Barry Gilberg, Ltd. v. Craftex Corp., Inc.

• Decision Date: 07 January 1987
• Docket Number: No. 85 C 5194.,85 C 5194.
• Citation: 665 F. Supp. 585
• Court: U.S. District Court — Northern District of Illinois
• Parties: BARRY GILBERG, LTD., Plaintiff, v. CRAFTEX CORPORATION, INC., Defendant.

665 F. Supp. 585

BARRY GILBERG, LTD., Plaintiff, v. CRAFTEX CORPORATION, INC., Defendant.

No. 85 C 5194.

United States District Court, N.D. Illinois, E.D. Eastern Division.

January 7, 1987.

COPYRIGHT MATERIAL OMITTED

Abraham N. Goldman, Chicago, Ill., for plaintiff.

Michael T. Trucco, Lee Ann Russo, Coffield, Ungaretti, Harris & Slavin, Chicago, Ill., Larry W. Bridgesmith, Constangy, Brooks & Smith, Atlanta, Ga., for defendant.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Barry Gilberg, Ltd. ("Gilberg"),¹ a sales representative for manufacturers of women's clothing, has brought this action for wrongful termination and breach of contract against defendant Craftex Creations, Inc. ("Craftex"), a women's clothing manufacturer. Currently before the Court is defendant Craftex's motion for summary judgment. For the reasons noted below, we grant that motion in part and deny that motion in part.

I. UNCONTESTED FACTS

Barry Gilberg is the principal and sole shareholder of Gilberg, which was incorporated on April 1, 1980. Gilberg has been involved in the sales, merchandising and sales management in the women's apparel industry for over thirty years. Craftex is a manufacturer of women's intimate apparel and leisure wear, and its main office and warehouse are in New York, New York. Craftex has been engaged in the women's apparel business for fifty years.

At the time Gilberg began to represent Craftex's lines, Robert Cohen was vicepresident of Craftex and Jack Cohen was vice-president in charge of sales and marketing. Robert and Jack Cohen are brothers who have been employed in the women's apparel industry through Craftex for over thirty years each.

In March 1980, Craftex and Gilberg entered into an oral agreement by which plaintiff agreed to exclusively represent goods manufactured by Craftex in the States of Illinois, Indiana, Wisconsin and Missouri. There was no written agreement between Craftex and Gilberg. The terms and conditions of the agreement between Craftex and Gilberg were orally expressed at a meeting between the parties in New York on or about March 21, 1980, and never reduced to writing. Gilberg and Craftex agreed that Gilberg would receive 6½% commission based on sales made to stores in Gilberg's territory for which Gilberg had sales responsibility. Also, Gilberg would receive 3% commission on all irregular and off price goods shipped into Gilberg's territory based on sales to stores for which Gilberg has had sales responsibility. Gilberg and Craftex agreed that Gilberg would pay his own expenses, including 75% of the rent on a showroom at the Apparel Center in Chicago, Illinois. Gilberg and Craftex agreed that Gilberg would be paid a draw against his commissions at a rate of $95,000 per year plus $3,000 travel allowance. Gilberg and Craftex agreed that initially Gilberg was to have managerial responsibility over JoAnne Bagley (sales representative in Michigan and Ohio) and Andrew Levin (sales representative in Kansas, Nebraska, North and South Dakota, Minnesota and Iowa). Gilberg was to receive a commission override for sales made by these sales representatives as compensation for his managerial oversight.

Gilberg was informed by Craftex that he would receive notice of shipments made to stores in his territory for which he was entitled to commissions and that there were five selling seasons annually.

Prior to employment, Gilberg and Craftex did not discuss whether and to what extent Gilberg would be charged for samples, whether Gilberg would receive commissions on reorders in his territory, whether Craftex would guarantee commissions on sales if Craftex shipping experience fell below 85%, the manner in which the parties would resolve disputes arising out of the relationship, or the duration of the relationship, how it might be terminated, or if notice before termination would be provided.

On April 1, 1980, shortly after the March meeting between Gilberg and Craftex, Barry Gilberg, Ltd. was incorporated.

Gilberg was paid for shipments on sales on a monthly basis with an accompanying commission statement reflecting shipments, commissions and deductions from commissions made by Craftex. Craftex reflected Gilberg's income for income tax purposes on IRS Form 1099.

About December 1980, Gilberg's Regional Manager responsibilities were removed by Craftex. At that time, Gilberg became responsible for sales to customers in Kansas, Nebraska, North and South Dakota, Minnesota and Iowa and was to be compensated by a commission at the agreed rate for all shipments resulting from sales in those additional states. In about January 1982, Missouri was reassigned to another sales representative.

In mid-1982, Gilberg's commission rate was increased from 6½% to 7% on all shipments based on sales to stores for which Gilberg had sales responsibility in his territory. At the same time, Gilberg assumed 50% of the advertising costs incurred in his territory, to start in 1983. In 1983, Gilberg and Craftex participated in a sales incentive markdown allowance program by which Craftex and Gilberg would share 50% of the customer profit margin guarantee markdown incurred through the program. Following these modifications in the terms of Gilberg's relationship with Craftex, Gilberg continued to represent Craftex's lines and make sales to Craftex's customers.

Gilberg's relationship with Craftex was terminated by Craftex on July 1, 1984, 30-45 days prior to the next selling season in the women's apparel industry. Craftex admits that it owes Gilberg $37,542.76 in unpaid commissions. Gilberg contends that the amount due is substantially greater.

Following Gilberg's termination, he received numerous job offers to represent other apparel manufacturers. Gilberg accepted some job offers, but declined all offers as an exclusive representative.

II. MOTION FOR SUMMARY JUDGMENT

Under Fed.R.Civ.P. 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The standard for granting summary judgment mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a). Celotex Corp. v. Catrett, 477 U.S. 317, ___, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Thus, the Rule 56(c) requires the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id.² Having defined the procedure to follow, we must next determine the substantive law that applies. The parties seem to have assumed that Illinois law governs this action merely because this action was filed in Illinois.³ In diversity cases a federal court must follow the conflict of laws principles prevailing in the state in which it sits. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Therefore, we must look to Illinois choice of law principles.

Gilberg's claims are in tort and contract and therefore require separate conflict of laws analysis.

As to the tort claims, Illinois has clearly adopted the Restatement's "most significant" contacts approach. Ingersoll v. Klein, 46 Ill.2d 42, 48, 262 N.E.2d 593, 596 (1973).⁴ The Restatement provides two sets of criteria for the measurement of the "most significant relationship." The first set of criteria includes general factors such as the needs of the interstate system; relevant policies of the forum and other interested states; protection of justified expectations; the basic policies underlying the particular field of law; certainty; predictability and uniformity of result; and ease in the determination and application of the law to be applied. Restatement (Second) of Conflicts § 6 (1971). The second set of criteria includes the contacts to be taken into account in applying these principles. These contacts are: (1) the place of the injury; (2) the place of misconduct; (3) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (4) the place where the relationship between the parties is centered. Restatement (Second) of Conflicts § 145 (1971).

Gilberg has identified three torts which he states are contained within Counts IV-VII, bad faith breach of contract, prima facie tort, and unfair competition. As discussed below, we do not believe that the claim Gilberg has styled as "bad faith breach of contract" is a claim in tort, but rather is a claim that sounds in contract. Therefore, for purposes of this analysis, we will only consider the claims for prima facie tort and unfair competition.

The place where the injury occurred could arguably be throughout Gilberg's sales territory, in that Gilberg claims he was injured by the misappropriation of his customers, injury to the good will he had developed with his customers and other assorted misdeeds with respect to his business with his customers.⁵ Yet, because Gilberg had his office in Illinois, and it is from this office that he coordinated his activities, it would seem that the injury occurred in Illinois where Gilberg lived and had his office located. The place where the conduct causing the injury occurred would seem to be in New York where Craftex's offices were located and from where the Cohens allegedly made certain promises to plaintiff. Gilberg, Ltd. has its offices in Northbrook, Illinois, and Barry Gilberg lives in Northbrook also. Craftex is a New York corporation with its principal place of business there also. Finally, the place where the relationship is centered would be Illinois. This is where Gilberg operated out of, it is where Gilberg had his showroom and where Gilberg coordinated its operations with respect to its many...