Zimmer-Masiello, Inc. v. Zimmer, Inc.

159 A.D.2d 363
CourtAppellate Division of the Supreme Court of the State of New York
DecidedMarch 22, 1990
StatusPublished
Cited by20 cases

This text of 159 A.D.2d 363 (Zimmer-Masiello, Inc. v. Zimmer, Inc.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Zimmer-Masiello, Inc. v. Zimmer, Inc., 159 A.D.2d 363 (N.Y. Ct. App. 1990).

Opinion

Order, Supreme Court, New York County (Diane Lebedeff, J.), entered September 13, 1988, which, inter alia, granted defendant’s motion for summary judgment to the extent of dismissing plaintiff’s second cause of action, unanimously modified, on the law, to grant defendant’s motion to the extent of dismissing the fourth and fifth causes [364]*364of action, and to reverse the dismissal of the second cause of action and reinstate that claim, and otherwise affirmed, without costs.

Plaintiff Zimmer-Masiello, Inc. (hereinafter Masiello) is a corporation that acted as the exclusive distributor, or sales representative, of surgical equipment and orthopedic supplies manufactured by defendant Zimmer, Inc. and sold primarily to doctors and hospitals.

Frank Masiello, who had been employed as a salesman by a former distributor of defendant’s products, was approached by defendant in 1976 with a proposal that he take over an exclusive distributorship, with provision for the payment of $90,000 over a five-year period to the retiring former distributor. The payments were to be arranged by Zimmer and deducted from commissions due to the plaintiff.

Frank Masiello accepted the proposal and formed the plaintiff corporation, which since 1976 has exclusively sold the defendant’s products in various territories within the metropolitan New York City area, and since 1980 in The Bronx and Manhattan only. To carry on the distributorship, plaintiff employed its own salesmen and staff. While plaintiff’s contract with the defendant was party written, it was primarily oral.

On June 15, 1987, the defendant unilaterally terminated the plaintiff’s distributorship without any prior notice. On that same day, defendant hired many of plaintiff’s employees and salespeople and commenced selling its products in plaintiff’s prior territory on a direct basis. This included selling directly to plaintiff’s former customers.

Plaintiff immediately instituted this action and sought preliminary injunctive relief which was denied on the ground that the injury could be adequately recompensed by monetary damages. Following extensive discovery, defendant made the instant motion for summary judgment seeking dismissal of the complaint.

The complaint alleged seven causes of action—(1) breach of fiduciary duty; (2) tortious interference with customers; (3) tortious interference with plaintiff’s sales associates; (4) fraud; (5) breach of contract; (6) an accounting for deferred commissions; and (7) an accounting for deferred commissions on sales to a particular customer (ETI). (The parties have apparently attempted to adjust their differences regarding commissions, and the last two causes of action, [6] and [7], are not at issue on this appeal.)

The IAS court granted defendant’s motion for summary [365]*365judgment only to the extent of dismissing the second cause of action for tortious interference with customers. Plaintiff appeals that dismissal while defendant appeals from the denial of the motion with respect to the remaining causes of action, other than those for the accountings. We discuss the various causes of action, seriatim, as follows:

Breach of Fiduciary Duty—This cause of action is predicated upon allegations of a relationship of trust and confidence between the parties and the breach of that fiduciary relationship in the termination of the at-will contract.

The classic formulation of a claim for breach of fiduciary duty is found in the case of A. S. Rampell, Inc. v Hyster Co. (3 NY2d 369), dealing with circumstances quite similar to those in the case at bar. In Rampell, the defendant manufacturer terminated a distributorship agreement with the plaintiff after a 15-year business relationship. The Court of Appeals held that the defendant’s appropriation of the plaintiff’s sales organization and goodwill was actionable because of the breach of the confidential relationship between the parties. The court found that a confidential relationship arose from the position of dominance by the manufacturer over its distributor, as well as from the investment by the distributor of its money and time to develop a business for the manufacturer over a course of many years. The court also noted that a relationship of confidence arose from the provisions of the contract between the parties whereby the distributor was obliged to make its lists of prospective customers available to the manufacturer, and to provide records of business activities and report on its inventory and financial condition, and the like.

In the instant case, the parties shared a similar relationship. The manufacturer, Zimmer, maintained a position of dominance and the plaintiff was dependent on Zimmer during their relationship of more than 11 years. Zimmer dictated the size of Masiello’s territory, prices and commissions, and as in Rampell (supra), exploited the same type of confidential and proprietary information which Masiello was required to provide Zimmer pursuant to their agreement. Accordingly, plaintiff sufficiently demonstrated a cause of action for breach of fiduciary duty and the IAS court properly denied defendant’s motion for summary dismissal of this claim. (See, A. S. Rampell, Inc. v Hyster Co., supra; see also, Apple Records v Capitol Records, 137 AD2d 50, and cases cited therein.)

While defendant recognizes the principles set forth in the [366]*366foregoing cases, it argues that the facts of this case are distinguishable, and that a different result is warranted here because Masiello was merely what it terms a "sales agent”, who did not take title to goods, as opposed to a resale dealer as was the plaintiff in Rampell (supra). To the extent that this distinction may be relevant, defendant has merely raised a factual issue concerning the nature and extent of plaintiff’s relationship with the defendant which would, in any event, require the denial of summary judgment.

Tortious Interference with Customers—In this cause of action, plaintiff alleges tortious interference by defendant with plaintiffs contractual relations with its customers. The IAS court granted summary judgment dismissing this cause of action because it found that the handbook entitled "Basic Facts About Zimmer Distributors”, which constitutes part of the contract between the parties, provides that the distributor’s customers remain Zimmer’s customers.

However, a review of this document reveals no such provision. While the handbook contains provisions concerning various other discrete aspects of the distributorship arrangement, it is silent on the issue of the relationship vis-á-vis the customers, the distributor and the manufacturer. Accordingly, triable issues of fact exist as to this key element of plaintiff’s claim, and the IAS court erred in granting summary judgment dismissing this cause of action based apparently upon a misreading of the handbook.

Tortious Interference with Plaintiff’s Sales Associates—This cause of action is predicated upon defendant’s hiring of plaintiffs employees and sales associates by inducing them to work directly for defendant upon its termination of Masiello’s distributorship. The IAS court denied summary judgment on this claim on the ground that "[allegations and proof of a confidential relationship may suffice to support Masiello’s action for tortious interference with Masiello’s at-will employees”, citing Guard-Life Corp. v Parker Hardware Mfg. Corp. (50 NY2d 183) and Rampell (supra),

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Bluebook (online)
159 A.D.2d 363, Counsel Stack Legal Research, https://law.counselstack.com/opinion/zimmer-masiello-inc-v-zimmer-inc-nyappdiv-1990.