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HAWES OFFICE SYS. v. WANG LABS.

February 28, 1984

HAWES OFFICE SYSTEMS, INC., Plaintiff, against WANG LABORATORIES, INC., Defendant.


The opinion of the court was delivered by: NEAHER

MEMORANDUM OF DECISION AND ORDER

NEAHER, District Judge.

 This diversity action arises from a claimed breach of an agency agreement between plaintiff Hawes Office Systems, Inc. (Hawes), an office equipment dealer located in Nassau County, New York, an defendant Wang Laboratories, Inc. (Wang), a manufacturer of data processing equipment located in Massachusetts. Under a provision of the agreement, the law of Massachusetts governs. *fn1"

 After a bench trial, the following constitutes the Court's findings of fact and conclusions of law. Fed. R. Civ. P. 52(a). By virtue of prior proceedings, Hawes Office Systems, Inc. v. Wang Laboratories, Inc., 524 F. Supp. 610 (E.D.N.Y. 1981) and 537 F. Supp. 939 (E.D.N.Y. 1982), the following issues remain for decision:

 1. Whether Wang breached the agency agreement by interfering with Hawes' business.

 2. Whether Hawes is entitled to interest upon commissions paid by Wang pursuant to the Court's order of April 23, 1982.

 3. Whether either party is entitled to an attorney's fee pursuant to paragraph 10 of the agency agreement.

 The following facts are not in dispute. On January 25, 1979, Hawes and Wang entered into an agency agreement, which terminated on January 25, 1981. 537 F. Supp. at 944. In exchange for commissions, Hawes agreed to merchandise a designated line of Wang word processing products in the four counties on Long Island and Staten Island. The first year's sales quota, renegotiable annually, was $300,000 net, and during the second year, $600,000 net.

 I.

 Plaintiff's theory of recovery is relatively straightforward. It contends that in 1980, Wand decided that plaintiff held too lucrative an agreement. To remedy this situation, Wang salesmen Ladimir, Buckley, and Benson assisted their supervisor, Esposito, at Esposito's direction, to sabotage Hawes' agency.

 Esposito joined Wang in August 1979 as branch manager. He shared office space with Hawes in Lake Success, Nassau County, from which he marketed the data processing product line and Hawes marketed the word processing product line. Eventually Hawes moved to its own offices in January 1980. About that time, the parties discussed a "joint venture" so as to maximize their business potential in the territory they covered.

 The negotiations produced nothing but arose in part from Esposito's belief that Hawes was not maintaining Wang's best interests. For example, he cited Hawes' sale of word processing equipment to Farmingdale High School, which had purchased data processing equipment from a Wang competitor on the perception that Wang neither sold nor made data processing equipment. He also noted two cases in which customers had contracted for "conversion" work. Both customers thought that their commitments derived from Wang itself.

 Esposito added that he had telephoned Hawes on several occasions when the phone was answered by Wang Labs. This confusion and possible abuse of Wang's name underlay part of a dispute between the parties which engendered a letter of termination on March 31, 1980. Hawes responded by filing suit in April; Wang withdrew the letter of termination on May 1, 1980.

 In May 1980, Esposito again approached Hawes about a joint marketing strategy. In exchange for not soliciting large accounts (companies), those with annual sales above $25,000,000, Hawes would be able to sell data processing equipment to smaller accounts, those with annual sales under $25,000,000. These negotiations had followed "legal discussions" related to the aforementioned termination letter.

 Esposito never testified specially that any of his salesmen were informed of the withdrawal of the termination letter. They were simply told of the "situation", which officially consisted of continuing to accept and process Hawes' orders. Buckley and Ladimir knew of the termination letter and that they were to sell word processing equipment; however, their testimony, without more, hardly evidences a breach of intent to breach. The agency agreement did not contain territorial restrictions; Wang salesmen were entitled to compete with Hawes.

 By way of additional circumstantial evidence, from which to draw adverse inferences, plaintiff asserts that more than competition occurred. Esposito admitted that he sent a letter, dated September 22, 1980, to 1,200 Wang customers informing them that Hawes was no longer an authorized dealer. Plaintiff further urges, based upon assertedly disinterested testimony of its customers' employees, that the plan to terminate him was well under way the Summer of 1980.

 Alfred Piscop of Doubleday & Co., Garden City, related his company's history with Wang word processing. In 1979 Doubleday upgraded its Wang system through Hawes which provided a "good quality" of training. In September 1980 Piscop decided to add another terminal:

 "A Approximately four to five weeks after we submitted the purchase order we got a call from Wang Laboratories, Inc., Dan Ladimir the sales representative, who told me that Hawes was no longer the authorized representative from Wang, and that the order should be resubmitted through Ladimir." T. at 688.

 Ladimir, who called sometime in October 1980, gave no reason for the order's rejection other than that Hawes was no longer Wang's representative.

 Ladimir testified that he did not know the reason for the rejection and had so stated to Piscop. He claiemd that he had contacted Doubleday in the past and had contacted Piscop just before Piscop first complained to Wang about the delayed order.

 During the interim, until December 1980, Hawes furnished Doubleday a terminal. Piscop added that the Wang supplied training was not as good as Hawes had provided in 1979.

 In November 1980 Piscop recommended a one-year rental of a Wang word processor with three terminals and a twin sheet feeder. He advised Doubleday to rent from Hawes because Hawes would train three operators -- Wang would train only one operator -- and Hawes' training course was superior. *fn2"

 Cross-examination proved unfruitful. Wang's efforts to elicit facts that Hawes was misrepresenting himself failed. Piscop stated that, based upon the "normal state of affairs in the industry", he had the impression that the agency was exclusive. Hawes had not suggested purchasing any data processing equipment such as small computers; however, the agency agreement did not require Hawes to make referrals or to "push" Wang's other product lines.

 Frank Agovino, senior patent attorney for Hazeltine Corp., Suffolk County, also attested to Hawes' superior support services. Hawes had furnished a substitute printer when the one purchaed had malfunctioned; without the printer, the system was worthless to this customer. In November 1980 Agovino had complained to Benson about the system's failure to "line number" -- automatically number the lines of a document in the left-hand margin as the document is produced -- a feature very convenient to patent lawyers. Benson told him that Hawes was no longer an authorized dealer. Wang eventually furnished the feature as part of a math package, but never explained how to use the feature, which had been a storng selling point of the system.

 Donald Brancaccio, assistant vice president of the Equitable Life Insurance Society, purchased Wang equipment after several demonstrations by William Bauer, plaintiff's salesman. The demonstrations had occurred both in plaintiff's territory and outside plaintiff's territory at Equitable's offices in Manhattan. At a meeting held in Manhattan and attended by Tom Schwantner, a Wang executive, Brancaccio learned, for the first time, that Equitable had a corporate contract with Wang and that "the purchase could not be put through the local vendor." He first heard of Hawes upon receipt of the subpoena to testify, a point W ang's counsel emphasized on cross-examination:

 "Q. I take it that you understood when we were dealing -- when you were dealing with Mr. Bauer that he was a Wang employee at the time?

 "A Yes." T. at 726-27.

 The essence of the Piscop/Doubleday case was repeated with E.D.S. Nuclear of Melville, Long Island, a nuclear engineering consulting firm. Elizabeth Stevens, word processing manager, testified that E.D.S. purchased Wang equipment from Hawes in May 1980. It was delivered in July 1980. Subsequently, E.D.S. placed orders for Wang equipment in October 1980 andin response received a letter signed by Benson and Esposito in November 1980, stating that Hawes ...


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