Borowski v. DePuy, Inc., a Div. of Boehringer Mannheim Co.

• Citation: 850 F.2d 297
• Decision Date: 17 June 1988
• Docket Number: Nos. 87-3059,88-1057,s. 87-3059
• Parties: , 11 Fed.R.Serv.3d 823 Chester H. BOROWSKI, Plaintiff-Appellant, v. DePUY, INC., A DIVISION OF BOEHRINGER MANNHEIM CO., and Stephen Bales, Defendants-Appellees. Chester H. BOROWSKI, Plaintiff, v. DePUY, INC., A DIVISION OF BOEHRINGER MANNHEIM CO., and Stephen Bales, Defendants-Appellees. Appeal of MITCHELL A. KRAMER & ASSOCIATES.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 297

850 F.2d 297

57 USLW 2066, 11 Fed.R.Serv.3d 823

Chester H. BOROWSKI, Plaintiff-Appellant, v. DePUY, INC., A DIVISION OF BOEHRINGER MANNHEIM CO., and Stephen Bales, Defendants-Appellees.

Chester H. BOROWSKI, Plaintiff, v. DePUY, INC., A DIVISION OF BOEHRINGER MANNHEIM CO., and Stephen Bales, Defendants-Appellees.

Appeal of MITCHELL A. KRAMER & ASSOCIATES.

Nos. 87-3059, 88-1057.

United States Court of Appeals Seventh Circuit.

Argued April 18, 1988.

Decided June 17, 1988.

Mitchell A. Kramer, Mitchell A. Kramer & Assoc., Philadelphia, Pa., for plaintiff-appellant.

Donald E. Knebel, Barnes & Thornburg, Indianapolis, Ind., for defendants-appellees.

Before CUMMINGS, CUDAHY and EASTERBROOK, Circuit Judges.

CUMMINGS, Circuit Judge.

The record in this egregious case of misleading and unprofessional attorney behavior compelled the district court to adopt the magistrate's report recommending that summary judgment be granted for both defendants on all of plaintiff's counts. The district court modified the report so that costs and attorney's fees were to be borne exclusively by plaintiff's lead counsel, Mitchell A. Kramer, with no right to reimbursement from the plaintiff. We affirm, and because plaintiff's counsel misstated and misrepresented the record below, we further award both defendants their respective costs and attorney's fees for having to defend this vexatious and frivolous appeal. Fed.R.App.P. 38.

This diversity contract and tort suit is governed by the law of Illinois which was the state of performance of contract obligations as well as the state of the most significant contact between the parties and the state where the claimed injury occurred. Because it arises on appeal of summary judgment for defendants, we review the inferences from the following facts in the light most favorable to the plaintiff, Chester A. Borowski. Int'l Union of Operating Engineers v. Assoc. General Contractors of Illinois, 845 F.2d 704 (7th Cir.1988). On May 8, 1986, Borowski filed a four-count complaint against defendants DePuy, Inc., and Stephen Bales. Counts I and II were against DePuy and Bales for alleged breach of an implied contract, and Counts III and IV were against Bales only and charged tortious interference with contractual relations against Borowski. DePuy, a division of Boehringer Mannheim Corporation, markets medical healthcare products throughout the country. Bales was a former national sales manager for DePuy. Borowski was DePuy's sales representative for an area around Cook County, Illinois, known as Territory 31.

Pursuant to an oral contract of unspecified duration in August 1977, Borowski began selling DePuy products, to be paid on a commission of approximately 17.5% of his sales. When he assumed his position with DePuy, Borowski bought certain instruments from Mr. Higby, his predecessor in the territory, at a cost less than if he had purchased them from DePuy.

Bales, as national sales manager, was in charge of hiring, reviewing, and firing distributors. In 1979, managerial problems involving Borowski's relationship with his sales associates and his performance as the Territory 31 distributor came to Bales' attention. Bales wrote Borowski to tell him to improve his distribution through an in-depth marketing and sales plan. Plaintiff promised to attempt to remedy both the low sales level and the associates' morale problem.

By the summer of 1984, the continuing problems reached a critical stage, which despite Borowski's implemented solutions, worsened in 1985. In that year, three local sales associates sent Bales a letter describing Borowski's mismanagement. As a result of his independent review, Bales fired Borowski on August 13, 1985 for failing to rectify the situation. DePuy approved this discharge as well as Bales' request to succeed Borowski as the distributor of Territory 31. After taking an inventory of the goods and merchandise belonging to DePuy in Borowski's possession on August 23, 1985, DePuy withheld his final sales commission check, pending resolution of Borowski's inventory shortage.

Borowski's suit alleged the following: 1) DePuy and Bales breached an implied contract when DePuy fired him without paying him an "override" to compensate him for growth in his territory, thereby resulting in defendants' unjust enrichment; 2) DePuy breached an implied contract both to repurchase DePuy's used equipment at 100% of original price as well as to pay him his withheld sales commission; 3) Bales tortiously interfered with his contractual relationship with DePuy by firing him as sales representative; and 4) Bales tortiously interfered with his contractual relationship with the three local sales associates. DePuy counterclaimed for the cost of inventory still in Borowski's possession.

On defendants' motions for summary judgment, the magistrate recommended that the motions be granted and that attorney's fees and costs be awarded to defendants pursuant to Rule 11, Fed.R.Civ.P. After a de novo review pursuant to Rule 72, Fed.R.Civ.P., the district court adopted this report but further directed that all of the sanctions be borne solely by Borowski's lead counsel, Mitchell A. Kramer. As recommended by the magistrate, the court also entered judgment of $2,882.73 in favor of DePuy on its counterclaim.

After a timely appeal, plaintiff on March 25, 1988, filed a motion in this Court seeking to supplement the record on appeal by including two documents entitled "Motion to Compel and for Sanctions of Defendant Bales" and "Memorandum of Law in Support of Plaintiff's Motion to Compel Defendant Bales to Answer Certain Deposition Questions And To Reconsider Its Denial of Access on the Document Produced In Camera." The motion also requested leave to file a "Supplemental Appendix" ¹ which was already attached to plaintiff's reply brief in this Court and which was in addition to a "Supplementary Appendix" previously filed here. At oral argument on April 18, 1988, Mitchell A. Kramer, plaintiff's counsel, stated to this Court that these documents were filed in the district court. This was disputed by both defendants' counsel in his response although the documents were apparently before the magistrate. Kramer chose not to make a rebuttal argument when offered by the Court, saying, "I did not reserve a rebuttal.... I think I've covered pretty well ... and the record I think is fairly clear." Therefore, there was no contradiction of defense counsel's assertion.

The arguments raised by plaintiff in his brief to this Court basically rehash those presented to the court below and deserve the summary treatment which follows. We discuss these unsupportable claims before analyzing the propriety of sanctions both below and on appeal. ²

Breach of Implied Contract

In the district court, Borowski alleged that DePuy and Bales breached an implied contract by failing to pay him compensation known as an "override"--a payment to a former distributor based on a percentage of sales--for development of his territory at the time of his termination, and as a result, that the defendants were unjustly enriched by this action. Plaintiff further asserted that the termination of the contract was made in bad faith and without cause, thereby constituting a breach of the oral at will contract by DePuy and Bales. Next, Count II of the complaint alleged that DePuy breached an implied agreement with Borowski to pay him 100% of the value of the instruments purchased from DePuy and sold to Borowski's customers. A contract implied in law allegedly existed due to the conduct of the parties, the custom and practice of the orthopedic products industry, and DePuy's practice with respect to other terminated distributors. As in Count I, Borowski's theory was predicated on unjust enrichment or quantum meruit principles.

Borowski's brief on the implied contract claim both misstates the record and rulings below and attempts to raise previously unmentioned issues. He initially fails to confront the well-known bar to his suit: in Illinois indefinite agreements between companies and their sales representatives can be terminated at will, for any or no reason, without liability. See Gordon v. Matthew Bender & Co., Inc., 562 F.Supp. 1286 (N.D.Ill.1983) (relying on Illinois law); see generally Epstein, In Defense of the Contract at Will, 51 U.Chi.L.Rev. 947 (1984). At oral argument, this Court directed plaintiff's counsel's attention to Kumpf v. Steinhaus, 779 F.2d 1323 (7th Cir.1985), where in construing the similar Wisconsin law, we discussed the rationale behind employment at will. Like Borowski,

Kumpf had no tenure of office. The lack of job security gave him a keen motive to do well. Security of position may diminish that incentive.... Employment at will, like the business judgment doctrine, also keeps debates about business matters out of the hands of courts. People who enter a contract without a fixed term know there is some prospect that their business partners may try to take advantage of them or simply make a blunder in deciding whether to continue the relationship. Yet people's concern for their reputation and their ability to make other advantageous contracts in the future leads them to try to avoid both mistakes and opportunistic conduct. Contracting parties may sensibly decide that it is better to tolerate the risk of error--to leave correction to private arrangements--than to create a contractual right to stay in office in the absence of a "good" reason. The reason for a business decision may be hard to prove, and the costs of proof plus the risk of mistaken findings of breach may reduce the productivity of the employment relation.

Kumpf, 779 F.2d at 1326. Plaintiff's counsel's only response to the above policy was his concession that Borowski could be fired without cause! He then attempted to restate that his ground for appeal was not for wrongful discharge but for unjust enrichment, and therefore that is this Court's concern.

As noted...