Sta-Rite Industries, LLC v. Franklin Electric Co., Inc.

519 F. App'x 370
CourtCourt of Appeals for the Sixth Circuit
DecidedApril 1, 2013
Docket11-4193
StatusUnpublished
Cited by3 cases

This text of 519 F. App'x 370 (Sta-Rite Industries, LLC v. Franklin Electric Co., Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sta-Rite Industries, LLC v. Franklin Electric Co., Inc., 519 F. App'x 370 (6th Cir. 2013).

Opinion

STEEH, District Judge.

Plaintiffs-Appellants Sta-Rite Industries, LLC and Pentair Pump Group, Inc. (“Pentair”) appeal the district court’s grant of summary judgment to Defendant-Ap-pellee Franklin Electric Co., Inc. (“Franklin”) on Pentair’s breach of contract and tortious interference claims. Because Pentair’s breach of contract claim rests upon an interpretation of the parties’ agreement that is contrary to its plain meaning and its claim of tortious interference is barred by the statute of limitations, we AFFIRM.

*372 I. Overview

In 2001, Pentair and Franklin entered into a written sales agreement. Pentair is a manufacturer of submersible pumps used in residential wells. Franklin manufactures submersible motors used in these submersible pumps. Pentair couples the motors it buys from Franklin with its own pumps and sells the product to distributors. Franklin manufactures both small and large motors. The small motors are 4-inch submersible electric motors rated 1/3 to 2 horsepower (the “Units”). The large motors are 4-inch submersible electric motors rated above 2 HP, 6-inch submersible motors, 8-inch submersible motors, control boxes, and other accessories (the “Non-Units”). The 2001 sales agreement only covered the sale of Franklin’s small motors, the Units, to Pentair.

Historically, Franklin sold its submersible motors exclusively through original equipment manufacturers (“OEMs”) such as Pentair. However, in 2004, Franklin acquired a pump manufacturer and decided to begin selling its motors and pumps directly to distributors. As a result, Pen-tair filed a lawsuit for breach of the sales agreement and related claims. The lawsuit quickly resolved when the parties entered into a Settlement Agreement. The Settlement Agreement governed Franklin’s sale of both small and large motors (Units and Non-Units) to Pentair. In this case, Pentair claims Franklin breached the Settlement Agreement by overcharging Pentair for the purchase of large motors, Non-Units. Pentair also claims that Franklin tortiously interfered with its relationship with its largest distributor, Preferred Pump and Equipment, LP (“Preferred”), by using its monopoly power in the motor market to coerce Preferred into breaching its contractual obligations to Pentair. The district court granted Franklin summary judgment on Pentair’s claims.

II. Factual Background

On August 27, 2004, Franklin issued a press release announcing it had acquired JBD, Inc., which produced a pump line competitive with Pentair’s line. In the same press release, Franklin announced its intention to sell motors directly to distributors. While the press release indicates the company planned to begin selling directly to distributors in November of 2004, Franklin’s Senior Vice President and President of the Americas Water Systems Group Robert Stone testified that Franklin actually started selling products directly to the distributors in “September or October, at the latest.” Pentair believed the Franklin motors would be sold directly to Pen-tair’s customers by Franklin for lower prices. As a result, it filed suit.

On September 30, 2004, Pentair filed a complaint against Franklin asserting claims for breach of the 2001 sales agreement, antitrust violations, unfair competition, and tortious interference with contracts/business relations. On October 1, 2004, the court entered a temporary restraining order (“TRO”). The TRO enjoined Franklin from selling the small motors, the Units, directly to Pentair’s customers. The TRO also enjoined Franklin from increasing its pricing without complying with the sales agreement’s notice requirement and from implementing certain new pricing.

On October 30, 2004, the parties resolved the litigation by entering into the Settlement Agreement. The Settlement Agreement amends the 2001 sales agreement and is effective October 30, 2004 through December 31, 2006. The Settlement Agreement addresses sales of both Units and Non-Units.

*373 Sections 4(A) and 4(M) of the Settlement Agreement, among others, govern the sale of Units. Section 4(A) provides that “Franklin shall not sell any Units, within the United States of America (‘USA’) and Canada to any customers except original equipment manufacturers (‘OEMs’) and ‘Class A’ Franklin Authorized Service Shops (‘FAMS’)” through December 31, 2006.

Section 4(M) provides favored pricing to Pentair on Units:

With respect to all Units purchased in the USA and Canada by Pentair from Franklin from the effective date of this Agreement through December 31, 2006, Franklin agrees to provide most favored purchaser protection to Pentair such that the Unit prices (including rebates, discounts, allowances, promotions, subsidies or other credits or payments), warranties, benefits and other terms provided to Pentair are equivalent to or better than the terms offered by Franklin to any of its other OEM and FAM customers in the USA and Canada ... If Franklin enters into an agreement with or sells Units to any other OEM or FAM customer in the USA or Canada providing such customer with more favorable terms, then this Agreement shall be deemed appropriately amended to provide such terms to Pentair.

In addition, § 4(K) expressly excludes § 4(M), and consequently the sale of Units, from its provision which eliminates “all other previously announced allowances, discounts and programs for Franklin products” as of October 17, 2004.

Sections 4(C) and 4(N) of the Settlement Agreement govern the sale of Non-Units. Section 4(C) provides that Franklin is free to “sell [Non-Units] to any customers of its choosing, without limitation, including any distributors, notwithstanding Franklin’s prior sales policies and practices, and whether or not Franklin sold to said customers or distributors previously.” Section 4(N) provides:

Except with respect to the Maximum Aggregate Payment described in sub-paragraph 4(G), the [earned volume discount] described in subparagraph 4(H) and as otherwise stated expressly in this Agreement, nothing herein shall prevent Franklin from making future adjustments to the price (whether by surcharges, discounts, rebates, allowances, or otherwise) of any of its products (including Units) as necessary or appropriate to respond to material, labor, and other business costs as may arise from time to time and upon sixty (60) days advance notice to Pentair. Until December 31, 2006, Franklin agrees not to raise the price it charges to Pentair on High HP 4" Motors, 6-inch motors, and 8-inch motors, as well as on control boxes, drives, and accessories, by more than the price increase on any such products it charges to other customers, including Franklin Pump Systems, Inc. and any other current or future affiliate of Franklin’s through December 31, 2006.

(Emphasis added). Section 4(K) does not expressly exclude § 4(N) from its provision which eliminates “all other previously, announced allowances, discounts and programs for Franklin products” as of October 17, 2004.

Franklin began selling Non-Units directly to distributors before execution of the Settlement Agreement. In addition, Franklin has offered and provided various discounts on Non-Unit sales to distributors that were not made available to pump OEMs. Senior Vice President and President of Americas Water Systems Group of Franklin, Robert J. Stone, explains:

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Cite This Page — Counsel Stack

Bluebook (online)
519 F. App'x 370, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sta-rite-industries-llc-v-franklin-electric-co-inc-ca6-2013.