ADA Solutions, Inc. v. Meadors, Civil Action Nos. 12–11306–DPW

Decision Date06 April 2015
Docket NumberCivil Action Nos. 12–11306–DPW,13–10583–DPW.
PartiesADA SOLUTIONS, INC., Plaintiff, v. Chuck MEADORS and Chuck Meadors, Inc., Defendants, Chuck Meadors and CMI, Inc., Plaintiffs, v. Continental Structural Plastics Inc. and ADA Solutions, Inc., Defendants.
CourtU.S. District Court — District of Massachusetts

Frank Mondano, Maria A. Luise, Mondano & Luise, Boston, MA, Stephan R. Wright, Fleissner, Davis and Johnson, Chattanooga, TN, for Plaintiff.

Thomas P. Casey, Law Offices of Thomas P. Casey, PC., Saint Clair Shores, MI, Christopher A. Callanan, Stevenson McKenna & Callanan LLP, Timothy K. Cutler, Cutler P.C., Boston, MA, for Defendants.

MEMORANDUM & ORDER

DOUGLAS P. WOODLOCK, District Judge.

These matters involve a dispute among three entities involved in the production, distribution, and sale of tactile tiles. ADA Solutions, Inc. (ADA) is a Massachusetts corporation engaged in the manufacture, sales, and installation of tactile warning devices, including detectable warning panels. Continental Structural Plastics, Inc. (CSP) is a Delaware corporation based in Ohio which engages in the manufacture of tiles for distribution. Chuck Meadors and Chuck Meadors, Inc. (together, Meadors1 ) have acted as intermediaries among producers and distributors of tactile tiles.

The three entities developed a business relationship beginning in 2005. CSP manufactured tiles and sold them to ADA. Meadors functioned as a broker between them. As described below, there has been a significant rupture in the business relationship between ADA and CSP, on one side, and Meadors, on the other. As a result, Meadors sued both ADA and CSP, while ADA asserts claims against Meadors, both in a separate action (in which Meadors has asserted counterclaims) and through counterclaims in the action Meadors brought. The parties assert breach of contractual duties along with myriad other statutory and common law claims.

I. FACTUAL BACKGROUND
A. Initial Relationship Between Meadors and ADA

Over the course of 2005, ADA entered into a business relationship with Meadors that assumed various forms. The relationship is memorialized in several agreements entered into that year and subsequently.

On June 2, 2005, after discussing a potential business relationship, ADA drafted and presented a manufacturing agreement to Meadors. Under that agreement, Meadors was to manufacture and supply to ADA tactile warning tiles conforming to designs provided to Meadors by ADA. The agreement prohibited Meadors from producing or designing any competing tactile tiles and provided that Meadors would be compensated for the manufacture of the tiles on a per-piece basis. The agreement provided that “Manufacturing is scheduled to begin on or around October 15, 2005 and will be in effect for a period of five years from commencement of molding operations.”

B. The Supplier Agreements between ADA and Meadors

Two months later, realizing it would be uneconomical for Meadors to produce tactile tiles with ADA as a sole customer, given the upfront costs and impossibility of realizing economies of scale, Meadors and ADA entered into a “Supplier Agreement” on August 23, 2005. Under the new arrangement, Meadors agreed that it would “supply the following services to ADA Solutions, Inc.:

Act as ADA's agent in negotiations for compression molders and SMC suppliers.
Daily pick up of all molded tiles.
Provide quality control inspection of all molded parts at molder's facilities.
Provide all labor required to perform all subassembly, packaging and preparation of tile for direct shipping of tile to ADA's customers.
Provide secure storage of tile as required. Complete all required paperwork for direct shipments.

In exchange for performing these services, Meadors was to be paid a commission between $1.00 and $5.00 per tile. The agreement also provided that Meadors was “to perform quality inspection, daily pick up, packaging, direct shipping of orders and storage of the retrofit tiles at the rate of $1.50 per tile” and that Meadors would “be responsible for any and all maintenance and/or repairs required for the operation of the hole punch fixtures including the regular replacement of drill bits.”

To facilitate Meadors's agency under the supplier agreement, ADA provided written authorization to Meadors to act on its behalf. That authorization stated:

ADA Solutions, Inc., hereby authorizes Chuck Meadors to act as an agent on it's [sic] behalf and negotiate and administer supplier agreements with potential compression molders and SMC suppliers in the state of Ohio.
Additional responsibilities include but are not limited to the following:
Quality control of raw material and molded parts
Inspection of tooling
Inspection and auditing of molded parts
Perform all operations of ADA's Ohio satellite operation

As part of the performance of these agreements, in addition to acting as a purchasing agent for ADA, Meadors provided ancillary or secondary services to ADA. Together with Siegfried Horn, whom Meadors hired, Meadors developed a new sheet molding compound formula. This allowed the compound to be manufactured by a designated supplier to ADA located and identified by Meadors, rather than requiring an external supplier. This supplier was CSP. In addition, Meadors assumed responsibility for certain post-production tasks such as quality checking and drilling tiles, which were required before delivery to ADA. Similarly, Meadors developed another molding compound with the assistance of James McDarment, who was hired for that purpose. These additional services allowed CSP to produce the tactile tiles required by ADA.

C. The Sales Representative Agreement between CSP and Meadors

On September 13, 2005, Meadors entered into a sales representative and agent agreement with New Venture Holdings, LLC, which was subsequently acquired by CSP. The agreement explained that:

This document is provided to cover the Confidential Agreements between [Meadors], and New Venture Holdings, LLC, or Continental Structural Plastics.
It is to provide that all products, projects and customers, including the first new business, i.e., ADA Solutions, Inc., will be exclusive to Chuck Meadors accounts. Further, that it is understood and acknowledged with this agreement of commissions to be paid to Chuck Meadors of 5% (five percent) for all sales/revenues of ADA Solutions, Inc., business beginning on this first day of September 13, 2005, and for the entire life of programs including—molded parts, commercially sold compound/SMC and/or all future sales generating revenue.
New Venture Holdings, LLC or Continental Structural Plastics agrees to not pursue said accounts that Chuck Meadors has identified in writing, as with ADA Solutions, Inc.

An attachment to the agreement identified all accounts.

On October 3, 2005, David Murtha, general manager of CSP, sent a letter to Meadors confirming the commission agreement on behalf of CSP. That letter stated:

This letter is to confirm that David Murtha, General Manager of the Connesut facility, has the authority from Continental Structural Plastics or New Venture Holdings LLC to ensure the life of the contract providing product to ADA Solutions with ADA Solutions approved custom made material (SMC) and molded product with tools supplied by ADA Solutions.
We recognize Chuck Meadors as the acting agent for ADA Solutions with a five percent (5%) commission fee on all sales of molded parts and and [sic] SMC compound commercially.

Although ADA does not dispute the existence of this agreement, the parties' positions concerning discussions between Meadors and ADA regarding the surrounding facts differ in one significant way. Meadors contends that it was authorized by ADA to charge this commission on sales from the suppliers of tiles to ADA and that this would be part of its compensation for acting as ADA's agent. During his deposition, Mr. Meadors explained that Mr. Flaherty, president of ADA, directed him to “negotiate ... a five percent deal.” ADA, in contrast, claims that the commissions received by Meadors from CSP were neither authorized by nor disclosed to ADA.

Regardless of whether ADA authorized the commissions, from October 2005 until June 2006, CSP provided tactile tiles to ADA and, during that period, paid a five percent commission on all such sales to Meadors, as set forth in the September and October 2005 agreements and letters between CSP and Meadors.

D. The Trusted Supplier Agreement Between ADA and Meadors

On April 27, 2006, ADA and Meadors entered into a “trusted supplier” agreement. In the letter setting forth the agreement, ADA explained that it would be providing Meadors with confidential information and required that Meadors keep the information confidential, that it not use the information for purposes other than acting on behalf of ADA, and that it refrain from engaging in certain activities in competition with ADA. This agreement also contained a choice of forum clause directing litigation to Massachusetts courts. According to ADA, Meadors did not disclose to ADA the five percent commission it was receiving from CSP when it signed this new agreement.

E. The June 2006 CSP/ADA Meeting and the Agreement by Meadors to look to ADA as its Sole Payment Source

On June 20, 2006, Dave Murtha, the plant manager at CSP's Connesut Ohio plant, and Tom Hilborn, vice president for sales of CSP, met with Mr. Flaherty, the president of ADA, and Scott Ober, a vice president and co-owner of ADA. Meadors was not present. During this meeting, Mr. Flaherty and Mr. Ober were allegedly informed for the first time of the payment of a five percent commission by CSP to Meadors on all of CSP's sales to ADA. According to those present at the meeting, CSP explained that it would be able to offer a more competitive price to ADA if CSP did not have to pay this commission, at which point Mr. Ober “almost fell off the chair” in surprise at the revelation of these payments.

Either during or shortly after the June 2006...

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