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David Engineering Company, L.L.C v. Morbern Inc

July 31, 2012

DAVID ENGINEERING COMPANY, L.L.C., PLAINTIFF,
v.
MORBERN INC., DEFENDANT.



The opinion of the court was delivered by: Hon. Marianne O. Battani

OPINION AND ORDER

GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

This matter is before the Court on Defendant Morbern, Inc.'s Motion for Partial Summary Judgment Regarding Plaintiff's Claims for Post-Termination Commissions. (Doc. 25). The Court heard oral argument on July 25, 2012, and at the conclusion of the hearing took the motion under advisement. For the reasons that follow, the Court GRANTS Defendant's motion.

I. STATEMENT OF FACTS

A. The Parties

Plaintiff David Engineering Company, L.L.C., is a Michigan limited liability company located in Rochester Hills, Michigan. David Calder solely owns and operates David Engineering. Defendant Morbern, Inc., is a Canadian corporation having its principal place of business located in Cornwall, Ontario. Defendant manufactures vinyl seating products for the automotive industry.

B. The Sales Agency Agreement

In the spring of 2009, John Weaver, Defendant's Vice President of Sales, asked Plaintiff to serve as Defendant's sales representative to the automotive industry in Southeastern Michigan. At the time, Defendant had very limited exposure in this industry. Weaver sought out Plaintiff for Calder's decades of experience and network of sales contacts. The primary purpose of this engagement was for Plaintiff to generate business for Defendant in Southeastern Michigan, and in particular, to procure business from the seating divisions of Lear and General Motors.

In April 2009, the parties negotiated a written Sales Agency Agreement (the "Agreement"). Plaintiff admits it had an opportunity to review and make changes to this Agreement. (Doc. 25 Ex. F at p. 46). Under the Agreement, which contains an Ontario choice of law clause, Defendant was to pay Plaintiff sales commissions of 5% on first $5 million of sales per contract year, 4% on the next $5 million of sales per contract year, and 3% on all sales in excess of $10 million per contract year. (Doc. 25 Ex. B at p. 1). With respect to post-termination commissions, the Agreement states: "If this agreement is terminated by either party, [Defendant] will pay [Plaintiff] commission for life of the program blanket purchase orders acquired by [Plaintiff] while working on behalf of [Defendant]." (Doc. 25 Ex. B at p. 1). The Agreement also contains the following integration clause: "The parties furthermore acknowledge and covenant that the provisions of this agreement have been freely and fully discussed and negotiated and that the execution of this agreement constitutes and is deemed to constitute full and final proof of the foregoing statement." (Doc. 25 Ex. B at p. 3).

In October 2010, Defendant proposed a new sales agency agreement to reduce Plaintiff's commission rate to 4% on first $5 million of sales per contract year, 3% on the next $5 million of sales per contract year, and 2.5% on all sales in excess of $10 million per contract year. (Doc. 27 at p. 3). The parties dispute whether Plaintiff agreed to the 2010 agreement. This dispute is not relevant for purposes of the present motion, however, since the 2010 agreement contains identical post-termination commissions and integration clause language. (Compare Doc. 25 Ex. B with Ex. C).

C. Defendant's Business with Lear

While Plaintiff was under contract to act as Defendant's sales agent, Defendant received four purchase orders from Lear. The parties dispute whether Plaintiff "acquired" that business for Defendant under the Agreement. Notwithstanding that conflict, Defendant apparently assumes for the purposes of the present motion that Plaintiff "acquired" the Lear business for Defendant (thereby triggering its duty to pay Plaintiff a sales commission), but disputes whether the four Lear purchase orders are "blanket" purchase orders that fall within the post-termination commissions clause of the Agreement. The Court reviews the details Defendant's business relationship with Lear to put this dispute in context.

In mid-May 2009, Mark Hikra, Lear's Vice President of Global Marketing, sent Weaver a Request For Quotation to supply its 57-inch WN1J product to General Motors. (Doc. 25 Ex. E at p. 24; Ex. G). This WN1J product was to be used as part of the General Motors GMT900 program for automobiles, such as the GMC Suburban, Cadillac Escalade, and Chevrolet Tahoe. Defendant sent Lear a price quote. (Doc. 25 Ex. F at pp. 51-53). Lear selected Defendant's quote after reviewing multiple bids from a variety of suppliers. (Id.).

Before Lear could issue purchase orders to Defendant for the WN1J product, Lear and Defendant had to first negotiate and sign a Lear Supply Agreement ("LSA"). An LSA sets forth the terms and conditions for all purchase orders of a particular part or program during the life of the LSA. Plaintiff admits the LSA is not itself, a purchase order. (Doc 25. Ex. F at pp. 122-123).*fn1 Rather, the LSA acts as the contract under which Lear issues purchase orders to its suppliers. (Doc. 25 Ex. F at p. 38).

Lear and Defendant executed a LSA in June 2010 (the "2010 LSA") for the WN1J products. (Doc. 25 Ex. I). The 2010 LSA provides: "Subject to approvals by the OEM and Lear, [Defendant] agrees that it will sell to Lear and Lear agrees to buy from [Defendant] all of Lear's requirements for the [WN1J products] at the price set forth below or as revised pursuant to the explicit provisions of this LSA." ...


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