Maverick Group Marketing, Inc. v. Worx Environmental Products, Inc.
Docket: Case No. 2:13-cv-02268-tmp
Court: District Court, W.D. Tennessee; April 9, 2015; Federal District Court
The Court is considering cross-motions for summary judgment between Plaintiff Maverick Group Marketing, Inc. and Defendants Worx Environmental Products, Ltd. and its affiliates. Worx filed its motion on January 8, 2015, with Maverick responding on February 4, 2015, and Worx replying on February 18, 2015. Maverick submitted its own motion on January 13, 2015, seeking partial summary judgment on its claims and full summary judgment on Worx’s counterclaims. Maverick's Statement of Undisputed Facts exceeded the ten-page limit set by Local Rule 56.1(a), containing 92 paragraphs over 18 pages, leading the Court to consider the excessive material inappropriate, as it included irrelevant issues. The Court noted that only 29 out of 162 presented facts were deemed undisputed, mostly pertaining to basic information such as dates and business purposes.
Worx manufactures environmentally-friendly cleaning products, while Maverick, owned by John Garrison, is a marketing company. Their dispute arises from a Marketing Agency Agreement executed on February 12, 2007. Following the Agreement, Maverick sought to establish a relationship with Wal-Mart for Worx. Key figures include Sergio Abarca, who became Worx’s Vice President and communicated with both Garrison and Wal-Mart. Worx claims Abarca sent a letter on February 2, 2009, terminating the Agreement, followed by another termination email on March 10, 2009. Maverick contends that the Agreement was not validly terminated and emphasizes that communication ceased after the purported termination, despite Abarca's continued engagement with Wal-Mart. The parties dispute the legal implications of Abarca's communications regarding whether an 'order' was solicited under the Agreement.
On July 2, 2009, Abarca informed Worx employees of securing a three-year contract with Wal-Mart to service 3,100 centers. Following this, on July 31, 2009, Wal-Mart ordered 3,118 cases of Worx products and issued a Production Notice, with shipments received by August 25. An award letter was drafted by Wal-Mart on August 26. Maverick did not receive any commissions from Worx, leading to a complaint filed by Maverick in the Chancery Court of Shelby County, Tennessee, on March 27, 2013, which was removed to federal court on May 1, 2013. An Amended Complaint was subsequently filed, seeking damages for breach of contract, unjust enrichment, and declaratory relief. Worx counterclaimed, alleging Maverick breached the agreement and committed fraud. The dispute centers on Maverick's entitlement to post-termination commissions for orders solicited before the termination date, which is defined as 120 days after effective notice.
The standard for summary judgment under Federal Rule of Civil Procedure 56(a) requires that the moving party demonstrate no genuine dispute on material facts. The court assesses evidence favorably for the nonmoving party, refraining from credibility assessments. The nonmoving party must provide specific facts to show genuine issues for trial, exceeding mere speculation. The court determines if the evidence warrants jury submission or if it overwhelmingly favors one side. Worx's fraud claim involves allegations that an altered Agreement was sent by Garrison of Maverick. Worx challenges the authenticity of the Agreement but admits to entering an Agreement with Maverick around February 12, 2007, accepting that certain provisions are consistent across versions.
Worx asserts that the Agreement is central to its arguments while simultaneously questioning the 'authenticity and validity' of the 'altered' Agreement concerning its fraud claim. Both parties acknowledge their obligation to the Agreement's language. Worx's fraud allegation hinges on a misrepresentation that did not affect the validity of the February 12, 2007 Agreement. The Court's approach to contract disputes involves determining the parties' intentions through the ordinary meaning of the contract's language, assessing for ambiguity, and applying rules of construction as needed. If ambiguity remains, the matter becomes a factual question for a jury, with the parties' intentions presumed to be those expressed in the contract.
Regarding the MANA Code of Ethics, the parties agree that the relevant provisions of the Agreement are binding. However, a dispute arises as Maverick claims Worx violated the MANA Code, while Worx contends these provisions are merely aspirational. Maverick argues that since the provisions are included in the Agreement and drafted by Worx, they should be binding. The Court must objectively evaluate whether the MANA Code was intended as binding contractual language. It concludes that no reasonable observer would see the MANA terms as binding due to their distinct format, separate numbering, and lack of reference in the Agreement’s main body. The Court distinguishes this case from precedents like American General Equity Services Corp. v. Schablik and Staubach Retail Services-Southeast, LLC v. H.G. Hill Realty Co., where the extrinsic terms were clearly referenced and standard in nature, unlike the MANA provisions in this case.
The MANA Code of Ethics is characterized as an aspirational document rather than an enforceable contract, as it is not mentioned in the Agreement between Worx and Maverick and lacks binding language. The code resembles a corporate mission statement, providing vague guidelines rather than specific contractual obligations. Examples include references to privileges between agents not defined in the Agreement, and duties that lack clarity regarding expectations for performance. The Agreement refers to Worx as 'Principal,' not 'Manufacturer,' further indicating the code's non-binding nature. Additionally, the code discusses drafting representation agreements rather than obligations under the existing Agreement. Maverick's claims of breach related to the MANA Code are undermined by the Agreement's clear termination provisions, which allow termination at any time with notice, contrary to the MANA Code's suggested cancellability terms. There is also no evidence of any agreed-upon arbitration process as suggested by the Code. Ultimately, the Code of Ethics served as a guideline for drafting the contract, and its provisions do not impose legal obligations, leading to the conclusion that Maverick's breach allegations are legally unfounded.
Worx's refusal to pay commissions to Maverick is examined in the context of the Agreement's termination requirements. The Agreement stipulates that termination requires a written notice mailed at least 120 days in advance, or mutual consent. Maverick asserts entitlement to commissions for business solicited before the termination date, but Worx does not acknowledge this claim and relies on its own interpretation of the termination date. According to the Agreement, written notices are effective 24 hours after mailing, but Worx argues that emails from Abarca constitute adequate notice, which is insufficient under the Agreement's terms.
Maverick, however, has waived its right to enforce strict compliance with the notice requirement. Citing a precedent, the court notes that a party may waive contractual rights either explicitly or through conduct that suggests an intention to accept non-compliance. After receiving an email from Garrison indicating he did not intend to terminate the Agreement, Maverick did not object to the notice. Furthermore, Maverick's subsequent acceptance of the second termination email indicates implied acceptance of the termination, relieving Worx of the obligation to provide formal written notice by mail.
Worx's termination of the Agreement is critical to Maverick's commission rights, which are contingent upon a defined 'Termination Date' set at 120 days post-notice. Worx claims to have terminated the Agreement via a letter dated February 2, 2009, indicating a shift in sales strategies and proposing that Maverick transition to a distributor and independent sales representative. The letter states the current relationship would officially end on June 2, 2009, and suggests mutual consent to terminate the Agreement immediately to facilitate a new agreement.
However, a subsequent email from Abarca on February 9, 2009, introduces ambiguity regarding termination. Abarca mentions the need to decide whether to terminate immediately by mutual consent or follow a 120-day notice period. The email also indicates that discussions about a new agreement would depend on the potential business with Wal-Mart. Garrison's prompt response expresses a desire to maintain the existing Agreement, emphasizing his commitment to pursuing the Wal-Mart opportunity.
Abarca replies the same day, clarifying that he does not intend to terminate the relationship concerning ongoing business efforts but insists on modifying the existing contractual agreements. He requests the return of inventory and reiterates that had he chosen to terminate the Agreement, he could have done so following the contract's termination clause.
Abarca's statement indicates that he did not terminate the agreement with Maverick and Worx as of February 9, 2009, despite earlier correspondence. His acknowledgment that he could have used the contract's termination clause but chose not to refutes any claims of unilateral termination by Worx prior to that date. On March 10, 2009, Abarca informed Garrison that Maverick's services were no longer required and formally terminated the agreement effective July 10, 2009, which was recognized by Maverick as proper notice. The termination date is thus established as 120 days post-notice, aligning with the contract's terms.
Maverick's claim for commissions hinges on the interpretation of "orders solicited" as outlined in paragraph 6 of the agreement, which asserts that commissions are owed for orders solicited prior to termination, irrespective of when they are accepted or fulfilled. Maverick contends that it was actively soliciting orders from Wal-Mart before the termination, while Worx counters that Maverick did not solicit any orders, thus disputing the entitlement to commissions. The court's task is to interpret "orders solicited" to determine if Maverick qualifies for commissions during the 120-day period following termination.
The term "orders solicited," which activates Maverick’s right to commissions after termination, is deemed ambiguous and open to multiple interpretations. "Solicit" is not explicitly defined in the Agreement but generally means to request or petition. Based on its common meaning, a ruling could favor Maverick since it is clear that Maverick solicited business from Wal-Mart. However, the frequent references to "orders solicited" throughout the Agreement introduce ambiguity regarding its meaning. The Agreement allows Maverick to solicit orders for Worx’s products, with commissions earned upon acceptance or delivery of orders. Yet, paragraph 6 suggests that commissions are also owed for orders solicited prior to termination, regardless of when they are accepted or shipped, implying a different interpretation of "orders solicited."
This creates a dual interpretation: one view sees "orders solicited" as linked to the agent's efforts in securing orders, potentially protecting Maverick's commission rights post-termination. Conversely, another interpretation requires actual orders from Wal-Mart, which could justify Worx’s termination of the Agreement if Maverick fails to meet performance expectations. Both interpretations are plausible, establishing contract ambiguity. The Court must apply rules of construction to address this ambiguity, but these rules do not clarify the matter as the conflicting paragraphs do not negate the "orders solicited" language, leaving Maverick’s entitlement to commissions unresolved.
Maverick's entitlement to commissions hinges on the interpretation of the term 'solicited' within the Agreement, particularly in light of the 'regardless' language in paragraph 6, which suggests commissions may be earned before formal acceptance or invoicing. The Court emphasizes that the intent of the contracting parties is paramount but finds the Agreement's language ambiguous regarding what constitutes solicitation. Consequently, both parties' motions for summary judgment regarding Maverick's commission entitlement are denied, and the matter will proceed to trial for clarification through evidence and testimony.
Worx's motion for summary judgment on Maverick's unjust enrichment claim is granted, as unjust enrichment claims are generally not available when a valid and enforceable contract governs the matter at hand. The Court acknowledges that the Agreement is enforceable, and the existence of this contract precludes Maverick from pursuing an unjust enrichment claim.
Regarding the procuring cause doctrine, the Court notes that it is premature to consider this doctrine in the context of the detailed contractual terms that govern commission entitlement. The Court will first interpret the contractual language before addressing any extrinsic evidence related to the procuring cause.
Maverick is also seeking summary judgment on Worx's counterclaims, which include allegations of breach of contract, misrepresentation, and fraud.
The breach of contract claim under Tennessee law requires three elements: (1) an enforceable contract, (2) nonperformance constituting a breach, and (3) damages resulting from the breach. Worx asserts that Maverick materially breached its obligations by failing to perform marketing services effectively and timely, which allegedly caused Worx to lose business opportunities and incur expenses. However, Worx does not identify any specific provisions of the Agreement that Maverick breached. The Agreement emphasizes that Worx is only interested in the results obtained by Maverick, who retained sole control over performance. Worx accepted the risk of Maverick's performance and compensated only through commissions, leading to the conclusion that Worx's breach-of-contract claim is unsubstantiated.
Regarding misrepresentation and fraud, the choice of law for tort claims hinges on the "most significant relationship" test from Tennessee law. This test considers various factors, including where the injury and conduct occurred and the parties' connections. The Court determines that Tennessee law applies since the relationship between the parties is centered in Tennessee, as governed by their contract.
Worx claims that Maverick misrepresented the quality of its services and falsely reported its marketing efforts. To establish intentional misrepresentation under Tennessee law, six elements must be proven: (1) a representation of an existing or past fact, (2) the falsity of the representation at the time it was made, (3) relevance to a material fact, (4) knowledge or reckless disregard for the truth by the defendant, among others.
Plaintiff must demonstrate that they reasonably relied on a misrepresented material fact and suffered damages due to that misrepresentation. Maverick, in its Motion for Summary Judgment, argues that Garrison, who had extensive contacts with Wal-Mart, did not misrepresent his relationship with the retailer, supported by a Senior Manager's confirmation of Garrison's beneficial relationship with Wal-Mart. Worx counters that the Senior Manager was uninvolved in purchasing Worx products and that Zach Freeze, the buyer, did not recall Garrison. However, these claims do not contradict Garrison’s sworn statement regarding his contacts with Wal-Mart, and Worx failed to challenge this statement effectively. The evidence shows that Maverick had substantial communication with Wal-Mart, which Worx did not rebut. Consequently, Worx’s misrepresentation claim fails as there is no genuine dispute regarding Maverick's representations.
Worx's final counterclaim alleges fraud, claiming Garrison altered the Agreement by changing its terms and adding an unauthorized Addendum, which constitutes fraud under Tennessee law. To prove fraud, Worx must show an intentional misrepresentation of a material fact, knowledge of its falsity, injury from reasonable reliance, and that the misrepresentation involved a past or existing fact. Both parties acknowledge the binding nature of the February 12, 2007 Agreement. Despite asserting various claims about the Agreement's interpretation and validity, Worx admits to entering the Agreement but questions its authenticity. Worx alleges that Maverick provided two altered versions of the Agreement, claiming reliance on these misrepresentations and resulting damages. Evidence indicates that Garrison sent an altered Agency Agreement to Worx's new representative, Abarca, which contains discrepancies from the original Agreement regarding commission payment due dates.
The original Agreement contains a commission listed as "8.," while the altered version has "8." underlined. The altered document references "Addendum A," which specifies company accounts, whereas the original does not mention this addendum. Worx claims that the names of companies listed in the altered Addendum differ from those in the original, alleging fraud. In response to Maverick’s Motion for Summary Judgment, Worx argues that the inconsistencies suggest intentional misrepresentation by Maverick regarding the Addendum's inclusion in the Agreement. Maverick contends that the discrepancies stem from sending an earlier draft rather than the signed Agreement and asserts that the changes did not cause any injury to Worx. Worx has failed to demonstrate any reliance on the altered agreement or evidence of injury from the changes, leading to the dismissal of its fraud claim as a matter of law, and Maverick's Motion for Summary Judgment on Worx's counterclaims is granted.
Regarding the defense of laches, Maverick seeks a ruling that it does not apply to its breach of contract claim. However, under Tennessee law, laches can bar legal claims if there’s an unreasonable delay causing prejudice. Worx points to Maverick’s nearly four-year delay after the agreement's termination, during which several witnesses have died. This creates a genuine dispute about laches, resulting in the denial of Maverick’s Motion for Summary Judgment on this issue.
Lastly, Worx acknowledges that Worx Environmental Products, Ltd. and Worx Environmental Products of Canada are proper parties. The Court lacks sufficient evidence to determine the status of Worx Environmental Products, Inc., which Worx claims does not exist, and this issue will be addressed at trial if contested.
Maverick's request for summary judgment against Worx on the issue of territorial limitation is denied. Maverick argued that no "Territorial Manager Agreement" existed, but Worx disputed this, indicating the presence of some documents suggesting territorial limitations despite others being lost. The court found insufficient evidence to support Maverick's claim of no genuine dispute.
Maverick also sought summary judgment on factual issues related to "24-store test results" and the credibility of witness Zach Freeze, both of which Worx adequately disputed. The court declined to resolve these disputed factual matters at the summary judgment stage, leading to a denial of Maverick's motions on these points.
Additionally, Maverick's motion to calculate damages before addressing substantive issues was also denied, with the court stating that any damages and their calculation would be determined at trial.
In conclusion, while Maverick's motion for summary judgment concerning Worx's counterclaims was granted, its motions related to its own claims and the discussed factual issues were denied. Worx’s motion for summary judgment was also denied. The court's application of Tennessee law to the Agreement was noted.
A systematic approach to resolving contractual ambiguity in Tennessee involves examining case law and established rules of construction. Key cases referenced include *Planters Gin Co.*, *Richards v. Taylor*, and *Coble Systems, Inc. v. Gifford Co.*, which emphasize that if a contract is deemed ambiguous, the court must look beyond the literal language to ascertain the parties' intentions. The excerpt discusses a specific Marketing Agency Agreement, highlighting that certain termination provisions may be inconsistent with the agreement's overall terms, leading to the potential disregard of those provisions. Maverick asserts that the agreement was not terminated, despite Abarca's claim of termination on March 10, 2009. Discrepancies exist regarding the effective termination date, with Abarca's communications indicating July 10, 2009, as the termination date, despite earlier claims. The court notes that neither party effectively contests this later date in their filings. The principles of contract interpretation dictate that ambiguous terms necessitate judicial clarification rather than strict adherence to the text.
Maverick can only invoke the procuring-cause doctrine if the underlying Agreement is deemed irredeemably ambiguous, as noted in its response to Worx’s motion for summary judgment. Worx confirmed its entry into the Agreement with Maverick on February 12, 2007, and withdrew its affirmative defense concerning the statute of limitations for breach of contract but maintained its defense based on laches. The document references various legal precedents regarding the application of tort law and conflict of laws, specifically addressing misrepresentation and reliance across state lines, although it notes a lack of Tennessee case law specifically applying section 148 of the Restatement (Second) of Conflict of Laws. For laches to preclude a claim where the statute of limitations is still viable, the plaintiff must exhibit gross laches. Additionally, it is established that the differences between the signed Agreement and its drafts are neither material nor injurious to Worx.
