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The Franchise Memorandum

Court Grants Partial Judgment to Distributor on Commission Claim
Posted in Contracts

The United States District Court for the Eastern District of Wisconsin has determined that a manufacturer was contractually required to pay a commission to one of its distributors in connection with the sale of its industrial hoist equipment. Marine Travelift, Inc. v. Marine Lift Sys., Inc., 2013 U.S. Dist. LEXIS 144435 (E.D. Wis. Sept. 30, 2013). The parties had entered into a distributorship agreement that granted the distributor, Marine Lift Systems, a nonexclusive right to purchase equipment from the manufacturer, Marine Travelift, and then resell it to customers at marked-up prices. The agreement specified that the distributor was not entitled to any wages or commissions from Marine Travelift and was to look only to its customers for payment. The parties subsequently entered into a separate written agreement (the unit order coversheet, or the “UOC”) to arrange for the sale of a boat hoist to a particular purchaser. The UOC contemplated that Marine Travelift would sell the hoist to the purchaser directly and then pay the distributor a commission equal to its usual markup. When Marine Travelift later terminated the distributorship agreement and brought suit against the distributor, the distributor counterclaimed for breach of the UOC on the grounds that it never received any payment for the boat hoist sale and sought exemplary damages and attorneys’ fees under Wisconsin’s independent sales representative statute.

The court held that Marine Travelift was liable for the commission it agreed to pay on the boat hoist sale and granted summary judgment to the distributor on its counterclaim. While Marine Travelift argued that the distributor was not entitled to a commission based on the plain terms of the agreement, the court concluded that the UOC represented a separate, binding agreement according to which Marine Travelift indisputably obligated itself to pay a commission for the particular sale at issue. The court also rejected Marine Travelift’s argument that there was a material dispute as to whether the distributor fulfilled its obligations under the UOC. The facts of record established that the commission was conditioned only on Marine Travelift receiving full payment from the buyer, which had already occurred. Marine Travelift further argued that summary judgment was premature because it was entitled to offset any amounts it owed to the distributor by losses it sustained as a result of the distributor’s breaches of the distributorship agreement. The court held that the mere possibility that Marine Travelift would prevail on one of its claims against the distributor did not create a triable issue as to Marine Travelift’s liability on the counterclaim.

Finally, although the court held that the distributor was entitled to a commission under the UOC, the court determined that the distributor could not obtain exemplary damages or attorneys’ fees under Wisconsin’s independent sales representative statute because it did not qualify as an independent sales representative.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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