Quad/Graphics, Inc. v. One2One Communications, LLC

529 F. App'x 784
CourtCourt of Appeals for the Seventh Circuit
DecidedSeptember 4, 2013
DocketNos. 12-2558, 12-2620
StatusPublished
Cited by3 cases

This text of 529 F. App'x 784 (Quad/Graphics, Inc. v. One2One Communications, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Quad/Graphics, Inc. v. One2One Communications, LLC, 529 F. App'x 784 (7th Cir. 2013).

Opinion

ORDER

I. Background

Since the 1980s, Bruce Heverly worked with or headed companies that processed and provided billing statements for cable television companies. He founded his own company in the 1990s called Comtec, Inc., which offered both billing services and call center services to cable companies. In 2000, Heverly sold his interest in Comtec. Later that year or in early 2001, Robert Kraft, who at the time was president of Openfirst, Inc., a company that specialized in printing billing statements for various companies, asked Heverly about representing Openfirst to cable companies. Openfirst sought out Heverly because the company wished to break into the billing services market for cable companies.

Openfirst and Heverly reached an agreement in 2001, and Heverly began “representing” Openfirst on a commission basis. Whether or not Heverly ever actually became an agent of Openfirst was a hotly contested issue at trial, but the jury found that there was an agency relationship between Heverly and Openfirst. The finding was based on Heverly’s course of conduct (explained in more detail below), as there was no written agreement between Heverly and Openfirst.

In 2002, Heverly spoke to Kraft about receiving an official title from Openfirst to assist his sales efforts. In March 2002, Kraft named Heverly CEO of Openfirst’s statement processing division, called Open-[785]*785first Communications. In May 2002, Hev-erly incorporated his own company called Openfirst Communications, Inc., headquartered in Madison, Wisconsin, and set himself up as CEO of this corporation as well. Heverly claims this was done with Kraft’s knowledge, but Kraft and Openfirst insist they were unaware Heverly had done this, especially since Heverly used the Openfirst name.

Nonetheless, the relationship between Heverly and Openfirst continued, with Heverly bringing in several contracts with various cable companies for Openfirst1 (or rather, contracts that were assumed to be with Openfirst), until Kraft and his management team sold their interests to an investment firm in Chicago in late 2002. During the due diligence portion of the transaction, it was discovered that Heverly had created the separate company with the same name as Openfirst’s billing division. Heverly claimed that Kraft had given him permission to form the company, but Kraft denied ever doing so.

Initially Heverly claimed that the contracts he brought in were actually between his own company and the cable companies, and that his company had merely subcontracted the production work to Openfirst. After a meeting between Kraft, Heverly, and others in August 2003, Heverly agreed to change the name of his company. They also agreed that Heverly could continue to work for his own company, which he renamed One20ne Communications, LLC. During the negotiations with Heverly, Kraft sought a so-called “evergreen agreement” with Heverly that would provide that the existing contracts between Open-first and the cable companies would be renewed when they expired, but the agreement was never finalized.

In 2006, Openfirst was sold to Quad/Graphics, Inc. (“Quad”). Quad continued to pay commissions to Heverly and Heverly’s company, One20ne. Quad was aware that Heverly was conducting his separate business, but also that Heverly was continuing to market the billing statement business for Openfirst under Open-first’s name. In June 2006, Heverly informed Quad that his company One20ne had purchased its own printing facility in Bolingbrook, Illinois. Heverly reassured Quad that the acquisition would not affect his “commitment to Openfirst per the term of the business we have placed with you.”

In early 2007, an employee of Openfirst named Chuck Olszewski received a phone call from a Time Warner Cable subsidiary. The caller had a technical question about an Openfirst product called “Power View.” The call confused Olszewski because Olsz-ewski had been told by Heverly that Open-first had lost the Time Warner subsidiary as a client. The caller stated that he was working with the Openfirst facility in Illinois and that he could not reach Heverly and so decided to contact Openfirst directly. Olszewski notified Kraft of the call because Openfirst had no facility in Illinois (Heverly’s company One20ne did, however).

An investigation revealed that Heverly and his company had been soliciting customers away from Openfirst and to their own facility in Illinois. Emails Heverly sent to Openfirst’s clients characterized the switch as a change in facilities and gave the impression that the billing processing work was simply being moved [786]*786from one Openfirst facility in Milwaukee to a facility in Bolingbrook, Illinois, but the companies were in fact contracting with Heverly’s company 0ne20ne. Heverly continued to represent himself as CEO of both Openfirst Communications, Inc. (Openfirst’s billing statements division) and his own company 0ne20ne during these transactions. This left Openfirst’s clients believing that they were still contracted with Openfirst when in fact their contracts were now with 0ne20ne. And internal emails between Heverly and his 0ne20ne employee Rick Brammer showed that Heverly debated disclosing his activities to Kraft, but decided against it after Brammer advised him against it and to “stick to the plan.”

Quad decided to terminate its relationship with Heverly entirely. James Nash, a former ComTec employee who had worked with Heverly in the past and was now with Quad, was in charge of executing the strategy to sever the relationship with Heverly. In an email to his colleagues, Nash stated the following: “I am a former lineman and football is usually how I think. I would like to do a nice chop block on [Bruce Heverly] and sew this thing up for us.” On March 1, 2007, Quad (which now wholly owned Openfirst) sent a Notice of Termination to Heverly and 0ne20ne indicating that Quad was severing all business relations with 0ne20ne.

On the same day, Quad employees (including Kraft) attempted to place phone calls to each of Quad’s billing customers. During the calls, Kraft told the customers that Heverly had misrepresented his relationship with Openfirst and that Heverly was “merely a sales agent” for Openfirst. Several of the clients with whom Kraft spoke indicated that they did not know that Heverly’s company and Openfirst were different entities. One client stated that she believed that her business was being transferred to “Openfirst South” in Illinois. Needless to say, there was no “Openfirst South” in Illinois — the clients’ bills were now being processed at 0ne20ne’s Bolingbrook facility.

Ultimately, 0ne20ne and Heverly retained most of the billing statement customers’ contracts. Pencor, for example, convened a meeting with in-house counsel and executives to examine the contract it had signed with Heverly. The company determined that the contract with Heverly was valid and binding, and that if Pencor did not honor the contract, Pencor would be in breach. Other clients such as Bright House and Insight did not renew their existing contracts with either Openfirst or Heverly, and subsequently put out Requests for Proposals to solicit bids.

Shortly after learning what Heverly had done, Quad suspended all commission payments to Heverly and 0ne20ne. Kraft indicated that it was a collective decision between Quad and its subsidiary Openfirst, and that the decision was motivated by Quad’s belief that it had been wronged by Heverly.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In Re One2One Communications, LLC
805 F.3d 428 (Third Circuit, 2015)

Cite This Page — Counsel Stack

Bluebook (online)
529 F. App'x 784, Counsel Stack Legal Research, https://law.counselstack.com/opinion/quadgraphics-inc-v-one2one-communications-llc-ca7-2013.