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MS. LIBERTY INC. v. EYELEMATIC MFG. CO.

July 10, 1996

MS. LIBERTY INC., Plaintiff, against EYELEMATIC MANUFACTURING COMPANY, INC., Defendant


The opinion of the court was delivered by: PARKER

 BARRINGTON D. PARKER, JR., U.S.D.J.

 This case presents for decision the interpretation of the termination provision of a sales representative contract between the plaintiff Ms. Liberty Inc. ("Ms. Liberty") and the defendant Eyelematic Manufacturing Company, Inc. ("Eyelematic"). Since the resolution of this case is driven primarily by this discreet question, the Court, pursuant to Fed.R.Civ.P. 42(b) held a trial limited to contract interpretation. Findings of Fact and Conclusions of Law follow. See Fed.R.Civ.P. 52(a).

 Eyelematic is a Connecticut corporation having its principal place of business in Watertown, Connecticut. It is in the business of manufacturing packaging and component parts for the cosmetics industry. Henry Seeback is Eyelematic's President and Chief Executive Officer and Al Velicka is its Vice-President of sales and marketing.

 Ms. Liberty is a New York corporation. Its sole shareholder, director and officer is Diane Elliot, who operates the corporation from her residence in Bedford, New York. The business of Ms. Liberty is to hire out Elliot as an independent sales representative to solicit and cultivate customers for clients such as Eyelematic.

 Velicka had known and worked with Elliot prior to his joining Eyelematic in May 1988. Shortly after joining Eyelematic, Elliot and Velicka had discussions in the fall of 1988 contemplating a possible business arrangement between her and Eyelematic since it was looking to hire independent sales representatives to expand its cosmetics part business. The discussions ranged across a variety of topics including Elliot's commission rate, her ability to work for others, as well as the circumstances under which the relationship, if consummated, could at some future time be terminated.

 Eyelematic had used independent contractors in the past and its historical practice had been to provide that contracts could be terminated by either party after one year. Elliot, for her part, was concerned during negotiations that commissions payable after termination for pre-termination work be protected. The 1988 negotiations centered around a number of topics, but this one was prominent.

 Prior to October 1, 1988, Velicka sent to Elliot a draft agreement that he had prepared on his word processor. The agreement contained the following provisions:

 
7. This Agreement shall be effective for one year from this date, and shall continue thereafter for an indefinite period of time unless terminated by either party at the original date upon 30 days written notice to the other party . . . .
 
8. Commissions will be paid on all residual business developed by Ms. Liberty Inc. for six months after termination.

 Elliot testified that termination protection was important to her. She believed she required protection in the event she devoted considerable time to cultivating a relationship that would prove beneficial to Eyelematic but was terminated before any commissions were payable. She testified she understood these clauses permitted her to be terminated only during an annual window period commencing 30 days prior to the anniversary of the execution of the contract. She testified that the purpose of paragraph 8 was to provide that she would be paid commissions on residual business for a period of six months after termination. Thus, according to her understanding of the agreement, in the event of termination occurring at any time other than the anniversary date, she would be entitled to continue to receive commissions both until the anniversary date and for a period of six months thereafter.

 Velicka's understanding of what transpired, and what was ultimately agreed upon, differed from Elliot's. He testified that the clause in question -- paragraph 7 -- inadvertently omitted a line and should have read as follows:

 
"This Agreement shall be effective for a one year period from this date, and shall continue thereafter for an indefinite period of time unless terminated by either party at the original expiration date or at a date subsequent to the expiration date upon 30 days written notice to the other party."

 His recollection was that he had intended to lift this language from a prior form of contract Eyelematic had used with other sales representatives. He testified that he sent to Elliot, prior to the execution of the October 1, 1988 agreement, a form agreement, with identifying references deleted, which contained this language. Elliot, on the other hand, testified that she had no recollection of receiving such a draft agreement. In any event, Velicka proceeded to draft a final version of the contract on his home word processor. He testified he lifted the language from one of the prior sales representative's contract and incorporated it into his draft agreement with Elliot. In the process of this drafting the underscored line was inadvertently omitted. He also testified ...


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