Aa Sales & Associates, Inc. v. Coni-Seal, Inc.

• Citation: 550 F.3d 605
• Decision Date: 09 December 2008
• Docket Number: No. 07-2694.,07-2694.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Parties: AA SALES & ASSOCIATES, INCORPORATED, Plaintiff-Appellant, v. CONI-SEAL, INCORPORATED, Defendant-Appellee.

550 F.3d 605

AA SALES & ASSOCIATES, INCORPORATED, Plaintiff-Appellant, v. CONI-SEAL, INCORPORATED, Defendant-Appellee.

No. 07-2694.

United States Court of Appeals, Seventh Circuit.

Argued September 16, 2008.

Decided December 9, 2008.

Peter V. Baugher, Jason M. Rosenthal (argued), Schopf & Weiss, Chicago, IL, for Plaintiff-Appellant.

Robert E. Shapiro (argued), Barack, Ferrazzano, Kirschbaum & Nagelberg, Chicago, IL, for Defendant-Appellee.

Before CUDAHY, FLAUM and ROVNER, Circuit Judges.

CUDAHY, 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 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 summary 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 judgment 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 manufacturer. 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 rewarded 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. The 1987 written contract entitled AA Sales to a six percent commission "on all products sold to the approved accounts," 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 Memphis, 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 the chassis line were available for sale. However, Saltzman claims that he was authorized under the original agreement 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 "override" 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 president 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 originally 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 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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (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 entitled to commissions on those sales even though he did 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] AA Sales & Associates, Inc. will act as the exclusive agent for Coni-Seal on selected accounts.

[2] All accounts must be approved by Coni-Seal prior to solicitation by AA Sales. A signed approval form will be forwarded back to AA Sales. . . .

[3] Coni-Seal Inc. agrees to pay AA Sales a Commission 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. . . .

[5] If termination is given by Coni-Seal, they (Coni-Seal) agree to continue to pay AA Sales a six (6) per cent commission on all accounts that had been previously called on and sold by AA Sales. This commission shall continue to be paid to AA 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 requires 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 approval 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 distinguishes between the terms `called on' and `sold' makes clear that, under the terms of the 1987 contract,...