts to settle this dispute, but to no avail.
Based upon all of the evidence presented at trial, and the post-trial submissions of the parties, the Court hereby makes the following:
FINDINGS OF FACT
1. Plaintiff, Tile by Design ("TxD"), is a distributor of tile products, including tile manufactured by Ceramiche Caesar, an Italian company. Ceramiche Caesar sells tile in the United States through its wholly-owned subsidiary, Defendant Caesar Ceramics USA, Inc. ("Caesar").
2. North American Tile and Stone, Inc. ("NAT"), not a party to this action, is also a distributor of tile products, including tile manufactured by Caesar. NAT, headquartered in Houston, Texas, competes with TxD in selling tile to be installed in malls.
3. This action involves the sale of tile for three retail malls: the Park Mall, located in Tucson, Arizona, the Sooner Mall and Quail Springs Mall, located in Oklahoma.
The Registration Process
4. In selling large commercial projects such as malls, Caesar has implemented a program involving "registration." The registration process is designed to allow the distributor who is first to register a project with Caesar the right to sell tile for that project to the exclusion of other Caesar distributors.
5. Caesar's program of registration is designed to accomplish several purposes — allowing registered distributors to exclusively sell a project, awarding distributors for sales efforts in connection with commercial projects like malls, facilitating the timely production and delivery of tile, and avoiding controversy between or among distributors claiming the right to sell Caesar tile for a particular commercial project.
6. Once a distributor is the registered distributor for a particular project, Caesar would give that distributor its full support in purchasing and reselling Ceramiche Caesar tile products for that project. Other distributors are effectively precluded from attempting to sell to the project because of their inability to buy Ceramiche Caesar tile for a project registered to another distributor.
7. A registration is designed to, and does, create a contractual relationship between the distributor and manufacturer wherein the distributor interests a developer or owner in purchasing a particular manufacturer's tile and in return receives the exclusive right to sell tile for that project.
8. The distributor earns a profit from the sale of tile by purchasing tile from the manufacturer at a predetermined price, adding its mark up, and reselling the tile for installation at the commercial project. Registrations are normally written and contain sufficient information to identify the project involved, the specific tile being considered, the approximate quantities and related information.
9. Caesar's registration process was followed with respect to a project at the Lyndale Mall located in Iowa. There, Caesar was the manufacturer of the tile used in the mall and TxD was the registered distributor. Although another Caesar distributor attempted to sell the project after TxD's registration, Caesar refused to allow the other distributor to participate in the sale of tile to the Lyndale Mall and otherwise took steps to preserve TxD's exclusive right to sell tile for the mall.
Park, Quail Springs, and Sooner Malls
10. Beginning in early 1998, both TxD and NAT attempted to sell stone products to the developer of the Park Mall located in Tucson, Arizona. These efforts included meeting and showing samples to the developer and the developer's architects.
11. In July 1998, TxD submitted various non-stone samples, which included Caesar's porcelain products, to the developer and the architects for the Park Mall project. In particular, a Caesar Pietre Celtiche porcelain tile sample book was sent to the developer and architects. (Exhibit 19.)
12. In November 1998, NAT also submitted various porcelain tile samples to the architects for the Park Mall project, including Caesar products.
13. On December 9, 1998, John Penta, the then vice president of marketing for Caesar in the United States, together with another Caesar representative from Italy, met with TxD representatives Dan Emmel and Joan Martin at the TxD headquarters in Plymouth, Minnesota. At that meeting, representatives of TxD informed John Penta that TxD would be registering the three malls involved in this litigation, the Park, Sooner, and Quail Springs malls.
14. John Penta was unaware of the Park, Sooner and Quail Springs malls before December 9, 1998 and expressed his pleasure about the potential sale of Caesar products for the three malls. It was decided by the meeting participants that the oral registration of these three malls would be followed by written registrations These written registrations were sent to Caesar on December 17, 1998. (Exhibit 3.) Upon receipt of the TxD registrations for the three malls, Mr. Penta requested certain additional information. Joan Martin of TxD hand-wrote the additional information on the December 17, 1998 registration and resubmitted it to Mr. Penta.
15. After he was informed by TxD of the three malls on December 9, 1998, Mr. Penta immediately called George Frisbie at NAT and advised him of the imminent registration of the three malls in question. By advising NAT of the imminent registration, Mr. Penta intended to allow and facilitate NAT to be the first to register in writing the malls in question. Mr. Penta purposely did not advise TxD of this communication with NAT.
16. In response to receiving information about the imminent registration of the malls by TxD, NAT, on December 10, 1998, faxed a letter to John Penta purporting to "update" a prior registration of the Park Mall on behalf of NAT. (Exhibit I.) There had in fact been no prior registration of the Park Mall by NAT; accordingly, the use of the term "update" was false and misleading and both NAT and John Penta knew it was false and misleading. The use of the term "update" was intended to secure priority for the registration of the Park Mall under circumstances where priority did not in fact exist. Both John Penta and George Frisbie knew that there had been no prior registration by NAT and the testimony of Mr. Penta and Mr. Frisbie to the contrary is not believable.
17. By letter dated December 23, 1998, (Exhibit 9), Defendant Caesar acknowledged the TxD registration of the two malls located in Oklahoma, Sooner and Quail Springs, but advised TxD that it would not be recognized as the proper registrant of the Park Mall because NAT had sent its "registration" dated December 10, 1998, and that registration, being earlier in time than TxD's, would be recognized.
18. A blind copy of Caesar's letter of December 23, 1998 was sent to George Frisbie at NAT. Upon receipt of the letter from Caesar, George Frisbie called John Penta and told him that NAT, not TxD, should have the Oklahoma malls, Sooner and Quail Springs, in addition to the Park Mall. John Penta informed George Frisbie that he would "switch over" those malls to NAT.
19. Through late December 1998 and January 1999, TxD placed a number of telephone calls to John Penta to discuss the registration issues with respect to the three malls. For the most part, John Penta refused to return telephone calls from TxD concerning the contested registrations.
20. By letter dated February 11, 1999, (Exhibit 18), Caesar informed TxD that it would no longer be recognized as the properly registered distributor for the Oklahoma malls, Sooner and Quail Springs. In so doing, Caesar relied upon an allegation that Joan Martin of TxD had disparaged Caesar products to the architects working on the Park Mall project. The reason given by John Penta was false and a pretext designed to justify the diversion of the Oklahoma malls to NAT and to exclude TxD from being able to sell tile for those projects.
21. Tile for the three projects was sold by NAT. The product sold was Caesar's Pietre Celtiche porcelain tile.
22. TxD was the first distributor to show and promote Caesar's porcelain tile products to the developer and architects for the three malls in question and TxD was, under the registration process established by Caesar, entitled to be designated and recognized as the distributor for these three malls.
23. The above actions of John Penta Caesar's representative in the United States, were calculated and designed to defeat and otherwise not recognize the legitimate registration of TxD for the three malls in question, and were instead designed to divert business to NAT. Mr. Penta intentionally took actions designed to prevent TxD from securing the registration for the three malls.
24. The testimony of John Penta in these proceedings was neither candid nor credible in the following respects: (1) claiming that his call to George Frisbie on December 9, 1998, after being advised of the anticipated registration of the three malls in question, was not for the purpose of encouraging NAT to file a registration ahead of TxD; (b) claiming to be desirous of making an informed decision to acknowledge only the proper registrant for the malls in question; (c) claiming to have fully and impartially investigated the competing claims to registration.
Damages
25. Neither the developer of the malls in question, General Growth, nor the tile installer, Rheinschmidt Tile and Marble, was concerned or cared about which distributor was named the registered supplier of tile.
26. Caesar's Pietre Celtiche was purchased for the three malls in question at a price quoted by NAT.
27. If TxD had been recognized as the registered distributor for the three malls, it would have been able to sell tile for the three malls in question at the price ultimately negotiated by NAT.
28. Tile in the quantities reflected in Exhibit 38 was sold by NAT for the three malls in question at prices (purchased from Caesar and sold to Rheinschimidt) listed on Exhibits 64 and 65.
29. Park Mall Phase II was also specified using Caesar Pietre Celtiche tile and represents an additional 35,000 square feet of tile sold in connection with the three malls.
30. Resolution of cleaning problems which developed after installation was the responsibility of the manufacturer.
31. Delivery problems and related costs encountered by NAT are not problems which necessarily would have affected delivery of tile by TxD.
32. The total net profit lost by TxD as a result of not being able to sell tile for the three malls is 69,830.93.
CONCLUSIONS OF LAW
1. An enforceable contract arose between Plaintiff Tile by Design and Defendant Caesar Ceramics USA, Inc. for Tile by Design to act as the exclusive distributor of Caesar tile for the three malls in question.
2. The contract required Caesar Ceramics USA, Inc. to fully support Tile by Design to the exclusion of other distributors in supplying tile for the three malls in question.
3. Tile by Design validly and timely registered the three malls in question.
4. Caesar Ceramics USA, Inc. breached its contract with Tile by Design beginning on December 9, 1998 by failing to support Tile by Design and taking actions designed to recognize NAT as the registrant.
5. The actions taken by Caesar Ceramics USA, Inc. were intended to preclude Tile by Design from being allowed to sell tile for the three malls in question.
ORDER FOR JUDGMENT
1. Plaintiff Tile by Design shall have judgment against Defendant Caesar Ceramics USA, Inc. in the amount of $69,830.93, together with its costs and disbursements.
2. The counterclaim of Caesar Ceramics USA, Inc. against Tile by Design is DISMISSED WITH PREJUDICE.
At the outset of trial, Caesar Ceramics USA, Inc. withdrew and did not prosecute its counterclaim.
3. LET JUDGMENT BE ENTERED ACCORDINGLY.