NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 07a0085n.06
Filed: February 1, 2007
No. 06-1279
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
URBAN ASSOCIATES, INCORPORATED, )
)
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
STANDEX ELECTRONICS, INCORPORATED, ) COURT FOR THE EASTERN
and S TANDEX INTERNATIONAL ) DISTRICT OF MICHIGAN
CORPORATION, )
)
Defendants-Appellees. )
)
________________________________________ )
BEFORE: BATCHELDER and GRIFFIN, Circuit Judges; and PHILLIPS, District Judge.*
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
*
The Honorable Thomas W. Phillips, United States District Judge for the Eastern District of
Tennessee, sitting by designation.
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
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).
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Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
I.
The district court had uncontested diversity jurisdiction over this matter under 28 U.S.C.
§ 1332(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
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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, “[T]here 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 solicit RFQs from
potential customers. While the representative was developing the RFQ with the customer, he bore
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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.
2. TERM. This Agreement shall be effective as of the date specified above and
shall continue in effect on an indefinite basis until terminated as provided in Section
10.
3. AUTHORITY. The Representative shall be the agent of the Company for the
sole purpose of soliciting and receiving orders for the Products . . . .
* * *
7. COMMISSIONS. Subject to the provisions of Section 8, a commission of
5% shall be paid by the Company to the Representative, as his sole compensation
hereunder, on the net sales value (invoice value less cash discounts, taxes, freight
charges, transportation insurance, cancellations, returns, allowances and similar
items) of shipments of Products made by the Company into the Territory as long as
this agreement is in effect. . . .
8. SPLIT COMMISSIONS. In the event that a particular order involves more
than one territory . . . the Company shall make a fair and equitable division of the
commission applicable to that order . . . .
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9. EXPENSES. The Representative shall pay all expenses and bear all liability
and obligations incurred in the operation of its business. . . .
10. TERMINATION. This Agreement may be terminated, with or without cause,
by either party.
If terminated by the Company, at least 60 days’ prior written notice by certified or
registered mail shall be given to the Representative. Such notice may be given at any
time during any month or year and the termination date shall be 60 days from the date
the notice is received by the Representative.
Upon termination by the Company, commissions shall be paid on all orders booked
by the Representative and received by the Company in house prior to and including
the termination date. No commissions shall be paid to the Representative for orders
booked by the Representative and/or received by the Company after the termination
date. . . .
* * *
15. STATUS. The Representative shall be an independent contractor and not an
employee or partner of the Company.
(Emphasis added). The agreement also contained an integration clause, ¶ 13, and the parties do not
rely on any purported written or oral undertaking other than this agreement.1 Urban and Standex
executed written amendments to the agreement, but they did not alter the material terms quoted
above, other than providing different commission rates for different products.
Pursuant to the agreement, Urban solicited orders for Standex’s RF inductor coils, reed
switches, reed relays, proximity sensors, toroids, and transformers from customers throughout the
entire state of Michigan, except for Ford ETC and Ford EFHD, plus specified locations in Illinois
1
See B.B. Banucks, Inc. v. City of Midland, No. 215176, 2000 WL 33407204, *2 (Mich. Ct.
App. Sept. 5, 2000) (“When a contract contains an integration clause it is conclusive; parol evidence
is not admissible to show that the agreement is not integrated unless fraud is alleged or where an
agreement is incomplete on its face and requires parol evidence to fill in the missing terms.”) (citing
UAW-GM H.R. Ctr. v. KSL Recreation Corp., 579 N.W.2d 411, 418 (Mich. Ct. App. 1998)).
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and Indiana. Urban alleges that Standex’s “business steadily increased after Urban became
associated with Standex.” Standex amended the agreement to add customers, and Standex named
Urban its Salesman of the Year for 2000.
Sometime before June 30, 2001, Standex’s Product Sales Manager Paul Linsley told Johnson
that he wanted to hire Denise Falzone, the Urban employee then assigned as Standex’s sales
representative, directly, which would enable Standex to terminate its agreement with Urban and
obviate the need to pay commissions. In July 2002, Standex general manager (“GM”) James
Anderson decided to terminate the agreement with Urban because he wished to eliminate sales
representatives and use Standex employees as salesmen instead.
No later than early October 2002, Linsley called Falzone and told her that Anderson would
be contacting her about “coming on board with Standex” and about Standex using direct salespeople.
Within a week, Anderson contacted Falzone and told her that Standex was going to terminate Urban
and go to direct sales, and that it was interested in hiring her. Later in October 2002, Anderson sent
Falzone the Standex benefits binder, negotiations took place, and Falzone accepted a written offer
of employment.
Standex sent a written notice of intent to terminate the agreement to Urban on November 15,
2002, with an effective date of January 14, 2003. Urban alleges that “the reason for waiting at least
4 months to terminate Urban [from GM Anderson’s July 2002 decision to terminate, to Standex’s
November 15, 2002 letter actually terminating the agreement] was to allow Standex time to secure
for itself the direct employment of Falzon [sic, Falzone] . . . .”
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In mid-November 2002, just before Urban received the termination notice, Falzone notified
Urban that she planned to quit on the last working day of that month. Falzone, who had worked for
Urban for at least eight years (since 1993 or 1994), testified that she had a good relationship with
Urban and had not been seeking other employment. Falzone immediately began working for
Standex, serving essentially the same customers, for essentially the same products, as she had done
as an Urban employee.
Standex paid commissions to Urban for orders shipped prior to the termination date, but it
has not paid commissions for orders that were shipped after that date, even if Urban before that date
had obtained (“booked”) the purchase order against which the order was shipped.
III.
Urban filed a four-count complaint in district court in February 2004, asserting only state
common-law claims, and Standex filed an answer in March 2004. In count one, Urban alleged that
Standex breached the agreement in bad faith in order to avoid paying commissions on sales to
customers assigned to Urban, “including customers located in Michigan, on business Plaintiff had
already secured and/or on business Plaintiff had been previously working on that was likely to
materialize and which did or will materialize.” In count two, Urban contended that if the agreement
did not expressly entitle Urban to the commissions sought, the court should order recovery under the
doctrines of implied contract, quantum meruit / unjust enrichment, and/or “procuring cause.” Urban
seeks an amount equal to the 5% general contractual commission rate “on all business developed
pursuant to the relationship between Plaintiff and Defendants for as long as Defendants benefit from
such business . . . .”
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Count three sounds in tort but still relates to the sales representative agreement and
relationship. Urban alleges that Standex knew about Falzone’s employment relationship with Urban
and the corresponding duties that she owed to Urban and wrongfully interfered with their
relationship. Urban further alleges that Standex illegally induced Falzone to breach her duties to,
and terminate her employment with, Urban, causing Urban to lose business, business opportunities,
and goodwill. Finally, count four is denominated as a claim for declaratory relief, but it actually lists
all the remedies sought by Urban, including compensatory damages, punitive (“exemplary”) damages
of three times actual damages, an accounting of commissions owed and not paid, and the creation
of a constructive trust and escrow account for the payment of commissions accruing in the future.
Standex moved for summary judgment, Urban filed an opposition brief, and Standex filed
a reply brief. Without oral argument, the district court granted summary judgment to Standex in
January 2006. Urban timely filed a motion for reconsideration, which the district court denied in
February 2006 without waiting for opposition and reply briefs. Urban appealed two days later.2
IV.
We review the district court’s entry of summary judgment de novo. Brainard v. Am. Skandia
Life Assur. Corp., 432 F.3d 655, 660 (6th Cir. 2005) (citation omitted). A district court’s
interpretation of state law is likewise governed by the de novo standard. Id. Denial of a Rule 59(e)
motion for reconsideration is generally reviewed only for abuse of discretion. Gage Prods. Co. v.
Henkel Corp., 393 F.3d 629, 637 (6th Cir. 2004) (citation omitted). When a party seeks
2
Like the district court, we apply Michigan law to the tortious-interference claim and Ohio
law to all other claims. The parties have not objected to this choice of law.
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reconsideration of a grant of summary judgment, however, we conduct de novo review using the
same standard employed by the district court. Id.
Summary judgment is proper where no genuine issue of material fact exists and the movant
is entitled to judgment as a matter of law. Moross Ltd. P’ship v. Fleckenstein Capital, Inc., 466 F.3d
508, 515 (6th Cir. 2006) (citing FED . R. CIV . P. 56(c)). In considering a motion for summary
judgment, we construe the evidence in the light most favorable to the non-movant and draw all
reasonable inferences therefrom in its favor. Moross, 466 F.3d at 515 (citation omitted). The central
issue is whether the evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law. Id. “The mere existence
of a scintilla of evidence in support of the [non-movant]’s position will be insufficient; there must
be evidence on which the jury could reasonably find for the plaintiff.” Id.
V.
A.
The district court ruled as follows on the breach-of-contract claim:
Here, the term “orders booked” is not susceptible to two or more reasonable
interpretations. It is unreasonable to assume that Plaintiff would be due commissions
on “orders” that would not create an enforceable obligation on the part of the
customer to purchase the products ordered. See Hudson v. Tektronix, Inc., 1982 Ohio
App. LEXIS 12909 (Ohio Ct. App. 1982) (unpublished); Chicago Fineblanking
Corp. v. D.J. Cotter & Co., 1996 U.S. Dist. LEXIS 21882 (E.D. Mich. 1996)
(unpublished). Plaintiff seems to argue that the Agreement vests commissions
through a blanket purchase order, which commissions later become due when a
shipment order is made by the customer. This interpretation, however, is not
supported [by] the Agreement. The Agreement only provides for the payment of
commissions “on the net sales value . . . of shipments of Products made by the
Company into the Territory as long as this agreement is in effect.” Mot., Ex. C ¶ 7
(emphasis added). The agreement does not provide for commission on a “life of the
part” basis because commissions are not paid on shipments made after termination
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of the Agreement. Neither is the interpretation supported by extrinsic evidence.
[citations to filings omitted]
Defendants owed commissions to Plaintiff for the “orders booked” that resulted in
the obligation on the part of the customer to purchase the product so ordered. That
obligation arose through the a [sic] customer’s shipment or release order, which,
when combined with the terms of the blanket purchase order against which it was
made, would determine the obligations of the contracting parties and the
commissions due Plaintiff. Defendants have paid Plaintiff all the commissions due
in this manner and are therefore entitled to summary judgment on this claim.
Op. at 7-8.
We note quickly some shortcomings in the district court’s analysis before delving into the
interpretation of “orders booked” in greater depth. First, the district court asserts that Urban’s “life-
of-the-part” interpretation is not supported by any extrinsic evidence, but, as discussed below, Urban
introduced expert testimony that, in its experience, life-of-the-part commissions are the industry
norm after termination, absent contractual provision or post-termination negotiation to the contrary.
Second, the district court relies on the reference in ¶ 7 (the agreement’s general commission
provision) to commissions payable on products that are actually shipped, yet it does not mention the
fact that ¶ 10 (the only provision that specifically addresses post-termination commissions) contains
no such limitation. Third, the district court refers to a “shipment [order] or release order,” despite
the fact that the agreement never uses those terms.
Fourth, the district court supposes that Urban’s right to commissions was predicated on the
issuance of an order that obligated the customer to buy a certain quantity of a Standex product. But
the agreement contains no such requirement as to post-termination commissions, and there is no
record evidence that that was the nature of the blanket POs or requirements contracts used in the auto
industry in Michigan at that time. On this point, the district court cited Hudson v. Tektronix, Inc.,
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No. 1631, 1982 WL 3704 (Ohio Ct. App. 2d Dist. Apr. 1, 1982), but Hudson is readily
distinguishable from the instant case. For one thing, Hudson involved a different industry (computer
graphics products rather than automotive parts), and the plaintiff there was on a salary and bonus-
incentive plan rather than straight commissions like Urban. More importantly, unlike ¶ 10 of the
Urban-Standex agreement (governing post-termination commissions), the 1977-78 incentive plan
in Hudson provided, “This plan is intended to pay a commission [only] on product orders which
result in a customer invoice.” Id. at *2 (emphasis added). In addition, unlike the Urban-Standex
agreement, the incentive plan in Hudson made clear how booked orders were different from
invoiced/shipped orders: “Although commission is due and payable upon issuance of an invoice . . .
commission will be paid, as an advance[,] on booked orders.” Id.
B.
Standex contends that the agreement’s term “orders booked” was equivalent to “shipment
orders” or “release orders.” Under that interpretation, it owes commissions only for orders actually
shipped on or before the termination date. Standex also emphasizes that customers typically began
by placing blanket orders, which did not directly or immediately effect the sale or shipment of any
products. Rather, a customer did not commit to buying a specific quantity of a specific product until
and unless it submitted an order “against” the blanket order, at which time Standex manufactured
and shipped the products (issuing a “shipment order” or “shipment release”) and invoiced the
customer.
Urban responds that (1) “orders booked” is a separate and distinct concept from “shipment
orders” and “release orders”; (2) Standex drafted the agreement, and if it wanted to predicate Urban’s
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right to post-termination commissions on shipments rather than orders booked, it could have done
so; (3) the Standex official who drafted the agreement, Johnson, stated that his understanding and
intention was that Urban would receive commissions for the life of the PO obtained by Urban; and
(4) absent a contractual limitation on the period of time for which a representative is entitled to
commissions for a booked order, the common industry understanding is that the representative
receives commissions for the “life of the part” – which is potentially longer than even the “life of the
order,” may last for many shipments, and may extend well past the termination of the agreement.
C.
At Ohio common law generally,
courts presume that the intent of the parties to a contract resides in the language they
chose to employ in the agreement.[3] * * * Only when the language of a contract is
unclear or ambiguous, or when the circumstances surrounding the agreement invest
the language of the contract with a special meaning will extrinsic evidence be
considered in an effort to give effect to the parties’ intentions.
L & M of Stark Cty., Ltd. v. Lodano’s Footwear, Inc., No. 2006-CA-91, 2006 WL 3290797, at*6 ¶
70 (Ohio Ct. App. 5th Dist. Nov. 13, 2006) (quoting Shifrin v. Forest Enters., Inc., 597 N.E.2d 499,
501 (Ohio 1992)). The Ohio courts caution that the mere “fact that parties may adopt conflicting
interpretations of a contract between them while involved in litigation will not create ambiguity or
a basis for unreasonable interpretation of the language and original intent of the parties where no
3
See also Marron v. USAA Cas. Ins. Co., No. CA2005-07-204, 2006 WL 1211210, at *1 ¶
9 (Ohio Ct. App. 12th Dist. May 8, 2006) (“The intent of the parties is paramount in guiding judicial
construction of contracts.”) (citing Hamilton Ins. Serv., Inc. v. Nationwide Ins. Co., 714 N.E.2d 898,
900 (Ohio 1999)), app. not allowed, 854 N.E.2d 1092 (Ohio 2006).
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such ambiguity should reasonably be found.” Ohio Water Dev. Auth. v. W. Res. Water Dist., 776
N.E.2d 530, 535 ¶ 25 (Ohio Ct. App. 10th Dist. 2002).
Rather, a contract term is ambiguous “if it is unclear, indefinite, and reasonably subject to
dual interpretations or is of such doubtful meaning that reasonable minds could disagree as to its
meaning.” Beverly v. Parilla, 848 N.E.2d 881, 886 (Ohio Ct. App. 7th Dist. 2006); see also, e.g.,
State Farm Mut. Auto. Ins. Co. v. Webb, 562 N.E.2d 132, 140 (Ohio 1990) (Resnick, J., concurring
in part and dissenting in part) (“[T]he meaning of ‘legally entitled to recover is susceptible to more
than one interpretation. On this basis, the phrase is ambiguous because reasonable minds can reach
different conclusions as to its true meaning.”).4
Whether a contract term is ambiguous is a question of law. Wells v. C.J. Mahan Const. Co.,
Nos. 05AP-180, 05AP-183, 2006 WL 951444, at*6 ¶ 21 (Ohio Ct. App. 10th Dist. Apr. 11, 2006)
(citing Latina v. Woodpath Dev. Co., 567 N.E.2d 262, 264 (Ohio 1991)), app. not allowed, 854
N.E.2d 1091 (Ohio 2006). Ohio appellate courts review such legal determinations de novo. Wells,
2006 WL 951444 at *6 ¶ 21 (citing Graham v. Drydock Coal Co., 667 N.E.2d 949, 952 (Ohio
1996)).5
4
Cf. Roberts v. Bowers, 162 N.E.2d 858, 860 (Ohio 1959) (per curiam) (“[A statute] . . . is
open to construction only where the language used in the statute requires interpretation, that is, where
. . . reasonable minds might be uncertain or disagree as to its meaning.”).
5
See also Hoog v. Hoog, No. C-980977, 1999 WL 741818, at *2 (Ohio Ct. App. 1st Dist.
Sept. 24, 1999); Emery v. Emery, No. 04CA1639, 2005 WL 119936, at *2 ¶ 11 (Ohio Ct. App. 2d
Dist. Jan. 21, 2005); Evans v. Evans, No. 02-CA-2869, 2003 WL 22053929, at *3 n.1 ¶ b (Ohio Ct.
App. 4th Dist. Aug. 22, 2003); Barnes v. Barnes, No. 2003-CA-383, 2005 WL 327552, at *1 ¶ 18
(Ohio Ct. App. 5th Dist. Feb. 11, 2005); Castillas v. Stinchcomb, No. E04-041, 2005 WL 1845318,
at *1 ¶ 7 (Ohio Ct. App. 6th Dist. July 8, 2005); Durick v. eBay, Inc., No. 05-MA-198, – N.E.2d –,
2006 WL 2672795, at *2 ¶ 14 (Ohio Ct. App. 7th Dist. Sept. 11, 2006); Williams v. Williams, No.
78193, 2001 WL 823650, at *2 (Ohio Ct. App. 8th Dist. July 12, 2001); Nationwide Mut. Fire Ins.
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D.
With these Ohio rules in mind, we turn to the agreement. Only two of its seventeen
paragraphs are potentially relevant. Paragraph 10 is most directly on point. It provides,
Upon termination by the Company, commissions shall be paid on all orders booked
by the Representative and received by the Company in house prior to and including
the termination date. No commissions shall be paid to the representative for orders
booked by the Representative and/or received by the Company after the termination
date. * * *
(Emphasis added). Paragraph 10 does not define “orders booked,” nor does it place any temporal
limit on how long Standex must pay commissions for such orders booked. Therefore, we check
whether other provisions directly or indirectly shed light on what the parties meant by “orders
booked.”
We consider ¶ 7, entitled “Commissions,” which provides, “[A] commission of 5% shall be
paid by the Company to the Representative, as his sole compensation hereunder, on the net sales
value . . . of shipments of Products made by the Company into the Territory as long as this
Agreement is in effect.” But there are several reasons why ¶ 7 does not support Standex’s argument
that by “orders booked” before termination (¶ 10), it meant “shipments made before termination.”
First, one can argue that, by its terms, ¶ 7 governs the payment of commissions only before
termination, not after, because it addresses the payment of a 5% commission “as long as this
agreement is in effect.” On this reading, once the agreement has been terminated, ¶ 7 no longer
applies, and ¶ 10 controls.
Co. v. Buckley, No. 06-CA-13-M, – N.E.2d –, 2006 WL 2934275, at *2 ¶ 12 (Ohio Ct. App. 9th Dist.
Oct. 16, 2006).
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By its terms, ¶ 10 deals specifically with Urban’s right to the payment of commissions in the
event that Standex terminates the agreement, while ¶ 7 contains no such language. Therefore, ¶ 7
can govern post-termination commissions only to the extent that it does not conflict with ¶ 10.
“It is well established in Ohio that where two clauses of a contract appear to be inconsistent,
the specific clause prevails over the general.” Lawhorn v. Joseph Toyota, Inc., 750 N.E.2d 610, 614
n.1 (Ohio Ct. App. 2d Dist. 2001) (citing Gibbons-Grable Co. v. Gilbane Bldg. Co., 517 N.E.2d 559,
564 (Ohio Ct. App. 8th Dist. 1986) (citing Hoke v. Marcis, 127 N.E.2d 54 (Ohio Ct. App. 8th Dist.
1955)).6 Thus, where ¶ 7 conflicts with ¶ 10, the latter alone determines what Standex must pay after
termination. Cf. Schlegel v. DeCamp, No. 15-99-20, 2000 WL 791800, at *4 (Ohio Ct. App. 3d Dist.
June 6, 2000) (“We cannot agree . . . that the general terminology employed in paragraph four of the
managerial contract takes precedence over and negates the specific provision of paragraph ten.
* * * Also, the record reflects that Appellant is responsible for having drafted the agreements . . . and
any ambiguity between this section and any other section . . . must be strictly construed against
Appellant.”).
Moreover, suppose we read ¶ 7 to preclude Urban from receiving commissions on products
that were (1) bought under an order that was both booked and received by Standex before
6
See, e.g., Nezhad v. Kilgore, No. 98-CA-3, 1999 WL 913, at *4 (Ohio Ct. App. 4th Dist.
Dec. 18, 1998) (“the specific metes and bounds description in the appellants’ deed prevails over the
deed’s general description” of the land); Sandusky Hsg. Trust Ltd. P’ship v. Bouman Group, No.
91AP-1249, 1992 WL 158460, at *3 (Ohio Ct. App. 10th Dist. June 30, 1992) (provision that
generally authorized a partner to make a contract that binds the whole partnership yielded to more-
specific provision that required prior written consent of all partners for any contract that disposed
of an interest in the partnership); City of Columbus v. State Emp. Relations Bd., No. 90AP-87, 1990
WL 129254, at *4 (Ohio Ct. App. 10th Dist. Sept. 4, 1990) (CBA’s general seniority provision
yielded to provision that specifically dealt with “seniority points”).
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
termination but (2) shipped after termination. That would render meaningless ¶ 10's mandatory
directive, “Upon termination by the Company, commissions shall be paid on all orders booked by
the Representative and received by the Company in house prior to and including the termination
date.” (Emphasis added.) Such a construction would violate Ohio’s “fundamental [rule] that a
contract should be construed so as to give effect to all its provisions.” Gibbons-Grable Co., 517
N.E.2d at 564 (emphasis in original) (citations omitted); see also Farmers Nat’l Bank v. Delaware
Ins. Co., 94 N.E. 834, 839 (Ohio 1911) (applying the “plain rule of construction . . . that every
provision of a contract shall be given effect if possible”); Ford Motor Co. v. John L. Frazier & Sons
Co., 196 N.E.2d 335, 337 (Ohio Ct. App. 8th Dist. 1964) (“In construing a written instrument, effect
should be given to all of its words . . . .”).
For these reasons, where ¶ 7 (“Commissions”) conflicts with ¶ 10 (“Termination”) as to post-
termination commissions, ¶ 10 must prevail as a matter of law.
E.
No other provisions of the agreement shed light on what the parties meant by ¶ 10's “orders
booked.” Accordingly, Ohio law permits the court to consider extrinsic evidence, “i.e., evidence
outside the four corners of the contract.” Lake Erie Towing v. Troike, No. E-05-62, 2006 WL
2790334, at *2 ¶ 13 (Ohio Ct. App. 6th Dist. Sept. 29, 2006); cf. Inland Refuse Transfer Co. v.
Browning Ferris Indus., Inc., 474 N.E.2d 271, 272 (Ohio 1984) (“[I]f a term cannot be determined
from the four corners of a contract, factual determination of intent or reasonableness may be
necessary to supply the missing term.”) (citing Hallet & Davis Piano Co. v. Starr Piano, 97 N.E. 377
(Ohio 1911)).
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
Such extrinsic evidence may include the circumstances surrounding the parties at the time
they entered into the contract, the objectives they intended to accomplish, and any acts by the parties
that demonstrate how they construed the ambiguous term. Blosser v. Cartre, 586 N.E.2d 253, 255-
56 (Ohio Ct. App. 4th Dist. 1990) (quoting Mosier v. Parry, 54 N.E. 364, syllabus ¶ 1 (Ohio 1899)).
Obviously, extrinsic evidence may include a contracting party’s own statement about what he
understood the disputed contract term to mean when he wrote, negotiated, or signed the contract.
Urban introduced two pieces of extrinsic evidence to support its reading of ¶ 10's “orders
booked and . . . received . . . prior to and including the termination date.” Standex does not
persuasively refute either piece of extrinsic evidence – let alone conclusively refute them so as to
take the issue away from the jury through summary judgment.
First, Urban introduced the testimony of an expert witness, Charles Mathews, as to how the
term “orders booked” was used and understood in the industry – specifically, whether orders booked
was considered to be the same as shipment orders or release orders as urged by Standex. Mathews
started out as a sales representative in 1965 and became a partner in a sales firm in 1980; since 1980,
he managed the firm and continued to actively sell on behalf of a changing roster of fifteen to
eighteen manufacturers. Mathews had been personally involved in negotiating twenty to twenty-five
sales-representative contracts since the early 1970s.
Mathews testified that if an agreement did not specify the representative’s entitlement to
post-termination commissions, the default was that the manufacturer was “obligated to pay post-
termination commissions for the life of the part.” Mathews also testified that he understood “orders
booked” to mean orders secured by the representative for the company, regardless of whether they
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
are original orders or reorders, so long as they are for the same part as in the order originally booked.
On cross-examination, Mathews testified further that in his experience, an auto-part manufacturer
who hires a representative would understand “orders booked” to entitle the representative to
commissions for the “life of the part,” even after termination.
Standex did not challenge Mathews’ qualifications as an expert in the field of automotive
sales-representative contracts and commissions. Standex did not introduce expert testimony
contradicting Mathews’ testimony that the default understanding, even without contractual language
governing post-termination commissions, was that a representative was entitled to commissions for
the life of the part, i.e., so long as that same part was purchased pursuant to the order originally
secured by the representative. Nor did Standex introduce expert testimony to contradict Mathews’
testimony that “orders booked” would be commonly understood to refer to such post-termination
life-of-the-part commissions.
Perhaps most damaging to Standex is the deposition testimony of its own VP of Sales and
GM, Charles Johnson. Johnson testified that he drafted the agreement, and that the parties never
discussed the definition of “orders booked” before signing the agreement:
Q. Take a look at Exhibit 8 again. This is a Sales Representative Agreement
between Standex and Urban and Associates, correct?
A. Right.
Q. And you were involved in drafting the agreement?
A. Yes.
Q. What role did you play in drafting it?
A. I essentially wrote this document with the approval of the corporate lawyers
while I was with Standex Electronics.
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
Q. Look at page 4 of the document, Exhibit 8, paragraph 10. It talks about
commissions will be paid upon termination?
* * *
Q. Do you have a specific recollection of defining orders booked in your
discussions with Urban when this agreement was entered into?
A. No, sir, I do not.
(Emphasis added).
In Standex’s favor, we note that Johnson did testify that Standex would not have promised
to pay post-termination commissions for the life of the part:
Q. You said in your testimony Standex would not agree to a life of a part
commission contract. I believe you said that.
A. I don’t believe they would. I would not have.
Q. Why would you not?
A. Well, simply because if you agree to a life of product or a part number, and
let’s say Craig [Urban] sold it last year, and they’re going to use it for the
next ten years and he leaves me as a rep or I fire him as a rep . . . .
Standex can cite this as evincing an understanding, on its part, that is contrary to the “life of the part”
commission arrangement that Urban’s expert testified was the industry default.
But Johnson goes on to directly contradict Standex’s position that commissions on “orders
booked” means that Urban is entitled to post-termination commissions only on products that actually
shipped before termination, i.e., that an “order booked” is synonymous with a shipping release.
Johnson had this exchange with Urban’s counsel:
Q. With regard to an order, and in that instance you were not talking about only
paying on shipping releases, fair statement?
A. That is correct.
Q. And so an order booked would not be a shipping release?
A. No, sir.
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
Johnson also stated, in response to his own counsel’s questioning, that he intended Urban to receive
post-termination commissions on products that were (1) shipped after termination (2) pursuant to
a purchase order received before termination (3) for the life of the purchase order. Johnson had this
exchange with Standex’s counsel:
Q. And it says, “Upon termination by the Company, commissions shall be paid
on all orders booked by the Representative and received by the Company in
house prior to and including the termination date”?
A. Yes.
Q. Are you familiar with the term life of the part commissions, or life –
A. We never entered into a life of the part commission with anyone.
Q. Do you view that, this termination language to mean that commissions will
be paid for life of the part –
A. No.
Q. – following termination?
A. I interpreted it to mean life of the purchase order. Purchase orders are
negotiated basically on an annual agreement-type basis, and they will issue
a purchase order that says for 100 percent or 80 percent or whatever
percentage [of the customer’s requirement] they want to give you of that
product in accordance with the shipping releases are to be shipped in
accordance with shipping releases [sic].
(Emphasis added); see also Johnson’s deposition statement that he intended to pay commissions on
“orders as they existed at the time of the effective date of termination” until and unless the PO
changed in terms of part design or price). Cf. Bhavnani v. I.D. Voldness, No. 95-AP-E03-284, 1995
WL 578124, at *4 (Ohio Ct. App. 10th Dist. Sept. 28, 1995) (in dispute over interpretation of
contract term, court noted, “appellant’s own testimony contradicts the position asserted by
appellant’s counsel in the brief. Statements of counsel do not constitute evidence.”).
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
Reading the agreement as a whole and considering all the extrinsic evidence, a reasonable
factfinder could conclude that the parties intended Urban to receive post-termination commissions
at least for the life of the POs that were received prior to the termination date. Indeed, it might be
difficult for a factfinder to conclude that the parties did not intend the agreement to give Urban a
right to commissions at least for the life of the purchase order – the very Standex official who drafted
the agreement testified that he understood the agreement to guarantee commissions to that extent.
Lastly, Standex drafted the agreement. If Standex wished to limit post-termination
commissions to products shipped before termination, it could have made that clear in ¶ 10.
Similarly, if Standex wished to impose a temporal limit on post-termination commissions, it could
have made that clear in ¶ 10.
But Standex used the term “orders booked” instead of referring to “products shipped” or
“shipment releases,” failed to define “orders booked,” and failed to include a temporal limit on post-
termination commissions. By these acts and omissions in drafting the agreement, Standex did
nothing to dispel the impression that it intended to pay Urban post-termination commissions for the
life of the PO (as Standex’s own Vice-President intended) or even for the life of the part (which
Urban’s expert testified was the default arrangement in the industry). Standex thus cannot escape
the long-settled principle of Ohio law that
everything is to be taken most strongly against the party who prepared the contract
– the one who, in the absence of proof to the contrary, created the doubt, which in
this case is the defendant. He who speaks in a written contract prepared by himself
should speak plainly and, failing to do so, must abide the natural and legal results of
such failure.
Coe v. Suburban Light & Power Co., 167 N.E. 693, 695 (Ohio Ct. App. 1929).
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
The district court erred in concluding that the term “orders booked” was not ambiguous, and
Urban presented ample evidence from which a reasonable factfinder could adopt one of its two
preferred interpretations of the term. “[W]hen contract terms are ambiguous and one interpretation
supports some recovery for plaintiff, the trial court may not enter summary judgment for defendant.”
Durick v. eBay, Inc., No. 05-MA-198, 2006 WL 2672795, ¶ 14 (Ohio Ct. App. 7th Dist. Sept. 11,
2006). Accordingly, we conclude that the district court erred in granting summary judgment to
Standex on the breach-of-contract claim contained in count one.
VI.
The district court ruled as follows on Urban’s claim for bad-faith termination of the
agreement (count one, part two):
Plaintiff relies on the case of Davis & Tatera, Inc. v. Gray-Syracuse, Inc., 796 F.
Supp. 1078 (D. Ohio 1992), which held that “‘where a principal has the right to
terminate the authority of an agent at any time, such principal may not do so in bad
faith as a device to escape the payment of a broker’s commission.’” Davis . . . [at]
1087 . . . (quoting Randolph v. New England Mut. Life Ins. Co., 526 F.2d 1383, 1387
(6th Cir. 1975)). Were the Court to hold likewise, despite what may be contrary
authority from the Ohio Supreme Court, Hamilton Ins. Servs. v. Nationwide Ins.
Cos., 86 Ohio St. 3d 270 (1999) (a court may not construe an implied covenant that
a contract is only terminable for cause, when the contract expressly states that it is
terminable without cause), Plaintiff’s claim would still fail. The duty of good faith
found by Davis, does not prevent Standex from terminating the agreement to prevent
paying commissions which Plaintiff has not yet earned but might earn if Standex
were to decide to continue to utilize Plaintiff’s services:
In no manner, however, can it be deemed bad faith for the Defendant
to have terminated the relationship between the parties in an effort to
cut off commissions for orders which had not yet been placed and for
which the Plaintiff had expended no effort. As a matter of law, the
Plaintiff is not entitled to commissions on such future orders as it
cannot be said that the decision of [the defendant] to terminate the
relationship in an effort to escape payment of those commissions is
anything but sound business judgment.
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
Davis, 796 F. Supp. at 1088 n.7. It is not bad faith to exercise the right to avoid
paying future commissions by no longer relying on sales representatives. Neither is
it bad faith to terminate the agreement when Plaintiff has expended effort to develop
business but will not receive commissions on that business because he has not yet
“booked” orders for it. These are rights provided by the contract. [citation to filings
omitted] Standex did not suddenly terminate the contract just before Plaintiff’s
commissions were to vest. Standex gave Plaintiff 60 days’ notice prior to
termination.
Op. at 8-9.7 See also Apex Sales Agency, Inc. v. Mather Co., No. 60344, 1992 WL 354816, at *10
(Ohio Ct. App. 8th Dist. Nov. 19, 1992) (“[T]he explicit language of both contracts provided that
written notice of termination could be given by either party at any time. * * * Mather’s termination
[of industrial-parts sales rep] was not executed in bad faith, or as a means to avoid a commission.”).
The district court properly granted summary judgment to Standex on the bad-faith
termination claim. We need not decide whether the district court’s stated reason was correct,
however, because Standex was entitled to summary judgment on this claim for a different reason:
under Ohio common law, Urban was not Standex’s agent. Therefore, any cause of action recognized
by Ohio for bad-faith breach of an agency contract does not apply. In Ohio,
[a]n agency relationship contains three essential attributes. First, the agent must have
the power to alter the legal relations between the principal and third parties.
Restatement (Second) of Agency § 12; Funk v. Hancock, . . . 498 N.E.2d 490, 493-94
7
Contrast Baker v. Modene, No. WD-97-112, 1998 WL 336314, at *2 (Ohio Ct. App. 6th
Dist. June 12, 1998) (“Here, appellee secured an executed purchase agreement at her expense, and
she was denied compensation by appellants only because the closing was not scheduled prior to her
termination date. * * * [W]e find that the trial court properly denied appellants’ motion for
summary judgment . . . .”); Hsing Chow v. Union Central Life Ins. Co., 457 F. Supp. 1303, 1309
(E.D.N.Y. 1978) (former insurance agent who alleged bad-faith termination aimed specifically at
avoiding payment of service fees that were due to plaintiff for the renewal of policies he had
previously obtained, sufficiently stated cause of action for breach of agency contract under Ohio law)
(citing Smith v. Frank R. Schoner, Inc., 115 N.E.2d 25, 27 (Ohio Ct. App. 9th Dist. 1957) and
Randolph v. New England Mut. Life Ins. Co., 526 F.2d 1383 (6th Cir. 1975)).
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
([Ohio Ct. App. 12th Dist.] 1985). Second, the agent must be a fiduciary of the
principal in matters within the scope of the agency. Restatement (Second) of Agency
§ 13. Third, the principal must have the right to control the agent’s conduct of
matters entrusted to her. Restatement (Second) of Agency § 14; Hanson v. Kynast,
. . . 494 N.E.2d 1091, 1094 ([Ohio] 1986).
Eyerman v. Mary Kay Cosmetics, Inc., 967 F.2d 213, 219 (6th Cir. 1992) (emphasis added).
The agreement recites that “[t]he Representative shall be the agent of the Company . . . .”
SRA ¶ 3 (“Authority”). In determining the existence of an agency relationship, however, substance
controls over form, and conclusory assertions of agency must yield to the rights and powers that the
alleged principal has actually given the alleged agent (or allowed the alleged agent to exercise). As
this court noted in another sales-representative case:
[W]e observe that the [sales agreement] unambiguously declared that Eyerman would
not be [defendant]’s agent. Eyerman correctly points out, however, that we must
look beyond the agreement to the reality of the relationship between the parties.
Turning to the first essential element [of agency under Ohio law], we find that
Eyerman did not have the legal power to bind [defendant]. The [agreement] stated:
Nothing in this Agreement shall be deemed to permit or empower
[Eyerman] to conduct business in the name of, or on account of,
[defendant], or to incur or assume any expense, debt, obligation,
liability, tax or responsibility in behalf of, or in the name of
[defendant] or to act in [defendant’s] behalf or to bind [defendant] in
any way whatsoever.
Comment a to section 12 of the Restatement explains that a person possesses the
requisite legal power if he or she could: (1) bind the principal in contract with a third
person; (2) divest the principal of interest in a thing, such as selling the principal’s
goods to a third person; (3) acquire new interests for the principal; or (4) subject the
principal to tort liability by injuring a third person.
Eyerman has not established a genuine issue of material fact as to her ability to alter
[defendant]’s legal relations. * * * Eyerman could not bind [defendant] to a contract
with a third party. Similarly, Eyerman could not bind [defendant] to sell its products
to third parties; . . . . There is no contention that Eyerman could purchase interests
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
on behalf of [defendant] or that she could subject [defendant] to tort liability by
injuring a third party.
Eyerman, 967 F.2d at 219.
Likewise here, Urban has not established a genuine issue of material fact as to its ability to
alter Standex’s legal relations. Urban could not bind Standex to a contract with a third party or bind
Standex to sell its products to a third party. The same paragraph of the agreement that purports to
make Urban an “agent” also contains a limitation that is fatal to Urban’s claim of legal agency status:
The Representative shall be the agent of the Company for the sole purpose of
soliciting and receiving orders for the Products in accordance with the then current
prices, terms, product representations and warranties of the Company. Unless
specifically authorized by the Company, the Representative shall not have any
authority to alter, enlarge or limit any of the then current prices, terms, product
representations or warranties of the Company or make any other terms, product
representations, warranties or allowances with respect to any of the Products.
SRA ¶ 3 (“Authority”) (emphasis added).
Not only did Urban lack the authority to offer different prices, terms, or warranties to
potential customers, it lacked the contractual authority to make a contract on Standex’s behalf even
at the pre-specified prices, terms, and warranties. Urban merely promoted Standex’s products in an
effort to induce the potential customer to submit an RFQ.
Then, if Standex conveyed a quotation to the potential customer and the potential customer
responded by making an offer to buy products, Urban had no authority to accept or reject the offer.
The provision entitled Acceptance of Orders made clear that “[a]ll orders are subject to acceptance
or rejection by the Company at its divisional office stated above . . . . * * * The Company shall also
have the right to fix the terms and/or conditions on which it will accept any orders solicited by the
Representative.” SRA ¶ 4 (emphasis added). Furthermore, the provision entitled Terms of Sale
--26--
Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
stated that “[t]he Representative shall not accept orders in the name of the Company or make price
quotations or delivery promises without the prior approval of the Company.” SRA ¶ 5 (emphasis
added).
For these reasons, Urban was not Standex’s agent under Ohio common law, so Urban could
not avail itself of any cause of action for bad-faith termination of an agency contract. Thus, even if
the district court’s stated reason for granting summary judgment on the bad-faith termination claim
was incorrect under Ohio law, we affirm summary judgment on that claim. See Hammon v. DHL
Airways, Inc., 165 F.3d 441, 445 (6th Cir. 1999) (“an appellate court may affirm a district court
where the district court reached the right result for the wrong reason”) (citing Union CATV v. City
of Sturgis, 107 F.3d 434, 442 (6th Cir. 1997)).8
VII.
The district court also granted summary judgment to Standex on count two, implied contract
and quantum meruit / unjust enrichment. In Ohio, an action for unjust enrichment will lie where a
party retains money or a benefit that in equity or justice belongs to someone else. Eyerman, 967 F.2d
at 222 (citing Hummel v. Hummel, 14 N.E.2d 923, 926-27 (Ohio 1938)). To establish unjust
enrichment, a plaintiff must show that he conferred a benefit on the defendant, that the defendant
8
The Ohio and Michigan courts take this view as well. See State v. Blankenship, 526 N.E.2d
816, 819 (Ohio 1988) (“Accordingly, the court of appeals reached the correct result even though for
the wrong reason and its judgment is affirmed.”); Gleason v. DOT, 662 N.W.2d 822, 824 (Mich. Ct.
App. 2003) (“A trial court’s ruling may be upheld on appeal where the right result issued, albeit for
the wrong reason.”) (citing Mulholland v. DEC Int’l Corp., 443 N.W.2d 340, 347 n.10 (Mich.
1989)).
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
knew about the benefit,9 and that under the circumstances, it would be inequitable for the defendant
to retain the benefit without paying plaintiff for its value. Seal Master Indus., Inc. v. Bay Area Seal
Coating & Stripping, No. L-05-1186, 2006 WL 1941528, at *6 ¶ 42 (Ohio Ct. App. 6th Dist. July 14,
2006) (citing Hambleton v. R.G. Barry Corp., 465 N.E.2d 1298, 1302 (Ohio 1984)).10
Nevertheless, absent fraud, illegality, or bad faith, a party to an express agreement may not
bring a claim for unjust enrichment, particularly when the express agreement contains a provision
governing the allegedly inequitable conduct of the other party. Sammarco v. Anthem Ins. Cos., Inc.,
723 N.E.2d 128, 137 n.26 (Ohio Ct. App. 1st Dist. 1998) (citing, inter alia, Aultman Hosp. Ass’n
v. Cmty. Mut. Ins. Co., 544 N.E.2d 920, 924 (Ohio 1989)).11
9
See Morgan v. Mikhail, Nos. 04AP-195, 04AP-196, 2004 WL 2445219, at *8 ¶ 24 (Ohio
Ct. App. 10th Dist. Nov. 2, 2004) (investor failed to state an unjust-enrichment claim against
investment advisor’s father, who allegedly allowed advisor to transfer money into his account, where
investor made no allegation that father knew the money belonged to the investor).
10
See, e.g., Video Discovery, Inc. v. Passov, No. 86445, 2006 WL 562148, at *3 ¶ 16 (Ohio
Ct. App. 8th Dist. Mar. 9, 2006) (“Plaintiff provided a valuable service – videotaping a medical
expert witness’s deposition for more than three hours – to defendant. Although defendant was not
satisfied in every respect with that service, and now unreasonably blames plaintiff’s conduct in large
part for his client’s loss at trial, he derived a benefit from it, and now must pay for it.”).
11
See, e.g., Davidson v. Davidson, No. 17-05-12, 2005 WL 3274853, at *4-5 ¶¶ 18-19 (Ohio
Ct. App. 3d Dist. Dec. 5, 2005) (“[S]ince the promissory note includes how it is to be enforced, the
equitable doctrine of unjust enrichment does not apply, because Appellant could recover based upon
the terms of the promissory note.”); Boston v. Sealmaster Indus., No. E-03-040, 2004 WL 1810324,
at *8 ¶ 38 (Ohio Ct. App. 6th Dist. Aug. 13, 2004) (“A recovery for unjust enrichment could not
occur . . . as a matter of law, because an actual contract existed concerning the chassis; therefore, a
quasi contract did not exist.”); Cleveland Mack Leasing, Ltd. v. Chef’s Classics, Inc., No. 05-MA-59,
2006 WL 459269, at *5 ¶ 35 (Ohio Ct. App. 7th Dist. Feb. 24, 2006) (lease provision that allowed
creditor to require debtor to make all delinquent payments and purchase the vehicles, did not unjustly
enrich the creditor) (“[S]ince . . . a written contract existed between the parties and there was no
allegation of fraud or illegality, the trial court did not err in finding that [the] unjust enrichment claim
failed.”); Struna v. Ohio Lottery Comm’n, No. 03AP-787, 2004 WL 2361570, at *5 ¶ 22 (Ohio Ct.
App. 10th Dist. Oct. 21, 2004) (“The amount of money plaintiff was entitled to with respect to his
--28--
Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
Urban’s complaint alleges that Standex is acting in bad faith when it refuses to pay
commissions on products that were (1) shipped after the termination date (2) pursuant to orders
booked before the termination date, see ¶ 19. Neither the district court opinion nor Standex’s
appellate brief addresses whether Urban’s allegations of bad faith are sufficient to allow it to assert
an unjust-enrichment claim notwithstanding the existence of an express contract covering the same
ground (Urban’s entitlement to the disputed commissions).
Where there is an express agreement, the party claiming unjust enrichment must prove fraud
or bad faith by clear and convincing evidence. Ullman v. May, 72 N.E.2d 63, 67 (Ohio 1947). Based
on this record, we cannot say that Urban has shown a genuine issue as to whether it can convince a
jury by clear and convincing evidence that Standex acted in bad faith in advancing its interpretation
of the agreement. Accordingly, the district court did not err in holding that the existence of an
express agreement that addresses post-termination commissions, prevents Urban from pursuing an
unjust-enrichment / quantum meruit claim as to those same commissions.
VIII.
The district court disposed of Urban’s tortious-interference claim (count three) as follows:
Plaintiff is correct that Michigan law provides a cause of action for tortious
interference with . . . an employee’s at-will employment contract, such as is the case
with Ms. Falzone. See Health Call v. Atrium Home & Health Care Servs., [706
N.W.2d 843] ([Mich. Ct. App.] 2005).[12] Nevertheless, Plaintiff has not suffered any
52 winning tickets, which is the subject matter of plaintiff’s unjust enrichment claim, was governed
by the terms of the contract between plaintiff and the Lottery Commission. Consequently, the unjust
enrichment doctrine has no application . . . .”), app. not allowed, 823 N.E.2d 458 (Ohio 2005).
12
See, e.g., Martinez v. Mueller, No. 266200, 2006 WL 1115534, at *2 (Mich. Ct. App.
Apr. 27, 2006) (recognizing that Health Call overruled Environair, Inc. v. Steelcase, Inc., 475
N.W.2d 266 (Mich. Ct. App. 2001) “to the extent that Environair is read as limiting recovery to
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
damages as a result of Standex’s inducement of Ms. Falzone [sic] to leave Plaintiff.
The only client that Plaintiff lost in connection with Standex’s actions was Standex
. . . and it is clear that Standex terminated its agreement with Plaintiff because it
wanted to cease relying on sales representatives. Plaintiff would have lost Standex
as a client even if Ms. Falzone had decided not to leave Plaintiff’s employment.
Op. at 9-10. The district court’s reasoning is basically13 sound, and Urban’s criticisms are
unpersuasive.
We first note that, even if Urban were able to show a genuine issue as to actual damages, it
still could not sustain a claim for tortious interference. To establish the third element of a tortious
interference claim under Michigan law, Urban has to prove that Standex committed “a per se
wrongful act or committed a lawful act with malice and without justification ‘for the purpose of
invading the contractual rights or business relationship of another.’” Pineau v. Comau PICO, No.
03-74708, 2006 WL 846750, at *2 (E.D. Mich. Mar. 31, 2006) (quoting Wausau Underwriters Ins.
Co. v. Vulcan Dev., Inc., 323 F.3d 396, 404 (6th Cir. 2003)); see also Stanton v. Dachille, 463
N.W.2d 479, 483 (Mich. Ct. App. 1990) (quoting Feldman v. Green, 360 N.W.2d 881 (Mich. Ct.
App. 1984)). A per se wrongful act is one that is “inherently wrongful or an act that can never be
justified under any circumstances.” Prysak v. R.L. Polk Co., 483 N.W.2d 629, 635 (Mich. Ct. App.
1992) (citing Formall, Inc. v. Cmty. Nat’l Bank of Pontiac, 421 N.W.2d 289 (Mich. Ct. App. 1988)).
nominal damages as a matter of law in all cases . . . arising out of or related to the termination of at-
will contracts”); Everton v. Williams, 715 N.W.2d 320, 321 (Mich. Ct. App. 2006) (same).
13
We express no opinion with regard to the district court’s finding that “Plaintiff would have
lost Standex as a client even if Ms. Falzone had decided not to leave Plaintiff’s employment.” Op.
at 10. The correctness of that finding does not affect the ground on which we affirm summary
judgment on the tortious-interference claim.
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
The weight of Michigan authority holds that when the defendant’s actions are motivated by
legitimate business reasons, its actions do not constitute improper motive or interference. See
Prysak, 483 N.W.2d 629 (citing Formall, 421 N.W.2d 289, and Christner v. Anderson, Neitzke &
Co., P.C., 401 N.W.2d 641 (Mich. Ct. App. 1986), modified o.g., 444 N.W.2d 779 (Mich. 1989));
Mino v. Clio Sch. Dist., 661 N.W.2d 586, 597-98 (Mich. Ct. App. 2003) (citing BPS Clinical Labs.
v. Blue Cross & Blue Shield of Mich., 552 N.W.2d 919, 925 (Mich. Ct. App. 1996) (citing Mich.
Podiatric Med. Ass’n v. Nat’l Foot Care Program, Inc., 438 N.W.2d 349, 355 (Mich. Ct. App.
1989))).14 By all accounts, the reason Standex terminated the agreement and began using its own
14
But see Jim-Bob, Inc. v. Mehling, 443 N.W.2d 451 (Mich. Ct. App. 1989), declining to hold
that a defendant whose alleged tortious interference was motivated by legitimate business interests
was necessarily free of liability. In addition to motive, that panel of the Michigan Court of Appeals
advised consideration of these factors: (1) the nature of the defendant’s conduct, (2) the nature of
the plaintiff’s contractual interest, (3) the social utility of the respective interests [sic] of the plaintiff
and the defendant, and (4) the proximity of the defendant’s conduct with the interference. Id. at 462-
63 (citing 4 Restatement of Torts 2d § 767 at pp. 26-27 and cmts. thereto).
The Michigan Supreme Court has never cited Jim-Bob. Moreover, only an unpublished
Michigan Court of Appeals decision has adopted Jim-Bob’s view that legitimate business motive
does not necessarily preclude liability for tortious interference. See Irwin v. Durussel & Durussel,
Inc., Nos. 205706, 205712, 1999 WL 33443482 (Mich. Ct. App. June 1, 1999). The only published
Michigan Court of Appeals decision to cite Jim-Bob merely noted the conflict between it and
Christner. See Wood v. Herndon & Herndon Investigations, Inc., 465 N.W.2d 5, 8 (Mich. Ct. App.
1990).
A panel of this court did endorse Jim-Bob’s approach to tortious-interference claims:
The approach taken by the Court of Appeals in Jim-Bob seems entirely consistent
with that taken by the Supreme Court in Wilkinson v. Powe, 300 Mich. 275, 1
N.W.2d 279 [(1942)]. There, it will be recalled, the Supreme Court said that there
can be no categorical answer to the question of what will constitute justification, “and
it is usually held that this question is one for the jury.” Id. at 283, 1 N.W.2d 279.
Tata Consultancy Servs. v. Systems Int’l, Inc., 31 F.3d 416, 427 (6th Cir. 1994). Even Tata, though,
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Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
employees instead of outside representatives was to avoid paying commissions. That is a legitimate
business motive, so Standex cannot be liable for tortious interference with the Urban-Falzone
relationship.
Even if Standex could satisfy the third element of tortious interference under Michigan law,
it cannot satisfy the fourth: damages. In an effort to show that it presented sufficient proof of actual
damages, Urban points out that “Falzon[e], Urban’s former employee, admitted that she had a good
relationship with Urban and was not seeking other employment.” This is accurate, but beside the
point. Even if we assume that Falzone would have remained an Urban sales rep for the rest of her
work-life, absent Standex’s blandishments, there is no reason to believe that Falzone’s refusal to
leave Urban would have caused Standex not to terminate the agreement. By terminating the
agreement and using an employee to solicit RFQs, Standex saves on commissions regardless of
whether Falzone or someone else is the employee doing the soliciting.
Urban also states that “Standex’s own emails establish that Standex hired Falzon [sic,
Falzone] prior to its termination of Urban, not ‘shortly after’ as Standex claimed below.” This may
be true, but it does not help Urban show a genuine issue as to actual damages suffered from the
alleged tortious interference.
Urban may be speculating that Standex would not have terminated its agreement with Urban
until and unless it was able to hire Falzone. Even if that were true, it does not mean that either half
of that process was legally actionable: Urban has not demonstrated that Standex acted tortiously in
held that in order to show tortious interference, the plaintiff had to show that the defendant “thereby
took away business that [the plaintiff] would not have lost otherwise . . . .” Tata, 31 F.3d at 429.
Urban has not made that showing here.
--32--
Case No. 06-1279
Urban Assocs., Inc. v. Standex Electronics, Inc. & Standex Int’l Corp.
convincing at-will employee Falzone to “jump ship” (this count), or in terminating the agreement
once it had secured Falzone’s services as its own employee (count one, part two). The district court
properly granted summary judgment on the tortious-interference claim.
IX.
Count four merely sought declaratory relief on counts two and three. Because it was proper
to grant summary judgment to Standex on counts two and three, it was proper to do so on count four.
X.
For the foregoing reasons, we reverse summary judgment as to the breach-of-contract claim
(count one, part one), but affirm summary judgment for Standex on Urban’s other claims.
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