Dahly Tool Co. v. Vermont Tap and Die Co., a Div. of Vermont American Corp., 83-1175

• Decision Date: 01 February 1984
• Docket Number: No. 83-1175,83-1175
• Citation: 742 F.2d 311
• Parties: DAHLY TOOL COMPANY, Plaintiff-Appellant, v. VERMONT TAP AND DIE COMPANY, A DIVISION OF VERMONT AMERICAN CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 311

742 F.2d 311

DAHLY TOOL COMPANY, Plaintiff-Appellant, v. VERMONT TAP AND DIE COMPANY, A DIVISION OF VERMONT AMERICAN CORPORATION, Defendant-Appellee.

No. 83-1175.

United States Court of Appeals Seventh Circuit.

Submitted Feb. 1, 1984. ^*

Decided March 2, 1984. ^**

John W. Damisch and Thomas J. Swabowski, Barclay, Damisch & Sinson, Ltd., Chicago, Ill., for plaintiff-appellant.

Jonathan B. Gilbert, Pedersen & Houpt, Chicago, Ill., Martin Roach, Hamilton, Roach & Diamond, Louisville, Ky., for defendant-appellee.

Before PELL, WOOD and CUDAHY, Circuit Judges.

CUDAHY, Circuit Judge.

In this diversity action, the appellant, a former manufacturer's representative of the appellee, appeals the district court's order, 561 F.Supp. 600, holding that the appellant was not entitled to commissions for orders placed with the appellee prior to the appellant's termination but filled afterwards, or for commissions on orders placed pursuant to "blanket orders" entered into prior to or shortly following the appellant's termination. Because we agree with the district court that the appellant failed to allege any orders for which he was the procuring cause and because neither the contract between the parties nor industry custom provides for the payment of commissions under these circumstances, we affirm.

I.

The parties entered into an oral agreement in 1951 which provided that the appellant ¹ would be a manufacturer's representative for the appellee for an indefinite period; at one point during the life of the agreement the appellant represented the appellee throughout much of the upper Midwest. The parties agree that the appellant's basic responsibility was to create a demand for the appellee's products by encouraging potential end users to test and subsequently purchase the products and by providing technical assistance after the sale occurred; the actual sales, however, were handled by one of the appellee's numerous distributors. The agreement further provided that the appellant would receive as a commission a percentage of the price on all sales occurring in the appellant's territory, regardless of whether the appellant was involved in the sale.

In October, 1979, the appellant was informed by the appellee that the appellant was to be terminated effective December 31, 1979; the appellee told the appellant that commissions would be paid on all orders shipped prior to that date.

The appellant subsequently brought an action in Illinois state court for an accounting of all orders placed prior to its termination but filled afterwards and for all orders placed under "blanket orders" negotiated in 1979 or early 1980. A blanket order is an agreement between a distributor and an end user of the appellee's products which provides that the distributor will supply the user at an agreed price for a period of usually one year; shipments are authorized by the issuance of a release rather than a purchase order. At trial a representative of one end user testified that users were not obligated to buy any particular number of the appellee's products; the representative also testified that buyers did not feel "locked in" by such blanket orders.

The appellee then removed this action to the district court. After trial, the district court found that the contract between the parties was terminable at will and that the contract made no provision concerning the payment of commissions upon termination. The district court held that the appellant was not entitled to commissions either on orders placed prior to his termination but shipped thereafter or to commissions on orders placed pursuant to blanket orders negotiated in 1979 or early 1980. The court concluded that the appellant had failed to allege any order of which the appellant was the procuring cause, and also concluded that industry custom, which under Illinois law can be used to supplement a contract not contrary to such custom, did not provide for payment of commissions under these circumstances. The appellant filed a timely notice of appeal to this Court.

II.

The only issue on appeal is whether the district court erred in holding that the appellant was not entitled to commissions on orders received prior to December 31, 1979, but not shipped until after that date, or to commissions on orders placed under blanket orders negotiated in 1979 or early 1980. The appellant offers two theories which it argues entitles it to those commissions. The first theory is that the appellant was the "procuring cause" of the orders and is consequently entitled to the commissions; the second theory is that industry custom provides for the payment of such commissions.

An agent who is the procuring cause of a transaction which he is authorized to negotiate is entitled to the commission for the transaction, regardless of the fact that he was discharged prior to completion of the deal. Graubremse GMBH v. Berg Manufacturing & Sales Co., 417 F.2d 1201, 1205 (7th Cir.1969). In another case interpreting Illinois law, this Court held that the plaintiff, a manufacturer's representative under an oral agreement which provided that the plaintiff would attempt to induce mail order companies to insert descriptions and photographs of the defendant's furniture in the mail order companies' catalogues, was the procuring cause of sales resulting from those catalogue listings and was consequently entitled to commissions on those sales, notwithstanding the fact that the sales were made or consummated subsequent to the termination of the plaintiff's services. Richer v. Khoury Bros., Inc., 341 F.2d 34, 38 (7th Cir.1965). See Stein...