Opinion
Case No. 1:99-CV-557.
December 4, 2000.
OPINION
Plaintiff, Phase III Marketing, Inc. ("Phase III"), a Michigan corporation, has sued Defendant, EZ Paintr Company ("EZ Paintr"), a Delaware corporation, alleging that EZ Paintr breached a contract and violated the Michigan Sales Representatives Commissions Act ("SRCA"), M.C.L. § 600.2961, by failing to pay Phase III commissions from the sale of paint applicator products to Meijer, Inc. The Court has jurisdiction pursuant to 28 U.S.C. § 1332 (a)(1). Now before the Court is EZ Paintr's motion for summary judgment. Phase III also requests that the Court enter summary judgment in its favor on the issue of liability.
Facts
EZ Paintr is engaged in the manufacture and sale of paint applicator products. For several years prior to 1990, EZ Paintr sold paint applicator products to Meijer, Inc. ("Meijer"), a Grand Rapids, Michigan-based company that operates approximately 127 retail stores throughout several Midwestern states. In 1990, Meijer's Buyer of Paint and Building Materials, Dwight Shupe ("Shupe"), made a recommendation to Ray Leach ("Leach"), Meijer's vice president of hard lines merchandising, and Harv Koetje ("Koetje"), Meijer's merchandise manager, that Meijer replace EZ Paintr with Adams Brush Manufacturing Co., Inc. ("Adams") as the vendor for paint applicator products. The decision to change to Adams was precipitated by Adams' offer to beat EZ Paintr's prices by a certain percentage. (Shupe Dep. at 29-30, attached to Def.'s Br. Supp.) Based on Adams' offer, Meijer decided to allow EZ Paintr the opportunity to meet Adams' offer for a trial period of six months. (See id. at 30-31.) Shortly thereafter, Shupe, Leach, and Koetje made the offer to EZ Paintr at a hardware show in Chicago, at which both Adams and EZ Paintr were present. (See id.) When EZ Paintr declined the Meijer proposal, Shupe, Leach, and Koetje walked over to Adams' booth and informed Adam Zurawin, the owner of Adams, that Meijer would give its paint applicator business to Adams. (See id. at 31-34.) On August 15, 1991, shortly after Adams obtained the Meijer account, Phase III entered into a written sales representative agreement (the "Agreement") with Adams to act as Adams' sales and service representative for the Meijer account. (See Konkle Dep. at 37, attached to Def.'s Br. Supp.; Agreement, Konkle Dep. Ex. 1) Although the Agreement initially provided that Phase III would receive a 5% commission on all sales to Meijer procured by Phase III, the commission rate was subsequently reduced to 4%, which continued in effect for the duration of the relationship between Adams and Phase III. (See Konkle Dep. at 39.)
While the Agreement referred to Phase III as a sales agent for Adams, in practice, Phase III functioned as a service agent rather than a sales agent. Thus, Phase III was responsible for matters such as "servicing the account, making sure that product was in the stores, point-of-purchase material was in place, [and making sure that] any vendor racks or displays were in the stores as they should be." (Shupe Dep. at 42.)
In March of 1998, EZ Paintr purchased a substantial portion of Adams' assets. One of EZ Paintr's primary motivations for the purchase was obtaining the Meijer account. In connection with the purchase, EZ Paintr informed Steve Konkle ("Konkle"), Phase III's president, sole shareholder, and primary contact with Meijer, that EZ Paintr would continue to use Phase III for the Meijer account. (See Konkle Dep. at 79, 100.) Konkle, on behalf of Phase III, became involved in EZ Paintr's relationship with Meijer at an early stage, when he attended the initial post-acquisition meeting between Shupe and Koetje, on behalf of Meijer, and Barry Silverman ("Silverman"), the National Accounts Manager assigned to the Meijer account, and Jon Balicki ("Balicki"), the Vice President of Sales, on behalf of EZ Paintr. Following that meeting, EZ Paintr continued to sell Adams products to Meijer, and Phase III continued to service the Meijer account as it had done for Adams. For its services, Phase III was compensated at the same 4% commission rate it had received from Adams. Although Konkle met with EZ Paintr representatives on a number of occasions to discuss certain matters, there was never any discussion regarding the specific terms of Phase III's representation, nor did the parties discuss signing a written agreement or whether the Adams agreement was still in effect. (See Haralson Dep. at 44, attached to Pl.'s Br. Opp'n.) However, in the initial meeting with Konkle shortly after EZ Paintr purchased the Adams assets, Balicki discussed what Konkle and Phase III were doing for Adams in the Meijer stores. (See Balicki Dep. at 10-11, attached to Pl.'s Br. Opp'n.)
The asset purchase agreement was between Adams and Newell Operating Company, of which EZ Paintr is a division.
In late August 1998, Shupe informed Craig Haralson ("Haralson"), who had taken over responsibility for the Meijer account from Silverman, that Meijer had received bids from other competitors and was considering replacing EZ Paintr. As part of that process, Shupe and Haralson scheduled a meeting for October 28, 1998, for the purpose of allowing EZ Paintr to present its product program and financial details to Meijer. Haralson, Balicki, and Jeff Burbach ("Burbach"), the President of EZ Paintr, were primarily responsible for laying the groundwork and preparing the presentation for the October 28, meeting, although Konkle did supply general information such as sales history and product pricing to EZ Paintr prior to the meeting. (See Konkle Dep. at 101-02, 115-16.) Konkle was present at the meeting but was not involved in the presentation by EZ Paintr. (See id. at 117.)
Following the October 28 meeting, Shupe and EZ Paintr representatives continued to discuss EZ Paintr's program and financial proposals, including the changes that Shupe wanted EZ Paintr to make. One of the changes which Shupe suggested, both before and after the meeting, was for EZ Paintr to replace Phase III with Meijer's in-house service representative, Daymond, and eliminate the sales representative position. Among other reasons for his suggestion, Shupe cited dissatisfaction with Phase III's performance. (See Shupe Dep. at 72, 161-63; Haralson Mem. of 11/4/98, Konkle Dep. Ex. 16, attached to Def.'s Br. Supp.) On November 30, Balicki and Haralson met with Shupe and Meijer representative Pat Woolley to address issues posed by Meijer following the October 28 meeting. Following the meeting, Shupe informed Haralson that EZ Paintr would retain the Meijer account. Meijer and EZ Paintr eventually entered into a verbal "gentleman's agreement" for a three-year term, with Meijer retaining the right to terminate the agreement at any time.
On December 9, 1998, EZ Paintr terminated Phase III based upon Meijer's dissatisfaction with Phase III's performance. In addition, based upon Shupe's recommendation, EZ Paintr designated the Meijer account a "house account," meaning that EZ Paintr personnel would deal directly with Meijer rather than through a sales representative. (See Haralson Dep. at 67.) In connection with the termination, EZ Paintr agreed to pay Phase II commissions on products shipped to Meijer through January 6, 1999. EZ Paintr continued to sell Adams products and some EZ Paintr products to Meijer until the first week of May 1999, when it replaced the entire Adams line with EZ Paintr products.
Summary Judgment Standard
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. The rule requires that the disputed facts be material. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). A dispute over trivial facts which are not necessary in order to apply the substantive law does not prevent the granting of a motion for summary judgment. Id. at 248, 106 S.Ct. at 2510. The rule also requires the dispute to be genuine. A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id. This standard requires the non-moving party to present more than a scintilla of evidence to defeat the motion. Id. at 251, 106 S.Ct. at 2511 (citing Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L.Ed. 867 (1872)).
A moving party who does not have the burden of proof at trial may properly support a motion for summary judgment by showing the court that there is no evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 2553-54 (1986). If the motion is so supported, the party opposing the motion must then demonstrate with "concrete evidence" that there is a genuine issue of material fact for trial. Id.; Frank v. D'Ambrosi, 4 F.3d 1378, 1384 (6th Cir. 1993). The court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Agristor Financial Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir. 1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986)).
Discussion
I. Count I
In Count I of its complaint, captioned "Breach Of Contract," Phase III alleges that it is entitled to post-termination commissions of the sale of products by EZ Paintr to Meijer under two theories. First, Phase III asserts that EZ Paintr impliedly assumed the Adams Agreement and therefore is bound by the terms and conditions set forth in the Agreement. Second, Phase III asserts that it is entitled to post-termination commissions under the "procuring cause" doctrine.
A. Implied Assumption
Under Michigan law, a corporation that acquires the assets of another corporation is not liable for the selling corporation's obligations solely by virtue of the acquisition. See City Management Corp. v. U.S. Chem. Co., 43 F.3d 244, 251 (6th Cir. 1994); Shue Voeks, Inc. v. Amenity Design, Mfg., Inc., 203 Mich. App. 124, 127-28, 511 N.W.2d 700, 701-02 (1994) (per curiam). In certain circumstances, an acquiring corporation will be held liable for the selling corporation's obligations. Such circumstances exist:
1. Where the transaction amounts to a consolidation or merger;
2. Where the acquiring corporation expressly or impliedly agrees to assume the selling corporation's obligations;
3. Where the new corporation is a mere continuation of the old corporation; or
4. Where the sale is fraudulent.
See Shue Voeks, Inc., 203 Mich. App. at 127-28, 511 N.W.2d at 701-2. The exception at issue in this case is the implied assumption exception.
In analyzing the implied assumption exception, the parties look to the law governing the formation of implied in fact contracts. Implied contracts may arise where there is no express contract between the parties. See Spruytte v. Department of Corr., 82 Mich. App. 145, 147, 266 N.W.2d 482, 483 (1978) (per curiam). Implied contracts, like express contracts, require mutual assent and consideration. See Mallory v. City of Detroit, 181 Mich. App. 121, 127, 449 N.W.2d 115, 118 (1989) (per curiam).
A contract implied in fact arises under circumstances which, according to the ordinary course of dealing and common understanding, [sic] of men, show a mutual intention to contract. A contract is implied in fact where the intention as to it is not manifested by direct or explicit words between the parties, but is to be gathered by implication or proper deduction from the conduct of the parties, language used or things done by them, or other pertinent circumstances attending the transaction.Erickson v. Goodell Oil Co., 3 84 Mich. 207, 211-12, 180 N.W.2d 798, 800 (1970) (citation omitted).
In what appears to be the only Michigan case discussing the application of the implied assumption exception to successor liability, Antiphon, Inc. v. LEP Transport, Inc., 183 Mich. App. 377, 454 N.W.2d 222 (1990), the Michigan Court of Appeals held that the test for determining liability for an implied assumption is in the nature of an estoppel inquiry. In that case, the plaintiff, Antiphon, alleged that the defendant, LEP, wrongfully retained monies Antiphon paid LEP for the debt of another corporation. LEP provided customs brokering and freight forwarding services to Antiphon. In the transaction at issue, Antiphon forwarded products to a Canadian customer. LEP notified Antiphon that it would not release the shipment to Antiphon's client because LEP claimed that Antiphon owed it several thousand dollars for previous shipments. Antiphon paid the shipments under protest and later sued LEP under various theories to recover the funds. The debt at issue was incurred by a company called Seamco, Inc. Through a series of corporate transactions, Antiphon purchased part of the assets of Seamco. LEP pled the defense of estoppel, alleging in its answer that Antiphon's post-purchase behavior lead LEP to conclude that Antiphon was somehow related to Seamco and thus responsible for Seamco's obligations. Following a bench trial, the trial court held for LEP.
On appeal, the Michigan Court of Appeals concluded that the estoppel defense asserted by LEP was consistent with the implied assumption exception, the rationale for both concepts "being that a party may not, by its conduct or silence, assume a position that if maintained would result in an injustice to another." See id. at 384, 454 N.W.2d at 225. The court noted:
Although there is no precise rule governing the finding of implied liability, there is authority that suggests such a finding may be made where the conduct or representations relied upon by the party asserting liability indicate an intention on the part of the buyer to pay the debts of the seller. Whether such an intent exists must be determined from the facts and circumstances of each case. The factors to consider are: (1) the effect of the transfer on the creditors of the predecessor corporation; and (2) admissions of liability on the part of officers or other spokespersons of the successor corporation.Id. The court found that there was sufficient evidence to demonstrate an implied agreement by Antiphon to assume Seamco's liabilities. In particular, the court noted that LEP had sent eight invoices to "Antiphon-Seamco" in Fort Wayne, Indiana on eight occasions and the invoices were paid by checks bearing the name "Antiphon-Seamco, Inc., Fort Wayne, Indiana"; certain invoices for costs incurred prior to the sale were paid by Antiphon-Seamco after the sale; after the sale "Antiphon II, Inc., Fort Wayne, Indiana" sent LEP three checks in payment of invoices sent to "Antiphon-Seamco"; and three invoices sent to "Antiphon, Inc., Fort Wayne Indiana" were paid by Antiphon. See id. at 385, 454 N.W.2d at 225-26. Additionally, the court observed that during the period of time in question, LEP dealt with the same personnel, the business was conducted in the same manner, neither Seamco nor any of its subsequent business forms ever informed LEP of the change in ownership of the Fort Wayne plant, and, as a result of Seamco-Antiphon's silence, LEP forewent its creditor remedies against Seamco before it became uncollectible. See id. at 385, 454 N.W.2d at 226.
The Maryland Court of Special Appeals dealt with the implied assumption exception in Baltimore Luggage Co. v. Holtzman, 80 Md. App.282, 562 A.2d 1286 (1989). Holtzman was the chief executive officer of Baltimore Luggage, a Maryland corporation ("BLM"). On November 1, 1983, BLM's parent company sold BLM's assets and liabilities to a Rhode Island corporation, which assumed the name Baltimore Luggage ("BLRI"). At the time of the sale, Holtzman had a long term employment/consulting agreement with BLM. The asset purchase agreement provided that BLM would indemnify and hold BLRI harmless for the obligations under Holtzman's employment agreement. Under the employment agreement, Holtzman was to serve as BLM's chief executive officer until the earlier of December 31, 1985, or 365 days following receipt of written notice by either party. In addition, the agreement provided that Holtzman would serve as a consultant for five years after his term as chief executive officer and would continue to receive fringe benefits during that period. Upon learning of the sale, Holtzman gave notice to BLM pursuant to the agreement. Following the sale, BLRI made regular salary and fringe benefit payments to Holtzman, which it deducted from the payments for assets to BLM. When the salary payments ended, BLRI paid Holtzman his consultant fee in the same manner, deducting that amount from the payments to BLM in the same manner. BLRI continued to pay Holtzman's consulting fees and health insurance, but ceased paying Holtzman fringe benefits upon instructions to do so by BLM's parent company. Holtzman then filed suit against BLRI, alleging that it was obligated to continue paying his fringe benefits. See id. at 285-89, 562 A.2d at 1287-89. Holtzman argued, among other things, that BLRI impliedly assumed BLM's obligations to Holtzman under the agreement. Recognizing the validity of the implied assumption exception under Maryland law, the court stated, "[i]n order for a promise to be implied on the part of a corporation to pay the debts of another corporation, the conduct or representations relied upon by the party asserting liability must indicate an intention of the buyer to pay the debts of the seller." Id. at 295, 562 A.2d at 1292. Holtzman cited the following as evidence of BLRI's intent to pay his contract: (1) BLRI's payment of a $25,000 bonus to Holtzman shortly after the sale; (2) BLRI's payment of his salary and consultant's fee following the sale; (3) BLRI's issuance of W-2 wage and tax statements to Holtzman; (4) BLRI's payment of fringe benefits to Holtzman until instructed not to do so by BLM's parent company; and (5) BLRI's continued payment of Holtzman's consulting fees and medical insurance. See id. at 295-96, 562 A.2d at 1292. The court concluded that these facts were insufficient to demonstrate BLRI's intention to assume liability given the circumstances under which the payments were made:
The record clearly indicates that, although payments were made by [BLRI] to Holtzman, those payments were in turn deducted from the payments by [BLRI] to [BLM] for the purchase of the assets. In essence, [BLRI] was reimbursed by [BLM] for the payments made to Holtzman. Moreover, Holtzman, himself, never considered that [BLRI] assumed the obligation for his contract. This is evidenced by his letter dated November 22, 1983 in which he acknowledged that [BLRI] would pay his consulting fees on behalf of [BLM], but [BLRI] had not assumed the obligation of his employment agreement.Id. at 296, 562 A.2d at 1292.
Phase III contends that the following evidence establishes an implied agreement by EZ Paintr to assume the Agreement: (1) immediately after the asset sale, EZ Paintr sent Konkle a letter stating that EZ Paintr had purchased Adams' assets, it would be "business as usual," and EZ Paintr was looking forward to a great future with Phase III (see Konkle Dep. at 79, 100); (2) EZ Paintr continued to pay Phase II a 4% commission for all products shipped to Meijer, as Adams had done; (3) EZ Paintr employees had knowledge of the Agreement; and (4) Phase III continued to perform the same duties for EZ Paintr as it had done for Adams under the Agreement.
Although Phase III's evidence shows that there were similarities between Phase III's relationship with Adams and its relationship with EZ Paintr, the evidence is insufficient to create a genuine issue of material fact with regard EZ Paintr's intention to assume the Agreement. There is no evidence in the record showing that EZ Paintr was even aware of the Agreement at the time Phase III began performing services for EZ Paintr. Contrary to Phase III's assertion, neither Balicki's nor Haralson's testimony establishes this fact. Balicki testified that sometime after the acquisition he "was given a folder of agreements from Adams that [he] . . . breezed through," but "didn't pay much attention to them." (Balicki Dep. at 13-14.) Balicki did not testify that he recalled seeing the Agreement. In addition, nothing in the record establishes that the Agreement was even contained in the folder of documents Balicki reviewed. Haralson's testimony that he reviewed the Agreement in August of 1998, when he took over management of the Meijer account from Silverman, is similarly unavailing because it is irrelevant to the question of whether EZ Paintr had any knowledge of the Agreement at the time of the acquisition. More importantly, there is no evidence in the record, and Phase III does not assert, that Konkle, on behalf of Phase III, ever specifically discussed the Agreement with anyone from EZ Paintr. Given the absence of any reference by EZ Paintr to the Agreement, Konkle could not have reasonably believed that EZ Paintr intended to assume the Agreement. It is true that Phase III continued to perform the same services for EZ Paintr that it performed for Adams as its representative and EZ Paintr paid Phase III the same percentage commission that Adams paid. However, all that can be drawn from these facts, without more, is that EZ Paintr had a verbal understanding with Phase III that Phase III would serve as EZ Paintr's representative on the Meijer account and would receive a 4% commission.
Konkle's own conduct, which is a key part of the inquiry, demonstrates that he did not believe that EZ Paintr assumed and was bound by the Agreement. Konkle never told anyone from EZ Paintr that he believed EZ Paintr was bound to honor the Agreement. In fact, prior to the October 28 meeting, several months after Phase III began working with EZ Paintr, Konkle asked Burbach, EZ Paintr's president, for a new contract. (See Konkle Dep. at 81-83.) According to Konkle, Burbach's response was to the effect that "to my knowledge, you know, we don't have any contracts with anybody. A handshake deal is as good as it needs to be with us . . . ." (Id. at 82-83.) Konkle did not testify that he brought the Agreement to Burbach's attention or attempted to correct his understanding that EZ Paintr did not have written contracts with its representatives. On January 6, 1999, following EZ Paintr's termination of Phase III, Konkle sent a letter to Burbach in which he expressed his regret of the termination. Notably, Konkle did not mention the Agreement, but instead stated,
I would also like to take this opportunity to acknowledge the fair and equitable manner in which EZ Paintr has handled the unpaid and disputed commissions that resulted from the different calculation methods used by Adams. The letter I received today . . . clearly explained the process by which the EZ Paintr Company determined outstanding monies due us.
(Letter from Konkle to Burbach of 1/6/99, Def.'s Br. Supp. Ex. E.). Konkle's own conduct and statements show that he was never under the impression that EZ Paintr assumed the Agreement.
As indicated in Antiphon, Inc._and Baltimore Luggage Co.., reliance by the party seeking to enforce the obligation is also an element in the implied assumption calculus. See Antiphon, Inc.,_183 Mich. App. at 384, 454 N.W.2d at 225; Baltimore Luggage Co., 80 Md. App. at 295, 562 A.2d at 1292. Phase III has failed to present any evidence showing how it relied on a statement or conduct by EZ Paintr to the effect that the Agreement continued in effect. See Antiphon, Inc., 183 Mich. App. at 385, 454 N.W.2d at 226 (noting that as a result of Antiphon's conduct, LEP "forewent its other creditor remedies against Seamco before Seamco became uncollectible"). Thus, the element of reliance is completely absent in this case.
Further support for the conclusion that EZ Paintr did not impliedly assume the Agreement is found in the Asset Purchase Agreement. Pursuant to section 1.1(g) of the Asset Purchase Agreement, EZ Paintr assumed "[a]ll rights and interests of [Adams] in, to and under all contracts, agreements, arrangements or understandings (both written and oral) ("Contracts") which are listed on Schedule 1.1(g)." (Asset Purchase Agreement § 1.1(g), Def.'s Br. Supp. Ex. A.) The Agreement is not listed in Schedule 1.1(g). In addition, in section 1.2(f), Adams and EZ Paintr "expressly underst[oo]d and agree[d] that [Adams was not] selling, assigning, transferring, conveying or delivering to" EZ Paintr any "[c]ontracts other than the [contracts listed on Schedule 1.1(g)] . . . ." (Id. § 1.2.) Because the Agreement was not listed in Schedule 1.2(g), the Asset Purchase Agreement expressly disclaimed liability for the Agreement. In City Management Corp. v. U.S. Chemical Co., 43 F.3d 244 (6th Cir. 1994), the Sixth Circuit rejected the defendants' argument that the plaintiff implied assumed liability for a contaminated site based upon contractual language in the asset purchase agreement expressly limiting the liabilities assumed by the purchaser. The court stated:
In this case, the Agreement expressly provided that plaintiffs assumption of hazardous waste contamination liabilities was limited to those connected with the Calahan Property. In the face of contractual language that expressly disclaims liability, we cannot find that there was an implied assumption of liability, and we need not consider the argument that plaintiff's conduct manifested an intent to assume such liability.Id. at 256; see also Ruiz v. Weiler Co, 860 F. Supp. 602, 605 (N.D.Ill. 1994) (finding that explicit language disclaiming contractual liabilities "strongly militate[d] against a finding of assumption of liability"). The Asset Purchase Agreement limits EZ Paintr's liability on Adams' contracts only to those specified Asset Purchase Agreement. This express disclaimer of liability effectively negates any implied assumption claim by Phase III.
EZ Paintr also asserts that it is entitled to summary judgment even if an implied assumption is found because the Agreement permitted EZ Paintr to designate the Meijer account a "house account," meaning that Phase III would not be entitled to commissions from that account. However, in light of the Court's ruling that EZ Paintr did not assume the Agreement, the Court need not address this argument.
B. Procuring Cause
Phase III also asserts that it is entitled to post-termination commissions under the "procuring cause" doctrine. Under this doctrine, a sales agent who is terminated by the principal is entitled to recover commissions, regardless of whether he actually personally completed the sale, if his efforts were the procuring cause of the sale. See Reed v. Kurdziel, 352 Mich. 287, 294-95, 89 N.W.2d 479, 483 (1958). The procuring cause doctrine is premised on "the basic principle of fair dealing, preventing a principal from unfairly taking the benefit of the agent's or broker's services without compensation and imposing upon the principal . . . liability . . . for sales upon which the agent or broker was the procuring cause." Id. at 294, 89 N.W.2d at 483. Under this doctrine, a sales agent's "entitlement to post-termination commissions depends upon the parties' intentions as determined from the contract and other circumstances." Fernandez v. Powerquest Boats, Inc., 798 F. Supp. 458, 461 (W.D.Mich. 1992). "Where the contract is silent, the agent is entitled to recover a commission on a sale, whether or not he personally concluded it, only where it can be shown that his efforts were the `procuring cause."' Roberts Assoc. . Inc. v. Blazer Int'l Corp., 741 F. Supp. 650, 652 (E.D.Mich. 1990). Michigan courts interpret the "procuring cause" doctrine "quite narrowly," applying it only to "acquisition of orders, not acquisition of customers." Fernandez, 798 F. Supp. at 461-2.
Because EZ Paintr did not assume the Agreement, the agreement between the parties was an oral contract, either express or implied. In addition, because the oral arrangement was of an indefinite duration, it was terminable at the will of either party. See Lichnovsky v. Ziebart Int'l Corp.,_ 414 Mich. 228, 236, 324 N.W.2d 732, 736-37 (1982). There is no evidence in the record relative to the oral agreement on the issue of whether Phase III had a right to post-termination commissions. EZ Paintr contends that Konkle's January 6, 1999, letter to Burbach demonstrates that the parties understood that Phase III was not entitled to post-termination commissions because Konkle failed to mention that Phase III was entitled to additional commissions for sales to the Meijer account. The Court disagrees with EZ Paintr's interpretation of the letter because it makes no reference to post-termination commissions. A different conclusion might be drawn if the letter had indicated Phase III's agreement with EZ Paintr's decision to pay Phase III commissions on products shipped to Meijer for thirty days following the termination, but that is not the case. Thus given the lack of any evidence, the Court must conclude there was simply no agreement on the issue. Accordingly, Phase III is entitled to commissions only if it was the procuring cause of those sales. See Fernandez, 798 F . Supp. at 461.
As noted above, courts construing the procuring cause doctrine under Michigan law have applied it narrowly, holding that it applies only to acquisition of sales, not acquisition of customers. See Roberts Assoc., 741 F. Supp. at 653 (quoting William Kehoe Assoc. v. Indiana Tube Corp, Nos. 88-1502, 88-2225, 1989 WL 146439, at *2 (6th Cir. Dec. 5, 1989) (per curiam)). It is undisputed that Phase III had nothing to do with sales made to Meijer following its termination by EZ Paintr. Nonetheless, Phase III argues that it is entitled to post-termination commissions on all sales to Meijer because it procured the Meijer account for EZ Paintr. It is true that under a "customer procurement" arrangement, a sales agent is entitled to a commission on all sales to a customer procured by the agent, regardless of whether the agent is involved in the sale. See Lilley v. BTM Corp., 958 F.2d 746, 751 (6th Cir. 1992). However, the contract between the parties controls the issue of whether the commission is paid for customer procurement or sales procurement. See id. Phase III has not presented any evidence to support its claim that it had a customer procurement arrangement with EZ Paintr, and the evidence in the record compels the conclusion that Phase III was entitled to commissions only on orders procured. First, the Agreement, which governed Phase III's relationship with Adams, specifically provided that Phase III was entitled to commissions on Meijer "orders procured" by Phase III and "shipped" by Adams. (See Agreement ¶ 2.) Thus, regardless of whether Phase III procured Meijer as a customer for Adams, it was only entitled to commissions on sales that it procured. Second, it is undisputed that EZ Paintr acquired the Meijer account through its acquisition of Adams' assets, not as a result of any effort by Phase III. In fact, had EZ Paintr decided not to use Phase III as its representative when it acquired Adams' assets, it could have done so without incurring any liability to Phase III. Finally, the commissions EZ Paintr paid to Phase III during their relationship were based on orders shipped to Meijer. Phase III only represented EZ Paintr on the Meijer account and was not engaged in procuring additional customers for EZ Paintr, as would be the case under a customer procurement arrangement. Phase III has not offered any evidence demonstrating that its commission arrangement with EZ Paintr changed in any manner up until the termination .
Even if Phase III had a customer procurement commission arrangement, it would still not be entitled to commissions because Phase III's evidence fails to raise an issue of fact with regard to whether it was the procuring cause for the Meijer account, for either Adams or EZ Paintr. The only evidence Phase III offers in support of its claim that it procured the Meijer account for Adams is language in paragraph 2 of the Agreement regarding payment of commissions and Konkle's testimony regarding a conversation he had with Leach, Meijer's vice-president of hard lines merchandising, at the Chicago hardware show in 1990, in which Leach allegedly stated that he wanted Konkle to become involved in the negotiations between Meijer and Adams (see Konkle Dep. at 36). This evidence does not show what Phase III claims. The language in the Agreement states nothing about the Meijer account, and Phase III's reliance on it is soundly refuted by Shupe's testimony regarding the circumstances under which Meijer awarded the account to Adams. Likewise, Konkle's testimony regarding Leach's statement, in addition to being hearsay, fails to show that Konkle did anything to obtain the Meijer account for Adams.
That paragraph states:
Adams agrees to pay [Phase III] a selling commission, as determined in "Exhibit A" hereof, on all orders procured by [Phase III] on or after the date hereof and accepted by Adams and shipped to customers within the territory . . .
(Agreement ¶ 2.)
Phase III's evidence also fails to show that it was the procuring cause of the Meijer account for EZ Paintr. As an aside, the Court notes that EZ Paintr never lost the Meijer business, so there was no account for Phase III to procure. Even if the procuring cause doctrine applies to situations where accounts are "saved" rather than procured, Phase III's evidence would be insufficient to create a genuine issue of material fact. The only evidence Phase III can offer is Burbach's testimony that Konkle provided him general information regarding Meijer's "concern[s] about continuity of the program, how [EZ Paintr] would be changing the product, whether [EZ Paintr] would be changing the package, [and] how that would affect signage at store level," (Burbach Dep. at 17), and Konkle's testimony that he provided "background and information" about Meijer to Haralson regarding pricing and movement of products (Konkle Dep. at 101-02). While Konkle may have provided some background information to EZ Paintr, he did not play any role in persuading Meijer to stay with EZ Paintr. Konkle did not attend a September 21, 1998, meeting involving Shupe, Haralson, and Burbach to address product inconsistencies in the Adams line; he was not involved in planning, preparing, or reviewing the sales presentation for the October 28 meeting; although he attended the October 28 meeting, he did not make any presentation and did not speak; he was not involved in attempting to get the Meijer account following the October 28 meeting, even though discussions were ongoing throughout November; and he was not involved in any of the negotiations between Meijer and EZ Paintr. Furthermore, Phase III's assertion that it procured the Meijer account for EZ Paintr must be considered in light of testimony by Shupe, the principal decisionmaker for Meijer, that Phase III did not influence his decision to continue to do business with EZ Paintr. (See Shupe Dep. at 169.) This evidence refutes any claim by Phase III that it was the procuring cause of the Meijer account, as does Shupe's testimony that Meijer was not happy with Phase III's performance. (See id. at 56-57, 71.) Therefore, EZ Paintr is entitled to summary judgment on Count I.
II. SRCA Claim
Phase III's remaining claim is that EZ Paintr violated the SRCA by failing to pay commissions owed to Phase III. The SRCA does not create a cause of action for commissions, but rather changes the remedy. See Flynn v. Flint Coatings, Inc., 230 Mich. App. 633, 637, 584 N.W.2d 627, 629 (1998). "Thus, an employer who was not liable under the common law is not liable under the SRCA." Id. Because the Court has already determined that EZ Paintr is not liable to Phase III for post-termination commissions, Phase III has no claim under the SRCA.
Conclusion
For the foregoing reasons, the Court will grant EZ Paintr's motion for summary judgment.
An Order consistent with this Opinion will be entered.
ORDER
In accordance with the Opinion filed on this date,
IT IS HEREBY ORDERED that Defendant's Motion for Summary Judgment (docket no. 48) is GRANTED.
This case is closed.