BellSouth Mobility, Inc. v. Cellulink, Inc.

• Decision Date: 25 May 2001
• Citation: 814 So.2d 203
• Parties: BellSOUTH MOBILITY, INC. v. CELLULINK, INC. Cellulink, Inc., and Eugene Ogletree v. BellSouth Mobility, Inc., and BellSouth Cellular National Marketing, Inc.
• Court: Alabama Supreme Court

814 So.2d 203

BellSOUTH MOBILITY, INC. v. CELLULINK, INC.

Cellulink, Inc., and Eugene Ogletree v. BellSouth Mobility, Inc., and BellSouth Cellular National Marketing, Inc.

1924.

Supreme Court of Alabama.

May 25, 2001.

Rehearing Denied September 7, 2001.

D. Owen Blake, Jr., general counsel, BellSouth Telecommunications, Inc., Birmingham; and John D. Clements, F.A. Flowers III, James E. Fleenor, Jr., and Rebecca W. Block of Burr & Forman, L.L.P., Birmingham, for appellants/cross appellees BellSouth Mobility, Inc., and BellSouth Cellular National Marketing, Inc.

Jere F. White, Jr., Madeline H. Haikala, Ivan B. Cooper, and Kevin E. Clark of Lightfoot, Franklin & White, L.L.C., Birmingham; and Richard A. Freese and Leslie E. McFall of Langston, Frazer, Sweet & Freese, P.A., Birmingham, for appellees/cross appellants Cellulink, Inc., and Eugene Ogletree.

WOODALL, Justice.

BellSouth Mobility, Inc. ("BellSouth"), appeals from a judgment entered on a jury verdict in favor of Cellulink, Inc. (appeal no. 1990082). Cellulink and Eugene Ogletree cross appeal from a judgment entered on that jury verdict and from a summary judgment entered in favor of BellSouth Mobility, Inc. (appeal no. 1990224). As to case 1990224, we affirm, but as to case 1990082, we reverse and remand.¹

Most of the pertinent facts are undisputed. BellSouth provides cellular telephone service to customers in the southeastern United States. On January 2, 1994, Eugene Ogletree, the owner of Cellulink, executed a document entitled "Authorized Agency Agreement Between BellSouth Mobility, Inc. and Cellulink" (the "Agency Agreement"). Under this agreement, which was to terminate on December 31, 1998, BellSouth appointed Cellulink a "nonexclusive agent of BellSouth to solicit and contract on behalf of BellSouth with Subscribers for [cellular telephone service] in the Area [serviced by BellSouth]."

Pursuant to the Agency Agreement, Ogletree purchased telephone equipment from BellSouth for resale to potential subscribers of BellSouth's cellular telephone service. However, the income that Ogletree received from BellSouth principally consisted of "activation" commissions and "residual compensation." Specifically, BellSouth paid Cellulink a commission for every customer Cellulink persuaded to subscribe to BellSouth's telephone service. Furthermore, for every such subscription that remained active for 150 days, BellSouth paid Cellulink "residual compensation," defined as a percentage "of the amount [BellSouth] bill[ed] that Subscriber for monthly access, airtime usage and service options, excluding insurance, roamer and Equipment charges, taxes and tolls." (Emphasis omitted.)

The Agency Agreement also contained the following pertinent provisions:

"ARTICLE IX QUOTAS

". . . .

"9.2 Establishment and Adjustment of Quotas. [Cellulink's] quota under this Agreement is the enrollment of 875 new [cellular telephone service] Subscribers within any consecutive ninety (90) day period. Established quota represents the minimum acceptable performance level for [Cellulink], but is not intended to be a ceiling on the number of Subscribers that Cellulink can solicit for [BellSouth's cellular telephone service].

". . . .

"9.3. Failure to Meet Quota. If Cellulink fails to meet the quota set forth in Paragraph 9.2 above, as such quota may be adjusted from time to time ..., [BellSouth] may, at its option,

"A. terminate this Agreement pursuant to Subparagraph 22.3(A)(iv); or

"B. (i) issue a warning after the first 90 day violation in any consecutive 365 day period;

"(ii) reduce Cellulink's residual compensation by fifty percent (50%) after the second 90 day violation in any consecutive 365 day period, and

"(iii) terminate the Agreement after the third 90 day violation in any consecutive 365 day period.

"Cellulink's full residual compensation shall be resumed at the beginning of the first full billing cycle after Cellulink attains its quota.

". . . .

"ARTICLE X "AGENT'S SALES FACILITIES

"[Cellulink] agrees that it will sell [cellular telephone service] and Equipment at sales facilities in the [service area] and at such additional or substitute sales facilities which [BellSouth] approves in writing from time to time during the term of this Agreement. Each of [Cellulink's]... sales facilities shall comply at all times during the term thereof with reasonable requirements which may be established by [BellSouth] for showroom and display capacity, appearance, accessibility, and efficiency and shall, at [Cellulink's] expense, display such signage identifying [Cellulink's] ... business as [BellSouth] may reasonably prescribe. [Cellulink] shall submit for approval by [BellSouth] such sales facilities, specifications and renderings of the business facility (or part thereof to be utilized for [Cellulink's] ... business) as [BellSouth] designates, approval of which will not be unreasonably withheld or withdrawn. At a minimum, each sales facility must: be a local facility which is open to the public at least eight (8) hours per day during normal business hours; be leased or owned in [Cellulink's] name; have a telephone with a number listed in the local directory and with directory assistance in [Cellulink's] name; and have at least one full-time cellular sales representative and a full-time support employee.

". . . .

"15.1 Compliance with [BellSouth] Criteria, Laws and Regulations.

". . . .

[Cellulink] shall maintain its business on a sound financial basis and comply with all legal obligations to [BellSouth], to [Cellulink's] employees, suppliers, lenders, lessors, and to federal, state and municipal authorities....

". . . .

"22.3 Termination for Cause.

"A. In addition to other rights of termination set forth in this Agreement, [BellSouth] shall have the right to terminate this Agreement for cause effective upon delivery of notice of termination to [Cellulink], if [Cellulink]...

". . . .

"(iv) fails to meet the quota specified in Article IX hereof, as such quota may be adjusted.

"B. [BellSouth] shall also have the right to terminate this Agreement if [Cellulink]:

"(i) fails to comply with any material provision of this Agreement... and does not correct such failure within thirty (30) days after written notice of such failure ...; or

"(ii) fails on two or more separate occasions within any period of six (6) consecutive months to comply with any material provision of this Agreement, ... whether or not such failures to comply are corrected after notice thereof is delivered to [Cellulink]."

The Agency Agreement also specifically referenced an appended document, described as Appendix B. Appendix B provided in pertinent part: "If [Cellulink] receives Equipment under any [BellSouth] program and invoices are not timely paid, or if [Cellulink] owes [BellSouth] amounts for any other reason, ... [BellSouth] reserves the right to deduct such unpaid amounts from [Cellulink's] compensation."²

Additionally, the Agency Agreement provided:

"31.4 Impossibility of Performance. Neither [BellSouth] nor [Cellulink] shall be liable for loss or damage or deemed to be in breach of this Agreement if its failure to perform its obligations results from (1) compliance with any law, ruling, order, regulation, requirement or instruction of any federal, state or municipal government or any department or agency thereof or court of competent jurisdiction; (2) acts of God; (3) acts or omissions of the other party; or (4) fires, strikes, embargoes, war, insurrection or riot. [BellSouth] shall not be liable for loss or damage or be deemed to be in breach of this Agreement if technological changes occur which prohibit [BellSouth] from issuing numbers to Subscribers. Any delay resulting from any of said causes shall extend performance accordingly or excuse performance, in whole or in part, as may be reasonable."

Under the Agency Agreement, Ogletree operated Cellulink stores in the Birmingham area. In doing so, he confined his equipment sales to telephones and related equipment that he purchased from BellSouth.

In 1994, Ogletree began discussing with BellSouth officials a proposal that involved the operation of booths, or "kiosks," in Wal-Mart stores within BellSouth's servicing area for the sale of BellSouth equipment and the solicitation of BellSouth's air-time subscriptions. Those discussions led to the execution of a "Letter Agreement" between Cellulink and BellSouth, dated October 12, 1994. The Letter Agreement evidenced the intent of the parties "with respect to the activation by Cellulink of subscribers to the radio-telephone service of BellSouth Mobility," but, specifically, with respect to "activations of subscribers in the Inverness Wal-Mart,... and up to three other Wal-Mart ... stores to be mutually agreed upon by Cellulink and BellSouth Mobility." (Emphasis added.)

The Letter Agreement expressly authorized Ogletree to sign leases with Wal-Mart. Under the Letter Agreement, BellSouth agreed to supply the "furniture and fixtures" of the kiosk at the Wal-Mart store in Inverness (the "Inverness Wal-Mart"). In an addendum to the Letter Agreement, the furniture and fixtures were valued at $9,750.00. BellSouth was to retain ownership of the furniture and fixtures, which it agreed to lease to Cellulink for $1.00 per year. Additionally, BellSouth agreed to "be responsible for the monthly lease space rental charges owed to the respective Wal-Mart ... in the amount of $1,000.00 per month." Cellulink agreed to execute the lease with Wal-Mart and to "assign the lease to [BellSouth] in the event that Cellulink cease[d] operation at a particular location." BellSouth also agreed to pay Cellulink $28,945.00 for "market development," which included (1) $2,250.00 for "signage," that is, outdoor and indoor banners; (2) a telephone deposit of $600.00; and (3) $3,470.00 in "miscellaneous start-up" expenses, including advertising and stationery. Finally, BellSouth agreed to pay Wal-Mart "10% of the monthly cellular telephone sales...