MARTIN C. CARLSON, Magistrate Judge.
This litigation stems from a broken and embittered commercial relationship between two independent salesman, an equine-products company, and its founder.
The plaintiffs, Joe Pete Wells and Les Krutoff, have sued JPC Equestrian, Inc. ("JPC") and its President, Varun Sharma, alleging that the defendants breached the terms of sales representation contracts by failing to pay the Wells and Krutoff sales commissions for products they sold on behalf of JPC. Additionally, the plaintiffs allege that Sharma tortiously interfered with their contractual relations by causing another corporate entity that Sharma controlled to engage in sales activity in the plaintiffs' assigned territories, thereby undercutting the commissions that they would have received from JPC.
After the preliminary disposition of a number of claims, the parties engaged in fact discovery, which has now concluded. Following that discovery, the parties have filed cross motions for summary judgment, which are now ripe for disposition. For the reasons that follow, we conclude that the plaintiffs' contract claims are replete with disputed issues of fact, and that the resolution of these disputes must await trial. The defendants insist that the record fails to support the plaintiffs' claims that there was mutual assent to support the contracts, or otherwise that the record should compel the conclusion that the plaintiffs waived their contract claims long ago by failing to pursue contractual remedies for years. We disagree that the record compels such a conclusion, and instead find that the contract claims in this case turn on the resolution of numerous disputed issues in the record, making summary judgment unwarranted.
In contrast, we agree with the defendants that there is insufficient evidence to support the plaintiffs' tortious interference claims, and will enter summary judgment in Sharma's favor on these claims alone.
The background facts relevant to this dispute begin nearly thirteen years ago, and many do not seem to be seriously disputed.
Varun Sharma is a native of India and, since 1992, has operated two businesses in that country. These businesses manufacture and sell equestrian-related supplies, clothing, and equipment. Sales from these businesses extend worldwide, and are primarily directed at wholesalers, who then sell the products to retailers.
One of the businesses that Sharma has operated in India is a company called JPC ("JPC-India"). JPC-India is a partnership, in which Sharma owns 90% and his son owns the remaining 10%. JPC-India primarily sells its products to wholesalers but sometimes sells to retailers as well. (Doc. 36, Affidavit of Varun Sharma ("Sharma Aff.") ¶¶ 1-5.)
In early 2002, Sharma came to the United States to establish a new business known as JPC Equestrian, Inc ("JPC"). On February 4, 2002, JPC was incorporated under the laws of Pennsylvania. JPC is a wholly owned subsidiary of Cotton Naturals India Ltd. Sharma owns 90% of Cotton Naturals, and his son owns the remaining 10%. Sharma is the President of JPC, which has its principal place of business in Drums, Pennsylvania. (Sharma Aff. ¶¶ 6-8.)
JPC sells equestrian-related supplies, clothing, and equipment to retailers in the United States. Its purchases inventory from JPC-India and then sells the product to retail-store customers. (Sharma Aff. ¶ 9.) Since it was established in the United States in 2002, JPC has used independent sales representatives to make many, but not all, of its sales. These sales representatives are assigned territories in which they are responsible for marketing and selling JPC product. (Sharma Aff. ¶ 10.) In order to market JPC products, sales representatives purchase product samples from JPC and then show those samples to customers. (Sharma Aff. ¶ 12.) The sales representatives are all independent contractors, and are paid solely through commissions on sales made to customers. (
Although many of JPC's sales are made through sales representatives, some sales are made through the company's customer service department. Customers who purchase products through JPC's customer service department are known as "house accounts." (
Generally, sales representatives receive 10% sales commissions. However, because sales to house accounts are made through JPC's customer service department, sales representatives do not receive commissions on these sales. They also do not receive commissions on close-out sales or other liquidation sales. (
As Sharma was preparing to enter the equine-products market in the United States, he consulted with a lawyer in New Hampshire, who provided him with a form document that was entitled "Sales Representation Agreement," which the lawyer suggested could be exchanged with the independent sales representatives that Sharma intended to use to market and sell products on behalf of JPC in the United States.
In January 2002, Sharma arranged to meet with the plaintiffs and other sales representatives in the business at a trade show in King of Prussia, Pennsylvania. (Sharma Aff. ¶ 25; Wells Dep. at 46-47; Krutoff Dep. at 29.) Sharma had some familiarity with the plaintiffs due to their involvement in the equine business, specifically as sales representatives for another equestrian-supply wholesaler, English Equestrian Group ("EEG"), and they met during the convention to discuss the possibility of the plaintiffs representing JPC's product line as independent sales representatives. Sharma recalls have some "general discussions" with the plaintiffs about how the prospective company would operate, what types of products representatives would be expected to sell, and how the representatives would market product and get paid for sales. (Sharma Aff. ¶ 25; Wells Dep. at 46-47; Krutoff Dep. at 25-31.) Although no agreements were reached at this meeting, Sharma claims that in April "without discussing any particulars about the company with me, plaintiffs said they would serve JPC Equestrian as independent sales representatives." (Sharma Aff. ¶¶ 25, 27.)
To memorialize this new business relationship, sometime in 2002, after the plaintiffs had begun marketing product on JPC's behalf, Sharma "inserted plaintiffs' respective names and addresses" into the "document template" for a sales representation agreement that Sharma had been provided by the New Hampshire lawyer, entitled "Sales Representation Agreement," which purported to outline the parties' relationship.
Although the defendants seem to dispute that Wells and Krutoff ever executed the Agreement, both Wells and Krutoff have testified that they did so. Wells testified as follows:
(Wells Dep. at 52-53.) Krutoff likewise testified that he received a copy of the Agreement, which he signed and returned to the company. (Krutoff Dep. at 35-36.) Nevertheless, in marked contrast, Sharma testified that he never received a signed copy of the Agreement from either of the plaintiffs. (Sharma Aff. ¶¶ 30-31.)
Pursuant to the terms of the Agreement,
The plaintiffs also claim that they had substantive discussions with Sharma about the terms of their Agreements and relationship with JPC, and the plaintiffs' version of these discussions differed markedly from that recalled by Sharma. Thus, Wells testified during his deposition that Sharma assured him that he would be paid a 10% commission on all sales made within his territory, and that Sharma agreed to furnish Wells with samples at no charge to enable him to "get right out and go" begin marketing and selling on JPC's behalf. (Wells Dep. at 47-48.) Krutoff similarly testified that he made it clear to Sharma that he wanted a 10% commission on all sales within his territory, which was exclusive, and that there would be no house accounts on which commissions would not be pa
The terms of the Agreement provide, apparently with no exceptions, that the plaintiffs would be paid a 10% commission on the total net payable invoices on sales made by the company and which resulted "from the Sales Representative's Introductions or other interventions." (Doc. 1, Compl., Ex., Sales Representation Agreement ¶ 4.) The Agreement also provided that the plaintiffs would bear their own expenses, with certain exceptions, and prohibited them from working for competitors while serving as JPC's representative. The Agreement also spelled out the procedures and timing by which either party could terminate the Agreement.
The defendants insist that the "Sales Representation Agreement" that Sharma prepared and provided to each of the plaintiffs does not amount to a contract. To the contrary, the defendants emphasize that the "Agreement" was never negotiated by the parties. They also assert that the plaintiffs failed to sign and return the document, or that neither JPC nor Sharma executed the document, and they highlight numerous instances where the parties did not faithfully follow each and every provision of the Agreement over the course of their years of commercial dealings with one another (something the plaintiffs acknowledge, but argue actually supports their claims that the defendants repeatedly breached the parties' agreement).
The plaintiffs claim that although they were typically paid the 10% commission called for under the Agreement, at numerous times JPC failed to pay a 10% percent commission on certain accounts, and instead paid only 5% for these accounts — something that Sharma has attested was the standard practice for JPC. Later, the plaintiffs claim that JPC converted some large accounts to "house accounts" and thus paid them no commissions at all on sales made to these accounts even if they were within the plaintiffs' sales territories. The plaintiffs also alleges that JPC sold directly to a number of their customers in order to avoid paying a commission as required under the Agreement. Finally, the plaintiffs allege that Sharma tortiously interfered with their contracts with JPC by selling products on behalf of JPC-India, in direct competition with JPC, and, therefore, denied the plaintiffs the benefit of their contracts with JPC by interfering with their sales efforts, and impairing their ability to earn commissions on the sales they generated.
JPC and Sharma take a decidedly different, and far narrower, view of the parties' relationship. Although they never explain or define the precise nature of the commercial relationship that JPC and the plaintiffs had for approximately eight years, or whether that relationship was governed by any written or oral contractual agreement, they are adamant that the "Sales Representation Agreement" first tendered from Varun Sharma to the plaintiffs in or around May 2002 did not form a contract. In support of this assertion, the defendants contend that the plaintiffs never signed the Agreement, despite being asked to do so by Sharma, or otherwise that no copy of a fully executed agreement have been produced. In the absence of a copy of the "Agreement" bearing all parties' signatures, the defendants insist the document never matured into an enforceable contract.
The defendants also note that the "Agreement" was not negotiated by the parties, emphasize that the plaintiffs testified during their depositions that the Agreement was essentially a formality and something that the parties did not focus on, and more importantly, the defendants maintain that the parties did not act consistently with numerous terms of the Agreement. Despite undisputed evidence showing that the parties adhered to many of the terms of the Agreement, the defendants insist that the parties paid so little regard to certain other terms that it compels a finding that the parties never manifested their assent to the Agreement.
Furthermore, the defendants argue that even if there were factual disputes regarding whether the parties entered in to the Agreement, they submit that summary judgment is nevertheless warranted because the plaintiffs have waived their right to enforce the Agreement's terms. Here the defendants are saying that because the plaintiffs continued working even while they were being paid less than full commissions on their sales, and while JPC was not adhering to all terms of the Agreement, their passivity should be construed as a waiver of their right now to enforce the terms of the parties' arrangement.
Finally, the defendants argue that they are entitled to summary judgment on the plaintiffs' claims that Sharma tortiously interfered with their contractual relations with JPC. The defendants assert that the plaintiffs have no evidence to show that Sharma caused JPC to breach any contract that it had with the plaintiffs, and there is no evidence showing that Sharma as a third party interfered with a contract that the plaintiffs may have had with JPC. Kearney, in contrast, argues that his claim is straightforward: JPC India sells bulk goods of the same type as those sold by JPC in smaller quantities, and in numerous instances Sharma, acting as managing director of JPC India, interfered with the plaintiffs' contracts with JPC by selling goods in direct competition with JPC, and, therefore, denying the plaintiffs the benefit of their own contracts with JPC.
Thus, despite agreeing on many of the facts in this case, the parties take sharply different views of the claims and the factual record, and those sharply divergent views are reflected in competing evidence in the record that makes summary judgment in favor of either party on the plaintiffs' breach-of-contract claim inappropriate at this time.
Although it is difficult to embrace the defendants' assertion that the parties operated for eight years in a commercial relationship without any contractual arrangement, and although many of the defendants' interpretive arguments seem rather narrow, we nonetheless find that there do remain sufficient questions as to whether and when the plaintiffs and JPC entered into an enforceable contract, and if so what the terms of that contract were, and whether those terms were breached.
In contrast, we find that the plaintiffs' tortious interference claim against Varun Sharma lacks sufficient evidentiary support, and is undermined by Sharma's sworn explanation regarding the nature of JPC-India's sales to customers in the plaintiffs' sales territories. Furthermore, we do not find in the record sufficient evidence to show that Sharma effectively could be considered a third-party interferer, since he effectively controlled both JPC and JPC India.
Accordingly, for the reasons that follow, the parties' cross-motions for summary judgment will be denied with respect to the plaintiffs' breach-of-contract claims, and granted in favor of Varun Sharma with respect only to the tortious-interference claims.
Rule 56(a) of the Federal Rules of Civil Procedure provides as follows:
Fed. R. Civ. P. 56(a). For purposes of Rule 56, a fact is material if proof of its existence of nonexistence might affect the outcome of the suit under the applicable substantive law.
Accordingly, in support of a motion for summary judgment, the moving party must show that if the evidence of record were reduced to admissible evidence in court, it would be insufficient to allow the non-moving party to carry its burden of proof.
In adjudicating the motion, the court must view the evidence presented in the light most favorable to the opposing party,
When a court is presented with cross-motions for summary judgment, "the court must rule on each party's motion on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the summary judgment standard."
"Where the facts are in dispute, the question of whether a contract was formed is for the jury to decide."
Mindful of this overarching principle of contract law and the proper respective roles of the court and the jury, we first consider the defendants' assertion that the Agreement never formed a contractual relationship between either of the plaintiffs and JPC. The Agreement provides that it was to be interpreted in accordance with Pennsylvania law, and the parties have at all times indicated that they mutually believe that Pennsylvania law governs the claims in this case. The defendants argue that the plaintiffs' failure to sign the document, or perhaps Sharma's failure to sign the document, caused it to be entirely unenforceable, and they argue that the parties' subsequent conduct, and indeed the plaintiffs' own testimony about how they viewed the written Agreement, compels a finding that neither the plaintiffs nor JPC considered themselves to be bound by the Agreement's terms.
As a threshold matter, as the parties prosecuting a claim for breach of contract, the plaintiffs bear the burden of proving the following: (1) the existence of a contract; (2) a breach of duty imposed by the contract; and (3) resultant damages.
"The law of this Commonwealth makes clear that a contract is created where there is mutual assent to the terms of a contract by the parties with the capacity to contract."
Under Pennsylvania law, courts determining whether the parties objectively manifested their intention to be bound will consider the entire document asserted to represent the parties' contractual agreement, and assess the relevant circumstances that surround the document's creation, including the parties' conduct.
As an initial matter, the defendants place undue weight on the fact that neither party has produced copies of the Agreement that bears all parties' signatures. It is undisputed that Sharma prepared the document, and that he sent the document to each of the plaintiffs with a request that they sign it. It is undisputed that no copy of the Agreement has been produced with the signatures of all parties. Relying on standard language contained in the Agreement that provides that it "may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument," (Doc. 1-1), and a single unpublished decision narrowly construing this language as creating an ironclad requirement that such an agreement be signed by both parties to be enforceable, the defendants argue that the absence of all parties' signatures renders the entire Agreement unenforceable as a matter of law. We disagree that this matter can be resolved at summary judgment.
A document signed by only one party may be enforceable "as long as both parties accept and act under its terms."
In
In contrast, the
Relying on the foregoing cases, the
Upon consideration, we do not find the
Since the language used in the Agreement did not expressly make clear that it could only become effective upon the signature of both parties, and because the language regarding counterparts and facsimile signatures are familiar and typical clauses used in commercial contracts generally, we do not agree that use of this customary language causes all agreements bearing this language to become unenforceable in the absence of signatures.
Our interpretation of the language at issue, and the teaching of
Next, the defendants argue that the Agreement should be declared unenforceable because "[t]he relevant circumstances surrounding the Document's creation and the parties' behavior afterward also show that the parties never intended to be bound by the Document." (Doc. 37, at 20.) In particular, the defendants argue that the plaintiffs and Sharma did not actively negotiate the terms of the Agreement, and that after the Agreement was exchanged the parties acted in a manner that was inconsistent with some of the Agreement's terms. The defendants also place great weight on select testimony by the plaintiffs to the effect that Wells considered that the Agreement was "unnecessary," (Wells Dep. at 58:20-24), that Krutoff considered it a mere "formality," (Krutoff Dep. at 36:6-12), and that the parties had few, if any discussions about it. In making these arguments, however, the defendants are really arguing about how the facts should be interpreted, and they do not persuade us that those facts compel the entry of summary judgment in their favor on the question of whether the parties entered into a valid and binding contract in 2002.
In addition to arguing that the parties' pre-contracting conduct suggests that the parties were not in mutual agreement, the defendants set forth numerous instances where the parties behaved contrary to, or inconsistently with, the terms of the Agreement. Thus, for example, the defendants note that although the Agreement provided that the plaintiffs would "meet reasonable gross sales requirements that are assigned . . . by the Company," (Agreement ¶ 1(b)), it is undisputed that JPC never established or imposed sales requirements on the plaintiffs. (Wells Dep. at 60:10-12; Krutoff Dep. at 43:21-24; 44:1-45:2; Sharma Aff. ¶ 33(a).) The defendants also note that paragraph 1(d) of the Agreement purports to require Kearney, as the sales representative, to collect payments from customers, but this was never done. (Wells Dep. at 61:5-15; Krutoff Dep. at 45:16-21; Sharma Aff. ¶ 33(b).) Likewise, the Agreement prohibits a sales representative from selling products that compete with JPC's products, but there is evidence to show that Krutoff did, and that Wells may have, sold products that competed with JPC during the time they worked on JPC's behalf, but JPC did not invoke the non-compete provision to force either plaintiff to discontinue their outside sales work. (Wells Dep. at 40-41; Krutoff Dep. at 21-22; Sharma Aff. ¶ 33(c).)
The Agreement further provided that the sales representative would receive a 10% commission on sales "directly resulting from the Sales Representative's introductions or other interventions." (Agreement ¶ 4.) It is undisputed that on multiple occasions, the plaintiffs were not paid a 10% commission on close-out sales, house accounts, or sales made to larger, national account customers, and these practices existed over the course of the parties' eight-year relationship. For their part, the defendants argue that JPC's routine practice of paying less than 10% commissions depending upon the particular customer and circumstances shows that the parties did not intend to be bound by the single 10% commission provided for in the Agreement. The plaintiffs have maintained that their agreements provided that they would be paid 10% and the fact that they were not paid such commissions on all sales is evidence not of a waiver, but of a breach. We believe that the parties' divergent interpretation of these facts highlight a material factual dispute, and does not compel the entry of judgment for either party as a matter of law.
The defendants submit numerous other instances where they claim the parties disregarded the Agreement's terms, or did not faithfully comply with them. The defendants aggregate instances where the parties did not strictly comply with the Agreement's provisions and terms, and argue that the conduct of the parties suggests a complete absence of outward and objective manifestations of assent to the terms of the Agreement. Again, the plaintiffs insist that whether or not all terms of the Agreement were followed is not dispositive of whether a binding contract was formed, and emphasize their view that instances of what they perceive as breach should not be construed instead as a waiver on their part of their right to enforce the terms that they claimed they bargained for.
On the record before the Court, we find that summary judgment in favor of either party is inappropriate on the question of whether the parties entered into a binding Agreement and, if so, what the scope of its terms were, and we do not find that these questions may be answered as a matter of law by this Court based purely upon examples of the parties' conduct over a lengthy commercial relationship. The defendants' collection of instances where the parties diverged from the precise terms of the Agreement are not sufficient to show that there was a complete absence of outward and objective manifestations of assent, since it is also undisputed that Sharma prepared and provided the Agreement to the plaintiffs, that the plaintiffs continued selling on behalf of JPC immediately after being provided the Agreement that Sharma himself prepared, and in many respects the parties seem to have followed fundamentally material aspects of the Agreement. Furthermore, the plaintiffs argue that Sharma required all sales representatives to have signed contracts, and that he maintained a file with these contracts at JPC's headquarters in Drums, Pennsylvania, thus suggesting that is was common practice for JPC to enter into agreements with its independent sales force. The record concerning whether the parties entered into a written contract, or otherwise entered into an enforceable oral agreement, is in dispute, and is not capable of being resolved through a motion for summary judgment.
The defendants argue that even if the Court finds that disputed issues of fact preclude summary judgment as to whether the parties entered into an enforceable contract, the Court should nevertheless grant summary judgment because the plaintiffs waived their right to enforce the Agreement as a matter of law. Here, too, we disagree.
"A waiver is the intentional relinquishment of a known right."
An implied waiver exists where: (1) there is an "unexpressed intention to waive, which may be clearly inferred from the circumstances"; or (2) when there is no such actual intention to waive, but where a party's conduct "misleads [the other contracting part] into a reasonable belief" that a contract provision no longer matters.
The defendants argue that the plaintiffs' failure to seek legal enforcement of their rights under the Agreement over eight years should now be construed as a matter of law to constitute waiver of those claims. The defendants have not carried their burden in this regard, in large part because other than to cite to cases in which waiver has been found, they have not demonstrated that in their case they were actually misled by the plaintiffs' conduct, or that they were actually prejudiced by the plaintiffs' decision not to enforce their alleged rights under the Agreement. Since the defendants have not demonstrated that they were somehow misled by the plaintiffs, or that they are now unreasonably prejudiced by their claims of breach, we cannot agree that a jury would be compelled to find in their favor on this affirmative defense.
Although we do not find that the defendants are entirely foreclosed from pursuing their affirmative defense of waiver at trial, they are not entitled to summary judgment on the basis of the defense.
In summary, we find that there remain disputed issues of material fact with respect to whether the parties had entered into an enforceable sales representation contract; about whether the defendants breached that contract; about which terms of that contract, if any, may have been breached; and about whether the plaintiffs may have waived their rights to enforce any aspect of that Agreement by waiting to bring suit until 2010.
The plaintiffs also claim that Varun Sharma tortiously interfered with their rights under the Agreement, and undercut their ability to earn commissions under the Agreement, by funneling sales in the plaintiffs' territories from JPC to JPC-India. Thus, the plaintiffs allege that Sharma sold products on behalf of JPC-India, and these products were precisely the same type and nature sold by JPC in smaller quantities.
Pennsylvania law has adopted the Restatement (Second) of Torts § 766, governing the tort of malicious interference with contract.
Restatement (Second) of Torts § 766.
To maintain a claim for tortious interference, the plaintiffs bear the burden of demonstrating: (1) the existence of a contractual, or prospective contractual relationship between the plaintiff and a third party; (2) purposeful action on the part of the defendant, specifically intended to harm the existing relationship, or to prevent a prospective relation from occurring; (3) the absence of privilege or justification on the part of the defendant; and (4) actual legal damages resulting from the defendant's conduct.
The plaintiffs claim that Sharma, acting on behalf of JPC-India, interfered with the Agreement between the plaintiffs and JPC by acting on behalf of JPC-India to divert sales from JPC to JPC-India, thereby depriving the plaintiffs of sales commissions. Yet, the plaintiffs never point to evidence showing that Sharma, acting on behalf of another corporate entity that he also controlled, intentionally interfered with an actual contractual relationship that the plaintiffs and JPC had. Even assuming that the Agreement constituted an enforceable contract, the plaintiffs do not explain, or point to evidence showing, that Sharma interfered with that contract by negotiating sales on behalf of JPC-India that may arguably have impacted the plaintiffs' ability to earn commissions. They simply assert that Sharma undermined their ability to earn commissions by selling products through JPC-India rather than through JPC. This is insufficient.
Furthermore, we have difficulty perceiving how the plaintiffs can satisfy the first prong necessary to a tortious interference claim, namely, that Sharma was a third-party interferer for purposes of the tort. It is fundamental that in order to recover for tortious interference, a plaintiff must demonstrate the existence of a contractual relationship between himself and a third person "other than the defendant."
Accordingly, for the foregoing reasons, the plaintiff's motion for partial summary judgment will be denied, and the defendants' motion for summary judgment will be granted with respect to the plaintiffs' tortious interference claim only, and will be denied in all other respects.
An order consistent with this memorandum shall issue separately.
1 Richard A. Lord, Williston on Contracts § 4:19 (4th ed. 2008) (quoted in