Urban Associates, Inc. v. Standex Electronics, Inc.

216 F. App'x 495
CourtCourt of Appeals for the Sixth Circuit
DecidedFebruary 1, 2007
Docket06-1279
StatusUnpublished
Cited by12 cases

This text of 216 F. App'x 495 (Urban Associates, Inc. v. Standex Electronics, 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
Urban Associates, Inc. v. Standex Electronics, Inc., 216 F. App'x 495 (6th Cir. 2007).

Opinion

GRIFFIN, Circuit Judge.

In 1990, the predecessor to plaintiff Urban Associates, Inc. (“Urban”) entered into a sales representative agreement (“agreement”) with defendant Standex Electronics, Inc., a wholly-owned subsidiary of Standex International Corporation (collectively “Standex”). The agreement called for Urban to solicit requests for quotation (“RFQs”) from potential customers in the automotive industry—primarily in Michigan—for Standex’s custom-manufactured parts. In return, Standex agreed to pay Urban commissions for certain sales generated pursuant to an RFQ obtained by Urban. After Urban performed under the agreement for about twelve years, Standex exercised its contractual right to terminate the agreement on sixty days’ written notice. At about the same time, Standex hired the Urban employee who had been soliciting customers under the agreement (“the sales representative”); that enabled Standex to have its own employee act as salesman, rather than paying commissions.

Urban sued in the United States District Court for the Eastern District of Michigan, claiming that Standex breached the agreement by failing to pay commissions due on products that were shipped after the termination date pursuant to purchase orders that were booked before the termination date (count one). Urban also claimed that Standex terminated the agreement in a bad-faith effort to avoid paying commissions due (also count one). In the alternative, Urban argued that if it were found not entitled to commissions on the disputed shipments under the agreement, it was entitled to compensation in quantum meruit to avoid the unjust enrichment of Standex (count two). Urban further claimed that Standex tortiously interfered with its employment relationship with the sales representative by inducing her to leave Urban (count three), and it sought declaratory relief as to Standex’s continuing obligations under counts two and three (count four).

The district court granted summary judgment for Standex on all counts. For the reasons that follow, we affirm in part and reverse in part. Specifically, we affirm summary judgment for Standex on the bad-faith termination claim (count one, part two), the quantum meruit claim (count two), the tortious-interference claim (count three), and the request for declaratory relief as to quantum meruit and tortious interference (count four). We reverse summary judgment, however, with regard to the breach-of-contract claim (count one, part one).

*498 I.

The district court had uncontested diversity jurisdiction over this matter under 28 U.S.C. § 1382(a)(1), and we have uncontested appellate jurisdiction under 28 U.S.C. § 1291.

II.

Urban was an independent sales representative enterprise that sold electronic components, primarily to the auto industry, on behalf of manufacturers. Standex is a manufacturer of electronic components and assemblies for use in the auto, communication, and medical industries.

Standex manufactures “engineered” parts, i.e., custom parts, which the parties agree require a great deal of effort before the final product reaches the consumer. First, the customer sends the specifications of its desired part to Standex with a request for a price quote. Second, Standex designs and engineers the part in order to ascertain how much to quote as its production price. If the customer accepts Standex’s bid, Standex begins making the tooling equipment (molds and presses) needed to make the part; this process can entail the creation of prototypes and some pre-production approval steps. Once Standex finishes the design and sets up the equipment to manufacture the part, it waits for the customer’s instructions as to how many parts to produce and when to deliver them. The time between development of a customer’s RFQ and Standex’s shipment of the custom parts can range from six months to a year.

When a customer decides that it is going to buy parts from Standex, the customer issues documentation indicating that Standex was awarded business for a given part, identified by part number, purchase order (“PO”), and percentage of the buyer’s business in that part. The customer might issue a purchase order for a specified period of time, a reorder of the same part, or a blanket PO (discussed below). Once the customer issues an order, Standex puts it into an “open order” file and issues an Order Acknowledgment that lists the PO date, purchase price, the customer’s part number, and Standex’s internal part number. As Standex Vice-President (“VP”) Charles Johnson testified at deposition, “[TJhere was always a constant record on the computer that we received this purchase order, it has been acknowledged and the sales [credit] go to this sales representative and the deliveries are such and such.”

The assigned part number remained the same as long as there was no change to the part; any revisions would be denoted by adding an alphabetical suffix to the part number. Johnson testified that Standex’s objective was to obtain the customer’s business for the life of the part or the life of the program.

A blanket PO specifies the customer’s possible quantity requirements, the prices for various quantities of the part, and other terms. A blanket order did not obligate the customer to buy any parts, and it did not obligate Standex to make or ship any parts; those obligations did not arise until the customer issued a shipment order (also known as a production or release order) “against” the blanket PO. Blanket POs could last for a period of time—Standex customers’ blanket PO’s typically lasted up to a year—whereas a shipment order was a discrete order to be filled under the terms spelled out in the blanket PO. If a blanket PO expired and the customer still wished to buy more of the same part, the customer would issue another blanket PO and issue shipment orders against it as needed.

Before 2003, Standex used sales representatives to make initial contact and soli *499 cit RFQs from potential customers. While the representative was developing the RFQ with the customer, he bore his own expenses; he was not entitled to commissions until the product shipped. Thus, a representative’s commissions depended on the quantity of the product actually shipped.

In 1990, Urban’s predecessor entered into an agreement to serve as Standex’s sales representative, and, in 1992, Urban acquired the predecessor’s assets and assumed its role under the agreement. The agreement, which was drafted by Johnson, contained only seventeen paragraphs. It provided, in part:

1. APPOINTMENT and ACCEPTANCE. The Company hereby appoints Representative as its sales representative to solicit orders for the sale of the products of the Company which are specified in Addendum “A” hereto ... from customers located in the territory designated in Addendum “B” hereto ... Representative hereby accepts such appointment and agrees to use its best efforts to aggressively solicit such orders from customers in the territory and to otherwise represent the interests of the Company in the Territory, in accordance with the terms and provisions of this Agreement.

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216 F. App'x 495, Counsel Stack Legal Research, https://law.counselstack.com/opinion/urban-associates-inc-v-standex-electronics-inc-ca6-2007.