AA Sales & Assoc v. Coni-Seal Inc ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-2694
AA S ALES & A SSOCIATES, INCORPORATED ,
Plaintiff-Appellant,
v.
C ONI-SEAL, INCORPORATED ,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 06 C 4636—Samuel Der-Yeghiayan, Judge.
A RGUED S EPTEMBER 16, 2008—D ECIDED D ECEMBER 9, 2008
Before C UDAHY, F LAUM and R OVNER, Circuit Judges.
C UDAHY, Circuit Judge. AA Sales alleges that Coni-Seal
breached the parties’ contract, as well as the Illinois Sales
Representative Act, 802 Ill. Comp. Stat. 120/1, et seq., by
failing to pay it the commissions it was due. It alleges that
it labored for nearly a decade to convince the retailer
AutoZone to do business with Coni-Seal, and that Coni-
Seal wrongfully denied it commissions after it finally
2 No. 07-2694
started making sales to AutoZone. It also claims that Coni-
Seal failed to pay it the post-termination commissions it
is due based on Coni-Seal’s sales to AA Sales’ former
accounts.
The district court granted Coni-Seal’s motion for sum-
mary judgment, finding, inter alia, that there was no
evidence that AA Sales actually effectuated Coni-Seal’s
sales to AutoZone. We affirm that portion of the judg-
ment dismissing AA Sales’ claim for post-termination
commissions based on Coni-Seal’s sales to accounts AA
Sales gave up in 1995, but reverse the dismissal of AA
Sales’ claim for commissions based on Coni-Seal’s
AutoZone sales.
I.
Coni-Seal is a family-owned automobile parts manufac-
turer. Originally, it made brake parts. More recently,
it expanded its product line to include, among other
things, chassis parts—parts related to an automobile’s
suspension system. AA Sales is a manufacturers’ sales
representative; Gerald Saltzman is its owner and sole
employee. Saltzman began working with Coni-Seal in the
1980’s. According to Saltzman, in the early days of the
parties’ relationship Coni-Seal offered few products and
had no large national accounts. Saltzman helped Coni-Seal
secure its first large, national clients and Coni-Seal re-
warded him by naming him its “special national
accounts representative” in 1987.
The parties memorialized their 1987 agreement in a one-
page contract that lies at the center of the present dispute.
No. 07-2694 3
The 1987 written contract entitled AA Sales to a six percent
commission “on all products sold to the approved ac-
counts,” and provided for post-termination commission
payments “on all accounts that had been previously called
on and sold by AA Sales.” “Approved accounts,” in turn,
were defined as accounts that Coni-Seal had given AA
Sales written authorization to solicit. The contract did not
prohibit oral modifications, and the parties subsequently
modified the contract orally in two important respects:
first, they began negotiating commissions on an account-
by-account basis; and second, they dispensed with
the written approval requirement, and Coni-Seal began
giving Saltzman oral approval to solicit particular clients.
In 1994, Coni-Seal gave Saltzman oral approval to
solicit sales from AutoZone, a large retailer of auto parts
and accessories. In exchange, Saltzman was promised a
three percent commission on all AutoZone sales. Relying
on Coni-Seal’s representation that AutoZone was AA Sales’
account, Saltzman made approximately fifty sales trips
at his own expense to AutoZone’s headquarters in Mem-
phis, Tennessee.
In 2001, Coni-Seal announced that it was expanding
its product line to include chassis parts. Although the
parties disagree about the details of this announcement,
Saltzman concedes that he was initially told that Coni-Seal
had no inventory or catalogs for its new product line
and that Coni-Seal’s sales representatives were “advised”
not to attempt to sell chassis parts until they were
notified that the line was ready. Saltzman further
concedes that he was never expressly told products from
4 No. 07-2694
the chassis line were available for sale. However, Saltzman
claims that he was authorized under the original agree-
ment to sell all of the products contained in Coni-Seal’s
products catalog and that Coni-Seal later sent him client
programs that included products from its chassis line.
Prior to Coni-Seal’s announcement of its new chassis
line, the parties’ relationship had begun to sour. In 1995,
Coni-Seal reassigned several accounts to its regional sales
staff.1 In exchange for yielding responsibility for these
accounts, Saltzman agreed to accept a two percent “over-
ride” commission based on Coni-Seal’s Illinois sales, as
well as a flat fee of $1,700 per month.
The deterioration of the parties’ relationship came to a
head in 2003 when Coni-Seal authorized a second sales
representative to make sales calls on AutoZone. When
Saltzman learned of this, he confronted Coni-Seal’s presi-
dent Frank Pagano. He alleges that Pagano told him
that Saltzman would share responsibility for the
AutoZone account and assured him that he would still
be entitled to the three percent commission he was origi-
nally promised. Later in 2003, Saltzman alleges that Coni-
Seal asked him to split his AutoZone commissions with
its other sales representative and that he refused.
In 2004, Coni-Seal began selling chassis parts to
AutoZone, first in Mexico and shortly thereafter in the
United States. Saltzman was not personally responsible
for bringing about these sales. Around this time, Saltzman
1
Specifically, Coni-Seal reassigned its Illinois regional accounts
as well as its Unicor account.
No. 07-2694 5
alleges that Pagano asked him to stop making sales calls
on AutoZone, but again promised him that he would be
paid commissions. Although Coni-Seal has made several
million dollars in chassis sales to AutoZone since 2004,
it has paid AA Sales no commissions based on these
sales. In 2006, Coni-Seal notified Saltzman that it would
discontinue the override and fixed income payments that
it had been making pursuant to their 1995 “override”
agreement. Saltzman commenced this action shortly
thereafter.
II.
We review de novo the district court’s decision granting
Coni-Seal’s motion for summary judgment. See Gates v.
Caterpillar, Inc., 513 F.3d 680, 685 (7th Cir. 2008). Summary
judgment is appropriate if a case presents “no genuine
issue as to any material fact.” Fed. R. Civ. P. 56(c). A
“genuine issue” exists where “there is sufficient evidence
favoring the nonmoving party for a jury to return a
verdict for that party.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249 (1986). We view the record in the light most
favorable to the nonmoving party and draw all reasonable
inferences in the nonmoving party’s favor. See Darst v.
Interstate Brands Corp., 512 F.3d 903, 907 (7th Cir. 2008). The
parties agree that Illinois law applies.
Saltzman was not actually responsible for persuading
AutoZone to buy chassis parts from Coni-Seal. The issue
now is whether under the 1987 written contract and the
Illinois Sales Representatives Act (“ISRA”) he was en-
titled to commissions on those sales even though he did
6 No. 07-2694
not actually effectuate them. The ISRA creates a cause of
action for a principal’s failure to pay “commissions due
at the time of termination of a contract between a sales
representative and principal . . . and commissions that
become due after termination.” 820 Ill. Comp. Stat. 120/2.
Claims under the ISRA, in other words, presuppose the
existence of a valid sales representatives’ contract. Thus,
AA Sales’ claim under the ISRA is parasitic on its breach
of contract claim: if it is entitled to commissions under
the parties’ contract, then the dismissal of its ISRA claim
was improper; otherwise not.
We begin by considering the language of the parties’
contract. See LaSalle Nat’l Bank v. Service Merchandise
Co., 827 F.2d 74, 78 (7th Cir. 1987) (“The starting point must
be the contract itself. If the language of the contract
unambiguously provides an answer to the question at
hand, the inquiry is over.”) (citation omitted). The
relevant parts of the parties’ contract can be reproduced
in their entirety:
[1] A A Sales & Associates, Inc. will act as the exclu-
sive agent for Coni-Seal on selected accounts.
[2] All accounts must be approved by Coni-Seal prior
to solicitation by A A Sales. A signed approval form
will be forwarded back to A A Sales . . . .
[3] Coni-Seal Inc. agrees to pay A A Sales a Commis-
sion of six (6) per cent on all products sold to the
approved accounts . . . .
[4] Either party may terminate this agreement . . .
[on] ninety (90) days written notice . . . .
No. 07-2694 7
[5] If termination is given by Coni-Seal, they (Coni-
Seal) agree to continue to pay A A Sales a six (6) per
cent commission on all accounts that had been previ-
ously called on and sold by A A Sales. This commission
shall continue to be paid to A A Sales for a period of
5 years.
The district court held that the contract requires AA Sales
to actually effectuate a sale in order to be entitled to a
commission. See AA Sales & Assoc., Inc. v. Coni-Seal, Inc.,
No. 06-4636, 2007 WL 1834399, at *3 (N.D. Ill. June 26,
2007). We disagree. By its plain terms, the contract re-
quires Coni-Seal to pay AA Sales a commission on all sales
to “approved accounts,” viz. accounts with respect to
which AA Sales has been authorized to act as its exclusive
agent. Further, while the second paragraph requires AA
Sales to obtain Coni-Seal’s written approval prior to
soliciting a customer, both parties claim that they orally
agreed to eliminate the written approval requirement.
Both parties also claim Saltzman was given verbal ap-
proval to solicit AutoZone in 1994, and was promised a
commission of three percent based on Coni-Seal’s sales
to AutoZone.
Nor does the contract’s fifth paragraph—according to
which AA Sales will be entitled to post-termination
commissions only for accounts “previously called on
and sold”—support the district court’s conclusion. The
court reasoned that “the fact that the contract distin-
guishes between the terms ‘called on’ and ‘sold’ makes
clear that, under the terms of the 1987 contract, AA Sales
must actually make sales to customers, rather than
8 No. 07-2694
merely making contact with customers.” 2007 WL 1834399,
at *3. The court was right to observe that the words “called
on” and “sold” would be redundant if they were not
assigned different meanings. Id. However, this does not
mean that the word “sold”should be viewed in isolation
and assigned the same meaning in paragraphs three
and five irrespective of any difference in context. On the
contrary, it seems clear that the word “sold” does one
kind of work in the phrase “sold to approved accounts,”
but quite another in the phrase “sold by AA Sales.”
It is a fundamental principal both of our canons of
interpretation and indeed of philosophy of language that
particular bits of contract language must be interpreted
in their own context. Compare Shi Liang Lin v. U.S. Dep’t of
Justice, 494 F.3d 296, 316 (2d Cir. 2007) (Katzmann, J.,
concurring with en banc judgment) (“Text without con-
text can lead to confusion and misunderstanding.”), with,
e.g., LUDWIG WITTGENSTEIN § 3.3 TRACTATUS
LOGICO-PHILOSOPHICUS (C.K. Ogden, trans. 1992)
(“only in the context of a proposition has a name mean-
ing.”). During the life of the contract, AA Sales was
entitled to commissions based on “all products sold to the
approved accounts.” (emphasis added). This language does
not require AA Sales to prove that it actually effectuated
sales in order to be entitled to a commission. On the
contrary, we think the contract means what it says:
while the contract remains in effect, AA Sales will be
entitled to commissions based on all sales to approved
accounts; after the contract has been terminated, how-
ever, it will be entitled to commissions only when it can
show that it actually brought about sales to the relevant
account while the contract was still in effect.
No. 07-2694 9
For this same reason, we are not persuaded by Coni-
Seal’s attempt to rely on Illinois’s “procuring cause rule” to
achieve by operation of law what the district court did by
misinterpreting the contract. Under the Illinois procuring
cause rule, brokers are not entitled to a commission
unless they can show that they actually sold the property
in question, were instrumental in bringing about the
sale or procured a purchaser who was willing and able to
purchase on the stipulated terms. Lord v. Melton, 400
N.E.2d 547, 550 (Ill. App. Ct. 3rd Dist. 1980). However,
the procuring cause rule is merely a default rule and is
inapplicable when a contract specifies other bases of fee
recovery. See Hammel v. Ruby, 487 N.E.2d 409, 411-12 (Ill.
App. Ct. 5th Dist. 1985); see also Grubb & Ellis Co. v. Bradley
Real Estate Trust, 909 F.2d 1050, 1055 (7th Cir. 1990) (“when
an agency agreement expressly provides for the pay-
ment of a commission upon sale without regard to the
agent’s role in the transaction, the agent’s failure to
procure the sale is irrelevant.”). Because the parties’
contract does not require AA Sales to show that it was
the cause of a sale in order to be entitled to pre-termina-
tion commissions, the procuring cause rule does not apply.
Nor, finally, are we persuaded by Coni-Seal’s argument
that Saltzman is entitled to commissions only for domestic
sales of automotive brake parts for the ostensible reason that
the contract names AA Sales a “National Accounts Repre-
sentative” (emphasis added), and was printed on letter-
head bearing Coni-Seal’s logo, which at the time read
“Coni-Seal Automotive Brake Parts” (emphasis added).
Coni-Seal’s logo no more forms a part of the contract
than does its address and telephone number, which are
10 No. 07-2694
printed at the bottom of the page. See Atlantic Mut. Ins. Co.
v. Metron Eng’g & Constr. Co., 83 F.3d 897, 899 (7th Cir.
1996) (“Under Illinois law introductory language or
recitals are not binding obligations.”). Further, although
the contract names AA Sales a “national accounts rep-
resentative,” there is no indication that the parties in-
tended this title to limit geographically the types of
accounts that Coni-Seal could authorize. Indeed, Saltzman
gave uncontradicted testimony that he had been assigned
international accounts as well as domestic accounts, and
that Coni-Seal paid commissions based on its sales to
these accounts without objection.
III.
Because the terms of the parties’ contract entitles AA
Sales to a commission on all sales to approved accounts,
the central issue is whether Coni-Seal’s sales to AutoZone
constitute sales to an approved account within the meaning
of the contract. Coni-Seal argues that these were not sales
to an approved account because AutoZone bought only
chassis parts, not brake parts, and because Coni-Seal’s first
sales were made to AutoZone stores in Mexico. In effect,
Coni-Seal claims that AutoZone is not one account but
many: AutoZone Mexico is one account, AutoZone U.S.
another; AutoZone brake parts is one account, AutoZone
chassis parts another.2 In support of this claim, Coni-Seal
2
Coni-Seal’s position is weakened somewhat by its counsel’s
concession at oral argument that sales of chassis parts and brake
(continued...)
No. 07-2694 11
notes that when the parties’ contract was executed in 1987,
and indeed when Saltzman was first authorized to call
on AutoZone in 1994, Coni-Seal had not even developed
its line of chassis parts. Further, Coni-Seal alleges that
Saltzman was instructed not to attempt to sell its chassis
products until he was expressly authorized to do so,
and that he was never subsequently authorized to begin
selling products from the chassis line. Finally, Coni-Seal
notes that Saltzman admits that he never even attempted
to sell Coni-Seal chassis products.
Saltzman’s version of events, not surprisingly, is quite
different. Although he admits that he never attempted to
sell products from Coni-Seal’s chassis line, he denies
that he was forbidden from attempting to do so. First,
he notes that Coni-Seal expanded its product line signifi-
cantly over the years, and claims that he was always
authorized to sell all of the parts listed in Coni-Seal’s
products catalog, including products that Coni-Seal began
manufacturing well after the parties’ contract was first
executed. Second, he disputes Coni-Seal’s characteriza-
tion of its instructions to him at the time that the new
chassis line was announced. Saltzman denies that he was
instructed not to sell Coni-Seal chassis parts. Rather,
according to him, all of Coni-Seal’s sales representatives
were told that inventory and cataloging was not yet
available when the new chassis line was announced.
2
(...continued)
parts to a particular customer would be considered sales to
a single account for the purposes of bill collection.
12 No. 07-2694
However, under Saltzman’s version of events, he was
later given programs to present to clients which included
parts from Coni-Seal’s chassis line. Third, and most
significantly, Saltzman alleges that Coni-Seal repeatedly
promised him that he would be paid commissions on
its chassis sales to AutoZone.3
We cannot determine as a matter of law whether AA
Sales is entitled to commissions based on Coni-Seal’s
sales to AutoZone. If a jury credits Coni-Seal’s factual
claims, then it could conclude that Saltzman was
explicitly forbidden from soliciting sales from AutoZone
Mexico’s buyers or its chassis buyers, and therefore, that
he is not entitled to commissions based on sales to these
“unapproved” accounts. On the other hand, if the jury
credits Saltzman’s testimony, the jury could find that
(1) Saltzman made substantial efforts and incurred sig-
nificant costs in reliance on Coni-Seal’s representation
that the AutoZone account was his, (2) Coni-Seal subse-
quently reassigned the AutoZone account to a different
sales representative without formally terminating Saltz-
3
Although we take no position on the truth of either party’s
allegations, we note that Saltzman’s version of events is at least
partly corroborated by the record. In 2003, Coni-Seal sent
Saltzman a series of e-mails apprising him of what it described
as its “highly confidential” plan to sell its chassis line through
AutoZone stores in Mexico. If AutoZone Mexico was a
separate account that Saltzman was not authorized to solicit,
and if Saltzman was never authorized to sell chassis parts to
any customer, we cannot explain why Coni-Seal would choose
to disclose its sales plans to Saltzman.
No. 07-2694 13
man’s responsibility for the AutoZone account and
(3) Coni-Seal terminated the parties’ 1987 written contract
only after it had begun making substantial sales to
AutoZone. In this case, Coni-Seal’s failure to pay AA Sales
commissions based on its sales to AutoZone prior to the
termination of the 1987 written contract and for five
years hence would constitute a breach of the contract
as well as the ISRA.
IV.
The parties’ dispute concerning their 1995 oral agree-
ment is subject to a different analysis. In 1995 the parties
orally agreed that Saltzman would give up responsibility
for certain accounts in exchange for a two percent com-
mission based on Coni-Seal’s Illinois sales—including
its sales to accounts for which Saltzman had not been
responsible—as well as a monthly fixed income. This is a
modification of the termination provisions of the 1987
written contract, not a new contract. See Schwinder v. Austin
Bank of Chicago, 809 N.E.2d 180, 189 (Ill. App. Ct. 1st Dist.
2004) (“A ‘modification’ of a contract is a change in one
or more respects which introduces new elements into
the details of the contract, or cancels some of them, but
leaves the general purpose and effect undisturbed.”).
We agree with the district court’s decision to dismiss AA
Sales’ claim based on Coni-Seal’s discontinuation of
payments under the 1995 oral agreement. See Taylor v.
Canteen Corp., 69 F.3d 773, 784 (7th Cir. 1995) (“we may
affirm the judgment of the district court on the basis of
any ground supported by the record.”). Coni-Seal contin-
14 No. 07-2694
ued paying commissions based on its sales to Saltzman’s
former accounts from 1995 until 2006. AA Sales points
to no evidence that Coni-Seal agreed to continue post-
termination commissions in perpetuity. Indeed, in
keeping with the informal (some would say “sloppy”)
manner in which the parties arranged their affairs, they
seem to have failed to address how long these post-termi-
nation commission payments were to continue. Therefore,
the provision of the 1987 written contract entitling AA
Sales to five years of post-termination commission pay-
ments presumptively remains in effect.
As we have often observed, summary judgment is the
“put up or shut up” moment in the life of a case. Johnson v.
Cambridge Indus., Inc., 325 F.3d 892, 901 (7th Cir. 2003).
In the present case, to survive summary judgment, AA
Sales would have to show through specific evidence that
a triable issue of fact remains as to whether it was
entitled to more than five years of post-termination
commissions. Since there is nothing in the record that
could lead a reasonable jury to conclude that AA Sales
was entitled to more than five years of post-termination
commission payments, summary judgment on this claim
was proper.
V.
Coni-Seal paid AA Sales for over ten years after Saltzman
agreed to give up responsibility for the Illinois and Unicor
accounts. Under the 1987 written contract, AA Sales is not
entitled to more. Accordingly, we A FFIRM that portion of
the district court’s judgment that dismissed AA Sales’
No. 07-2694 15
claim for commissions based on Coni-Seal’s sales to Unicor
and to its Illinois regional accounts. However, if a jury
were to credit Saltzman’s allegations, then AA Sales
would be entitled to commissions based on Coni-Seal’s
AutoZone sales under the 1987 written contract. Accord-
ingly, we R EVERSE the remainder of the district court’s
judgment and R EMAND the case for trial on these issues.
12-9-08