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FREEMAN v. COMPLEX COMPUTING CO.

October 14, 1997

DANIEL FREEMAN, Plaintiff, against COMPLEX COMPUTING COMPANY, INC., et al., Defendants.


The opinion of the court was delivered by: KAPLAN

 LEWIS A. KAPLAN, District Judge.

 The principal issue presented by this case is whether the corporate veil of an entity known as Complex Computing Co., Inc. ("C3") may be pierced to require Jason Glazier, C3's equitable owner, to arbitrate the plaintiff's claim against him. This Court previously held that it may and directed Glazier to arbitrate. *fn1" The Court of Appeals, although largely affirming the previous decision, has remanded for the purpose of this Court making a finding as to "whether Glazier used his control over C3 to commit a fraud or other wrong that resulted in an unjust loss or injury to Freeman." *fn2"

 Facts

 The facts are largely set out in the prior opinions of this Court and the Court of Appeals and need not be repeated. It is necessary only to summarize Freeman's contract with C3 and to place it in the broader context of the present dispute.

 The Freeman Contract

 On September 30, 1993, Freeman entered into an agreement with C3 pursuant to which he agreed to serve as an independent sales representative. Section 4 of the contract provided in relevant part that C3:

 
"shall pay to [Freeman] 20% of all Revenues (hereinafter defined) on a Commissionable Sale (hereinafter defined) during the seven years after the closing of such sale, and 10% of all Revenues on a Commissionable Sale during the three years next succeeding such seven-year period, except that such commissions shall be 10% and 5% with respect to Commissionable Sales made during the three-month period commencing six months after the expiration of the full Term or following its earlier termination under Section 5 hereof. 'Revenues' means gross revenues received on a Commissionable Sale during the specified time period immediately succeeding the date of the execution of a binding agreement or other closing of such Commissionable Sale, in respect of the Product . . . 'Commissionable Sales' means sales or licensings of the Product or any part of it by the Company, for which a binding agreement is executed during the Term or during the nine-month period immediately following the expiration of the full Term . . . to customers satisfying each of the following conditions: (a) the customer is listed on Schedule 1 hereto (all references to Schedule 1 mean Schedule 1 as amended from time to time, provided that it may not be amended at any time without the written consent of the Company); and (b) [Freeman] shall have performed material sales, marketing and/or negotiating services necessary to secure the sale of the Product to such customer . . ."

 In broad summary, then, Freeman was to receive with respect to all sales that he brought about to customers listed on Schedule 1 (a) 20 percent of the gross revenues for the first seven years, and (b) 10 percent of the gross revenues for the next three years.

 The agreement contemplated the possibility that C3 would acquire, merge with or be acquired by a customer, an event that could cut off the flow of sales revenues notwithstanding that the customer would continue to have the benefit of C3's product. Section 8 therefore provided in relevant part that:

 
"During the term of this Agreement, if the Company makes a Commissionable Sale that does not result in any Revenues because the Company effects a merger, consolidation, or stock acquisition transaction with the party to whom such Commissionable Sale was made, then in lieu of any commission in respect thereof, the Company shall pay to [Freeman] an amount equal to 10% of the total consideration conveyed in such merger, consolidation or stock acquisition transaction."

 In other words, if C3 entered into a business combination that would deprive Freeman of commissions contemplated by Section 4, Freeman would be entitled to receive an amount equal to 10 percent of the deal.

 The Thomson Transactions

 On August 18, 1994, C3 entered into an agreement pursuant to which it granted Thomson Trading Systems, Inc. exclusive worldwide sales and marketing rights for its product with respect to non-broker/dealer customers. *fn3" As the Court of Appeals noted, Thomson was among the entities listed on Schedule 1 of the Freeman-C3 agreement, and an amendment to that contract acknowledged that Freeman "has performed -- and will continue to perform -- material marketing services" with respect to the customers so listed. *fn4" Freeman therefore had at ...


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