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Winter-Wolff International, Inc v. Alcan Packaging

May 23, 2012

WINTER-WOLFF INTERNATIONAL, INC., PLAINTIFF,
v.
ALCAN PACKAGING FOOD AND TOBACCO INC., DEFENDANT.



The opinion of the court was delivered by: Hurley, Senior District Judge:

MEMORANDUM & ORDER

Winter-Wolff International, Inc. ("Winter-Wolff" or "plaintiff") commenced this action in Nassau County Supreme Court. Defendant later removed the case to this Court, citing diversity as the basis for federal jurisdiction.*fn1 Plaintiff's second amended complaint ("SAC"), filed after removal, brings breach of contract and other related claimsagainst defendant Alcan Packaging Food and Tobacco, Inc. ("APF&T" or "defendant"). Before the Court are the parties' cross motions for summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons set forth below, defendant's motion is granted and plaintiff's motion is denied.

I.The Agreement

BACKGROUND

In July of 2002, defendant's corporate predecessor, Lawson Mardon USA Inc. ("Lawson Mardon" or "LM")*fn2 entered into a "Manufacturer's Representative Agreement" ("Contract" or "Agreement") with plaintiff. (The Parties' Local Civil Rule 56.1 Statement of Undisputed Material Facts ("56.1 Stmnt.") ¶¶ 5-6.)*fn3 Under this Agreement, Winter-Wolff became APF&T's exclusive sales agent for certain "Authorized Products," defined in the Agreement as "Lawson Mardon flexible lamination food packaging products for retort applications." (Agreement at 16, attached to the Declaration of Amanda Gallagher ("Gallagher Decl.") as Exhibit 1.) All purchases of Authorized Products by "Authorized Customers"*fn4 within the "Authorized Territory" of North America during the contract period would earn Winter-Wolff five percent commissions on the net sales.

The broad aim of the Agreement was to "develop and maintain a substantial volume of sales for LM," in line with its objective to become a "major supplier in the US retort market." (Agreement § 1.) Specifically, the Contract called for Winter-Wolff to "actively support and effect the transition of product manufacturing activities [then] conducted by affiliates of LM in Switzerland and Germany to the United States," and to "use its best efforts to assist in LM's development of retort market in the United States." (Id. § 8(f); see Stacey Dep. 61.)

Before it could offer a sales price to a potential customer, Winter-Wolff was first required to seek authorization for a particular price quote from defendant. (Agreement § 2(g).) However, Winter-Wolff did not need to secure the sale itself in order to receive commissions. The Agreement specifically states that its provisions "shall not preclude LM, or an affiliate of LM, from directly or indirectly promoting or offering for sale any of the Authorized Products," so long as Winter-Wolff receives commissions on those sales. (Agreement § 2(d).)

Winter-Wolff believed that developing the domestic market for defendant could potentially take years with little immediate payoff, and therefore negotiated for a long contract period in which they would serve as defendant's exclusive sales representative. (See 56.1 Stmnt. ¶ 81;Stacey Dep. 86.) The agreed-upon Contract ran from January 1, 2003 through December 31, 2005, and under the terms of the Agreement, the parties could only terminate during that period for cause. At the end of the contract period, either party could terminate without cause, but only upon twelve months' notice. (Id. §§ 3, 6.) Therefore, unless the Agreement was terminated for cause, the parties' contractual obligations ran, at a minimum, through December 31, 2006.

II.The Acquisition and Integration of PPPI

In late 2003 or early 2004, defendant's "indirect corporate parent," Alcan Inc., acquired the company Pechiney S.A., which owned and operated Pechiney Plastic Packaging Inc. ("PPPI"). (56.1 Stmnt. ¶¶ 7-8.) Prior to this acquisition, PPPI was a direct competitor to APF&T, with a foothold in the very same domestic market for flexible packaging that APF&T was attempting to develop through its representative Agreement with Winter-Wolff. In fact, PPPI sold flexible lamination food packaging to some of the same Authorized Customers targeted in the Agreement. (Id. ¶¶ 14, 16.)

Although PPPI and APF&T remained separate corporate and legal entities following the acquisition, (id. ¶ 9), the two affiliated companies integrated their businesses in significant ways. For example, both conducted business under the trade name "Alcan Packaging," (id. ¶¶ 26-28); Alcan Inc.'s business unit, Alcan Food Packaging Americas, began to oversee sales for both of the subsidiaries, (id. ¶¶ 30, 61; Mosesian Dep. 48); both companies utilized the same sales website, (id. ¶¶ 49-50); and members of the two sales teams-although nominally employed by either APF&T or PPPI-identified themselves to customers as representatives of "Alcan Packaging," (id. ¶ 51), and used "alcon.com" email addresses (id. ¶ 53). In a February 5, 2004 letter to the sales team of the "'new' Alcan Packaging," David Stacey ("Stacey"), APF&T's Vice President of Sales, stated that through the "integration process," the sales team would "be able to offer [] customers the widest range of product capabilities in the flexible packaging business" from a company "made up of many different parts, the latest of which is [PPPI]." (P's Ex. 5.) Additionally, Robert Mosesian ("Mosesian") served as Vice President and Chief Financial Officer of PPPI as well as Vice President and Treasurer of APF&T. (56.1 Stmnt. ¶ 58). All decisions regarding capital investments at the two companies' respective factories were made by one person, Michael Schmidt, a PPPI employee. (Id. ¶¶ 54-56.) After the acquisition, Winter-Wolff's contacts within the company also changed. Now, instead of going through David Stacey, plaintiff reported to Jeff Heaslip, a PPPI employee. (Id. ¶¶ 33-39.) Plaintiff was also instructed to obtain authorization for price quotes from Erin Larson, also a PPPI employee. (Id. ¶¶ 26-28.)

In other key ways, however, the two companies preserved their status as distinct entities. Mosesian testified that they maintained separate corporate and tax identities, which meant keeping their own income statements, bank accounts, balance sheets and boards of directors. (Mosesian Dep. 28, 122, 141.) Importantly, the two companies continued to maintain separate ownership of their pre-existing production plants, with APF&T holding onto its plant in Shelbyville, Kentucky and PPPI to its plant in Neenah, Wisconsin.

The new "Alcan Packaging" joint sales team, which consisted of sales agents employed by either APF&T or PPPI, was now able to sell products produced at either factory. As the companies' two plants had differing production capabilities, this meant that the sales agents could now offer their customers a broader range of products. (Lozen Dep. 121, 135.) However, when approaching a customer regarding such sales, agents would not distinguish between products that would ultimately be produced by APF&T in Shelbyville or PPPI in Neenah. As Stacey noted after the acquisition, "[t]here is only one Alcan and both Alcan and our customers have full expectations that we will integrate and operate as such." (56.1 Stmnt.¶ 48.) The shared sales website did not make such a distinction either, branding all products as available through "Alcan Packaging." (Id. ¶¶ 49-50.)

It was only after a particular sale was made that the companies would decide which of the two factories would produce the order. This decision would be based on "which plant had the best production equipment," which plant had the most "experience in producing the product," which had the available capacity, and which plant "was qualified to produce the product." (Id. ¶¶ 64-66.) Once a particular plant was selected, price quotes would be generated by that production plant. (D's Ex. 10.) And, upon shipment of the final product, the company that owns the plant where the items were produced would issue the payment invoice. (D's Ex. 11.) The customer would then tender payment to whichever company owned the plant where the product was made -- either APF&T or PPPI, (see Mosesian Dep. at 57).*fn5

III.Termination of the Agreement

The acquisition and integration of PPPI naturally created certain redundancies within the two companies. Many of the customers that had been "targeted by APF&T" prior to the acquisition were "pre-existing within PPPI." (See Email dated 10/14/01, P's Ex. 7; Stacey Dep. 145.) This overlap meant that various accounts that Winter-Wolff was charged with soliciting under the Agreement were also being approached by PPPI sales representatives, creating an unnecessary expense and sowing confusion among the customers. (Id.) Additionally, the two manufacturing facilities at issue-APF&T's plant in Shelbyville and PPPI's plant in Neenah- each possessed production capabilities that the other did not have. As Stacey testified at deposition, "I think a business decision was made. If Shelbyville couldn't manufacture the product at that time, there was no point spending money, further money . . . if the business was already being produced within PPPI." (Stacey Dep. 133.) For example, after the acquisition, APF&T delayed the process of upgrading its Shelbyville plant to produce Meals Ready to Eat ("MRE") packaging because such products were already able to be produced at PPPI's Neenah plant. (56.1 Stmnt. ¶ 88.)

In March of 2004, Stacey met with the principal of Winter-Wolff, Dan Weil ("Weil"), for preliminary discussions about removing some of the Authorized Customers listed in the Contract. (56.1 Stmnt. ¶ 86.) Later, on July 14, 2004, Stacey sent a letter to Weil informing him that APF&T was terminating the Agreement, effective July 19, 2005. (7/14/04 Letter, D's Ex.

15.) The letter stated that APF&T would continue to pay the relevant sales commissions during this notice period on business that Alcan sales representatives secured themselves, but that Winter-Wolff was "prohibited from, directly or indirectly, contacting or engaging any of the [Authorized Customers]." (Id.)

Winter-Wolff responded by letter dated August 18, 2004, stating that defendant's notice of termination was a "nullity" because under the Agreement, neither party could declare its intention to terminate the contract, without cause, before the contract ended on December 31, 2005. (P's Ex. 16.) The letter also stated that APF&T had an implied duty under the Agreement to entertain all price-quote requests submitted by Winter-Wolff and that there was nothing in the contract authorizing APF&T to bar Winter-Wolff from contacting the Authorized Customers. The letter further noted that Winter-Wolff did not believe it had been receiving all of the commissions to which it was owed. Specifically, plaintiff claimed that Authorized Products "manufactured by Lawson Mardon USA Inc. / [APF&T] are to be included in the sales upon which commissions are due, regardless of the manufacturing site." (Id.)

Beginning in or around June 2004, APF&T stopped responding to a number of requests from Winter-Wolff for price quotes from Authorized Customers. (56.1 Stmnt. ¶ 88.) However, Winter-Wolff continued to receive monthly commission checks for some time before they abruptly stopped. (56.1 Stmnt. ¶ 92.) The parties, however, dispute when the last check was actually issued. Plaintiff alleges it stopped receiving payments in June of 2005, while defendant contends that the payments continued through September 2005.*fn6 (56.1 Stmnt. ¶ 94.)

By letter dated May 5, 2005, plaintiff informed defendant that since July 19, 2004, APF&T had been in breach of the Contract by failing to pay all of the commissions due under the agreement, and that it had breached the covenant of good faith and fair dealing by failing to respond to the numerous requests for price quotes that plaintiff had submitted. (D's Ex. 25.) The letter also referred to two prior "requests to cure" sent by Winter-Wolff to APF&T, which were allegedly ignored. The letter stated that if defendant fails to cure these breaches by May 12, 2005, plaintiff would deem the contract terminated.*fn7 (Id.) In January 2006, Winter-Wolff began representing Floeter Flexible Packaging Group, a competitor to APF&T. (56.1 Stmnt. ¶ 20.)

IV.Commission Payments and Plaintiff's Claims

The parties have stipulated that APF&T paid Winter-Wolff a total of $256,392.85 in commissions between January 1, 2003 and December 31, 2006. (56.1 Stmnt. ¶ 24.) Defendant claims that the payment of this amount satisfies all of its obligations under the Contract, as it equals five percent of $5,127,849, the total net sales of all Authorized Products sold to Authorized Customers in the Authorized Territory during the relevant time period.

Winter-Wolff, however, claims that this sales total does not account for all of the sales for which it is due commissions under the Agreement, and brings this case for unpaid commissions under four causes of action. First, plaintiff claims that APF&T breached the terms of the Agreement by only paying commissions on products produced at the APF&T Shelbyville plant, and not products made at PPPI's Neenah plant. Second, plaintiff claims that APF&T's July 14, 2004 letter purporting to terminate the contract, and directing Winter-Wolff to refrain from contacting the Authorized Customers constituted an anticipatory breach. Third, that APF&T breached the covenant of good faith and fair dealing by failing to respond to Winter-Wolff's repeated requests for price quotes (SAC ¶ 93), by refusing to "provide Authorized Products to the Authorized Customers solicited by Winter-Wolff," (SAC ¶ 94), and by informing "Authorized Customers that Winter-Wolff was no longer authorized to sell to Authorized Customers or otherwise act as a sales representative for defendant," (SAC ¶ 96). Plaintiff's fourth and final claim alleges that defendant violated the Illinois Sales Representative Act, 820 ILCS 120/1(4), by allegedly failing to pay timely commissions. (SAC ¶¶ 100-06.) Plaintiff seeks treble statutory damages under this statute for what it claims was willful and bad faith conduct. (SAC ¶¶ 107, 109.)

DISCUSSION

I.STANDARD OF REVIEW

Summary judgment should be granted where the pleadings and admissible evidence offered to the Court demonstrate "no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." FED. R. CIV. P. 56; Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 309 (2d Cir. 2008). An issue of fact is genuine if the "evidence is such that a reasonable jury could return a judgment for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir. 2008). Further, the relevant governing law determines which facts are material; "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Accordingly, where the undisputed facts demonstrate the union of all the required elements of a cause of action and no reasonable juror could find otherwise, the plaintiff is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) ("Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existent of an element essential to that party's case.").

A party may defeat a motion for summary judgment only "by coming forward with evidence that would be sufficient, if all reasonable inferences were drawn in [its] favor, to establish the existence of [an] element at trial." Roe,542 F.3d at 36 (quoting Grain Traders, Inc. v. Citibank, N.A., 160 F.3d 97, 100 (2d Cir. 1998)). The non-movant must advance "more than a scintilla of evidence," Anderson, 477 U.S. at 252, and demonstrate more than "some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Affidavits submitted in opposition to summary judgment must be based on personal knowledge, must "set forth such facts as would be admissible in evidence," and must show that the affiant is "competent to testify to the matters stated therein." Patterson v. County of Oneida, 375 F.3d 206, 219 (2d Cir. 2004) (citing FED.R.CIV.P. 56(e)).*fn8 Conclusory statements in affidavits or allegations in the pleadings are therefore insufficient to defeat a motion for summary judgment. Gottlieb v. County of Orange, 84 F.3d 511, 518 (2d Cir. 1996).

II.PLAINTIFF'S FIRST CLAIM:COMMISSIONS ON SALES OF PRODUCTS PRODUCED BY PPPI

As a matter of clarification, whether Winter-Wolff is entitled to commissions for Authorized Products that were merely sold by PPPI is, alone, not at issue. As discussed above, section 2(d) of the Contract explicitly accounts for the payment of commissions on sales of Authorized Products to Winter-Wolff, whether the sale was secured by APF&T or one of its affiliates. Neither party disputes this. At issue is whether Winter-Wolff is entitled to commissions on the sales of products produced by PPPI at its Neenah plant, regardless of which company originally cultivated and secured the sale.

a.The Parties' ...


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